EXHIBIT 10.30
FORM OF RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the "Agreement"), is made by
and between Skilled Healthcare Group Inc., a Delaware corporation (the
"Company"), and [______________](1) ("Executive"), effective as of March 8, 2004
("Grant Date").
WHEREAS, the Company and Executive are parties to the Amended
and Restated Employment Agreement between Company and Executive dated as of the
Grant Date (the "Amended Employment Agreement"), which agreement provides, in
part, for the grant to Executive of shares of Class B Non-Voting Common Stock,
subject to certain Restrictions (as defined below); and
WHEREAS, the Company's Board of Directors has determined that
it would be to the advantage and best interest of the Company and its
stockholders to issue the Restricted Shares provided for herein to Executive as
an inducement to remain in the service of the Company and as an incentive for
increased efforts during such service, and for other good and valuable
consideration provided for herein;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
Section 1.1 "Adjustment Factor" shall have the meaning set forth in Section
3.1(c) and Schedule A hereof.
Section 1.2 "Affiliated Entities" shall mean Skilled Healthcare LLC and any
entity that is controlled by and consolidated with in the financial statements
of either the Company or Skilled Healthcare LLC.
Section 1.3 "Asset Sale" shall mean the date of closing for the sale of all or
substantially all of the assets of the Company and its Affiliated Entities.
Section 1.4 "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
- -------------------------
(1) Each of Messrs. Hendrickson, Lynch, Rapp and Harrison are a party to a
Restricted Stock Agreement, substantially in this form.
Section 1.5 "Cause" shall mean the reasonable and good faith determination by a
majority of the Board, that, during the Period of Employment, any of the
following events or contingencies exists or has occurred:
(a) Executive has breached a fiduciary duty to the Company or
any of its Affiliated Entities or breached of any of Executive's
obligations under Section 5 of the Amended Employment Agreement;
(b) Executive has been convicted of a felony or misdemeanor
that involves fraud, dishonesty, theft, embezzlement, and/or an act of
violence or moral turpitude, or Executive has plead guilty or no
contest (or a similar plea) to any such felony or misdemeanor; or
(c) Executed has committed an act or an omission that
constitutes fraud, gross negligence, or willful misconduct in
connection with Executive's employment by the Company or any of its
Affiliated Entities.
Section 1.6 "Conversion Rates" shall have the meaning set forth in Section
3.1(c) and Schedule A hereof.
Section 1.7 "Class B Common Stock" shall mean the Company's Class B Non-Voting
Common Stock , par value $0.01 per share, that is non-voting and junior to the
Company's Class A Common Stock, par value $0.01 per share ("Class A Common
Stock").
Section 1.8 "Disability" shall mean an illness (mental or physical) or injury
that, in the good faith and reasonable determination of a majority of the Board,
based on the report of a reputable physician selected jointly by the Board and
Executive, renders Executive unable to perform Executive's duties for six (6)
months during any twelve (12) month period.
Section 1.9 "EBITDA" shall mean for the applicable fiscal year the net income
(or loss) of the Company (after eliminating (x) all extraordinary items of
income or loss and (y) all income or loss related to non-cash change in interest
rate hedge), as reflected in the Company's financial statements for such fiscal
year, plus to the extent deducted in computing such net income (or loss),
without duplication, (i) all interest and other similar expense in respect of
indebtedness for borrowed money and similar expense in respect of capitalized
leases and preferred stock, plus (ii) all expenses for income taxes (whether
paid, accrued or deferred), plus (iii) depreciation and amortization expenses,
less (iv) interest and other similar income in respect of money loaned by the
Company and deposits of the Company, all of the foregoing as determined on a
consolidated basis for Company and its Affiliated Entities. EBITDA shall be
determined after all compensation accruals, including all compensation payable
to Executive but before giving effect to any Annual Performance Bonuses (as
defined in the Amended Employment Agreement) payable to Executive or any other
executive officers.
2
Section 1.10 "IPO" shall mean the date that the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company to the public occurs and the Common Stock becomes listed or quoted
on a national security exchange or in the NASDAQ National Market Quotation
System.
Section 1.11 "Period of Employment" shall mean [________________] through and
including [_______________](2).
Section 1.12 "Qualifying Termination of Service" shall mean termination of
Executive's employment with the Company and its Affiliated Entities by reason of
Executive's death or Disability or any termination of the Executive by the
Company without Cause. In addition to the terminations of Executive by the
Company without Cause, as defined in Section 1.5, Executive shall be deemed to
have been terminated by the Company without Cause if Executive resigns from the
Company within six (6) months after a Change of Control as a result of a
diminution of his Base Salary, the Company's termination of his status as an
executive officer of the Company, and/or a material diminution in his duties
and/or responsibilities from their level in effect immediately prior to the
Change of Control. For purposes of the preceding sentence "Change of Control"
and "Base Salary" shall have the meanings ascribed to them in the Amended
Employment Agreement. The Board, in its discretion, shall determine the effect
of all matters and questions relating to a Termination of Service, including
without limitation whether a Termination of Service is a Qualifying Termination
of Service.
Section 1.13 "Restated Certificate of Incorporation" shall mean the Second
Amended and Restated Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on or about March 5, 2004, as the same may be
amended or restated from time to time.
Section 1.14 "Restricted Shares" shall mean the shares of Class B Common Stock
granted under this Agreement that are subject to Restrictions.
Section 1.15 "Restrictions" shall mean the vesting requirements set forth in
Sections 3.1, 3.2, 3.3 and 3.4, the Company's repurchase rights set forth in
Section 3.5, and the restrictions on sale or other transfer set forth in Section
3.6.
Section 1.16 "Stock Sale" shall mean the date as of which at least a majority of
the Company's then outstanding common stock is sold in a single transaction or
series of substantially related transactions and, unless otherwise approved by
the Board, the consideration paid is cash or marketable securities.
Section 1.17 "Termination of Service" shall mean termination of Executive's
employment with the Company and its Affiliated Entities for any reason. The
Board, in its discretion, shall determine the effect of all matters and
questions relating to a Termination of Service, including, without limitation,
whether a Qualifying Termination of Service has occurred.
- --------------------------
(2) April 1, 2002 through March 31, 2007 for Mr. Hendrickson; February 18,
2002 through February 17, 2007 for Mr. Lynch; April 1, 2002 through
March 26, 2007 for Mr. Rapp; and July 1, 2002 through June 30, 2007 for
Mr. Harrison.
3
Section 1.18 "Terminal Equity Value" shall mean: (i) in the case of an IPO, the
equity value of the Company's outstanding common stock determined based on the
public offering price of the Company's common stock in the IPO and the number of
shares of common stock outstanding immediately prior to the IPO; (ii) in the
case of a Stock Sale, the equity value of the Company's outstanding common stock
determined based on the net proceeds distributable in respect of the common
stock of the Company that is sold in the Stock Sale and the number of shares of
common stock outstanding; and (iii) in the case of an Asset Sale, the aggregate
net proceeds that are or would be distributable in respect of all outstanding
common stock of the Company assuming that the Company paid off its debt and
preferred stock and debt securities, and liquidated on the Asset Sale, and
assuming that any right, warrant or option to acquire any common stock of the
Company entitled to be exercised is converted immediately prior to the
distribution.
Section 1.19 "Trigger Event" shall mean any of (i) an Asset Sale, (ii) an IPO,
or (iii) a Stock Sale, in each case with a Terminal Equity Value equal to [the
minimum Terminal Equity Value] or more.
ARTICLE II.
ISSUANCE OF RESTRICTED SHARES
Section 2.1 Issuance of Restricted Shares
In consideration of the recitals and for other good and
valuable consideration, on the Grant Date the Company agrees to and does hereby
issue to Executive [____________________________________________ (________)](3)
Restricted Shares (i.e., shares of Class B Common Stock subject to the
Restrictions and other conditions set forth in this Agreement). As a condition
to the Company's obligations and Executive's rights under this Agreement, the
spouse of Executive, if any, shall execute and deliver to the Company the
Consent of Spouse attached as Exhibit "A" hereto.
Section 2.2 Purchase Price
The purchase price of the Restricted Shares shall be $0.05 per
share, without commission or other charge, payable in cash or by check. The
Company hereby acknowledges receipt of payment of $[_________], in full payment
for the Restricted Shares.
Section 2.3 Consideration to Company
As partial consideration for the issuance of Restricted Shares
by the Company, Executive agrees to render faithful and efficient services to
the Company or any of its Affiliate Entities, as applicable for a period of at
least one (1) year from the Grant Date. Nothing in this Agreement shall confer
upon Executive any right to continue in the employ of the Company or shall
interfere with or restrict in any way the rights of the Company, which are
hereby expressly reserved, to discharge Executive at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in the Amended Employment Agreement.
- -----------------------------
(3) 39,439, 19,719, 6,573 and 4,930, respectively, for Messrs. Hendrickson,
Lynch, Rapp and Harrison.
4
Section 2.4 Adjustments in Restricted Shares
In the event that the outstanding shares of Class A Common
Stock or Class B Common Stock are changed into or exchanged for a different
number or kind of capital stock or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Board shall make an appropriate and
equitable adjustment in the number and kind of Restricted Shares. Any such
adjustment made by the Board shall be final and binding upon Executive, the
Company and all other interested persons.
ARTICLE III.
RESTRICTIONS
Section 3.1 Full Vesting and Lapse of Restrictions in Connection with a Trigger
Event
(a) Vesting and Lapse of Restrictions. The Restricted Shares
shall vest in full and the Restrictions with respect to all Restricted Share
shall lapse in full upon the happening of a Trigger Event that occurs during the
Period of Employment, subject only to Executive's continued employment with the
Company through the Trigger Event.
(b) No Company Repurchase Rights. The Company shall have no
right to repurchase any Restricted Shares that so vest in connection with a
Trigger Event.
(c) Adjustment Factors and Conversion Ratios. For purposes of
determining the Per Share Class B Common Stock Preference (as defined in the
Restated Certificate of Incorporation) or other distribution that is payable on
the Class B Common Stock as a result of an Asset Sale or otherwise, an
adjustment factor shall be applied, based on the applicable Terminal Equity
Value of the Company, as determined by the Board pursuant to Section 3.13
hereof. The adjustment factors, as they correlate to the applicable Terminal
Equity Values, are set forth on Schedule A attached hereto and made a part
hereof (the "Adjustment Factors"). Upon or promptly following an Asset Sale with
a Terminal Equity Value of [the minimum Terminal Equity Value] or more, the
Company shall either cause the Company to liquidate and wind up its affairs, or
it shall pay to Executive the aggregate amount that would be distributable to
Executive as a holder of Class B Common Stock had the Company immediately
liquidated and dissolved. In the event of an IPO or Stock Sale, the Class B
Common Stock shall convert to Class A Common Stock, as provided in the Restated
Certificate of Incorporation, based on the conversion ratios set forth on
Schedule A attached hereto and made a part hereof ("Conversion Ratios"). The
Conversion Ratios are based on the Terminal Equity Value of the Company, as
determined by the Board pursuant to Section 3.13 and Schedule A.
Section 3.2 Vesting in Connection with a Qualifying Termination of Service
(a) Vesting. On the date of a Qualifying Termination of
Service, a certain number of Restricted Shares (the "Termination Vesting
Number") shall be and become vested. The Termination Vesting Number shall be
equal to (1) [approximately 40-50% of grant amount] shares plus (2) an
additional [approximately 2% of grant amount] shares for each full calendar
month (except for the last calendar month, which shall be for [____] shares)
elapsed from the
5
Grant Date (e.g., commencing with March 2004) and ending with the last full
calendar month prior to the month in which the Qualifying Termination occurs. In
no event shall the Terminal Vesting Number exceed the number of Restricted
Shares granted to Executive pursuant to Section 2.1 hereof.
(b) Vesting of Additional Shares. Notwithstanding the
foregoing, if a Trigger Event occurs within the nine (9) month period following
such Qualifying Termination of Service, then Executive shall vest as of such
Trigger Event in such additional number of Restricted Shares (if any) as would
have vested pursuant to Section 3.1(a) above in connection with such Trigger
Event, less the total number of Restricted Shares that Executive actually vested
in pursuant to Section 3.2(a). The Company shall have no right to purchase any
such Restricted Shares that vest as a result of a Trigger Event.
(c) Company Repurchase Rights. The Company shall have the
limited right to repurchase the Restricted Shares that so vest as provided in
Section 3.5.
Section 3.3 Vesting in Connection with Certain EBITDA Performance
(a) Vesting. Effective as [the last day of the Period of
Employment], the Restricted Shares shall vest 50% in the event: (i) a Trigger
Event has not previously occurred; and (ii) the Company has had EBITDA of over
$60 million in any of its fiscal years during the Period of Employment; and
(iii) Executive has complied with Section 5 of the Amended Employment Agreement;
and (iv) Executive is employed by the Company as of [the last day of the Period
of Employment]. Executive and Company understand and agree that subsequent
acquisitions, mergers, dispositions or similar corporate transactions may affect
EBITDA and Executive and Company agree to negotiate, in good faith, a revised
EBITDA threshold in such event.
(b) Executive's Put Right. In the event that (i) 50% of the
Restricted Shares vest pursuant to Section 3.3(a) and (ii) there is a
Termination of Service (including a Qualifying Termination of Service) that
occurs on or after [the last day of the Period of Employment] Executive has the
right to require the Company to repurchase the Restricted Shares that vested
pursuant to Section 3.3(a), provided Executive makes a valid election to
exercise this right (determined as provided below). The repurchase price of the
shares will equal their fair market value, as reasonably determined by the
Board, as of the date that Executive makes such valid election. If Executive
objects to the Board's determination of fair market value for this purpose, the
valuation process set forth in Section 3.13 shall be followed to determine the
fair market value of the shares. Subject to Section 3.6, any payment by the
Company to Executive under this paragraph will be made in a lump sum (without
interest) as soon as practical following the determination of the purchase price
for the shares to be repurchased. Executive's put right under this paragraph
shall terminate if Executive breaches any of the provisions of Section 5 of the
Amended Employment Agreement. Executive's election to exercise his put right
under this paragraph shall be valid only if it is made in writing to the Company
within twelve (12) months after the date of Executive's Termination of Service.
Executive's put right provided for in this paragraph shall terminate, to the
extent not exercised, immediately prior to an IPO.
6
(c) Vesting of Additional Shares. If a Trigger Event occurs
within the nine (9) month period following [the last day of the Period of
Employment] and Executive is employed by the Company as of [the last day of the
Period of Employment], then Executive shall be deemed to have vested as of such
Trigger Event in such additional number of Restricted Shares (if any) as would
have vested pursuant to Section 3.1(a) above in connection with such Trigger
Event, less the total number of Restricted Shares, if any, that Executive
actually vested in pursuant to Section 3.3(a). Executive shall not have any put
rights under Section 3.3(b) with respect to such additional vested shares. The
Company shall have no right to purchase any such Restricted Shares that vest as
a result of a Trigger Event.
(d) Company Repurchase Rights. The Company shall have the
limited right to repurchase the Restricted Shares that vest pursuant to Section
3.3(a) as provided in Section 3.5.
Section 3.4 Board Discretion
By resolution, the Board may, on such terms and conditions as
it deems appropriate, remove any or all of the Restrictions (including, without
limitation, accelerating vesting) at any time or from time to time.
Section 3.5 Repurchase Rights
(a) Qualifying Termination of Service; Purchase Right for
Vested Restricted Shares. If there is a Qualifying Termination of Service during
the Period of Employment, or a Termination of Service for any reason on or after
[the last day of the Period of Employment], then the Company shall have the
right to purchase all vested Restricted Shares then held by Executive, at a cash
price per share equal to the then fair market value of the shares as reasonably
determined by the Board. The repurchase right provided in this paragraph shall
terminate, to the extent not exercised, immediately prior to an IPO.
In the event additional Restricted Shares vest pursuant to
Section 3.2(b) or 3.3(c) and a repurchase of shares pursuant to this Section 3.5
has previously occurred, the Company shall promptly pay to Executive (without
interest) the additional amount due to Executive (if any) to (i) repurchase the
additional shares that vested pursuant to Section 3.2(b) or 3.3(c), as
applicable and (ii) to reflect that such shares would have been repurchased by
the Company for their fair market value as opposed to the price paid by
Executive to acquire such shares.
(b) Termination of Service; Repurchase Right for Unvested
Restricted Shares. Without limiting the foregoing paragraph, any Restricted
Shares that are unvested as of (and after giving effect to) a Termination of
Service of Executive (including any Qualifying Termination of Service) may be
repurchased by the Company for the price initially paid by Executive to purchase
such Restricted Shares from the Company (without interest or any other
adjustments) or, if less, the then fair market value of the shares as reasonably
determined by the Board effective as of such payment date. By way of example, in
the event that Executive resigns or is terminated by the Company for Cause, then
the Restricted Shares shall in no event vest and the Company shall have the
right to repurchase such Restricted Shares pursuant to this paragraph (b).
7
(c) Repurchase in the Event of a Stock Sale, IPO or Asset Sale
with a Terminal Equity Value less than [the minimum Terminal Equity Value].
Notwithstanding the provisions of paragraph (a) or (b) of this Section 3.5, in
the event of a Stock Sale, IPO or Asset Sale with a Terminal Equity Value of
less than [the minimum Terminal Equity Value], the Company shall have the right
to purchase all Restricted Shares (vested and unvested) for the price initially
paid by Executive to purchase such Restricted Shares from the Company (without
interest or any other adjustments) or, if less, the then fair market value of
the shares as reasonably determined by the Board effective as of such payment
date.
(d) Exercise and Termination of Repurchase Rights. If
Executive objects to the Board's determination of fair market value for the
purpose of any of the Company's repurchase rights set forth in this Section 3.5,
the valuation process set forth in Section 3.13 shall be followed to determine
the fair market value of the shares. The Company shall exercise its repurchase
rights pursuant to this Section 3.5 by delivering notice of election to
repurchase such shares within 90 days following (i) the date of Termination of
Services for repurchases pursuant to paragraphs (a) and (b), and (ii) the date
of closing of such Stock Sale, IPO or Asset Sale for repurchases pursuant to
paragraph (c), which notice shall set forth a date for closing not later than 60
days following the mailing of such notice. The closing shall take place at the
Company's office on or before the date specified in the notice, unless the
purchase price for such shares is determined pursuant to the valuation process
set forth in Section 3.13, in which event the closing shall take place not later
than 60 days following the determination of the purchase price pursuant to
Section 3.13. At the closing, the Company shall deliver the purchase price
therefore and the stock certificates representing the shares so purchased shall
be cancelled. If the Company does not so send such notice within such required
90 day period, the Company's repurchase rights shall automatically terminate.
(e) No Repurchase Rights For Class A Common Stock. Nothing
herein shall be deemed to grant the Company any repurchase rights with respect
to the Class A Common Stock that is issued upon conversion of the Class B Common
Stock.
Section 3.6 Insufficient Funds
In the event Executive exercises his put right pursuant to
Section 3.3(b) or the Company exercises any of its repurchase rights pursuant to
Section 3.5 and the Company does not have sufficient funds to pay the repurchase
price for the shares or such repurchase would violate any of the provisions of
any of the Company's existing or future credit facilities or indentures
(including the Indenture concerning the Senior Subordinated Secured Increasing
Rate Notes due 2008) (collectively, the " Credit Facilities") then in effect, or
the rights and preferences of preferred stock then outstanding, or any
applicable law, then to the extent necessary to comply with the Credit
Facilities, the preferred stock or applicable law, the Company shall issue a
subordinated promissory note to Executive representing the unpaid balance of the
purchase price and bearing interest at the then-current Applicable Federal Rate,
which note shall be payable (in installments or in whole) as soon as permitted
under the Credit Facilities, the preferred stock preference or applicable law,
and no later than the date of any IPO, Stock Sale or Asset Sale.
8
Section 3.7 Restriction on Transfer of Restricted Shares
Executive shall not sell, exchange, transfer, alienate,
hypothecate, pledge, encumber or assign any Restricted Shares, or any rights
with respect thereto, until such shares have vested and the Company's repurchase
rights with respect to such shares have terminated. Neither the Restricted
Shares nor any interest or right therein or part thereof shall be liable for the
debts, contracts, or engagements of Executive or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy) and any
attempted disposition thereof shall be null and void and of no effect.
Section 3.8 Assignment of Repurchase Rights
The Company may assign any of its repurchase rights under
Section 3.5 to any Company stockholder.
Section 3.9 Escrow
(a) The Corporate Secretary of the Company or any other person
designated by the Board as escrow agent shall retain physical custody of any
certificates representing the Restricted Shares until and to the extent (i) such
Restricted Shares have vested and all Restrictions have been removed or lapsed
as to such shares under this Agreement, or (ii) the Company exercises its
repurchase right under Section 3.5 as to such shares, or (iii) such shares have
been forfeited or cancelled. To ensure the delivery of Executive's Restricted
Shares upon repurchase by the Company pursuant to Section 3.5, Executive hereby
appoints the Corporate Secretary of the Company or any other designated escrow
agent as Executive's attorney-in-fact to sell, assign and transfer unto the
Company (or such designee), such Restricted Shares, if any.
(b) The Corporate Secretary of the Company, or other escrow
agent, shall not be liable for any act he or she may do or omit to do with
respect to holding the Restricted Shares in escrow and while acting in good
faith and in the exercise of his or her judgment.
Section 3.10 Legend
The share certificate evidencing the Restricted Shares issued
hereunder may at the discretion of the Company be endorsed with the following
legend (in addition to any legend required under applicable state securities
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND REPURCHASE RIGHTS HELD BY THE ISSUER AS
SET FORTH IN A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE CORPORATE SECRETARY OF
THE ISSUER, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY,
OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
9
OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE
PROVISIONS OF SUCH AGREEMENT.
Section 3.11 Vested Shares without Restrictions
(a) As and to the extent the Restricted Shares vest in
accordance with the terms of this Agreement and all the Restrictions on such
shares have lapsed, certificates representing such shares of Class B Common
Stock shall be delivered to Executive or for the benefit of his or her account
without the legend referenced in Section 3.10. Such shares shall cease to be
considered Restricted Shares subject to the terms and conditions of this
Agreement, and shall be shares of Class B Common Stock of the Company free of
all Restrictions.
(b) Notwithstanding the foregoing, certificates representing
vested shares of Class B Common Stock (as to which all Restrictions have lapsed)
shall not be delivered to Executive or for the benefit of or to his account
unless and until Executive shall have paid to the Company in cash or made
provisions for payment through withholding against income, the full amount of
all federal and state (or applicable foreign) withholding or other employment
taxes applicable to the taxable income of Executive resulting from the grant of
the Restricted Shares, vesting of the Restricted Shares, or the lapse or removal
of the Restrictions.
Section 3.12 Restrictions on New Shares and Distributions
In the event of any dividend or other distribution (including
ordinary cash dividends, and whether in the form of Class A Common Stock or
Class B Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-off, spin-off, combination, purchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, or issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
transaction or event, is paid, issued, exchanged or distributed in respect of
Restricted Shares, such new or additional or different shares or securities or
property (including cash) which are attributable to Executive in his capacity as
the owner of the Restricted Shares, shall be considered to be Restricted Shares
and shall be subject to all of the Restrictions, unless the Board shall, in its
discretion, otherwise provide.
Section 3.13 Determination of Terminal Equity Value and Fair Market Value
For purposes of determining the fair market value of a share
of Class B Common Stock or vested Restricted Shares, the Board shall determine
the Terminal Equity Value for an Asset Sale, assuming that the Company was
willing and sold its assets to a willing purchaser. For purposes of the
conversion features of the Class B Common Stock, the Board shall determine the
Terminal Equity Value for an IPO or Stock Sale, as applicable. For purposes of
the liquidation payments for the Class B Common Stock upon an Asset Sale, the
Board shall determine the Terminal Equity Value for an Asset Sale, assuming that
the Company was willing and sold its assets to a willing purchaser. The Board
shall provide prompt written notice to Executive of such valuation.
10
If Executive disagrees with such valuation by the Board,
Executive may, by written notice to the Board no later than 10 days after
Executive is notified of the Board's determination of Terminal Equity Value,
elect to have a nationally recognized valuation firm conduct a separate
determination of such Terminal Equity Value. Any valuation firm selected must
complete its determination within 75 days of its engagement and must base its
determination upon the applicable factor(s) identified in the definition of
Terminal Equity Value. Executive shall initially select a nationally recognized
valuation firm to conduct the determination. The Company must approve or deny
the valuation firm selected by Executive within 15 business days, which approval
shall not be unreasonably withheld. If the Company denies Executive's proposed
valuation firm, Executive can select an alternate firm and the Company will have
10 business days to reasonably approve or deny such selection. If the Company
denies Executive's second proposed valuation firm, Executive can select a third
firm and the Company will have 5 business days to reasonably approve or deny
such selection provided, however, that if the Company denies 3 nationally
recognized valuation firms selected by Executive, Executive can require the
Company to choose one of the 3 nominated firms within 5 business days, and if
the Company does not select a firm Executive may select one of such firms. The
Company shall be deemed to have approved any selection by Executive if it does
not provide an approve or deny response within the specified time period.
Following the determination of Terminal Equity Value by the
valuation firm, the Company and Executive will have a 3 week period to mutually
agree that the Terminal Equity Value will be the average or some other
permutation of the Board's determination and the valuation firm's determination.
If the Company and Executive do not agree to a Terminal Equity Value based on
those two determinations within 3 weeks, the valuation firm and the Company will
choose a second nationally recognized valuation firm by each proposing 3
candidates to the Company and Executive simultaneously within two weeks, and any
candidate appearing on both lists will be selected (if more than one candidate
appears on both lists the final selection will be determined by chance (i.e.,
flipping a coin)). If no candidate appears on both lists, the process will be
repeated until a common candidate is found or the Company, in its sole
discretion, can select any firm previously submitted by Executive. The second
valuation firm will have 75 days to complete its determination of Terminal
Equity Value (and if not completed the average of the Company's and the fast
valuation firm's determinations will be used). After the second valuation firm
completes its determination, the Terminal Equity Value used will be the average
of the two determinations that are closest in value from among the three
determinations (the Board's, the first valuation firm's, and the second
valuation firm's).
The Company will pay the costs of the first valuation firm,
except that the Company shall be entitled to reimbursement from Executive for
such costs if the first valuation firm's valuation is within 5% of the Board's
valuation. The Company and Executive will equally share the costs of the second
valuation firm, if needed. If the Company is entitled to reimbursement from
Executive for any costs in accordance with the preceding two sentences, the
Company may offset all or a portion of the amount owing to the Company by
Executive against any amount (including, without limitation, any amount of
compensation) otherwise payable to Executive. The Company and Executive shall be
bound by the final determination of Termination Value pursuant to this Section
3.13.
11
Section 3.14 Revisions to Adjustment Factors, Conversion Rates and Terminal
Equity Value Thresholds
The Company and Executive shall negotiate in good faith
revisions to Adjustment Factors, Conversion Rates, and the Terminal Equity Value
thresholds, as applicable, in the event of any acquisitions, dispositions,
combinations, mergers, consolidation, reorganization or similar corporate
transaction that is reasonably expected to materially affect the Terminal Equity
Value of the Company.
ARTICLE IV.
MISCELLANEOUS
Section 4.1 Administration
The Board shall have the power to interpret this Agreement and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Board in good faith shall be final and binding upon Executive, the Company and
all other interested persons. No member of the Board shall be personally liable
for any action, determination, or interpretation made in good faith with respect
to the Restricted Shares.
Section 4.2 Conditions to Issuance of Stock Certificates
The Restricted Shares may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
pursuant to this Agreement prior to fulfillment of all of the following
conditions:
(i) The admission of such shares to listing on all
stock exchanges on which such class of stock is then listed,
if applicable; and
(ii) The completion of any registration or other
qualification of such shares under any state or federal law or
under rulings or regulations of the Securities and Exchange
Commission or of any other governmental regulatory body, if
applicable, or the receipt of further representations from
Executive as to investment intent or completion of other
actions necessary to perfect exemptions, as the Board shall,
in its absolute discretion, deem necessary or advisable; and
(iii) The obtaining of any approval or other
clearance from any state or federal governmental agency which
the Board shall, in its absolute discretion, determine to be
necessary or advisable; and
(iv) The lapse of such reasonable period of time as
the Board may from time to time establish for reasons of
administrative convenience; and
12
(v) The receipt by the Company of payment of any
applicable withholding tax.
Section 4.3 Rights as Stockholder
Except as otherwise provided herein, upon issuance of the
Restricted Shares upon the Grant Date, Executive shall have all the rights of a
stockholder with respect to said shares, subject to the Restrictions herein,
including the right to receive all dividends or other distributions paid or made
with respect to the Class B Common Stock; provided, however, that any and all
shares received by Executive with respect to such Restricted Shares as a result
of stock dividends, stock splits or any other form of recapitalization shall
also be subject to the Restrictions until the Restrictions on the underlying
Restricted Shares lapse or are removed pursuant to this Agreement.
Section 4.4 Section 83(b) Election
If Executive makes an election under Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") to be taxed with respect
to all or any portion of the Restricted Shares as of the date of issuance of the
Restricted Shares rather than as of the date or dates upon which Executive would
otherwise be taxable under Section 83(a) of the Code, Executive shall deliver a
copy of such election to the Company promptly after filing such election with
the Internal Revenue Service. Section 83(b) elections must be filed with the
Internal Revenue Service within 30 days following the Grant Date.
Section 4.5 Notices
Any notice or other communication given pursuant to this
Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) if to the Company:
Skilled Healthcare Group, Inc.
Attention: Board of Directors
27442 Portola Parkway,
Suite 200
Foothill Ranch, California 92610
With copy to:
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
(b) if to Executive:
13
[_________________]
[_________________]
[_________________]
Either party may change its address set forth above by written
notice given to the other party in accordance with the foregoing. Any notice
shall be effective when personally delivered, 2 business days after being
delivered to overnight courier or express mail, or 5 business days after by
first class certified or registered mail, postage prepaid, return receipt
requested.
Section 4.6 Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 4.7 Governing Law
This Agreement and the legal relations hereby created between
the parties hereto shall be governed by and construed under and in accordance
with the laws of the State of California, without regard to choice of law
provisions thereof.
Section 4.8 Conformity to Securities Laws
Executive acknowledges that this Agreement is intended to
conform to the extent necessary with all provisions of all applicable federal
and state laws, rules and regulations and to such approvals by any listing,
regulatory or other governmental authority as may, in the opinion of counsel for
the Company, be necessary or advisable in connection therewith. Notwithstanding
anything herein to the contrary, the Restricted Shares are granted only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, this Agreement and the Restricted Shares shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
Section 4.9 Amendments
No amendment or waiver of this Agreement or any term,
covenant, or condition hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not be
deemed a waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times.
Section 4.10 Assignment
This Agreement is personal in its nature and neither of the
parties hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations
14
hereunder; provided, however, that, in the event of a merger, consolidation, or
transfer or sale of all or substantially all of the assets or stock of the
Company with or to any other individual(s) or entity, this Agreement shall be
binding upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.
Section 4.11 Limitation on Amendments of the Restated Certificate of
Incorporation
The Company shall not amend, modify or restate the Restated
Certificate of Incorporation in any way that adversely affects any rights,
preferences or privileges of Executive as a holder of Class B Common Stock.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
SKILLED HEALTHCARE GROUP, INC.
a Delaware corporation
By_____________________________________
Title__________________________________
EXECUTIVE
____________________________
[_______________]
15
EXHIBIT A
CONSENT OF SPOUSE
I, [_____________], spouse of [_____________] have read and
approve the foregoing Restricted Stock Agreement, dated as of March 8, 2004, by
and between my spouse and Skilled Healthcare Group, Inc., a Delaware corporation
("Skilled"). In consideration of granting to my spouse shares of Skilled, as set
forth in the Restricted Stock Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Restricted
Stock Agreement and agree to be bound by the provisions of the Restricted Stock
Agreement insofar as I may have any rights in said Restricted Stock Agreement or
any shares issued pursuant thereto under the community property laws or similar
laws relating to marital property in effect in the state of our residence as of
the date of the signing of the foregoing Restricted Stock Agreement.
________________________________
Name: [_____________]
Date: March 8, 2004
16