Document:

exv10w1

 

Exhibit 10.1

SKILLED HEALTHCARE GROUP, INC.

ACKNOWLEDGEMENT OF INCREASING LENDERS

     This Acknowledgement of Increasing Lenders (this “Agreement”) dated as of March 31, 2008 is
entered into by and between Skilled Healthcare Group, Inc. (formerly known as SHG Holding
Solutions, Inc.), a Delaware corporation (the “Company”), the Lenders listed on the signature pages
hereto (each an “Increasing Lender” and, collectively, the “Increasing Lenders”) and Credit Suisse,
Cayman Islands Branch, as Administrative Agent (in such capacity, “Administrative Agent”) pursuant
to that certain Second Amended and Restated First Lien Credit Agreement dated as of December 27,
2005 and entered into by and among the Company, the financial institutions party thereto (the
“Lenders”) and the Administrative Agent and Collateral Agent (said Credit Agreement, as amended,
supplemented, restated or otherwise modified from time to time, being the “Credit Agreement”).
Capitalized terms used herein without definition shall have the same meanings herein as set forth
in the Credit Agreement.

     1. The Company has notified the Administrative Agent and the Lenders that it intends to
exercise its rights under subsection 2.1A(iv) of the Credit Agreement to seek to increase the
Revolving Loan Commitments by up to $50,000,000.

     2. Pursuant to subsection 2.1A(iv) of the Credit Agreement, each Increasing Lender desires to
increase the principal amount of its Revolving Loan Commitment under the terms of the Credit
Agreement. Each Increasing Lender hereby ratifies, as of the date hereof, and agrees to be bound
by, all of the terms, provisions and conditions contained in the Credit Agreement and in the Loan
Documents which are binding upon the Lenders, including, without limitation, all of the
authorizations of the Lenders set forth in Section 9 of the Credit Agreement, as supplemented from
time to time in accordance with the terms thereof.

     3. Each Increasing Lender’s portion of the Revolving Loan Commitments shall be as set forth on
Schedule A annexed hereto.

     4. Each Increasing Lender (a) represents and warrants that (i) it has full power and
authority, and has taken all action necessary, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; (ii) from and after the date hereof, it shall
continue to be bound by the provisions of the Credit Agreement and, to the extent of its Pro Rata
Share of the Commitments, shall continue to have the rights and obligations of a Lender thereunder;
and (iii) it has received such information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Agreement on the basis of which it has made such analysis
and decision; and (b) agrees that (1) it will, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents; and (2) it will continue to perform in accordance with their terms
all of the obligations which by the terms of the Loan Documents are required to be performed by it
as a Lender.

     5. The undersigned officer of the Company hereby represents, warrants and agrees as follows:

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          a. The representations and warranties contained in the Credit Agreement and the other Loan
Documents are true, correct and complete in all material respects on and as of the date hereof to
the same extent as though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date, in which case such
representations and warranties were true, correct and complete in all material respects on and as
of such earlier date.

          b. No event has occurred and is continuing or would result from the consummation of the
increase in the Revolving Loan Commitments that constitutes or would constitute an Event of Default
or a Potential Event of Default.

          c. The Company and its Subsidiaries are in Pro Forma Compliance with each of the financial
covenants contained in subsection 7.6 of the Credit Agreement.

          d. The following conditions to the increase under subsection 2.1A(iv) of the Credit Agreement
have been met: (i) the Company has not requested more than five increases of the Commitments
pursuant to Section 2.1A(iv) of the Credit Agreement, (ii) the increase in the Revolving Loan
Commitments is in a minimum amount of at least $30,000,000, (iii) the aggregate principal amount of
the increases in the Revolving Loan Commitments and/or Term Loan Commitments pursuant to subsection
2.1A(iv) of the Credit Agreement will not exceed $150,000,000, upon consummation of the increase in
the Revolving Loan Commitments hereunder, (iv) the increase in the Revolving Loan Commitments is
for the purpose of funding Permitted Acquisitions or for general corporate purposes, (v) the new
Revolving Loan Commitments provided hereunder shall expire on the same date as the existing
Revolving Loan Commitments under subsection 2.1A(ii) of the Credit Agreement, (vi) the weighted
average interest rates applicable to the Revolving Loans hereunder does not exceed the rates set
forth in subsection 2.2 of the Credit Agreement by more than 25 basis points, (vii) the Revolving
Loan Commitments (and related Revolving Loans) provided hereunder constitute permitted indebtedness
under the Senior Subordinated Note Indenture and shall constitute “Senior Indebtedness” (as defined
in the Senior Subordinated Note Indenture) for purposes of the Senior Subordinated Note Indenture,
and (viii) Lenders shall have received originally executed copies of one or more favorable written
opinions of Roland G. Rapp, General Counsel of the Company, in form and substance reasonably
satisfactory to Administrative Agent and its counsel, dated as of the date hereof as to the
increases in the Revolving Loan Commitments and such other matters as Administrative Agent acting
on behalf of Lenders may reasonably request (this Agreement constituting a written request by
Company to such counsel to deliver such opinions to Lenders).

     6. The Company hereby accepts the additional Revolving Loan Commitments of each Increasing
Lender as set forth on Schedule A attached hereto (the “New Revolving Loan Commitments”)
and hereby notifies the Administrative Agent that the aggregate principal amount of the Revolving
Loan Commitments are hereby increased pursuant to subsection 2.1A(iv) of the Credit Agreement by
the amount of the New Revolving Loan Commitments.

     7. The Company agrees that at any time and from time to time, upon the written request of the
Administrative Agent, it will execute and deliver such further documents and instruments (including
any replacement Note requested by an Increasing Lender, and any Mortgage amendments and increases
in title policies requested by Administrative Agent) and

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take such further actions as the Administrative Agent may reasonably request in connection
with the increase in the Revolving Commitments pursuant to this Agreement.

     8. This Agreement may be executed in two or more counterparts, each of which shall constitute
an original but all of which when taken together shall constitute one contract; signature pages may
be detached from multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. Delivery of an executed counterpart
of this Agreement by telefacsimile or electronic mail shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an executed counterpart
of this Agreement by telefacsimile or electronic mail also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement. This Agreement shall
become effective upon execution of this Agreement by the Administrative Agent, the Company and
Increasing Lenders holding new Revolving Loan Commitments evidencing an aggregate increase in the
principal amount equal to the Total Commitment/Loans for Increasing Lenders set forth on
Schedule A attached hereto.

     9. Upon effectiveness of this Agreement, the Commitments and Pro Rata Shares of each Lender
will be adjusted to give effect to the increase in the Revolving Loan Commitments, effected hereby
as of the date of this Agreement.

     10. This Agreement shall be governed by and construed and interpreted in accordance with the
laws of the State of New York.

     11. Each Increasing Lender agrees that at any time and from time to time, upon the written
request of the Administrative Agent, it will execute and deliver such further documents and do such
further acts and things as the Administrative Agent may reasonably request in order to effect the
purposes of this Agreement.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Company, Administrative Agent and the Increasing Lenders have caused
this Agreement to be duly executed by their respective authorized officers, as of the day and year
first above written.

	 	 	 	 	 
	COMPANY 	SKILLED HEALTHCARE GROUP, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Acknowledgement

 

 

	 	 	 	 	 
	ADMINISTRATIVE AGENT:	 CREDIT SUISSE, CAYMAN ISLANDS 
BRANCH, as
Administrative Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Acknowledgement

 

 

	 	 	 	 	 
	INCREASING LENDER:  	[_______________], as Increasing Lender

 	 
	 	By:  	 	 
	 	 	Name: 	 	 
	 	 	Title:	 
	 

Acknowledgementexv10w1

 

Exhibit 10.1

2008 Executive

Annual Incentive Plan

The performance goals for 2008 are based on the 2008 business plan approved by the Board of
Directors. These goals reflect the Board of Directors and CEO’s expectations for performance and
accountability of the leadership team.

For 2008, the weighting of the Financial Measures is:

	 	•	 	EPS: 40%
	 
	 	 	 	The definition of Earnings Per Share (“EPS”) is net income divided by the number of shares
outstanding. EPS is the most common way that public companies are measured.
	 
	 	•	 	EBITDA: 30%
	 
	 	 	 	Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is a commonly
used measure of cash flow from operations. Cash flow is critical to our Company in order for
us to meet our debt covenants, make capital investments and pay the interest and principal
on corporate debt. Depreciation and amortization are expenses of the business that relate to
past investments (i.e., the purchase of barges). Therefore, to determine how much cash is
available, we add these expenses back to our operating earnings.

For 2008, the weighting of the Business Goals is:

	 	•	 	Safety: 10%
	 
	 	 	 	It is critical that we continue to provide a safe environment for all employees. Safety
will be measured by the incident rate which is defined as the number of recordable injuries
× 200,000 divided by the number of employee hours worked.
	 
	 	•	 	Environmental: 5% — We are committed to conducting our businesses in an environmentally
responsible and proactive manner, for both the safety of our employees as well as the
communities in which we operate. This new metric will elevate our focus in the following
key areas:

	 	o	 	Notice of Violation (NOV): 2.5%
	 
	 	 	 	A Notice of Violation is any formal letter from a state agency informing us that we
have violated a state environmental regulation, such as industrial pre-treatment
permits,
national pollutant discharge elimination system permits and care and custody of any
hazardous waste.

 

	 	o	 	Environmental-National Response Center (NRC): 2.5%
	 
	 	 	 	We report all releases entering the river to the NRC, regardless of amount of
product. These spills generally are far less than a gallon of fuel or product.

	 	•	 	10K Barrel Liquid Turn Rate: 2.5%
	 
	 	 	 	The organization as a whole must focus on turning our liquid fleet more rapidly to realize
the growth in liquids we are targeting. Turn rate is calculated by the total number of days
in the year divided by the average number of days it takes to move one lift on a 10K barrel
barge. The improvement of this metric will provide significant financial gain for the
Company.
	 
	 	•	 	Covered Hopper Stationary Days: 2.5%
	 
	 	 	 	The organization must also focus on reducing non-revenue producing stationary days on our
covered hopper dry fleet. Reduction of these days will enable us to reduce the time it
takes to deliver our customer’s freight, enabling us to free up capacity for additional
freight moves.
	 
	 	•	 	SG&A % to Revenue: 5%
	 
	 	 	 	This expense category is disclosed in the Company financial statements and will be measured
as a percent of total revenue, excluding the cost of any bonus. It represents our need to be
more efficient and to improve our profit margins.
	 
	 	•	 	Average Working Capital as a % of Revenue: 5%
	 
	 	 	 	By managing our working capital, we generate cash to help pay down debt and pay for
investments. Working capital is measured by adding accounts receivable, inventory and other
current assets, minus accounts payable and other current liabilities, and then divided by
revenue.

Plan Administration

Eligibility Criteria

	 	•	 	Full-time salaried executive employees in grades 16 - 20 approved by the Compensation
Committee.
	 
	 	•	 	Hire date on or before September 30, 2008.
	 
	 	•	 	Employed by ACL or one of its subsidiaries at time the incentive awards are paid.
	 
	 	•	 	Individual performance rated at a satisfactory level or higher.

Award Opportunities

Each performance measure has a corresponding percentage of the target award opportunity. Some
incentive can still be earned if you are close to, but fall short of the goals. Also, higher
incentives may be earned if goals are exceeded. Therefore, if actual performance falls between any
of the defined levels, the award opportunities will be calculated proportionately.

	 	•	 	Minimum performance (80% attainment) pays 50% of the target opportunity.
	 
	 	•	 	Target performance (100% attainment) pays 100% of target opportunity.
	 
	 	•	 	Superior performance (120% attainment) pays 150% of the target opportunity.

 

Award Calculations

The awards will be calculated based on the following formula:

2008 Base Salary Earnings × Target Award Opportunity × Performance Score for Each Goal

Actual base salary earnings are defined as only the base compensation earned from January 1 through
December 31. In other words, your AIP payout will be prorated based on your actual salary earnings
for the year. The overall performance score is determined by multiplying the achievement levels of
the financial and business objectives by their respective weighting and added together.

Timing of Payment

Earned disbursement of the 2008 bonus amounts will occur after the 2008 financial results have been
tabulated, Ernst &Young LLP has finished their audit and the Audit Committee has signed-off on the
results of the audit; estimated to be February, 2009. Also, all payments must be approved in
advance by the Compensation Committee of the Board of Directors. In all events, bonus amounts will
be paid no later than December 31, 2009, with respect to the 2008 bonus program.

Administration

The Compensation Committee of the Board of Directors has the full power, authority and discretion
to construe, interpret and administer this bonus program. The Compensation Committee may delegate
this authority to any appropriate person or persons and such delegates shall have all the powers
the Compensation Committee would have if it had acted itself. As a condition of eligibility to
participate in this bonus program, a participant must accept that all determinations of the
Compensation Committee or any of its delegates will be final, conclusive and binding.

Amendment

The Compensation Committee, in its sole discretion, may, at any time with or without notice, amend,
modify, suspend or terminate this bonus program, including the right to suspend or eliminate some
or all payments under this bonus program at any time.

Assignment

Payments under this bonus program may not be assigned or alienated.

Applicable Law

This document shall be governed by the laws of the State of Indiana.

No Employment Rights

Nothing contained in this bonus program shall be construed as a contract of employment between ACL
or its subsidiaries and a participant or as a right of any participant to be continued in the
employment of ACL or its subsidiaries, or as a limitation of the right of ACL or its subsidiaries
to discharge any of its employees with or without cause.

American Commercial Lines Inc.

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