Exhibit 10.1

CONSENT NO. 3 AND WAIVER

CONSENT NO. 3 AND WAIVER (this “Consent”) dated as of January 19, 2007, pursuant
to the $400,000,000 Amended and Restated Credit Agreement dated as of June 28,
2004 (as heretofore amended, the “Credit Agreement”) among KINDRED HEALTHCARE,
INC. (the “Borrower”), the LENDERS party thereto, and JPMORGAN CHASE BANK, N.A.
(formerly known as JPMorgan Chase Bank), as Administrative Agent and Collateral
Agent.

W I T N E S S E T H:

WHEREAS, the Borrower has informed the Agent and the Lenders that (a) each of
Bayberry Care Center, L.L.C., Care Center of Rossmoor, L.L.C., Pacific Coast
Care Center, L.L.C., Siena Care Center, L.L.C. and Smith Ranch Care Center,
L.L.C. (each, a “Transaction Subsidiary”) proposes to lease (each such lease, a
“Proposed Lease”) a Healthcare Facility from Ocadian Care Centers, LLC
(“Ocadian”) (each such Healthcare Facility, an “Ocadian Facility”), (b) each
Ocadian Facility is subject to a mortgage guaranteed by the Department of
Housing and Urban Development (“HUD”) and (c) HUD is willing to consent to each
Proposed Lease only if the Lenders agree not to require any Leasehold Mortgage
with respect to such Proposed Lease and further agree to release any Accounts of
any Transaction Subsidiary relating to operations at the applicable Ocadian
Facility or services rendered by a Transaction Subsidiary at the applicable
Ocadian Facility (the “Transaction Accounts”) from the Security Interests of the
Security Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1. Defined Terms. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement has the meaning
assigned to such term in the Credit Agreement.

SECTION 2. Future Assets To Be Added To Collateral; Limited Release of Liens.
(a) The Agent and the Required Lenders hereby (but subject to the provisions of
clauses (b) and (c)) (i) waive compliance by the Borrower with the provisions of
Section 5.09(c) of the Credit Agreement to the extent (but solely to the extent)
that such provisions apply to any Ocadian Facility leased by any Transaction
Subsidiary and (ii) agree that, contemporaneously with such Transaction
Subsidiary entering into a Proposed Lease of such Ocadian Facility, the
Transaction Accounts of such Transaction Subsidiary (but no other assets) shall
be automatically released from the Security Interests of the Security Agreement.
For the avoidance of doubt, while the foregoing waiver and consent are in
effect, the Transaction Accounts shall not be included in the calculation of the
Borrowing Base.

(b) The waiver and agreement set forth in clause (a) shall each automatically
terminate with respect to an Ocadian Facility contemporaneously with such
Ocadian Facility no longer being subject to any mortgage guaranteed by HUD (or,
if earlier, upon HUD no longer restricting the ability of the applicable
Transaction Subsidiary to grant a Leasehold Mortgage with respect its leasehold
interest in such Ocadian Facility and a Lien with respect to the Transaction
Accounts in favor or the Agent). While the waiver

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and agreement set forth in clause (a) are in effect, the Borrower shall, and
shall cause each Transaction Subsidiary to, ensure that no Lien over the
leasehold interest of any such Transaction Subsidiary in any Ocadian Facility or
over any Transactions Accounts is granted to any other Person (other than the
Agent).

(c) From and after the termination of the waiver and agreement set forth in
clause (a) as contemplated by clause (b) with respect to any Ocadian Facility
(i) the provisions of Section 5.09(c) of the Credit Agreement shall apply to the
leasehold interest of the applicable Transaction Subsidiary in such Ocadian
Facility and, if such lease is of a Material Real Property, the Borrower shall
cause the applicable Transaction Subsidiary to attempt in good faith to amend
such lease to conform to the requirements of the last sentence of
Section 5.09(c) of the Credit Agreement (unless such lease already conforms to
such requirements), (ii) the Borrower shall cause the applicable Transaction
Subsidiary to execute and deliver any and all documents, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements), that may be required under any applicable
law, or that the Administrative Agent may reasonably request, to grant and
perfect a Lien on the Transaction Accounts of such Transaction Subsidiary to the
Agent and (iii) the Transaction Accounts of such Transaction Subsidiary may be
included in the calculation of the Borrowing Base so long as such Transaction
Accounts satisfy the applicable eligibility criteria for inclusion therein.

(d) The Required Lenders hereby authorize and direct the Agent to execute and
deliver all release documents and any other consents, agreements or other
instruments reasonably requested and which are reasonably satisfactory to the
Agent to give effect to the foregoing provisions of this Section (without the
requirement of consent from any Lender), in each case at the Borrower’s sole
cost and expense.

SECTION 3. Representations Correct; No Default. The Borrower represents and
warrants that (i) the representations and warranties contained in the Financing
Documents are true as though made on and as of the date hereof and will be true
on and as of the Consent Effective Date (as defined below) as though made on and
as of such date; provided that those representations and warranties that speak
only of a specific date shall only speak as of such date and (ii) no Default has
occurred and is continuing on the date hereof and no Default will occur or be
continuing on the Consent Effective Date.

SECTION 4. Counterparts. This Consent may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

SECTION 5. Effectiveness. (a) This Consent shall become effective as of the date
hereof on the date (the “Consent Effective Date”) when the Administrative Agent
shall have received duly executed counterparts hereof signed by the Borrower and
the Required Lenders (or, in the case of any Lender as to which an executed
counterpart shall not have been received, the Administrative Agent shall have
received facsimile or other written confirmation from such party of execution of
a counterpart hereof by such Lender).

(b) Except as expressly set forth herein, the consents and waivers contained
herein shall not constitute consents to departure from or waivers of any term or
condition

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of the Credit Agreement or any other Financing Document, and all such terms and
conditions shall remain in full force and effect and are hereby ratified and
confirmed in all respects.

SECTION 6. Governing Law. THIS CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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

 

KINDRED HEALTHCARE, INC., as

Borrower

By:  

/s/ Hank Robinson

Name:   Hank Robinson Title:   Senior V.P. of Tax and Treasurer

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ALLIED IRISH BANKS, P.L.C.

By:

 

/s/ Martin S. Chin

 

Name:   Martin S. Chin Title:   Senior Vice President

 

ALLIED IRISH BANKS, P.L.C.

By:

 

/s/ Eanna P. Mulkere

 

Name:   Eanna P. Mulkere Title:   Assistant Vice President

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THE CIT GROUP/BUSINESS CREDIT, INC.

By:

 

 

Name:   Title:  

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CITICORP NORTH AMERICA, INC.

By:

 

 

Name:   Title:  

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CITICORP USA, INC. By:  

/s/ William Washburn

Name:   William Washburn Title:   Director/Vice President

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FIFTH THIRD BANK, KENTUCKY, INC. By:  

/s/ Richard G. Whipple

Name:   Richard G. Whipple Title:   Vice President

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GENERAL ELECTRIC CAPITAL CORPORATION By:  

/s/ Dennis W. Cloud

Name:   Dennis W. Cloud Title:   Duly Authorized Signatory

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JPMORGAN CHASE BANK, N.A., as

Administrative Agent, Collateral Agent

and Lender

By:  

/s/ Dawn Lee Lum

Name:   Dawn Lee Lum Title:   Vice President

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MERRILL LYNCH CAPITAL

CORPORATION, a division of Merrill

Lynch Business Financial Services, Inc.

By:  

/s/ Paula Berry

 

Name:   Paula Berry Title:   V.P.

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NORTH FORK BUSINESS CAPITAL CORP. By:  

/s/ Robert R. Wallace

Name:   Robert R. Wallace Title:   Vice President

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PNC BANK, N.A. By:  

/s/ Patricia S. Robertson

 

Name:   Patricia S. Robertson Title:   Senior Vice President

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SIEMENS FINANCIAL SERVICES, INC. By:  

/s/ Mark Picillo

 

Name:   Mark Picillo Title:   Vice President

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U.S. BANK NATIONAL ASSOCIATION By:  

/s/ David A. Wombwell

Name:   David A. Wombwell Title:   Senior Vice President

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UBS AG, STAMFORD BRANCH By:  

/s/ Irja R. Otsa

Name:   Irja R. Otsa Title:   Associate Director   Banking Products   Services,
US By:  

/s/ Mary E. Evans

Name:   Mary E. Evans Title:   Associate Director   Banking Products   Services,
US

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THE FOOTHILL GROUP, INC.

By:  

/s/ Richard Bohannon

 

Name:   Richard Bohannon Title:  

S.V.P.