ex10-4.htm


    EXHIBIT
      10.4

    Amendment
      No. 1

    to

    EMPLOYMENT
      AGREEMENT

    


    THIS
      AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (“Agreement”) effective as of
      October 31, 2007, by and between Richard Matros (“Mr. Matros”)
      and Sun Healthcare Group, Inc., a Delaware corporation
      (“Sun”);

     

    WHEREAS,
      Sun and Mr. Matros entered into an Employment Agreement dated as of October
      12,
      2006 (the “Employment Agreement”), and they desire to amend the Employment
      Agreement with respect to the terms and conditions of Mr. Matros’ bonus
      eligibility, as approved by the Compensation Committee of the Board of Directors
      of Sun on February 27, 2007 and, as to the quality of care component referenced
      in Schedule A attached hereto, August 22, 2007), as set forth below (capitalized
      terms used in this Agreement without definition shall have the meanings provided
      in the Employment Agreement).

     

    NOW,
      THEREFORE, in consideration of the above recitals and the mutual covenants
      and
      agreements contained herein, Mr. Matros and Sun agree as follows:

     

    1.           Amendment.  Schedule
      A to the Employment Agreement is amended by deleting it in its entirety and
      inserting Schedule A hereto in lieu thereof.

     

    2.           Miscellaneous.

     

    
      	
               

            	
              (a)

            	
              Amendments,
                Waivers, Etc.  Except as otherwise provided herein,
                no provision of this Agreement may be modified, waived or discharged
                unless such waiver, modification or discharge is agreed to in writing
                signed by both parties.  No waiver by either party hereto at any
                time of any breach by the other party hereto of, or compliance with,
                any
                condition or provision of this Agreement to be performed by such
                other
                party shall be deemed a waiver of similar or dissimilar provisions
                or
                conditions at the same or at any prior or subsequent
                time.

            


    

     

    
      	
               

            	
              (b)

            	
              Entire
                Agreement.  The Employment Agreement, as amended by
                this Agreement, sets forth the entire agreement and understanding
                of the
                parties hereto with respect to the matters covered hereby and supersedes
                all prior agreements and understandings of the parties with respect
                to the
                subject matter hereof.  No agreements or representations, oral
                or otherwise, express or implied, with respect to the subject matter
                hereof have been made by either party which are not expressly set
                forth in
                the Employment Agreement, as amended hereby, and the Employment Agreement,
                as so amended, shall supersede all prior agreements, negotiations,
                correspondence, undertakings and communications of the parties, oral
                or
                written, with respect to the subject matter hereof.  Except for
                the changes set forth in Section 1 and Schedule A hereto, the Employment
                Agreement shall remain in full force and
                effect.

            


    

     


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    (c)           Counterparts.  This
      Agreement may be executed in one or more counterparts, each of which, when
      so
      executed and delivered, shall be deemed an original, but all such counterparts
      together shall constitute one and the same instrument.

     

    


     

    The
      parties hereto have executed this
      Agreement as of the date first above written.

    


    


    
      	 /s/
              Richard Matros	 October
              31, 2007
	
              Richard
                Matros

            	
              Date

            
	 	 
	
              SUN
                HEALTHCARE GROUP, INC.

            	 
	 	 
	
              By /s/
                 Michael Newman 

            	
              October
                31, 2007

            
	
              Its
                Executive Vice President

            	
              Date

            


    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    Schedule
      A

     

    Mr.
      Matros’ Bonus for any fiscal year (the “Applicable Fiscal Year”) shall be based
      on the criteria set forth below.    There are two components
      to his Bonus:  EBITDA and quality of care.  In the event the
      EBITDA performance threshold is met as outlined below, his minimum bonus shall
      be no less than 10% of his Base Salary for the Applicable Fiscal Year, and
      his
      maximum Bonus shall be no more than120% of his Base Salary for the Applicable
      Fiscal Year.

     

    


    1.           Maximum
      Amount.  The maximum amount of the Bonus shall be based upon
      the earnings before interest, taxes, depreciation and amortization of Sun
      (“EBITDA”), as published by Sun in its press release announcing financial
      results for the Applicable Fiscal Year, but excluding the effect of actuarial
      adjustments for self-insurance for general and professional
      liability.  The Compensation Committee reserves the right to make
      adjustments to the calculation, including the inclusion or exclusion of
      discontinued operations and other normalizing adjustments.

    


    The
      Compensation Committee shall
      establish the EBITDA target each year.The potential amount
      of
      the  Bonus shall be based upon actual EBITDA attained as a percentage
      of the target EBITDA as follows:  if actual EBITDA is less than 85% of
      target EBITDA, the maximum amount of the Bonus (the “Maximum Amount”) will be
      zero; if actual EBITDA is 85% of target EBITDA, the Maximum Amount will be
      10%
      of Base Salary; if actual EBITDA is 100% of target EBITDA, the Maximum Amount
      will be 50% of Base Salary (if actual EBITDA is greater than 85% but less than
      100% of target EBITDA, the amount will be pro rated between 10% and 50% of
      Base
      Salary); and if actual EBITDA is 115% (or greater) of target EBITDA, the Maximum
      Amount will be 120% of Base Salary (if actual EBITDA is greater than 100% but
      less than 115% of target EBITDA, the Maximum Amount will be pro rated between
      50% and 120% of Base Salary).  

    


    2.           EBITDA
      Component.  Subject to
      the provisions
      of paragraph 3 below, in the event that the Maximum Amount is greater than
      zero,
      then Mr. Matros shall be paid 100% of the Maximum
      Amount.    

    


    3.           Quality
      of Care Component.    If the quality of care target
      is met, the EBITDA Component shall be paid in the amount determined as set
      forth
      above.  If the quality of care target is not met, the Compensation
      Committee shall deduct such amount of the EBITDA Component as it determines
      in
      its discretion from the amount otherwise payable.  The quality of care
      target is met if quality of care at skilled nursing centers operated by
      SunBridge Healthcare Corporation and its subsidiaries
      (“SunBridge”)  is better than or equal to the quality of care at
      skilled nursing centers of SunBridge’s for-profit peer group of companies for
      the Applicable Fiscal Year (or the twelve month period ending as close as
      possible to the end of Applicable Fiscal Year for which data are available
      at
      the time the Compensation Committee considers the amount of the Bonus), in
      each
      case as measured by the Health Deficiency Index reported by the Long Term Care
      Institute.

    


    4.           Timing
      of Payment.  The Bonus shall be paid to Mr. Matros at the
      time specified in Section 3(b).

     

    3