ex10-3.htm


    EXHIBIT
      10.3

    Amendment
      No. 2

    to

    EMPLOYMENT
      AGREEMENT

    


    THIS
      AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (“Agreement”) effective as of October
      31, 2007, by and between William A. Mathies (“Mr. Mathies”) and
Sun Health Specialty Services, Inc., a New Mexico corporation
      (“SHSS”);

     

    WHEREAS,
      SHSS is a wholly owned subsidiary of SunBridge Healthcare Corporation
      (“SunBridge” or “Company”) which is a wholly owned subsidiary of Sun Healthcare
      Group, Inc. (“SHG”);

     

    WHEREAS,
      SunBridge and its direct and indirect subsidiaries (collectively, “the LTC
      subsidiaries”) provide inpatient services throughout the United
      States;

     

    WHEREAS,
      SHSS has service agreements with the LTC subsidiaries to provide employees,
      including Mr. Mathies, to the LTC subsidiaries;

     

    WHEREAS,
      Mr. Mathies has been appointed as President and Chief Operating Officer of
      SunBridge and  SHG Services, Inc., the subsidiary of SHG that is a
      holding company for other operating subsidiaries of SHG that are not LTC
      subsidiaries; and

     

    WHEREAS,
      SHSS and Mr. Mathies entered into an Employment Agreement dated as of February
      28, 2002 and an Amendment No. 1 to Employment Agreement dated as of October
      12,
      2006 (collectively, the “Employment Agreement”), and they desire to amend the
      Employment Agreement with respect to the terms and conditions of Mr. Mathies’
bonus eligibility, as approved by the Compensation Committee of the Board of
      Directors of SHG 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. Mathies and SHSS 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

            


    

     


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              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.

            


    

     

    
      	
               

            	
              (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/
              William A. Mathies	 October
              31, 2007
	
              William
                A. Mathies

            	
              Date

            
	 	 
	
              SUN
                HEALTH SPECIALTY SERVICES, INC.

            	 
	 	 
	
              By /s/
                Michael Newman

            	
              October
                31, 2007

            
	
              Its
                Vice President

            	
              Date

            


    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    Schedule
      A

    


     

    Mr.
      Mathies’ 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 than 120% 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 SHG
      (“EBITDA”), as published by SHG 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. Mathies shall be paid 100% of the Maximum
      Amount in recognition of the achievement of the EBITDA
      target.    

    


    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 the LTC subsidiaries 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. Mathies at the
      time specified in Section 3(b).

     

    3