Document:

Employment Agreement 1/1/2006 between Kindred and Gregory C.Miller

 Exhibit 10.1 
  
 EMPLOYMENT AGREEMENT 
  

This EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 1st day of January, 2006 (the “Effective Date”), by and between
Kindred Healthcare Operating, Inc., a Delaware corporation (the “Company”), and Gregory C. Miller (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; and 
  
 WHEREAS, the Company has determined that it is in the best interests of the Company 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 (the “Term”) specifying the effective date of such notice. 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 as Senior Vice
President of Development and Financial Planning, reporting directly to Paul J. Diaz, President and Chief Executive Officer. 
  
 3. Extent of Services. Executive, subject to the direction and control of the Board of Directors of the Parent (the “Board”) and the
Company, shall have the power and authority commensurate with his executive status and necessary to perform his duties hereunder. During the Term, Executive shall devote his entire working time, attention, labor, skill and energies to the business
of the Company, and shall not, without the consent of the Company, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. 

 4. Compensation. As compensation for services hereunder rendered, Executive shall receive during
the Term: 
  
 (a) A base salary of $240,000 per
year (“Base Salary”) 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) Executive will be eligible to participate in the
Company’s short-term incentive plan and long-term incentive plan in 2006, and in each subsequent full or partial year of employment. 
  
 5. Benefits. 
  
 (a) Executive shall be entitled to participate in any and all pension benefit (whether tax qualified or non-qualified), welfare benefit
(including, without limitation, medical, dental, disability and group life insurance coverages) and fringe benefit plans from time to time in effect for officers of the Company and its affiliates following the Company’s standard waiting
periods, if any. 
  
 (b) Executive shall be
entitled to participate in such bonus, stock option, or other incentive compensation plans of the Company and its affiliates in effect from time to time for officers of the Company. 
  
 (c) Executive shall be entitled to earn paid time off each year up to a maximum of 208 hours per year,
subject to the Company’s policies. The Executive shall schedule the timing of such paid time off in a reasonable manner. The Executive also may be entitled to such other leave, with or without compensation, as shall be mutually agreed by the
Company and Executive. 
  
 (d) Executive may incur
reasonable expenses for promoting the Company’s business, including expenses for entertainment, travel and similar items. The Company shall reimburse Executive for all such reasonable expenses in accordance with the Company’s reimbursement
policies and procedures. 
  
 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 

  

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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. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. 
  
 (c) Good Reason. Executive’s employment may be terminated by Executive for Good Reason. “Good Reason” shall exist upon the occurrence, without Executive’s express written consent, of any of the following events:

  
 (i) the Company shall assign to Executive
duties of a substantially nonexecutive or nonmanagerial nature; 
  
 (ii) an adverse change in Executive’s status or position as an executive officer of the Company, including, without limitation, an adverse change in Executive’s status or position as a result of a diminution
in Executive’s duties and responsibilities (other than any such change directly attributable to the fact that the Company is no longer publicly owned); 
  
 (iii) the Company shall (A) materially reduce the Base Salary or bonus opportunity of Executive, or (B) materially reduce his
benefits and perquisites (other than pursuant to a uniform reduction applicable to all similarly situated executives of the Company); 
  

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 (iv) the Company shall require Executive to relocate Executive’s principal business
office more than 30 miles, provided that the Executive and the Company acknowledge that Executive’s principal business office is 680 South Fourth Street, Louisville, Kentucky 40202; or 
  
 (v) the failure of the Company to obtain the assumption of
this Agreement as contemplated by Section 9(c). 
  
 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 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 

  

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by reason of death or Disability, the Date of Termination shall be the date of death of Executive or the Disability Effective Date, as the case may be.

  
 7. Obligations of the Company Upon Termination.
Following the termination of Executive’s employment hereunder for any reason, the Company shall pay Executive his Base Salary through the Date of Termination and any amounts owed to Executive pursuant to the terms and conditions of the benefit
plans and programs of the Company at the time such payments are due. In addition, subject to Executive’s execution of a general release of claims in form satisfactory to the Company, 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 within 30 days of the date when such amounts would otherwise have been payable to the Executive if Executive’s employment had
not terminated. 
  
 (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) Within 14 days of Executive’s Date of Termination,
the Company shall pay to Executive (i) the prorated portion of the Target Bonus for Executive for the year in which the Date of Termination occurs, and (ii) an amount equal to 1.5 times the sum of the Executive’s Base Salary and
Target Bonus as of the Date of Termination. 
  
 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. 
  
 (2) For a period of 18 months following the Date of Termination, the Executive shall be treated as if he had continued to be an Executive
for all purposes under the Parent’s Health Insurance Plan and Dental Insurance Plan; or if the Executive is prohibited from participating in such plan, the Company or Parent shall otherwise provide such benefits. Executive shall be responsible
for any employee contributions for such insurance coverage. Following this continuation period, the Executive 

  

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shall be entitled to receive continuation coverage under Part 6 of Title I of ERISA (“COBRA Benefits”) treating the end of this period as a
qualifying event based on a loss of coverage due to the termination of the Executive’s employment to the extent allowed by law. 
  
 (3) For a period of 18 months following the Date of Termination, Parent shall maintain in force, at its expense, the Executive’s life
insurance in effect under the Parent’s voluntary life insurance benefit plan as of the Date of Termination. Executive shall be responsible for any employee contributions for such insurance coverage. 
  
 (4) For a period of 18 months following the Date of
Termination, the Company or Parent 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. 
  
 (5)
To the extent not already vested pursuant to the terms of such plan, the Executive’s interests under the Parent’s retirement savings plan shall be automatically fully (i.e., 100%) vested, without regard to otherwise applicable
percentages for the vesting of employer matching contributions based upon the Executive’s years of service with the Company. 
  
 (6) Parent may adopt such amendments to its executive benefit plans, if any, as are necessary to effectuate the provisions of this
Agreement. 
  
 (7) Executive shall be entitled to
an additional 18 months of vesting for purposes of all outstanding stock option awards and restricted stock awards and Executive will have an additional 18 months following the Date of Termination in which to exercise such stock options. 

 
 (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. 
  

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 (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. 
  
 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, its Parent and their
successors and assigns. 
  
 (c) The Company shall
require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, or any business of the Company for which Executive’s services are
principally performed, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement,
“Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
  
 10. Other Severance Benefits. Executive hereby agrees that in
consideration for the payments to be received under this Agreement, Executive waives any and all rights to any payments or benefits under any severance plans or arrangements of the Company or its affiliates that specifically provide for severance
payments, other than the Change in Control Severance Agreement between the Company and Executive (the “Change in Control Severance Agreement”); provided that any payments payable to Executive hereunder shall be offset by any
payments payable under the Change in Control Severance Agreement. 
  

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 11. Withholding. All payments to be made to Executive hereunder will be subject to all applicable
required withholding of taxes. 
  
 12. 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. If the restrictions set forth in this section would otherwise be determined to be invalid or unenforceable by a court of competent jurisdiction, the parties intend and agree that such court shall exercise its discretion in reforming
the provisions of this Agreement to the end that the Executive will be subject to a non-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. This Section 13 shall survive this Agreement.

  
 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: 
 Gregory C. Miller 
 680 South Fourth Street

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

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 15. Waiver of Breach and Severability. The waiver by either party of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by either party. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and
the remaining provisions of the Agreement shall continue to be binding and effective. 
  
 16. Entire Agreement; Amendment. This instrument contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or oral with respect to the subject matter hereof. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by Executive and such officer of the Company specifically designated by the Board. 
  
 17. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. 
  
 18. Headings. The headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions. 
  
 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 
  
 20. Survival. Any provision of this Agreement creating obligations
extending beyond the Term of this Agreement shall survive the expiration or termination of this Agreement, regardless of the reason for such termination. 
  

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 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

  

			
	 KINDRED HEALTHCARE OPERATING, INC.

		
	 By:
	 	 /s/ Paul J. Diaz

	 	 	 Paul J. Diaz

	 	 	 President and Chief Executive Officer

	
	 Solely for the purpose
 of Section 7 and Section 9

	
	 KINDRED HEALTHCARE, INC.

		
	 By:
	 	 /s/ Paul J. Diaz

	 	 	 Paul J. Diaz

	 	 	 President and Chief Executive Officer

	
	 /s/ Gregory C. Miller

	 GREGORY C. MILLER

  

 10Change-in-Control Severence Agree. 1/1/06 between Kindred and Gregory C. Miller

 Exhibit 10.2 
  
 CHANGE-IN-CONTROL SEVERANCE AGREEMENT 
  
 This CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the “Agreement”) is made as of January 1, 2006 by and between
Kindred Healthcare Operating, Inc., a Delaware corporation, (the “Company”) and Gregory C. Miller (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 will 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
Securities Exchange Act of 1934) 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 January 1, 2006, 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 Kindred Healthcare, Inc.’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 Securities Exchange Act of 1934) 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 full amount of target annual short-term incentive bonus that would be payable to the Employee, assuming the target performance criteria on which such annual short-term incentive bonus were deemed to be satisfied,
in respect of services 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 purchaser of the 

  

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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 January 1, 2006 (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 cash 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 Employee’s effective date of termination. 
  
 b. Continuation of Benefits. 
  
 (i) For a period of three years following the Termination of Employment, the
Employee shall be treated as if he had continued to be an employee for all purposes under Parent’s health insurance plan and dental insurance plan; or if the Employee is prohibited from participating in such plan, the Company or Parent shall
otherwise provide such benefits. Following this continuation period, the Employee shall be entitled to receive continuation coverage under Part 6 of Title I or ERISA (“COBRA Benefits”) treating the end of this period as a termination of
the Employee’s employment if allowed by law. 
  

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 (ii) For a period of three years following the Termination of Employment, Parent shall maintain in
force, at its expense, the Employee’s life insurance in effect under Parent’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.

  
 (iii) For a period of three years following the
Employee’s Termination of Employment, the Company or Parent 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. 
  
 c. Retirement Savings Plan. To the extent not already vested pursuant to the terms of such plan, the Employee’s interests under the
Parent’s retirement savings plan shall be automatically fully (i.e., 100%) vested, without regard to otherwise applicable percentages for the vesting of employer-matching contributions based upon the Employee’s years of service with
the Company. 
  
 d. Plan Amendments. Parent 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 that Employee is
utilizing as of the date of such Termination of Employment. In addition, for a period of one year 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. 
  
 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 Employee an
additional payment or payments (individually and collectively, the 

  

 -5- 

 
“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 the Company’s receipt of written notice from the
Employee that such Excise Tax has been paid or will be payable at any time in the future. 
  
 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 other severance or change in control or similar agreement previously entered into 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 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 

  

 -6- 

 
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:
	 	 Gregory C. Miller
 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 

  

 -7- 

 
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. 
  
 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. 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. 
  

 -8- 

 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

  

			
	 KINDRED HEALTHCARE OPERATING, INC.

	
	 /s/ Paul J. Diaz

	 By:
	 	 Paul J. Diaz

	 	 	 President and Chief Executive Officer

	
	 Solely for the purposes of

	 Sections 3, 4, 5 and 12:

	
	 KINDRED HEALTHCARE, INC.

	
	 /s/ Paul J. Diaz

	 By:
	 	 Paul J. Diaz

	 	 	 President and Chief Executive Officer

	
	 /s/ Gregory C. Miller

	 GREGORY C. MILLER

  

 -9-

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