Employment Agreement (2006)Full Document 

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                              EMPLOYMENT AGREEMENT

     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


     (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
          the Executive.

     (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

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