Employment Agreement



 Exhibit 10.7 
 EMPLOYMENT AGREEMENT 
 This EMPLOYMENT
AGREEMENT (this “Agreement”) is made as of the 18th day of December, 2008 (the “Effective Date”), by and between Kindred
Healthcare Operating, Inc., a Delaware corporation (the “Company”), and Frank J. Battafarano (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; 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 term of this Agreement shall be for the period commencing on the Effective Date and ending February 28, 2011 (the “Term”), subject to earlier termination
as provided in Section 6 hereof. 
 2. Duties. Executive is engaged by the Company as Chief Operating Officer of Kindred
Healthcare, Inc., 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. 
 4. Compensation. As compensation for services hereunder
rendered, Executive shall receive during the Term: 
 (a) A base salary (“Base Salary”) of not 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 in its sole discretion. 







 (b) During the Term, in addition to Base Salary, Executive will be eligible to
participate in the Company’s short-term and long-term incentive plans, as such plans may be in effect from time to time. The Executive’s full-year target under the short-term incentive plan is 75% of Base Salary (the “Target
Bonus”) (but the actual percentage awarded could be higher or lower in accordance with the terms of the relevant plan). The Executive’s full-year target under the long-term incentive plan is 45% of Base Salary (the “Target Long-Term
Bonus”) (but the actual percentage awarded could be higher or lower in accordance with the terms of the relevant plan). 
 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, as in effect from time to time. The Executive shall schedule the timing of
such paid time off in a reasonable manner. The Executive also may be entitled to such other leave, with or without compensation, as shall be mutually agreed by the Company and Executive. 
 (d) Executive may incur reasonable expenses for promoting the Company’s business, including expenses for entertainment, travel and
similar items. The Company shall reimburse Executive for all such reasonable expenses in accordance with the Company’s reimbursement policies and procedures, as may be in effect from time to time. 
 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 his 

  

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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 by Executive during
the Term for Good Reason. “Good Reason” shall exist upon the occurrence, without Executive’s express written consent, of any of the following events: 
 (1) 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); 
 (2) the Company shall materially reduce the Base Salary or annual bonus opportunity of Executive; 
 (3) 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 
 (4) a material breach by the Company of Section 5(a) 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 

  

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not constitute “Good Reason” provided that such event is remedied within 60 days after receipt of such written notice. 
 (d) Expiration of the Term. In the event the Executive is an employee of the Company on February 28, 2011, the
Executive’s employment with the Company shall terminate as of such date and shall, for purposes of this Agreement, be deemed a termination by the Company other than for Cause. 
 (e) 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. 
 (f) 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 (other than as set forth in Section 6(d) hereof) 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, (iii) February 28, 2011, if Executive’s employment is terminated as a result of the expiration of the Term as provided for in Section 6(d)
hereof and (iv) 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 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
Section 7(e) hereof and the conditions set forth below, Executive shall be entitled to the following additional payments: 
 (a) Death or Disability. If, during the Term, Executive’s employment 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) an amount equal to the product of (i) the annual bonus to which the Executive would have been entitled for 

  

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the year of termination of employment had Executive’s employment with the Company not been terminated, as determined in accordance with
Section 4(b) hereof, if any, multiplied by (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 such 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. 
 (b) Good Reason; Other than for Cause. If the
Company shall terminate Executive’s employment other than for Cause (including for this purpose, any termination pursuant to Section 6(d) hereof, but excluding a termination of employment 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, a lump sum cash severance payment in an amount equal to the sum of (i) the Base Salary Executive would have received during the period commencing on the Date of Termination and ending on the conclusion of the Term (the “Term
Remainder”) had Executive remained an employee of the Company for the duration of such period, (ii) the product of (A) the number of full calendar years in the Term Remainder and (B) the Target Bonus, and (iii) in the event the
Executive’s Date of Termination occurs after February 28, 2010, an additional $300,000. 
 (2) 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 to which the Executive would have been entitled for the year of termination of employment had Executive’s employment with the Company not been terminated, as determined in accordance with Section 4(b) hereof, if
any, multiplied by (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 such 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. 
 (3) To the extent not yet paid, the Company shall pay to Executive any amounts earned
by the Executive prior to the Date of Termination under the Company’s long-term incentive plan. Such amount shall be paid on the same schedule and in the same manner as if the Executive had remained employed with the Company through settlement
of such long-term incentive award, as 

  

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determined in accordance with the terms and conditions of the Company’s long-term incentive plan. 
 (4) Notwithstanding anything in the Company’s long-term incentive plan to the contrary, in the event the Executive’s Date of
Termination occurs after February 28, 2010, Executive shall not be entitled to payment of any amounts under the Company’s long-term incentive plan with respect to the 2010 and 2011 performance periods. 
 (5) In the event the Executive’s Date of Termination occurs (A) prior to or on February 28, 2010, then for the Term
Remainder, or (B) after February 28, 2010, then for a period of thirty-eight 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 Company’s
health insurance plan and dental insurance plan; or if the Executive is prohibited from participating in such plan, the Company shall otherwise provide such benefits. Executive shall be responsible for any employee contributions for such insurance
coverage. Following the applicable 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 the applicable period as the applicable qualifying
event (i.e. as a termination of employment for purposes of ERISA Section 603(2)) and with the concurrent loss of coverage occurring on the same date, to the extent allowed by law. 
 (6) In the event the Executive’s Date of Termination occurs (A) prior to or on February 28, 2010, then for the Term
Remainder, or (B) after February 28, 2010, then for a period of thirty-eight months following the Date of Termination, Company shall maintain in force, at its expense, the Executive’s life insurance in effect under the Company’s
voluntary life insurance benefit plan as of the Date of Termination. Executive shall be responsible for any employee contributions for such insurance coverage. For purposes of clarification, the portion of the premiums in respect of such voluntary
life insurance for which Executive and Company are responsible, respectively, shall be the same as the portion for which Executive and Company are responsible, respectively, immediately prior to the Date of Termination. 
 (7) In the event the Executive’s Date of Termination occurs (A) prior to or on February 28, 2010, then for the Term
Remainder, or (B) after February 28, 2010, then for a period of thirty-eight months following the Date of Termination, the Company 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 the applicable continuation period, Executive shall be entitled to receive such benefits, and for such duration, as the applicable 

  

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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. 
 (8) 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. 
 (9) In the event the Executive’s Date of Termination occurs (A) prior to or on February 28, 2010, then for the Term
Remainder, or (B) after February 28, 2010, then for a period of three-years following the Date of Termination, any outstanding, unvested stock options, or performance units held by Executive on the Date of Termination shall continue to
vest in accordance with their original terms (including any related performance measures) (the “Tail Vesting Period”) as if Executive had remained an employee of the Company through the end of such period. In addition, Executive shall have
the right to continue exercise any such options during the applicable Tail Vesting Period; provided that in no event shall the Executive be entitled to exercise any such option beyond the original expiration date of such option. With respect to any
outstanding shares of restricted stock held by Executive as of the Date of Termination, any such shares of restricted stock that would have vested (i) in the event such Date of Termination occurs prior to or on February 28, 2010, then
during the Term Remainder or (ii) in the event such Date of Termination occurs after February 28, 2010, then during the period commencing on the Date of Termination and ending on the three-year anniversary thereof, in each case had
Executive remained an employee of the Company through the end of such period shall be immediately vested as of the Date of Termination. 
 (10) Company shall adopt such amendments to its benefit plans referred to in this Agreement, if any, as are necessary to effectuate the provisions of this Agreement. To the extent an applicable plan cannot be so
amended due to nondiscrimination or other requirements applicable to the plan, Company shall adopt or implement an alternative written plan or program to accomplish this purpose. 
 (11) 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 

  

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other than due to such Executive’s death) during the Term, this Agreement shall terminate without further additional obligations to Executive 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 owed to the Executive hereunder; or in the event of no designated beneficiary, the remaining payments
shall be made to Executive’s estate. 
 (e) General Release of Claims. Notwithstanding anything herein to the
contrary, the amounts payable pursuant to this Section 7 are subject to the condition that Executive has delivered to the Company an executed copy of an irrevocable general release of claims in a form satisfactory to the Company within the 60
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)(5), (6) and (7) of this Section 7 shall continue in effect after separation
from service pending the execution and delivery of such release for a period not to exceed 60 days; provided further that if such release is not executed and delivered within such 60-day period, Executive shall reimburse the Company for the full
cost of coverage during such period. 
 (f) Six Month Delay for Specified Employee. 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 commencement of any payments or benefits otherwise payable hereunder is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments 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 payments or benefits ultimately paid or provided 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 the Executive’s death), together with interest during such
period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of the Wall Street Journal, or other equivalent publication if the Wall Street Journal no longer publishes such information, on the first publication
date of the Wall Street Journal or equivalent publication after the date of Executive’s separation from service (provided that if more than one such Prime Rate is published on any given day, the highest of such published rates shall be used).

 8. Disputes. Any dispute or controversy arising under, out of, or in connection with this Agreement shall, at the election and upon
written demand of either party, be finally determined and settled by binding arbitration in the City of Louisville, Kentucky, in accordance with the Labor Arbitration rules and procedures of the American Arbitration 

  

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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 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, other than those payments and benefits provided for under Section 7(b)(3) and Section 7(b)(4) hereof, shall be offset by any payments payable under the Change in Control Severance Agreement. 
 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. 
  

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 13. Non-Competition; Non-solicitation. 
 (a) From the Effective Date until the Date of Termination and for a period of one year after the Date of Termination (the “Restricted
Period”), Executive shall not directly or indirectly, individually or on behalf of any person other than the Company, 
 (1) own, operate, manage or otherwise engage in a Competitive Business or enter the employ of, or render any services to, any Competitive Business (or any division thereof). For purposes of this Agreement, “Competitive Business”
means any individual, corporation, partnership, limited liability company, business or other entity, whether for profit or not-for-profit, which engages or attempts to engage, in the operation, management, or ownership of any business or other
endeavor, in any way similar or identical to the business, operations, or services that the Company or any of its affiliates currently, or at any time during the Term, operates, manages, owns or provides, or has specific plans to do so; provided,
however, that the term “Competing Business” shall exclude Executive’s ownership of up to five percent (5%) of the securities of a company publicly traded on a national securities exchange acquired in open market transactions;

 (2) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the Effective
Date) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or any of its affiliates of which it is reasonable to expect that Executive is aware; or 
 (3) 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 nothing in this Section 13(a)(3)
shall prevent Executive from soliciting any person who responds to a general media advertisement or solicitation. 
 (b) 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-competition or non-solicitation covenant, as applicable, 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 Restricted 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. 
  

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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: 
 Frank J. Battafarano 
 680 South Fourth Street 
 Louisville, KY 40202 
 If to Company: 
 Kindred Healthcare Operating, Inc. 
 680 South Fourth Street 
 Louisville, KY 40202 
 Attn: General Counsel 
 15. Waiver of Breach and Severability. The waiver by either party of a breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach by either party. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and the remaining provisions of the Agreement
shall continue to be binding and effective. 
 16. Entire Agreement; Amendment. This 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. 
 21. Cancellation of Prior Agreement. The Executive hereby acknowledges and agrees that this Agreement is intended to and does hereby replace that certain employment 

  

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agreement dated March 1, 2008, 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/ Paul J. Diaz

		 	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

		 	Paul J. Diaz
		 	President and Chief Executive Officer
	
	 /s/ FRANK J. BATTAFARANO

	FRANK J. BATTAFARANO


  

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