This Employment Agreement dated as of December 27, 2005 (the "Agreement"),
is made by and between Skilled Healthcare Group, Inc., a Delaware corporation
(together with any successor thereto, the "Company") and Jose C. Lynch (the
A. It is the desire of the Company to assure itself of the continued services
of the Executive by entering into this Agreement.
B. The Executive and the Company mutually desire that Executive provide
services to the Company on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below the parties hereto agree as follows:
(a) General. The Company shall employ the Executive and the Executive
shall enter the employ of the Company, for the period set forth in
Section 1(b), in the position set forth in Section 1(c), and upon the
other terms and conditions herein provided.
(b) Employment Term. The initial term of employment under this Agreement
(the "Initial Term") shall be for the period beginning on the Closing,
as such term is defined in the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of October 22, 2005 among the Company,
SHG Holding Solutions, Inc., a Delaware corporation ("Parent"), SHG
Acquisition Corp., a Delaware corporation, Heritage Partners
Management Company, LLP, Heritage Fund II, L.P., a Delaware limited
partnership, and Heritage Investors II, L.L.C., a Delaware limited
liability company (the date of such Closing is the "Effective Date")
and ending on (and including) the second anniversary thereof, unless
earlier terminated as provided in Section 3. Should the Closing not
occur, this Agreement shall be null and void and shall not become
effective. The employment term hereunder shall automatically be
extended for successive one-year periods ("Extension Terms" and,
collectively with the Initial Term, the "Term") unless either party
gives written notice of non-extension to the other no later than sixty
(60) days prior to the expiration of the then-applicable Term and
subject to earlier termination as provided in Section 3.
(c) Position and Duties. The Executive shall serve as the President and
Chief Operating Officer of the Company with such customary
responsibilities, duties and authority as may from time to time be
assigned to the Executive by the Chief Executive Officer of the
Company, the Board of Directors of the Company (the "Board") or by the
Board of Directors of Parent. The Executive shall devote
substantially all his working time and efforts to the business and
affairs of the Company (which may include service to Parent, the
Company and their respective direct and indirect subsidiaries). The
Executive agrees to observe and comply with the rules and policies of
the Company as adopted by or under the authority of the Board from
time to time. During the Term, it shall not be a violation of this
Agreement for the Executive to serve on industry trade, civic or
charitable boards or committees and manage his personal investments
and affairs, as long as such activities do not materially interfere
with the performance of the Executive's duties and responsibilities as
an employee of the Company. During his employment and following
termination of his employment with the Company, the Executive agrees
not to disparage the Company, any of its products or practices, or any
of its directors, officers, agents, representatives, stockholders or
affiliates, either orally or in writing.
(d) Location. The Executive acknowledges that the Company's principal
executive offices are currently located at Foothill Ranch, California.
The Executive shall operate principally out of such executive offices,
as they may be moved from time to time within 40 miles of their
current location in Foothill Ranch, California. The Company expects,
and the Executive agrees, that the Executive shall be required to
travel from time to time in order to fulfill his duties to the
2. COMPENSATION AND RELATED MATTERS.
(a) Annual Base Salary. During the Term, the Executive shall receive a
base salary at a rate of $460,000 per annum (the "Annual Base
Salary"), which shall be paid in accordance with the customary payroll
practices of the Company, subject to upward adjustment as may be
determined by the Board in its discretion.
(b) Annual Bonus. During the Term, the Executive will be eligible to
participate in an annual performance-based bonus plan established by
the Board that provides an opportunity substantially the same as the
bonus plan first adopted by the Board after the Effective Date.
(c) Restricted Stock Plan. During the Term, the Executive shall be
entitled to participate in the equity plan (the "Restricted Stock
Plan") of Parent pursuant to which, on the Effective Date, the
Executive shall receive a number of shares of common stock of Parent
equal to 2.8125% of the number of shares of common stock of Parent
outstanding on the Effective Date, excluding shares issued under the
Restricted Stock Plan. Restricted Stock shall vest as to 25% of the
shares granted on the Effective Date and each of the first three
anniversaries of the Effective Date, but only to the extent the
Executive remains continuously employed by the Company through the
applicable vesting date.
(d) Benefits. During the Term, the Executive shall be entitled to
participate in group medical insurance, 401(k) and other standard
benefits provided by the Company, as may be amended from time to time,
which are applicable to the senior officers of the Company.
(e) Vacation. During the Term, the Executive shall be entitled to four
weeks paid vacation per calendar year and the maximum unused vacation
time that the Executive may accrue is eight weeks. Any vacation shall
be taken at the reasonable and mutual convenience of the Company and
(f) Expenses. During the Term, the Company shall reimburse the Executive
for all reasonable travel and other business expenses incurred by him
in the performance of his duties to the Company in accordance with the
Company's expense reimbursement policy.
(g) Key Person Insurance. At any time during the Term, the Company shall
have the right to insure the life of the Executive for the Company's