KINDRED HEALTHCARE INC
AMENDED 401K PLAN (KINDRED)
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>7
<FILENAME>dex1012.txt
<DESCRIPTION>AMENDED 401K PLAN (KINDRED)
<TEXT>
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                                                                   EXHIBIT 10.12

                                 AMENDMENT NO. 3
                                     TO THE
                               KINDRED 401(k) PLAN

         This is Amendment No. 3 to the Kindred 401(k) Plan (the "Plan") as last
amended and restated as of March 1, 2000.

                                    RECITALS
                                    --------

A.       Kindred Healthcare, Inc. (the "Company") maintains the Plan and has
         reserved the right in Section 9.1 of the Plan to amend the Plan from
         time to time in its discretion.

B.       Certain employees of the Company are currently participants in the
         Nationwide Care, Inc. 401(k) Plan (the "Nationwide Plan"); and

C.       The Company wishes to amend the Plan in connection with the spinoff of
         assets from the Nationwide Plan to the Plan for participants who have
         an account in the Plan or who do not have an account in either the Plan
         or the Kindred & Affiliates 401(k) Plan also maintained by the Company
         (the Nationwide Plan is being merged into the Plan, but Nationwide Plan
         accounts of participants who have an account in the Kindred &
         Affiliates 401(k) Plan but not in this Plan are being transferred to
         the Kindred & Affiliates 401(k) Plan, rather than to this Plan).

D.       The Company also wishes to amend the Plan to eliminate optional forms
         of benefit preserved from various mergers and spinoffs of assets into
         the Plan, as is now allowed due to changes in the law, effective 90
         days following notice thereof to the affected participants and to allow
         in-service distributions on or after age 59 1/2 for all prior plan
         accounts for ease of administration.

E.       The Company also wishes to amend the Plan to clarify that the Company
         reserves the discretion to change the matching contribution formula
         from time to time.

F.       The Company also desires to allow an employee who has terminated
         employment with the Company due to a corporate merger or acquisition,
         but still performs the same functions for the successor employer, to
         receive distribution of their Plan accounts, as is now allowed due to
         changes in the law.

G.       As of July 26, 2001, the Company has acquired the management of
         facilities at

                       Fifth Avenue Healthcare Center #275
                                1601 Fifth Avenue
                              San Rafael, CA 94901

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                      Smith County Health Care Center #274
                              112 Healthcare Drive
                               Carthage, TN 37030

         (the "Lenox Facilities") and employed the persons who operate them,
         which employees previously participated in the Lenox Healthcare, Inc.
         401(K) Plan (the "Lenox Plan"), and the Company wishes to amend the
         Plan to grant past service credit under the Plan to these employees.

                                   AMENDMENTS
                                   ----------

         1.       Section 5.5(b) of the Plan is hereby amended effective
December 17, 2001 by the addition of the following new sentence at the end
thereof :

                  A Participant shall always be 100% vested in all amounts in
                  his Prior Plan Employer Contribution Account that were
                  transferred from the Nationwide Care, Inc. 401(k) Plan.

         2.       Section 5.6(c) of the Plan is hereby amended effective
December 17, 2001, so that as amended it shall read in its entirety as follows:

                  (c) Notwithstanding any other provisions of the Plan, the
                  payment of a Participant's benefits hereunder shall begin by
                  payment of a lump sum of the entire Accounts of the
                  Participant no later than the April 1 following the calendar
                  year in which the Participant has both attained age 70 1/2 and
                  has retired, provided that for 5% owners as defined in Section
                  416 of the Code, distribution must begin by April 1 following
                  the calendar year in which the Participant attains age 70 1/2,
                  regardless of whether the Participant has retired; and further
                  provided that a Participant who had attained age 70 1/2 on or
                  before December 31, 1998, or who has a Prior Plan account from
                  the Nationwide Care, Inc. 401(k) Plan and who had attained age
                  70 1/2 on or before December 31, 2001, shall have the option
                  to take a lump sum distribution even while employed, at the
                  April 1 following attainment of age 70 1/2, if the Participant
                  so elects in writing, and, if so elected, shall receive a
                  distribution on or before December 31 of the year after
                  attainment of age 70 1/2, and again each year thereafter while
                  still employed, shall receive a similar distribution of all
                  amounts accrued in Accounts of the Participant since the last
                  such distribution.

         3.       Section 5.7(c) of the Plan is hereby amended effective
December 31, 2001 so that as amended it shall read in its entirety as follows:

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                  Effective on the 90/th/ day following the provision of written
                  notice to affected Participants, all installment payment and
                  annuity optional forms of distribution otherwise applicable on
                  December 31, 2001 to Prior Plan Salary Redirection Accounts
                  and Prior Plan Employer Contribution Accounts shall be
                  eliminated, and such accounts shall be distributed only in a
                  lump sum payment in cash. Notwithstanding anything in this
                  Section 5.7 to the contrary, but subject to the elimination of
                  such rights as provided in the preceding sentence of this
                  Section 5.7(c), in the case of a Participant who has a Prior
                  Plan Salary Redirection Account or a Prior Plan Employer
                  Contribution Account, the Participant may take distribution of
                  his Prior Plan Salary Redirection Account or Prior Plan
                  Employer Contribution Account at such time or in such other
                  form as was provided in the plan (as in effect as of the date
                  of transfer) from which the Prior Plan Salary Redirection
                  Account or Prior Plan Employer Contribution Account was
                  transferred.

         4.       Section 6.2 of the Plan is hereby amended effective
December 31, 2001 so that as amended it shall read in its entirety as follows:

         Section 6.2   Prior Plan Account Withdrawals

                  Upon proper written application in such manner and in such
                  form as the Committee may specify, a Participant shall be
                  permitted to withdraw a portion or all of the balance of his
                  Prior Plan Employer Contribution Account and Prior Plan Salary
                  Redirection Account while employed, but only on or after
                  attainment of age 59 1/2, determined as of the Valuation Date
                  coincident with or immediately preceding the requested date of
                  withdrawal. In addition, a Participant shall be permitted to
                  withdraw up to 50% of his Prior Plan Employer Contribution
                  Account from the THC Retirement Savings Plan after ten years
                  of participation and permitted to withdraw any after-tax
                  contributions from the THC Retirement Savings Plan at any
                  time.

         5.       Section 3.2 of the Plan is hereby amended effective January 1,
2002, so that as amended it shall read in its entirety as follows:

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                  Section 3.2   Matching Contributions

                  As of the end of each calendar quarter, the Employer may make
                  a Matching Contribution to the Trust Fund on behalf of
                  eligible Participants. If Matching Contributions are made
                  prior to the end of a calendar quarter, they shall nonetheless
                  be left unallocated until the quarter ends. The Sponsoring
                  Employer shall determine from time to time the rate at which
                  the Employer will match net eligible Salary Redirection of
                  eligible Participants contributed pursuant to Section 3.1. Net
                  eligible Salary Redirection means Salary Redirection not to
                  exceed a percentage of Compensation set from time to time by
                  the Sponsoring Employer, during the period since the last
                  preceding calendar-quarter end, which Salary Redirection has
                  not been withdrawn since the preceding calendar-quarter end.
                  For purposes of calculating net eligible Salary Redirection,
                  withdrawals shall be deemed to have been made from the
                  earliest Salary Redirection not yet withdrawn. Any Matching
                  Contribution shall be allocated to the Matching Contribution
                  Account of each eligible Participant. For purposes of this
                  Section, the term "eligible Participant" shall mean a
                  Participant who is either (i) actively employed by the Company
                  or an employer which participates in the Kindred & Affiliates
                  401(k) Plan (even if not still an "Employee") as of the end of
                  each calendar quarter, or (ii) died since the end of the
                  preceding calendar quarter, or (iii) retired or became
                  disabled pursuant to Section 5.1, 5.2, or 5.4 since end of the
                  preceding calendar quarter, or (iv) on a Family and Medical
                  Leave Act leave of absence at the end of the calendar quarter.

         6.       Section 5.5(l) of the Plan is hereby amended effective
January 1, 2002 so that as amended it shall read in its entirety as follows:

                  Notwithstanding anything to the contrary in this Section 5.5
                  or in Section 5.6(a), no portion of a Participant's Individual
                  Account shall be distributed to him until the participant has
                  a severance from employment within the meaning of Code Section
                  401(k)(2)(B), unless the distribution is in connection with a
                  plan termination described in Code Section 401(k)(10) and the
                  Treasury Regulations under that Section.

         7.       Section 12.5 of the Plan is hereby amended effective
November 1, 2001 so that as amended it shall read in its entirety as follows:

                  The Board of Directors of a Participating Employer may at any
                  time terminate this Plan with respect to its Employees by
                  adopting a resolution to that effect and delivering a
                  certified copy of the Committee. Section 9.2 shall not apply
                  to vest the Individual

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                  Accounts of a Participating Company's Employees upon such
                  termination (unless the termination results in a partial
                  termination of the entire Plan), and the continuation of the
                  Plan by the Sponsoring Employer and other Participating
                  Employers shall not be affected. The termination of the Plan
                  with respect to a Participating Employer's Employees shall not
                  effect a termination with respect to an Employee of the
                  Sponsoring Employer or another Participating Employer if such
                  Employee was not employed by the terminating Participating
                  Employer on the effective date of the termination, even though
                  he may have been employed by the terminating Participating
                  Employer at an earlier date, and shall not entitle a
                  Participant to a distribution until an actual severance from
                  employment within the meaning prescribed under Code Section
                  401(k)(2)(B) has occurred, unless distribution follows a
                  termination of the plan under Code Section 401(k)(10) and the
                  Treasury Regulations thereunder. Any fees and other expenses
                  related to a Participating Employer's termination shall be
                  charged against the Accounts of the affected Participants, if
                  not paid by the terminating Participating Employer.

         8.       Appendix A to the Plan is hereby amended to add to the end
thereof the following so that credit for service for eligibility and vesting
will be granted for the Lenox Facilities' employees:

                  All past Service of Employees hired prior to October 1, 2001
                  by the Employer at the Lenox Facilities that would have been
                  credited in the Lenox Plan shall be credited for purposes of
                  eligibility and vesting under the Plan, effective October 1,
                  2001.

         IN WITNESS WHEREOF, the Employer has caused this Amendment No. 3 to be
executed this 28/th/ day of December, 2001.


                          KINDRED HEALTHCARE, INC.


                          By: /s/ Richard E. Chapman
                              -------------------------------------------------

                          Title: Chief Administrative Officer and Information
                                 ----------------------------------------------
                                 Officer and Senior Vice President
                                 ----------------------------------------------

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