Document:

Change-in-Control Severance Agreement

 Exhibit 10.6 
 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 A. LECHLEITER (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 

  

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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. 
 (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 

  

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offer of immediate reemployment by a successor or assign of the Company or a 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 

  

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a lump sum on the first day of the 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 Employee 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 Employee 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. 
  

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 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 exercisability 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 

  

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pay to the 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 induce any of the 

  

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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 A. Lechleiter
 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 

  

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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. 
 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. 
  

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 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. 
 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. 
  

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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 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 A. LECHLEITER

	RICHARD A. LECHLEITER

  

 -11-Employment Agreement

 Exhibit 10.7 
 EMPLOYMENT AGREEMENT 
 This EMPLOYMENT
AGREEMENT (this “Agreement”) is made as of the 18th day of December, 2008 (the “Effective Date”), by and between Kindred
Healthcare Operating, Inc., a Delaware corporation (the “Company”), and Frank J. Battafarano (the “Executive”). 
 WITNESSETH: 
 WHEREAS, the Executive is employed by the Company, a wholly-owned subsidiary of Kindred Healthcare, Inc.
(“Parent”), and the parties hereto desire to provide for the terms of Executive’s employment by the Company; and 
 WHEREAS,
the Executive Compensation Committee of the Board of Directors of the Parent has determined that it is in the best interests of the Company and Parent to enter into this Agreement. 
 NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and intending to be legally bound hereby,
the Company and Executive agree as follows: 
 1. Employment. The Company hereby agrees to employ Executive and Executive hereby agrees
to be employed by the Company on the terms and conditions herein set forth. The term of this Agreement shall be for the period commencing on the Effective Date and ending February 28, 2011 (the “Term”), subject to earlier termination
as provided in Section 6 hereof. 
 2. Duties. Executive is engaged by the Company as Chief Operating Officer of Kindred
Healthcare, Inc., reporting directly to Paul J. Diaz, President and Chief Executive Officer. 
 3. Extent of Services. Executive,
subject to the direction and control of the Board of Directors of the Parent (the “Board”) and the Company, shall have the power and authority commensurate with his executive status and necessary to perform his duties hereunder. During the
Term, Executive shall devote his entire working time, attention, labor, skill and energies to the business of the Company, and shall not, without the consent of the Company, be actively engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage. 
 4. Compensation. As compensation for services hereunder
rendered, Executive shall receive during the Term: 
 (a) A base salary (“Base Salary”) of not less than his current
base salary per year payable in equal installments in accordance with the Company’s normal payroll procedures. Executive may receive increases in his Base Salary from time to time, as approved by the Board in its sole discretion. 

 (b) During the Term, in addition to Base Salary, Executive will be eligible to
participate in the Company’s short-term and long-term incentive plans, as such plans may be in effect from time to time. The Executive’s full-year target under the short-term incentive plan is 75% of Base Salary (the “Target
Bonus”) (but the actual percentage awarded could be higher or lower in accordance with the terms of the relevant plan). The Executive’s full-year target under the long-term incentive plan is 45% of Base Salary (the “Target Long-Term
Bonus”) (but the actual percentage awarded could be higher or lower in accordance with the terms of the relevant plan). 
 5.
Benefits. 
 (a) Executive shall be entitled to participate in any and all pension benefit (whether tax qualified or
non-qualified), welfare benefit (including, without limitation, medical, dental, disability and group life insurance coverages) and fringe benefit plans from time to time in effect for officers of the Company and its affiliates following the
Company’s standard waiting periods, if any. 
 (b) Executive shall be entitled to participate in such bonus, stock
option, or other incentive compensation plans of the Company and its affiliates in effect from time to time for officers of the Company. 
 (c) Executive shall be entitled to earn paid time off each year up to a maximum of 208 hours per year, subject to the Company’s policies, as in effect from time to time. The Executive shall schedule the timing of
such paid time off in a reasonable manner. The Executive also may be entitled to such other leave, with or without compensation, as shall be mutually agreed by the Company and Executive. 
 (d) Executive may incur reasonable expenses for promoting the Company’s business, including expenses for entertainment, travel and
similar items. The Company shall reimburse Executive for all such reasonable expenses in accordance with the Company’s reimbursement policies and procedures, as may be in effect from time to time. 
 6. Termination of Employment. 
 (a) Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death during the Term. If the Company determines in good faith that the Disability of Executive has occurred during the Term
(pursuant to the definition of Disability set forth below) it may give to Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on
the 30th day after receipt of such notice by Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For
purposes of this Agreement, “Disability” shall mean Executive’s absence from his 

  

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full-time duties hereunder for a period of 90 days due to disability as defined in the long-term disability plan provided to Executive by the Company.

 (b) Cause. The Company may terminate Executive’s employment during the Term for Cause. For purposes of this
Agreement, “Cause” shall mean the Executive’s (i) conviction of or plea of nolo contendere to a crime involving moral turpitude; or (ii) willful and material breach by Executive of his duties and
responsibilities, which is committed in bad faith or without reasonable belief that such breaching conduct is in the best interests of the Company and its affiliates, but with respect to (ii) only if the Board adopts a resolution by a vote of
at least 75% of its members so finding after giving the Executive and his attorney an opportunity to be heard by the Board and a reasonable opportunity of not less than 30 days to remedy or correct the purported breaching conduct. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the
best interests of the Company. 
 (c) Good Reason. Executive’s employment may be terminated by Executive during
the Term for Good Reason. “Good Reason” shall exist upon the occurrence, without Executive’s express written consent, of any of the following events: 
 (1) a material adverse change in Executive’s authority, duties or responsibilities (including, without limitation, the Company
assigning to Executive duties of a substantially nonexecutive or nonmanagerial nature) (other than any such change directly attributable to the fact that the Company is no longer publicly owned); 
 (2) the Company shall materially reduce the Base Salary or annual bonus opportunity of Executive; 
 (3) the Company shall require Executive to relocate Executive’s principal business office more than 30 miles, provided that the
Executive and the Company acknowledge that Executive’s principal business office is 680 South Fourth Street, Louisville, Kentucky 40202; or 
 (4) a material breach by the Company of Section 5(a) or Section 9(c) of this Agreement. 
 For purposes of this Agreement, “Good Reason” shall not exist until after Executive has given the Company notice of the applicable event within 90 days of the initial occurrence of such event and which is not remedied within 30
days after receipt of written notice from Executive specifically delineating such claimed event and setting forth Executive’s intention to terminate employment if not remedied; provided, that if the specified event cannot reasonably be
remedied within such 30-day period and the Company commences reasonable steps within such 30-day period to remedy such event and diligently continues such steps thereafter until a remedy is effected, such event shall 

  

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not constitute “Good Reason” provided that such event is remedied within 60 days after receipt of such written notice. 
 (d) Expiration of the Term. In the event the Executive is an employee of the Company on February 28, 2011, the
Executive’s employment with the Company shall terminate as of such date and shall, for purposes of this Agreement, be deemed a termination by the Company other than for Cause. 
 (e) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by
Notice of Termination given in accordance with this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) specifies the intended termination date (which date, in
the case of a termination for Good Reason, shall be not more than thirty days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s
rights hereunder. 
 (f) Date of Termination. “Date of Termination” means (i) if Executive’s
employment is terminated by the Company for Cause, or by Executive for Good Reason, the later of the date specified in the Notice of Termination or the date that is one day after the last day of any applicable cure period, (ii) if
Executive’s employment is terminated by the Company other than for Cause (other than as set forth in Section 6(d) hereof) or Disability, or Executive resigns without Good Reason, the Date of Termination shall be the date on which the
Company or Executive notified Executive or the Company, respectively, of such termination, (iii) February 28, 2011, if Executive’s employment is terminated as a result of the expiration of the Term as provided for in Section 6(d)
hereof and (iv) if Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of Executive or the Disability Effective Date, as the case may be. 
 7. Obligations of the Company Upon Termination. Following the termination of Executive’s employment hereunder for any reason, the Company
shall pay Executive his Base Salary through the Date of Termination and any amounts owed to Executive pursuant to the terms and conditions of the benefit plans and programs of the Company at the time such payments are due. In addition, subject to
Section 7(e) hereof and the conditions set forth below, Executive shall be entitled to the following additional payments: 
 (a) Death or Disability. If, during the Term, Executive’s employment shall terminate by reason of Executive’s death or Disability, the Company shall pay to Executive (or his designated beneficiary or estate, as the case may
be) an amount equal to the product of (i) the annual bonus to which the Executive would have been entitled for 

  

 4 

 
the year of termination of employment had Executive’s employment with the Company not been terminated, as determined in accordance with
Section 4(b) hereof, if any, multiplied by (ii) a fraction, the numerator of which is the number of days in the period beginning on the first day of the calendar year in which such termination occurs and ending on the Date of Termination
and the denominator of which is 365. Such amount shall be paid on the date when such amounts would otherwise have been payable to the Executive if Executive’s employment with the Company had not terminated, as determined in accordance with the
terms and conditions of the applicable short-term incentive plan. 
 (b) Good Reason; Other than for Cause. If the
Company shall terminate Executive’s employment other than for Cause (including for this purpose, any termination pursuant to Section 6(d) hereof, but excluding a termination of employment for Disability), or the Executive shall terminate
his employment for Good Reason: 
 (1) Within 14 days of Executive’s Date of Termination, the Company shall pay to
Executive, a lump sum cash severance payment in an amount equal to the sum of (i) the Base Salary Executive would have received during the period commencing on the Date of Termination and ending on the conclusion of the Term (the “Term
Remainder”) had Executive remained an employee of the Company for the duration of such period, (ii) the product of (A) the number of full calendar years in the Term Remainder and (B) the Target Bonus, and (iii) in the event the
Executive’s Date of Termination occurs after February 28, 2010, an additional $300,000. 
 (2) In satisfaction of the
annual bonus Executive would otherwise be eligible to receive under the short-term incentive plan in respect of the calendar year in which the Date of Termination occurs, the Company shall pay to Executive an amount equal to the product of
(i) the annual bonus to which the Executive would have been entitled for the year of termination of employment had Executive’s employment with the Company not been terminated, as determined in accordance with Section 4(b) hereof, if
any, multiplied by (ii) a fraction, the numerator of which is the number of days in the period beginning on the first day of the calendar year in which such termination occurs and ending on the Date of Termination and the denominator of which
is 365. Such amount shall be paid on the date when such amounts would otherwise have been payable to the Executive if Executive’s employment with the Company had not terminated, as determined in accordance with the terms and conditions of the
applicable short-term incentive plan. 
 (3) To the extent not yet paid, the Company shall pay to Executive any amounts earned
by the Executive prior to the Date of Termination under the Company’s long-term incentive plan. Such amount shall be paid on the same schedule and in the same manner as if the Executive had remained employed with the Company through settlement
of such long-term incentive award, as 

  

 5 

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

  

 6 

 
plan provides. For purposes of clarification, the portion of the premiums in respect of such short-term and long-term disability benefits for which Executive
and Company are responsible, respectively, shall be the same as the portion for which Executive and Company are responsible, respectively, immediately prior to the Date of Termination. 
 (8) Within fifteen (15) days after the Date of Termination, the Company shall pay to Executive a cash payment in an amount, if
any, necessary to compensate Executive for the Executive’s unvested interests under the Company’s retirement savings plan which are forfeited by Executive in connection with the termination of Executive’s employment. 
 (9) In the event the Executive’s Date of Termination occurs (A) prior to or on February 28, 2010, then for the Term
Remainder, or (B) after February 28, 2010, then for a period of three-years following the Date of Termination, any outstanding, unvested stock options, or performance units held by Executive on the Date of Termination shall continue to
vest in accordance with their original terms (including any related performance measures) (the “Tail Vesting Period”) as if Executive had remained an employee of the Company through the end of such period. In addition, Executive shall have
the right to continue exercise any such options during the applicable Tail Vesting Period; provided that in no event shall the Executive be entitled to exercise any such option beyond the original expiration date of such option. With respect to any
outstanding shares of restricted stock held by Executive as of the Date of Termination, any such shares of restricted stock that would have vested (i) in the event such Date of Termination occurs prior to or on February 28, 2010, then
during the Term Remainder or (ii) in the event such Date of Termination occurs after February 28, 2010, then during the period commencing on the Date of Termination and ending on the three-year anniversary thereof, in each case had
Executive remained an employee of the Company through the end of such period shall be immediately vested as of the Date of Termination. 
 (10) Company shall adopt such amendments to its benefit plans referred to in this Agreement, if any, as are necessary to effectuate the provisions of this Agreement. To the extent an applicable plan cannot be so
amended due to nondiscrimination or other requirements applicable to the plan, Company shall adopt or implement an alternative written plan or program to accomplish this purpose. 
 (11) Notwithstanding anything in this Agreement to the contrary, in no event shall the provision of in-kind benefits pursuant to this
Section 7 during any taxable year of Executive affect the provision of in-kind benefits pursuant to this Section 7 in any other taxable year of Executive. 
 (c) Cause; Other than for Good Reason. If Executive’s employment shall be terminated for Cause or Executive terminates
employment without Good Reason (and 

  

 7 

 
other than due to such Executive’s death) during the Term, this Agreement shall terminate without further additional obligations to Executive under this
Agreement. 
 (d) Death after Termination. In the event of the death of Executive during the period Executive is
receiving payments pursuant to this Agreement, Executive’s designated beneficiary shall be entitled to receive the balance of the payments owed to the Executive hereunder; or in the event of no designated beneficiary, the remaining payments
shall be made to Executive’s estate. 
 (e) General Release of Claims. Notwithstanding anything herein to the
contrary, the amounts payable pursuant to this Section 7 are subject to the condition that Executive has delivered to the Company an executed copy of an irrevocable general release of claims in a form satisfactory to the Company within the 60
day period immediately following the Executive’s separation from service (the “Release Period”). Any payment that otherwise would be made prior to Executive’s delivery of such executed release pursuant to this Section 7
shall be paid on the first business day following the conclusion of the Release Period; provided that in-kind benefits provided pursuant to subsections (b)(5), (6) and (7) of this Section 7 shall continue in effect after separation
from service pending the execution and delivery of such release for a period not to exceed 60 days; provided further that if such release is not executed and delivered within such 60-day period, Executive shall reimburse the Company for the full
cost of coverage during such period. 
 (f) Six Month Delay for Specified Employee. Notwithstanding anything herein to
the contrary, if at the time of Executive’s separation from service Executive is a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (the
“Code”) and the deferral of the commencement of any payments or benefits otherwise payable hereunder is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments to which
Executive would otherwise be entitled during the first six months following his separation from service shall be deferred and accumulated (without any reduction in such payments or benefits ultimately paid or provided to Executive) for a period of
six months from the date of separation from service and paid in a lump sum on the first day of the seventh month following such separation from service (or, if earlier, the date of the Executive’s death), together with interest during such
period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of the Wall Street Journal, or other equivalent publication if the Wall Street Journal no longer publishes such information, on the first publication
date of the Wall Street Journal or equivalent publication after the date of Executive’s separation from service (provided that if more than one such Prime Rate is published on any given day, the highest of such published rates shall be used).

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

  

 8 

 
Association, and judgment upon the award may be entered in any court having jurisdiction thereof. The Company shall pay all costs of the arbitration and all
reasonable attorneys’ and accountants’ fees of the Executive in connection therewith, including any litigation to enforce any arbitration award. 
 9. Successors. 
 (a) This Agreement is personal to Executive and without the prior
written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

 (b) This Agreement shall inure to the benefit of and be binding upon the Company, its Parent and their successors and
assigns. 
 (c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Company, or any business of the Company for which Executive’s services are principally performed, to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
 10. Other Severance
Benefits. Executive hereby agrees that in consideration for the payments to be received under this Agreement, Executive waives any and all rights to any payments or benefits under any severance plans or arrangements of the Company or its
affiliates that specifically provide for severance payments, other than the Change in Control Severance Agreement between the Company and Executive (the “Change in Control Severance Agreement”); provided that any payments payable to
Executive hereunder, other than those payments and benefits provided for under Section 7(b)(3) and Section 7(b)(4) hereof, shall be offset by any payments payable under the Change in Control Severance Agreement. 
 11. Withholding. All payments to be made to Executive hereunder will be subject to all applicable required withholding of taxes. 
 12. No Mitigation. Executive shall have no duty to mitigate his damages by seeking other employment and, should Executive actually receive
compensation from any such other employment, the payments required hereunder shall not be reduced or offset by any such compensation. Further, the Company’s and Parent’s obligations to make any payments hereunder shall not be subject to or
affected by any setoff, counterclaims or defenses which the Company or Parent may have against Executive or others. 
  

 9 

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

 (2) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the Effective
Date) between the Company or any of its affiliates and customers, clients, suppliers partners, members or investors of the Company or any of its affiliates of which it is reasonable to expect that Executive is aware; or 
 (3) aid or endeavor to solicit or induce any of the Company’s or its affiliates’ employees to leave their employment with the
Company or such affiliates in order to accept employment with Executive or any other person, corporation, limited liability company, partnership, sole proprietorship or other entity; provided, however, that nothing in this Section 13(a)(3)
shall prevent Executive from soliciting any person who responds to a general media advertisement or solicitation. 
 (b) If
the restrictions set forth in this section would otherwise be determined to be invalid or unenforceable by a court of competent jurisdiction, the parties intend and agree that such court shall exercise its discretion in reforming the provisions of
this Agreement to the end that the Executive will be subject to a non-competition or non-solicitation covenant, as applicable, which is reasonable under the circumstances and enforceable by the Company. It is agreed that no adequate remedy at law
exists for the parties for violation of this section and that this section may be enforced by any equitable remedy, including specific performance and injunction, without limiting the right of the Company to proceed at law to obtain such relief as
may be available to it. The running of the Restricted Period shall be tolled for any period of time during which Executive is in violation of any covenant contained herein, for any reason whatsoever. This Section 13 shall survive this
Agreement. 
  

 10 

 14. Notices. Any notice required or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or sent by telephone facsimile transmission, personal or overnight couriers, or registered mail with confirmation or receipt, addressed as follows: 
 If to Executive: 
 Frank J. Battafarano 
 680 South Fourth Street 
 Louisville, KY 40202 
 If to Company: 
 Kindred Healthcare Operating, Inc. 
 680 South Fourth Street 
 Louisville, KY 40202 
 Attn: General Counsel 
 15. Waiver of Breach and Severability. The waiver by either party of a breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach by either party. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and the remaining provisions of the Agreement
shall continue to be binding and effective. 
 16. Entire Agreement; Amendment. This instrument contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter hereof.
No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by Executive and such officer of the Company specifically designated by the Board. 
 17. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. 
 18. Headings. The headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 

19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. 
 20. Survival. Any provision of this Agreement creating obligations extending
beyond the Term of this Agreement shall survive the expiration or termination of this Agreement, regardless of the reason for such termination. 
 21. Cancellation of Prior Agreement. The Executive hereby acknowledges and agrees that this Agreement is intended to and does hereby replace that certain employment 

  

 11 

 
agreement dated March 1, 2008, between the Company and the Executive, and that such agreement is cancelled, terminated and of no further force and
effect. 
 22. Section 409A. If any provision of this Agreement (or any award of compensation or benefits provided under this
Agreement) would cause Executive to incur any additional tax or interest under Section 409A of the Code, the Company shall reform such provision to comply with 409A and agrees to maintain, to the maximum extent practicable without violating
409A of the Code, the original intent and economic benefit to Executive of the applicable provision; provided that nothing herein shall require the Company to provide Executive with any gross-up for any tax, interest or penalty incurred by Executive
under Section 409A of the Code. Furthermore, notwithstanding anything herein to the contrary, no payment or benefit payable under this Agreement shall be required to be paid or provided in calendar year 2008 if the payment of such payment or
benefit would constitute an impermissible acceleration under Section 409A of the Code and the transition guidance thereunder and such payment shall instead be paid on January 1, 2009, without interest. 
  

 12 

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

  

			
	KINDRED HEALTHCARE OPERATING, INC.
		
	By:	 	 /s/ Paul J. Diaz

		 	Paul J. Diaz
		 	President and Chief Executive Officer
	
	Solely for the purpose of Section 7 and Section 9
	
	KINDRED HEALTHCARE, INC.
		
	By:	 	 /s/ Paul J. Diaz

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

	FRANK J. BATTAFARANO

  

 13

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