ex10-5.htm


    EXHIBIT
      10.5

    Amendment
      No. 1

    to

    EMPLOYMENT
      AGREEMENT

    


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

     

    WHEREAS,
      Sun and Executive 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 Executive’s 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, Executive 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.

            


    

     

    
      	
               

            	
              (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.

            


    

     


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    


     

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

    


    


    
      	 /s/
              Chauncey J. Hunker	 October
              31, 2007
	
              Chauncey
                J. Hunker

            	
              Date

            
	 	 
	
              SUN
                HEALTHCARE GROUP, INC.

            	 
	 	 
	
              By /s/
                Richard K.
                Matros          

            	
              October
                31, 2007

            
	
              Its
                Chief Executive Officer

            	
              Date

            


    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    Schedule
      A

    


    Executive’s
      Bonus for any fiscal year (the “Applicable Fiscal Year”) shall be based on the
      criteria set forth below.    There are three components to
      his Bonus:  EBITDA, quality of care and individual
      goals.  In no event shall his Bonus exceed 100% 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
      8% 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 8% and 50% of Base
      Salary); and if actual EBITDA is 115% (or greater) of target EBITDA, the Maximum
      Amount will be 100% 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 100% of Base Salary).  

    


    2.           EBITDA
      Component.  Subject to
      the provisions
      of paragraph 4 below, in the event that the Maximum Amount is greater than
      zero,
      then Executive shall be paid 70% of the Maximum Amount in recognition of the
      achievement of the EBITDA target.    

    


    3.           Individual
      Goals Component.  The Chief Executive Officer of Sun (the
“CEO”) shall establish the individual goals each year after consulting
      with
      Executive, the Compensation Committee, and such others as the CEO deems
      appropriate.  Subject to the provisions of paragraph 4 below, in the
      event that the Maximum Amount is greater than zero, then Executive shall be
      paid
      up to 30% of the Maximum Amount in recognition of the achievement of his
      individual goals, to be determined as follows: after the end of the Applicable
      Fiscal Year, the CEO shall make a recommendation to the Compensation Committee
      as to what extent the goals have been met.  The Compensation Committee
      shall determine the amount of this component of the Bonus to be paid to
      Executive based upon the level of attainment of the goals.

    


    4.           Quality
      of Care Component.    If the quality of care target
      is met, the EBITDA Component and the Individual Goals Component shall be paid
      in
      the amounts 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 and the Individual Goals Component as it determines in its
      discretion from the amounts 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


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    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.

    


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

     

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