Document:

Exhibit 10.3  

THE ENSIGN GROUP, INC.  

 2007 OMNIBUS INCENTIVE PLAN  

 
 Table of Contents  

	SECTION 1.	 	PURPOSE	 	1
	
SECTION 2.	
 	

DEFINITIONS	
 	

1
	
SECTION 3.	
 	

ADMINISTRATION	
 	

3
	 	(a)	 	Power and Authority of the Committee	 	3
	 	(b)	 	Power and Authority of the Board	 	4
	
SECTION 4.	
 	

SHARES AVAILABLE FOR AWARDS	
 	

4
	 	(a)	 	Shares Available	 	4
	 	(b)	 	Accounting for Awards	 	4
	 	(c)	 	Adjustments	 	5
	
SECTION 5.	
 	

ELIGIBILITY	
 	

5
	
SECTION 6.	
 	

AWARDS	
 	

5
	 	(a)	 	Options	 	5
	 	(b)	 	Stock Appreciation Rights	 	6
	 	(c)	 	Restricted Stock and Restricted Stock Units	 	6
	 	(d)	 	Performance Awards	 	7
	 	(e)	 	Dividend Equivalents	 	7
	 	(f)	 	Other Stock Grants	 	8
	 	(g)	 	Other Stock-Based Awards	 	8
	 	(h)	 	General	 	8
	 	(i)	 	Directors' Automatic Option Grant Program	 	9
	
SECTION 7.	
 	

AMENDMENT AND TERMINATION; ADJUSTMENTS	
 	

11
	 	(a)	 	Amendments to the Plan	 	11
	 	(b)	 	Amendments to Awards	 	11
	 	(c)	 	Correction of Defects, Omissions and Inconsistencies	 	11
	
SECTION 8.	
 	

INCOME TAX WITHHOLDING	
 	

11
	
SECTION 9.	
 	

GENERAL PROVISIONS	
 	

12
	 	(a)	 	No Rights to Awards	 	12
	 	(b)	 	Award Agreements	 	12
	 	(c)	 	Plan Provisions Control	 	12
	 	(d)	 	No Rights of Stockholders	 	12
	 	(e)	 	No Limit on Other Compensation Arrangements	 	12
	 	(f)	 	No Right to Employment	 	12
	 	(g)	 	Governing Law	 	12
	 	(h)	 	Severability	 	12
	 	(i)	 	No Trust or Fund Created	 	13
	 	(j)	 	Other Benefits	 	13
	 	(k)	 	No Fractional Shares	 	13
	 	(l)	 	Headings	 	13
	 	(m)	 	Section 16 Compliance; Section 162(m) Administration	 	13
	 	(n)	 	Conditions Precedent to Issuance of Shares	 	13
	
SECTION 10.	
 	

EFFECTIVE DATE OF THE PLAN	
 	

13
	
SECTION 11.	
 	

TERM OF THE PLAN	
 	

14

i

THE ENSIGN GROUP, INC.

2007 OMNIBUS INCENTIVE PLAN  

Section 1. Purpose  

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

Section 2. Definitions  

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

        (a)   "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is
controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. 

        (b)   "Automatic Option Grant Program" shall mean the Directors' Automatic Option Grant Program described in
Section 6(i) of the Plan. 

        (c)   "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award,
Dividend Equivalent, Other Stock Grant or Other Stock-Based Award granted under the Plan. 

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

        (e)   "Board" shall mean the Board of Directors of the Company. 

        (f)    "Change in Control" shall mean a change in ownership or control of the Company effected through any of the following
transactions: (i) a merger, consolidation or other reorganization unless securities representing more than 50% of the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company's outstanding voting
securities immediately prior to such transaction; (ii) a sale, transfer or other disposition of all or substantially all of the Company's assets; or (iii) the acquisition, directly or
indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the Company's stockholders. 

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

        (h)   "Committee" shall mean a committee of Directors designated by the Board to administer the Plan, which shall initially be
the Company's compensation committee. The Committee shall be comprised of at least two Directors but not less than such number of Directors as shall be required to permit Awards granted under the Plan
to qualify under Rule 16b-3 and Section 162(m) of the Code, and each member of the Committee shall each be an "Outside
Director." 

        (i)    "Company" shall mean The Ensign Group, Inc., a Delaware corporation, and any successor corporation. 

        (j)    "Director" shall mean a member of the Board, including any Non-Employee Director. 

 

        (k)   "Dividend Equivalent" shall mean any right granted under Section 6(e) of the Plan. 

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

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

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

        (o)   "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other
securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing and unless
otherwise determined by the Committee, the Fair Market Value of a Share as of a given date shall be the closing sale price of one Share as reported on the Nasdaq Global Market or such other principal
United States securities market for such Shares on the date as of which Fair Market Value is being determined, if the Shares are then listed on the Nasdaq Global Market or another principal
United States securities market for such Shares. 

        (p)   "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to qualify
as an "incentive stock option" in accordance with the terms of Section 422 of the Code or any successor provision. 

        (q)   "Non-Employee Director" shall mean any Director who is not also an employee of the Company or an Affiliate
within the meaning of Rule 16b-3 (which term "Non-Employee Director" is defined in this paragraph for purposes of the definition of "Committee" only and is not intended
to define such term as used elsewhere in the Plan). 

        (r)   "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not
an Incentive Stock Option. 

        (s)   "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. 

        (t)    "Other Stock Grant" shall mean any right granted under Section 6(f) of the Plan. 

        (u)   "Other Stock-Based Award" shall mean any right granted under Section 6(g) of the Plan. 

        (v)   "Outside Director" shall mean any Director who is an "outside director" within the meaning of Section 162(m) of
the Code. 

        (w)  "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. 

        (x)   "Performance Award" shall mean any right granted under Section 6(d) of the Plan. 

        (y)   "Performance Goal" shall mean one or more of the following performance goals, either individually, alternatively or in
any combination, applied on a corporate, subsidiary or business unit basis: revenue, cash flow, gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and
amortization and net earnings, earnings per share, margins (including one or more of gross, operating and net income margins), returns (including one or more of return on assets, equity, investment,
capital and revenue and total stockholder return), stock price, economic value added, working capital, market share, cost reductions, workforce satisfaction and diversity goals, employee 

2

 

retention,
customer satisfaction, completion of key projects and strategic plan development and implementation. Such goals may reflect absolute entity or business unit performance or a relative
comparison to the performance of a peer group of entities or other external measure of the selected performance criteria. The Committee shall establish the Performance Goals for an Award on or before
the 90th day of the applicable performance period for which Performance Goals are established and in no event after 25% of the applicable performance period has elapsed and in any
event when the achievement of the applicable Performance Goals remains substantially uncertain. The Committee may appropriately adjust any evaluation of performance under such Performance Goals to
exclude the effect of certain events, including any of the following events: asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such
laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; and gains or losses from the disposition of businesses or
assets or from the early extinguishment of debt. 

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

        (aa) "Plan" shall mean The Ensign Group, Inc. 2007 Omnibus Incentive Plan, as amended from time to time, the
provisions of which are set forth herein. 

        (bb) "Qualified Performance Based Award" shall have the meaning set forth in Section 6(d) of the Plan. 

        (cc) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. 

        (dd) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to
receive a Share (or evidencing the right to receive a cash payment equal to the Fair Market Value of a Share if explicitly so provided in the Award Agreement) at some future date. 

        (ee) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation. 

        (ff)  "Section 162(m)" shall mean Section 162(m) of the Code and the applicable Treasury Regulations promulgated
thereunder. 

        (gg) "Securities Act" shall mean the Securities Act of 1933, as amended. 

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

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

        (jj)   "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. 

Section 3. Administration  

        (a)    Power and Authority of the Committee.    The Plan shall be administered by the Committee. Any Awards made to
members of the Committee, however, should also be authorized by a disinterested majority of the Board. Subject to the express provisions of the Plan and to applicable law, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of
Shares to be covered by (or the method by which payments or other rights are to be determined in connection with) each Award; (iv) determine the terms and conditions of any Award or
Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of any Option or waive any restrictions relating to any Award;
(vi) determine whether, to 

3

 

what
extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) interpret and
administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable
for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any
Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Eligible Person and any holder or beneficiary
of any Award. The administration of the Automatic Option Grant Program, however, shall be self-executing in accordance with the terms of that program so that neither the Board nor any
Committee shall exercise any discretionary functions with respect to any Awards made under that program. 

        (b)    Power and Authority of the Board.    Notwithstanding anything to the contrary contained herein, the Board may,
at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, but only to the extent it would not cause a loss of any
benefits under Section 162(m). 

Section 4. Shares Available for Awards  

        (a)    Shares Available.    Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number
of Shares that may be issued under the Plan shall be 1,000,000, plus an automatic annual increase on the first day of each of the Company's fiscal years beginning on January 1, 2008 equal to
the lesser of (i) 1,000,000 shares of Common Stock or (ii) two percent (2.0%) of the number of shares of Common Stock outstanding on the last day of the immediately preceding fiscal year
or (iii) such lesser number as determined by the Board. Shares to be issued under the Plan may be either authorized but unissued Shares or Shares re-acquired and held in treasury.
Any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award, or in
connection with the satisfaction of tax obligations relating to an Award, shall again be available for granting Awards (other than Incentive Stock Options) under the Plan. In addition, if any Shares
covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan.
Notwithstanding the foregoing, (i) the number of Shares available for granting Incentive Stock Options under the Plan shall not exceed 1,000,000, plus the automatic annual increase described
above, subject to adjustment as provided in Section 4(c) of the Plan and subject to the provisions of Section 422 or 424 of the Code or any successor provision and (ii) the
number of Shares available for granting Restricted Stock and Restricted Stock Units shall not exceed 1,000,000, plus the automatic annual increase described above, subject to adjustment as provided in
Section 4(c) of the Plan. 

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

4

 

respect
to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. 

        (c)    Adjustments.    In the event of any Equity Restructuring, the number and type of Shares (or other
securities or other property) subject to outstanding Awards, and the purchase price or exercise price with respect to any Award will be proportionately adjusted; provided,
however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. The adjustments provided under this Section 4(c)
shall be nondiscretionary and shall be final and binding on the affected Participant and the Company. The Committee shall make such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Sections 4(a) and 6(d) hereof). Notwithstanding the above, in the event (i) of any reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other securities of the Company or any other similar corporate transaction or event or (ii) the Company shall enter into a
written agreement to undergo such a transaction or event, the Committee may, in its sole discretion, cancel any or all outstanding Awards and pay to the holders of any such Awards that are otherwise
vested, in cash, the value of such Awards based upon the price per share of capital stock received or to be received by other stockholders of the Company in such event. 

Section 5. Eligibility  

        Any Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the
Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which
term as used herein includes, without limitation, officers and directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such
Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. 

Section 6. Awards  

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

        (i)    Exercise Price.    The purchase price per Share purchasable under an Option shall be determined by the
Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market
Value of a Share on the date of grant of such Option. 

        (ii)    Option Term.    The term of each Option shall be fixed by the Committee at the time of grant, but shall not be
longer than 10 years from the date of grant. 

        (iii)    Time and Method of Exercise.    The Committee shall determine the time or times at which an Option may be
exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any
combination thereof, having a Fair Market Value on the exercise date equal to the applicable exercise price) in which payment of the exercise price with respect thereto may be made or deemed to have
been made. 

5

 

        (iv)    Incentive Stock Options.    Notwithstanding anything in the Plan to the contrary, the following additional
provisions shall apply to the grant of stock options which are intended to qualify as Incentive Stock Options: 

        (A)  The
Committee will not grant Incentive Stock Options in which the aggregate Fair Market Value (determined as of the time the option is granted) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under this Plan and all other plans of the Company and its Affiliates) shall
exceed $100,000. 

        (B)  All
Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board or the date this Plan was approved
by the stockholders of the Company. 

        (C)  Unless
sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than 10 years after the date of grant;  provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the
time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of
its Affiliate, such Incentive Stock Option shall expire and no longer be exercisable no later than 5 years from the date of grant. 

        (D)  The
purchase price per Share for an Incentive Stock Option shall be not less than 100% of the Fair Market Value of a Share on the date of grant of the Incentive Stock
Option; provided, however, that, in the case of the grant of an Incentive Stock Option to a Participant
who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or of its Affiliate, the purchase price per Share purchasable under an Incentive Stock Option shall be not less than 110% of the Fair Market Value of a Share on the date of grant of the
Incentive Stock Option. 

        (E)  Any
Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent
with and contain all provisions required in order to qualify the Option as an Incentive Stock Option. 

        (b)    Stock Appreciation Rights.    The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible
Persons subject to the terms of the Plan and any applicable Award Agreement. Each Stock Appreciation Right granted under the Plan shall confer on the holder upon exercise the right to receive a number
of Shares equal to the excess of (a) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after
the date of exercise) over (b) the grant price of the Stock Appreciation Right as determined by the Committee, which grant price shall not be less than 100% of the Fair Market Value of one
Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan, the grant price,
term, methods of exercise, dates of exercise and any other terms and conditions (including conditions or restrictions on the exercise thereof) of any Stock Appreciation Right shall be as determined by
the Committee. 

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

6

  

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

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

        (iii)    Forfeiture.    Except as otherwise determined by the Committee, upon a Participant's termination of Service
(as determined under criteria established by the Committee) during the applicable restriction period, all applicable Shares of Restricted Stock and Restricted Stock Units at such time subject
to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee
may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted
Stock Units. 

        (d)    Performance Awards.    The Committee is hereby authorized to grant Performance Awards to Eligible Persons
subject to the terms of the Plan. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted
Stock Units), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such
Performance Goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the Performance Goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee. From time to time, the Committee may designate an Award granted pursuant to the Plan as an award of "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code (a "Qualified Performance Based Award"). Qualified Performance Based Awards shall, to the
extent required by Section 162(m), be conditioned solely on the achievement of one or more objective Performance Goals, and such Performance Goals shall be established by the Committee within
the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). The Committee shall also certify in writing that such Performance Goals have been met prior
to payment of the Qualified Performance Based Awards to the extent required by Section 162(m). Subject to adjustment as provided in Section 4(c), no Participant may be granted
(i) Options or Stock Appreciation Rights during any performance period with respect to more
than 2,500,000 Shares or (ii) Restricted Stock, Restricted Stock Units, Other Stock Grants or Other Stock-Based Awards in any performance period that are intended to comply with the
performance-based exception under Section 162(m) of the Code and are denominated in Shares with respect to more than 2,500,000 Shares (the "Limitations"). In addition to the
foregoing, the maximum dollar value that may be earned by any Participant in any performance period with respect to Performance Awards that are intended to comply with the performance-based exception
under Section 162(m) of the Code and are denominated in cash is $5,000,000. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable Limitations. 

        (e)    Dividend Equivalents.    The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons
under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent
to the amount of cash dividends paid by the Company to holders of Shares with respect to a 

7

 

number
of Shares determined by the Committee. Subject to the terms of the Plan, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. 

        (f)    Other Stock Grants.    The Committee is hereby authorized, subject to the terms of the Plan, to grant to
Eligible Persons Shares without restrictions thereon as are deemed by the Committee to be consistent with the purpose of the Plan. Subject to the terms of the Plan and any applicable Award Agreement,
such Other Stock Grant may have such terms and conditions as the Committee shall determine. 

        (g)    Other Stock-Based Awards.    The Committee is hereby authorized to grant to Eligible Persons, subject to the
terms of the Plan, such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. Shares or other securities delivered pursuant to a purchase right granted under this
Section 6(g) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, other securities, other
Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair
Market Value of such Shares or other securities as of the date such purchase right is granted. 

        (h)    General.    

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

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

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

        (iv)    Limits on Transfer of Awards.    No Award (other than Other Stock Grants) and no right under any such Award
shall be transferable by a Participant other than by will or by the laws of descent and distribution and the Company shall not be required to recognize any attempted assignment of such rights by any
Participant; provided, however, that, if so determined by the Committee, a Participant may, in the
manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death
of the Participant; provided, further, that, if so determined by the Committee, a Participant may, at
any time that such Participant holds such Option, transfer a Non-Qualified Stock Option to any "Family Member" (as such term is
defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities Act),  provided that the Participant may not receive any consideration
for such transfer, the Family Member may not make any subsequent transfers other than by
will or by the laws of descent and distribution and the Company receives written notice of such transfer. Except 

8

 

as
otherwise determined by the Committee, each Award (other than an Incentive Stock Option) or right under any such Award shall be exercisable during the Participant's lifetime only by the Participant
or, if permissible under applicable law, by the Participant's guardian or legal representative. Except as otherwise determined by the Committee, no Award (other than an Incentive Stock Option) or
right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or other encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate. 

        (v)    Term of Awards.    Subject to Section 6(a)(iv)(C), the term of each Award shall be fixed by the
Committee at the time of grant, but shall not be longer than 10 years from the date of grant. 

        (vi)    Restrictions; Securities Exchange Listing.    All Shares or other securities delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities
laws and regulatory requirements, and the Committee may direct appropriate stop transfer orders and cause other legends to be placed on the certificates for such Shares or other securities to reflect
such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required, and shall have no liability for failure, to deliver any Shares or other
securities covered by an Award unless and until such Shares or other securities have been and continue to be admitted for trading on such securities exchange. No Shares or other assets shall be issued
or delivered pursuant to the Plan, and the Company shall have no liability for failure to issue or deliver Shares under the Plan, unless and until there shall have been compliance with all applicable
requirements of applicable securities laws, including the filing and effectiveness of the Form S-8 registration statement for the Shares issuable pursuant to the Plan, and all
applicable listing requirements of any stock exchange or trading system, including the Nasdaq Stock Market, on which Common Stock is then traded. No Shares shall be issued or delivered pursuant to the
Plan, and the Company shall have no liability for failure to issue or deliver Shares under the Plan, if doing so would violate any internal policies of the Company. 

        (vii)    Prohibition on Repricing.    Except as provided in Section 4(c) of the Plan, no Option or Stock Appreciation
Right may be amended to reduce its initial exercise or grant price and no Option or Stock Appreciation Right shall be canceled and replaced with Options or Stock Appreciation Rights having a lower
exercise or grant price, without the approval of the stockholders of the Company. 

        (i)    Directors' Automatic Option Grant Program.    

        (i)    Automatic Grants — Election for a Three-Year Term.    Each
non-employee director shall receive on the date at which he or she is appointed, elected or re-elected to serve a three-year term, a Non-Qualified
Option to purchase 12,000 Shares. The exercise price for such Shares shall be 100% of the Fair Market Value of the Shares on the date of grant. Each such Option shall become exercisable in
accordance with the vesting schedule below, shall be exercisable for 10 years following the date of grant and shall be generally subject to the terms and conditions set forth in the Plan. Each
such Option shall vest in three equal annual installments of 4,000 Shares upon the non-employee director's completion of each year of service as a Board member over the
three-year period measured from the date of grant. There shall be no limit on the number of such automatic Option grants any one non-employee director may receive over his or
her period of Board service, and non-employee directors who have previously been employees of the Company (or any Affiliate) or who have received one or more Option grants from the
Company prior to becoming a non-employee director shall be eligible to receive one or more such automatic Option grants over their period of continued Board service. 

9

 

        (ii)    Annual Automatic Grants — Election for Other Term.    In the event that a
non-employee director is appointed, elected or re-elected to serve a term of less than three years, such non-employee director shall receive on the date of such
appointment, election or re-election to serve a one-year term or a two-year term, a Non-Qualified Option to purchase 4,000 Shares or
8,000 Shares, as the case may be. The exercise price for such Shares shall be 100% of the Fair Market Value of the Shares on the date of grant. Each such Option shall become exercisable in
accordance with the vesting schedule below, shall be exercisable for 10 years following the date of grant and shall be generally subject to the terms and conditions set forth in the Plan. Each
such Option for 8,000 Shares shall vest in two equal annual installments of 4,000 Shares upon the non-employee director's completion of each year of service as a Board member
over the two-year period measured from the date of grant, and each such Option for 4,000 Shares shall vest in a single installment of 4,000 Shares upon the
non-employee director's completion of one year of service as a Board member measured from the date of grant. There shall be no limit on the number of such automatic Option grants any one
non-employee director may receive over his or her period of Board service, and non-employee directors who have previously been employees of the Company (or any
Affiliate) or who have received one or more Option grants from the Company prior to becoming a non-employee director shall be eligible to receive one or more such automatic Option grants
over their period of continued Board service. 

        (iii)    Termination of Board Service.    The following provisions shall govern the exercise of any options granted to
non-employee directors pursuant to the Automatic Option Grant Program that are outstanding at the time the non-employee director ceases to serve as a Board member: 

        (A)  Should
the non-employee director's service as a Board member cease for any reason while one or more Options granted pursuant to this Automatic Option Grant
Program are outstanding, then each such Option shall remain exercisable, for any or all of the vested Shares for which the Option is exercisable at the time of such cessation of Board service, until
the earlier of (i) the termination date of the Option or (ii) the expiration of 90 days measured from the date the non-employee director's Board service ceases. Upon
the expiration of the 90-day post-termination exercise period, or (if earlier) upon the termination date of the Option, the Option shall terminate with respect to any
vested Shares for which the Option has not been exercised. 

        (B)  Each
Option granted pursuant to this Automatic Option Grant Program that is outstanding at the time of the non-employee director's cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any and all unvested Shares for which the Option is not otherwise at that time exercisable. 

        (iv)    Change in Control.    In the event of a Change in Control effected during the non-employee
director's period of Board service, the vesting of each Option granted pursuant to this Automatic Option Grant Program at the time held by such non-employee director shall automatically
accelerate so that each such Option shall, immediately prior to the specified effective date for the Change in Control, become exercisable for all
of the Shares at the time subject to such Option and may be exercised for all or any portion of such Shares. Upon the consummation of the Change in Control, all Options granted pursuant to this
Automatic Option Grant Program shall terminate and cease to be outstanding, unless assumed by the successor corporation. 

        (v)    Remaining Terms.    The remaining terms and conditions of each Option granted pursuant to this Automatic Option
Grant Program shall be substantially the same as the terms in effect for Options made under the Plan and shall be set forth in an Option Agreement. 

10

 

Section 7. Amendment and Termination; Adjustments  

        (a)    Amendments to the Plan.    The Board may amend, alter, suspend, discontinue or terminate the Plan at any time;  provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the
Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: 

        (i)    violates
the rules or regulations of the National Association of Securities Dealers, Inc. or any other securities exchange that are applicable to
the Company; 

        (ii)   causes
the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan; 

        (iii)  increases
the number of shares authorized under the Plan as specified in Section 4(a); 

        (iv)  permits
the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair Market Value of a Share on the date of grant of such Option or Stock
Appreciation Right, as prohibited by Sections 6(a)(i) and 6(b) of the Plan or the repricing of Options or Stock Appreciation Rights, as prohibited by Section 6(h)(vii) of the
Plan; or 

        (v)   would
prevent the grant of Options or Stock Appreciation Rights that would qualify under Section 162(m) of the Code. 

        (b)    Amendments to Awards.    The Committee may waive any conditions of or rights of the Company under any
outstanding Award, prospectively or retroactively. Except as otherwise provided herein or in an Award Agreement, the Committee may not amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively or retroactively, if such action would adversely affect the rights of the holder of such Award, without the consent of the Participant or holder or beneficiary thereof.
Notwithstanding the foregoing, the Committee shall not waive any conditions or rights of the Company, or otherwise amend or alter any outstanding Qualified Performance Based Award in such a manner as
to cause such Award not to constitute "qualified performance based compensation" within the meaning of Section 162(m) of the Code. 

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

Section 8. Income Tax Withholding  

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

11

 

Section 9. General Provisions  

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

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

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

        (d)    No Rights of Stockholders.    Except with respect to Shares of Restricted Stock as to which the Participant has
been granted the right to vote, neither a Participant nor the Participant's legal representative shall be, or have any of the rights and privileges of, a stockholder of the Company with respect to any
Shares issuable to such Participant upon the exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued in the name of such Participant or such Participant's
legal representative without restrictions thereto. 

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

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

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

        (h)    Severability.    If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to 

12

 

conform
to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. 

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

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

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

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

        (m)    Section 16 Compliance; Section 162(m) Administration.    The Plan is intended to comply in all
respects with Rule 16b-3 or any successor provision, as in effect from time to time, and in all events the Plan shall be construed in accordance with the requirements of
Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as hereafter amended or interpreted, the provision shall be deemed inoperative. The Board
of Directors, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan with respect to persons who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Eligible Persons. With respect to Options and Stock Appreciation
Rights, the Company intends to have the Plan administered in accordance with the requirements for the award of "qualified performance-based compensation" within the meaning of Section 162(m) of
the Code. 

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

Section 10. Effective Date of the Plan  

        The Plan shall be effective as of the date on which the Company's registration statement on Form S-1 relating to the initial public offering of
its common stock is declared effective by the Securities and Exchange Commission, subject to the prior approval of the Board and stockholders of the Company. 

13

 

Section 11. Term of the Plan  

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

14Exhibit 10.4  

THE ENSIGN GROUP, INC.

NON-INCENTIVE STOCK OPTION AGREEMENT  

        This NON-INCENTIVE STOCK OPTION AGREEMENT
(the "Agreement") is made this                          day of
                        ,
                         by and between The Ensign Group, Inc., a Delaware
corporation
(the "Company") and                         , an individual resident of
                        ,
                         ("Optionee"). All capitalized terms used herein but
not defined herein shall have the meanings given to
them in The Ensign Group, Inc. 2007 Omnibus Incentive Plan (the "Plan"). 

        1.    Grant of Option.    The Company hereby grants Optionee, on the date such grant was approved by the Committee
(the "Grant Date"), the option (the "Option") to purchase all or any part of an aggregate
of                          shares (the "Shares") of Common Stock of
the Company at the exercise price of
$                         per share according to the terms and conditions set forth in this Agreement and in the Plan. The
Option will not be treated as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Option is issued under the Plan and
is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee. 

        The
Option shall terminate at the close of business ten years from the Grant Date (the "Expiration Date") unless sooner terminated
or cancelled in accordance with this Agreement or the Plan. 

        2.    Vesting of Option Rights.    

        (a)   Except
as otherwise provided in this Agreement, the Option may be exercised for vested Shares by Optionee in accordance with the following schedule: 

	On or after each of

the following dates
	 	Number of Shares

with respect to which

the Option is vested and

exercisable

	
 	
 	

 
	
 	
 	

 
	
 	
 	

 

        (b)   During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable by Optionee, other than by will or the laws
of descent and distribution; provided however, that Optionee may transfer the Option to any "Family Member" (as such term is
defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the Securities Act),  provided that the Participant may not receive any consideration
for such transfer, the Family Member may not make any subsequent transfers other than by
will or by the laws of descent and distribution and the Company receives written notice of such transfer. 

        3.    Exercise of Option after Death or Termination of Service.    The Option shall terminate and may no longer be
exercised if Optionee ceases to provide Service to the Company or its affiliates, except that: 

        (a)   If
Optionee's Service shall be terminated for any reason, voluntary or involuntary, other than for "Cause"
(as defined in Section 3(e)) or Optionee's death or disability (within the meaning of Section 22(e)(3) of the Code), Optionee may at any time within a period of
3 months after such termination exercise the Option to the extent the Option was vested and exercisable by Optionee on the date of the termination of Optionee's Service. 

1

 

        (b)   If
Optionee's Service is terminated for Cause, the Option shall be terminated as of the date of the act giving rise to such termination. 

        (c)   If
Optionee shall die while the Option is still exercisable according to its terms or if Optionee's Service is terminated because Optionee has become disabled (within
the meaning of Section 22(e)(3) of the Code) while providing Service to the Company and Optionee shall not have fully exercised the Option, such Option may be exercised at any time within
12 months after Optionee's death or date of termination of Service for disability by Optionee, personal representatives or administrators or guardians of Optionee, as applicable or by any
person or persons to whom the Option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of Shares Optionee was entitled to purchase under the
Option on (i) the earlier of the date of death or termination of Service or (ii) the date of termination for such disability, as applicable. 

        (d)   Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Expiration Date of the Option. 

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

        4.    Method of Exercise of Option.    Subject to the foregoing, the Option may be exercised in whole or in part from
time to time by serving written notice of exercise on the Company at its principal office within the Option period. The notice shall state the number of Shares as to which the Option is being
exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made (i) in cash (including bank check, personal check or money order payable to the
Company), or (ii) with the approval of the Company (which may be given in its sole discretion), by delivering to the Company for cancellation shares of the Company's Common Stock already owned
by Optionee having a Fair Market Value (as defined in the Plan) equal to the full exercise price of the Shares being acquired. Subject to Section 402 of the Sarbanes-Oxley Act of 2002,
to the extent this Option is exercised for vested Shares, the Option may be exercised in whole or in part from time to time through a special sale and remittance procedure pursuant to which Optionee
shall concurrently provide irrevocable instructions (1) to Optionee's brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares plus all applicable income and employment taxes required to be
withheld by the Company by reason of such exercise, and (2) to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete
the sale. 

        5.    Miscellaneous.    

        (a)    Plan Provisions Control.    In the event that any provision of the Agreement conflicts with or is inconsistent
in any respect with the terms of the Plan, the terms of the Plan shall control. This 

2

 

Agreement
(and any addendum hereto) and the Plan together constitute the entire agreement between the parties hereto with regard to the subject matter hereof. 

        (b)    No Rights of Stockholders.    Neither Optionee, Optionee's legal representative nor a permissible assignee of
this Option shall have any of the rights and privileges of a stockholder of the Company with respect to the Shares, unless and until such Shares have been issued in the name of Optionee, Optionee's
legal representative or permissible assignee, as applicable. 

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

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

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

        (f)    No Trust or Fund Created.    Neither the Plan nor the Agreement shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Optionee or any other person. 

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

        (h)    Conditions Precedent to Issuance of Shares.    Shares shall not be issued, and the Company shall not have any
liability for failure to issue Shares, pursuant to the exercise of the Option unless such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, the
requirements of any applicable Stock Exchange and the Delaware General Corporation Law. As a condition to the exercise of the purchase price relating to the Option, the Company may require that 

3

 

the
person exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if,
in the opinion of counsel for the Company, such a representation and warranty is required by law. 

        (i)    Withholding.    In order to provide the Company with the opportunity to claim the benefit of any income tax
deduction which may be available to it upon the exercise of the Option and in order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as
it deems appropriate to insure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Optionee. 

        (j)    Consultation With Professional Tax and Investment Advisors.    The holder of this Award acknowledges that the
grant, exercise, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares acquired pursuant to the exercise thereof, may have tax consequences
pursuant to the Code or under local, state or international tax laws. The holder further acknowledges that such holder is relying solely and exclusively on the holder's own professional tax and
investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Finally, the holder understands and
agrees that any and all tax consequences resulting from the Award and its grant, exercise, vesting or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired
pursuant to the Plan, is solely
and exclusively the responsibility of the holder without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse such holder for such taxes
or other items. 

        IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement on the date set forth in the first paragraph. 

	 	 	THE ENSIGN GROUP, INC.
	
 	
 	

 	

 
	

 	
 	

By:	

	

 	
 	

Name:	

	

 	
 	

Title:	

	

 	
 	

 	

 
	
 	
 	
[OPTIONEE]
	
 	
 	

 	

 
	
 	
 	

 	

 
	 	 	

	

 	
 	

Name:	

4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}]]