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                                                                    EXHIBIT 10.3

                         SKILLED HEALTHCARE GROUP, INC.

                            2007 INCENTIVE AWARD PLAN

      Skilled Healthcare Group, Inc., a Delaware corporation (the "Company"), by
resolution of its Board of Directors, hereby adopts the Skilled Healthcare
Group, Inc. 2007 Incentive Award Plan (the "Plan"). The Plan  will become
effective upon the approval of the Plan by the Company's stockholders (the
"Effective Date").

      The purpose of the Plan is to promote the success and enhance the value of
the Company by linking the personal interests of the members of the Board,
Employees, and Consultants to those of the Company's stockholders and by
providing such individuals with an incentive for outstanding performance to
generate superior returns to the Company's stockholders. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of members of the Board, Employees, and
Consultants upon whose judgment, interest, and special effort the successful
conduct of the Company's operation is largely dependent.

                                   ARTICLE I.

                                   DEFINITIONS

            Wherever the following terms are used in the Plan they shall have
the meanings specified below, unless the context clearly indicates otherwise.
The singular pronoun shall include the plural where the context so indicates.

            1.1. "Administrator" shall mean the entity that conducts the general
administration of the Plan as provided in Article X. With reference to the
duties of the Committee under the Plan which have been delegated to one or more
persons pursuant to Section 10.5, or as to which the Board has assumed, the term
"Administrator" shall refer to such person(s) unless the Committee has revoked
such delegation.

            1.2. "Award" shall mean an Option, a Restricted Stock award, a
Restricted Stock Unit award, a Performance Award, a Dividend Equivalents award,
a Deferred Stock award, a Stock Payment award or a Stock Appreciation Right,
which may be awarded or granted under the Plan (collectively, "Awards").

            1.3. "Award Agreement" shall mean a written agreement, which shall
contain such terms and conditions with respect to an Award as the Administrator
shall determine, consistent with the Plan.

            1.4. "Award Limit" shall mean Five Hundred Sixty One Thousand
(561,000) shares of Common Stock, as adjusted pursuant to Section 11.3. Solely
with respect to Performance Awards granted pursuant to Section 8.2(b), "Award
Limit" shall mean One Million Dollars ($1,000,000).

            1.5. "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.

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            1.6. "Change in Control" means the occurrence of any of the
following events:

                  (a) a transaction or series of transactions (other than an
offering of Stock to the general public through a registration statement filed
with the Securities and Exchange Commission) whereby any "person" or related
"group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act) (other than the Company, any of its subsidiaries, an employee
benefit plan maintained by the Company or any of its subsidiaries or a "person"
that, prior to such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company possessing more than 50% of the total
combined voting power of the Company's securities outstanding immediately after
such acquisition; or

                  (b) During any 36-month period, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in Section 1.6(a)
or Section 1.6(c)) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
36-month period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or

                  (c) The consummation by the Company (whether directly
involving the Company or indirectly involving the Company through one or more
intermediaries) of (x) a merger, consolidation, reorganization, or business
combination or (y) a sale or other disposition of all or substantially all of
the Company's assets in any single transaction or series of related transactions
or (z) the acquisition of assets or stock of another entity, in each case other
than a transaction:

                        (i) Which results in the Company's voting securities
      outstanding immediately before the transaction continuing to represent
      (either by remaining outstanding or by being converted into voting
      securities of the Company or the person that, as a result of the
      transaction, controls, directly or indirectly, the Company or owns,
      directly or indirectly, all or substantially all of the Company's assets
      or otherwise succeeds to the business of the Company (the Company or such
      person, the "Successor Entity")) directly or indirectly, at least a
      majority of the combined voting power of the Successor Entity's
      outstanding voting securities immediately after the transaction, and

                        (ii) After which no person or group beneficially owns
      voting securities representing 50% or more of the combined voting power of
      the Successor Entity; provided, however, that no person or group shall be
      treated for purposes of this Section 1.6(c)(ii) as beneficially owning 50%
      or more of combined voting power of the Successor Entity solely as a
      result of the voting power held in the Company prior to the consummation
      of the transaction; or

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                  (d) The Company's stockholders approve a liquidation or
dissolution of the Company.

                  For purposes of subsection (a) above, the calculation of
voting power shall be made as if the date of the acquisition were a record date
for a vote of the Company's stockholders, and for purposes of subsection (c)
above, the calculation of voting power shall be made as if the date of the
consummation of the transaction were a record date for a vote of the Company's
stockholders.

            1.7. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

            1.8. "Committee" shall mean the Compensation Committee of the Board,
or another committee or subcommittee of the Board, appointed as provided in
Section 10.1.

            1.9. "Common Stock" shall mean the Class A common stock of the
Company, par value $0.001 per share.

            1.10. "Company" shall mean Skilled Healthcare Group, Inc., a
Delaware corporation, or any successor entity.

            1.11. "Consultant" shall mean any consultant or adviser if: (a) the
consultant or adviser is a natural person, (b) the consultant or adviser renders
bona fide services to the Company or any Subsidiary; and (c) the services
rendered by the consultant or adviser are not in connection with the offer or
sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company's securities.

            1.12. "Covered Employee" shall mean any Employee who is, or could
be, a "covered employee" within the meaning of Section 162(m) of the Code.

            1.13. "Deferred Stock" shall mean rights to receive Common Stock
awarded under Article VIII of the Plan, which may be expressed in terms of
units, shares or otherwise.

            1.14. "Director" shall mean a member of the Board.

            1.15. "Dividend Equivalent" shall mean a right to receive the
equivalent value (in cash or Common Stock) of dividends paid on Common Stock,
awarded with respect to Awards pursuant to Article VIII of the Plan.

            1.16. "DRO" shall mean a domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

            1.17. "Effective Date" shall mean the date the Plan is approved by
the Company's stockholders.

            1.18. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any Subsidiary.

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            1.19. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

            1.20. "Fair Market Value" means, as of any date:

                  (a) If the Common Stock is listed on any established stock
exchange (such as the New York Stock Exchange) or any national market system,
including without limitation any market system of The NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for a share of Common Stock
as quoted on such exchange or system on that date (or if no such sales price is
quoted on such date, then the Fair Market Value shall be the closing sale price
on the last preceding date for which such quotation exists), as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;

                  (b) If the Common Stock is regularly quoted by a recognized
securities dealer but closing sales prices are not reported, its Fair Market
Value shall be the mean of the high bid and low asked prices on that date (or if
no such sales price is quoted on such date, then the Fair Market Value shall be
the closing sale price on the last preceding date for which such information
exists), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or

                  (c) If the Common Stock is neither listed on an established
stock exchange or a national market system nor regularly quoted by a recognized
securities dealer, the Fair Market Value thereof shall be established by the
Administrator in good faith.

                  Notwithstanding the foregoing, The Fair Market Value of a
share of Common Stock on the effective date of the initial public offering of
the Common Stock shall be the initial offering price to the public under such
initial public offering.

            1.21. "Fiscal Year" means the fiscal year of the Company.

            1.22. "Holder" shall mean a person who has been granted or awarded
an Award.

            1.23. "Incentive Stock Option" shall mean an option which conforms
to the applicable provisions of Section 422 of the Code and which is designated
as an Incentive Stock Option by the Administrator.

            1.24. "Non-Employee Director" shall mean a member of the Board who
is not an Employee.

            1.25. "Non-Qualified Stock Option" shall mean an Option which is not
designated as an Incentive Stock Option by the Administrator.

            1.26. "Option" shall mean a stock option granted under Article IV of
the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Non-Employee Directors and
Consultants shall be Non-Qualified Stock Options.

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            1.27. "Performance Award" shall mean a cash bonus, stock bonus or
other performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Article VIII of the Plan.

            1.28. "Performance Criteria" means the criteria that the Committee
selects for an Award for purposes of establishing the Performance Goal or
Performance Goals for a Performance Period. The Performance Criteria that will
be used to establish Performance Goals are limited to the following, or growth
in the following, alone or in combination: (a) net earnings (either before or
after (i) interest, (ii) taxes, (iii) depreciation and (iv) amortization), (b)
gross or net sales or revenue, (c) net income (either before or after taxes),
(d) operating earnings, (e) cash flow (including, but not limited to, operating
cash flow and free cash flow), (f) return on assets, (g) return on capital, (h)
return on stockholders' equity, (i) return on sales, (j) gross or net profit or
operating margin, (k) costs, (l) funds from operations, (m) expense, (n) working
capital, (o) earnings per share, (p) price per share of Common Stock, (q) FDA or
other regulatory body approval for commercialization of a product, (r)
implementation or completion of critical projects, and (s) market share, any of
which may be measured either in absolute terms or as compared to any incremental
increase or decrease or as compared to results of a peer group. The Committee
shall, within the time prescribed by Section 162(m) of the Code, define in an
objective fashion the manner of calculating the Performance Criteria it selects
to use for such Performance Period for such Award; provided, however, that each
Performance Criteria shall be determined in accordance with generally accepted
accounting principles to the extent applicable.

            1.29. "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of any Holder of a Performance Award (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event, or development, or (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions. The achievement of each Performance Goal shall be determined in
accordance with generally accepted accounting principles to the extent
applicable.

            1.30. "Performance Period" means one or more periods of time, which
may be of varying and overlapping durations, as the Committee may select, over
which the attainment of one or more Performance Goals will be measured for the
purpose of determining a Holder's right to, and the payment of, a Performance
Award.

            1.31. "Plan" shall mean the Skilled Healthcare Group, Inc. 2007
Incentive Award Plan, as the same may be amended or restated from time to time.

            1.32. "Restricted Stock" shall mean Common Stock awarded under
Article VII of the Plan.

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            1.33. "Restricted Stock Units" shall mean rights to receive Common
Stock awarded under Article VIII.

            1.34. "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act, as such Rule may be amended from time to time.

            1.35. "Securities Act" shall mean the Securities Act of 1933, as
amended.

            1.36. " Stock Appreciation Right" shall mean a stock appreciation
right granted under Article IX of the Plan.

            1.37. " Stock Payment" shall mean: (a) a payment in the form of
shares of Common Stock, or (b) an option or other right to purchase shares of
Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses, commissions and directors' fees, that would otherwise become payable to
a Employee, Non-Employee Director or Consultant in cash, awarded under Article
VIII of the Plan.

            1.38. "Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

            1.39. "Substitute Award" shall mean an Option granted under this
Plan upon the assumption of, or in substitution for, outstanding equity awards
previously granted by a company or other entity in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of
property or stock; provided, however, that in no event shall the term
"Substitute Award" be construed to refer to an award made in connection with the
cancellation and repricing of an Option.

            1.40. "Termination of Service" shall mean:

                  (i) the time when a Holder who is a Non-Employee Director
      ceases to be a Director for any reason, including, without limitation, a
      termination by resignation, failure to be elected, death or retirement; or

                  (ii) the time when the engagement of a Holder as a Consultant
      to the Company or a Subsidiary is terminated for any reason, with or
      without cause, including, without limitation, by resignation, discharge,
      death or retirement, but excluding terminations where there is a
      simultaneous commencement of employment with the Company or any
      Subsidiary; or

                  (iii) the time when the employee-employer relationship between
      a Holder and the Company or any Subsidiary is terminated for any reason,
      with or without cause, including, without limitation, a termination by
      resignation, discharge, death, disability or retirement; but excluding (a)
      terminations where there is a simultaneous reemployment or continuing
      employment of a Holder by the Company or any Subsidiary, and (b)
      terminations which are followed by the simultaneous establishment of a
      consulting

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      relationship by the Company or a Subsidiary with the former employee,
      provided, however, that, with respect to Incentive Stock Options, unless
      the Administrator otherwise provides in the terms of the Award Agreement
      or otherwise, a leave of absence, change in status from an employee to an
      independent contractor or other change in the employee-employer
      relationship shall constitute a Termination of Employment if, and to the
      extent that, such leave of absence, change in status or other change
      interrupts employment for the purposes of Section 422(a)(2) of the Code
      and the then applicable regulations and revenue rulings under said
      Section.

            The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Service,
including, without limitation, the question of whether a Termination of Service
resulted from a discharge for cause. Notwithstanding any other provision of the
Plan, the Company or any Subsidiary has an absolute and unrestricted right to
terminate a Consultant's or Employee's service at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in writing. For purposes of the Plan, a Holder's employee-employer
relationship or consulting relationship, as applicable, shall be deemed to be
terminated in the event that the Subsidiary employing such Holder ceases to
remain a Subsidiary following any merger, sale of stock or other corporate
transaction or event (including, without limitation, a spin-off).

                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

            2.1. Shares Subject to Plan.

                  (a) Subject to Section 11.3 and Section 2.1(b), the aggregate
number of shares of Common Stock that may be issued or transferred pursuant to
Awards under the Plan shall be equal to One Million One Hundred Twenty Three
Thousand One Hundred Eighty One (1,123,181) shares.

                  (b) To the extent that an Award terminates, expires, lapses or
is forfeited for any reason, any shares of Common Stock then subject to such
Award shall again be available for grant pursuant to the Plan. To the extent
permitted by applicable law or any exchange rule, shares of Common Stock issued
in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary, and all
Substitution Awards, shall not be counted against shares of Common Stock
available for grant pursuant to this Plan. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be granted or awarded hereunder, subject to
the limitations of Section 2.1(a). Shares of Common Stock withheld by the
Company or delivered to the Company in payment of the exercise price or tax
withholding obligations of any Award shall not be available for grant under the
Plan. The payment of Dividend Equivalents in conjunction with any outstanding
Awards shall not be counted against the shares available for issuance under the
Plan. Notwithstanding the provisions of this Section 2.1(b), no shares of Common
Stock may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.

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            2.2. Stock Distributed. Any Common Stock distributed pursuant to an
Award shall consist, in whole or in part, of authorized and unissued Common
Stock or shares of Common Stock held in treasury.

            2.3. Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, and subject to
Article XI, the maximum number of shares of Common Stock with respect to one or
more Awards that may be granted to any one individual during any calendar year
shall not exceed the Award Limit; provided, however, that in the year of initial
hiring of an Employee, the maximum number of shares of Common Stock with respect
to one or more Awards that may be granted to such Employee during such year of
initial hiring shall not exceed 150% of the Award Limit. To the extent required
by Section 162(m) of the Code, shares subject to Awards which are canceled shall
continue to be counted against the Award Limit.

                                  ARTICLE III.

                               GRANTING OF AWARDS

            3.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation (as described in Section 162(m)(4)(C) of the
Code) shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.

            3.2. Provisions Applicable to Covered Employees.

                  (a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation (as described in Section
162(m)(4)(C) of the Code).

                  (b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Covered Employee, including Restricted Stock
the restrictions with respect to which lapse upon the attainment of specified
Performance Goals and any performance or incentive award described in Article
VIII that vests or becomes exercisable or payable upon the attainment of one or
more specified Performance Goals.

                  (c) To the extent necessary to comply with the
performance-based compensation requirements of Section 162(m)(4)(C) of the Code,
with respect to any Award granted under Articles VII and VIII which may be
granted to one or more Covered Employees, no later than ninety (90) days
following the commencement of any Fiscal Year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (i) designate one or more Covered Employees, (ii) select the
Performance Criteria applicable to the Fiscal Year or other designated fiscal
period or period of service, (iii) establish the various performance targets, in
terms of an objective formula or standard, and amounts of such Awards, as
applicable, which may be earned for such Fiscal Year or other designated fiscal
period or period of service, and (iv) specify the relationship between
Performance Criteria and the performance targets and the

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amounts of such Awards, as applicable, to be earned by each Covered Employee for
such Fiscal Year or other designated fiscal period or period of service.
Following the completion of each Fiscal Year or other designated fiscal period
or period of service, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such Fiscal Year or other
designated fiscal period or period of service. In determining the amount earned
by a Covered Employee, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the Fiscal Year or other
designated fiscal period or period of service.

                  (d) Furthermore, notwithstanding any other provision of the
Plan, any Award which is granted to a Covered Employee and is intended to
qualify as performance-based compensation (as described in Section 162(m)(4)(C)
of the Code) shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation (as described in Section
162(m)(4)(C) of the Code), and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.

            3.3. Limitations Applicable to Section 16 Persons. Notwithstanding
any other provision of the Plan, the Plan, and any Award granted or awarded to
any individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

            3.4. At-Will Employment. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Holder any right to continue in the
employ of, or as a Consultant for, the Company or any Subsidiary, or as a
Director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which rights are hereby expressly
reserved, to discharge any Holder at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in a written
employment agreement between the Holder and the Company and any Subsidiary.

            3.5. Foreign Laws. Notwithstanding any provision of the Plan to the
contrary, in order to comply with the laws in other countries in which the
Company or its Subsidiaries operate or have Employees, Non-Employee Directors or
Consultants, or in order to comply with the listing standards of any foreign
stock exchange on which the Company's shares are listed or traded, the
Administrator, in its discretion, shall have the power and authority to: (i)
determine which Subsidiaries shall be covered by the Plan; (ii) determine which
Employees, Non-Employee Directors or Consultants outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of
any Awards to comply with applicable foreign laws or listing requirements of any
such foreign stock exchange; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be
necessary or advisable (any such subplans and/or modifications shall be attached
to this Plan as

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appendices); provided, however, that no such subplans and/or modifications shall
increase the share limitation contained in Section 2.1 of the Plan; and (v) take
any action, before or after an Award is made, that it deems advisable to obtain
approval or comply with any necessary local or foreign governmental regulatory
exemptions or approvals or listing requirements of any such foreign stock
exchange. Notwithstanding the foregoing, the Administrator may not take any
actions under this Section 3.6 that would violate the Code, any applicable
federal, state or foreign securities law or governing statute or any other
applicable law or that would require prior stockholder approval (until such
approval was obtained).

            3.6. Awards in Lieu of Cash Compensation. Awards may be granted
under the Plan to Employees and Consultants in lieu of cash bonuses which would
otherwise be payable to such Employees and Consultants, and to Non-Employee
Directors in lieu of directors' fees which would otherwise be payable to such
Non-Employee Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.

                                   ARTICLE IV.

                        GRANTING OF OPTIONS TO EMPLOYEES,
                     CONSULTANTS AND NON-EMPLOYEE DIRECTORS

            4.1. Eligibility. Each Employee, Consultant and Non-Employee
Director selected by the Administrator shall be eligible to be granted an
Option.

            4.2. Disqualification for Stock Ownership. No person may be granted
an Incentive Stock Option under the Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (as defined in Section 424(e) of the
Code) unless such Incentive Stock Option conforms to the applicable provisions
of Section 422 of the Code.

            4.3. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.

            4.4. Granting of Options to Employees and Consultants.

                  (a) The Administrator shall from time to time, in its absolute
discretion, and, subject to applicable limitations of the Plan:

                        (i) Select from among the Employees or Consultants
      (including Employees or Consultants who have previously received Awards
      under the Plan) such of them as in its opinion should be granted Options;

                        (ii) Subject to the Award Limit, determine the number of
      shares to be subject to such Options granted to the selected Employees or
      Consultants;

                        (iii) Subject to Section 4.3, determine whether such
      Options are to be Incentive Stock Options or Non-Qualified Stock Options
      and

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      whether such Options are to qualify as performance-based compensation (as
      described in Section 162(m)(4)(C) of the Code); and

                        (iv) Subject to the provisions of Article V, determine
      the terms and conditions of such Options, consistent with the Plan;
      provided, however, that the terms and conditions of Options intended to
      qualify as performance-based compensation (as described in Section
      162(m)(4)(C) of the Code) shall include, but not be limited to, such terms
      and conditions as may be necessary to meet the applicable provisions of
      Section 162(m) of the Code.

                  (b) Upon the selection of an Employee or Consultant to be
      granted an Option, the Administrator shall instruct the Secretary of the
      Company to issue the Option and may impose such conditions on the grant of
      the Option as it deems appropriate.

                  (c) Any Incentive Stock Option granted under the Plan may be
      modified by the Administrator, with the consent of the Holder, to
      disqualify such Option from treatment as an "incentive stock option" under
      Section 422 of the Code.

            4.5. Granting of Options to Non-Employee Director. The Administrator
shall from time to time, in its absolute discretion, and subject to applicable
limitations of the Plan:

                  (a) Select from among the Non-Employee Directors (including
Non-Employee Directors who have previously received Awards under the Plan) such
of them as in its opinion should be granted Options;

                  (b) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Non-Employee Directors;
and

                  (c) Subject to the provisions of Article V, determine the
terms and conditions of such Options, consistent with the Plan.

                                   ARTICLE V.

                                TERMS OF OPTIONS

            5.1. Option Price. The price per share of the shares subject to each
Option granted to Employees, Non-Employee Directors and Consultants shall be set
by the Administrator; provided, however, that:

                  (a) Such price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted; and

                  (b) In the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code), such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is

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granted (or the date the Option is modified, extended or renewed for purposes of
Section 424(h) of the Code).

            5.2. Option Term. The term of an Option granted to an Employee,
Non-Employee Director or Consultant shall be set by the Administrator in its
discretion; provided, however, that the term shall not be more than ten (10)
years from the date the Option is granted, or five (5) years from the date the
Option is granted if the Option is an Incentive Stock Option granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 409A or
Section 422 of the Code and regulations and rulings thereunder, the
Administrator may extend the term of any outstanding Option in connection with
any Termination of Service of the Holder, or amend any other term or condition
of such Option relating to such a Termination of Service.

            5.3. Option Vesting.

                  (a) The period during which the right to exercise, in whole or
in part, an Option vests in the Holder shall be set by the Administrator and the
Administrator may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted. At any time after grant of an
Option, the Administrator may, in its sole and absolute discretion and subject
to whatever terms and conditions it selects, accelerate the period during which
an Option vests.

                  (b) No portion of an Option granted to an Employee,
Non-Employee Director or Consultant which is unexercisable at Termination of
Service shall thereafter become exercisable, except as may be otherwise provided
by the Administrator either in the Award Agreement or by action of the
Administrator following the grant of the Option.

                  (c) To the extent that the aggregate fair market value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Holder during any calendar year under the
Plan, and all other plans of the Company and any Subsidiary or parent
corporation thereof, within the meaning of Section 424 of the Code, exceeds
$100,000, the Options shall be treated as Non-Qualified Stock Options to the
extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options and other "incentive stock options"
into account in the order in which they were granted. For purposes of this
Section 5.3(c), the fair market value of stock shall be determined as of the
time the Option or other "incentive stock options" with respect to such stock is
granted.

            5.4. Substitute Awards. Notwithstanding the foregoing provisions of
this Article V to the contrary, in the case of an Option that is a Substitute
Award, the price per share of the shares subject to such Option may be less than
the Fair Market Value per share on the date of grant, provided, that the excess
of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the shares subject to the Substitute Award, over (b) the aggregate
exercise price thereof does not exceed the excess of: (x) the aggregate fair
market value (as of the time immediately preceding the transaction giving rise
to the Substitute Award, such fair

                                       12
<PAGE>

market value to be determined by the Administrator) of the shares of the
predecessor entity that were subject to the grant assumed or substituted for by
the Company, over (y) the aggregate exercise price of such shares.

                                   ARTICLE VI.

                               EXERCISE OF OPTIONS

            6.1. Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

            6.2. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company, or such other person or entity designated by the Administrator,
or his, her or its office, as applicable:

                  (a) A written notice complying with the applicable rules
      established by the Administrator stating that the Option, or a portion
      thereof, is to be exercised;

                  (b) Such representations and documents as the Administrator,
      in its absolute discretion, deems necessary or advisable to effect
      compliance with all applicable provisions of the Securities Act and any
      other federal or state securities laws or regulations. The Administrator
      may, in its absolute discretion, also take whatever additional actions it
      deems appropriate to effect such compliance including, without limitation,
      placing legends on share certificates and issuing stop-transfer notices to
      agents and registrars;

                  (c) In the event that the Option shall be exercised pursuant
      to Section 11.1 by any person or persons other than the Holder,
      appropriate proof of the right of such person or persons to exercise the
      Option;

                  (d) Full cash payment to the Secretary of the Company for the
      shares with respect to which the Option, or portion thereof, is exercised.
      However, the Administrator may, in its discretion, allow such payment to
      be made, in whole or in part, (i) through the delivery (actual or
      constructive through attestation) of shares of Common Stock with a Fair
      Market Value on the date of delivery equal to the aggregate exercise price
      of the Option or exercised portion thereof; (ii) through the surrender of
      shares of Common Stock then issuable upon exercise of the Option having a
      Fair Market Value on the date of Option exercise equal to the aggregate
      exercise price of the Option or exercised portion thereof; (iii) through
      the delivery of property of any kind which constitutes good and valuable
      consideration; (iv) through the delivery of a notice that the Holder has
      placed a market sell order with a broker with respect to shares of Common
      Stock then issuable upon exercise of the Option, and the broker timely
      pays a sufficient portion of the net proceeds of the sale to the Company
      in satisfaction of the Option exercise price; or (v) through any
      combination of the consideration provided in the foregoing subparagraphs
      (i), (ii), (iii) and (iv); provided, however, that the payment in the
      manner prescribed in the preceding paragraphs shall not be permitted to
      the extent that

                                       13
<PAGE>

      the Administrator determines that payment in such manner shall result in
      an extension or maintenance of credit, an arrangement for the extension of
      credit, or a renewal or an extension of credit in the form of a personal
      loan to or for any Director or executive officer of the Company that is
      prohibited by Section 13(k) of the Exchange Act or other applicable law;
      and

                  (e) The receipt by the Company of full payment of any
      applicable withholding tax, which in the discretion of the Administrator
      may be in the form of consideration used by the Holder to pay for such
      shares under Section 6.2(d).

            6.3. Rights as Stockholders. Holders shall not be, nor have any of
the rights or privileges of, stockholders of the Company in respect of any
shares purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.

            6.4. Ownership and Transfer Restrictions. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder, or (b) one year after the transfer of such shares to such
Holder.

                                  ARTICLE VII.

                            AWARD OF RESTRICTED STOCK

            7.1. Eligibility. Subject to the Award Limit, Restricted Stock may
be awarded to any Employee, Non-Employee Director or Consultant who the
Administrator determines should receive such an Award.

            7.2. Award of Restricted Stock.

                  (a) The Administrator may from time to time, in its absolute
discretion:

                        (i) Select from among the Employees, Non-Employee
      Directors or Consultants (including Employees, Non-Employee Directors or
      Consultants who have previously received Awards under the Plan) such of
      them as in its opinion should be awarded Restricted Stock; and

                        (ii) Determine the purchase price, if any, restrictions
      and other terms and conditions applicable to such Restricted Stock,
      consistent with the Plan.

                                       14
<PAGE>

                  (b) The Administrator shall establish the purchase price, if
any, and form of payment for Restricted Stock; provided, however, that such
purchase price shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all cases,
legal consideration shall be required for each issuance of Restricted Stock.

                  (c) Upon the selection of an Employee, Non-Employee Director
or Consultant to be awarded Restricted Stock, the Administrator shall instruct
the Secretary of the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems appropriate.

            7.3. Rights as Stockholders. The Holder shall have, unless otherwise
provided by the Administrator, all the rights of a stockholder with respect to
the Restricted Stock issued to the Holder, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that,
in the discretion of the Administrator, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 7.4.

            7.4. Restriction. All shares of Restricted Stock issued under the
Plan (including any shares received by Holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment,
directorship or consultancy with the Company, Company performance, and
individual performance or any of the Performance Criteria or other criteria
determined appropriate by the Administrator. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire. By action taken
after the Restricted Stock is issued, the Administrator may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Award Agreement. If no consideration
was paid by the Holder upon issuance, the Holder shall automatically forfeit all
rights in Restricted Stock then subject to restrictions, and such Restricted
Stock shall be surrendered to the Company without consideration upon Termination
of Service; provided, however, that the Administrator in its sole and absolute
discretion may provide that the Holder shall not forfeit any or all of such
shares of Restricted Stock and the restrictions thereon shall lapse in the event
of Termination of Service following a Change in Control of the Company or
because of the Holder's retirement, death or disability or termination without
cause, or otherwise.

            7.5. Repurchase of Restricted Stock. The Administrator shall provide
in the terms of each individual Award Agreement that the Company shall have the
right to repurchase from the Holder the Restricted Stock then subject to
restrictions under the Award Agreement immediately upon a Termination of
Service, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Administrator in its sole and
absolute discretion may provide that the Company shall not have such right of
repurchase for any or all of such shares of Restricted Stock and the
restrictions thereon shall lapse in the event of a Termination of Service,
following a Change in Control of the Company or because of the Holder's
retirement, death or disability or termination without cause, or otherwise.

                                       15
<PAGE>

            7.6. Escrow. The Secretary of the Company or such other escrow
holder as the Administrator may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Award Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.

            7.7. Legend. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Administrator shall cause a legend or
legends to be placed on certificates (or book entries) representing all shares
of Restricted Stock that are still subject to restrictions under Award
Agreements, which legend or legends shall make appropriate reference to the
conditions imposed thereby.

            7.8. Section 83(b) Election. If a Holder makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.

                                  ARTICLE VIII.

            PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
                     STOCK PAYMENTS, RESTRICTED STOCK UNITS

            8.1. Eligibility. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalent awards, Deferred Stock awards, Stock
Payment awards, and/or Restricted Stock Unit awards may be granted to any
Employee, Non-Employee Director or Consultant whom the Administrator determines
should receive such an Award.

            8.2. Performance Awards.

                  (a) Any Employee, Non-Employee Director or Consultant selected
by the Administrator may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to any one or more of the Performance
Criteria or other specific criteria determined appropriate by the Administrator,
in each case on a specified date or dates or over any period or periods
determined by the Administrator. In making such determinations, the
Administrator shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular Employee, Non-Employee Director or
Consultant.

                  (b) Without limiting Section 8.2(a), the Administrator may
grant Performance Awards to any Covered Employee in the form of a cash bonus
payable upon the attainment of objective Performance Goals which are established
by the Administrator, in each case on a specified date or dates or over any
period or periods determined by the Administrator. Any such bonuses paid to
Covered Employees shall be based upon objectively determinable bonus formulas
established in accordance with the provisions of Section 3.2. The maximum
aggregate amount of all Performance Awards granted to a Covered Employee under
this Section 8.2(b) during any calendar year shall not exceed the Award Limit.
Unless otherwise specified by the Administrator at the time of grant, the
Performance Criteria with respect to a Performance

                                       16
<PAGE>

Award payable to a Covered Employee shall be determined on the basis of
generally accepted accounting principles.

            8.3. Dividend Equivalents. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may be granted Dividend Equivalents
based on the dividends declared on Common Stock, to be credited as of dividend
payment dates, during the period between the date a Award is granted and the
date such Award vests, is exercised, is distributed or expires, as determined by
the Administrator. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Administrator.

            8.4. Stock Payments. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may receive Stock Payments in the
manner determined from time to time by the Administrator. The number of shares
shall be determined by the Administrator and may be based upon the Performance
Criteria or other specific criteria determined appropriate by the Administrator,
determined on the date such Stock Payment is made or on any date thereafter.

            8.5. Deferred Stock. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may be granted an award of Deferred
Stock in the manner determined from time to time by the Administrator. The
number of shares of Deferred Stock shall be determined by the Administrator and
may be linked to the satisfaction of one or more Performance Criteria or other
specific criteria as the Administrator determines to be appropriate at the time
of grant, in each case on a specified date or dates or over any period or
periods determined by the Administrator. Common Stock underlying a Deferred
Stock award will not be issued until the Deferred Stock award has vested,
pursuant to a vesting schedule or performance criteria set by the Administrator,
if applicable, and until such distribution date as specified by the
Administrator. The Administrator may permit the Holder to elect the distribution
date, subject to compliance with Section 409A of the Code. Unless otherwise
provided by the Administrator, a Holder of Deferred Stock shall have no rights
as a Company stockholder with respect to such Deferred Stock until such time as
the Award has vested and the Common Stock underlying the Award has been issued.

            8.6. Restricted Stock Units. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may be granted an award of Restricted
Stock Units in the manner determined from time to time by the Administrator. The
Administrator is authorized to make awards of Restricted Stock Units in such
amounts and subject to such terms and conditions as determined by the
Administrator. The Administrator shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and nonforfeitable, and may
specify such conditions to vesting as it deems appropriate, and may specify that
such Restricted Stock Units become fully vested and nonforfeitable pursuant to
the satisfaction of one or more Performance Criteria or other specific criteria
as the Administrator determines to be appropriate at the time of the grant, in
each case on a specified date or dates or over any period or periods determined
by the Administrator. The Administrator shall specify the distribution dates
applicable to each award of Restricted Stock Units, which shall be no earlier
than the vesting dates. The Administrator may permit the Holder to elect the
distribution date, subject to compliance with Section 409A of the Code. On the
distribution dates, the Company shall issue

                                       17
<PAGE>

to the Holder one unrestricted, fully transferable share of Common Stock for
each Restricted Stock Unit distributed.

            8.7. Term. The term of a Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit
award shall be set by the Administrator in its discretion.

            8.8. Exercise or Purchase Price. The Administrator may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock,
shares distributed as a Stock Payment award or shares distributed pursuant to a
Restricted Stock Unit award; provided, however, that such price shall not be
less than the par value of a share of Common Stock, unless otherwise permitted
by applicable state law.

            8.9. Termination of Employment, Termination of Consultancy or
Termination of Directorship. A Performance Award, Dividend Equivalent award,
Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award may
vest or become exercisable or distributable only while the Holder is an
Employee, Consultant or Non-Employee Director, as applicable; provided, however,
that the Administrator in its sole and absolute discretion may provide that such
Award may vest, be exercised or distributed subsequent to a Termination of
Service following a Change in Control of the Company or because of the Holder's
retirement, death or disability or termination without cause, or otherwise.

            8.10. Form of Payment. Payment of the amount determined under
Section 8.2 or 8.3 above shall be in cash, in Common Stock or a combination of
both, as determined by the Administrator. To the extent any payment under this
Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 11.7.

                                   ARTICLE IX.

                            STOCK APPRECIATION RIGHTS

            9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any Employee, Non-Employee Director or Consultant selected by
the Administrator. A Stock Appreciation Right may be granted: (a) in connection
and simultaneously with the grant of an Option, or (b) independent of an Option.
A Stock Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Administrator shall impose and shall be
evidenced by an Award Agreement.

            9.2. Coupled Stock Appreciation Rights.

                  (a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.

                  (b) A CSAR may be granted to the Holder for no more than the
number of shares subject to the simultaneously granted Option to which it is
coupled.

                                       18
<PAGE>

                  (c) A CSAR shall entitle the Holder (or other person entitled
to exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying (i) the difference
obtained by subtracting the exercise price per share of the CSAR from (ii) the
Fair Market Value of a share of Common Stock on the date of exercise of the CSAR
by the number of shares of Common Stock with respect to which the CSAR shall
have been exercised, subject to any limitations the Administrator may impose.

            9.3. Independent Stock Appreciation Rights.

                  (a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Administrator but in no
event longer than ten (10) years following the grant date. An ISAR shall be
exercisable in such installments as the Administrator may determine. An ISAR
shall cover such number of shares of Common Stock as the Administrator may
determine. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Administrator; provided, that such exercise price per share
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the date the ISAR is granted. An ISAR is exercisable only while the Holder is
an Employee, Non-Employee Director or Consultant; provided, that the
Administrator may determine that the ISAR may be exercised subsequent to
Termination of Service without cause, or following a Change in Control of the
Company, or because of the Holder's retirement, death or disability, or
otherwise.

                  (b) An ISAR shall entitle the Holder (or other person entitled
to exercise the ISAR pursuant to the Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms) and
to receive from the Company an amount determined by multiplying (i) the
difference obtained by subtracting the exercise price per share of the ISAR from
the Fair Market Value of a share of Common Stock on the date of exercise of the
ISAR by (ii) the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Administrator may
impose.

            9.4. Payment and Limitations on Exercise.

                  (a) Payment of the amounts determined under Section 9.2(c) and
9.3(b) above shall be in cash, shares of Common Stock (based on its Fair Market
Value as of the date the Stock Appreciation Right is exercised), or a
combination of both, as determined by the Administrator. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock issuable upon the exercise of any Stock Appreciation Right prior to
fulfillment of the conditions set forth in Section 6.3 above.

                  (b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation, as
may be imposed in the discretion of the Administrator.

                                       19
<PAGE>

                                   ARTICLE X.

                                 ADMINISTRATION

            10.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under the Plan) shall consist solely of two or more Non-Employee Directors
appointed by and holding office at the pleasure of the Board, each of whom is
intended to qualify as both a "non-employee director" as defined by Rule 16b-3
and an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

            10.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith, to interpret, amend or
revoke any such rules and to amend any Award Agreement provided that the rights
or obligations of the Holder of the Award that is the subject of any such Award
Agreement are not affected adversely. Any such grant or award under the Plan
need not be the same with respect to each Holder. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board may
at any time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Awards granted to Non-Employee Directors.

            10.3. Majority Rule; Unanimous Written Consent. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

            10.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.

                                       20
<PAGE>

            10.5. Delegation of Authority to Grant Awards. The Committee may,
but need not, delegate from time to time some or all of its authority to grant
Awards under the Plan to a committee consisting of one or more members of the
Board or of one or more officers of the Company; provided, however, that the
Committee may not delegate its authority to grant Awards to individuals: (a) who
are subject on the date of the grant to the reporting rules under Section 16(a)
of the Exchange Act, (b) who are Covered Employees, or (c) who are officers of
the Company who are delegated authority by the Committee hereunder. Any
delegation hereunder shall be subject to the restrictions and limits that the
Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 10.5 shall serve in such capacity at the pleasure of the
Committee.

                                   ARTICLE XI.

                            MISCELLANEOUS PROVISIONS

            11.1. Transferability of Awards.

                  (a) Except as otherwise provided in Section 11.1(b):

                        (i) No Award under the Plan may be sold, pledged,
      assigned or transferred in any manner other than by will or the laws of
      descent and distribution or, subject to the consent of the Administrator,
      pursuant to a DRO, unless and until such Award has been exercised, or the
      shares underlying such Award have been issued, and all restrictions
      applicable to such shares have lapsed;

                        (ii) No Award or interest or right therein shall be
      liable for the debts, contracts or engagements of the Holder or his
      successors in interest or shall be subject to disposition by transfer,
      alienation, anticipation, pledge, hypothecation, encumbrance, assignment
      or any other means whether such disposition be voluntary or involuntary or
      by operation of law by judgment, levy, attachment, garnishment or any
      other legal or equitable proceedings (including bankruptcy), and any
      attempted disposition thereof shall be null and void and of no effect,
      except to the extent that such disposition is permitted by the preceding
      sentence; and

                        (iii) During the lifetime of the Holder, only the Holder
      may exercise an Option or other Award (or any portion thereof) granted to
      him under the Plan, unless it has been disposed of pursuant to a DRO;
      after the death of the Holder, any exercisable portion of an Option or
      other Award may, prior to the time when such portion becomes unexercisable
      under the Plan or the applicable Award Agreement, be exercised by his
      personal representative or by any person empowered to do so under the
      deceased Holder's will or under the then applicable laws of descent and
      distribution.

                  (b) Notwithstanding Section 11.1(a), the Administrator, in its
sole discretion, may determine to permit a Holder to transfer a Non-Qualified
Stock Option to any

                                       21
<PAGE>

one or more Permitted Transferees (as defined below), subject to the following
terms and conditions: (i) a Non-Qualified Stock Option transferred to a
Permitted Transferee shall not be assignable or transferable by the Permitted
Transferee other than by will or the laws of descent and distribution; (ii) any
Non-Qualified Stock Option which is transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Non-Qualified
Stock Option as applicable to the original Holder (other than the ability to
further transfer the Non-Qualified Stock Option); and (iii) the Holder and the
Permitted Transferee shall execute any and all documents requested by the
Administrator, including, without limitation documents to (A) confirm the status
of the transferee as a Permitted Transferee, (B) satisfy any requirements for an
exemption for the transfer under applicable federal and state securities laws
and (C) evidence the transfer. For purposes of this Section 11.1(b), "Permitted
Transferee" shall mean, with respect to a Holder, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Holder's household (other than a tenant or employee), a trust in
which these persons (or the Holder) control the management of assets, and any
other entity in which these persons (or the Holder) own more than fifty percent
of the voting interests, or any other transferee specifically approved by the
Administrator after taking into account any state or federal tax or securities
laws applicable to transferable Non-Qualified Stock Options.

            11.2. Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company's
stockholders given within twelve (12) months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
11.3, (i) increase the limits imposed in Section 2.1 on the maximum number of
shares which may be issued under the Plan, (ii) take any action in violation of
Section 11.6 to decrease the exercise price of any outstanding Option or Stock
Appreciation Right granted under the Plan, or (iii) take any action requiring
stockholder approval under any applicable law or requirement of any stock
exchange or any national market system. Except as provided in Section 11.2, no
amendment, suspension or termination of the Plan shall, without the consent of
the Holder, adversely alter or impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of suspension or
after termination of the Plan, and in no event may any Award be granted under
the Plan after the expiration of ten (10) years from the Effective Date.

            11.3. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.

                  (a) Subject to Section 11.3(e), in the event of any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other

                                       22
<PAGE>

rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, the Administrator shall make
proportionate adjustments to any or all of:

                        (i) The number and kind of shares of Common Stock (or
      other securities or property) with respect to which Awards may be granted
      or awarded (including, without limitation, adjustments of the limitations
      in Section 2.1 on the maximum number and kind of shares which may be
      issued under the Plan and adjustments of the Award Limit);

                        (ii) The number and kind of shares of Common Stock (or
      other securities or property) subject to outstanding Awards;

                        (iii) The number and kind of shares of Common Stock (or
      other securities or property) for which automatic grants are subsequently
      to be made to new and continuing Non-Employee Directors pursuant to
      Section 4.6;

                        (iv) The grant or exercise price with respect to any
      Award.

                  (b) Subject to Sections 11.3(c) and 11.3(e), in the event of
any transaction or event described in Section 11.3(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the
Company, or the financial statements of the Company or any affiliate, or of
changes in applicable laws, regulations or accounting principles, the
Administrator on such terms and conditions as it deems appropriate, either by
the terms of the Award or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Holder's request, is
hereby authorized to take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:

                        (i) To provide for either the purchase of any such Award
      for an amount of cash equal to the amount that could have been attained
      upon the exercise of such Award or realization of the Holder's rights had
      such Award been currently exercisable or payable or fully vested or the
      replacement of such Award with other rights or property selected by the
      Administrator in its sole discretion;

                        (ii) To provide that the Award cannot vest, be exercised
      or become payable after such event;

                        (iii) To provide that such Award shall be exercisable as
      to all shares covered thereby, notwithstanding anything to the contrary in
      Section 5.3 or the provisions of such Award;

                        (iv) To provide that such Award be assumed by the
      successor or survivor corporation, or a parent or subsidiary thereof, or
      shall be substituted for by similar options, rights or awards covering the
      stock of the

                                       23
<PAGE>

      successor or survivor corporation, or a parent or subsidiary thereof, with
      appropriate adjustments as to the number and kind of shares and prices;

                        (v) To make adjustments in the number and type of shares
      of Common Stock (or other securities or property) subject to outstanding
      Awards, and/or in the terms and conditions of (including the grant,
      exercise or purchase price), and the criteria included in, outstanding
      options, rights and awards and options, rights and awards which may be
      granted in the future; and

                        (vi) To provide that, for a specified period of time
      prior to such event, the restrictions imposed under an Award Agreement
      upon some or all shares of Restricted Stock, Restricted Stock Units or
      Deferred Stock may be terminated, and, in the case of Restricted Stock,
      some or all shares of such Restricted Stock may cease to be subject to
      repurchase under Section 7.5 or forfeiture under Section 7.4 after such
      event.

                  (c) Notwithstanding any other provision of the Plan, in the
event of a Change in Control, each outstanding Award shall be assumed or an
equivalent Award substituted by the successor corporation or a parent or
subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Award, the Administrator may
cause any or all of such Awards to become fully exercisable immediately prior to
the consummation of such transaction and all forfeiture restrictions on any or
all of such Awards to lapse. If an Award is exercisable in lieu of assumption or
substitution in the event of a Change in Control, the Administrator shall notify
the Holder that the Award shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Award shall terminate upon the
expiration of such period. For the purposes of this Section 11.3(c), an Award
shall be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each share of Common Stock subject
to the Award immediately prior to the Change in Control, the consideration
(whether stock, cash, or other securities or property) received in the Change in
Control by holders of Common Stock for each share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the Change in Control
was not solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Award, for each share
of Common Stock subject to an Award, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.

                  (d) Subject to Sections 11.3(e) and 3.2, the Administrator
may, in its discretion, include such further provisions and limitations in any
Award, agreement or certificate, as it may deem equitable and in the best
interests of the Company.

                  (e) With respect to Awards which are granted to Covered
Employees and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 11.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so

                                       24
<PAGE>

qualify under Section 162(m)(4)(C), or any successor provisions thereto. No
adjustment or action described in this Section 11.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment or action
would result in short-swing profits liability under Section 16 or violate the
exemptive conditions of Rule 16b-3 unless the Administrator determines that the
Award is not to comply with such exemptive conditions. The number of shares of
Common Stock subject to any Award shall always be rounded down to the next whole
number.

                  (f) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way the right or
power of the Company or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

                  (g) No action shall be taken under this Section 11.3 which
shall cause an Award to fail to comply with Section 409A of the Code or the
Treasury Regulations thereunder, to the extent applicable to such Award.

            11.4. Approval of Plan by Stockholders. The Plan will be submitted
for the approval of the Company's stockholders within twelve (12) months after
the date of the Board's initial adoption of the Plan.

            11.5. Tax Withholding. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Holder to remit to
the Company, an amount sufficient to satisfy federal, state, local and foreign
taxes (including the Holder's FICA obligation) required by law to be withheld
with respect to any taxable event concerning a Holder arising as a result of
this Plan. The Administrator may in its discretion and in satisfaction of the
foregoing requirement allow a Holder to elect to have the Company withhold
shares of Common Stock otherwise issuable under an Award (or allow the return of
shares of Common Stock) having a Fair Market Value equal to the sums required to
be withheld. Notwithstanding any other provision of the Plan, the number of
shares of Common Stock which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the
Holder of such Award in order to satisfy the Holder's federal, state, local and
foreign income and payroll tax liabilities with respect to the issuance,
vesting, exercise or payment of the Award shall be limited to the number of
shares which have a Fair Market Value on the date of withholding or repurchase
equal to the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal, state, local and foreign income tax and payroll
tax purposes that are applicable to such supplemental taxable income.

            11.6. Prohibition on Repricing. Subject to Section 11.3, the
Administrator shall not, without the approval of the stockholders of the
Company, (i) authorize the amendment of

                                       25
<PAGE>

any outstanding Award to reduce its price per share, (ii) authorize the
cancellation of any outstanding Award in exchange for the grant of an Award
having a lesser price per share, or (iii) authorize the cancellation of any
outstanding Option or SAR in exchange for Restricted Stock or any other Award.
Subject to Section 11.2, the Administrator shall have the authority, without the
approval of the stockholders of the Company, to amend any outstanding Option or
SAR to increase its price per share or to cancel and replace an Option or SAR
with the grant of a Option or SAR having a price per share that is greater than
or equal to the price per share of the original Option or SAR.

            11.7. Conditions to Issuance of Shares and Stock Certificates. The
Company shall not be required to issue any shares of Common Stock or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of any Award or portion thereof prior to fulfillment of all of the
following conditions:

                  (a) The admission of such shares to listing on all stock
      exchanges and quotation systems on which such class of stock is then
      listed or traded;

                  (b) The completion of any registration or other qualification
      of such shares under any local, state, federal or foreign law, or under
      the rulings or regulations of the Securities and Exchange Commission or
      any other local, state, federal or foreign governmental regulatory body
      which the Administrator shall, in its absolute discretion, deem necessary
      or advisable;

                  (c) The obtaining of any approval or other clearance from any
      local, state, federal or foreign governmental agency which the
      Administrator shall, in its absolute discretion, determine to be necessary
      or advisable;

                  (d) The lapse of such reasonable period of time following the
      exercise of the Option as the Administrator may establish from time to
      time for reasons of administrative convenience; and

                  (e) The receipt by the Company of full payment for such
      shares, including payment of any applicable withholding tax, which in the
      discretion of the Administrator may be in the form of consideration
      specified in Section 6.2(d).

            11.8. Additional Limitations on Payment, Settlement or Exercise of
an Award. Holders may be required to comply with any timing or other
restrictions with respect to the payment, settlement or exercise of an Award,
including a window-period limitation, as may be imposed in the discretion of the
Administrator.

            11.9. Effect of Plan upon Options and Compensation Plans. The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company: (a) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary, or (b) to grant or assume options or other rights or
awards otherwise than under the Plan in connection with any proper corporate
purpose including without limitation, the grant or assumption of options in
connection with the acquisition by purchase,

                                       26
<PAGE>

lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or association.

            11.10. Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal, state and
foreign laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith. Any
securities delivered under the Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and Awards
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

            11.11. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.

            11.12. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

            11.13. Section 409A. To the extent that the Administrator determines
that any Award granted under the Plan is subject to Section 409A of the Code,
the Award Agreement evidencing such Award shall incorporate the terms and
conditions required by Section 409A of the Code. To the extent applicable, the
Plan and Award Agreements shall be interpreted in accordance with Section 409A
of the Code and Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations or
other guidance that may be issued after the Effective Date. Notwithstanding any
provision of the Plan to the contrary, in the event that following the Effective
Date the Administrator determines that any Award may be subject to Section 409A
of the Code and related Department of Treasury guidance (including such
Department of Treasury guidance as may be issued after the Effective Date), the
Administrator may adopt such amendments to the Plan and the applicable Award
Agreement or adopt other policies and procedures (including amendments, policies
and procedures with retroactive effect), or take any other actions, that the
Administrator determines are necessary or appropriate to (a) exempt the Award
from Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Award, or (b) comply with the requirements
of Section 409A of the Code and related Department of Treasury guidance.

                                       27
<PAGE>

                                    * * * * *

            I hereby certify that the foregoing Skilled Healthcare Group, Inc.
2007 Incentive Award Plan was duly adopted by the Board of Directors of Skilled
Healthcare Group, Inc. on April 19, 2007.

                                    * * * * *

            I hereby certify that the foregoing Skilled Healthcare Group, Inc.
2007 Incentive Award Plan was approved by the stockholders of Skilled Healthcare
Group, Inc. on April 26, 2007.

            Executed on this 26th day of April, 2007.

                                                    /s/ Roland G. Rapp
                                                    ---------------------------
                                                    Roland G. Rapp
                                                    General Counsel, Secretary
                                                    and Chief Administrative
                                                    Officer

                                       28<PAGE>

                                                                   EXHIBIT 10.10

                           INDEMNIFICATION AGREEMENT

            This Indemnification Agreement ("Agreement") is made as of
      ____________, 2007 (the "Effective Date") by and between Skilled
      Healthcare Group, Inc., a Delaware corporation (the "Company"), and
      ______________ who serves as a director and/or officer of the Company
      ("Indemnitee").

            WHEREAS, highly competent persons have become more reluctant to
      serve corporations as directors or officers unless they are provided with
      adequate protection through insurance and/or indemnification against the
      risks of claims being asserted against them arising out of their service
      to and activities on behalf of such corporations; and

            WHEREAS, the board of directors of the Company (the "Board") has
      determined that, in order to help attract and retain qualified individuals
      as directors and officers, the best interests of the Company and its
      investors will be served by attempting to maintain, on an ongoing basis,
      at the Company's sole expense, insurance to protect persons serving the
      Company and its subsidiaries as directors or officers from certain
      liabilities. Although the furnishing of such insurance has been a
      customary and widespread practice among United States-based corporations
      and other business enterprises for many years, the Company believes that,
      given current market conditions and trends, such insurance may be
      available to it in the future only at higher premiums and with more
      exclusions. At the same time, directors and officers in service to
      corporations or business enterprises are being increasingly subjected to
      expensive and time-consuming litigation; and

            WHEREAS, the Board has determined that, in order to help attract and
      retain qualified individuals as directors and officers, the best interests
      of the Company and its investors will be served by assuring such
      individuals that the Company will indemnify them to the maximum extent
      permitted by law; and

            WHEREAS, the Amended and Restated Certificate of Incorporation (the
      "Certificate of Incorporation") of the Company permit, and the By-Laws
      (the "By-Laws") of the Company require, indemnification of the officers
      and directors of the Company, and Indemnitee may also be entitled to
      indemnification pursuant to the Delaware General Corporation Law ("DGCL");
      and

            WHEREAS, the Certificate of Incorporation, the By-Laws and the DGCL
      expressly provide that the indemnification provisions set forth therein
      are not exclusive, and thereby contemplate that contracts may be entered
      into between the Company and its directors and officers with respect to
      indemnification and the advancement of defense costs; and

            WHEREAS, the Board has determined that the increased difficulty in
      attracting and retaining such persons is detrimental to the best interests
      of the Company's investors

<PAGE>

      and that the Company should act to assure such persons that there will be
      increased certainty of such protection in the future; and

            WHEREAS, it therefore is reasonable, prudent and necessary for the
      Company contractually to obligate itself to indemnify, and to advance
      defense costs on behalf of, such persons to the fullest extent permitted
      by applicable law so that they will serve or continue to serve the Company
      free from undue concern that they will not be so indemnified; and

            WHEREAS, this Agreement is a supplement to and in furtherance of the
      Certificate of Incorporation, By-Laws and any resolutions adopted pursuant
      thereto, and shall not be deemed a substitute therefor, nor shall it be
      deemed to diminish or abrogate any rights of Indemnitee thereunder; and

            WHEREAS, the Board recognizes that the Indemnitee does not regard
      the protection available under the Company's Certificate of Incorporation,
      the By-Laws and insurance program as adequate in the present
      circumstances, and may not be willing to serve or continue to serve as a
      director, officer or in such other capacity as the Company may request
      without adequate protection, and the Company desires Indemnitee to serve
      in such capacity; and

            WHEREAS, Indemnitee is willing to serve, and continue to serve, as a
      member of the Board (and any committee thereof) or as an officer of the
      Company, on the condition that he or she be indemnified as provided for
      herein.

            NOW, THEREFORE, in consideration of the premises and the covenants
      contained herein, the Company and Indemnitee do hereby covenant and agree
      as follows:

      1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to serve, at
the will of the Company, as a director or officer of the Company for so long as
Indemnitee is duly elected or appointed or until Indemnitee tenders his or her
resignation. This Agreement shall not serve as a binding commitment on the part
of Indemnitee to continue to serve in such capacity, or on the part of the
Company to cause him or her to be nominated to successive terms as a director or
officer or to not otherwise be removed for cause or without cause, as permitted
under law.

      2. DEFINITIONS. As used in this Agreement:

               (a) "Beneficial Owner" shall have the meaning given to such term
      in Rule 13d-3 issued under the Exchange Act; provided, however, that
      Beneficial Owner shall exclude any Person becoming a Beneficial Owner by
      reason of the stockholders of the Company approving a merger of the
      Company with another entity.

               (b) A "Change in Control" shall be deemed to occur upon the
      earliest to occur after the date of this Agreement of any of the following
      events:

                                       2
<PAGE>

                  (i) Acquisition of Stock by Third Party. Any Person (as
      defined below, but excluding any subsidiary or employee benefit plan of
      the Company), subsequent to the date of this Agreement, becomes the
      Beneficial Owner, directly or indirectly, of securities of the Company
      representing fifty percent (50%) or more of the combined voting power of
      the Company's then outstanding securities entitled to vote generally in
      the election of directors, unless (1) the change in the relative
      Beneficial Ownership of the Company's securities by any Person results
      solely from a reduction in the aggregate number of outstanding shares of
      securities entitled to vote generally in the election of directors, or (2)
      such acquisition was approved in advance by the Continuing Directors (as
      defined below) and such acquisition would not constitute a Change in
      Control under part (iii) of this definition; provided, however, that the
      current ownership of more that 50% of the voting power of the Company by
      Onex Partners LP and Onex Corporation or the transfer of such voting power
      by Onex Partners LP or Onex Corporation to its partners or stockholders
      respectively, or to its directly or indirectly wholly-owned subsidiaries,
      shall not be considered a Change of Control;

                  (ii) Change in Board of Directors. Individuals who, as of the
      date hereof, constitute the Board, and any new director whose election by
      the Board or nomination for election by the Company's stockholders was
      approved by a vote of at least two thirds of the directors then still in
      office who were directors on the date hereof or whose election for
      nomination for election was previously so approved (collectively, the
      "Continuing Directors"), cease for any reason to constitute at least a
      majority of the members of the Board;

                  (iii) Corporate Transactions. The effective date of a
      reorganization, merger or consolidation of the Company (a "Business
      Combination"), in each case, unless, following such Business Combination:
      (1) all or substantially all of the individuals and entities who were the
      Beneficial Owners of securities entitled to vote generally in the election
      of directors immediately prior to such Business Combination beneficially
      own, directly or indirectly, more than 51% of the combined voting power of
      the then outstanding securities entitled to vote generally in the election
      of directors of the Company resulting from such Business Combination
      (including, without limitation, a corporation which as a result of such
      transaction owns the Company or all or substantially all of the Company's
      assets either directly or through one or more Subsidiaries) in
      substantially the same proportions as their ownership, immediately prior
      to such Business Combination, of the securities entitled to vote generally
      in the election of directors; (2) no Person (excluding any corporation
      resulting from such Business Combination) is the Beneficial Owner,
      directly or indirectly, of 15% or more of the combined voting power of the
      then outstanding securities entitled to vote generally in the election of
      directors of such corporation except to the extent that such ownership
      existed prior to the Business Combination; and (3) at least a majority of
      the Board resulting from such Business Combination were Continuing
      Directors at the time of the execution of the initial agreement, or of the
      action of the Board, providing for such Business Combination;

                                       3
<PAGE>

                  (iv) Liquidation. The approval by the stockholders of the
      Company of a complete liquidation of the Company or an agreement or series
      of agreements for the sale or disposition by the Company of all or
      substantially all of the Company's assets, other than factoring the
      Company's current receivables or escrows due (or, if such approval is not
      required, the decision by the Board to proceed with such a liquidation,
      sale, or disposition in one transaction or a series of related
      transactions); or

                  (v) Other Events. There occurs any other event of a nature
      that would be required to be reported in response to Item 6(e) of Schedule
      14A of Regulation 14A (or a response to any similar item on any similar
      schedule or form) promulgated under the Exchange Act (as defined below),
      whether or not the Company is then subject to such reporting requirement.

               (c) "Corporate Status" shall describe the status of a person who
      is or was a director, officer, trustee, partner, member, fiduciary,
      employee or agent of the Company or of any other Enterprise (as defined
      below), which such person is or was serving at the request of the Company.

               (d) "Disinterested Director" shall mean a director of the Company
      who is not and was not a party to the Proceeding (as defined below) in
      respect of which indemnification is sought by Indemnitee.

               (e) "Enterprise" shall mean any corporation, limited liability
      company, partnership, joint venture, trust, employee benefit plan or other
      enterprise of which Indemnitee is or was serving at the request of the
      Company as a director, officer, trustee, administrator, partner, member,
      fiduciary, employee or agent.

               (f) "Exchange Act" shall mean the Securities Exchange Act of
      1934, as amended.

               (g) "Expenses" shall include all reasonable attorneys' fees,
      retainers, court costs, transcript costs, fees of experts and accountants,
      witness fees, travel expenses, duplicating costs, printing and binding
      costs, telephone charges, postage, delivery service fees, and all other
      disbursements or expenses of the types and amounts customarily incurred in
      connection with prosecuting, defending, preparing to prosecute or defend,
      investigating, being or preparing to be a witness in, or otherwise
      participating in, a Proceeding (as defined below). Expenses also shall
      include costs incurred in connection with any appeal resulting from any
      Proceeding (as defined below), including, without limitation, the premium,
      security for, and other costs relating to any bond, supersedeas bond, or
      other appeal bond or its equivalent. Expenses, however, shall not include
      amounts paid in settlement by Indemnitee or the amount of judgments or
      fines against Indemnitee.

               (h) "Independent Counsel" shall mean a law firm, or a member of a
      law firm, that is experienced in matters of corporation law and neither
      presently is, nor in the past five (5) years has been, retained to
      represent: (i) the Company or Indemnitee in

                                       4
<PAGE>

      any matter material to either such party (other than with respect to
      matters concerning the Indemnitee under this Agreement, or other
      indemnitees under similar indemnification agreements), or (ii) any other
      party to the Proceeding giving rise to a claim for indemnification
      hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
      shall not include any person who, under the applicable standards of
      professional conduct then prevailing, would have a conflict of interest in
      representing either the Company or Indemnitee in an action to determine
      Indemnitee's rights under this Agreement.

               (i) References to "fines" shall include any excise tax assessed
      on a person with respect to any employee benefit plan pursuant to
      applicable law.

               (j) References to "serving at the request of the Company" shall
      include any service provided at the request of the Company as a director,
      officer, trustee, administrator, partner, member, fiduciary, employee or
      agent of the Company which imposes duties on, or involves services by,
      such director, officer, trustee, administrator, partner, member,
      fiduciary, employee or agent with respect to an employee benefit plan, its
      participants or beneficiaries.

               (k) "Person" shall have the meaning set forth in Sections 13(d)
      and 14(d) of the Exchange Act; provided, however, that Person shall
      exclude (i) the Company and (ii) any trustee or other fiduciary holding
      securities under an employee benefit plan of the Company or a subsidiary
      of the Company.

               (l) Any action taken or omitted to be taken by a person for a
      purpose which he or she reasonably believed to be in the interests of the
      participants and beneficiaries of an employee benefit plan shall be deemed
      to have been taken in "good faith" and for a purpose which is "not opposed
      to the best interests of the Company", as such terms are referred to in
      this Agreement and used in the DGCL.

               (m) The term "Proceeding" shall include any threatened, pending
      or completed action, suit, arbitration, alternate dispute resolution
      mechanism, investigation, inquiry, administrative hearing or any other
      actual, threatened or completed proceeding, whether brought in the right
      of the Company or otherwise and whether of a civil, criminal,
      administrative or investigative nature, including any related appeal, in
      which Indemnitee was, is or will be involved as a party or witness or
      otherwise by reason of the fact that Indemnitee is or was a director,
      officer, trustee, administrator, partner, member, fiduciary, employee or
      agent of the Company, by reason of any action taken or not taken by him or
      her while acting as director, officer, trustee, administrator, partner,
      member, fiduciary, employee or agent of the Company, or by reason of the
      fact that he or she is or was serving at the request of the Company as a
      director, officer, trustee, administrator, partner, member, fiduciary,
      employee or agent of any other Enterprise, in each case whether or not
      serving in such capacity at the time any liability or expense is incurred
      for which indemnification, reimbursement, or advancement of expenses can
      be provided under this Agreement.

                                       5
<PAGE>

      3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Company shall indemnify and
hold harmless Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee is made, or is threatened to be made, a party to or a participant in
(as a witness or otherwise) any Proceeding, other than a Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
Section 3, Indemnitee shall be indemnified and held harmless against all
judgments, fines, penalties, amounts paid in settlement (if such settlement is
approved in writing in advance by the Company, which approval shall not be
unreasonably withheld) (including, without limitation, all interest, assessments
and other charges paid or payable in connection with or in respect of any of the
foregoing) (collectively, "Losses") and Expenses actually and reasonably
incurred by Indemnitee or on his or her behalf in connection with such
Proceeding or any action, discovery event, claim, issue or matter therein or
related thereto, if Indemnitee acted in good faith, for a purpose which he or
she reasonably believed to be in or not opposed to the best interests of the
Company and, in the case of a criminal Proceeding, in addition, had no
reasonable cause to believe that his or her conduct was unlawful.

      4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 4
if Indemnitee is made, or is threatened to be made, a party to or a participant
in (as a witness or otherwise) any Proceeding by or in the right of the Company
to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall
be indemnified and held harmless against all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection with the defense or
settlement of such Proceeding or any action, discovery event, claim, issue or
matter therein or related thereto, if Indemnitee acted in good faith, for a
purpose which he or she reasonably believed to be in or not opposed to the best
interests of the Company. No indemnification, however, shall be made under this
Section 4 in respect of any claim, issue or matter as to which Indemnitee shall
have been adjudged to be liable to the Company, unless and only to the extent
that the court in which the Proceeding was brought or, if no Proceeding was
brought in a court, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case, Indemnitee
fairly and reasonably is entitled to indemnification for such portion of the
Expenses as the court deems proper.

      5. INDEMNIFICATION FOR EXPENSES WHERE INDEMNITEE IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding and in addition to the provisions of Section 3 and 4
of this Agreement, to the extent that Indemnitee is a party to a Proceeding and
is successful, on the merits or otherwise, in the defense of any claim, issue or
matter therein, the Company shall indemnify and hold harmless Indemnitee against
all Expenses actually and reasonably incurred by him or her or on his or her
behalf in connection with such successful defense. For the avoidance of doubt,
if Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or her or on his or her behalf
in connection with each successfully resolved claim, issue or matter. For
purposes of this Section 5, and without limitation, the termination of any
claim, issue or matter in such a Proceeding by withdrawal or dismissal, with or
without prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.

                                       6
<PAGE>

      6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. To the extent that
Indemnitee is, by reason of his or her Corporate Status, a witness in or
otherwise incurs Expenses in connection with any Proceeding to which Indemnitee
is not a party, he or she shall be indemnified and held harmless by the Company
against all Expenses actually and reasonably incurred by him or her or on his or
her behalf in connection therewith.

      7. ADDITIONAL INDEMNIFICATION.

               (a) Notwithstanding any limitation in Sections 3, 4, or 5 hereof
      or in Section 145 of the DGCL or other applicable statutory provision, the
      Company shall indemnify Indemnitee to the fullest extent permitted by law
      if Indemnitee is made, or is threatened to be made, a party to any
      Proceeding (including a Proceeding by or in the right of the Company to
      procure a judgment in its favor) against all Losses and Expenses actually
      and reasonably incurred by Indemnitee in connection with the Proceeding,
      provided that no indemnification shall be made under this Section 7(a) on
      account of Indemnitee's conduct which constitutes a breach of Indemnitee's
      duty of loyalty to the Company or its investors or is an act or omission
      not in good faith or which involves intentional misconduct or a knowing
      violation of the law.

               (b) For purposes of Sections 7(a), the meaning of the phrase "to
      the fullest extent permitted by law" shall include, but not be limited to:

                  (i) to the fullest extent authorized or permitted by the
      then-applicable provisions of the DGCL or other applicable statutory
      provision, that authorize or contemplate indemnification by agreement, or
      the corresponding provision of any amendment to or replacement of the DGCL
      or other applicable statutory provision, and

                  (ii) to the fullest extent authorized or permitted by any
      amendments to or replacements of the DGCL or other applicable statutory
      provision, adopted after the date of this Agreement that increase the
      extent to which a corporation limited liability company or partnership, as
      applicable, may indemnify its officers, directors or persons holding
      similar fiduciary responsibilities.

               (c) Indemnitee shall be entitled to the prompt payment of all
      Expenses reasonably incurred in enforcing successfully (fully or
      partially) this Agreement.

      8. CONTRIBUTION. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu
of indemnifying Indemnitee, shall contribute to the amount incurred by
Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid
or to be paid in settlement and/or for Expenses, in connection with any claim
relating to an indemnifiable event under this Agreement, in such proportion as
is deemed fair and reasonable in light of all of the circumstances of such
Proceeding in order to reflect (i) the relative benefits received by the
Company, on the one hand, and Indemnitee, on the other, as a result of the
event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the

                                       7
<PAGE>

relative fault of the Company, on the one hand (and its directors, officers,
employees and agents) and Indemnitee, on the other, in connection with such
event(s) and/or transaction(s).

      9. EXCLUSIONS. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:

               (a) for which payment actually has been received by or on behalf
      of Indemnitee under any insurance policy or other indemnity provision,
      except with respect to any excess beyond the amount actually received
      under such insurance policy or other indemnity provision; or

               (b) for an accounting of profits made from the purchase and sale
      (or sale and purchase) by Indemnitee of securities of the Company or any
      subsidiary of the Company within the meaning of Section 16(b) of the
      Exchange Act, as amended, or similar provisions of state blue sky law,
      state statutory law or common law; or

               (c) prior to a Change in Control, in connection with any
      Proceeding (or any part of any Proceeding) initiated by Indemnitee,
      including any Proceeding (or any part of any Proceeding) initiated by
      Indemnitee against the Company (other than any Proceeding referred to in
      Sections 14(d) or (e) below or any other Proceeding commenced to recover
      any Expenses referred to in Section 7(c) above) or its directors,
      officers, employees or other indemnitees, unless (i) the Board authorized
      the Proceeding (or any part of any Proceeding) prior to its initiation or
      (ii) the Company provides the indemnification, in its sole discretion,
      pursuant to the powers vested in the Company under applicable law; or

               (d) if the funds at issue were paid pursuant to a settlement
      approved by a court and indemnification would be inconsistent with any
      condition with respect to indemnification expressly imposed by the court
      in approving the settlement.

      10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM.

               (a) The Company shall advance pursuant to this Section 10(a) the
      Expenses incurred by Indemnitee in connection with any Proceeding within
      thirty (30) days after the receipt by the Company of a written statement
      or statements requesting such advances from time to time, whether prior to
      or after final disposition of any Proceeding. Advances shall be unsecured
      and interest free. Advances shall be made without regard to Indemnitee's
      ability to repay such advances. Advances shall include any and all
      reasonable Expenses incurred pursuing an action to enforce such right to
      receive advances. Notwithstanding any provision of this Agreement to the
      contrary, the Indemnitee shall be entitled to advances of Expenses
      incurred by him or her or on his or her behalf in connection with a
      Proceeding that Indemnitee claims is covered by Sections 3 and 4 hereof,
      prior to a final determination of eligibility for indemnification and
      prior to the final disposition of the Proceeding, upon the execution and
      delivery to the Company of an undertaking by or on behalf of the
      Indemnitee providing that the Indemnitee will

                                       8
<PAGE>

      repay such advances to the extent that it ultimately is determined that
      Indemnitee is not entitled to be indemnified by the Company. This Section
      10(a) shall not apply to any claim made by Indemnitee for which indemnity
      is excluded pursuant to Section 9.

               (b) The Company will be entitled to participate in the Proceeding
      at its own expense.

               (c) The Company shall not settle any action, claim or Proceeding
      (in whole or in part) which would impose any Expense, judgment, fine,
      penalty or limitation on the Indemnitee without the Indemnitee's prior
      written consent, which consent shall not be unreasonably withheld.

      11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.

               (a) Within sixty (60) days after the actual receipt by Indemnitee
      of written notice that he or she is a party to or is requested to be a
      participant in (as a witness or otherwise) any Proceeding, Indemnitee
      shall submit to the Company a written notice identifying the Proceeding.
      The failure by the Indemnitee to notify the Company within such 60-day
      period will not relieve the Company from any liability which it may have
      to Indemnitee (i) other than under this Agreement, and (ii) under this
      Agreement, provided that if the Company can establish that such failure to
      notify the Company in a timely manner resulted in actual prejudice to the
      Company, then the Company will be relieved from liability under this
      Agreement only to the extent of such actual prejudice.

               (b) Indemnitee shall at the time of giving such notice pursuant
      to Section 11(a) or thereafter deliver to the Company a written
      application for indemnification. Such application may be delivered at such
      time as Indemnitee deems appropriate in his or her sole discretion.
      Following delivery of such a written application for indemnification by
      Indemnitee, the Indemnitee's entitlement to indemnification shall be
      determined promptly according to Section 12(a) of this Agreement and the
      outcome of such determination shall be reported to Indemnitee in writing
      within forty-five (45) days of the submission of such application.

      12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.

               (a) Upon written application by Indemnitee for indemnification
      pursuant to Section 11(b) or written statement by Indemnitee for advances
      of Expenses pursuant to Section 10(a), a determination with respect to
      Indemnitee's entitlement thereto pursuant to the mandatory terms of this
      Agreement, pursuant to statute, or pursuant to other sources of right to
      indemnity, shall be made in the specific case: (i) by a majority vote of
      the Disinterested Directors, whether or not such directors otherwise would
      constitute a quorum of the Board; (ii) by a committee of Disinterested
      Directors designated by a majority vote of such directors, whether or not
      such directors would otherwise constitute a quorum of the Board, (iii) if
      there are no Disinterested Directors, by Independent Counsel in a written
      opinion to the Board, a copy of which shall be delivered to Indemnitee or
      (iv) by the stockholders of the Company. Indemnitee shall

                                       9
<PAGE>

      reasonably cooperate with the person, persons or entity making the
      determination with respect to Indemnitee's entitlement to indemnification,
      including providing to such person, persons or entity upon reasonable
      advance request any documentation or information which is not privileged
      or otherwise protected from disclosure and which is reasonably available
      to Indemnitee and reasonably necessary to such determination. Any costs or
      Expenses (including attorneys' fees and disbursements) incurred by
      Indemnitee in so cooperating with the person, persons or entity making
      such determination shall be borne by the Company (irrespective of the
      determination as to Indemnitee's entitlement to indemnification) and the
      Company hereby indemnifies and agrees to hold Indemnitee harmless from any
      such costs and Expenses.

               (b) If it is determined that Indemnitee is entitled to the
      indemnification requested by the Indemnitee in a written application
      submitted to the Company pursuant to Section 11(b), payment to Indemnitee
      shall be made within ten (10) days after such determination. All advances
      of Expenses requested in a written statement by Indemnitee pursuant to
      Section 10(a) prior to a final determination of eligibility for
      indemnification shall be paid in accordance with Section 10.

               (c) In the event the determination of entitlement to
      indemnification or advancement of Expenses is to be made by Independent
      Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be
      selected as provided in this Section 12(c). If a Change in Control shall
      not have occurred, the Independent Counsel shall be selected by the Board,
      and the Company shall give written notice to Indemnitee advising him or
      her of the identity of the Independent Counsel so selected. If a Change in
      Control shall have occurred, the Independent Counsel shall be selected by
      Indemnitee (unless Indemnitee shall request that such selection be made by
      the Board, in which event the preceding sentence shall apply), and
      Indemnitee shall give written notice to the Company advising it of the
      identity of the Independent Counsel so selected. In either event,
      Indemnitee or the Company, as the case may be, may, within ten (10) days
      after such written notice of selection shall have been received, deliver
      to the Company or to Indemnitee, as the case may be, a written objection
      to such selection; provided, however, that such objection may be asserted
      only on the ground that the Independent Counsel so selected does not meet
      the requirements of "Independent Counsel" as defined in Section 2 of this
      Agreement, and the objection shall set forth with particularity the
      factual basis of such assertion. Absent a proper and timely objection, the
      person so selected shall act as Independent Counsel. If a written
      objection is made and substantiated, the Independent Counsel so selected
      may not serve as Independent Counsel unless and until such objection is
      withdrawn or a court of competent jurisdiction has determined that such
      objection is without merit. If, within twenty (20) days after submission
      by Indemnitee of a written request for advancement of Expenses or
      indemnification pursuant to Section 10(a) or 11(b) hereof, no Independent
      Counsel shall have been selected and not objected to, either the Company
      or Indemnitee may petition a court of competent jurisdiction for
      resolution of any objection which shall have been made by the Company or
      Indemnitee to the other's selection of Independent Counsel and/or for the
      appointment as Independent Counsel of a person selected by the court or by
      such other person as the court shall

                                       10
<PAGE>

      designate, and the person with respect to whom all objections are so
      resolved or the person so appointed shall act as Independent Counsel under
      Section 12(a) hereof.

               (d) The Company shall pay the reasonable fees and expenses of the
      Independent Counsel and to fully indemnify such Independent Counsel
      against any and all Expenses, claims, liabilities and damages arising out
      of or relating to this Agreement or its engagement pursuant hereto.

               (e) Upon the due commencement of any judicial proceeding or
      arbitration pursuant to Section 14(a) of this Agreement, any Independent
      Counsel shall be discharged and relieved of any further responsibility in
      such capacity (subject to the applicable standards of professional conduct
      then prevailing).

      13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

               (a) Presumption in Favor of Indemnitee. In making a determination
      with respect to entitlement to indemnification or advancement of Expenses
      hereunder, the person or persons or entity making such determination shall
      presume that Indemnitee is entitled to indemnification or advancement of
      Expenses under this Agreement if Indemnitee has submitted an application
      for advancement of Expenses in accordance with Section 10(a) of this
      Agreement or indemnification in accordance with Section 11(b) of this
      Agreement, and the Company shall have the burden of proof to overcome that
      presumption.

               (b) No Presumption Against Indemnitee. Neither the failure of the
      Company (including by its directors or Independent Counsel) to have made a
      determination prior to the commencement of any action pursuant to this
      Agreement nor an actual determination by the Company (including by its
      directors or Independent Counsel) that Indemnitee has not met the
      applicable standard of conduct for indemnification shall be a defense to
      the action or create a presumption that Indemnitee has not met the
      applicable standard of conduct.

               (c) Sixty Day Period for Determination. If the person, persons or
      entity empowered or selected under Section 12 of this Agreement to
      determine whether Indemnitee is entitled to indemnification or advancement
      of Expenses shall not have made a determination within sixty (60) days
      after receipt by the Company of an application therefor, a determination
      of entitlement to indemnification or advancement of Expenses shall be
      deemed to have been made and Indemnitee shall be entitled to such
      indemnification, absent (i) a misstatement by Indemnitee of a material
      fact, or an omission of a material fact necessary to make Indemnitee's
      statement not materially misleading, in connection with the application
      for indemnification or advancement of Expenses, or (ii) a prohibition of
      such indemnification under applicable law; provided, however, that such
      60-day period may be extended for a reasonable time, not to exceed an
      additional thirty (30) days, if the person, persons or entity making the
      determination with respect to entitlement to indemnification in good faith
      requires such additional time for the obtaining or evaluating of
      documentation and/or information relating thereto.

                                       11
<PAGE>

               (d) No Presumption from Termination of a Proceeding. The
      termination of any Proceeding or of any claim, issue or matter therein, by
      judgment, order, settlement or conviction, or upon a plea of nolo
      contendere, or its equivalent, shall not of itself adversely affect the
      right of Indemnitee to indemnification or create a presumption that
      Indemnitee did not act in good faith and for a purpose which he or she
      reasonably believed to be in or not opposed to the best interests of the
      Company or, with respect to any criminal Proceeding, that Indemnitee had
      reasonable cause to believe that his or her conduct was unlawful.

               (e) Reliance as Safe Harbor. For purposes of any determination of
      good faith, Indemnitee shall be deemed to have acted in good faith if
      Indemnitee's action or failure to act is based on the records or books of
      account of the Company or any Enterprise other than the Company, including
      financial statements, or on information supplied to Indemnitee by the
      officers of the Company or any Enterprise other than the Company in the
      course of their duties, or on the advice of legal counsel for the Company
      or any Enterprise other than the Company or on information or records
      given or reports made to the Company or any Enterprise other than the
      Company by an independent certified public accountant or by an appraiser
      or other expert selected by the Company or any Enterprise other than the
      Company, except if the Indemnitee knew or had reason to know that such
      records or books of account of the Company, information supplied by the
      officers of the Company, advice of legal counsel or information or records
      given or reports made by an independent certified public accountant or by
      an appraiser or other expert were materially false or materially
      inaccurate. The provisions of this Section 13(e) shall not be deemed to be
      exclusive or to limit in any way the other circumstances in which the
      Indemnitee may be deemed or found to have met any applicable standard of
      conduct.

               (f) Actions of Others. The knowledge and/or actions, or failure
      to act, of any other director, officer, trustee, administrator, partner,
      member, fiduciary, employee or agent of the Company or any Enterprise
      other than the Company shall not be imputed to Indemnitee for purposes of
      determining the right to indemnification under this Agreement.

      14. REMEDIES OF INDEMNITEE.

               (a) Adjudication/Arbitration. In the event that (i) a
      determination is made pursuant to Section 12 of this Agreement that
      Indemnitee is not entitled to indemnification under this Agreement, (ii)
      advancement of Expenses is not timely made pursuant to Section 10 of this
      Agreement, (iii) subject to Section 13(b), no determination of entitlement
      to indemnification shall have been made pursuant to Section 12(a) of this
      Agreement within 60 days after receipt by the Company of the application
      for indemnification, or (iv) payment of indemnification is not made
      pursuant to Sections 3, 4, 5, 6, 7 and 12(b) of this Agreement within ten
      (10) days after a determination has been made that Indemnitee is entitled
      to indemnification, or after receipt by the Company of a written request
      for any additional monies owed with respect to a Proceeding as to which it
      already has been determined that Indemnitee is entitled to
      indemnification, Indemnitee

                                       12
<PAGE>

      shall be entitled to an adjudication by a court of his or her entitlement
      to such indemnification or advancement of Expenses. Alternatively,
      Indemnitee, at his or her option, may seek an award in arbitration to be
      conducted by a single arbitrator pursuant to the Commercial Arbitration
      Rules of the American Arbitration Association. The Company shall not
      oppose Indemnitee's right to seek any such adjudication or award in
      arbitration.

               (b) Indemnitee Not Prejudiced by Prior Adverse Determination. In
      the event that a determination shall have been made pursuant to Section
      12(a) of this Agreement that Indemnitee is not entitled to
      indemnification, any judicial proceeding or arbitration commenced pursuant
      to this Section 14 shall be conducted in all respects as a de novo trial,
      or arbitration, on the merits, and Indemnitee shall not be prejudiced by
      reason of the prior adverse determination. In any judicial proceeding or
      arbitration commenced pursuant to this Section 14, the Company shall have
      the burden of proving Indemnitee is not entitled to indemnification or
      advancement of Expenses, as the case may be.

               (c) Company Bound by Prior Determination. If a determination
      shall have been made pursuant to Section 12(a) of this Agreement that
      Indemnitee is entitled to indemnification, the Company shall be bound by
      such determination in any judicial proceeding or arbitration commenced
      pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a
      material fact, or an omission of a material fact necessary to make
      Indemnitee's statement not materially misleading, in connection with the
      application for indemnification, or (ii) a prohibition of such
      indemnification under applicable law.

               (d) Expenses. In the event that Indemnitee, pursuant to this
      Section 14, seeks a judicial adjudication of or an award in arbitration to
      enforce his or her rights under, or to recover damages for breach of, this
      Agreement, Indemnitee shall be entitled to recover from the Company, and
      shall be jointly and severally indemnified by the Company against, any and
      all Expenses actually and reasonably incurred by him or her in such
      judicial adjudication or arbitration if it shall be determined in such
      judicial adjudication or arbitration that Indemnitee is entitled to
      receive all or part of the indemnification or advancement of Expenses
      sought which the Company had disputed prior to the commencement of the
      judicial proceeding or arbitration.

               (e) Advances of Expenses. If requested by Indemnitee, the Company
      shall (within ten (10) days after receipt by the Company of a written
      request therefore) advance to Indemnitee the Expenses which are incurred
      by Indemnitee in connection with any judicial proceeding or arbitration
      brought by Indemnitee for indemnification or advance of Expenses from the
      Company under this Agreement or under any directors' and officers'
      liability insurance policies maintained by the Company, if the Indemnitee
      has submitted an undertaking to repay such Expenses if Indemnitee
      ultimately is determined to not be entitled to such indemnification,
      advancement of Expenses or insurance recovery, as the case may be. The
      Indemnitee's financial ability to repay any such advances shall not be a
      basis for the Company to decline to make such advances.

                                       13
<PAGE>

               (f) Precluded Assertions by the Company. The Company shall be
      precluded from asserting in any judicial proceeding or arbitration
      commenced pursuant to this Section 14 that the procedures and presumptions
      of this Agreement are not valid, binding and enforceable and shall
      stipulate in any such court or before any such arbitrator that the Company
      is bound by all the provisions of this Agreement.

      15. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.

               (a) Rights of Indemnitee Not Exclusive. The rights of
      indemnification and to receive advancement of Expenses as provided by this
      Agreement shall not be deemed exclusive of any other rights to which
      Indemnitee may at any time be entitled under applicable law, the
      Certificate of Incorporation, or the By-Laws, any agreement, vote of
      investors or a resolution of directors, members, partners, or otherwise.
      No right or remedy herein conferred by this Agreement is intended to be
      exclusive of any other right or remedy, and every other right and remedy
      shall be cumulative and in addition to every other right and remedy given
      hereunder or now or hereafter existing at law or in equity or otherwise.
      The assertion or employment of any right or remedy hereunder, or
      otherwise, shall not prevent the concurrent or subsequent assertion or
      employment of any other right or remedy.

               (b) Survival of Rights. No amendment, alteration or repeal of
      this Agreement or of any provision hereof shall limit or restrict any
      right of Indemnitee under this Agreement in respect of any action taken or
      omitted by such Indemnitee in his or her Corporate Status prior to such
      amendment, alteration or repeal.

               (c) Change of Law. To the extent that a change in Delaware law,
      whether by statute or judicial decision, permits greater indemnification
      or advancement of Expenses than would be afforded currently under the
      Certificate of Incorporation or the By-Laws, or this Agreement, it is the
      intent of the parties hereto that Indemnitee shall enjoy and be conferred
      by this Agreement the greater benefits so afforded by such change.

               (d) Insurance. To the extent that the Company maintains an
      insurance policy or policies providing liability insurance for directors,
      officers, trustees, administrators partners, members, fiduciaries,
      employees, or agents of the Company or of any other Enterprise which such
      person serves at the request of the Company, Indemnitee shall be covered
      by such policy or policies in accordance with its or their terms to the
      maximum extent of the coverage available for any such director, trustee,
      partner, member, fiduciary, officer, employee or agent under such policy
      or policies. If, at the time the Company receives notice from any source
      of a Proceeding as to which Indemnitee is a party or a participant (as a
      witness or otherwise) the Company has director and officer liability
      insurance in effect that covers Indemnitee, the Company shall give prompt
      notice of such Proceeding to the insurers in accordance with the
      procedures set forth in the respective policies. The Company shall
      thereafter take all necessary or desirable action to cause such insurers
      to pay, on behalf of the Indemnitee,

                                       14
<PAGE>

      all amounts payable as a result of such Proceeding in accordance with the
      terms of such policies.

               (e) Subrogation. In the event of any payment under this
      Agreement, the Company, shall be subrogated to the extent of such payment
      to all of the rights of recovery of Indemnitee, who shall execute all
      papers required and take all action necessary to secure such rights,
      including execution of such documents as are necessary to enable the
      Company to bring suit to enforce such rights.

               (f) Other Payments. The Company shall not be liable under this
      Agreement to make any payment of amounts otherwise indemnifiable (or for
      which advancement is provided hereunder) if and to the extent that
      Indemnitee has otherwise actually received such payment under any
      insurance policy, contract, agreement or otherwise.

               (g) Other Indemnification. The Company's obligation to indemnify
      or advance Expenses hereunder to Indemnitee who is or was serving at the
      request of the Company as a director, officer, trustee, administrator
      partner, member, fiduciary, employee or agent of any other Enterprise
      shall be reduced by any amount Indemnitee has actually received as
      indemnification or advancement of expenses from such Enterprise.

      16. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as any of the following: a director, officer, agent
or employee of the Company or as a director, officer, trustee, administrator
partner, member, fiduciary, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other Enterprise
which Indemnitee served at the request of the Company; or (b) one (1) year after
the final termination of any Proceeding (including after the expiration of any
rights of appeal) then pending in respect of which Indemnitee is granted rights
of indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 14 of this Agreement (including any
rights of appeal of any Proceeding commenced pursuant to Section 14). This
Agreement shall be binding upon the Company and its respective successors and
assigns and shall inure to the benefit of Indemnitee and his or her heirs,
executors and administrators.

      17. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; (b) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable law and to give
the maximum effect to the intent of the parties hereto; and (c) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal

                                       15
<PAGE>

or unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.

      18. ENFORCEMENT.

               (a) The Company expressly confirms and agrees that it has entered
      into this Agreement and assumed the obligations imposed on it hereby in
      order to induce Indemnitee to serve, or to continue to serve, as a
      director or officer of the Company, and the Company acknowledges that
      Indemnitee is relying upon this Agreement in serving or continuing to
      serve as a director or officer of the Company.

               (b) This Agreement constitutes the entire agreement between the
      parties hereto with respect to the subject matter hereof and supersedes
      all prior agreements and understandings, oral, written and implied,
      between the parties hereto with respect to the subject matter hereof.

      19. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by each of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions of this Agreement
nor shall any waiver constitute a continuing waiver.

      20. SUCCESSORS AND BINDING AGREEMENT.

               (a) The Company will require any successor (whether direct or
      indirect, by purchase, merger, consolidation, reorganization or otherwise)
      and any acquiror of all or substantially all of the business or assets of
      the Company by agreement in form and substance reasonably satisfactory to
      Indemnitee and/or his or her counsel, expressly to assume and agree to
      perform this Agreement in the same manner and to the same extent the
      Company would be required to perform it if no such succession had taken
      place.

               (b) This Agreement will be binding upon and inure to the benefit
      of the Company and any successor to the Company, including, without
      limitation, any person acquiring directly or indirectly all or
      substantially all of the business or assets of the Company whether by
      purchase, merger, consolidation, reorganization or otherwise (and such
      successor will thereafter be deemed the "Company" for purposes of this
      Agreement), but will not otherwise be assignable or delegatable by the
      Company.

               (c) This Agreement will inure to the benefit of and be
      enforceable by the Indemnitee's personal or legal representatives,
      executors, administrators, successors, heirs, distributees, legatees and
      other successors.

               (d) This Agreement is personal in nature and neither of the
      parties hereto will, without the consent of the other, assign or delegate
      this Agreement or any rights or obligations hereunder except as expressly
      provided in Sections 20(a), (b) and (c). Without limiting the generality
      or effect of the foregoing, Indemnitee's right to

                                       16
<PAGE>

      receive payments hereunder will not be assignable, whether by pledge,
      creation of a security interest or otherwise, other than by a transfer by
      the Indemnitee's will, devise, a grantor's trust instrument under which
      the Indemnitee or his estate is the sole beneficiary, or by the laws of
      descent and distribution, and, in the event of any attempted assignment or
      transfer contrary to this Section 20(d), the Company will have no
      liability to pay any amount so attempted to be assigned or transferred.

      21. NOTICES. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
if: (i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, on the date of such receipt, or
(ii) mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:

               (a) If to Indemnitee, at the address indicated on the signature
      page of this Agreement, or such other address as Indemnitee subsequently
      shall provide in writing to the Company.

               (b) If to the Company to:

                        Skilled Healthcare Group, Inc.
                        27442 Portola Parkway, Suite 200
                        Foothill Ranch, California 92610
                        Attention: General Counsel

      or to any other address as may have been furnished to Indemnitee in
      writing by the Company.

      22. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the
legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its conflict of laws, principles or rules. Except with respect to any
arbitration commenced by Indemnitee pursuant to Section 14 of this Agreement,
the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that
any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the Chancery Court of the State of Delaware (the
"Delaware Court"), and not in any other state or federal court in the United
States of America or any court in any other country, (ii) consent to submit to
the exclusive jurisdiction of the Delaware Court for purposes of any action or
proceeding arising out of or in connection with this Agreement, (iii)
irrevocably appoint, to the extent such party is not a resident of the State of
Delaware, CT Corporation, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19808 as its agent in the State of Delaware as such party's agent for
acceptance of legal process in connection with any such action or proceeding
against such party with the same legal force and validity as if served upon such
party personally within the State of Delaware, (iv) waive any objection to the
laying of venue of any such action or proceeding in the Delaware Court, and (v)
waive, and agree not to plead or to make, any claim that any such action or
proceeding brought in the Delaware Court has been brought in an improper or
inconvenient forum.

                                       17
<PAGE>

      23. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.

      24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate. The headings of the paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

            [The remainder of this page is intentionally left blank.]

                                       18
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the day and year first above written.

SKILLED HEALTHCARE GROUP,                    INDEMNITEE
INC.

By:
        ___________________________          Name:
                                                    __________________________
Name:
        ___________________________

Title:                                       Address for Notices to Indemnitee:
        ___________________________

                                             __________________________________

                                             __________________________________

                                             __________________________________

                                       19

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