Exhibit 10.11

 

 

 

THE PENNANT GROUP, INC.

2019 LONG TERM INCENTIVE PLAN

 

 

 

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THE PENNANT GROUP, INC.

2019 LONG TERM INCENTIVE PLAN

Section 1. Purpose

The purpose of the Plan is to promote the interests of the Company by aiding the
Company in attracting and retaining employees, officers, consultants,
independent contractors and directors capable of assuring the future success of
the Company and its Affiliates, to offer such persons incentives to continue in
the employ or service of the Company or its Affiliates and to afford such
persons an opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Company.

Section 2. Definitions

As used in the Plan, the following terms shall have the meanings set forth
below:

(a) “Affiliate” shall mean (i) any entity that, directly or indirectly through
one or more intermediaries, is controlled by the Company, (ii) any entity in
which the Company has a significant equity interest, in each case as determined
by the Committee and (iii) The Ensign Group, Inc. and its subsidiaries and
affiliates.

(b) “Award” shall mean any Restricted Stock granted under the Plan.

(c) “Award Agreement” shall mean any written agreement, contract or other
instrument or document evidencing an Award granted under the Plan. Each Award
Agreement shall be subject to the applicable terms and conditions of the Plan
and any other terms and conditions (not inconsistent with the Plan) determined
by the Committee.

(d) “Board” shall mean the Board of Directors of Pennant.

(e) “Cause” shall mean (i) the willful and continued failure by Participant
substantially to perform his or her duties and obligations (other than any such
failure resulting from his or her incapacity due to physical or mental illness),
(ii) Participant’s conviction or plea bargain of any felony or gross misdemeanor
involving moral turpitude, fraud or misappropriation of funds, or (iii) the
willful engaging by Participant in misconduct which causes substantial injury to
the Company or its affiliates, its other employees or the employees of its
affiliates or its clients or the clients of its affiliates, whether monetarily
or otherwise. For purposes of this paragraph, no action or failure to act on
Participant’s part shall be considered “willful” unless done or omitted to be
done, by Participant in bad faith and without reasonable belief that his or her
action or omission was in the best interests of the Company. However, if the
term or concept has been defined in an employment agreement between the Company
and Participant, then Cause shall have the definition set forth in such
employment agreement. The foregoing definition shall not in any way preclude or
restrict the right of the Company (or any Affiliate) to discharge or dismiss
Participant or other person providing Service to the Company (or any Affiliate)
for any other acts or omissions but such other acts or omissions shall not be
deemed, for purposes of this Agreement, to constitute grounds for termination
for Cause.

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(f) “Change in Control” shall mean a change in ownership or control of the
Company effected through any of the following transactions: (i) a merger,
consolidation or other reorganization unless securities representing more than
50% of the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company’s outstanding voting securities immediately prior
to such transaction; (ii) a sale, transfer or other disposition of all or
substantially all of the Company’s assets; or (iii) the acquisition, directly or
indirectly, by any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company), of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the
total combined voting power of the Company’s outstanding securities pursuant to
a tender or exchange offer made directly to the Company’s stockholders. Change
in Control shall not include an Initial Public Offering (“IPO”) by the Company
of its equity securities to the public pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, or under any
similar law then in effect.

(g) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, and any regulations promulgated thereunder.

(h) “Committee” shall mean a committee of the Board appointed to administer the
Plan; provided if there is no compensation committee, the Board means the
compensation committee of the Board.

(i) “Company” shall mean The Pennant Group, Inc., a Delaware Corporation, and
any successor corporation.

(j) “Director” shall mean a member of the Board of Directors of the Company.

(k) “Eligible Person” shall mean any employee, officer, consultant, independent
contractor or director providing services to the Company or any Affiliate who
the Committee determines to be an Eligible Person. An Eligible Person must be a
natural person.

(l) “Equity Restructuring” shall mean a dividend or other distribution (whether
in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Shares
or other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company or other similar corporate
transaction or event that affects the Shares such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.

(m) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(n) “Market Value” shall mean, for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, the market value as determined by the Committee in good faith in
whatever manner it considers appropriate, taking into account the requirements
of Section 409A of the Code and any other applicable laws, rules or regulations.

 

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(o) “Participant” shall mean an Eligible Person designated to be granted an
Award under the Plan.

(p) “Person” shall mean any individual or entity, including a corporation,
partnership, limited liability company, association, joint venture or trust.

(q) “Plan” shall mean The Pennant Group, Inc. 2019 Long Term Incentive Plan, as
amended from time to time, the provisions of which are set forth herein.

(r) “Securities Act” shall mean the Securities Act of 1933, as amended.

(s) “Service” shall mean the Participant’s performance of services for the
Company (or any Affiliate) in the capacity of an employee, officer, consultant,
independent contractor or director.

(t) “Share” or “Shares” shall mean a share or shares of common stock, $0.001 par
value per share, of the Company or such other securities or property as may
become subject to Awards pursuant to an adjustment made under Section 4(c) of
the Plan.

Section 3. Administration

(a) Power and Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan and to applicable law,
the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or the method by which payments or other rights are to be determined in
connection with) each Award; (iv) determine the terms and conditions of any
Award or Award Agreement; (v) amend the terms and conditions of any Award or
Award Agreement or waive any restrictions relating to any Award; (vi) determine
whether, to what extent and under what circumstances Awards may be exercised in
cash, Shares, other securities, other Awards or other property, or canceled,
forfeited or suspended; (vii) interpret and administer the Plan and any
instrument or agreement, including an Award Agreement, relating to the Plan;
(viii) establish, amend, suspend or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the
Plan; and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award or Award Agreement shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Eligible Person and any holder or beneficiary of any Award.

(b) Power and Authority of the Board. Notwithstanding anything to the contrary
contained herein, the Board may, at any time and from time to time, without any
further action of the Committee, exercise the powers and duties of the Committee
under the Plan.

 

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Section 4. Shares Available for Awards

(a) Shares Available. Subject to adjustment as provided in Section 4(c) of the
Plan, the aggregate number of Shares that may be issued under the Plan shall be
500,000 Shares, or (ii) such lesser number of Shares as determined by the Board.
Shares to be issued under the Plan may be either authorized but unissued Shares
or Shares re-acquired and held in treasury. Any Shares that are used by a
Participant as full or partial payment to the Company of the purchase price
relating to an Award, or in connection with the satisfaction of tax obligations
relating to an Award, shall again be available for granting Awards under the
Plan. In addition, if any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such Award,
to the extent of any such forfeiture or termination, shall again be available
for granting Awards under the Plan.

(b) Accounting for Awards. For purposes of this Section 4, if an Award entitles
the holder thereof to receive or purchase Shares, the number of Shares covered
by such Award or to which such Award relates shall be counted on the date of
grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan. Any Shares that are used by a Participant as
full or partial payment to the Company of the purchase price relating to an
Award or in connection with the satisfaction of tax obligations relating to an
Award, shall again be available for granting Awards under the Plan. In addition,
if any Shares covered by an Award or to which an Award relates are not purchased
or are forfeited, or if an Award otherwise terminates without delivery of any
Shares, then the number of Shares counted against the aggregate number of Shares
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, shall again be available for granting Awards under
the Plan.

(c) Adjustments. In the event of any Equity Restructuring, the number and type
of Shares (or other securities or other property) subject to outstanding Awards,
and the purchase price or exercise price with respect to any Award will be
proportionately adjusted to avoid dilution or enlargement of rights resulting
from such event; provided, however, that the number of Shares covered by any
Award or to which such Award relates shall always be a whole number. The
adjustments provided under this Section 4(c) shall be nondiscretionary and shall
be final and binding on the affected Participant and the Company. The Committee
shall make such proportionate adjustments to appropriately reflect such Equity
Restructuring with respect to the number and kind of Shares that may be issued
under the Plan (including, but not limited to, adjustments of the limitations in
Sections 4(a) hereof). Notwithstanding the above, in the event (i) of any
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company or any other
similar corporate transaction or event or (ii) the Company shall enter into a
written agreement to undergo such a transaction or event, any or all outstanding
Awards may be canceled and the holders of any such Awards that are otherwise
vested, may be paid in cash, the value of such Awards based upon the price per
share of capital stock received or to be received by other stockholders of the
Company in such event. Notwithstanding anything to the contrary herein, any such
adjustment will be made in accordance with the provisions of Section 409A of the
Code to the extent applicable. The number of Shares granted hereunder covered by
any Award may also be adjusted if the total Shares granted hereunder equal
greater than two percent (2%) of the outstanding shares of common stock of the
Company following its spin-off from The Ensign Group, Inc. In such event, all
Awards granted hereunder shall be adjusted pro rata such that they will total
less than two percent (2%) of the outstanding shares of the common stock of the
Company following such spin-off.

 

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Section 5. Eligibility

Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions to
the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant.

Section 6. Awards

(a) Restricted Stock Awards. The Committee is hereby authorized to grant
Restricted Stock to Eligible Persons with the following terms and conditions and
with such additional terms and conditions not inconsistent with the provisions
of the Plan, the terms and conditions of any Award, as the Committee shall
determine:

(i) Restrictions. Shares of Restricted Stock shall be subject to such
restrictions the Committee may impose (including, without limitation, a
restriction on or prohibition against the right to receive any dividend or other
right or property with respect thereto), which restrictions may lapse separately
or in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate.

(ii) Vesting of Restricted Stock Awards. A Restricted Stock Award shall vest in
accordance with the schedule designated by the Committee as set forth in the
Award Notice.

(iii) Issuance of Shares. Any Restricted Stock granted under the Plan may be
evidenced in such manner as the Board may deem appropriate, including book-entry
registration or issuance of a stock certificate or certificates, which
certificate or certificates shall be held by the Company. Such certificate or
certificates shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the restrictions and possible forfeiture
applicable to such Restricted Stock as set forth in the Award Agreement.

(iv) Forfeiture. Except as otherwise determined by the Committee, (A) upon a
Participant’s termination of Service (as determined under criteria established
by the Committee) during the applicable restriction period or prior to the
vesting of such Awards, all applicable Shares of Restricted Stock at such time
subject to restriction shall be forfeited to the Company; (B) upon a
Participant’s death or disability all applicable Shares of Restricted Stock at
such time subject to restriction or that are not vested shall be forfeited to
the Company, provided, however, that the Committee may, when it finds that a
waiver would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to Shares of Restricted Stock or
any such award.

(b) General Consideration for Awards. Awards may be granted for no cash
consideration or for any cash or other consideration as determined by the
Committee and required by applicable law.

 

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(i) Awards May Be Granted Separately or Together. Awards may, in the discretion
of the Committee, be granted either alone or in addition to, in tandem with any
other Award or any award granted under any plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under any such other plan of the Company or any
Affiliate may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.

(ii) Forms of Payment under Awards. Subject to the terms of the Plan and of any
applicable Award Agreement, payments or transfers to be made by the Company or
an Affiliate upon the grant, exercise or payment of an Award may be made in such
form or forms as the Committee shall determine (including, without limitation,
cash, Shares, other securities, other Awards or other property or any
combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee.

(iii) Limits on Transfer of Awards. No Award and no right under any such Award
shall be transferable by a Participant and the Company shall not be required to
recognize any attempted assignment of such rights by any Participant; provided,
however, that, if so determined by the Committee or as set forth in the terms
and conditions of any Awards (which have been previously approved by the
Committee), a Participant may, in the manner established by the Committee,
designate a beneficiary or beneficiaries to exercise the rights of the
Participant and receive any property distributable with respect to any Award
upon the death of the Participant. Except as otherwise determined by the
Committee or as set forth in the terms and conditions of any Awards (which have
been previously approved by the Committee), each Award or right under any such
Award shall be exercisable during the Participant’s lifetime only by the
Participant or, if permissible under applicable law, by the Participant’s
guardian or legal representative. Except as otherwise determined by the
Committee, no Award or right under any such Award may be pledged, alienated,
attached or otherwise encumbered, and any purported pledge, alienation,
attachment or other encumbrance thereof shall be void and unenforceable against
the Company or any Affiliate.

(iv) Restrictions; Securities Exchange Listing. All Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan, applicable federal or state securities laws and
regulatory requirements, and the Committee may direct appropriate stop transfer
orders and cause other legends to be placed on the certificates for such Shares
or other securities to reflect such restrictions. If the Shares or other
securities are traded on a securities exchange, the Company shall not be
required, and shall have no liability for failure, to deliver any Shares or
other securities covered by an Award unless and until such Shares or other
securities have been and continue to be admitted for trading on such securities
exchange. No Shares shall be issued or delivered pursuant to the Plan, and the
Company shall have no liability for failure to issue or deliver Shares under the
Plan, if doing so would violate any internal policies of the Company.

 

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Section 7. Amendment and Termination; Adjustments

(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or
terminate the Plan at any time; provided, however, that, such amendment,
alteration, suspension, discontinuation or termination shall be consistent with
the terms the Securities Act.

(b) Amendments to Awards. The Committee may waive any conditions of or rights of
the Company under any outstanding Award, prospectively or retroactively. Except
as otherwise provided herein or in an Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, if such action would adversely affect the rights
of the holder of such Award, without the consent of the Participant or holder or
beneficiary thereof.

(c) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any Award or Award Agreement in the manner and to the extent it shall
deem desirable to implement or maintain the effectiveness of the Plan.

Section 8. Income Tax Withholding

In order to comply with all applicable federal, state or local income tax laws
or regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal, state or local payroll, withholding, income
or other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant. In order to assist a
Participant in paying all or a portion of the federal, state and local taxes to
be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Market
Value equal to the amount of such taxes (up to the maximum marginal tax rate in
the Participant’s jurisdiction) or (ii) delivering to the Company Shares other
than Shares issuable upon exercise or receipt of (or the lapse of restrictions
relating to) such Award with a Market Value equal to the amount of such taxes
(but only to the extent of the minimum amount required to be withheld under
applicable laws or regulations). The election, if any, must be made on or before
the date that the amount of tax to be withheld is determined.

Section 9. General Provisions

(a) No Rights to Awards. No Eligible Person or other Person shall have any claim
to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Eligible Persons or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be the same
with respect to any Participant or with respect to different Participants.

(b) Award Agreements. No Participant will have rights under an Award granted to
such Participant unless and until an Award Agreement shall have been duly
executed on behalf of the Company and, if requested by the Company, signed by
the Participant.

 

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(c) Plan Provisions Control. In the event that any provision of an Award
Agreement conflicts with or is inconsistent in any respect with the terms of the
Plan as set forth herein or subsequently amended, the terms of the Plan shall
control.

(d) No Rights of Stockholders. Neither a Participant nor the Participant’s legal
representative shall have any voting rights, dividend rights, or cash dividend
rights with respect to any Award or issuance of Shares under this plan other
than those rights that are mandated by operation of law.

(e) No Limit on Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in effect
other or additional compensation arrangements, and such arrangements may be
either generally applicable or applicable only in specific cases.

(f) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ, nor will it affect
in any way the right of the Company or an Affiliate to terminate a Participant’s
employment or Service at any time, with or without cause. In addition, the
Company or an Affiliate may at any time dismiss a Participant from employment,
free from any liability or any claim under the Plan or any Award, unless
otherwise expressly provided in the Plan or in any Award Agreement. Nothing in
this Plan shall confer on any person any legal or equitable right against the
Company or any Affiliate, directly or indirectly, or give rise to any cause of
action at law or in equity against the Company or an Affiliate. The Awards
granted hereunder shall not form any part of the wages or salary of any Eligible
Person for purposes of severance pay or termination indemnities, irrespective of
the reason for termination of employment. Under no circumstances shall any
person ceasing to be an employee of the Company or any Affiliate be entitled to
any compensation for any loss of any right or benefit under the Plan which such
employee might otherwise have enjoyed but for termination of employment, whether
such compensation is claimed by way of damages for wrongful or unfair dismissal,
breach of contract or otherwise. By participating in the Plan, each Participant
shall be deemed to have accepted all the conditions of the Plan and the terms
and conditions of any rules and regulations adopted by the Committee and shall
be fully bound thereby.

(g) Governing Law. The validity, construction and effect of the Plan or any
Award, and any rules and regulations relating to the Plan or any Award, shall be
determined in accordance with the internal laws, and not the law of conflicts,
of the State of Delaware.

(h) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.

(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and an Eligible Person or any
other Person. To the extent that any Person acquires a right to receive payments
from the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.

 

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(j) Other Benefits. No compensation or benefit awarded to or realized by any
Participant under the Plan shall be included for the purpose of computing such
Participant’s compensation under any compensation-based retirement, disability,
or similar plan of the Company unless required by law or otherwise provided by
such other plan.

(k) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash shall be paid in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.

(l) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

(m) Conditions Precedent to Issuance of Shares. Shares shall not be issued, and
the Company shall not have any liability for failure to issue Shares, pursuant
to the exercise or payment of the purchase price relating to an Award unless
such exercise or payment and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, the requirements of any applicable Stock Exchange and
the Delaware General Corporation Law. As a condition to the exercise or payment
of the purchase price relating to such Award, the Company may require that the
person exercising or paying the purchase price represent and warrant that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation and warranty is required by law.

Section 10. Effective Date of the Plan

The Plan shall be effective as of August 27, 2019.

Section 11. Term of the Plan

No Award shall be granted under the Plan after (a) the tenth anniversary of the
later of (i) the date on which this Plan was adopted by the Board or (ii) the
date this Plan was approved by the stockholders of the Company, or (b) any
earlier date of discontinuation or termination established pursuant to
Section 7(a) of the Plan. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award theretofore granted may
extend beyond such date, and the authority of the Committee provided for
hereunder with respect to the Plan and any Awards, and the authority of the
Board to amend the Plan, shall extend beyond the termination of the Plan.

 

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