exv10w1



 





Exhibit 10.1




Employment Agreement




     This Employment Agreement dated as of August 14, 2007 (the “Agreement”), is made by
and between Skilled Healthcare, LLC., a Delaware limited liability company (together with its
Parent and any successor thereto, the “Company”) and Chris Felfe (the “Executive”).



RECITALS





	A.	 	It is the desire of the Company to assure itself of the continued services of the Executive
by entering into this Agreement.
	 
	B.	 	The Executive and the Company mutually desire that Executive provide services to the Company
on the terms herein provided.





AGREEMENT




     NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements set forth below the parties hereto agree as follows:



1. Employment.





	 	(a)	 	General. The Company shall employ the Executive and the Executive shall
enter the employ of the Company, for the period set forth in Section 1(b), in
the position set forth in Section 1(c), and upon the other terms and conditions
herein provided.
	 
	 	(b)	 	Employment Term. The initial term of employment under this Agreement
(the “Initial Term”) shall be for the period beginning on August 10, 2007, (the
“Effective Date”) and ending on (and including) the first anniversary thereof,
unless earlier terminated as provided in Section 3. The employment term
hereunder shall automatically be extended for successive one-year periods
(“Extension Terms” and, collectively with the Initial Term, the “Term”)
unless either party gives written notice of non-extension to the other no later than
sixty (60) days prior to the expiration of the then-applicable Term and subject to
earlier termination as provided in Section 3.
	 
	 	(c)	 	Position and Duties. The Executive shall serve as the Senior Vice
President of Finance and Chief Accounting Officer of the Company with such customary
responsibilities, duties and authority as may from time to time be assigned to the
Executive by the Chief Financial Officer, Chief Executive Officer of the Company, the
Board of Directors of the Company or by the Board of Directors of Parent (the
“Board”). The Executive shall devote substantially all his working time and
efforts to the business and affairs of the Company (which may include service to Parent,
the Company and their respective direct and indirect subsidiaries). The Executive
agrees to observe and comply with the rules and policies of the Company as adopted by or
under the authority of the Board from time to time. During the Term, it shall not be a
violation of this Agreement for the Executive to serve on industry trade, civic or
charitable boards or committees and manage his personal investments and affairs, as




 









 












	 	 	 	long as such activities do not materially interfere with the performance of the
Executive’s duties and responsibilities as an employee of the Company. During his
employment and following termination of his employment with the Company, the
Executive agrees not to disparage the Company, any of its products or practices, or
any of its directors, officers, agents, representatives, stockholders or affiliates,
either orally or in writing.
	 
	 	(d)	 	Location. The Executive acknowledges that the Company’s principal
executive offices are currently located at Foothill Ranch, California. The Executive
shall operate principally out of such executive offices, as they may be moved from time
to time within 40 miles of their current location in Foothill Ranch, California. The
Company expects, and the Executive agrees, that the Executive shall be required to
travel from time to time in order to fulfill his duties to the Company.





2. Compensation and Related Matters.





	 	(a)	 	Annual Base Salary. During the Term, the Executive shall receive a base
salary at a rate of $ 225,000 per annum (the “Annual Base Salary”), which shall
be paid in accordance with the customary payroll practices of the Company, subject to
upward adjustment as may be determined by the Board in its discretion.
	 
	 	(b)	 	Annual Bonus. During the Term, the Executive will be eligible to
participate in an annual performance-based bonus plan that provides an opportunity of
30% of the Executive’s pro-rata Annual Base Salary on terms substantially the same as
the bonus plan adopted by the Board for other senior officers of the Company.
	 
	 	(c)	 	Equity Plan. During the Term, and subject to Board approval, the
Executive shall be entitled to participate in the 2007 Equity Award Plan (the
“Equity Plan”) of Parent pursuant to which, on the date the Board selects as the
grant date (the “Grant Date”), the Executive shall receive shares of common
stock of Parent, which equal approximately $ 250,000 in value based upon the closing
market price of the Parent’s publicly traded stock on the Grant Date pursuant to Board
discretion and policy. Restricted Stock shall vest as to 25% of the shares granted on
each of the first four anniversaries of the Grant Date, but only to the extent the
Executive remains continuously employed by the Company through the applicable vesting
date.
	 
	 	(d)	 	Benefits. During the Term, the Executive shall be entitled to
participate in group medical insurance, 401(k) and other standard benefits provided by
the Company, as may be amended from time to time, which are applicable to the Senior
Vice Presidents of the Company.
	 
	 	(e)	 	Vacation. During the Term, the Executive shall not participate in any
Company sponsored vacation plan; however the Executive will be expected to work a
minimum of 49 weeks per calendar year which will allow three weeks off with pay. The
minimum work threshold is tied to the calendar year and no rollover is permitted from
one year to the next. Any vacation shall be taken at the reasonable and mutual
convenience of the Company and the Executive. The minimum threshold weeks for the first
partial calendar year following the Effective Date shall be 18.





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	 	(f)	 	Expenses. During the Term, the Company shall reimburse the Executive for
all reasonable travel and other business expenses incurred by him in the performance of
his duties to the Company in accordance with the Company’s expense reimbursement policy.
	 
	 	(g)	 	Key Person Insurance. At any time during the Term, the Company shall
have the right to insure the life of the Executive for the Company’s sole benefit. The
Company shall have the right to determine the amount of insurance and the type of
policy. The Executive shall cooperate with the Company in obtaining such insurance by
submitting to physical examinations, by supplying all information reasonably required by
any insurance carrier, and by executing all necessary documents reasonably required by
any insurance carrier. The Executive shall incur no financial obligation by executing
any required document, and shall have no interest in any such policy.
	 
	 	(h)	 	Annual Review. Approximately every 12 months during the Term, the
Executive and the Company’s Chief Financial Officer, Chief Executive Officer, Board or
appropriate committee of the Board shall meet to discuss the Executive’s performance and
terms of the Executive’s employment by the Company.





3. Termination.




    The Term and the Executive’s employment hereunder may be terminated by the Company or the
Executive, as applicable, without any breach of this Agreement only under the following
circumstances:




	 	(a)	 	Circumstances.






	 	(i)	 	Death. The Term and the Executive’s employment
hereunder shall terminate upon his death.
	 
	 	(ii)	 	Disability. If the Executive has incurred a
Disability, the Company may terminate the Term and the Executive’s employment
hereunder.
	 
	 	(iii)	 	Termination for Cause. The Company may terminate the
Term and the Executive’s employment hereunder for Cause.
	 
	 	(iv)	 	Termination without Cause. The Company may terminate
the Term and the Executive’s employment hereunder without Cause.
	 
	 	(v)	 	Resignation by the Executive. The Executive may resign
his employment and terminate the Term for any reason.
	 
	 	(vi)	 	Non-extension of Term by the Company. The Company may
give notice of non-extension to the Executive pursuant to Section 1(b).
	 
	 	(vii)	 	Non-extension of Term by the Executive. The Executive
may give notice of non-extension to the Company pursuant to Section 1(b).






	 	(b)	 	Notice of Termination. Any termination of the Executive’s employment by
the Company or by the Executive under this Section 3 (other than termination
pursuant to paragraph (a)(i)) shall be communicated by a written notice to the





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	 	 	 	other party indicating the specific termination provision in this Agreement relied
upon, and specifying a Date of Termination which, if submitted by the Executive,
shall be at least two weeks following the date of such notice (a “Notice of
Termination”). A Notice of Termination submitted by the Company may provide for
a Date of Termination on the date the Executive receives the Notice of Termination,
or any date thereafter elected by the Company in its sole discretion.






	 	(c)	 	Company obligations upon termination. Upon termination of the
Executive’s employment, the Executive (or the Executive’s estate) shall be entitled to
receive the sum of the Executive’s Annual Base Salary through the Date of Termination
not theretofore paid, any expenses owed to the Executive under Section 2(f), and
except as otherwise provided herein, any amount accrued and arising from the Executive’s
participation in, or benefits accrued under any employee benefit plans, programs or
arrangements under Section 2(d), which amounts shall be payable in accordance
with the terms and conditions of such employee benefit plans, programs or arrangements,
and such other or additional benefits as may be, or become, due to him under the
applicable terms of applicable plans, programs, agreements, corporate governance
documents and other arrangements of the Company and its parent and subsidiaries
(collectively, the “Company Arrangements”).





4. Severance Payments.





	 	(a)	 	Termination for Cause, Resignation by the Executive, Non-extension of Term by
the Executive or the Company, death or Disability. If the Executive’s employment is
terminated pursuant to Section 3(a)(iii) for Cause, pursuant to
Section 3(a)(v) for Resignation by the Executive, pursuant to Section
3(a)(vii) due to non-extension of the Term by the Executive, or pursuant to
Section 3(a)(iv) without cause during the first six months of employment, the
Executive shall not be entitled to any severance payment or benefits. If the
Executive’s employment is terminated pursuant to Section 3(a)(i) as a result of
Executive’s death or pursuant to Section 3(a)(ii) as a result of the Executive’s
Disability, the Company shall, subject to the Executive signing and not revoking, within
sixty days following delivery to Executive, a separation and release agreement in the
form attached hereto, (i) pay to the Executive an amount equal to the product of (x) the
bonus that the Executive would have earned during the calendar year in which the Date of
Termination occurs, if any, and (y) a fraction, the numerator of which is the number of
days that elapsed in such calendar year through the Date of Termination and the
denominator of which is 365, payable when bonuses would have otherwise been payable had
the Executive’s employment not terminated and (ii) in the case of termination pursuant
to Section 3(a)(ii) as a result of the Executive’s Disability, pay to the
Executive an amount equal to the excess, if any, of (x) the amount that would have been
payable to the Executive pursuant to Section 4(b)(i) if the Executive had been
terminated by the Company without Cause pursuant to Section 3(a)(iv) after six
months of continuous employment over (y) the present value of the benefits to be
received by the Executive (or his beneficiaries) under any disability plan sponsored by
the Company or its affiliates (for purposes of this clause (ii) the amounts in (x) and
(y) shall be determined by the Company on an after-tax basis to the extent that their
receipt by the Executive (or his beneficiaries) would be subject to tax and on actuarial
assumptions satisfactory to the Company). If the Executive’s





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	 	 	 	employment is terminated pursuant to Section 3(a)(vi) due to non-extension of
the Term by the Company, the Company shall, subject to the Executive signing and not
revoking, within sixty days following delivery to Executive, a separation and release
agreement in the form attached hereto at Annex A, (i) pay to the Executive an amount
equal to the product of (x) the bonus that the Executive would have earned during the
calendar year in which the Date of Termination occurs, if any, and (y) a fraction,
the numerator of which is the number of days that elapsed in such calendar year
through the Date of Termination and the denominator of which is 365, payable when
bonuses would have otherwise been payable had the Executive’s employment not
terminated and (ii) pay to the Executive, in a lump sum, an amount equal to the
Annual Base Salary that the Executive would have been entitled to receive if the
Executive had continued his employment hereunder for a period of 12 months following
the Date of Termination.
	 
	 	(b)	 	Termination without Cause. If after continuous employment with the
Company for a period of six months the Executive’s employment shall be terminated by the
Company without Cause pursuant to Section 3(a)(iv) the Company shall, subject to
the Executive signing and not revoking, within sixty days following delivery to
Executive, a separation and release agreement in the form attached hereto:






	 	(i)	 	pay to the Executive, in a lump sum, an amount equal to the
Annual Base Salary that the Executive would have been entitled to receive if
the Executive had continued his employment hereunder for a period of 12 months
following the Date of Termination;
	 
	 	(ii)	 	pay to the Executive an amount equal to the product of (x) the
bonus that the Executive would have earned during the calendar year in which
the Date of Termination occurs, if any, and (y) a fraction, the numerator of
which is the number of days that elapsed in such calendar year through the Date
of Termination and the denominator of which is 365, payable when bonuses would
have otherwise been payable had the Executive’s employment not terminated; and
	 
	 	(iii)	 	cover the premium costs for medical benefits under COBRA for
the Executive and, where applicable, his spouse and dependents, life insurance
and disability insurance (all as in effect immediately prior to the Date of
Termination) for a period of 12 months following the Date of Termination.






	 	(c)	 	Survival. The expiration or termination of the Term shall not impair the
rights or obligations of any party hereto, which shall have accrued prior to such
expiration or termination.
	 
	 	(d)	 	409A. Notwithstanding anything to the contrary in this Section 4, no
payments in this Section 4 will be paid during the six-month period following the
Executive’s termination of employment unless the Company determines, in its good faith
judgment, that paying such amounts at the time or times indicated in this Section would
not cause the Executive to incur an additional tax under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) (in which case such amounts shall be paid
at the time or times indicated in this Section). If the payment of any amounts are
delayed as a





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	 	 	 	result of the previous sentence, on the first day following the end of the six-month
period, the Company will pay the Executive a lump-sum amount equal to the cumulative
amounts that would have otherwise been previously paid to the Executive under this
Section 4. Thereafter, payments will resume in accordance with this Section.





5. Competition.





	 	(a)	 	The Executive shall not, at any time during the Term or during the two-year
period following the Date of Termination, directly or indirectly engage in, have any
equity interest in, or manage or operate any person, firm, corporation, partnership or
business (whether as director, officer, employee, agent, representative, partner,
security holder, consultant or otherwise) that engages in any business (x) which
competes with any business of the Company anywhere in the States of California, Kansas,
Missouri, Nevada or Texas, (y) which competes with any business of the Company in any
State in which the Company operated a facility at any time (whether before or after the
date of this Agreement) that the Executive was employed by the Company or (z) which
derives $500,000,000 or more in annual consolidated revenues from the operation of
skilled nursing facilities in the United States; provided, however, that
the Executive shall be permitted to acquire a passive stock interest in such a business
provided the stock acquired is publicly traded and is not more than five percent (5%) of
the outstanding interest in such business.
	 
	 	(b)	 	The Executive shall not at any time during the Term or during the two-year period
following the date of Termination, directly or indirectly, recruit or otherwise solicit
or induce or encourage any employee, contractor, customer or supplier of the Company
(i) to terminate its employment or arrangement with the Company, (ii) to otherwise
change its relationship with the Company or (iii) to establish any relationship with the
Executive or any other person, firm, corporation or other entity for any business
purpose competitive with the business of the Company.
	 
	 	(c)	 	In the event the terms of this Section 5 shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its being too
extensive in any other respect, it will be interpreted to extend only over the maximum
period of time for which it may be enforceable, over the maximum geographical area as to
which it may be enforceable, or to the maximum extent in all other respects as to which
it may be enforceable, all as determined by such court in such action.
	 
	 	(d)	 	As used in this Section 5, the term “Company” shall include
Parent, the Company and their respective direct or indirect subsidiaries.





6. Nondisclosure of Proprietary Information.





	 	(a)	 	Except in connection with the faithful performance of the Executive’s duties
hereunder or pursuant to Section 6(c), the Executive shall, in perpetuity,
maintain in confidence and shall not directly, indirectly or otherwise, use,
disseminate, disclose or publish, or use for his benefit or the benefit of any person,
firm, corporation or other entity any confidential or proprietary information or trade
secrets of or relating to the Company (including, without





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	 	 	 	limitation, intellectual property in the form of patents, trademarks and copyrights
and applications therefor, ideas, inventions, works, discoveries, improvements,
information, documents, formulae, practices, processes, methods, developments, source
code, modifications, technology, techniques, data, programs, other know-how or
materials, owned, developed or possessed by the Company, whether in tangible or
intangible form, information with respect to the Company’s operations, processes,
products, inventions, business practices, finances, principals, vendors, suppliers,
customers, potential customers, marketing methods, costs, prices, contractual
relationships, regulatory status, prospects and compensation paid to employees or
other terms of employment), or deliver to any person, firm, corporation or other
entity any document, record, notebook, computer program or similar repository of or
containing any such confidential or proprietary information or trade secrets. The
parties hereby stipulate and agree that as between them the foregoing matters are
important, material and confidential proprietary information and trade secrets and
affect the successful conduct of the businesses of the Company (and any successor or
assignee of the Company). Confidential Information shall not include any information
which has entered the public domain through no fault of the Executive.
	 
	 	(b)	 	Upon termination of the Executive’s employment with the Company for any reason,
the Executive will promptly deliver to the Company all correspondence, drawings,
manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial
documents, or any other documents concerning the Company’s customers, business plans,
marketing strategies, products or processes.
	 
	 	(c)	 	The Executive may respond to a lawful and valid subpoena or other legal process
but shall give the Company the earliest possible notice thereof, shall, as much in
advance of the return date as possible, make available to the Company and its counsel
the documents and other information sought and shall assist such counsel at Company’s
expense in resisting or otherwise responding to such process.
	 
	 	(d)	 	As used in this Section 6 and Section 7, the term
“Company” shall include the Company and its direct or indirect parents, if any,
and subsidiaries.
	 
	 	(e)	 	Nothing in this Agreement shall prohibit the Executive from (i) disclosing
information and documents when required by law, subpoena or court order (subject to the
requirements of Section 6(c) above), (ii) disclosing information and documents to his
attorney or tax adviser on a confidential basis for the purpose of securing legal or
tax advice, (iii) disclosing the post-employment restrictions in this Agreement in
confidence to any potential new employer, or (iv) retaining, at any time, his personal
correspondence, his personal rolodex and documents related to his own personal
benefits, entitlements and obligations.





7. Inventions.




    All rights to discoveries, inventions, improvements and innovations (including all data and
records pertaining thereto) related to the business of the Company, whether or not patentable,
copyrightable, registrable as a trademark, or reduced to writing, that the Executive may discover,
invent or originate during the Term, either alone or with others and




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whether or not during working hours or by the use of the facilities of the Company
(“Inventions”), shall be the exclusive property of the Company. The Executive shall
promptly disclose all Inventions to the Company, shall execute at the request of the Company any
assignments or other documents the Company may deem reasonably necessary to protect or perfect its
rights therein, and shall assist the Company, upon reasonable request and at the Company’s expense,
in obtaining, defending and enforcing the Company’s rights therein. The Executive hereby appoints
the Company as his attorney-in-fact to execute on his behalf any assignments or other documents
reasonably deemed necessary by the Company to protect or perfect its rights to any Inventions.




8. Injunctive Relief.




     It is recognized and acknowledged by the Executive that a breach of the covenants contained in
Sections 5, 6 and 7 will cause irreparable damage to Company and its goodwill, the exact
amount of which will be difficult or impossible to ascertain, and that the remedies at law for any
such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of
any of the covenants contained in Sections 5, 6 and 7, in addition to any other remedy
which may be available at law or in equity, the Company will be entitled to specific performance
and temporary, preliminary and permanent injunctive relief.



9. Assignment and Successors.




    The Company may assign its rights and obligations under this Agreement to any successor to all
or substantially all of the business or the assets of the Company (by merger or otherwise), and may
assign or encumber this Agreement and its rights hereunder as security for indebtedness of the
Company and its affiliates. This Agreement shall be binding upon and inure to the benefit of the
Company, the Executive and their respective successors, assigns, personnel and legal
representatives, executors, administrators, heirs, distributees, devisees, and legatees, as
applicable. None of the Executive’s rights or obligations may be assigned or transferred by the
Executive, other than the Executive’s rights to payments hereunder, which may be transferred only
by will or operation of law. Notwithstanding the foregoing, the Executive shall be entitled, to
the extent permitted under applicable law and applicable Company Arrangements, to select and change
a beneficiary or beneficiaries to receive compensation hereunder following his death by giving
written notice thereof to the Company.



10. Certain Definitions.





	 	(a)	 	Cause. The Company shall have “Cause” to terminate the Term and the
Executive’s employment hereunder upon:






	 	(i)	 	the Executive’s failure to perform substantially his duties as
an employee of the Company (other than any such failure resulting from the
Executive’s incapacity due to physical or mental illness), which is not cured
within 15 days after a written demand for performance is given to the Executive
by the Board specifying in reasonable detail the manner in which the Executive
has failed to perform substantially his duties as an employee of the Company;
	 
	 	(ii)	 	the Executive’s failure to carry out, or comply with, in any
material respect any lawful and reasonable directive of the Board consistent
with the terms of this Agreement that, if capable of cure, is not cured
by the Executive within 15 days after written notice given to the Executive
describing such failure in reasonable detail;





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	 	(iii)	 	the Executive’s conviction, plea of no contest, plea of nolo
contendere, or imposition of unadjudicated probation for any felony or, to the
extent involving fraud, dishonesty, theft, embezzlement or moral turpitude, any
other crime;
	 
	 	(iv)	 	the Executive’s violation of a material regulatory requirement
relating to the business of the Company and its subsidiaries that, in the good
faith judgment of the Board, is injurious to the Company in any material
respect;
	 
	 	(v)	 	the Executive’s unlawful use (including being under the
influence) or possession of illegal drugs on the Company’s premises or while
performing the Executive’s duties and responsibilities under this Agreement;
	 
	 	(vi)	 	the Executive’s breach of this Agreement in any material
respect that, if capable of cure, is not cured by the Executive within 15 days
after written notice given to the Executive describing such breach in
reasonable detail; or
	 
	 	(vii)	 	the Executive’s commission of an act of fraud, embezzlement,
misappropriation, willful misconduct, gross negligence or breach of fiduciary
duty with respect to the Company or any of its affiliates;






	 	(b)	 	Date of Termination. “Date of Termination” shall mean (i) if the
Executive’s employment is terminated by his death, the date of his death; (ii) if the
Executive’s employment is terminated pursuant to Section 3(a)(ii) – (v) either
the date indicated in the Notice of Termination or the date specified by the Company
pursuant to Section 3(b), whichever is earlier; (iii) if the Executive’s
employment is terminated pursuant to Section 3(a)(vi) or
Section 3(a)(vii), the expiration of the then-applicable Term.
	 
	 	(c)	 	Disability. “Disability” shall mean, at any time the Company or any of
its affiliates sponsors a long-term disability plan for the Company’s employees in which
the Executive participates, “disability” as defined in such long-term disability plan
for the purpose of determining a participant’s eligibility for benefits, provided,
however, if the long-term disability plan contains multiple definitions of disability,
“Disability” shall refer that definition of disability which, if the Executive qualified
for such disability benefits, would provide coverage for the longest period of time. The
determination of whether the Executive has a Disability shall be made by the person or
persons required to make disability determinations under the long-term disability plan.
At any time the Company does not sponsor a long-term disability plan for its employees
in which the Executive participates, Disability shall mean the Executive’s inability to
perform, with or without reasonable accommodation, the essential functions of his
position hereunder for a total of six months during any 12-month period as a result of
incapacity due to mental or physical illness as determined by a physician selected by
the Board and acceptable to the Executive or the Executive’s legal representative, such
agreement as to acceptability not to be unreasonably withheld or delayed. Any refusal
by the Executive to submit to a
medical examination for the purpose of determining Disability shall be deemed to
constitute conclusive evidence of the Executive’s Disability.





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11. Governing Law.




     This Agreement shall be governed, construed, interpreted and enforced in accordance with its
express terms, and otherwise in accordance with the substantive laws of the State of California,
without reference to the principles of conflicts of law, and where applicable, the federal laws of
the United States.



12. Validity.




     The invalidity or unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, which shall remain
in full force and effect.



13. Notices.




     Any notice, request, claim, demand, document and other communication hereunder to any party
shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by facsimile or certified or registered mail, postage prepaid, or any nationally
recognized overnight courier service with signature certification of receipt, as follows:




	 	(a)	 	If to the Company:






	 	 	 	Skilled Healthcare, LLC

27442 Portola Parkway

Suite 200

Foothill Ranch, California 92610

Attn: CEO/ Boyd Hendrickson

	 
	 	 	 	with copies to:
	 
	 	 	 	Skilled Healthcare, LLC

27442 Portola Parkway

Suite 200

Foothill Ranch, California 92610

Attn: General Counsel/Roland Rapp







	 	(b)	 	If to the Executive:






	 	 	 	Chris Felfe

1524 Sylvia Lane

Newport Beach, CA 92660





     or at any other address as any party shall have specified by notice in writing to the other
party.




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14. Counterparts.




     This Agreement may be executed in several counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the same Agreement. Signatures
delivered by facsimile shall be deemed effective for all purposes.



15. Entire Agreement.




     The terms of this Agreement are intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the Company and supersede all prior
understandings and agreements, whether written or oral. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of their terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal
proceeding to vary the terms of this Agreement.



16. Amendments; Waivers.




     This Agreement may not be modified, amended, or terminated except by an instrument in writing,
signed by the Executive and a duly authorized officer of Company. By an instrument in writing
similarly executed, the Executive or a duly authorized officer of the Company may waive compliance
by the other party or parties with any specifically identified provision of this Agreement that
such other party was or is obligated to comply with or perform; provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No
failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any
other or further exercise of any other right, remedy, or power provided herein or by law or in
equity. Except as otherwise set forth in this Agreement, the respective rights and obligations of
the parties under this Agreement shall survive any termination of Executive’s employment.



17. No Inconsistent Actions.




     The parties hereto shall not voluntarily undertake or fail to undertake any action or course
of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it
is the intent of the parties hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.



18. Construction.




     This Agreement shall be deemed drafted equally by both the parties. Its language shall be
construed as a whole and according to its fair meaning. Any presumption or principle that the
language is to be construed against any party shall not apply. The headings in this Agreement are
only for convenience and are not intended to affect construction or interpretation. Any references
to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless
the context clearly indicates to the contrary. Also, unless the context clearly indicates to the
contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and
“or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means
“any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”;
(e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the
entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and
(f) all pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the entities or persons referred to
may require.




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19. Arbitration.




     Any controversy arising out of or relating to this Agreement, its enforcement or
interpretation, or because of an alleged breach, default, or misrepresentation in connection with
any of its provisions, or any other controversy arising out of the Executive’s employment by the
Company, including, but not limited to, any state or federal statutory claims, shall be submitted
to arbitration in Los Angeles County, California, before a sole neutral arbitrator (the
“Arbitrator”), mutually selected and agreeable to both parties and selected from Judicial
Arbitration and Mediation Services, Inc., Los Angeles County, California, or its successor
(“JAMS”), or if JAMS is no longer able to supply the Arbitrator, such Arbitrator shall be selected
from the American Arbitration Association, and shall be conducted in accordance with the provisions
of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the resolution of
such dispute; provided, however, that provisional injunctive relief (including, but not limited to,
temporary restraining orders and preliminary injunctions) may, but need not, be sought by either
party to this Amended Agreement in any court of competent jurisdiction while arbitration
proceedings are pending, and any provisional injunctive relief granted by such court shall remain
effective until the matter is finally determined by the Arbitrator; no bond or other security shall
be required in connection therewith.



     Final resolution of any dispute through arbitration may include any remedy or relief that the
Arbitrator deems just and equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written
decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award
or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and
binding on the parties hereto and may be enforced by any court of competent jurisdiction.



     The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in
any action, proceeding or counterclaim brought by either of the parties against the other in
connection with any matter whatsoever arising out of or in any way connected with this Amended
Agreement or the services rendered hereunder. The parties agree that the Company Shall be
responsible for payment of the forum costs of any arbitration hereunder, including the Arbitrator’s
fee. The Executive and the Company further agree that in any proceeding to enforce the terms of
this Amended Agreement, the prevailing party shall be entitled to its or her reasonable attorneys’
fees and costs (other than forum costs associated with the arbitration) incurred by it or him in
connection with resolution of the dispute up to a maximum of Fifty Thousand Dollars ($50,000.00) in
addition to any other relief granted.



20. Enforcement.




     If any provision of this Agreement is held to be illegal, invalid or unenforceable under
present or future laws effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as
part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.




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21. Withholding.




     The Company shall be entitled to withhold from any amounts payable under this Agreement any
federal, state, local or foreign withholding or other taxes or charges which the Company is
required to withhold. The Company shall be entitled to rely on an opinion of counsel if any
questions as to the amount or requirement of withholding shall arise.



22. Indemnification.




     The Company agrees that (a) if the Executive is made a party, or is threatened to be made a
party, to any threatened or actual action, suit or proceeding whether civil, criminal,
administrative, investigative, appellate or other (a “Proceeding”) by reason of the fact that he is
or was a director, officer, employee, agent, manager, consultant or representative of the Company
or (b) if any claim, demand, request, investigation, controversy, threat, discovery request or
request for testimony or information (a “Claim”) is made, or threatened to be made, that arises out
of or relates to the Executive’s service in any of the foregoing capacities, then the Executive
shall promptly be indemnified and held harmless by the Company to the fullest extent permitted by
the laws of the state of incorporation of the Company, against any and all costs, expenses,
liabilities and losses incurred or suffered by the Executive in connection therewith, and such
indemnification shall continue as to the Executive even if he has ceased to be a director, member,
employee, agent, manager, consultant or representative of the Company and shall inure to the
benefit of the Executive’s heirs, executors and administrators. The Company may assume the defense
of any Proceeding or Claim with counsel selected by the Company and reasonably satisfactory to the
Executive and, if it does so, the Executive shall not be entitled to be reimbursed for any separate
counsel he may retain in connection with such Proceeding or Claim.



     Neither the failure of the Company (including its Board, independent legal counsel or
stockholders) to have made a determination in connection with any request for indemnification that
the Executive has satisfied any applicable standard of conduct, nor a determination by the Company
(including its Board, independent legal counsel or stockholders) that the Executive has not met any
applicable standard of conduct, shall create a presumption that the Executive has not met an
applicable standard of conduct.



     During the period of Employment and for a period of time thereafter determined as provided
below, the Company shall keep in place a directors and officers’ liability insurance policy (or
policies) providing coverage, or such coverage may be provided under a policy that provides
coverage to Onex Corporation or Onex Partners LP and their affiliates, to the Executive if and to
the extent that the Company provides such coverage to its directors and such coverage (or other
directors and officers liability insurance coverage) shall continue after the termination of the
Period of Employment if and for the period of time that such coverage is extended to the Company’s
former director, other than former directors who are employees of Onex Corporation, Onex Partners
LP or their affiliates.



23. Cooperation in Litigation.




     The Executive promises and agrees that, following the date his employment by the Company
terminates, he will reasonably cooperate with the Company in any litigation in which the Company is
a party or otherwise involved which arises out of events occurring prior to the termination of his
employment, including but not limited to, serving as a
consultant (at a reasonable hourly rate) or witness and producing documents and information
relevant to the case or helpful to the Company.




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24. Employee Acknowledgement.




     The Executive acknowledges that he has read and understands this Agreement, is fully aware of
its legal effect, has not acted in reliance upon any representations or promises made by the
Company other than those contained in writing herein, and has entered into this Agreement freely
based on his own judgment.



     IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above
written.



	 	 	 	 	 	 	 
	 	 	SKILLED HEALTHCARE GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Boyd W. Hendrickson	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Boyd W. Hendrickson	 	 
	 

	 	 	 	Title:   Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Chris Felfe	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Chris Felfe	 	 








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