Exhibit 10.5

KINDRED DEFERRED COMPENSATION PLAN

Second Amendment and Restatement Effective

as of January 1, 2005

(to address proposed Code Section 409A regulations)

Purpose and History

This Plan is designed to provide specified benefits to a select group of
management or highly compensated Employees who contribute materially to the
continued growth, development and future business success of Kindred Healthcare,
Inc., a Delaware corporation, and its subsidiaries and affiliates. This Plan
shall be unfunded for tax purposes and for purposes of Title I of ERISA.

This Plan was originally adopted as the Vencor, Inc. Deferred Compensation Plan,
effective as of January 1, 1996 (the “1996 Plan”). It was assumed by the current
sponsoring company pursuant to an Employee Benefits Agreement in connection with
the April 30, 1998 spin off between Vencor, Inc. (predecessor of a company
currently called Ventas, Inc.) and Vencor Healthcare, Inc., after which spin
off, Vencor Healthcare, Inc. changed its name to Vencor, Inc. At that time, the
Plan was restated (the “1998 Plan”).

Vencor, Inc. later amended the 1998 Plan twice, including, in an amendment
effective April 16, 2002, to change the name of the Plan to the Kindred Deferred
Compensation Plan when Vencor, Inc.’s name changed, and, in an amendment
effective April 30, 1998, to provide for the cessation of deferrals under the
Plan at the discretion of the Committee and a one-time withdrawal of benefits.
The Committee exercised this discretion to cease deferrals, and Participants’
ability to make deferrals under the Plan was suspended effective March 29, 1999.

In 2004, Kindred Healthcare, Inc. (the “Company”) decided to use this Plan again
to provide deferral opportunities to certain of its eligible employees,
consistent with the parameters of newly-adopted Section 409A of the Code.
Therefore, an amended and restated Plan was adopted by the Board in October
2004, to allow deferrals by Participants, matching contributions by the
Employers participating herein, and to make certain changes in design, all
effective as of January 1, 2005. In light of proposed regulations and other
guidance recently issued by the Internal Revenue Service under Code
Section 409A, the Company now desires to amend and restate the Plan again in its
entirety, to bring the Plan into compliance with such guidance and to make minor
clarifying changes, effective as of January 1, 2005 except as otherwise provided
herein. Any individual who was a Participant with an Account Balance in the 1998
Plan immediately prior to the effective date of this restatement shall continue
to be a Participant in the Plan on and after such effective date.

 

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ARTICLE I

DEFINITIONS

For purposes hereof, unless otherwise clearly apparent from the context, the
following phrases or terms shall have the following indicated meanings:

 

1.1 “Account Balance” shall mean with respect to a Participant the sum of
(i) his or her Deferral Amount, plus (ii) his or her Employer contributions,
contributed under Section 3.2 hereof, plus (iii) interest credited in accordance
with all the applicable interest crediting provisions of this Plan, less
(iv) all distributions. This account shall be a bookkeeping entry only and shall
be utilized solely as a device for the measurement and determination of the
amounts to be paid to a Participant pursuant to this Plan.

 

1.2 “Annual Enrollment Period” shall mean with respect to any Plan Year the
period prior to the first day of the Plan Year (or, in the case of those
notified of first eligibility during a Plan Year, the period ending 30 days
thereafter) during which (i) any Employee who has been notified by the Committee
of his or her eligibility to enroll in the Plan must enroll in accordance with
Article 2 in order to make deferrals for the Plan Year and (ii) any other
Participant who is eligible to make deferrals under the Plan must return his or
her Election Form to the Committee in order to make deferrals for the Plan Year.

 

1.3 “Annual Short-Term Incentive” shall mean any compensation, in addition to
Base Annual Salary, paid annually to a Participant for services performed during
a Plan Year and designated as an “Annual Short-Term Incentive” or “STI” under
rules adopted by the Committee.

 

1.4 “Annual Deferral Amount” shall mean with respect to a Participant that
portion of the Participant’s Base Annual Salary to be paid during a Plan Year
and the Participant’s Annual Short-Term Incentive that relates to services
performed during a Plan Year that the Participant elects to have and actually is
deferred in accordance with Article 3, for any one Plan Year. In the event that
deferrals cease due to a Participant’s Retirement, Unforeseeable Financial
Emergency, Disability, death, unpaid leave of absence or Termination of
Employment prior to the end of a Plan Year, the Annual Deferral Amount for such
Plan Year shall be the actual amount deferred and withheld from amounts earned
for periods prior to such event or determination.

 

1.5 “Base Annual Salary” shall mean, for any Plan Year or part thereof during
which an Employee is eligible to make deferrals under this Plan (which shall not
include compensation payable for periods after a Termination of Employment, such
as severance pay, but shall include vacation time earned but not yet paid as of
the last day at work), total compensation paid to an Employee by an Employer
that is includible in the Employee’s gross income, including bonuses (other than
amounts considered part of the Annual Short-Term Incentive, Gross-Up Portion, or
the “long-term incentive compensation” excluded below), commissions and
overtime, but excluding (i) reimbursements or other expense allowances,
(ii) fringe benefits (cash and noncash), (iii) moving expenses, (iv) welfare
benefits, (v) amounts realized from the exercise of a non-qualified stock option
(or the lifting of restrictions on restricted stock) or the sale or exchange of
stock acquired under a qualified stock option, (vi) the Gross-Up Portion of
incentive awards as described in Section 3.1(a) of the Kindred 401(k) Plan and
(vii) any amounts that are designated as “long-term incentive compensation”
pursuant to rules adopted by the Committee. Notwithstanding the foregoing
definition and exclusions, Base Annual Salary shall include any amounts deducted
pursuant to Code Sections 125 (flexible benefit plans), 402(a)(8) (salary
redirection), 402(h)(1)(B) (simplified employee plan), 132(f) (qualified
transportation expenses) and 403(b).

 

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1.6 “Beneficiary” shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 10, that are entitled to receive
benefits under this Plan upon the death of a Participant.

 

1.7 “Beneficiary Designation Form” shall mean the form or electronic beneficiary
designation process established from time to time by the Committee that a
Participant uses to designate one or more Beneficiaries.

 

1.8 “Board” shall mean the Board of Directors of the Company.

 

1.9 “Claimant” shall have the meaning set forth in Section 15.1.

 

1.10 “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.

 

1.11 “Committee” shall mean the committee described in Article 13.

 

1.12 “Company” shall mean Kindred Healthcare, Inc., a Delaware corporation.

 

1.13 “Crediting Rate” shall mean for any Plan Year, an interest rate determined
by the Committee prior to the first day of the Plan Year, which shall be a fixed
rate equal to 100% of the interest rate published in Moody’s Bond Record under
the heading “Moody’s Corporate Bond Yield Baa Average” for the month of October
preceding the first day of the Plan Year.

 

1.14 “Death Benefit” shall mean the benefit described in Article 7.

 

1.15 “Deferral Amount” shall mean with respect to a Participant the sum of all
of the Participant’s Annual Deferral Amounts.

 

1.16 “Disability” shall mean a period of disability during which a Participant
qualifies for benefit payments under the long-term disability plan maintained by
his or her Employer.

 

1.17 “Election Form” shall mean the form or electronic enrollment process
established from time to time by the Committee that a Participant uses to make
an election under the Plan.

 

1.18 “Employee” shall mean a person who is classified as a common law employee
of any Employer and who is paid through the normal payroll system of such
Employer, except that the term “Employee” shall not include any person who is
classified on the payroll records of his or her Employer as a per diem employee.

 

1.19 “Employer” shall mean (i) the Company and all of the legal entities that
are part of a controlled group or affiliated service group with the Company
pursuant to the provisions of Code Sections 414 (b), (c), (m) or (o); (ii) any
partnership in which the Company or a wholly owned subsidiary of the Company
owns an interest; (iii) any entity that has entered into a contract with the
Company or a subsidiary for the receipt of management

 

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services at one or more facilities owned by such entity if the entity has been
selected by the Committee to participate in the Plan; and (iv) any entity which
with the consent of the Board becomes a participating Employer hereunder.
Obligations of each Employer hereunder shall be separate except where Kindred
Healthcare, Inc. has by specific action of its Board of Directors or other
written agreement executed by a duly authorized officer agreed that it and/or
its wholly-owned subsidiaries will undertake joint and several liability.

 

1.20 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

1.21 “Participant” shall mean any Employee (i) who is selected to participate in
the Plan based on the eligibility requirements set forth in Article 2; (ii) who
elects to participate in the Plan and meets all enrollment requirements set
forth in Article 2, including timely completing an Election Form; (iii) whose
completed Election Form is accepted by the Committee; (iv) who commences
participation in the Plan in accordance with Article 2; and (v) whose Account
Balance has not been fully distributed. The term “Participant” also shall
include any former Employee or any Employee who is no longer eligible to make
deferrals under the Plan but who still has an Account Balance hereunder.

 

1.22 “Plan” shall mean this Kindred Deferred Compensation Plan, evidenced by
this instrument as may be amended from time to time.

 

1.23 “Plan Year” shall mean the twelve month period beginning on January 1 and
ending on December 31.

 

1.24 “Retirement” for all Participants shall mean, effective when new elections
are given to Participants in the 1998 Plan in accordance with Section 18.17, a
Participant’s Termination of Employment occurring on or after the Participant
attains age 55 for any reason other than death.

 

1.25 “Retirement Benefit” shall mean the benefit described in Article 6.

 

1.26 “Termination Benefit” shall mean the benefit described in Article 8.

 

1.27 “Termination of Employment” shall mean the voluntary or involuntary
severance from employment with all Employers, for any reason other than death,
prior to the attainment of the applicable age for Retirement. The Committee
shall determine, consistent with Code Section 409A and guidance issued
thereunder, whether a change in status to a part-time employee providing minimal
services or to a consultant or independent contractor still providing
substantial services shall be considered a Termination of Employment, and
whether and when a sick leave, authorized leave of absence or other absence for
military or government service constitutes a Termination of Employment for
purposes of this Plan (generally not before at least six months have elapsed).

 

1.28 “Trust” shall mean a grantor or “rabbi” trust within the meaning of Code
Section 671, the assets of which shall at no time be located outside the United
States.

 

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1.29 “Unforeseeable Financial Emergency” shall mean a severe financial hardship
to a Participant arising as a result of events beyond the control of the
Participant and resulting from (i) a sudden and unexpected illness or accident
of the Participant or a dependent of the Participant (as defined in Code
Section 152(a)); (ii) a loss of the Participant’s property due to casualty; or
(iii) other similar extraordinary and unforeseeable circumstances, all as
determined in the sole discretion of the Committee in accordance with the Code.

ARTICLE 2

ELIGIBILITY, ENROLLMENT AND PARTICIPATION

 

2.1 Selection by Committee of Eligible Employees. Participation in the Plan
shall be limited to a select group of management or highly compensated
Employees. Prior to the Annual Enrollment Period for each Plan Year, the
Committee shall determine which Employees will be eligible to participate in the
upcoming Plan Year (generally based on whom it expects will qualify as “highly
compensated employees” of an Employer within the meaning of Code Section 414(q)
for the next following Plan Year, to the extent such determination is consistent
with the criteria in the first sentence of this Section) and shall notify such
Employees of their eligibility to enroll in the Plan during the Annual
Enrollment Period. An Employee who is not notified of his or her eligibility to
participate in the Plan prior to the first day of a Plan Year may be permitted
to enroll during a Plan Year, provided that such Employee has never been
previously eligible in this or any of account-balance Plan of deferred
compensation sponsored by the Employer, and that, once so determined and
notified in writing of the Employee’s eligibility, the Employee completes all
enrollment requirements within 30 days thereafter. Any deferral election made
after a Plan Year begins shall apply to (i) Base Annual Salary that relates to
services performed after the Employee commences participation under Section 2.3,
and (ii) a pro rata portion of STI, determined by multiplying the total amount
of STI earned during the Plan Year by a fraction, the numerator of which equals
the number of days the Employee is employed by an Employer during the Plan Year
after participation commences under Section 2.3, and the denominator of which
equals the total number of days the Employee is employed by an Employer during
the Plan Year.

 

2.2 Enrollment Requirements. Employees determined by the Committee to be
eligible to enroll in the Plan in accordance with Section 2.1 may enroll by
completing and delivering, in the mode approved by the Committee, an Election
Form prior to the end of each applicable Annual Enrollment Period, which form
for the first Annual Enrollment Period for each Participant shall also provide
for an election (to apply to the entire Account Balance) of the form of payment
of benefits hereunder upon Retirement. Notwithstanding the foregoing, the
Committee may establish from time to time such other enrollment requirements as
it determines, in its sole discretion, are necessary or appropriate.

 

2.3 Commencement of Participation. Participation in this Plan shall commence on
the first day of the first Plan Year after the Committee receives and accepts
the Employee’s completed Election Form, except in the case of Employees notified
of eligibility for the first time during a Plan Year, in which case, eligibility
shall be effective, if the enrollment requirements are met, 30 days following
notification of eligibility. If an Employee fails

 

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to meet the enrollment requirements in Section 2.2 prior to the end of any
applicable Annual Enrollment Period, such Employee shall not commence or
continue participation in the Plan until the first day of the first Plan Year
beginning after such requirements are met.

 

2.4 Eligibility: Cessation of Deferrals. Except as otherwise provided herein, a
Participant’s deferrals of Base Annual Salary and Annual Short-Term Incentive
under the Plan shall cease upon the earlier of: (i) the first day of the first
Plan Year after the Participant fails to complete and return to the Committee an
Election Form during the Annual Enrollment Period for such Plan Year; (ii) the
first day of the first Plan Year following the suspension of deferrals by the
unilateral action of the Committee, which action must apply uniformly to all
similarly-situated groups of Participants; (iii) upon approval of a distribution
based on Unforeseeable Financial Emergency; (iv) the first day of the first Plan
year after the Participant changes status and is no longer an Employee (e.g.
becomes a per diem employee); or (v) upon determination by the Committee, in its
sole discretion, with respect to any one or more Participant(s), that that
Participant shall no longer be an eligible Participant for future deferrals,
effective at the beginning of the next Plan Year after notice of revocation of
participation is delivered to the Participant. Cessation of deferrals pursuant
to this Section shall not constitute a termination of the Plan, and the rights
of affected Participants to interest crediting and distribution of Account
Balances shall not be affected by cessation or suspension of the right to defer.

 

2.5 Reemployment During Plan Year. If a Participant experiences a Termination of
Employment or Retirement, such Participant’s deferrals shall cease as of the
effective date of such Termination of Employment or Retirement and shall not
resume in the event of reemployment as an Employee during the Plan Year. A
Participant who is reemployed by an Employer after experiencing a Termination of
Employment or Retirement shall be permitted to re-enroll in the Plan and make a
new deferral election during the first Annual Enrollment Period to occur
following the effective date of reemployment, provided that the other
eligibility requirements in Section 2.1 are met.

ARTICLE 3

DEFERRALS, CONTRIBUTIONS AND INTEREST CREDITING

 

3.1 Maximum Deferrals. For each Plan Year, a Participant may elect to defer
(i) any whole percentage of his or her Base Annual Salary that would otherwise
be paid during the Plan Year, up to a maximum limit of 25% of such Base Annual
Salary; and (ii) a percentage of his or her Annual Short-Term Incentive that
relates to services performed during the Plan Year, up to a maximum limit of
100% of such Annual Short-Term Incentive. The Committee shall permit a separate
election to be applied to the Annual Short-Term Incentive, provided that such
election must be made prior to the first day of the Plan Year during which
related services are performed, despite the fact that STI for that Plan Year
would not otherwise be paid until the Plan Year following the year in which
services are performed. To the extent that any Base Annual Salary related to the
last payroll period of a Plan Year is otherwise paid on a date in the following
Plan Year, the deferral election in place for the year in which the Base Annual
Salary is, absent a deferral election, otherwise payable will apply to such
amount, rather than the year in which the payroll period ends. All amounts
deferred under this Section 3.1 shall at all times be fully vested and
nonforfeitable.

 

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3.2 Employer Contribution—Matching.

 

  (a) Subject to an Employer’s right to amend or terminate the Plan and
applicable limitations herein, as of the last day of each pay period, each
Employer shall credit to the Account Balance of each Participant an amount equal
to: (i) the contribution that would be calculated under the matching
contribution formula in effect for the Plan Year under the 401(k) plan of the
Employer for which the Participant is eligible, using the maximum amount of
compensation that may be used to determine contributions under such 401(k) plan
pursuant to the limit established in Code Section 401(a)(17), less (ii) the
amount the Participant would receive during the Plan Year as a matching
contribution under such 401(k) plan if the Participant had contributed the
maximum amount of elective deferral contributions permissible under the
administrative provisions of the 401(k) plan for persons of the Participant’s
status (e.g. those who are “highly compensated”).

For example, assume a Participant whose combined Base Annual Salary and Annual
Short-Term Incentive (as defined in this Plan) equals $220,000 for the Plan Year
elects to defer 5% of this amount under this Plan, and the 401(a)(17) limit on
compensation for the Plan Year is $205,000, and the 401(k) plan’s announced
administrative limit on elective deferral contributions by highly compensated
employees is 5% of compensation, and the 401(k) plan matching contribution
formula in effect for the Plan Year is 25 cents per dollar deferred, on up to
the 6% of compensation. For this Participant, the matching contribution in this
Plan would be 25 cents per dollar deferred from Base Annual Salary and Annual
Short-Term Incentive under this Plan, up to 1% of $205,000 of the Participant’s
compensation as defined in the 401(k) plan, or $512.50, without regard to
whether the Participant actually defers the 5% of compensation permitted under
the 401(k) plan or receives a matching contribution thereon under the 401(k)
plan.

 

  (b) Subject to Section 3.2(c), all amounts received under Section 3.2(a) shall
be at all times fully vested and nonforfeitable.

 

  (c) Notwithstanding any other provision of this Plan including Section 3.2(b),
the Committee shall have the right in its sole discretion to cause any or all of
the Employer contributions credited to an Account Balance, including earnings,
to be forfeited if the Committee at any time determines that:

 

  (i) The Participant has divulged Employer confidential information to the
competitors of the Employer which is detrimental to the Employer; or

 

  (ii) The Participant has engaged in criminal conduct which is detrimental to
the Employer.

 

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3.3 Election to Defer. In connection with a Participant’s commencement of
participation in the Plan, the Participant shall make a deferral election by
delivering a completed Election Form to the Committee during the appropriate
Annual Enrollment Period, which Election form must be timely received and
accepted by the Committee for a valid election to exist. For each succeeding
Plan Year, the Participant must deliver a new completed Election Form to the
Committee during the Annual Enrollment Period for the Plan Year, which Election
Form must be timely received and accepted by the Committee for a valid election
to exist. If no Election Form is timely delivered for a Plan Year, no deferrals
shall be made with respect to the Participant for that Plan Year. In no event
may a Participant make a valid deferral election for any amount of Base Annual
Salary or Annual Short-Term Incentive at any time after the close of the Annual
Enrollment Period for the Plan Year or portion thereof when the services are
performed to which such amount of Base Annual Salary or Annual Short-Term
Incentive relate.

 

3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual Salary
portion of a Participant’s Annual Deferral Amount shall be withheld and credited
to the Plan each payroll period in accordance with the Participant’s elected
percentage of Base Annual Salary. The Annual Short-Term Incentive portion of the
Annual Deferral Amount shall be withheld and credited to the Plan at the time
the Annual Short-Term Incentive (if any) otherwise would be paid to the
Participant.

 

3.5 Interest Crediting—Ongoing. The rate of interest for crediting in all cases
shall be the Crediting Rate. Interest shall be credited and compounded monthly
on a Participant’s Account Balance as if the Participant’s Annual Deferral
Amount and Employer contribution amounts credited during a month were made in
two equal installments, one on the first day of the month and one on the last
day of the month.

 

3.6 Interest Crediting—In Month of a Distribution. In the case of a Participant
who receives a lump sum distribution of his or her entire Account Balance during
a month, such distribution shall be treated for purposes of interest crediting
as if the distribution were made on the first day of the month, and no interest
shall be credited for the partial month prior to the date on which the
distribution occurs. In the case of a Participant who receives a partial
distribution of his or her Account Balance pursuant to Article 5 during a month,
the partial distribution amount shall be deducted from the Participant’s Account
Balance for purposes of future interest crediting as if such partial
distribution were made on the first day of the month.

 

3.7 Installment Distribution Determination. In the event that a distribution is
to be made in the form of installment payments under Article 6 or Article 8, the
amount of each installment payment shall be calculated by amortizing the
Participant’s Account Balance, in equal monthly (or annual, to the extent
payments are made annually under Section 6.2) installment payments each year
over the term of the specified payment period (beginning on the date that
installment payments are to commence), using an interest rate that is equal to
the Crediting Rate for the Plan Year in which installment payments commence. For
the January payment in each Plan Year, the Participant’s undistributed Account
Balance shall be re-amortized based on the prior Plan Year end Account balance,
using the Crediting Rate applicable to such Plan Year, and the remaining
installment term.

 

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For example, if the Crediting Rate established for the 2005 Plan Year (based on
October 2004 rate) is 4%, and the installment period elected is 60 months, and
the Account Balance as of the beginning of payments on 2/1/05 is $60,000, then
each payment for the remainder of 2005 will be $1,101.32. At the end of 2005, if
the Participant’s Account Balance is $ 49,877.51, and the 2006 crediting rate is
5%, payments in 2006 will be $1,122.79 per month.

 

3.8 FICA and Other Employment Taxes. For each Plan Year in which an Annual
Deferral Amount is being withheld, a Participant’s Employer shall ratably
withhold the Participant’s share of FICA and other employment taxes related to
the Annual Deferral and any match thereon, from that portion of the
Participant’s Base Annual Salary and Annual Short-Term Incentive that is not
deferred and is actually paid to the Participant. If necessary, the Committee
shall reduce the Participant’s Annual Deferral Amount in order to comply with
this Section 3.8.

ARTICLE 4

DISTRIBUTION EVENTS

 

4.1 Limited Events Triggering Distribution. Except as otherwise provided herein,
a Participant or Beneficiary shall be entitled to a distribution of the
Participant’s Account Balance only upon the occurrence of one of the following
events: (i) the Participant’s Retirement or Termination of Employment (including
on account of and when determined based on Disability); (ii) the Participant’s
Death; and (iii) the occurrence of an Unforeseeable Financial Emergency, as
determined by the Committee in accordance with Section 409A of the Code, but
only to the extent such distribution is necessary to relieve the Unforeseeable
Financial Emergency. Distributions to a Participant on account of Retirement
shall be made in accordance with Article 6. Distributions to a Participant on
account of Termination of Employment for reasons other than Retirement or death
shall be made in accordance with Article 8. Distributions to a Beneficiary on
account of the death of a Participant shall be made in accordance with Article
7. Distributions to a Participant on account of Unforeseeable Financial
Emergency shall be made in accordance with Article 5.

 

4.2 Delayed Payment for Specified Employees. Notwithstanding anything herein to
the contrary, in the case of a Participant who is a “specified employee” within
the meaning of Prop. Treas. Reg. 1.409A-1(i) (or any successor thereto) at the
time a distribution on account of Retirement or Termination of Employment would
otherwise take place, the distribution shall not commence earlier than six
months after the effective date of the Participant’s Retirement or Termination
of Employment.

 

4.3 Reemployed Participants. If a Participant who is receiving a benefit in the
form of installment payments is reemployed by an Employer before the
distribution is complete, installment payments shall cease upon the effective
date of the Participant’s reemployment and shall not recommence until the
Participant again qualifies for a distribution pursuant to this Article 4.

 

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4.4 Payments Delayed in Certain Circumstances. Notwithstanding anything herein
to the contrary, any payment due to a Participant or Beneficiary on a date
specified under Article 5, 6, 7, 8 or 12 shall be delayed as follows: (i) if the
Committee reasonably anticipates that an Employer’s deduction with respect to
the payment otherwise would be reduced or eliminated by application of Code
Section 162(m), the payment shall not be made until the earliest date on which
the Committee reasonably anticipates that the Employer’s deduction will not be
reduced or eliminated by application of Section 162(m); (ii) if the Committee
reasonably anticipates that making the payment will violate a term of a loan
agreement or similar contract that the Employer entered into for legitimate
business reasons and such violation will cause material harm to the Employer,
then the payment shall not be made until the earliest date on which the
Committee reasonably anticipates that making the payment will not violate the
agreement or that the violation will not materially harm the Employer; and
(iii) if the Committee reasonably anticipates that making the payment will
violate Federal securities law or other applicable laws, then the payment will
not be made until the earliest date on which the Committee reasonably
anticipates that the payment will not cause any such violation, provided that
for purposes of this Section, inclusion of any amount in gross income or the
application of any penalty or other provision of the Code shall not be
considered a violation of applicable law.

ARTICLE 5

DISTRIBUTIONS ON ACCOUNT OF

UNFORESEEABLE FINANCIAL EMERGENCY

If a Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to receive a partial or full distribution
of his or her Account Balance from the Plan. The petition shall be accompanied
by such documentation in support of the existence of an Unforeseeable Financial
Emergency as the Committee shall require. The distribution shall not exceed the
lesser of (i) the Participant’s Account Balance, calculated as if such
Participant were receiving a Termination Benefit; and (ii) the amount necessary
to satisfy the Unforeseeable Financial Emergency, plus any amount necessary to
pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which the hardship resulting from the Unforeseeable
Financial Emergency is or may be relieved through reimbursement or compensation
by insurance or otherwise by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship). If the Committee in its sole discretion and in accordance with the
Code approves the petition for a distribution, the distribution shall be made
within 90 days after the date of approval. If a Participant receives a
distribution pursuant to this Article 5, the Participant’s deferral election
shall be cancelled for the remainder of the Plan Year. Such Participant shall be
permitted to make a new deferral election during the Annual Enrollment Period
for the next following Plan Year, provided that the Participant is otherwise
eligible to make deferrals under the Plan.

ARTICLE 6

RETIREMENT BENEFIT DISTRIBUTIONS

 

6.1 Retirement Benefit. A Participant who qualifies for and takes Retirement
shall receive a complete distribution of his or her Account Balance as a
Retirement Benefit.

 

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6.2 Form and Timing of Retirement Benefit Distributions. Each Participant, in
connection with his or her commencement of participation in the Plan or
otherwise as provided in Section 6.3, shall elect on an Election Form to receive
any Retirement Benefit to which the Participant may become entitled in a lump
sum or in one of three installment payment forms. A Participant may elect an
installment distribution that will pay roughly equal monthly installments
(determined in accordance with Section 3.7 above) over a period of 5, 10 or 15
years, provided, however that if under the Participant’s selected installment
option monthly payments would be less than $1,000 each, the Participant’s
account will instead be paid in roughly equal annual installments (determined in
accordance with Section 3.7) over the elected period, and provided, further that
if such annual payments would be less than $1,000 each, the Participant will
receive annual installments equal to the greater of $1,000 and the remainder of
his Account Balance. Provided further, however, that a Participant with an
Account Balance of $10,000 or less at a Retirement that occurs on or after
January 1, 2007, will be paid his benefit in a single lump sum regardless of any
previous written election, at the time provided in the next sentence, but in no
event later than the 15th day of the third month after the calendar year in
which Retirement occurs. Any distribution made pursuant to this Section 6.2
shall be made (in the case of a lump sum) or shall commence (in the case of
installment payments) 90 days (6 months for a “specified employee;” see Article
4) after the Participant’s Retirement. If any Participant fails to elect a
payment form in connection with his participation in the Plan, any Retirement
Benefit payable to the Participant will be distributed in a single lump sum.

 

6.3 Special 2006 Payment Form Election for Retirement Benefit Distributions.
Notwithstanding any provision of the Plan to the contrary, any Participant who
has an Account Balance in the Plan as of 30 days following the date that this
Second Amended and Restated Plan is adopted, and who does not otherwise become
entitled to a payment under this Plan during 2006 (without regard to the special
election in this Section), shall have an opportunity to make a new election to
receive any Retirement Benefit to which the Participant may become entitled in
2007 and thereafter in any of the payment forms described in Section 6.2. Such
election must be made, in the form prescribed by the Committee, on or before
December 31, 2006 and shall apply to the Participant’s entire Account Balance
under the Plan, including any amounts accrued under the 1998 Plan. No election
made under this Section 6.3 shall be given if effect if the Participant is
entitled to any Retirement Benefit payments on or before December 31, 2006, but
any such election otherwise shall be considered irrevocable as of December 31,
2006. To the extent that any Participant fails to elect a payment form on or
before December 31, 2006, any Retirement Benefit payable to the Participant will
be distributed in the form elected on the Election Form filed when he began
participation in this Plan, or, if none or if the Participant has funds deferred
under the 1998 Plan, in a single lump sum.

ARTICLE 7

DEATH BENEFIT DISTRIBUTIONS

7.1 Death Prior to Retirement or Termination of Employment. If a Participant
dies prior to Retirement or Termination of Employment, the Participant’s
Beneficiary shall be entitled to a complete distribution of the Participant’s

 

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Account Balance as a Death Benefit, paid to the Beneficiary in a lump sum by the
Payment Date. The lump sum provided for in this Section, an the acceleration of
payments in the event of death provided for in Section 7.2, shall not apply to
an account balance accumulated under the 1998 Plan, if the death of the
Participant occurs in 2006; in that case, the election form previously filed
under the 1998 Plan shall control. The Payment Date specified in this Section
shall be the last to occur of the following:

(i) satisfactory proof of death has been provided to the Retirement Committee,
and

(ii) the Retirement Committee has directed the benefit be paid or begin to be
paid, which direction shall be deemed to occur 90 days after the date (i) is
satisfied, unless additional documentation is necessary to determine a
Beneficiary.

 

7.2 Death Prior to Completion of Installment Payments. If a Participant who is
receiving or is entitled to receive a Retirement Benefit or Termination Benefit
in the form of installment payments dies after Retirement or Termination of
Employment but before the distribution of installment payments is complete, the
Participant’s Beneficiary shall receive the undistributed portion of the
Participant’s Account Balance as a Death Benefit, paid to the Beneficiary in a
lump sum 90 days after the date the Committee is provided with satisfactory
proof of the Participant’s death.

ARTICLE 8

TERMINATION BENEFIT DISTRIBUTIONS

 

8.1 Termination Benefit. A Participant who experiences a Termination of
Employment prior to his or her Retirement or death shall receive a complete
distribution of his or her Account Balance as a Termination Benefit.

 

8.2 Form and Timing of Termination Benefit Distribution. The Termination Benefit
shall be paid (in the case of a lump sum) or shall commence (in the case of
installment payments) 90 days (6 months in the case of a “specified employee;”
see Article 4) after the effective date of the Participant’s Termination of
Employment. The Termination Benefit shall be paid as follows:

 

  (a) A Termination Benefit that is less than or equal to $50,000, shall be paid
in a lump sum.

 

  (b) A Termination Benefit that is greater than $50,000, shall be paid in equal
monthly installments (or annual, on the anniversaries of the date payments
commences, if the monthly payment when the payments commence in 2007 or
thereafter would be less than $1,000) over a period of 60 months, calculated in
accordance with Section 3.7.

 

12

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ARTICLE 9

DISABILITY

 

9.1 Effect of Disability on Deferrals. If a Participant experiences a
Disability, no deferrals shall be made under the Plan during the period in which
the Participant is not receiving any payments of Base Annual Salary or Annual
Short Term Incentives due to such Disability. If the Participant returns to
active employment with his or her Employer during the Plan Year in which the
period of Disability began, withholding of deferrals shall resume, provided that
a deferral election was properly made for such Plan Year pursuant to Article 3.
The Participant shall be permitted to make additional deferral elections during
any Annual Enrollment Period that occurs during such period of Disability,
provided that the Participant is otherwise eligible to make deferral elections
during such Annual Enrollment Period; provided however that deferrals shall not
commence pursuant to such election until the Disability ceases and the
Participant returns to active employment with his or her Employer. If the
Participant returns to active employment during a Plan Year for which no
deferral election was properly made in accordance with Article 3, no deferrals
shall be made for the remainder of such Plan Year.

 

9.2 Effect of Disability on Distribution Rights. A Participant who experiences a
Disability shall, for all purposes under this Plan, continue to be considered to
be employed by his or her Employer and shall not be entitled to a distribution
from the Plan as provided under Article 4, until the Committee determines when,
for purposes of this Plan, the Participant has experienced a Termination of
Employment or Retirement.

ARTICLE 10

BENEFICIARY DESIGNATION

 

10.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (primary as well as contingent) to receive
any Death Benefit payable under the Plan to a beneficiary. The Beneficiary
designated under this Plan may be the same as or different from the Beneficiary
designation under any other plan of an Employer in which the Participant
participates.

 

10.2 Beneficiary Designation, Change. A Participant shall designate his or her
Beneficiary by completing a Beneficiary Designation Form, and returning it to
the Committee or its designated agent. A Participant shall have the right to
change a Beneficiary designation by completing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee’s rules and
procedures, as in effect from time to time. Upon the acceptance by the Committee
of a new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Committee shall be entitled to rely on the last
Beneficiary Designation Form filed by the Participant and accepted by the
Committee prior to his or her death.

 

10.3 Receipt by Committee. No designation or change in designation of a
Beneficiary shall be effective until received and accepted by the Committee or
its designated agent. The Committee may reject an ambiguous or incomplete
designation in its discretion.

 

10.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary in accordance with this Article 10, or if all designated
Beneficiaries predecease the Participant or die prior to complete distribution
of the Participant’s benefits, then the

 

13

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Participant’s designated Beneficiary shall be deemed to be his or her surviving
spouse. If the Participant has no surviving spouse, the benefits remaining under
the Plan to be paid to a Beneficiary shall be paid to the care of the executor
or personal representative of the Participant for the benefit of the
Participant’s estate. A person designated as beneficiary by the Participant,
whether primary or contingent, must, if the beneficiary designation does not
specifically provide to the contrary, survive the Participant until at least the
“Payment Date” in order for that Beneficiary to be entitled to be paid the
benefit or the portion thereof then due.

 

10.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, exercisable in its discretion, to cause the Participant’s Employer to
withhold such payments until this matter is resolved to the satisfaction of the
Committee.

 

10.6 Discharge of Obligations. The distribution of a Death Benefit to a
Beneficiary shall fully and completely discharge the Committee and all Employers
from all further obligations under this Plan with respect to the Participant.

ARTICLE 11

LEAVE OF ABSENCE

 

11.1 Paid Leave of Absence. A Participant who is on a paid leave of absence duly
authorized by the Participant’s Employer for any reason shall continue to be
considered employed by the Employer for the duration of such leave of absence,
to the extent permitted under Code Section 409A, and shall be entitled to a
distribution only when the Participant is deemed to experience a Retirement or
Termination of Employment under this Plan, or otherwise as provided under
Article 4. Such Participant’s Annual Deferral Amount shall continue to be
withheld from his or her Base Annual Salary and Annual Short-Term Incentive
during the paid leave of absence, in accordance with Article 3.

 

11.2 Unpaid Leave of Absence. A Participant who is on an unpaid leave of absence
duly authorized by the Participant’s Employer for any reason shall continue to
be considered employed by the Employer for the duration of such leave of
absence, to the extent permitted under Code Section 409A, and shall be entitled
to a distribution only when the Participant is deemed to experience a Retirement
or Termination of Employment under this Plan, or otherwise as provided under
Article 4. No deferrals shall be made under the Plan during any period in which
the Participant is not entitled to receive payments of Base Annual Salary or
Annual Short-Term Incentive (as the case may be) due to such unpaid leave of
absence. If the Participant returns to active employment with his or her
Employer during the Plan Year in which the leave of absence began, withholding
of deferrals at the previously-elected rate shall resume, provided that a
deferral election was properly made for such Plan Year pursuant to Article 3.
The Participant shall be permitted to make additional deferral elections during
any Annual Enrollment Period that occurs during such leave of absence, provided
that the Participant is otherwise eligible to make deferral elections during
such Annual Enrollment Period; provided, however, that deferrals shall not
commence in accordance with such election until the Participant returns to
active employment with his or her Employer. If the Participant returns to active
employment during a Plan Year for which no deferral election was properly made
in accordance with Article 3, no deferrals shall be made for the remainder of
such Plan Year.

 

14

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ARTICLE 12

TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN

 

12.1 Termination of the Plan. The Company reserves the right to terminate the
Plan by the action of its Board of Directors and distribute the Account Balances
of all Participants as provided in Section 12.1 (a), (b) or (c), or under such
other circumstances as permitted under guidance published by the Internal
Revenue Service under Code Section 409A. If the Company terminates the Plan, no
further deferrals or matching contributions shall be made, and the Account
Balance of all Participants will be determined as if the Participant had
experienced a Termination of Employment on the date of Plan termination or, if
Plan termination occurs after the date upon which the Participant becomes
eligible for Retirement, as if the Participant had retired on the date of Plan
termination, and paid to the Participant as described in the applicable
subsection below. Except as otherwise provided in this Section 12.1, the
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under the
Plan as of the date of the Plan’s termination.

 

  (a) Corporate Dissolution or Bankruptcy. The Company may terminate the Plan
within 12 months of a corporate dissolution taxed under Code Section 331 or with
the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided
that all Account Balances are distributed and included in the gross incomes of
Participants and Beneficiaries in the later of (1) the calendar year in which
the Plan termination occurs or (2) the first calendar year in which the payment
is administratively practicable.

 

  (b) Change in Control. The Company may terminate the Plan within 30 days
before or 12 months after a Change in Control Event, provided that all Account
Balances are distributed within 12 months of the effective date of termination,
and that any substantially similar deferred compensation arrangements maintained
by the Company or any Employer also are terminated with all deferred amounts
distributed within 12 months of termination. For purposes of this Section, a
“Change in Control Event” means a change in control of the Company, a change in
effective control of the Company or a change in the ownership of a substantial
portion of the Company’s assets, the occurrence of which is objectively
determinable, all within the meaning of Code Section 409A and applicable
guidance issued thereunder.

 

  (c) Elimination of Account-Based Deferred Compensation Arrangements. The
Company may terminate the Plan at any time, provided that (1) any other deferred
compensation arrangements maintained by the Company or any Employer that
calculate benefits payable to participants based on an account balance are also
terminated; (2) no payments are made to any Participant or Beneficiary under
this Plan within 12 months after the effective date of the Plan’s termination,
except to the extent a payment is otherwise due under Article 5, 6, 7 or 8;
(3) all Account

 

15

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       Balances are completely distributed within 24 months of the effective
date of the Plan’s termination; and (4) neither the Company nor any Employer may
adopt a deferred compensation arrangement that calculates benefits based on an
account balance for a period of five years after the effective date of the
Plan’s termination.

 

12.2 Amendment. The Company may, at any time and for any reason, amend or modify
the Plan in whole or in part by the action of its Board of Directors, and the
Committee (or, if so delegated, the Retirement Committee of the Company) may
make any amendment determined to be required to conform the Plan to the
requirements of Code Section 409A in order to avoid income taxation to
Participants of amounts accumulated hereunder until actually paid to
Participants. No amendment or modification shall have the effect of reducing the
value of a Participant’s Account Balance in existence at the time the amendment
or modification is made (calculated as if the Participant had experienced a
Termination of Employment as of the effective date of the amendment or
modification; or, if the amendment or modification occurs after the date upon
which the Participant becomes eligible for Retirement, the Participant had
retired as of the effective date of the amendment or modification). Except with
respect to Company rights to accelerate payment of benefits upon Plan
termination in the preceding section, no amendment or modification of the Plan
shall affect the rights of any Participant or Beneficiary who is entitled to a
distribution under the Plan as of the effective date of the amendment or
modification.

 

12.3 Effect of Payment. The complete distribution of a Participant’s Account
Balance under Article 6, 7, 8 or 12 of the Plan shall completely discharge all
obligations to the Participant and his or her designated Beneficiaries under
this Plan.

ARTICLE 13

ADMINISTRATION

 

13.1 Committee Duties. This Plan shall be administered by the Executive
Compensation Committee of the Board. Any Employee who is a member of the
Committee shall not be prohibited from being a Participant in this Plan solely
by reason of membership in the Committee. The Committee shall have the authority
in its sole discretion (i) to make, amend, interpret and enforce such rules and
regulations for the administration of this Plan as it deems necessary or
appropriate; and (ii) to decide or resolve any and all questions, including
claims for benefits, and make any interpretations with respect to the Plan that
may arise in connection with the Plan. Notwithstanding the foregoing, the Board
or the Committee may in its discretion, delegate to the Retirement Committee of
the Company (as defined in the Kindred 401(k) Plan) any or all of its
responsibilities hereunder, in which event the actions of such Retirement
Committee shall have the same force and effect as if taken by the Committee.

 

13.2 Agents. In the administration of this Plan, the Committee may, from time to
time, employ agents and delegate to them such administrative duties as it sees
fit (including acting through a duly appointed representative) and may from time
to time consult with counsel who may be counsel to any Employer.

 

16

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13.3 Binding Effect of Decisions. The decision or action of the Committee with
respect to any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.

 

13.4 Indemnification of the Committee. All Employers shall indemnify and hold
harmless the members of the Committee, and in the event of delegation of
responsibility to the Retirement Committee of the Company, the members of the
Retirement Committee, and each of them against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct.

 

13.5 Employer Information. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee on all
matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of Employment
of its Participants, and such other pertinent information as the Committee may
reasonably require.

ARTICLE 14

OTHER BENEFITS AND AGREEMENTS

The benefits provided for a Participant or Beneficiary under the Plan are in
addition to any other benefits available to such Participant or Beneficiary
under any other plan or program for employees of the Participant’s Employer. The
Plan shall supplement and shall not supersede, modify or amend any other such
plan or program except as may otherwise be expressly provided.

ARTICLE 15

CLAIMS PROCEDURES

 

15.1 Presentation of Claim. Any Participant or Beneficiary who believes that he
or she is entitled to benefits under the Plan in an amount greater than those
received (a “Claimant”) may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant from
the Plan. Any claim that relates to the contents of a notice received by the
Claimant from the Plan must be made within 60 days after such notice was
received by the Claimant. Any other claim must be made within 180 days of the
date on which the event that gave rise to the claim occurred. All claims must
state with particularity the determination desired by the Claimant.

 

15.2 Notification of Decision. The Committee shall consider a Claimant’s claim
and shall notify the claimant in writing of its determination within a
reasonable amount of time and not later than 90 days from the date on which the
claim was filed, unless special circumstances require an extension of time, in
which case the Committee shall notify the Claimant of its determination within
180 days of the date on which the claim was filed. In the event that special
circumstances require an extension of time, the Claimant will be provided with
written notice of the extension within the initial 90-day period, which notice
shall explain the circumstances requiring an extension and provide the date on

 

17

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which the Committee expects to render a decision on the claim. If notice is not
provided within the required time period, the claim shall be deemed denied.
Notice of the Committee’s determination shall provide either:

 

  (a) that the Claimant’s requested determination has been made and that the
claim has been allowed in full; or

 

  (b) that the Committee has reached a conclusion that is contrary, in whole or
in part, to the Claimant’s requested determination, in which case such notice
shall set forth in a manner calculated to be understood by the Claimant:

 

  (i) specific reason(s) for the denial of the claim or any part thereof;

 

  (ii) specific reference(s) to pertinent provisions of the Plan upon which such
denial was based;

 

  (iii) a description of any additional material or information necessary for
the Claimant to perfect the claim, and an explanation of why such material or
information is necessary; and

 

  (iv) an explanation of the claim review procedure set forth in Section 15.3
below, including applicable time limits and a statement of such Claimant’s right
to bring a civil action under Section 502(a) of ERISA in the event that the
denial is upheld on review.

 

15.3 Review of a Denied Claim. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, (or 60 days after
the claim is deemed denied) a Claimant (or the Claimant’s duly authorized
representative) may file with the Board (or, if the initial adjudication of the
claim was delegated to the Retirement Committee of the Company, then to the
Committee) (the “Appeal Committee”) a written request for a review of the denial
of the claim. Thereafter, the Claimant (or the Claimant’s duly authorized
representative) shall have the right to:

 

  (a) review documents pertinent to the claim;

 

  (b) submit written comments or other documents or information; and

 

  (c) request a hearing, which the Appeal Committee in its sole discretion may
grant or deny.

When reviewing a denied claim, the Appeal Committee shall take into account all
comments, documents, records and other information submitted by the Claimant (or
his or her duly authorized representative) and relating to the claim, without
regard to whether such material or information was considered during the initial
benefit determination.

 

15.4 Decision on Review. The Appeal Committee shall render a decision on review
within a reasonable period of time and not later than 60 days after the written
request for review is filed, unless a hearing is held or other special
circumstances require additional time, in

 

18

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which case the Appeal Committee must provide the Claimant with written notice of
the extension within the initial 60-day period and must render a decision within
120 days after the written request for review is filed. Any notice of extension
must describe the circumstances requiring the extension and provide a date by
which the Appeal Committee expects to render a decision. If notice is not
provided within the required time period, the claim is deemed denied. Notice of
the decision on review shall be written in a manner calculated to be understood
by the Claimant and, if the claim was denied in whole or in part, shall contain:

 

  (a) specific reason(s) for the decision;

 

  (b) specific reference(s) to the pertinent Plan provisions upon which the
decision was based;

 

  (c) a statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of all documents, records and
other information relevant to the claim; and

 

  (d) a statement of the Claimant’s right to bring a civil action under
Section 502(a) of ERISA.

 

15.5 Legal Action. Compliance by a Claimant with the foregoing provisions of
this Article 15 shall be a mandatory prerequisite to the Claimant’s right to
commence any legal action with respect to any claim for benefits under this
Plan.

ARTICLE 16

TRUST

 

16.1 Establishment of Trust. The Company may in its sole discretion establish a
Trust for the Plan and in that event the Employers shall transfer over to the
Trust such assets as the Employers determine, in their sole discretion, are
necessary to assist in providing funds to meet the Employers’ liabilities
created hereunder. The establishment of a Trust pursuant to this Section 16.1
shall not have the effect of changing the Plan’s unfunded status for purposes of
ERISA.

 

16.2 Interrelationship of the Plan and Trust. If the Company establishes a Trust
pursuant to Section 16.1, the provisions of the Plan shall govern the rights of
a Participant or Beneficiary to receive distributions under the Plan. The
provisions of the Trust shall govern the respective rights of the Employers,
Participants and Beneficiaries, and the creditors of the Employers to the assets
transferred to the Trust. Each Employer shall at all times remain liable to
carry out its obligations under the Plan. Each Employer’s obligations under the
Plan may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer’s obligations under
this Plan.

 

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ARTICLE 17

PROVISIONS RELATED TO OTHER EMPLOYERS

PARTICIPATING IN THE PLAN

 

17.1 General. Any Employer that, with the Board’s consent, adopts this Plan
shall be a “Participating Employer.” Each Participating Employer shall be
subject to the terms and conditions of this Plan as in effect at the effective
date of adoption by the Participating Employer and as subsequently amended from
time to time by the Company, subject to such modifications as are set forth in
the document evidencing the Participating Employer’s adoption of the Plan.
Unless the context of the Plan clearly indicates to the contrary, the term
“Employer” shall be deemed to include each Participating Employer as relates to
its adoption of the Plan. When an entity ceases to be an Employer because it is
no longer a part of the Company or it is no longer managed by an entity in the
Company’s controlled group, the entity shall cease to be a Participating
Employer.

 

17.2 Single Plan. This Plan shall be deemed to be a single plan of all Employers
that have adopted this Plan. Employees may be transferred among Participating
Employers or may be employed simultaneously by more than one Participating
Employer, and no such transfer or simultaneous Employment shall effect a
Termination of Employment or be deemed a Retirement of an Employee.

 

17.3 Company as Agent. Each Participating Employer shall be deemed to have
designated irrevocably the Company as its sole agent for all purposes relating
to the operation and administration of the Plan and for the purpose of amending
the Plan. The Committee shall make any and all rules and regulations which it
shall deem necessary or appropriate to effectuate the purpose of this Article
17, and such rules and regulations shall be binding upon the Company, the
Participating Employers, the Participants and their Beneficiaries.

 

17.4 Termination of Participation. A Participating Employer may at any time
terminate this Plan with respect to its participating Employees by action of its
board of directors to that effect, a certified copy of which shall be delivered
to the Committee, and the continuation of the Plan by the Company and other
Participating Employers shall not be affected. Upon termination of its
participation in the Plan, a Participating Employer shall have discretion to
accelerate payment of benefits to its participating Employees as described in
Section 12.1(a) or (b) in the event of a corporate dissolution, bankruptcy or
change in control, and otherwise in accordance with Section 12.1(c) only if the
Participating Employer is no longer considered a member of a controlled group or
under common control with the Company under Section 414(b) and (c) of the Code.
The termination of the Plan with respect to a Participating Employer’s Employees
shall not effect a termination with respect to an Employee of the Company or
another Participating Employer if such Employee was not employed by the
terminating Participating Employer on the effective date of the termination,
even though he may have been employed by the terminating Participating Employer
at an earlier date, and shall not entitle any Participant to a distribution
until one of the events described in Article 4 has occurred, unless the
Participant receives a distribution pursuant to the terminating Participating
Employer’s right to accelerate payment of benefits upon termination of its
participation in the Plan under this Section.

 

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ARTICLE 18

MISCELLANEOUS PROVISIONS

 

18.1 Unsecured General Creditor Status. No Participant or Beneficiary, or any of
their heirs, successors or assigns, shall have any legal or equitable right,
interest or claim to any property or assets of any Employer. Any and all of each
Employer’s assets shall be, and remain, the general, unpledged, unrestricted
assets of the Employer. An Employer’s obligation under the Plan shall be merely
that of an unfunded and unsecured promise to pay money in the future, and a
Participant shall have only an unsecured contractual right to the amounts, if
any, that may become payable hereunder, against the Company or a particular
Employer.

 

18.2 Employer’s Liability. An Employer’s liability for the payment of benefits
shall be defined only by this Plan document. An Employer shall have no
obligation to any Participant under the Plan except as expressly provided in
this Plan document.

 

18.3 Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt, the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are expressly declared to be, unassignable and
non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant’s or any other
person’s bankruptcy or insolvency. The preceding sentences shall apply to the
creation, assignment or recognition of any right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order is determined by the Committee or its agent to be a qualified domestic
relations order, as defined in Section 414(p) of the Code. Payment will be made
to an alternate payee under a qualified domestic relations order at the time and
in the form provided in the order, provided, however, that no order that
attempts to provide for a payment form not otherwise available under the Plan
will be considered a qualified domestic relations order or accepted by the Plan.
An order will not be deemed not to be qualified merely because it provides for
payment of the alternate payee’s interest at a time when the Participant is not
yet entitled to a distribution. Nothing in this Section 18.3 gives any
Participant a right to receive a distribution prior to the occurrence of one of
the events described in Article 4.

 

18.4 No Contract of Employment. The terms and conditions of this Plan shall not
be deemed to constitute a contract of employment between any Employer and any
Participant. Such employment hereby is acknowledged to be an “at will”
employment relationship that can be terminated at any time for any reason, with
or without cause, unless expressly provided otherwise in a separate written
employment agreement. Nothing in this Plan shall be deemed to give a Participant
the right to be retained in the service of any Employer, or to interfere with
the right of any Employer to discipline or discharge the Participant at any
time.

 

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18.5 Furnishing Information. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information requested by
the Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations as the
Committee may deem necessary.

 

18.6 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were also in the feminine in all cases where they would
so apply; and whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.

 

18.7 Captions. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.

 

18.8 Governing Law. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the Commonwealth of Kentucky
without regard to its conflicts of laws principles, and in all events shall be
construed and interpreted to conform to the requirements of Code Section 409A in
order to avoid income taxation of amounts payable hereunder unless and until
distributed to Participants.

 

18.9 Notices. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below, or given in
accordance with such other method as deemed acceptable by the Committee:

Kindred Healthcare, Inc.

Attention: General Counsel

680 South Fourth Street

Louisville, KY 40202

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.

Any notice or filing required or permitted to be given to a Participant or
Beneficiary under this Plan shall be sufficient if in writing and hand-delivered
or sent by mail to the last known address of the Participant.

 

18.10 Successors. The provisions of this Plan shall bind and inure to the
benefit of each Employer and its successors and assigns and each Participant and
the Participant’s designated Beneficiaries.

 

18.11 Spouse’s Interest. Any interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass to the
Participant upon the death

 

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of the spouse and shall not be transferable by such spouse in any manner,
including but not limited to such spouse’s will, nor shall such interest pass
under any law of intestate succession.

 

18.12 Incompetent. If the Committee determines in its discretion that a benefit
under this Plan is to be paid to a minor, a person declared incompetent or to a
person incapable of handling the disposition of his or her property, the
Committee may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or incapable person. The Committee may require proof of minority, incompetency,
incapacity or guardianship, as it may deem appropriate prior to distribution of
the benefit. Any payment of a benefit pursuant to this Section 18.12 shall be a
payment for the account of the Participant or Beneficiary, as the case may be,
and shall be a complete discharge of any liability under the Plan for such
payment amount.

 

18.13 Court Order. The Committee is authorized to make any payments directed by
court order in any action in which the Plan or the Committee has been named as a
party.

 

18.14 Distribution in the Event of Taxation.

 

  (a) General. Notwithstanding any provision of the Plan to the contrary, if for
any reason all or any portion of a Participant’s Account Balance under this Plan
becomes income-taxable to the Participant for Federal tax purposes prior to
actual receipt, the Participant may petition the Committee for a distribution of
that portion of his or her Account Balance that is subject to current taxation.
Upon the grant of such a petition, which grant shall not be unreasonably
withheld, the Participant’s Employer shall distribute to the Participant
immediately available funds in an amount equal to the taxable portion of his or
her Account Balance (which amount shall not exceed the Participant’s unpaid
vested Account Balance under the Plan). Any distribution made pursuant to this
Section 18.14(a) shall be made within 90 days of the date on which the
Participant’s petition is granted. Such a distribution shall affect and reduce
any benefits payable to the Participant under this Plan.

 

  (b) Trust. If the Company establishes a Trust pursuant to Article 16, the
Trust is terminated and benefits are distributed from the Trust to a
Participant, the Participant’s benefits under this Plan shall be reduced to the
extent of such distribution.

 

18.15 Taxes and Withholding. A Participant’s Employer(s) or the trustee of the
Trust, if any, established pursuant to Article 16 may withhold from any
distribution under this Plan any and all income and employment taxes required to
be withheld by applicable law, with respect to the Participant.

 

18.16 Severability. If and to the extent any provision hereof is held to be void
or unenforceable, the Plan shall remain in full force and effect with such
provision severed as though such provision had not been included in the original
Plan.

 

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18.17 Accounts Accumulated Prior to December 31, 2004. Account Balances
accumulated prior to December 31, 2004, along with all interest credited
thereto, were separately accounted for under this Plan, with the provisions of
the 1998 Plan (including any payment elections thereunder) controlling their
disposition until the adoption of the Second Amendment and Restatement of the
Plan. Effective upon the adoption of this Second Amendment and Restatement of
the Plan, the provisions set forth herein shall control all Account Balances
regardless of when such funds were accumulated.

IN WITNESS WHEREOF, the Company has caused this Second Amendment and Restatement
of the Plan to be executed, effective as of January 1, 2005, but actually on the
date set forth below.

 

KINDRED HEALTHCARE, INC. By:  

/s/ Richard E. Chapman

Title:  

Executive Vice President and Chief Administrative and Information Officer

Date:  

November 7, 2006

 

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