Document:

Employment Agreement dated as of December 18, 2008 - Richard E. Chapman

 Exhibit 10.21 
 EMPLOYMENT AGREEMENT 
 This EMPLOYMENT
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 Richard E. Chapman (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 Executive’s continued employment by the Company; and 
 WHEREAS, the Executive Compensation Committee of the Board of Directors of Parent (the “Board”) 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 of this Agreement shall be for a one-year period commencing on the Effective Date. The Term shall be automatically extended by one
additional day for each day beyond the Effective Date that the Executive remains employed by the Company until such time as the Company elects to cease such extension by giving written notice of such election to the Executive. In such event, the
Agreement shall terminate on the first anniversary of the effective date of such election notice. 
 2. Duties. Executive is engaged
by the Company in an executive capacity as Executive Vice President and Chief Administrative and Information Officer. 
 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 working
time, attention, labor, skill and energies to the business of the Company, and shall not, without the consent of the Company, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage. 
  

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 4. Compensation. As compensation for services hereunder rendered, Executive shall receive during
the Term: 
 (a) A base salary (“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. 
 (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 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 Executive 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 such
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 four weeks of paid vacation each year. The Executive shall schedule the timing of such vacations 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 in accordance with the Company’s reimbursement policies
and procedures, as may be in effect from time to time. 
  

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 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 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 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, or ; 
  

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 (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) 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 thirty days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s
rights hereunder. 
 (e) Date of Termination. “Date of Termination” means (i) if Executive’s
employment is terminated by the Company for Cause, or by Executive for Good Reason, the later of the date specified in the Notice of Termination or the date that is one day after the last day of any applicable cure period, (ii) if
Executive’s employment is terminated by the Company other than for Cause or Disability, or Executive resigns without Good Reason, the Date of Termination shall be the date on which the Company or Executive notified Executive or the Company,
respectively, of such termination and (iii) if Executive’s employment is terminated 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.

  

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 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 Executive 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) 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. 
 (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 

  

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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 1.5 times the sum of the Executive’s Base Salary and Target Bonus as of the Date of Termination. 
 (3)
For a period of 18 months 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 or ERISA (“COBRA Benefits”) by treating the end of this 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 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 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 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 he remained employed under the disability insurance plans applicable to Executive on the Date of Termination. Executive shall be responsible for any employee contributions for
such insurance coverage. Should Executive become disabled during such period, Executive shall be entitled to receive such benefits, and for such duration, as the applicable plan provides. For purposes of 

  

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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) Company shall 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) 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. 
 (10) Following the Executive’s Date of Termination, the Executive shall receive the computer which Executive is utilizing as of the
Date of Termination. 
  

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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 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) 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)(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.

 (f) 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 Executive’s 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 

  

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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 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 plans, programs, contracts or arrangements of the Company or their respective affiliates that provide for severance
payments or benefits upon a termination of employment, other than the Change in Control Severance Agreement between the Company and Executive (the “Severance Agreement”); provided that any payments payable to Executive under
Section 7(b) hereof shall be offset by any payments payable under the 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. 
 13. Non-solicitation. During the Term and for a period of one year thereafter (collectively, the “Non-solicitation Period”), Executive
shall not directly or indirectly, individually or on behalf of any person other than the Company, aid or endeavor to solicit or induce any of the Company’s or its affiliates’ employees to leave their employment with the Company or such
affiliates in order to accept employment with Executive or any other person, corporation, limited liability company, partnership, sole proprietorship or other entity; 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. 
  

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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: 
 Richard E. Chapman

 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. 
  

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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. 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 July 28, 1998, and any amendments thereto, between the Company (or its predecessor) and the
Executive, and that such agreement is cancelled, terminated and of no further force and effect. 
 21. 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
	
	KINDRED HEALTHCARE, INC.
		
	By:	 	 /s/ Paul J. Diaz

		 	Paul J. Diaz, President and
		 	Chief Executive Officer
	
	 /s/ Richard E. Chapman

	RICHARD E. CHAPMAN

  

 –13–Change-in-Control Severance Agreement - Richard E. Chapman

 Exhibit 10.22 
 CHANGE-IN-CONTROL SEVERANCE AGREEMENT 
 THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the
“Agreement”) is made as of December 18, 2008, by and between KINDRED HEALTHCARE OPERATING, INC., a Delaware corporation, (the “Company”) and RICHARD E. CHAPMAN (the “Employee”). 
 RECITALS: 
 A. The
Employee is employed by the Company, a wholly owned subsidiary of Kindred Healthcare, Inc. (the “Parent”). 
 B. The Company
recognizes that the Employee’s contribution to the Company’s growth and success has been and continues to be significant. 
 C.
The Company wishes to encourage the Employee to remain with and devote full time and attention to the business affairs of the Company and wishes to provide income protection to the Employee for a period of time in the event of a Change in
Control. 
 NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
 AGREEMENT: 
 1. Definitions. 
 a.
“Base Salary” shall mean the Employee’s regular annual rate of base pay in gross as of the date in question as elected under Paragraph 3(a). 
 b. “Cause” shall mean the Employee’s (i) conviction of or plea of nolo contendere to a crime involving
moral turpitude; or (ii) willful and material breach by Employee 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, but with
respect to (ii) only if the Board of Directors of Parent (the “Board”) adopts a resolution by a vote of at least 75% of its members so finding after giving the Employee and his attorney an opportunity to be heard by the Board.

 c. “Change in Control” The term “Change in Control” shall mean
any one of the following events occurring after the date of this Agreement: 
 (i) An acquisition (other than directly from Parent) of any
voting securities of Parent (the “Voting Securities”) by any “Person” (as defined in Paragraph 1(f) hereof) immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 under the 1934
Act) of 20% or more of the combined voting power of Parent’s then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in an acquisition by
(i) Parent or any of its subsidiaries, (ii) an employee benefit plan (or a trust forming a part thereof) maintained by Parent or any of its subsidiaries or (iii) any Person in connection with an acquisition referred to in the
immediately preceding clauses (i) and (ii) shall not constitute an acquisition which would cause a Change in Control. 
 (ii) The
individuals who, as of December 18, 2008, constituted the Board of Directors of Parent (the “Incumbent Board”) cease for any reason to constitute over 50% of the Board; provided, however, that if the election, or nomination for
election by Parent’s stockholders, of any new director was approved by a vote of over 50% of the Incumbent Board, such new director shall, for purposes of this Section 1(c)(ii), be considered as though such person were a member of the
Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described
in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of Parent (a “Proxy Contest”), including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest. 
 (iii) Consummation of a merger, consolidation or
reorganization involving Parent, unless each of the following events occurs in connection with such merger, consolidation or reorganization: 
 (A) the stockholders of Parent, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, over 50% of the combined voting power of all
voting securities of the corporation resulting from such merger or consolidation or reorganization (the “Surviving Company”) over which any Person has Beneficial Ownership in substantially the same proportion as their ownership of the
Voting Securities immediately before such merger, consolidation or reorganization; 
 (B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute over 50% of the members of the board of directors of the Surviving Company; and 
 (C) no Person (other than Parent, any of its subsidiaries, any employee benefit plan (or any trust forming a part thereof) maintained by Parent, the
Surviving Company or any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of 20% or more of the then outstanding Voting Securities) has Beneficial Ownership of 20% or more of the combined voting
power of the Surviving Company’s then outstanding voting securities. 
  

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 (iv) Approval by Parent’s stockholders of a complete liquidation or dissolution of Parent.

 (v) Approval by Parent’s stockholders of an agreement for the sale or other disposition of all or substantially all of the assets of
Parent to any Person (other than a transfer to a subsidiary of Parent). 
 (vi) Any other event that the Board shall determine constitutes
an effective Change in Control of Parent. 
 (vii) Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely
because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by Parent which, by reducing the number of
Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person; provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting
Securities by Parent, and after such share acquisition by Parent, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur. 
 d. “Change-in-Control Date” shall mean the date
immediately prior to the effectiveness of the Change in Control. 
 e. “Good Reason” The Employee shall have
good reason to terminate employment with the Company if (i) the Employee’s title, duties, responsibilities or authority is reduced or diminished from those in effect on the Change-in-Control Date without the Employee’s written
consent; (ii) the Employee’s compensation is reduced; (iii) the Employee’s benefits are reduced, other than pursuant to a uniform reduction applicable to all managers of the Company; or (iv) the Employee is asked to relocate
his office to a place more than 30 miles from his business office on the Change-in-Control Date. 
 f.
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in
Section 13(d). 
 g. “Target Bonus” shall mean the Employee’s target annual short-term incentive
bonus for the calendar year in which the date in question occurs. 
 h. “Termination of Employment” shall mean
(i) the termination of the Employee’s employment by the Company other than such a termination in connection with an offer of immediate reemployment by a successor or assign of the Company or a 

  

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purchaser of the Company or its assets under terms and conditions which would not permit the Employee to terminate his employment for Good Reason or
otherwise during any Window Period; or (ii) the Employee’s termination of employment with the Company for Good Reason or during any Window Period. 
 i. “Window Period” shall mean either of two 30-day periods of time commencing 30 days after (i) a Change in Control and (ii) one year after a Change in Control. 
 2. Term. The initial term of this Agreement shall be for a three-year period commencing on December 18, 2008 (the “Effective
Date”) (the “Term”). The Term shall be automatically extended by one additional day for each day beyond the Effective Date that the Employee 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 Employee. In such event, the Agreement shall terminate on the third anniversary of the effective date of such election notice. Notwithstanding the foregoing, this Agreement shall automatically
terminate if and when the Employee terminates his employment with the Company or two years after the Change-in-Control Date, whichever first occurs. 
 3. Severance Benefits. If at any time following a Change in Control and continuing for two years thereafter, the Company terminates the Employee without Cause, or the Employee terminates employment with
the Company either for Good Reason or during any Window Period, then as compensation for services previously rendered the Employee shall be entitled to the following benefits: 
 a. Cash Payment. The Employee shall be paid a cash severance payment equal to three times the greater of: 
 (i) the sum of the Employee’s Base Salary and Target Bonus as of the Termination of Employment, or 
 (ii) the sum of the Employee’s Base Salary and Target Bonus as of the Change-in-Control Date. 
 Payment shall be made in a single lump sum upon the effective date of Employee’s Termination of Employment. For purposes of clarification, the Employee shall not be
entitled to payment of an annual bonus (or pro-rated portion thereof) pursuant to the applicable short-term incentive plan of the Company for the year in which the Employee’s Termination of Employment occurs. Notwithstanding anything herein to
the contrary, if at the time of Employee’s separation from service Employee 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 this Section 3(a) is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payment to which Employee 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 Employee) 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 

  

 -4- 

 
seventh month following such separation from service (or, if earlier, the date of Employee’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 Employee’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). 
 b. Continuation of Benefits. 
 (i) For a period of three years following the Termination of Employment (the “Benefit Continuation Period”), the Employee 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 Employee is prohibited from participating in such plans, the Company shall otherwise provide such benefits. Employee shall be responsible for any employee contributions for such insurance coverage.
Following the Benefit Continuation Period, Employee 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 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 applicable law. 
 (ii) For the Benefit Continuation Period, the Company shall maintain in force, at its expense, the Employee’s life insurance in effect under the
Company’s voluntary life insurance benefit plan as of the Change-in-Control Date or as of the date of Termination of Employment, whichever coverage limits are greater. For purposes of clarification, the portion of the premiums in respect of
such voluntary life insurance for which Employee and the Company are responsible, respectively, shall be the same as the portion for which the Company and Employee are responsible, respectively, immediately prior to the date of Termination of
Employment or the Change-in-Control Date, as applicable. 
 (iii) For the Benefit Continuation Period, the Company shall provide short-term
and long-term disability insurance benefits to Employee equivalent to the coverage that the Employee would have had had he remained employed under the disability insurance plans applicable to Employee on the date of Termination of Employment, or, at
the Employee’s election, the plans applicable to Employee as of the Change-in-Control Date. Should Employee become disabled during such period, Employee 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 Employee and the Company are responsible, respectively, shall be the same as the portion for which
Employee and the Company are responsible, respectively, immediately prior to the date of Termination of Employment or the Change-in-Control Date, as applicable. 
 (iv) Notwithstanding anything in this Agreement to the contrary, in no event shall the provision of in-kind benefits pursuant to this Section 3 during any taxable year of Employee affect the provision of in-kind
benefits pursuant to this Section 3 in any other taxable year of Employee. 
  

 -5- 

 c. Retirement Savings Plan. Within fifteen (15) days after the date of
Termination of Employment, the Company shall pay to Employee a cash payment in an amount, if any, necessary to compensate Employee for the Employee’s unvested interests under the Company’s retirement savings plan which are forfeited by
Employee in connection with the Termination of Employment. 
 d. Plan Amendments. The Company shall adopt such amendments to
its employee benefit plans, if any, as are necessary to effectuate the provisions of this Agreement. 
 e. Fringe Benefits.
Following the Employee’s Termination of Employment, the Employee shall receive the computer which Employee is utilizing as of the date of such Termination of Employment. In addition, following Employee’s Termination of Employment, Employee
shall be entitled to be reimbursed for any legal or accounting services utilized by Employee to minimize any personal income tax obligations arising from the Change in Control, in an amount not to exceed $5,000, such reimbursement shall be made in
the calendar year following the calendar year in which the separation from service occurs, subject to the Company’s receipt of appropriate invoices from the Employee evidencing the expenses to be reimbursed. 
 f. General Release of Claims. Notwithstanding anything herein to the contrary, the amounts payable pursuant to this Section 3
are subject to the condition that Employee 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 Employee’s separation
from service (the “Release Period”). Any payment that otherwise would be made prior to Employee’s delivery of such executed release pursuant to this Section 3 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)(i), (ii) and (iii) of this Section 3 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, Employee shall reimburse the Company for the full cost of coverage during such period. 
 4. Golden Parachute Tax Reimbursement. Whether or not any payments are made pursuant to Section 3 above, if a Change in Control occurs
at any time and the Employee reasonably determines that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any restricted stock, stock option, stock appreciation right or similar right, or the lapse or termination of
any restriction on or the vesting or exercisablility of any of the foregoing (individually and collectively, the “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”) (or any successor provision thereto) by reason of being considered “contingent on a change in ownership or control,” within the meaning of Section 280G of the Code (or any successor provision thereto), or any
interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Company or Parent shall pay to the 

  

 -6- 

 
Employee an additional payment or payments (individually and collectively, the “Gross-Up Payment”). The Gross-Up Payment shall be in an amount such
that, after payment by the Employee of all taxes required to be paid by the Employee with respect to the receipt thereof under the terms of any federal, state or local government or taxing authority (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed with respect to the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. The Gross-Up Payment shall be paid to the
Employee within 30 days of its receipt of written notice from the Employee that such Excise Tax has been paid or will be payable at any time in the future, but in no event later than the end of the year immediately following the year in which the
related taxes are remitted to the appropriate taxing authority. 
 5. No Mitigation Required or Setoff Permitted. In no event
shall Employee be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Employee under the terms of this Agreement, and all such amounts shall not be reduced whether or not Employee obtains other
employment. 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 Employee or others.

 6. Waiver of Other Severance Benefits. The benefits payable pursuant to this Agreement are in lieu of any other severance
benefits which may otherwise be payable by the Company or its affiliates to the Employee upon termination of employment pursuant to a severance program of the Company or its affiliates (including, without limitation, any benefits to which Employee
might otherwise be entitled under any employment agreement or other severance or change in control or similar agreement between Employee and the Company or any of its affiliates). 
 7. Employment at Will. Notwithstanding anything to the contrary contained herein, the Employee’s employment with the Company is not
for any specified term and may be terminated by the Employee or by the Company at any time, for any reason, with or without cause, without any liability, except with respect to the payments provided hereunder or as required by law or any other
contract or employee benefit plan. 
 8. Disputes. Any dispute or controversy arising under, out of, or in connection with this
Agreement shall, at the election and upon written demand of either party, be finally determined and settled by binding arbitration in the City of Louisville, Kentucky, in accordance with the Labor Arbitration rules and procedures of the American
Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof. The Company shall pay all costs of the arbitration and all attorneys’ and accountants’ fees of the Employee in connection
therewith, including any litigation to enforce any arbitration award. 
 9. Non-solicitation. During the Term and for a period
of one year thereafter (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 

  

 -7- 

 
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. 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 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. 
 10. Successors; Binding Agreement. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company or by any merger or consolidation where the Company is not the surviving corporation, or upon any transfer of all or substantially all of the Company’s stock or assets. In
the event of such merger, consolidation or transfer, the provisions of this Agreement shall be binding upon and shall inure to the benefit of the surviving corporation or corporation to which such stock or assets of the Company shall be transferred.

 11. Notices. Any notice or other communication hereunder shall be in writing and shall be effective upon receipt (or refusal
of receipt) if delivered personally, or sent by overnight courier if signature for the receiving party is obtained, or sent by certified or registered mail, postage prepaid, to the other party at the address set forth below: 
  

			
	If to the Company:	 	 Kindred Healthcare Operating, Inc.
 680 South Fourth
Street
 Louisville, KY 40202
 Attention: General
Counsel

		
	If to Employee:	 	 Richard E. Chapman
 680 South Fourth Street

Louisville, KY 40202

 Either party may change its specified address by giving notice in writing to the other.

 12. Indemnification. The Company shall indemnify, defend and hold the Employee harmless from and against any liability,
damages, costs and expenses (including attorneys’ fees) in connection with any claim, cause of action, investigation, litigation or proceeding involving him by reason of his having been an officer, director, employee or agent of the Company,
except to the extent it is judicially determined that the Employee was guilty of gross negligence or willful misconduct in connection with the matter giving rise to the claim for indemnification. This indemnification shall be in addition to and
shall not be substituted for any other indemnification or similar agreement or arrangement which may be in effect between the Employee and the Company or may otherwise exist. The Company also agrees to maintain adequate directors and officers
liability insurance, if applicable, for the benefit of Employee for the term of this Agreement and for five years thereafter. 
  

 -8- 

 13. ERISA. Many or all of the employee benefits addressed in Paragraph 3(b) and
(c) exist under plans which constitute employee welfare benefit plans (“Welfare Plans”) within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Any payments
pursuant to this Agreement which could cause any of such Plans not to constitute a Welfare Plan shall be deemed instead to be made pursuant to a separate “employee pension benefit plan” within the meaning of Section 3(2) of ERISA or a
“top hat” plan under Section 201(2) of ERISA as to which the applicable portions of the document constituting the Welfare Plan shall be deemed to be incorporated by reference. None of the benefits hereunder may be assigned in any way.

 14. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or
enforceability of any other provision, which other provision shall remain in full force and effect. 
 15. Interpretation. The
headings used herein are for convenience only and do not limit or expand the contents of this Agreement. Use of any male gender pronoun shall be deemed to include the female gender also. 
 16. No Waiver. No waiver of a breach of any provision of this Agreement shall be construed to be a waiver of any other breach of this
Agreement. No waiver of any provision of this Agreement shall be enforceable unless it is in writing and signed by the party against whom it is sought to be enforced. 
 17. Survival. Any provisions 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. 
 18. Amendments. Any amendments to this Agreement shall be effective only if in writing and signed by the
parties hereto. 
 19. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof. 
 20. Governing Law. This Agreement shall be interpreted in accordance with and governed by the law of
the State of Delaware. 
 21. Section 409A. If any provision of this Agreement (or any award of compensation or
benefits provided under this Agreement) would cause Employee 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 Employee of the applicable provision; provided that nothing herein shall require the Company to provide Employee with any gross-up for any tax, interest or
penalty incurred by Employee under Section 409A of the Code. 
  

 -9- 

 22. Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute one and the same instrument. 
 23. Cancellation of Prior
Agreement. The Employee hereby acknowledges and agrees that this Agreement is intended to and does hereby replace that certain change-in-control severance agreement, dated as of May 1, 1998, as amended, between Company (or its
predecessor) and the Employee, and that such agreement is cancelled, terminated and of no further force and effect. 
  

 -10- 

 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 purposes of
	Sections 3, 4, 5 and 12:
	
	KINDRED HEALTHCARE, INC.
		
	By:	 	 /s/ Paul J. Diaz

		 	Paul J. Diaz
		 	President and Chief Executive Officer
	
	 /s/ Richard E. Chapman

	RICHARD E. CHAPMAN

  

 -11-

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