Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 1st day of
January, 2006 (the “Effective Date”), by and between Kindred Healthcare
Operating, Inc., a Delaware corporation (the “Company”), and Gregory C. Miller
(the “Executive”).

 

W I T N E S S E T H:

 

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

 

WHEREAS, the 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 (the
“Term”) specifying the effective date of such notice. In such event, the
Agreement shall terminate on the first anniversary of the effective date of such
election notice.

 

2. Duties. Executive is engaged by the Company as Senior Vice President of
Development and Financial Planning, reporting directly to Paul J. Diaz,
President and Chief Executive Officer.

 

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

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

 

(a) A base salary of $240,000 per year (“Base Salary”) payable in equal
installments in accordance with the Company’s normal payroll procedures.
Executive may receive increases in his Base Salary from time to time, as
approved by the Board.

 

(b) Executive will be eligible to participate in the Company’s short-term
incentive plan and long-term incentive plan in 2006, and in each subsequent full
or partial year of employment.

 

5. Benefits.

 

(a) Executive shall be entitled to participate in any and all pension benefit
(whether tax qualified or non-qualified), welfare benefit (including, without
limitation, medical, dental, disability and group life insurance coverages) and
fringe benefit plans from time to time in effect for officers of the Company and
its affiliates following the Company’s standard waiting periods, if any.

 

(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) Executive shall be entitled to earn paid time off each year up to a maximum
of 208 hours per year, subject to the Company’s policies. 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.

 

(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.

 

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 30th

 

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day after receipt of such notice by Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, Executive shall not have
returned to full-time performance of Executive’s duties. For purposes of this
Agreement, “Disability” shall mean Executive’s absence from his full-time duties
hereunder for a period of 90 days due to disability as defined in the long-term
disability plan provided to Executive by the Company.

 

(b) Cause. The Company may terminate Executive’s employment during the Term for
Cause. For purposes of this Agreement, “Cause” shall mean the Executive’s
(i) conviction of or plea of nolo contendere to a crime involving moral
turpitude; or (ii) willful and material breach by Executive of his duties and
responsibilities, which is committed in bad faith or without reasonable belief
that such breaching conduct is in the best interests of the Company and its
affiliates, but with respect to (ii) only if the Board adopts a resolution by a
vote of at least 75% of its members so finding after giving the Executive and
his attorney an opportunity to be heard by the Board. 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.

 

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

 

(i) the Company shall assign to Executive duties of a substantially nonexecutive
or nonmanagerial nature;

 

(ii) an adverse change in Executive’s status or position as an executive officer
of the Company, including, without limitation, an adverse change in Executive’s
status or position as a result of a diminution in Executive’s duties and
responsibilities (other than any such change directly attributable to the fact
that the Company is no longer publicly owned);

 

(iii) the Company shall (A) materially reduce the Base Salary or bonus
opportunity of Executive, or (B) materially reduce his benefits and perquisites
(other than pursuant to a uniform reduction applicable to all similarly situated
executives of the Company);

 

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(iv) the Company shall require Executive to relocate Executive’s principal
business office more than 30 miles, provided that the Executive and the Company
acknowledge that Executive’s principal business office is 680 South Fourth
Street, Louisville, Kentucky 40202; or

 

(v) the failure of the Company to obtain the assumption of this Agreement as
contemplated by Section 9(c).

 

For purposes of this Agreement, “Good Reason” shall not exist until after
Executive has given the Company notice of the applicable event within 90 days of
such event and which is not remedied within 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 30-day
period and the Company commences reasonable steps within such 30-day period to
remedy such event and diligently continues such steps thereafter until a remedy
is effected, such event shall not constitute “Good Reason” provided that such
event is remedied within 60 days after 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.

 

(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

 

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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 the termination of
Executive’s employment hereunder for any reason, the Company shall pay Executive
his Base Salary through the Date of Termination and any amounts owed to
Executive pursuant to the terms and conditions of the benefit plans and programs
of the Company at the time such payments are due. In addition, subject to
Executive’s execution of a general release of claims in form satisfactory to the
Company, Executive shall be entitled to the following additional payments:

 

(a) Death or Disability. If, during the Term, Executive’s employment shall
terminate by reason of Executive’s death or Disability, the Company shall pay to
Executive (or his designated beneficiary or estate, as the case may be) the
prorated portion of any Target Bonus (as defined below) Executive would have
received for the year of termination of employment. Such amount shall be paid
within 30 days of the date when such amounts would otherwise have been payable
to the Executive if Executive’s employment had not terminated.

 

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

 

(1) Within 14 days of Executive’s Date of Termination, the Company shall pay to
Executive (i) the prorated portion of the Target Bonus for Executive for the
year in which the Date of Termination occurs, and (ii) an amount equal to 1.5
times the sum of the Executive’s Base Salary and Target Bonus as of the Date of
Termination.

 

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

 

(2) For a period of 18 months following the Date of Termination, the Executive
shall be treated as if he had continued to be an Executive for all purposes
under the Parent’s Health Insurance Plan and Dental Insurance Plan; or if the
Executive is prohibited from participating in such plan, the Company or Parent
shall otherwise provide such benefits. Executive shall be responsible for any
employee contributions for such insurance coverage. Following this continuation
period, the Executive

 

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shall be entitled to receive continuation coverage under Part 6 of Title I of
ERISA (“COBRA Benefits”) treating the end of this period as a qualifying event
based on a loss of coverage due to the termination of the Executive’s employment
to the extent allowed by law.

 

(3) For a period of 18 months following the Date of Termination, Parent shall
maintain in force, at its expense, the Executive’s life insurance in effect
under the Parent’s voluntary life insurance benefit plan as of the Date of
Termination. Executive shall be responsible for any employee contributions for
such insurance coverage.

 

(4) For a period of 18 months following the Date of Termination, 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 he
remained employed under the disability insurance plans applicable to Executive
on the Date of Termination. Executive shall be responsible for any employee
contributions for such insurance coverage. Should Executive become disabled
during such period, Executive shall be entitled to receive such benefits, and
for such duration, as the applicable plan provides.

 

(5) To the extent not already vested pursuant to the terms of such plan, the
Executive’s interests under the Parent’s retirement savings plan shall be
automatically fully (i.e., 100%) vested, without regard to otherwise applicable
percentages for the vesting of employer matching contributions based upon the
Executive’s years of service with the Company.

 

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

 

(7) Executive shall be entitled to an additional 18 months of vesting for
purposes of all outstanding stock option awards and restricted stock awards and
Executive will have an additional 18 months following the Date of Termination in
which to exercise such stock options.

 

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

 

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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.

 

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

 

9. Successors.

 

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

 

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

 

(c) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, or any business of the Company for which
Executive’s services are principally performed, to assume expressly and agree to
perform this 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 in 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 this Agreement, Executive waives any and all
rights to any payments or benefits under any severance plans or arrangements of
the Company or its 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 hereunder shall be offset by any payments payable
under the Change in Control Severance Agreement.

 

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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 his damages by
seeking other employment and, should Executive actually receive compensation
from any such other employment, the payments required hereunder 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-solicitation. During the Term and for a period of one year thereafter
(collectively, the “Non-solicitation Period”), Executive shall not directly or
indirectly, individually or on behalf of any person other than the Company, aid
or endeavor to solicit or induce any of the Company’s or its affiliates’
employees to leave their employment with the Company or such affiliates in order
to accept employment with Executive or any other person, corporation, limited
liability company, partnership, sole proprietorship or other entity. If the
restrictions set forth in this section would otherwise be determined to be
invalid or unenforceable by a court of competent jurisdiction, the parties
intend and agree that such court shall exercise its discretion in reforming the
provisions of this Agreement to the end that the Executive will be subject to a
non-solicitation covenant which is reasonable under the circumstances and
enforceable by the Company. It is agreed that no adequate remedy at law exists
for the parties for violation of this section and that this section may be
enforced by any equitable remedy, including specific performance and injunction,
without limiting the right of the Company to proceed at law to obtain such
relief as may be available to it. The running of the Non-solicitation Period
shall be tolled for any period of time during which Executive is in violation of
any covenant contained herein, for any reason whatsoever. This Section 13 shall
survive this Agreement.

 

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:

 

If to Executive:

Gregory C. Miller

680 South Fourth Street

Louisville, KY 40202

 

If to Company:

Kindred Healthcare Operating, Inc.

680 South Fourth Street

Louisville, KY 40202

Attn: General Counsel

 

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

 

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.

 

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.

 

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

 

KINDRED HEALTHCARE OPERATING, INC.

By:

 

/s/ Paul J. Diaz

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Paul J. Diaz

   

President and Chief Executive Officer

Solely for the purpose

of Section 7 and Section 9

KINDRED HEALTHCARE, INC.

By:

 

/s/ Paul J. Diaz

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Paul J. Diaz

   

President and Chief Executive Officer

/s/ Gregory C. Miller

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GREGORY C. MILLER

 

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