Document:

ex43forms8.htm

    EXHIBIT
4.3

    

    HEMAGEN
DIAGNOSTICS, INC.

    

    2007
STOCK INCENTIVE PLAN

    as
Amended and Restated through April 30, 2009

    

    ARTICLE
1

    OBJECTIVES

    

    The
objectives of this 2007 Stock Incentive Plan, as Amended and Restated through
April 30, 2009 (the “Plan”) are to enable HEMAGEN DIAGNOSTICS, INC. (the
“Company”) to compete successfully in retaining and attracting key employees of
outstanding ability, to stimulate the efforts of such employees toward the
Company’s objectives and to encourage the identification of their interests with
those of the Company’s shareholders.

     

    ARTICLE
2

    DEFINITIONS

    

    For
purposes of this Plan, the following terms shall have the following
meanings:

     

    2.1  “Award” means an award of
a Stock Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit
Award or Stock Award granted under the Plan.

     

    2.2  “Award Agreement” means a
written or electronic agreement entered into between the Company and a
Participant setting forth the terms and conditions of an Award granted to a
Participant.

     

    2.3  “Board” means the Board
of Directors of the Company.

     

    2.4  “Code” means the Internal
Revenue Code of 1986, as amended, or any successor legislation.

     

    2.5  “Committee” means a
committee designated by the Board of the Company. The Committee shall be
comprised of two or more directors, each of whom shall be (1) a “non-employee
director” as defined in Rule 16b-3 promulgated under the Exchange Act, (2) an
“outside director” under Section 162(m) of the Code (“Section 162(m)”) and (3)
an “independent director” under rules adopted by the Nasdaq Stock Market, in
each case as such rules and sections may be amended, superseded or interpreted
hereafter.

     

    2.6  “Common Stock” means the
Company’s common stock, no par value.

     

    2.7  “Disability” means a
Participant being considered “disabled” within the meaning of Section
409A(a)(2)(C) of the Code, unless otherwise provided in an Award
Agreement.

     

    2.8  “Eligible Employee” means
any individual who performs services for the Company or any Subsidiary of the
Company and is treated as an “employee” for federal income tax purposes or any
individual or firm who performs services for the Company as a
consultant.

     

    2.9  “Exchange Act” means the
Securities Exchange Act of 1934.

     

    2.10  “Fair Market Value” of a
Share as of a given date shall, if the Common Stock is quoted on the
Over-the-Counter Bulletin Board (“OTCBB”), be the reported closing price for a
Share on the date as of which
Fair Market Value is to be determined. If Common Stock is not quoted on the
OTCBB on the date as of which Fair Market Value is to be determined, the
Committee shall determine in good faith the Fair Market Value in whatever manner
it considers appropriate.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.11  “Grant Date” means the
date designated by the Committee as the date upon which an Award is
granted.

     

    2.12  “Incentive Option” means
any Stock Option intended to be and designated as an “Incentive Stock Option”
within the meaning of Section 422 of the Code or any successor
provision.

     

    2.13  “Non-Qualified Option”
means any Stock Option that is not an Incentive Option.

     

    2.14  “Option Price” or
“Exercise Price” means the price per Share at which Common Stock may be
purchased upon the exercise of an Option.

     

    2.15  “Participant” means a
person to whom an Award has been granted pursuant to this Plan.

     

    2.16  “Restricted Stock Award”
means a grant of Shares to an Eligible Employee under Article 7 that are issued
subject to such vesting and transfer restrictions as the Committee shall
determine and set forth in an Award Agreement.

     

    2.17  “Retirement” means any
termination of employment (other than by death or Disability) by an employee who
is at least 65 years of age, or 55 years of age with at least ten years of
employment with the Company or a Subsidiary of the Company.

     

    2.18  “Share” means one share
of the Common Stock.

     

    2.19  “Stock Appreciation
Right” means a contractual right granted to an Eligible Employee under ARTICLE 6
entitling such Eligible Employee to receive a payment, representing the
difference between the base price per Share of the right and the Fair Market
Value of a Share, at such time, and subject to such conditions, as are set forth
in the Plan and the applicable Award Agreement.

     

    2.2  “Stock Award” means a
grant of Shares to an Eligible Employee under Article 9 that are issued free of
transfer restrictions and forfeiture conditions.

     

    2.21  “Stock Option” or
“Option” means the right to purchase Shares granted pursuant to this
Plan.

     

    2.22  “Stock Unit Award” means
a contractual right granted to an Eligible Employee under Article 8 representing
notional unit interests equal in value to a Share to be paid or distributed at
such times, and subject to such conditions, as set forth in the Plan and the
applicable Award Agreement.

     

    2.23  “Subsidiary” has the
meaning set forth in Section 424(f) of the Code.

     

    2.24  “Term” means the period
beginning on a Grant Date and ending on the expiration date of such
Award.

     

    2.25  “Transfer” means sale,
assignment, pledge, encumbrance, alienation, attachment, charge or other
disposition, whether or not for consideration; and the terms “Transferred” or
“Transferable” have corresponding meanings.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ARTICLE
3

    ADMINISTRATION,
PARTICIPATION AND AWARDS

    

    3.1  The Committee. This Plan
shall be administered and interpreted by the Committee.

     

    3.2  Committee Authority. The
Committee shall have such powers and authority as may be necessary or
appropriate for the Committee to carry out its functions as described in the
Plan. Subject to the express limitations of the Plan, the Committee shall have
authority in its discretion to determine, after considering management’s
recommendations with respect to Eligible Employees excluding the Company’s
executive officers, the Eligible Employees to whom, and the time or times at
which, Awards may be granted, the number of Shares, units or other rights
subject to each Award, the exercise, base or purchase price of an Award (if
any), the time or times at which an Award will become vested, exercisable or
payable, the performance goals and other conditions of an Award, the duration of
the Award, and all other terms of the Award. The Committee shall determine the
terms and conditions of all Awards granted to Participants. Subject to the terms
of the Plan, the Committee shall have the authority to amend the terms of an
Award in any manner that is not inconsistent with the Plan, provided that no
such action shall adversely affect the rights of a Participant with respect to
an outstanding Award without the Participant’s consent. The Committee shall also
have discretionary authority to interpret the Plan, to make factual
determinations under the Plan, and to make all other determinations necessary or
advisable for Plan administration, including, without limitation, to correct any
defect, to supply any omission or to reconcile any inconsistency in the Plan or
any Award Agreement hereunder. The Committee may prescribe, amend, and rescind
rules and regulations relating to the Plan. The Committee’s determinations under
the Plan need not be uniform and may be made by the Committee selectively among
Participants and Eligible Employees, whether or not such persons are similarly
situated. The Committee shall, in its discretion, consider such factors as it
deems relevant in making its interpretations, determinations and actions under
the Plan including, without limitation, the recommendations or advice of any
officer or employee of the Company or such attorneys, consultants, accountants
or other advisors as it may select. All interpretations, determinations and
actions by the Committee shall be final, conclusive, and binding upon all
parties.

     

    3.3  Delegation of Authority.
The Committee shall be permitted to delegate to any appropriate officer or
employee of the Company responsibility for performing certain ministerial
functions under the Plan. In the event that the Committee’s authority is
delegated to officers or employees in accordance with the foregoing, all
provisions of the Plan relating to the Committee shall be interpreted in a
manner consistent with the foregoing by treating any such reference as a
reference to such officer or employee for such purpose. Any action undertaken in
accordance with the Committee’s delegation of authority hereunder shall have the
same force and effect as if such action was undertaken directly by the Committee
and shall be deemed for all purposes of the Plan to have been taken by the
Committee.

     

    3.4  Designation of
Participants. All Eligible Employees are eligible to be designated by the
Committee to receive Awards and become Participants under the Plan. The
Committee has the authority, in its discretion, to determine and designate from
time to time those Eligible Employees who are to be granted Awards, the types of
Awards to be granted and the number of Shares or rights subject to Awards
granted under the Plan. In selecting Eligible Employees to be Participants and
in determining the type and amount of Awards to be granted under the Plan, the
Committee shall consider any and all factors that it deems relevant or
appropriate.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
4

    SHARES
SUBJECT TO PLAN

    

    4.1  Shares. Subject to
adjustment as provided in Section 4.2, the number of Shares which may be issued
under this Plan shall not exceed Three Million Dollars (3,000,000) Shares.
Shares issued and sold under the Plan may be either authorized but unissued
Shares or Shares held in the Company’s treasury. To the extent that any Award
involving the issuance of Shares is forfeited, cancelled, returned to the
Company for failure to satisfy vesting requirements or other conditions of the
Award, or is otherwise terminated without an issuance of Shares being made
thereunder, the Shares covered thereby will no longer be counted against the
foregoing maximum Share limitations and may again be made subject to Awards
under the Plan pursuant to such limitations. Any Awards or portions thereof that
are settled in cash and not in Shares shall not be counted against the foregoing
maximum Share limitations.

     

    4.2  Adjustment Provisions. If
there shall occur any change with respect to the outstanding Shares by reason of
any recapitalization, reclassification, stock dividend, extraordinary dividend,
stock split, reverse stock split or other distribution with respect to the
Shares, or any merger, reorganization, consolidation, combination, spin-off or
other similar corporate change, or any other change affecting the Common Stock,
the Committee may, in the manner and to the extent that it deems appropriate and
equitable to the Participants and consistent with the terms of the Plan, cause
an adjustment to be made in (i) the maximum number and kind of Shares provided
in Section 4.1hereof, (ii) the number and kind of Shares, units or other rights
subject to then outstanding Awards, (iii) the exercise or base price for each
Share, unit or other right subject to then outstanding Awards, and (iv) any
other terms of an Award that are affected by the event. Notwithstanding the
foregoing, in the case of Incentive Stock Options, any such adjustments shall,
to the extent practicable, be made in a manner consistent with the requirements
of Section 424(a) of the Code.

     

    ARTICLE
5

    STOCK
OPTIONS

    

    5.1  Grants. Each Option
granted shall be designated as either a Non-Qualified Option or an Incentive
Option. One or more Stock Options may be granted to any Eligible
Employee.

     

    5.2  Incentive Options. Any
Option designated by the Committee as an Incentive Option will be subject to the
general provisions applicable to all Options granted under the Plan plus the
following specific provisions:

     

        5.2.1  If an Incentive Option is
granted to a person who owns, directly or indirectly, stock representing more
than 10% of (i) the total combined voting power of all classes of stock of the
Company and its Subsidiaries, or (ii) a corporation that owns 50% or more of the
total combined voting power of all classes of stock of the Company,
then

     

            5.2.1.1  the Option Price must equal at
least 110% of the Fair Market Value on the Grant Date; and

     

            5.2.1.2  the term of the Option shall not
be greater than five years from the Grant Date.

     

        5.2.2  The aggregate Fair Market
Value of Shares, determined at the Grant Date, with respect to which Incentive
Options that may become exercisable for the first time during any calendar year
under this Plan or any other plan maintained by the Company and its Subsidiaries
shall not exceed $100,000 determined in accordance with Section 422(d) of the
Code. To the extent that the aggregate Fair Market Value of
Shares with respect to which Incentive Options become exercisable for the first
time by any individual during any calendar year, under all plans of the Company
and its Subsidiaries, exceeds $100,000, such Options shall be treated as
Non-Qualified Options.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

        5.2.3  Notwithstanding anything
in this Plan to the contrary, no term of this Plan relating to Incentive Options
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under this Plan be exercised, so as to disqualify this Plan under
Section 422 of the Code, or, without the consent of the Participants affected,
to disqualify any Incentive Option under Section 422 of the Code.

     

    5.3  Terms of Options. Except
as otherwise required by Sections 5.2 and subject to Section 5.5.2 and ARTICLE
11, Options granted under this Plan shall be subject to the following terms and
conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem desirable:

     

        5.3.1  The Option Price shall be
determined by the Committee at the Grant Date, except that no Incentive Option
may be granted for an Option Price less than 100% of Fair Market Value on the
Grant Date.

     

        5.3.2  The Option Term shall be
fixed by the Committee, but no Option shall be exercisable more than ten years
after its Grant Date.

     

        5.3.3  An Option shall be exercisable
at such time or times and subject to such terms and conditions as shall be
specified in the Award Agreement, provided, however, that an Option may not be
exercised as to the lesser of 100 Shares at any one time or the total number
available for exercise at that time.

     

        5.3.4  Stock Options shall
terminate in accordance with Section 5.5.2.

     

    5.4   Vesting of Stock Options.
The Committee shall, in its discretion, prescribe the time or times at which, or
the conditions upon which, a Stock Option or portion thereof shall become vested
and/or exercisable, and may accelerate the vesting or exercisability of any
Stock Option at any time. The requirements for vesting and exercisability of a
Stock Option may be based on the continued employment of a Participant with the
Company or a Subsidiary of the Company for a specified period (or periods) or on
the attainment of performance goals established by the Committee in its sole
discretion.

     

    5.5   Exercise of Options. Any
Participant entitled to exercise an Option in whole or in part, may do so by
delivering a written notice of exercise to the Company at its principal office.
The written notice shall specify the number of Shares for which an Option is
being exercised and the Grant Date of the Option being exercised and shall be
accompanied by full payment in cash or by check of the Option Price for the
Shares being purchased and any withholding taxes. In addition, at the discretion
of the Committee, either as set forth in an Option Agreement or determined at
the time of exercise, the exercise price and withholding taxes may be
paid:

     

        5.5.1    By tender to the Company
of Shares owned by the Participant having a Fair Market Value not less than the
exercise price (the Committee shall have the discretion to require that the
Participant own such shares for six (6) months);

     

        5.5.2  By the assignment of the
proceeds of a sale or loan with respect to some or all of the Shares being
acquired upon the exercise of the Option;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

        5.5.3  By such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law; or

     

        5.5.4  By any combination of the
methods described above in Sections 5.5.1 to 5.3.3.

     

    5.6    Limited Transferability
of Non-Qualified Options. Except as otherwise provided in Section 13.4, no Stock
Option shall be Transferable or exercisable by any person other than the
Participant except (i) upon the Participant’s death, in accordance with Sections
5.7.3 and 5.7.5 hereof or (ii) in the case of Non-Qualified Stock Options only,
for the Transfer of all or part of the Stock Option to a Participant’s “family
member” (as defined for purposes of the Form S-8 registration statement under
the Securities Act of 1933), as may be approved by the Committee in its sole and
absolute discretion at the time of proposed Transfer. The Transfer of a
Non-Qualified Stock Option may be subject to such terms and conditions as the
Committee may in its discretion impose from time to time. Subsequent Transfers
of a Non-Qualified Stock Option shall be prohibited other than in accordance
with Sections 5.7.3, 5.7.4 and 5.7.5 hereof.

     

    5.7  Termination of Stock
Options. All Stock Options issued under this Plan shall terminate as
follows:

     

        5.7.1  During any period of
continuous employment or business relationship with the Company or any
Subsidiary of the Company, a Stock Option will be terminated only if it is fully
exercised or if it has expired by its terms or by the terms of this Plan,
including this Section 5.7.1. For purposes of this Plan, any leave of absence
approved by the Company or the Subsidiary of the Company shall not be deemed to
be a termination of employment.

     

        5.7.2  If a Participant violates
any terms of any written employment, confidentiality or noncompetition agreement
between the Company or any Subsidiary of the Company and the Participant, all
existing Stock Options granted to such Participant will terminate. In addition,
if at the time of such violation such Participant has exercised Stock Options
but has not received certificates for the Shares to be issued, the Company may
void the Award and its exercise. Any such actions by the Company shall be in
addition to any other rights or remedies available to the Company or the
Subsidiaries of the Company in such circumstances. In the event Section 5.7.2
and 5.7.4 both apply to a situation, the provisions of Section 5.7.2 shall take
precedence over the provisions of Section 5.7.4 and govern the
situation.

     

        5.7.3  If a Participant’s
employment by the Company or any Subsidiary of the Company terminates by reason
of death, unless otherwise determined by the Committee, all Stock Options shall
be fully vested and may thereafter be exercised by the Participant’s beneficiary
or legal representative, for a period of one year or such longer period as the
Committee may specify at or after grant in all cases other than Incentive
Options, or until the expiration of the stated term of such Stock Option,
whichever period is shorter.

     

        5.7.4  If Participant’s
employment by the Company or a Subsidiary of the Company terminates by reason of
Disability or Retirement, unless otherwise determined by the Committee based
upon, among other factors, the Participant’s contributions to, and longevity
with, the Company or any Subsidiary, all Stock Options shall terminate (i) on
the date which is 90 days after the date of such termination of employment or on
the expiration of the stated term of the Stock Option, whatever shall first
occur, in the case of a Participant which has been employed by the Company or
any of its subsidiaries for ten full years or less, (ii) on the date which is
one year after the date of such termination of employment or on the expiration
of the stated term of the Stock Option, whichever shall first occur, in the case
of a Participant who has been employed by the Company or any of its Subsidiaries
for more than ten full years, but less than twenty full years, or (iii) on the
date which is two years after the date of termination of employment or on the
expiration of the stated term of the Stock Option, whichever shall first occur,
in the case of a Participant
who has been employed by the Company or any of its Subsidiaries for twenty full
years or more.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

        5.7.5  Unless otherwise
determined by the Committee at or after grant, if a Participant’s employment by
the Company or any Subsidiary of the Company terminates for any reason other
than death, Disability or Retirement, the Stock Option will terminate
immediately on the date of termination of the employment.

     

    5.8  Repricing Prohibited.
Subject to the anti-dilution adjustment provisions contained in Section 0
hereof, without the prior approval of the Company’s shareholders, evidenced by a
majority of votes cast, neither the Committee nor the Board shall cause the
cancellation, substitution or amendment of a Stock Option that would have the
effect of reducing the exercise price of such a Stock Option previously granted
under the Plan, or otherwise approve any modification to such a Stock Option
that would be treated as a “repricing” under the then applicable rules,
regulations or listing requirements adopted by the Nasdaq Stock
Market.

     

    5.9  Awards to Non-Employee
Directors. Notwithstanding any other provisions herein, members of the Board of
Directors who are not otherwise employees of the Company shall be entitled to
receive Awards (other than Incentive Options) in forms and amounts as determined
by the Committee in its discretion under this Plan from time to time and at the
following times:

     

        5.9.1  On the date on which a
person first becomes a member of the Board of Directors, whether by election or
appointment; and

     

        5.9.2  On the date of
re-election by shareholders to the Board of Directors.

     

        5.9.3  On each annual
anniversary of election as a member of the Board of Directors
therafter.

     

    ARTICLE
6

    STOCK
APPRECIATION RIGHTS.

    

    6.1  Grant of Stock
Appreciation Rights. A Stock Appreciation Right may be granted to any Eligible
Employee selected by the Committee. Stock Appreciation Rights may be granted on
a basis that allows for the exercise of the right by the Participant or that
provides for the automatic payment of the right upon a specified date or event.
Stock Appreciation Rights shall be exercisable or payable at such time or times
and upon conditions as may be approved by the Committee, provided that the
Committee may accelerate the exercisability or payment of a Stock Appreciation
Right at any time.

     

    6.2  Freestanding Stock
Appreciation Rights. A Stock Appreciation Right may be granted without any
related Stock Option and may be subject to such vesting and exercisability
requirements as specified by the Committee in an Award Agreement. Such vesting
and exercisability requirements may be based on the continued service of the
Participant with the Company or its Subsidiaries for a specified time period (or
periods) or on the attainment of specified performance goals established by the
Committee in its discretion. A Stock Appreciation Right will be exercisable or
payable at such time or times as determined by the Committee, provided that the
maximum term of a Stock Appreciation Right shall be ten years from the Grant
Date. The base price of a Stock Appreciation Right granted without any related
Stock Option shall be determined by the Committee in its sole discretion;
provided, however, that the base price per Share of any such freestanding Stock
Appreciation Right shall not be less than 100% of the Fair Market Value of the
Shares on the Grant Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.3  Tandem Stock Option/Stock
Appreciation Rights. A Stock Appreciation Right may be granted in tandem with a
Stock Option, either at the time of grant or at any time thereafter during the
term of the Stock Option. A tandem Stock Option/Stock Appreciation Right will
entitle the holder to elect, as to all or any portion of the number of Shares
subject to such Stock Option/Stock Appreciation Right, to exercise either the
Stock Option or the Stock Appreciation Right, resulting in the reduction of the
corresponding number of Shares subject to the right so exercised as well as the
tandem right not so exercised. A Stock Appreciation Right granted in tandem with
a Stock Option hereunder shall have a base price per Share equal to the Exercise
Price of the Stock Option, will be vested and exercisable at the same time or
times that a related Stock Option is vested and exercisable, and will expire no
later than the time at which the related Stock Option expires.

     

    6.4  Payment of Stock
Appreciation Rights.  A Stock Appreciation Right will entitle the
holder, upon exercise or other payment of the Stock Appreciation Right, as
applicable, to receive an amount determined by multiplying: (i) the excess of
the Fair Market Value of a Share on the date of exercise or payment of the Stock
Appreciation Right over the base price of such Stock Appreciation Right, by (ii)
the number of Shares as to which such Stock Appreciation Right is exercised or
paid. Subject to the requirements of Section 409A of the Code, payment of the
amount determined under the foregoing may be made, as approved by the Committee
and set forth in the Award Agreement, in Shares valued at their Fair Market
Value on the date of exercise or payment, in cash, or in a combination of Shares
and cash, subject to applicable tax withholding requirements.

     

    6.5  Repricing
Prohibited.   Subject to the anti-dilution adjustment provisions
contained in Section 4.2 hereof, without the prior approval of the Company’s
shareholders, evidenced by a majority of votes cast, neither the Committee nor
the Board shall cause the cancellation, substitution or amendment of a Stock
Appreciation Right that would have the effect of reducing the base price of such
a Stock Appreciation Right previously granted under the Plan, or otherwise
approve any modification to such a Stock Appreciation Right that would be
treated as a “repricing” under the then applicable rules, regulations or listing
requirements adopted by the Nasdaq Stock Market.

     

    ARTICLE
7

    RESTRICTED
STOCK AWARDS

    

    7.1  Grant of Restricted Stock
Awards.  A Restricted Stock Award may be granted to any Eligible
Employee selected by the Committee. The Committee may require the payment by the
Participant of a specified purchase price in connection with any Restricted
Stock Award.

     

    7.2  Vesting
Requirements.  The restrictions imposed on Shares granted under a
Restricted Stock Award shall lapse in accordance with the vesting requirements
specified by the Committee in the Award Agreement, provided that the Committee
may accelerate the vesting of a Restricted Stock Award at any time. Such vesting
requirements may be based on the continued employment of the Participant with
the Company or its Subsidiaries for a specified time period (or periods) or on
the attainment of specified performance goals established by the Committee in
its discretion. If the vesting requirements of a Restricted Stock Award shall
not be satisfied, the Award shall be forfeited and the Shares subject to the
Award shall be returned to the Company.

     

    7.3  Restrictions.  Shares
granted under any Restricted Stock Award may not be transferred, assigned or
subject to any encumbrance, pledge, or charge until all applicable restrictions
are removed or have expired, unless otherwise allowed by the Committee. Failure
to satisfy any applicable restrictions shall result in the subject shares of the
Restricted Stock Award being forfeited and returned to the Company. The
Committee may require in an Award Agreement that certificates representing the
shares granted under a Restricted Stock Award bear a legend making appropriate
reference to the restrictions imposed,
and that certificates representing the shares granted or sold under a Restricted
Stock Award will remain in the physical custody of an escrow holder until all
restrictions are removed or have expired.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7.4  Rights as
Shareholder.  Subject to the foregoing provisions of this Section 8
and the applicable Award Agreement, the Participant shall have all rights of a
shareholder with respect to the Shares granted to the Participant under a
Restricted Stock Award, including the right to vote the Shares and receive all
dividends and other distributions paid or made with respect thereto. The
Committee may provide in an Award Agreement for the payment of dividends and
distributions to the Participant at such times as paid to shareholders generally
or at the times of vesting or other payment of the Restricted Stock
Award.

     

    7.5  Section 83(b)
Election.  If a Participant makes an election pursuant to Section
83(b) of the Code with respect to a Restricted Stock Award, the Participant
shall file, within 30 days following the Grant Date, a copy of such election
with the Company and with the Internal Revenue Service, in accordance with the
regulations under Section 83 of the Code. The Committee may provide in an Award
Agreement that the Restricted Stock Award is conditioned upon the Participant’s
making or refraining from making an election with respect to the Award under
Section 83(b) of the Code.

     

    ARTICLE
8

    STOCK
UNIT AWARDS

    

    8.1  Grant of Stock Unit
Awards.  A Stock Unit Award may be granted to any Eligible Employee
selected by the Committee. The value of each stock unit under a Stock Unit Award
is equal to the Fair Market Value of a Share on the applicable date or time
period of determination, as specified by the Committee. A Stock Unit Award shall
be subject to such restrictions and conditions as the Committee shall determine.
A Stock Unit Award may be granted together with a dividend equivalent right with
respect to the Shares subject to the Award, which may be accumulated and may be
deemed reinvested in additional stock units, as determined by the Committee in
its discretion.

     

    8.2  Vesting of Stock Unit
Awards.  On the Date of Grant, the Committee shall in its discretion
determine any vesting requirements with respect to a Stock Unit Award, which
shall be set forth in the Award Agreement, provided that the Committee may
accelerate the vesting of a Stock Unit Award at any time. Vesting requirements
may be based on the continued employment of the Participant with the Company or
its Subsidiaries for a specified time period (or periods) or on the attainment
of specified performance goals established by the Committee in its discretion. A
Stock Unit Award may also be granted on a fully vested basis, with a deferred
payment date.

     

    8.3  Payment of Stock Unit
Awards.  A Stock Unit Award shall become payable to a Participant at
the time or times determined by the Committee and set forth in the Award
Agreement, which may be upon or following the vesting of the Award. Payment of a
Stock Unit Award may be made, at the discretion of the Committee, in cash or in
Shares, or in a combination thereof, subject to applicable tax withholding
requirements. Any cash payment of a Stock Unit Award shall be made based upon
the Fair Market Value of the Common Stock, determined on such date or over such
time period as determined by the Committee.

     

    8.4  No Rights as
Shareholder.  The Participant shall not have any rights as a
shareholder with respect to the shares subject to a Stock Unit Award until such
time as Shares are delivered to the Participant pursuant to the terms of the
Award Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ARTICLE
9

    STOCK
AWARDS

    

    9.1  Grant of Stock
Awards.  A Stock Award may be granted to any Eligible Employee
selected by the Committee. A Stock Award may be granted for past services, in
lieu of bonus or other cash compensation or for any other valid purpose as
determined by the Committee. A Stock Award granted to an Eligible Employee
represents Shares that are issued without restrictions on transfer and other
incidents of ownership and free of forfeiture conditions, except as otherwise
provided in the Plan and the Award Agreement. The Committee may, in connection
with any Stock Award, require the payment of a specified purchase
price.

     

    9.2  Rights as
Shareholder.  Subject to the foregoing provisions of this ARTICLE 9
and the applicable Award Agreement, upon the issuance of the Shares under a
Stock Award the Participant shall have all rights of a shareholder with respect
to the Shares, including the right to vote the shares and receive all dividends
and other distributions paid or made with respect thereto.

     

    ARTICLE
10

    EXTRAORDINARY
EVENTS

    

    10.1  In the event of the
dissolution or liquidation of the Company or any merger, other than a merger for
the purpose of the redomestication of the Company not involving a change in
control, consolidation, exchange or other transaction in which the Company is
not the surviving corporation or in which the outstanding Shares of the Company
are converted into cash, other securities or other property, each outstanding
Award shall automatically become fully vested and fully exercisable immediately
prior to such event. Thereafter the holder of any Option shall, upon exercise of
the Option, receive, in lieu of the stock or other securities and property
receivable upon exercise of the Option prior to such transaction, the stock or
other securities or property to which such holder would have been entitled upon
consummation of such transaction if such holder had exercised such Option
immediately prior to such transaction.

     

    10.2  All outstanding Awards
shall become fully vested and immediately exercisable in full if a change in
control of the Company occurs. For purposes of this Agreement, a “change in
control of the Company” shall be deemed to have occurred if:

     

        10.2.1  there occurs an event or
series of events by which any person or group of persons become the “beneficial
owners” as defined in Rule 13d-3 under the Exchange Act of at least 40% of the
Common Stock; or

     

        10.2.2  during any period of one
year after January 1, 2007, individuals who at the beginning of such period
constitute the Board and any new director whose election by the Board or
nomination for election by the Company’s shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof.

     

    ARTICLE
11

    FORFEITURE
EVENTS

    

    11.1  General. In addition to
the termination provisions applicable to Stock Options as provided in Section
5.5.2, the Committee may specify in an Award Agreement at the time of the Award
that the Participant’s rights, payments and benefits with respect to an Award
shall be 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    subject
to termination, reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but
shall not be limited to, termination of employment for cause, violation of
material Company policies, breach of noncompetition, confidentiality or other
restrictive covenants that may apply to the Participant, or other conduct by the
Participant that is detrimental to the business or reputation of the
Company.

     

    11.2  Termination for Cause.
Unless otherwise provided by the Committee and set forth in an Award Agreement,
if a Participant’s employment with the Company or any Subsidiary of the Company
shall be terminated for cause, the Company may, in its sole discretion,
immediately terminate such Participant’s right to any further payments, vesting
or exercisability with respect to any Award in its entirety. In the event a
Participant is party to an employment (or similar) agreement with the Company or
any Subsidiary of the Company that defines the term “cause,” such definition
shall apply for purposes of the Plan. The Company shall have the power to
determine whether the Participant has been terminated for cause and the date
upon which such termination for cause occurs. Any such determination shall be
final, conclusive and binding upon the Participant. In addition, if the Company
shall reasonably determine that a Participant has committed or may have
committed any act which could constitute the basis for a termination of such
Participant’s employment for cause, the Company may suspend the Participant’s
rights to exercise any options, receive any payment or vest in any right with
respect to any Award pending a determination by the Company of whether an act
has been committed which could constitute the basis for a termination for
“cause” as provided in this Section 11.2.

     

    ARTICLE
12

    TERMINATION
OR AMENDMENT OF THIS PLAN

    

    12.1  The Board may at any time
amend, suspend, or terminate the Plan; provided, however, that no amendments by
the Board shall, without further approval of the shareholders of the
Company:

     

        12.1.1  Change the definition of
Eligible Employees;

     

        12.1.2  Except as provided in
ARTICLE 4 hereof, increase the number of Shares which may be subject to Awards
granted under the Plan; or increase the maximum number of Shares with respect to
which Awards may be granted to any Participant during any fiscal
year;

     

        12.1.3  Cause the Plan or any
Award granted under the Plan that would otherwise meet the conditions for
exclusion of application of the $1 million deduction limitation imposed by
Section 162(m) of the Code to fail to meet such conditions;

     

        12.1.4  Cause any Option granted
as an Incentive Stock Option to fail to qualify as an “Incentive Stock Option”
as defined by Section 422 of the Code; or

     

        12.1.5  Where, as determined by
the Board, the approval by the shareholders may be necessary or advisable for
purposes of compliance with Section 162(m) or Section 422 of the Code, the
listing requirements of the Nasdaq Stock Market or other exchange or market or
for any other purpose, amendments to the Plan shall be approved by the
shareholders.

     

    12.2  No amendment or
termination of the Plan shall impair any Award granted under the Plan without
the consent of the holder thereof.

     

    12.3  This Plan shall continue
in effect until the expiration of all Awards granted under the Plan unless
terminated earlier in accordance with this ARTICLE 12; provided, however, that
it shall otherwise terminate
and no options shall be granted after ten (10) years from the date on which this
Plan became effective.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
13

    GENERAL
PROVISIONS

    

    13.1  Shareholder Approval.
This Plan shall become effective following its adoption by the Board and its
approval by the Company’s shareholders on the date of the 2007 Annual Meeting of
Shareholders.

     

    13.2  Award Agreements. An
Award under the Plan shall be evidenced by an Award Agreement in a written or
electronic form approved by the Committee setting forth the number of Shares,
units or rights subject to the Award, the exercise price, base price, or
purchase price of the Award, the time or times at which an Award will become
vested, exercisable or payable and the term of the Award. The Award Agreement
may also set forth the effect on an Award of termination of employment under
certain circumstances. The Award Agreement shall be subject to and incorporate,
by reference or otherwise, all of the applicable terms and conditions of the
Plan, and may also set forth other terms and conditions applicable to the Award
as determined by the Committee consistent with the limitations of the Plan.
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. The grant of an Award under the Plan shall not confer any rights
upon the Participant holding such Award other than such terms, and subject to
such conditions, as are specified in the Plan as being applicable to such type
of Award (or to all Awards) or as are expressly set forth in the Award
Agreement. The Committee need not require the execution of an Award Agreement by
a Participant, in which case, acceptance of the Award by the Participant shall
constitute agreement by the Participant to the terms, conditions, restrictions
and limitations set forth in the Plan and the Award Agreement as well as the
administrative guidelines of the Company in effect from time to
time.

     

    13.3  Deferrals. The Committee
may permit recipients of Awards to defer the distribution of all or part of any
Award in accordance with such terms and conditions as the Committee shall
establish.

     

    13.4  Transfer; Assignment.
Except as otherwise provided in Sections 5.6, 5.7.3, 5.7.4 and 5.7.5 hereof
solely with respect to Options and except as otherwise provided below, Awards
under the Plan shall not be Transferable by the Participant or exercisable by
any person other than the Participant, and Awards under the Plan shall not be
subject in any manner to assignment, alienation, pledge, encumbrance or
charge:

     

        13.4.1  During the lifetime of a
Participant, an Award is not transferable voluntarily or by operation of law and
may be exercised only by such individual;

     

        13.4.2  Upon the death of a
Participant, an Award may be transferred to the beneficiaries or heirs of the
Participant will or by will or the laws of descent and
distribution;

     

        13.4.3  An Award may be
transferred pursuant to a qualified domestic relations order as defined by the
Code or Title I of ERISA.

     

    Notwithstanding
the above, the Committee may, with respect to particular Awards, establish or
modify the terms of the Award to allow the Award to be transferred at the
request of a Participant to trusts established by a Participant or as to which a
Participant is a grantor or to lineal descendants of a Participant or otherwise
for personal and tax planning purposes of a Participant. If the Committee allows
such transfer, such Awards shall not be exercisable for a period of six months
following the action of the Committee

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    13.5  Securities Laws. No
Shares will be issued or transferred pursuant to an Award unless and until all
then applicable requirements imposed by Federal and state securities and other
laws, rules and regulations and by any regulatory agencies having jurisdiction,
and by any exchanges upon which the Shares may be listed, have been fully met.
As a condition precedent to the issuance of Shares pursuant to the grant or
exercise of an Award, the Company may require the Participant to take any
reasonable action to meet such requirements. The Committee may impose such
conditions on any Shares issuable under the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities Act of 1933,
under the requirements of any exchange upon which such shares of the same class
are then listed, and under any blue sky or other securities laws applicable to
such shares. The Committee may also require the Participant to represent and
warrant at the time of issuance or transfer that the Shares are being acquired
only for investment purposes and without any current intention to sell or
distribute such shares.

     

    13.6  No Right to Continued
Employment. Neither the establishment of the Plan nor the granting of any Award
hereunder shall confer upon any Eligible Employee any right to continue in the
employ of the Company or any Subsidiary of the Company, or interfere in any way
with the right of the Company or any Subsidiary of the Company to terminate such
employment at any time.

     

    13.7  No Rights as Shareholder.
Except as otherwise provided in Section 7.4, Participant shall have no rights as
a holder of Shares with respect to any unissued securities covered by an Award
until the date the Participant becomes the holder of record of such
securities.

     

    13.8  Other Plans. The value
of, or income arising from, any Awards issued under this Plan shall not be
treated as compensation for purposes of any pension, profit sharing, life
insurance, disability or other retirement or welfare benefit plan now maintained
or hereafter adopted by the Company or any Subsidiary of the Company, unless
such plan specifically provides to the contrary.

     

    13.9  Unfunded Plan. The
adoption of the Plan and any reservation of Shares or cash amounts by the
Company to discharge its obligations hereunder shall not be deemed to create a
trust or other funded arrangement. Except upon the issuance of Common Stock
pursuant to an Award, any rights of a Participant under the Plan shall be those
of a general unsecured creditor of the Company, and neither a Participant nor
the Participant’s permitted transferees or estate shall have any other interest
in any assets of the Company by virtue of the Plan. Notwithstanding the
foregoing, the Company shall have the right to implement or set aside funds in a
grantor trust, subject to the claims of the Company’s creditors or otherwise, to
discharge its obligations under the Plan.

     

    13.10  Withholding of Taxes. The
Participant shall be responsible for payment of any taxes or similar charges
required by law to be withheld from an Award or an amount paid in satisfaction
of an Award, which shall be paid by the Participant on or prior to the payment
or other event that results in taxable income in respect of an Award. The Award
Agreement may specify the manner in which the withholding obligation shall be
satisfied with respect to the particular type of Award.

     

    13.11  Compliance with Section
409A of the Code. Except to the extent specifically provided otherwise by the
Committee, Awards under the Plan are intended to satisfy the requirements of
Section 409A of the Code (and the Treasury Department guidance and regulations
issued thereunder) so as to avoid the imposition of any additional taxes or
penalties under Section 409A of the Code. If the Committee determines that an
Award, Award Agreement, payment, distribution, deferral election, transaction or
any other action or arrangement contemplated by the provisions of the Plan
would, if undertaken, cause a Participant to become subject to any additional
taxes or other penalties under Section 409A of the Code, then unless the
Committee specifically provides otherwise, such Award, Award Agreement, payment,
distribution, deferral election, transaction or other action or arrangement
shall not be given effect to the extent it causes such result and the related
provisions of the Plan and/or Award Agreement
will be deemed modified, or, if necessary, suspended in order to comply with the
requirements of Section 409A of the Code to the extent determined appropriate by
the Committee, in each case without the consent of or notice to the
Participant.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    13.12  Severability. If any
provision of the Plan or any Award Agreement shall be determined to be illegal
or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

     

    13.13  Liability. No employee of
the Company and no member of the Committee or the Board shall be liable for any
action or determination taken or made in good faith with respect to the Plan or
any Award granted hereunder and, to the fullest extent permitted by law, all
employees and members of the Committee or the Board shall be indemnified by the
Company for any liability and expenses which may occur through any claim or
cause of action arising under or in connection with this Plan or any Awards
granted under this Plan.

     

    13.14  Governing Law. This Plan
and actions taken in connection with it shall be governed by the laws of
Delaware, without regard to the principles of conflict of laws.exv10w1

Exhibit 10.1

SKILLED HEALTHCARE GROUP, INC.

2007 INCENTIVE AWARD PLAN

RESTRICTED STOCK AWARD GRANT NOTICE

     Skilled Healthcare Group, Inc., a Delaware corporation (the “Company”), pursuant to its 2007
Incentive Award Plan (the “Plan”), hereby grants to the holder listed below (“Holder”) the number
of shares of the Company’s Class A common stock, par value $0.001 per share (“Stock”), set forth
below (the “Shares”). This Restricted Stock award is subject to all of the terms and conditions
set forth herein and in the Restricted Stock Award Agreement attached hereto as Exhibit A
(the “Restricted Stock Agreement”) and the Plan, each of which are incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Restricted Stock Award Grant Notice (the “Grant Notice”).

	 	 	 	 	 
	Holder:

	 	 
	 	 
	 	 	 	 	 
	 
	 	 	 	 
	Grant Date:
	 	 	 	 
	 	 	 	 	 
	Total Number of
	 	 	 	 
	Shares of Restricted Stock:
	 	 	 	 
	 	 	 	 	 

Vesting Schedule:

As of the Grant Date, 100% of the Shares will be subject to the
Forfeiture Restriction (as defined in the Restricted Stock
Agreement). Subject to the terms and conditions of the Plan,
this Grant Notice and the Restricted Stock Agreement, the
Forfeiture Restriction shall lapse as to the Shares as follows:

1. Installments. The Restricted Stock Award shall be comprised
of the four Installments, which shall include an Installment for
each Fiscal Year of the Performance Period. Twenty-five percent
(25%) of the Shares shall be allocated to each Installment.

2. Vesting of Installments.

     (a) An Installment shall be eligible for vesting upon the
completion of the Fiscal Year of such Installment and each
Fiscal Year thereafter.

     (b) Subject to Section 3, as of the Vesting Date for each
Fiscal Year of the Performance Period, the Forfeiture
Restriction shall lapse with respect to each Installment
then eligible for vesting as to the number of Shares
(rounded to the nearest whole share) equal to: (i) the
Vesting Percentage for such Fiscal Year, multiplied by the
number of Shares subject to such Installment, less (ii) the
total number of Shares subject to such Installment for
which the Forfeiture Restriction previously lapsed. Such
lapse shall be subject to any certification required in
order for the Shares to be qualified performance-based
compensation under Section 162(m) of the Code (or any
successor provision thereto), or constitute tax deductible
compensation.

     (c) In no event shall the Forfeiture Restriction lapse with
respect to any Installment after the Vesting Date for the
Fiscal Year ending on December 31, 2012 and any Shares
remaining subject to the Forfeiture Restriction shall be
immediately forfeited after such Vesting Date.

3. Termination of Service.

     (a) Except as provided in subsection (b) or (c), in no
event shall the Forfeiture Restriction lapse as to any
additional Shares following Holder’s Termination of
Service.

     (b) In the event of the Holder’s Termination of Service by
reason of death prior to the Vesting Date for the Fiscal
Year ending on December 31, 2012, the Forfeiture
Restriction shall lapse with

 

 

respect to all of the Shares
then subject to the Forfeiture Restriction.

     (c) In the event of the Holder’s Termination of Service by
reason of total and permanent disability prior to the
Vesting Date for the Fiscal Year ending on December 31,
2012, the Installments eligible for vesting on the Vesting
Date next following such Termination of Service shall be
subject to Section 2(b) on such Vesting Date and any Shares
remaining subject to the Forfeiture Restriction shall be
immediately forfeited after such Vesting Date.

4. Definitions.

     (a) “Compound Annual Growth Rate” for any Fiscal Year shall
mean the compound annual growth rate (if any), expressed as
a percentage (and rounded to the nearest one hundredth of
one percent), in the EBITDA for such Fiscal Year, when
measured against the EBITDA for the Fiscal Year ending on
December 31, 2008.

     (b) “EBITDA” for any Fiscal Year shall mean the Company’s
net earnings before interest, taxes, depreciation or
amortization for such Fiscal Year.

     (c) “Fiscal Year” shall mean the Company’s fiscal year.

     (d) “Performance Period” shall mean the period comprised of
the four Fiscal Years ending on December 31, 2009, 2010,
2011 and 2012.

     (e) “Vesting Date” for any Fiscal Year shall mean the
sixtieth (60th) day following the last day of
such Fiscal Year.

     (f) “Vesting Percentage” for any Fiscal Year shall mean the
percentage (rounded to the nearest one hundredth of one
percent and not exceeding 100%) equal to (i) the Compound
Annual Growth Rate for such Fiscal Year, minus 2.50%,
divided by (ii) 5.00%.

Except as otherwise expressly provided herein, all accounting
terms not otherwise defined herein shall have the meanings
assigned to them in conformity with generally accepted accounting
principles.

          By his or her signature below, Holder agrees to be bound by the terms and conditions of the
Plan, the Restricted Stock Agreement and this Grant Notice. Holder has reviewed the Restricted
Stock Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Restricted Stock Agreement and the Plan. Holder hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Administrator upon any
questions arising under or relating to the Plan, this Grant Notice or the Restricted Stock
Agreement. If Holder is married, his or her spouse has signed the Consent of Spouse attached to
this Grant Notice as Exhibit B.

	 	 	 	 	 	 	 
	SKILLED HEALTHCARE GROUP, INC.:	 	HOLDER:	 	 
	 
	 	 	 	 	 	 
	By:

	 	 
	 	By:
	 	 
	 	 	 	 	 	 	 
	Print Name:

	 	 	 	Print Name:	 	 
	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	Address:

	 	27442 Portola Parkway, Suite 200
	 	Address:	 	 
	 	 	 	 	 	 	 
	 

	 	Foothill Ranch, CA 92610	 	 	 	 
	 	 	 	 	 	 	 

			
	Attachments:	 	Restricted Stock Award Agreement (Exhibit A)

Consent of Spouse (Exhibit B)

Stock Assignment (Exhibit C)

Joint Escrow Instructions (Exhibit D)

Form of Internal Revenue Code Section 83(b) Election and Instructions (Exhibit E)

     - Election under Internal Revenue Code Section 83(b) (Attachment 1 to Exhibit E)

-2-

 

			
	Attachments:	 	     - Sample Cover Letter to Internal Revenue Service (Attachment 2 to Exhibit E)

2007 Incentive Award Plan (Exhibit F)

2007 Incentive Award Plan Prospectus (Exhibit G)

-3-

 

EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AWARD AGREEMENT

     Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this
Restricted Stock Award Agreement (this “Agreement”) is attached, Skilled Healthcare Group, Inc., a
Delaware corporation (the “Company”), has granted to Holder the number of shares of the Company’s
Class A common stock, par value $0.001 per share (“Stock”), specified in the Grant Notice (the
“Shares”), upon the terms and conditions set forth in the Skilled Healthcare Group, Inc. 2007
Incentive Award Plan (the “Plan”), the Grant Notice and this Agreement.

ARTICLE I

GENERAL

     1.1 Defined Terms. Capitalized terms not specifically defined herein shall have the
meanings specified in the Grant Notice or, if not defined therein, the Plan.

     1.2 Incorporation of Terms of Plan. The Shares are subject to the terms and
conditions of the Plan, which are incorporated herein by reference.

ARTICLE II

GRANT OF RESTRICTED STOCK

     2.1 Grant of Restricted Stock. In consideration of Holder’s agreement to remain in
the service or employ of the Company or a Subsidiary and for other good and valuable consideration
which the Committee has determined exceeds the aggregate par value of the Shares, effective as of
the “Grant Date” set forth in the Grant Notice (the “Grant Date”), the Company hereby agrees to
issue to Holder the Shares, upon the terms and conditions set forth in the Plan, the Grant Notice
and this Agreement.

     2.2 Issuance of Shares. Subject to Section 2.3, the issuance of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution of
the Grant Notice by the parties or on such other date as the Company and Holder shall agree (the
“Issuance Date”). Subject to the provisions of Article IV, the Company shall issue the Shares
(which shall be issued in Holder’s name) on the Issuance Date.

     2.3 Conditions to Issuance of Shares. The Shares, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have then been reacquired
by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any Shares prior to fulfillment of all of the following conditions:

          (a) The admission of such Shares to listing on all stock exchanges on which the Common Stock
is then listed;

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

 

 

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

          (d) The receipt by the Company of full payment for all amounts which, under federal, state,
local or foreign tax law, the Company (or other employer corporation) is required to withhold upon
issuance of such Shares; and

          (e) The lapse of such reasonable period of time following the satisfaction of all other
conditions to issuance as the Administrator may from time to time establish for reasons of
administrative convenience.

     2.4 Rights as Stockholder. Except as otherwise provided herein, upon delivery of the
Shares to the escrow agent pursuant to Article IV, Holder shall have all the rights of a
stockholder with respect to said Shares, subject to the restrictions herein, including the right to
vote the Shares and to receive all dividends or other distributions paid or made with respect to
the Shares; provided, however, that any and all extraordinary cash dividends paid on such Shares
and any and all shares of Stock, capital stock or other securities or property received by or
distributed to Holder with respect to the Shares as a result of any stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification or similar change in the
capital structure of the Company shall also be subject to the Forfeiture Restriction (as defined in
Section 3.1) and the restrictions on transfer in Section 3.4 until such restrictions on the
underlying Shares lapse or are removed pursuant to this Agreement (or, if such Shares are no longer
outstanding, until such time as such Shares would have been released from the Forfeiture
Restriction pursuant to this Agreement). In addition, in the event of any merger, consolidation,
share exchange or reorganization affecting the Shares, then any new, substituted or additional
securities or other property (including money paid other than as a regular cash dividend) that is
by reason of any such transaction received with respect to, in exchange for or in substitution of
the Shares shall also be subject to the Forfeiture Restriction and the restrictions on transfer in
Section 3.4 until such restrictions on the underlying Shares lapse or are removed pursuant to this
Agreement (or, if such Shares are no longer outstanding, until such time as such Shares would have
been released from the Forfeiture Restriction pursuant to this Agreement). Any such assets or
other securities received by or distributed to Holder with respect to, in exchange for or in
substitution of any Unreleased Shares (as defined in Section 3.3) shall be immediately delivered to
the Company to be held in escrow pursuant to Article IV.

ARTICLE III

RESTRICTIONS ON SHARES

     3.1 Forfeiture Restriction. Subject to the provisions of Section 3.2, upon Holder’s
Termination of Service, for any or no reason, all of the Unreleased Shares (as defined in Section
3.3) shall thereupon be forfeited immediately and without any further action by the Company (the
“Forfeiture Restriction”). Upon the occurrence of such a forfeiture, the Company shall become the
legal and beneficial owner of the Shares being forfeited and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to its own name the
number of Shares being forfeited by Holder. In the event any of the Unreleased Shares are
forfeited under this Section 3.1, any cash, cash equivalents, assets or securities received by or
distributed to Holder with respect to, in exchange for or in substitution of such Shares and held
by the escrow agent pursuant to Section 4.1 and the Joint Escrow Instructions shall be promptly
transferred by the escrow agent to the Company.

     3.2 Release of Shares from Forfeiture Restriction; Acceleration upon Change in
Control. The Shares shall be released from the Forfeiture Restriction as indicated in the
Grant Notice or, if earlier, upon the occurrence of a Change in Control; provided, however, that,
except as otherwise provided in the

A-2

 

Grant Notice, in no event shall the Forfeiture Restriction lapse as to any additional Shares
following Holder’s Termination of Service. Any of the Shares released from the Forfeiture
Restriction shall thereupon be released from the restrictions on transfer under Section 3.4. In
the event any of the Shares are released from the Forfeiture Restriction, any cash, cash
equivalents, assets or securities received by or distributed to Holder with respect to, in exchange
for or in substitution of such Shares and held by the escrow agent pursuant to Section 4.1 and the
Joint Escrow Instructions shall be promptly transferred by the escrow agent to Holder.

     3.3 Unreleased Shares. Any of the Shares which, from time to time, have not yet been
released from the Forfeiture Restriction are referred to herein as
“Unreleased Shares.”

     3.4 Restrictions on Transfer. Unless otherwise permitted by the Administrator
pursuant to the Plan, no Unreleased Shares or any dividends or other distributions thereon or any
interest or right therein or part thereof, shall be liable for the debts, contracts or engagements
of Holder or Holder’s successors in interest or shall be subject to sale or other disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such
sale or other 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 sale or other disposition thereof shall be null and void and of no effect.

ARTICLE IV

ESCROW OF SHARES

     4.1 Escrow of Shares. To insure the availability the Unreleased Shares for delivery
in the event of forfeiture of such Shares by Holder pursuant to Section 3.1, Holder hereby appoints
the Secretary of the Company, or any other person designated by the Administrator as escrow agent,
as Holder’s attorney-in-fact to assign and transfer unto the Company, such Unreleased Shares, if
any, forfeited by Holder pursuant to Section 3.1 and any cash, cash equivalents, assets or
securities received by or distributed to Holder with respect to, in exchange for or in substitution
of such Unreleased Shares, and shall, upon execution of this Agreement, deliver and deposit with
the Secretary of the Company, or such other person designated by the Administrator, any share
certificates representing the Unreleased Shares, together with the Stock Assignment duly endorsed
in blank, attached as Exhibit C to the Grant Notice. The Unreleased Shares and stock
assignment shall be held by the Secretary of the Company, or such other person designated by the
Administrator, in escrow, pursuant to the Joint Escrow Instructions of the Company and Holder
attached as Exhibit D to the Grant Notice, until the Unreleased Shares are forfeited by
Holder as provided in Section 3.1, until such Unreleased Shares are released from the Forfeiture
Restriction, or until such time as this Agreement no longer is in effect. Upon release of the
Unreleased Shares from the Forfeiture Restriction, the escrow agent shall deliver to Holder the
certificate or certificates representing such Shares in the escrow agent’s possession belonging to
Holder in accordance with the terms of the Joint Escrow Instructions attached as Exhibit D
to the Grant Notice, and the escrow agent shall be discharged of all further obligations hereunder;
provided, however, that the escrow agent shall nevertheless retain such certificate or certificates
as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.
If the Shares are held in book entry form, then such entry will reflect that the Shares are subject
to the restrictions of this Agreement. If any cash, cash equivalents, assets or securities are
paid, received by or distributed to Holder with respect to, in exchange for or in substitution of
the Unreleased Shares and held by the escrow agent pursuant to Section 4.1 and the Joint Escrow
Instructions, such cash, cash equivalents, assets or securities shall also be subject to the
restrictions set forth in this Agreement and held in escrow pending release of the Unreleased
Shares with respect to which such cash, cash equivalents, assets or securities were paid, received
or distributed from the Forfeiture Restriction.

A-3

 

     4.2 Transfer of Forfeited Shares. Holder hereby authorizes and directs the Secretary
of the Company, or such other person designated by the Administrator, to transfer the Unreleased
Shares which have been forfeited by Holder to the Company, and any cash, cash equivalents, assets
or securities received by or distributed to Holder with respect to, in exchange for or in
substitution of such Unreleased Shares.

     4.3 No Liability for Actions in Connection with Escrow. The Company, or its designee,
shall not be liable for any act it may do or omit to do with respect to holding the Shares in
escrow while acting in good faith and in the exercise of its judgment.

ARTICLE V

OTHER PROVISIONS

     5.1 Administration. The Administrator shall have the power to (a) interpret the Plan
and this Agreement, (b) adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such rules and (c) amend
this Agreement, subject to Section 5.8. All actions taken and all interpretations and
determinations made by the Administrator in good faith shall be binding, conclusive and final upon
Holder, the Company and all other interested persons. No member of the Administrator shall be
personally liable for any action, determination or interpretation made in good faith with respect
to the Plan, this Agreement or the Shares. In its discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Administrator 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 discretion of the Administrator

     5.2 Restrictive Legends and Stop-Transfer Orders.

          (a) Any share certificate(s) evidencing the Shares issued hereunder shall be endorsed with the
following legend and any other legend(s) that may be required by any applicable federal, state or
foreign securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF THE
COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED
STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY.

          (b) Holder agrees that, in order to ensure compliance with the restrictions referred to
herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if
any, and that, if the Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.

          (c) The Company shall not be required: (i) to transfer on its books any Shares that have been
sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or
other transferee to whom such Shares shall have been so transferred.

     5.3 Adjustments. The Administrator may adjust the Unreleased Shares in accordance
with the provisions of Section 11.3 of the Plan.

A-4

 

     5.4 Notices. Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of the Secretary of the Company, and any notice to be
given to Holder shall be addressed to Holder at the address given beneath Holder’s signature on the
Grant Notice or at the last known address for Holder contained in the Company’s records. By a
notice given pursuant to this Section 5.4, either party may hereafter designate a different address
for notices to be given to that party. Any notice shall be deemed duly given when sent via email
or enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service.

     5.5 Titles. Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

     5.6 Governing Law; Severability. This Agreement shall be administered, interpreted
and enforced under the laws of the State of Delaware, without regard to the conflicts of laws
principles thereof. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     5.7 Conformity to Securities Laws. Holder acknowledges that the Plan is intended to
conform to the extent necessary with all applicable federal, state and foreign securities laws
(including the Securities Act and the Exchange Act) and any and all regulations and rules
promulgated thereunder by the Securities and Exchange Commission or any other governmental
regulatory body. Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the Shares are to be issued, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be
deemed amended to the extent necessary to conform to such laws, rules and regulations.

     5.8 Amendments. This Agreement may not be modified, amended or terminated, except by
an instrument in writing, signed by a duly authorized representative of the Company and, to the
extent any such modification, amendment or termination may adversely affect Holder’s rights under
this Agreement, by Holder, except as otherwise provided under the terms of the Plan.

     5.9 Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon Holder and Holder’s heirs, executors, administrators,
successors and assigns.

     5.10 No Employment Rights. Nothing in the Plan or this Agreement shall confer upon
Holder any right to continue in the employ or service of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights
are hereby expressly reserved, to discharge or terminate the services of Holder at any time for any
reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a
written agreement between the Company or a Subsidiary and Holder.

     5.11 Taxes. Holder has reviewed with Holder’s own tax advisors the federal, state,
local and foreign tax consequences of this investment and the transactions contemplated by the
Grant Notice and this Agreement. Holder is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Holder understands that Holder
(and not the Company) shall be responsible for Holder’s own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement. Holder understands
that Holder will recognize ordinary income for federal income tax purposes under Section 83 of the
Code as the restrictions applicable to the Unreleased Shares lapse. In this context, “restriction”
includes the Forfeiture Restriction. Holder understands that Holder may elect to be taxed for
federal income tax purposes at the time the Shares are issued rather than

A-5

 

as and when the Forfeiture Restriction lapses by filing an election under Section 83(b) of the
Code with the Internal Revenue Service no later than 30 days following the date of purchase. A
form of election under Section 83(b) of the Code is attached to the Grant Notice as Exhibit
E.

     HOLDER ACKNOWLEDGES THAT IT IS HOLDER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO TIMELY
FILE THE ELECTION UNDER SECTION 83(B), EVEN IF HOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HOLDER’S BEHALF.

     5.12 Tax Withholding.

          (a) The Company shall be entitled to require payment of any sums required by federal, state or
local tax law to be withheld with respect to the transfer of the Shares or the lapse of the
Forfeiture Restriction with respect to the Shares, or any other taxable event related thereto. The
Company may permit Holder to make such payment in one or more of the forms specified below:

               (i) by cash or check made payable to the Company;

               (ii) by the deduction of such amount from other compensation payable to Holder;

               (iii) by tendering Shares which are not subject to the Forfeiture Restriction and which
have a then current Fair Market Value not greater than the amount necessary to satisfy the
Company’s withholding obligation based on the minimum statutory withholding rates for
federal, state and local income tax and payroll tax purposes; or

               (iv) in any combination of the foregoing.

          (b) In the event Holder fails to provide timely payment of all sums required by the Company
pursuant to Section 5.12(a), the Company shall have the right and option, but not obligation, to
treat such failure as an election by Holder to provide all or any portion of such required payment
by means of tendering Shares in accordance with Section 5.12(a)(iii).

     5.13 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan or this Agreement, if Holder is subject to Section 16 of the Exchange Act,
the Plan, the Shares and this Agreement 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, this Agreement shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule.

     5.14 Entire Agreement. The Plan, the Grant Notice (including all Exhibits thereto)
and this Agreement constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Holder with respect to the subject matter
hereof, except to the extent expressly provided otherwise in a written agreement between the
Company or a Subsidiary and Holder.

A-6

 

EXHIBIT B

TO RESTRICTED STOCK AWARD GRANT NOTICE

CONSENT OF SPOUSE

     I,                                                             , spouse of     
                                                        , have read and approve the foregoing Restricted Stock Award Agreement (the
“Agreement”). In consideration of issuing to my spouse the shares of common stock of Skilled
Healthcare Group, Inc., a Delaware corporation (the “Company”), set forth in the Restricted Stock
Award Grant Notice and Restricted Stock Award Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound
by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares
of the common stock of the Company issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our residence as of the date of
the signing of the foregoing Agreement.

	 	 	 	 	 	 	 	 	 
	Dated:

	 	 
	, 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Signature of Spouse

 

 

EXHIBIT C

TO RESTRICTED STOCK AWARD GRANT NOTICE

STOCK ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned,                          , hereby sells, assigns and transfers unto SKILLED
HEALTHCARE GROUP, INC., a Delaware corporation (the “Company”),                           shares of the
common stock of the Company, standing in its name on the books of said corporation represented by
Certificate No.            herewith and does hereby irrevocably constitute and appoint
                                              to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

     This Stock Assignment may be used only in accordance with the Restricted Stock Award Grant
Notice between the Company and the undersigned dated                         , 20           and the Restricted Stock
Award Agreement attached thereto.

	 	 	 	 	 	 	 	 	 
	Dated:

	 	 
	, 	 
	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Signature of Holder

     INSTRUCTIONS: Please do not fill in the blanks other than the signature line. The purpose of
this assignment is to enable the Company to enforce the Forfeiture Restriction as set forth in the
Agreement, without requiring additional signatures on the part of Holder.

 

 

EXHIBIT D

TO RESTRICTED STOCK AWARD GRANT NOTICE

JOINT ESCROW INSTRUCTIONS

                                        ,           

Secretary

Skilled Healthcare Group, Inc.

27442 Portola Parkway, Suite 200

Foothill Ranch, CA 92610

Ladies and Gentlemen:

     As escrow agent (the “Escrow Agent”) for both Skilled Healthcare Group, Inc., a Delaware
corporation (“Skilled Healthcare”), and the undersigned recipient of stock of Skilled Healthcare
(the “Holder”), you are hereby authorized and directed to hold in escrow the documents delivered to
you pursuant to the terms of that certain Restricted Stock Award Agreement (the “Agreement”)
between Skilled Healthcare and the undersigned (the “Escrow”), including the stock certificate and
the Stock Assignment, in accordance with the following instructions:

     1. In the event of (a) forfeiture by Holder of any of the shares owned by Holder pursuant to
Section 3.1 of the Agreement (the “Forfeiture Restriction”), or (b) an election (or deemed
election) by Holder to tender shares owned by Holder which are not subject to the Forfeiture
Restriction to satisfy the Company’s tax withholding obligation pursuant to Section 5.12 of the
Agreement, Skilled Healthcare and/or any assignee of Skilled Healthcare (referred to collectively
for convenience herein as the “Company”) shall give to Holder and you a written notice specifying
the number of shares of stock forfeited or tendered and the date of forfeiture or tender. Holder
and the Company hereby irrevocably authorize and direct you to effect the forfeiture or tender
contemplated by such notice in accordance with the terms of said notice.

     2. As of the date of forfeiture or tender indicated in such notice, you are directed (a) to
date the stock assignments necessary for the forfeiture/tender and transfer in question, (b) to
fill in the number of shares being forfeited/tendered and transferred, and (c) to deliver the same,
together with the certificate evidencing the shares of stock to be forfeited/tendered and
transferred, to the Company or its assignee.

     3. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing
shares of stock to be held by you hereunder and any additions and substitutions to said shares as
described in the Agreement. Holder does hereby irrevocably constitute and appoint you as Holder’s
attorney-in-fact and agent for the term of this escrow to execute with respect to such securities
all documents necessary or appropriate to make such securities negotiable and to complete any
transaction herein contemplated, including, but not limited to, the filing with any applicable
state blue sky authority of any required applications for consent to, or notice of transfer of, the
securities. Subject to the provisions of this paragraph 3, Holder shall exercise all rights and
privileges of a stockholder of the Company while the stock is held by you.

     4. Upon written request of Holder, but no more than once per calendar year, unless the
Forfeiture Restriction has been enforced, you will deliver to Holder a certificate or certificates
representing so many shares of stock as are not then subject to the Forfeiture Restriction. Within
120 days after any voluntary or involuntary termination of Holder’s services to the Company for any
or no reason, you will deliver to Holder a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not forfeited pursuant to the
Forfeiture Restriction.

 

 

     5. If at the time of termination of this escrow you should have in your possession any cash,
cash equivalents, documents, securities or other property belonging to Holder, you shall deliver
all of the same to Holder and shall be discharged of all further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Holder while acting in good faith, and any act
done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you shall not be liable
to any of the parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     10. You shall not be liable for the expiration of any rights under any applicable federal,
state, local or foreign statute of limitations or similar statute or regulation with respect to
these Joint Escrow Instructions or any documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel and may pay such counsel reasonable compensation therefor.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
an officer or agent of the Company or if you shall resign by written notice to each party. In the
event of any such termination, the Company shall appoint a successor Escrow Agent.

     13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.

     15. Any notice or other communication required or permitted hereunder shall be in writing and
shall be delivered personally or sent by facsimile transmission, overnight air courier, or first
class

D-2

 

certified or registered mail, postage prepaid, and addressed to the parties at the addresses
of the parties set forth at the end of these Joint Escrow Instructions or such other address as a
party may designate by five days’ advance written notice to the other parties hereto. All notices
and communications shall be deemed to have been received unless otherwise set forth herein: (i) in
the case of personal delivery, on the date of such delivery; (ii) in the case of facsimile
transmission, on the date on which the sender receives electronic confirmation that such notice was
received by the addressee; (iii) in the case of overnight air courier, on the second business day
following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by
first class certified or registered mail, postage prepaid, return receipt requested, on the fifth
business day following such mailing.

     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns.

     18. These Joint Escrow Instructions shall be governed by, and interpreted and enforced in
accordance with, the laws of the State of Delaware, without regard to the conflicts of laws
principles thereof.

(Signature page follows.)

D-3

 

     IN WITNESS WHEREOF, the parties have executed these Joint Escrow Instructions as of the date
first written above.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Very truly yours,
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	SKILLED HEALTHCARE GROUP, INC.:
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Name:
	 	 	 	 	 	 	 	 	Title:
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Address:	 	27442 Portola Parkway, Suite 200
	 

	 	 	 	 	 	 	 	 	 	Foothill Ranch, CA 92610
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	HOLDER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Address	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ESCROW AGENT:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	Secretary	 	 	 	 	 	 
	 	 	Skilled Healthcare Group, Inc.	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Address	 	27442 Portola Parkway, Suite 200	 	 	 	 	 	 
	 

	 	 	 	Foothill Ranch, CA 92610	 	 	 	 	 	 

D-4

 

EXHIBIT E

TO RESTRICTED STOCK AWARD GRANT NOTICE

FORM OF 83(B) ELECTION AND INSTRUCTIONS

     These instructions are provided to assist you if you choose to make an election under Section
83(b) of the Internal Revenue Code, as amended, with respect to the shares of common stock, par
value $0.001 per share, of Skilled Healthcare Group, Inc. transferred to you. Please consult with
your personal tax advisor as to whether an election of this nature will be in your best interests
in light of your personal tax situation.

     The executed original of the Section 83(b) election must be filed with the Internal Revenue
Service not later than 30 days after the date the shares were transferred to you. PLEASE NOTE:
There is no remedy for failure to file on time. The steps outlined below should be followed to
ensure the election is mailed and filed correctly and in a timely manner. ALSO, PLEASE NOTE: If
you make the Section 83(b) election, the election is irrevocable.

	1.	 	Complete Section 83(b) election form (attached as Attachment 1) and make four (4)
copies of the signed election form. (Your spouse, if any, should sign the Section 83(b)
election form as well.)
	 
	2.	 	Prepare the cover letter to the Internal Revenue Service (sample letter attached as
Attachment 2).
	 
	3.	 	Send the cover letter with the originally executed Section 83(b) election form and one (1)
copy via certified mail, return receipt requested to the Internal Revenue Service at the
address of the Internal Revenue Service where you file your personal tax returns. We suggest
that you have the package date-stamped at the post office. The post office will provide you
with a white certified receipt that includes a dated postmark. Enclose a self-addressed,
stamped envelope so that the Internal Revenue Service may return a date-stamped copy to you.
However, your postmarked receipt is your proof of having timely filed the Section 83(b)
election if you do not receive confirmation from the Internal Revenue Service.
	 
	4.	 	One (1) copy must be sent to Skilled Healthcare Group, Inc. for its records and one (1) copy
must be attached to your federal income tax return for the applicable calendar year.
	 
	5.	 	Retain the Internal Revenue Service file stamped copy (when returned) for your records.

     Please consult your personal tax advisor for the address of the office of the Internal Revenue
Service to which you should mail your election form.

 

 

ATTACHMENT 1 TO EXHIBIT E

TO RESTRICTED STOCK AWARD GRANT NOTICE

ELECTION UNDER INTERNAL REVENUE CODE SECTION 83(B)

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of
any compensation taxable to taxpayer in connection with taxpayer’s receipt of shares (the “Shares”)
of Class A common stock, par value $0.001 per share, of Skilled Healthcare Group,
Inc., a Delaware corporation (the “Company”).

	1.	 	The name, address and taxpayer identification number of the undersigned taxpayer are:

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	SSN:
	 	 	 	 
	 	 	 	 	 	 	 

          The name, address and taxpayer identification number of the taxpayer’s spouse are (complete
if applicable):

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	SSN:
	 	 	 	 
	 	 	 	 	 	 	 

	2.	 	Description of the property with respect to which the election is being made:

                                              shares of Class A common stock, par value $0.001 per share, of the Company.

	3.	 	The date on which the property was transferred was                          , 2007.
	 
	4.	 	The taxable year to which this election relates is calendar year 2007.
	 
	5.	 	Nature of restrictions to which the property is subject:
	 
	 	 	The Shares may not be transferred and are subject to forfeiture if taxpayer’s
employment or service with the Company and its majority-owned subsidiaries terminates
for any reason (other than death or total and permanent disability). The forfeiture
restriction applicable to the Shares will lapse in whole or in part upon the
achievement of certain performance conditions for the Company’s fiscal years ending on
December 31, 2009, 2010, 2011 and 2012 or, if earlier, upon the occurrence of a
qualifying change in ownership or control of the Company.
	 
	6.	 	The fair market value at the time of transfer (determined without regard to any lapse
restrictions, as defined in Treasury Regulation Section 1.83-3(a)) of the Shares was $                    
per Share.
	 
	7.	 	No amount was paid by the taxpayer for the Shares.
	 
	8.	 	A copy of this statement has been furnished to the Company.

Dated:                           , 20      Taxpayer Signature                               
                                                 

The undersigned spouse of Taxpayer joins in this election. (Complete if applicable).

Dated:                          , 20      Spouse’s Signature                                
                                                 

 

 

ATTACHMENT 2 TO EXHIBIT E

TO RESTRICTED STOCK AWARD GRANT NOTICE

SAMPLE COVER LETTER TO INTERNAL REVENUE SERVICE

[Date]

VIA
CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Internal Revenue Service

[Address where taxpayer files returns]

	 	 	 	 	 
	 

	 	Re:
	 	Election under Section 83(b) of the Internal Revenue Code of 1986

			
	Taxpayer:	 	
 

			
	Taxpayer’s Social Security Number:	 	
 

			
	Taxpayer’s Spouse:	 	
 

			
	Taxpayer’s Spouse’s Social Security Number:	 	
 

Ladies and Gentlemen:

     Enclosed please find an original and one copy of an Election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, being made by the taxpayer referenced above. Please
acknowledge receipt of the enclosed materials by stamping the enclosed copy of the Election and
returning it to me in the self-addressed stamped envelope provided herewith.

	 	 	 	 	 	 	 
	 

	 	 	 	Very truly yours,
	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Enclosures	 	 	 	 
	cc:

	 	Skilled Healthcare Group, Inc.	 	 	 	 

 

 

EXHIBIT F

TO RESTRICTED STOCK AWARD GRANT NOTICE

SKILLED
HEALTHCARE GROUP, INC. 2007 INCENTIVE AWARD PLAN

 

 

EXHIBIT G

TO RESTRICTED STOCK AWARD GRANT NOTICE

SKILLED
HEALTHCARE GROUP, INC. 2007 INCENTIVE AWARD PLAN PROSPECTUS

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