Document:

Notice of Renewal of Renewal Group 1 - Master Lease No. 4

 Exhibit 10.3 

 
 

 
 Notice of Renewal 
 April 26, 2012 
 Ventas Realty, Limited Partnership 

c/o Ventas, Inc. 
 10350 Ormsby Park Place, Suite
300 
 Louisville, Kentucky 40223 

Attention: Lease Administration 
 Ventas Realty,
Limited Partnership 
 c/o Ventas, Inc. 

10350 Ormsby Park Place, Suite 300 
 Louisville,
Kentucky 40223 
 Attention: General Counsel 
 Re:    Second Amended and Restated Master Lease Agreement No. 4 – Notice of Renewal 
 Ladies and Gentlemen: 
 Kindred Healthcare, Inc., a Delaware corporation formerly
known as Vencor, Inc. (“Kindred”), and Kindred Healthcare Operating, Inc., a Delaware corporation formerly known as Vencor Operating, Inc. (“Operator”; and together with Kindred and permitted successors and assigns
of Operator and Kindred, “Tenant”) hereby give this renewal notice effective as of the date hereof to Ventas Realty, Limited Partnership, a Delaware limited partnership (together with its successors and assigns,
“Lessor”) of their exercise of the five-year renewal option for Renewal Group 1, as more particularly set forth on Schedule A attached hereto, pursuant to Section 19.1 of that certain Second Amended and Restated
Master Lease Agreement No. 4 (the “Master Lease”) by and between Lessor and Tenant dated as of April 27, 2007. 
 Tenant expressly reserves its right to deliver one or more additional renewal notices in accordance with Section 19.1 of the Master Lease or other master lease agreements currently in effect between
Lessor and Tenant. 
 If you have any questions or concerns, please feel free to contact the undersigned at (502) 596-7556.

  
  
  

 
  
 

 

 Sincerely, 

 

			
	KINDRED HEALTHCARE, INC.
		
	By:	 	/s/    Gregory C. Miller
		 	Name: Gregory C. Miller
		 	Title: Chief Development Officer

  

			
	KINDRED HEALTHCARE OPERATING, INC.
		
	By:	 	/s/    Gregory C. Miller
		 	Name: Gregory C. Miller
		 	Title: Chief Development Officer

  
  
  

 
  
  

 
  
 Second Amended
and Restated Master Lease 
 Agreement No. 4 — Notice of Renewal 

 Schedule A 

 

											
	
    Facility    
 ID
	  	Name	  	City	  	    State    	  	Lease
    Expiration Date    	  	
    Renewal    
 Group

	146	  	Rose Manor Health Care Center	  	Durham	  	NC	  	April 30, 2013	  	1
	 148
	  	Village Square Nursing & Rehab Center	  	San Marcos	  	CA	  	April 30, 2013	  	1
	 209
	  	Valley View Health Care Center	  	Elkhart	  	IN	  	April 30, 2013	  	1
	 225
	  	Aspen Park Healthcare	  	Moscow	  	ID	  	April 30, 2013	  	1
	 350
	  	Valley Gardens Healthcare & Rehab Center	  	Stockton	  	CA	  	April 30, 2013	  	1
	 481
	  	South Central Wyoming HC & Rehab	  	Rawlins	  	WY	  	April 30, 2013	  	1
	 566
	  	Windsor Rehab & Healthcare Center	  	Windsor	  	CT	  	April 30, 2013	  	1
	 585
	  	Great Barrington Rehab & Nursing Center	  	Great Barrington	  	MA	  	April 30, 2013	  	1
	 4645
	  	Kindred Hospital So. Florida Ft. Lauderdale	  	Ft. Lauderdale	  	FL	  	April 30, 2013	  	1
	 4685
	  	Kindred Hospital Houston	  	Houston	  	TX	  	April 30, 2013	  	1Employment  Agreement between Kindred Healthcare Operating Inc. - Diaz

 EXHIBIT 10.4 
 EMPLOYMENT AGREEMENT 
 This EMPLOYMENT AGREEMENT
(the “Agreement”) is made as of the 17th day of
May, 2012 (the “Effective Date”), by and between Kindred Healthcare Operating, Inc., a Delaware corporation (the “Company”), and Paul J. Diaz (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 as 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 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 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 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. 

  
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 (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. 
 (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. 

  
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 (c) Good Reason. Executive’s employment may be terminated during
the Term 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) 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 Effective 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 

  
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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 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. 

  
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 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. 
 (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

  
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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. 
 (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. 

  
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 (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 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. 

  
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 (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. 
 (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 

  
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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 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. 

  
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 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. 
 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

  
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(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 November 13, 2009 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
December 18, 2008, 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 2012 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, 2013, 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/ Benjamin A. Breier
		 	 Benjamin A. Breier

President and Chief Operating Officer

  

			
	For purposes of Section 7 and as guarantor of Company’s obligations under this Agreement
	
	KINDRED HEALTHCARE, INC.
		
	By:	 	/s/ Benjamin A. Breier
		 	 Benjamin A. Breier

President and Chief Operating Officer

  

	
	/s/ Paul J. Diaz
	PAUL J. DIAZ

  
 15 

 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. 

  
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 (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 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. 

  
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 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 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
November 13, 2009. 

  
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