Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is made as of the 18 ^th day of December, 2008 by and between Kindred Healthcare, Inc., a Delaware corporation (the "Company") and Edward L. Kuntz ("Kuntz").

WITNESSETH :

WHEREAS, Kuntz is serving as Executive Chairman of the Board and the Company desires to continue the services of Kuntz in that capacity; and

WHEREAS, the Executive Compensation Committee (the "Executive Compensation Committee") of the Board of Directors (the "Board") has determined that it is in the best interests of the Company and its subsidiaries 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 Kuntz agree as follows:

1. Employment as Executive Chairman of the Board .

(a) Term . The Company or one of its subsidiaries hereby agrees to employ Kuntz and Kuntz hereby agrees to be employed as Executive Chairman of the Board of Directors ("Executive Chairman") effective on the date hereof on the terms and conditions herein set forth. The term of this Agreement (the "Term") shall be for a one-year period commencing on the date hereof (the "Effective Date"). The Term shall be automatically extended by one additional day for each day beyond the Effective Date that Kuntz remains employed by the Company until such time as the Board of Directors elects to cease such extension by giving written notice of such election to Kuntz. In such an event, the Agreement shall terminate on the first anniversary of the date of such election notice, unless a later date is specified.

(b) Duties . As Executive Chairman, Kuntz shall perform the following duties: (i) coordinate all Board matters and committee activities and act as the principal liaison between the Board and senior management; (ii) continue his responsibility for public lobbying and relationships with various healthcare related organizations; (iii) advise the chief executive officer and senior management on strategic initiatives including financing, acquisition and development activities; (iv) advise the chief executive officer and senior management concerning all compliance and regulatory matters; and (v) such other similar matters as reasonably requested by the Board.

(c) Extent of Services . Kuntz, subject to the direction and control of the Board, shall have the power and authority commensurate with his status as

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Executive Chairman and necessary to perform his duties hereunder. During the Chairman Term, Kuntz shall devote approximately two days a week or 60 hours a month to the business of the Company. With notice to the Board, Kuntz may engage in any other business activities, whether or not such business activities are pursued for gain, profit or other pecuniary advantage provided such activities do not conflict with the Company’s objectives and operations.

(d) Compensation . As compensation for services rendered as Executive Chairman, Kuntz shall receive during the Chairman Term:

(i) A salary ("Chairman Salary") of not less than his current base salary per year payable in equal installments in accordance with the Company’s normal payroll procedures. Kuntz may receive increases in his Chairman Salary from time to time, as approved by the Executive Compensation Committee.

(ii) Kuntz may be eligible to receive additional compensation as the Executive Compensation Committee may approve from time to time but is not intended that Kuntz will continue to participate in the Company’s standard bonus or long-term incentive plans. It is intended that any such additional compensation shall be structured, to the extent necessary, to comply with Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (the "Code").

(e) Benefits . During the Term:

(i) Kuntz shall be entitled to participate in any and all welfare benefit (including, without limitation, medical, dental, disability and group life insurance coverages) and fringe benefit plans from time to time in effect for executives of the Company and its affiliates.

(ii) Kuntz may incur reasonable expenses for promoting the Company’s business, including expenses for entertainment, travel and similar items. The Company shall reimburse Kuntz for all such reasonable expenses in accordance with the Company’s reimbursement policies and procedures.

(iii) Kuntz will continue to vest in his existing stock options, restricted stock and accrued long-term incentive benefits.

(iv) The Company shall provide Kuntz with an office suite in Houston, Texas and an administrative assistant substantially comparable to his existing office suite and administrative assistant being furnished as of the date of this Agreement.

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2. Termination of Employment .

(a) Death or Disability . Kuntz’s employment shall terminate automatically upon Kuntz’s death during the Term. If the Board determines in good faith that the Disability of Kuntz has occurred during the Term (pursuant to the definition of Disability set forth below) it may give to Kuntz written notice of its intention to terminate Kuntz’s employment. In such event, Kuntz’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by Kuntz (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Kuntz shall not have returned to performance of Kuntz’s duties. For purposes of this Agreement, "Disability" shall mean Kuntz’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 Kuntz by the Company.

(b) Cause . The Company may terminate Kuntz’s employment during the Term for Cause. For purposes of this Agreement, "Cause" shall mean Kuntz’s (i) conviction of or plea of nolo contendere to a crime involving moral turpitude; or (ii) willful and material breach by Kuntz 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 Kuntz 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 Kuntz in good faith and in the best interests of the Company.

(c) Good Reason . Kuntz’s employment may be terminated by Kuntz for Good Reason. "Good Reason" shall exist upon the occurrence, without Kuntz’s express written consent, of any of the following events:

(i) The Company shall materially reduce the Chairman Salary;

(ii) The Company shall require Kuntz to relocate Kuntz’s principal business office more than 30 miles from its location on the date of this Agreement;

(iii) If Kuntz ceases to be Chairman of the Board, for any reason, including failing to be elected at any annual or special meeting of the shareholders of the Company (which shall be deemed a material adverse change in Kuntz’s duties and responsibilities); or

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(iv) a material breach by the Company of Section 1(d)(ii), Section 1(e)(i) or Section 5(c) of this Agreement.

For purposes of this Agreement, "Good Reason" shall not exist until after Kuntz has given the Company notice of the applicable event within 10 days of the initial occurrence of such event and which is not remedied within 10 days after receipt of written notice from Kuntz specifically delineating such claimed event and setting forth Kuntz’s intention to terminate employment if not remedied; provided, that if the specified event cannot reasonably be remedied within such 10-day period and the Company commences reasonable steps within such 10-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 30 days after receipt of such written notice.

(d) Retirement . Kuntz’s employment shall be terminated upon Retirement. For purposes of this Agreement, "Retirement" means an election by either Kuntz or the Company to terminate this Agreement upon Kuntz reaching age 65 or anytime thereafter.

(e) Notice of Termination . Any termination by the Company for Cause, by Kuntz for Good Reason or by either Kuntz or the Company upon Retirement, 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 Kuntz’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 10 days after the giving of such notice). The failure by Kuntz 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 Kuntz or the Company, respectively, hereunder or preclude Kuntz or the Company, respectively, from asserting such fact or circumstance in enforcing Kuntz’s or the Company’s rights hereunder.

(f) Date of Termination . "Date of Termination" means (i) if Kuntz’s employment is terminated by the Company for Cause, or by Kuntz 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 Kuntz’s employment is terminated by the Company other than for Cause, Disability or Retirement, or Kuntz resigns without Good Reason (and other than due to Retirement), the Date of Termination shall be the date on which the Company or Kuntz notified Kuntz or the Company, respectively, of such termination (iii) if Kuntz’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of Kuntz or the Disability Effective Date,

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as the case may be and (iv) if Kuntz’s employment is terminated by either Kuntz or the Company upon Retirement, the date specified in the Notice of Termination.

3. Obligations of the Company Upon Termination . Following any termination of Kuntz’s employment hereunder, the Company shall pay Kuntz his accrued wages through the Date of Termination and any amounts owed to Kuntz 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 3(g) hereof, Kuntz shall be entitled to the following additional payments:

(a) Death or Disability . Kuntz shall not be entitled to any additional benefits by reason of his death or Disability during the Term.

(b) Good Reason; Other than for Cause . If, during the Term, the Company shall terminate Kuntz’s employment other than for Cause (but not for Disability or Retirement), or Kuntz shall terminate his employment for Good Reason:

(i) Within 14 days of Kuntz’s Date of Termination, the Company shall pay to Kuntz an amount equal to three times the Chairman Salary as of th