Employment Agreement



 Exhibit 10.3 
 EMPLOYMENT AGREEMENT 
 This EMPLOYMENT
AGREEMENT is made as of the 18th day of December, 2008 (the “Execution Date”), by and between Kindred Healthcare Operating, Inc., a
Delaware corporation (the “Company”), and Paul J. Diaz (the “Executive”). 
 WITNESSETH: 
 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 as President and Chief Executive Officer; and 
 WHEREAS, the
Executive Compensation Committee of the Board of Directors of the Parent has determined that it is in the best interests of the Company and Parent to enter into this Agreement. 
 NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and intending to be legally bound hereby,
the Company and Executive agree as follows: 
 1. Employment. The Company hereby agrees to employ Executive and Executive hereby agrees
to be employed by the Company on the terms and conditions herein set forth. The initial term (the “Term”) of this Agreement shall be for a three-year period commencing on December 18, 2008 (the “Effective Date”). The Term shall
be automatically extended by one additional day for each day beyond the Effective Date that the Executive remains employed by the Company until such time as the Company elects to cease such extension by giving written notice of such election to the
Executive. In such event, the Agreement shall terminate on the third anniversary of the date of such election notice, unless a later date is specified. 
 2. Duties. Executive is engaged by the Company as its President and Chief Executive Officer. The Executive will have the same titles with the Parent. Executive shall perform such duties commensurate with his
title and as otherwise designated by the Board of Directors of the Parent (the “Board”). 
 3. Extent of Services.
Executive, subject to the direction and control of the Board, shall have the power and authority commensurate with his executive status and necessary to perform his duties hereunder. During the Term, Executive shall devote his entire working time,
attention, labor, skill and energies to the business of the Company, and shall not, without the consent of the Company, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other
pecuniary advantage. Notwithstanding the foregoing, it shall not be a breach or 

  

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violation of this Agreement for the Executive to (i) serve on corporate boards with the prior approval of the Board, (ii) serve on civic or
charitable boards or committees, or (iii) manage personal investments, so long as such activities do not reasonably interfere with or reasonably detract from the performance of the Executive’s responsibilities to the Company in accordance
with this Agreement. 
 4. Compensation. As compensation for services hereunder rendered, Executive shall receive during the Term:

 (a) A base salary (“Base Salary”) of no less than his current base salary per year payable in equal installments
in accordance with the Company’s normal payroll procedures. Executive may receive increases in his Base Salary from time to time, as approved by the Board. 
 (b) In addition to Base Salary, Executive shall be entitled to receive bonuses and other incentive compensation as the Board may approve
from time to time, including participation in the Company’s annual short-term incentive compensation plan and its long-term incentive compensation plan, in accordance with the terms and conditions of such plans as may be in effect from time to
time. 
 5. Benefits. 
 (a) Executive shall be entitled to participate in any and all pension benefit, welfare benefit (including, without limitation, medical, dental, disability and group life insurance coverages) and fringe benefit plans
from time to time in effect for executives of the Company and its affiliates. 
 (b) Executive shall be entitled to
participate in other bonus, stock option, or other incentive compensation plans of the Company and its affiliates in effect from time to time for executives of the Company. 
 (c) Executive shall be entitled to paid time off benefits of the Company and its affiliates in effect from time to time for executives of
the Company but such paid time off shall be equivalent to at least 26 days of paid time off per year. The Executive shall schedule the timing of such paid time off in a reasonable manner. The Executive may also be entitled to such other leave, with
or without compensation, as shall be mutually agreed by the Company and Executive. 
 (d) Executive may incur reasonable
expenses for promoting the Company’s business, including expenses for entertainment, travel and similar items. The Company shall reimburse Executive for all such reasonable expenses 

  

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

 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 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 Executive’s 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 and a reasonable opportunity of not less than 30 days to remedy or correct the purported breaching
conduct. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. 
 (c) Good Reason. Executive’s employment may be terminated
during the Term by Executive for Good Reason. “Good Reason” shall exist upon the 

  

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occurrence, without Executive’s express written consent, of any of the following events: 
 (i) a material adverse change in Executive’s authority, duties or responsibilities (including, without limitation the Company
assigning to Executive duties of a substantially nonexecutive or nonmanagerial nature) (other than any such change directly attributable to the fact that the Company is no longer publicly owned); 
 (ii) the Company shall materially reduce the Base Salary or annual bonus opportunity of Executive; 
 (iii) the Company shall require Executive to relocate Executive’s principal business office more than 30 miles from its location on
the Execution Date; or 
 (iv) a material breach by the Company of Section 5(a), Section 5(e) or Section 9(c)
of this Agreement. 
 For purposes of this Agreement, “Good Reason” shall not exist until after Executive has given
the Company notice of the applicable event within 90 days of the initial occurrence 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 30 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 

  

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shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing Executive’s or the Company’s rights hereunder. 
 (e) Date of Termination.
“Date of Termination” means (i) if Executive’s employment is terminated by the Company for Cause, or by Executive for Good Reason, the later of the date specified in the Notice of Termination or the date that is one day after the
last day of any applicable cure period, (ii) if Executive’s employment is terminated by the Company other than for Cause or Disability, or Executive resigns without Good Reason, the Date of Termination shall be the date on which the
Company or Executive notified Executive or the Company, respectively, of such termination and (iii) if Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of Executive
or the Disability Effective Date, as the case may be. 
 7. Obligations of the Company Upon Termination. Following any termination of
Executive’s employment hereunder, the Company shall pay Executive his Base Salary through the Date of Termination and any amounts owed to Executive pursuant to the terms and conditions of the benefit plans and programs of the Company at the
time such payments are due. In addition, subject to Section 7(f) hereof and the conditions set forth below, Executive shall be entitled to the following additional payments: 
 (a) Death or Disability. If, during the Term, Executive’s employment shall terminate by reason of Executive’s death or
Disability, the Company shall pay to Executive (or his designated beneficiary or estate, as the case may be) the prorated portion of any Target Bonus (as defined below) Executive would have received for the year of termination of employment. Such
amount shall be paid on the date when such amounts would otherwise have been payable to the Executive if Executive’s employment with the Company had not terminated as determined in accordance with the terms and conditions of the applicable
short-term incentive plan of the Company. 
 For purposes of this Agreement: “Target Bonus” shall mean the full
amount of the targeted annual short-term incentive bonus that would be payable to the Executive, assuming the targeted performance criteria on which such annual short-term incentive bonus is based were deemed to be satisfied, in respect of services
for the calendar year in which the date in question occurs. 
  

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 (b) Good Reason; Other than for Cause. If, during the Term, the Company shall
terminate Executive’s employment other than for Cause (but not for Disability), or the Executive shall terminate his employment for Good Reason: 
 (1) in satisfaction of the annual bonus Executive would otherwise be eligible to receive under the short-term incentive plan in respect of the calendar year in which the Date of Termination occurs, the Company shall
pay to Executive an amount equal to the product of (i) the annual bonus, if any, to which the Executive would have been entitled for the year in which the Date of Termination occurs had Executive’s employment with the Company not been
terminated, as determined in accordance with the terms and conditions of the applicable short-term incentive plan of the Company as provided in Section 4(b) hereof, and (ii) a fraction, the numerator of which is the number of days in the
period beginning on the first day of the calendar year in which the Date of Termination occurs and ending on the Date of Termination and the denominator of which is 365. Such amount shall be paid on the date when such amounts would otherwise have
been payable to the Executive if Executive’s employment with the Company had not terminated as determined in accordance with the terms and conditions of the applicable short-term incentive plan of the Company. 
 (2) Within 14 days following Executive’s Date of Termination, the Company shall pay to Executive a cash severance payment in an
amount equal to three times the sum of the Executive’s Base Salary and Target Bonus as of the Date of Termination. 
 (3)
For a period of three years following the Date of Termination (the “Benefit Continuation Period”), the Executive shall be treated as if he had continued to be an executive for all purposes under the Company’s health insurance
plan and dental insurance plan; or if the Executive is prohibited from participating in such plans, the Company shall otherwise provide such benefits. Executive shall be responsible for any employee contributions for such insurance coverage.
Following the Benefit Continuation Period, the Executive shall be entitled to receive continuation coverage under Part 6 of Title I of ERISA (“COBRA Benefits”) by treating the end of this period as the applicable qualifying event (i.e., as
a termination employment) for purposes of ERISA Section 603(2)) and with the concurrent loss of coverage occurring on the same date, to the extent allowed by applicable law. 
  

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 (4) For the Benefit Continuation Period, Company shall maintain in force, at its expense,
the Executive’s life insurance in effect under the Company’s life insurance benefit plan as of the Date of Termination. Executive shall be responsible for any employee contributions for such insurance coverage. For purposes of
clarification, the portion of the premiums in respect of such voluntary life insurance for which Executive and Company are responsible, respectively, shall be the same as the portion for which Company and Executive are responsible, respectively,
immediately prior to the Date of Termination. 
 (5) For the Benefit Continuation Period, the Company shall provide short-term
and long-term disability insurance benefits to Executive equivalent to the coverage that the Executive would have had if he had remained employed under the disability insurance plans applicable to Executive on the Date of Termination. Executive
shall be responsible for any employee contributions for such insurance coverage. Should Executive become disabled during such period, Executive shall be entitled to receive such benefits, and for such duration, as the applicable plan provides. For
purposes of clarification, the portion of the premiums in respect of such short-term and long-term disability benefits for which Executive and Company are responsible, respectively, shall be the same as the portion for which Executive and Company
are responsible, respectively, immediately prior to the Date of Termination. 
 (6) Within fifteen (15) days after
the Date of Termination, the Company shall pay to Executive a cash payment in an amount, if any, necessary to compensate Executive for the Executive’s unvested interests under the Company’s retirement savings plan which are forfeited by
Executive in connection with the termination of Executive’s employment. 
 (7) The Company may adopt such amendments to
its executive benefit plans, if any, as are necessary to effectuate the provisions of this Agreement. 
 (8) Any outstanding
unvested stock options, stock performance units or similar equity awards (other than restricted stock awards) held by Executive on the Date of Termination shall continue to vest in accordance with their original terms (including any related
performance measures) for the duration of the Benefit Continuation Period as if Executive had remained an employee of the Company through the end of such period and any such stock option, stock performance unit or other equity award (other than
restricted stock awards) that has not vested as of the conclusion of 

  

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such period shall be immediately cancelled and forfeited as of such date. In addition, Executive shall have the right to continue to exercise any outstanding
vested stock options held by Executive during the Benefit Continuation Period; provided that in no event shall Executive be entitled to exercise any such option beyond the original expiration date of such option. Any outstanding restricted stock
award held by Executive as of the Date of Termination that would have vested during the Benefit Continuation Period had Executive remained an employee of the Company through the end of such period shall be immediately vested as of the Date of
Termination and any restricted stock award that would not have vested as of the conclusion of such period shall be immediately cancelled and forfeited as of such date. 
 (9) Following the Executive’s Date of Termination, the Executive shall receive the computer which Executive is utilizing as of the
Date of Termination. In addition, Executive shall be entitled to the furniture in Executive’s office suite as of the Date of Termination. In addition, until the end of the second taxable year following the year in which the Date of Termination
occurs, the Company shall provide Executive with an office suite and administrative assistant, each substantially comparable to the office suite and administrative assistant that were furnished to Executive as of the Date of Termination. 

(10) Notwithstanding anything in this Agreement to the contrary, in no event shall the provision of in-kind benefits pursuant to this
Section 7 during any taxable year of Executive affect the provision of in-kind benefits pursuant to this Section 7 in any other taxable year of Executive. 
 (c) Cause; Other than for Good Reason. If Executive’s employment shall be terminated for Cause or Executive terminates
employment without Good Reason (and other than due to such Executive’s death) during the Term, this Agreement shall terminate without further additional obligations to Executive except as otherwise provided under this Agreement. 
 (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. 
  

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 (e) If the Company is unable to provide the Executive with any benefits required
hereunder by reason of the termination of the Executive’s employment pursuant to this Section 7, then the Company shall pay the Executive cash equal to the value of the benefit that otherwise would have accrued for the Executive’s
benefit under the plan, for the period during which such benefits could not be provided under the plans, said cash payments to be made within 45 days after the end of the year for which such contributions would have been made or would have accrued.

 (f) General Release of Claims. Notwithstanding anything herein to the contrary, the amounts payable pursuant to
this Section 7 are subject to the condition that Executive has delivered to the Company an executed copy of an irrevocable general release of claims in a form substantially similar to Exhibit A within the 60 day period immediately following the
Executive’s separation from service (the “Release Period”). Any payment that otherwise would be made prior to Executive’s delivery of such executed release pursuant to this Section 7 shall be paid on the first business day
following the conclusion of the Release Period; provided that in-kind benefits provided pursuant to subsections (b)(3), (4) and (5) of this Section 7 shall continue in effect after separation from service pending the execution and
delivery of such release for a period not to exceed 60 days; provided further that if such release is not executed and delivered within such 60-day period, Executive shall reimburse the Company for the full cost of coverage during such period.

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

  

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service (provided that if more than one such Prime Rate is published on any given day, the highest of such published rates shall be used). 
 8. Disputes. Any dispute or controversy arising under, out of, or in connection with this Agreement shall, at the election and upon written demand
of either party, be finally determined and settled by binding arbitration in the City of Louisville, Kentucky, in accordance with the National Employment 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 and its successors and assigns. 
 (c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, or any business of the Company for which Executive’s services are principally performed, to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As used this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
 10. Other Severance Benefits. Executive
hereby agrees that in consideration for the payments to be received under Section 7(b) of this Agreement, Executive waives any and all rights to any payments or benefits under any severance plans or arrangements of the Company or 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 otherwise payable to
Executive under Section 7(b) hereof 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. 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; provided, however, that the
foregoing shall not restrict Executive or any other person from conducting general solicitations or advertisements not directed specifically at employees of the Company or its affiliates, or from employing any employee who responds to any such
general solicitation or advertisement or who otherwise initiates a request for employment. 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 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. 
 13. No Mitigation. Executive shall have no duty to mitigate his damages by seeking other employment and, should
Executive actually receive compensation from any such other employment, the payments required hereunder (including, without limitation, the provision of in-kind benefits provided under Section 7(b) hereof) shall not be reduced or offset by any
such compensation. Further, the Company’s and Parent’s obligations to make any payments hereunder shall not be subject to or affected by any setoff, counterclaims or defenses which the Company or Parent may have against Executive or
others. 
  

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 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: 
 Paul J. Diaz 
 680 South Fourth Avenue 
 Louisville, KY 40202 
 Facsimile: 502-596-4141 
 If to Company: 
 Kindred Healthcare Operating, Inc. 
 680 South Fourth Avenue 
 Louisville, KY 40202 
 Attn: General Counsel 
 Facsimile: 502-596-4075 
 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 and the Change in Control Severance Agreement dated December 18, 2008 contain 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. 
  

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 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the same instrument. 
 20. Indemnification. 
 (a) The Parent and Executive agree that the Indemnification Agreement previously entered into between the Parent and Executive shall
remain in full force and effect. 
 (b) No claim, action, suit or proceeding of any kind related to this Agreement, the
Executive’s employment with the Company, or otherwise may be asserted or brought by the Company, the Parent or any of their affiliates more than one year after the date that the Company, the Parent or any affiliate first obtains knowledge of,
or should have obtained knowledge of, any facts or allegations giving rise to such claim, action, suit or proceeding, and any such claim, action, suit or proceeding asserted or brought after such one-year period shall be barred. This
Section 20(b) shall survive the expiration or termination, for any reason, of this Agreement. 
 21. Cancellation of Prior
Agreement. The Executive hereby acknowledges and agrees that this Agreement is intended to and does hereby replace that certain employment agreement dated October 28, 2003, and any amendments thereto, between the Company and the Executive,
and that such agreement is cancelled, terminated and of no further force and effect. 
 22. Section 409A. If any provision of
this Agreement (or any award of compensation or benefits provided under this Agreement) would cause Executive to incur any additional tax or interest under Section 409A of the Code, the Company shall reform such provision to comply with 409A
and agrees to maintain, to the maximum extent practicable without violating 409A of the Code, the original intent and economic benefit to Executive of the applicable provision; provided that nothing herein shall require the Company to provide
Executive with any gross-up for any tax, interest or penalty incurred by Executive under Section 409A of the Code. Furthermore, notwithstanding anything herein to the contrary, no payment or benefit payable under this Agreement shall be
required to be paid or provided in calendar year 2008 if the payment of such payment or benefit would constitute an impermissible acceleration under Section 409A of the Code and the transition guidance thereunder and such payment shall instead
be paid on January 1, 2009, without interest. 
  

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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/ Edward L. Kuntz

		 	Edward L. Kuntz
		 	Executive Chairman
	
	For purposes of Section 7 and as guarantor of Company’s obligations under this Agreement
	
	KINDRED HEALTHCARE, INC.
		
	By:	 	 /s/ Edward L. Kuntz

		 	Edward L. Kuntz
		 	Executive Chairman
	
	 /s/ PAUL J. DIAZ

	PAUL J. DIAZ


  

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 Exhibit A 
 Employee Acknowledgment and Release. Employee expressly acknowledges that the payments hereunder include consideration for the settlement, waiver, release and discharge of any and all claims or actions arising
from Employee’s employment, the terms and conditions of Employee’s employment, or Employee’s termination of employment with the Company, including claims of employment discrimination, wrongful termination, unemployment compensation or
any claim arising under law or equity, express or implied contract, tort, public policy, common law or any federal, state or local statute, ordinance, regulation or constitutional provision. 
 (a) The claims released and discharged by Employee include, but are not limited to, claims arising under Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991; The Older Workers Benefit Protection Act (“OWBPA”); the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended; the Americans with Disabilities Act (“ADA”); the Fair
Labor Standards Act; the Employee Retirement Income and Security Act of 1974, as amended; the National Labor Relations Act; the Labor Management Relations Act; the Equal Pay Act of 1963; the Pregnancy Discrimination Act of 1978; the Rehabilitation
Act of 1973; workers’ compensation laws; Kentucky Wage and Hours Laws, claims before the Kentucky Commission for Human Rights and Kentucky Revised Statutes sections 341 et seq. 
 (b) Employee recognizes that by signing this Agreement, he may be giving up some claim, demand or cause of action which he now has or may have, but
which is unknown to him. 
 (c) Employee agrees not to file any charges, complaints, lawsuits or other claims against the Company that
relate in any manner to the Employee’s employment or the resignation or termination of Employee’s employment with the Company. 
 (d) Employee expressly waives any claims against the Company for alleged race, color, religious, sex, national origin, age or disability discrimination or harassment under Title VII of the Civil Rights Act of 1964, as amended; the Civil
Rights Act of 1991; the Equal Pay Act of 1963; the Americans with Disabilities Act; the Family Medical Leave Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Rehabilitation Act of 1973; or any
other federal or state law protecting against such discrimination or harassment. 
 (e) Employee acknowledges that the Company has not and
does not admit that it engaged in any discrimination, wrong doing or violation of law on the Company’s part concerning Employee. Employee and the Company agree that by 

  

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entering into this Agreement no discrimination, wrong doing, or violation of law has been acknowledged by the Company or assumed by Employee. Employee and
the Company further acknowledge that this Agreement is not an admission of liability. 
 Confidentiality. Employee and the Company
agree to keep the contents and terms of this Agreement confidential and not to voluntarily disclose the terms or amount of settlement to third parties. The only exception is that Employee may reveal the terms of this Agreement to his spouse,
attorney, tax preparer or as otherwise required by law. The Company may reveal the terms of this Agreement to its attorneys, accountants, financial advisors, managerial employees, and any disclosure required by law or business necessity. In the
event that Employee breaches the confidentiality of this Agreement, Employee understands that the Company shall have the right to pursue all appropriate legal relief, including, but not limited to, attorneys’ fees and costs. 
 Public Statement. Employee further agrees not to make derogatory or negative remarks or comments about the Company, its affiliates and their
respective directors, officers, shareholders, agents or employees, to any third parties, and not to otherwise defame the Company in any manner. In the event that Employee defames the Company, its affiliates and their respective directors, officers,
shareholders, agents or employees, Employee understands that the Company shall have the right to pursue all appropriate legal relief, including but not limited to, attorneys’ fees and costs, and reimbursement of all monies paid hereunder.
Company agrees not to make derogatory or negative remarks or comments about Employee to any third parties, not to otherwise defame the Employee in any manner. In the event that the Company defames Employee, Company understands that the Employee
shall have the right to pursue all appropriate legal relief, including but not limited to, attorneys’ fees and costs. 
 Confidential
Information. At no time shall Employee divulge, furnish, or make accessible to anyone any confidential knowledge or information about the Company’s businesses or operations (except as required by law or order of court or other governmental
agency) or any of the clients, patients, customers or suppliers of the Company or with respect to any other confidential aspect of the businesses of the Company. Employee understands and agrees that any violation of this provision will cause the
Company irreparable harm which cannot adequately be compensated by an award of money damages. As a result, Employee agrees that, in addition to any other remedy the Company may have, a violation of this Agreement may be restrained by issuance of an
injunction by any court of competent jurisdiction. Employee further agrees to accept service of process by first class or certified United States mail. 
 Cooperation. Employee agrees that should the Company request Employee’s cooperation in connection with litigation, government investigations or other administrative or legal proceeding, Employee shall
cooperate fully with the Company or 

  

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its designated agents. Employee further agrees to cooperate fully in disclosing to the Company or its designated agents, any information that Employee
obtained during the course and scope of his employment with the Company, and to which other employees of the Company were not privy. 
 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 Employee incurred in connection therewith, including any litigation to enforce any arbitration award. 
 Non-solicitation. For a period of one year from the date hereof (collectively, the “Non-solicitation Period”), Employee 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 Employee or any other person, corporation, limited liability company, partnership, sole proprietorship or other entity; provided, however, that the foregoing shall not restrict Employee or any other person from
conducting general solicitations or advertisements not directed specifically at employees of the Company or its affiliates, or from employing any employee who responds to any such general solicitation or advertisement or who otherwise initiates a
request for employment. 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 Employee 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 Employee is in violation of any covenant contained herein, for any reason whatsoever. 
 Indemnification. Nothing herein shall be construed to terminate or limit the Company’s indemnification obligations under the Indemnification
Agreement dated as of October 28, 2003 between the Parent and Employee or paragraph 11 of Employee’s Change-in-Control Severance Agreement dated December 18, 2008. 
  

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