ex1010.htm


    


    Exhibit
10.10

     

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

     

    THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into
effective as of the 17th day of December, 2008, by and between Chauncey J. Hunker
(“Executive”) and Sun
Healthcare Group, Inc., a Delaware corporation (“Sun” or
“Company”).

     

    WHEREAS,
Executive serves as the Chief Compliance and Risk Officer of Sun;

     

    WHEREAS,
Sun and Executive are parties to that certain Employment Agreement dated as of
October 12, 2006, as amended on October 31, 2007 and March 31, 2008 (the
“Existing Agreement”); and

     

    WHEREAS,
Sun and Executive wish to amend and restate the Existing Agreement upon the
terms set forth in this Agreement to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), effective as of the date
hereof.

     

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

     

    Section
1:   Employment; Term of
Employment.

     

    
      	
              a.  

            	
              Employment.  Sun agrees
      to employ Executive and Executive agrees to accept employment with Sun,
      subject to the terms and conditions of this
  Agreement.

            


    

     

    
      	
              b.  

            	
              Term
      of Employment.  The period
      of Executive’s employment under this Agreement commenced as of September
      1, 2006 and shall continue until terminated in accordance with Section 5
      below. As used in this Agreement, the phrase “Employment Term” refers to
      Executive’s period of employment from October 12, 2006 (the date of the
      Existing Agreement) until the date his employment is
      terminated.

            


    

     

    Section
2:   Duties
and Responsibilities.  Executive shall devote his full
employment time, efforts, skills and attention exclusively to his duties as
Chief Compliance and Risk Officer; provided, however, that to the extent the
following activities do not materially interfere or conflict with his duties and
responsibilities hereunder, Executive may (i) serve as a member of the boards of
directors of other companies with the prior written consent of the Chief
Executive Officer of Sun; and (ii) engage in charitable, civic and religious
affairs.

     

    Section
3:  Compensation, Benefits and
Related Matters.

     

    
      	
              a.  

            	
              Annual
      Base Salary.  During the Employment Term, Sun shall pay
      to Executive a base salary at an annual rate of $300,000
      (“Base Salary”), such salary to be payable in accordance with Sun’s
      customary payroll practices as in effect from time to time (but not less
      frequently than monthly). The annual Base Salary
  will

            


    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

      
        	
                 

              	
                be
      reviewed at least annually for possible merit increases and
      any increase in Executive’s annual base salary rate shall thereafter
      constitute “Base Salary” for purposes of this
  Agreement.

              


      

       

    

    
      	
              b.  

            	
              Cash
      Bonus/Incentive Compensation.  In addition to the Base
      Salary provided for in Section 3(a) above, Executive shall be entitled to
      receive an annual incentive bonus (“Bonus”) in accordance with the Sun
      Healthcare Group, Inc. Executive Bonus Plan, as it may be amended from
      time to time by the Compensation Committee of the Board of Directors;
      provided, however, that no amendment shall be effective if it reduces the
      percentage of Base Salary that would constitute the minimum or maximum
      potential amount of the Bonus as compared to the prior year, unless such
      amendment has been agreed to in writing by Executive.  The Bonus
      shall be payable at the same time as other annual bonuses are paid to
      senior management personnel with respect to that fiscal
      year.  Subject to the provisions of Section 6, in order to have
      earned and to be paid any such Bonus, Executive must be employed by Sun on
      the date of such payment. It is intended that the Bonus described in this
      Section 3(b) qualify as “performance based compensation” under Section
      162(m) of the Code to the extent necessary to preserve Sun’s ability to
      deduct such Bonus.

            


    

     

    
      	
              c.  

            	
              Equity
      Incentive.  During the Employment Term, Executive shall
      be eligible to be granted equity incentive awards during his employment on
      the same basis as other senior executive officers of Sun. Such equity
      incentive awards may include stock options and restricted units.
      Executive’s eligibility, rights and entitlement to such equity incentive
      awards shall be governed by the applicable equity incentive plan, award
      agreement, award and/or grant.

            


    

     

    
      	
              d.  

            	
              Retirement
      and Benefit Plans.  During the Employment Term, Executive
      shall be eligible to participate in or receive benefits under any pension
      plan, 401(k) savings plan, nonqualified deferred compensation plan,
      supplemental executive retirement plan, medical and dental benefits plan,
      life insurance plan, short-term and long-term disability plans, or any
      other employee benefit or fringe benefit plan, generally made available by
      Sun to senior executives in accordance with the eligibility requirements
      of such plans and subject to the terms and conditions set forth in this
      Agreement. Such plans, programs and arrangements are subject to change
      during employment at the sole discretion of the
  Company.

            


    

     

    
      	
              e.  

            	
              Sick,
      Holiday and Vacation Pay. Executive is entitled to holiday and sick
      pay consistent with Sun’s Employee Handbook or other policy applicable to
      senior executives. Sick and Holiday Pay is subject to change during
      employment at the sole discretion of the Company. Executive shall be
      entitled to up to 160 hours of vacation per year, which shall accrue at
      the rate of 6.152 hours per pay period (26 pay periods). However, in
      accordance with Sun’s Employee Handbook or other policy applicable to
      senior executives, vacation hours shall be subject to an accrual cap of
      two times Executive’s annual allotment of vacation hours and shall be
      subject to change during employment at the sole discretion of the
      Company.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              f.  

            	
              Indemnification,
      Liability/Insurance.  Executive shall be entitled to
      indemnification by Sun to the extent required by applicable law and the
      charter and bylaws of Sun. In addition, Sun shall maintain during
      Executive’s employment customary directors and officers’ liability
      insurance and Executive shall be covered by such
  insurance.

            


    

     

    
      	
              g.  

            	
              Taxes.  All
      compensation payable to Executive shall be subject to withholding for all
      applicable federal, state and local income taxes, occupational taxes,
      Social Security and similar mandatory
  withholdings.

            


    

     

    
      	
              h.  

            	
              Expenses.  Executive
      shall be entitled to reimbursement for expenses incurred by him in
      connection with the discharge of his duties hereunder, including
      reasonable costs of traveling from Executive’s residence in Madison,
      Wisconsin to Albuquerque, New Mexico or such other place of business as
      may be designated by the Chief Executive Officer, and reasonable housing
      expense at such times as Executive is temporarily located in Albuquerque,
      New Mexico or such other place of business. All such expense reimbursement
      shall be subject to and shall be submitted, documented and paid in
      accordance with the expense reimbursement policies of Sun, as such
      policies may change from time to time.  Executive agrees that he
      will provide such documentation to the Company promptly after expenses are
      incurred.

            


    

     

    Section
4:  Cooperation.  Following
the expiration or a termination of this Agreement for any reason, Executive
shall provide such cooperation as is reasonably required by the Company,
including, without limitation, consulting with the Company with respect to
litigation and/or matters that relate to facts and circumstances that occurred
during the Employment Term, and executing such documents and instruments
relating to such employment as are reasonably requested by Sun.

     

    Section
5:   Termination
of Employment.  Sun, at any time in its sole discretion, may
terminate Executive as Chief Compliance and Risk Officer and from all other
positions with Sun and its direct and indirect subsidiaries. Upon termination,
Executive (or his beneficiary or estate as the case may be) shall be entitled to
receive the compensation and benefits described in Section 6 below.

     

    
      	
              a.  

            	
              Termination
      by Sun for “Good Cause.”  Sun may, at any time, by
      written notice to Executive at least five (5) business days prior to the
      date of termination specified in such notice and specifying the acts or
      omissions believed to constitute Good Cause (as defined below), terminate
      Executive as an officer and employee and from all other positions with Sun
      for Good Cause. Sun may relieve Executive of his duties and
      responsibilities pending a final determination of whether Good Cause
      exists, and such action shall not constitute Good Reason (as defined in
      Section 5(c) below) for purposes of this Agreement. Payment to Executive
      upon a termination for Good Cause is set forth in Section 6(a). “Good
      Cause” for termination shall mean any one of the
  following:

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              1.  

            	
              Any
      criminal conviction (including conviction on a nolo contendere plea)
      under the laws of the United States or any state or other political
      subdivision thereof which, in the sole discretion of the Chief Executive
      Officer of Sun, renders Executive unsuitable as an officer or employee of
      Sun.

            


    

     

    
      	
              2.  

            	
              Executive’s
      continued failure to substantially perform the duties reasonably requested
      by the Chief Executive Officer of Sun and commensurate with his position
      as Chief Compliance and Risk Officer of Sun (other than any such failure
      resulting from his incapacity due to his physical or mental condition)
      after a written demand for substantial performance is delivered to him by
      the Chief Executive Officer of Sun, which demand specifically identifies
      the manner in which the Chief Executive Officer of Sun believes that
      Executive has not substantially performed his duties, and which
      performance, in the sole discretion of the Chief Executive Officer is
      determined to not be substantially corrected by Executive within ten (10)
      calendar days of receipt of such
demand;

            


    

     

    
      	
              3.  

            	
              Any
      material workplace misconduct or willful failure to comply with Sun’s
      general policies and procedures as they may exist from time to time by
      Executive which, in the sole discretion of the Chief Executive Officer of
      Sun, renders Executive unsuitable as an officer or employee;
      and

            


    

     

    
      	
              4.  

            	
              Breach
      of any of the covenants set forth in Section 8 of this
      Agreement.

            


    

     

    Regardless
of whether Executive’s employment initially was considered to be terminated for
any reason other than Good Cause, Executive’s employment will be considered to
have been terminated for Good Cause for purposes of this Agreement if the Chief
Executive Officer of Sun subsequently determines that Executive engaged in an
act constituting Good Cause.

     

    
      	
              b.  

            	
              Termination
      by Sun without Good Cause.  Sun may at any time in its
      sole discretion, by written notice to Executive at least five (5) business
      days prior to date of termination specified in such notice, terminate
      Executive as an officer and employee and from all other positions with
      Sun. If such termination is made by Sun other than by reason of
      Executive’s death or Disability (as defined in Section 5(e)) and Good
      Cause does not exist, such termination shall be treated as a termination
      without Good Cause and Executive shall be entitled to payment in
      accordance with Section 6(b).

            


    

     

    
      	
              c.  

            	
              Termination
      by Executive for Good Reason.  Executive may, at any time
      at his option within sixty (60) calendar days following an event or
      condition that constitutes Good Reason (as defined below), resign for Good
      Reason, as an officer and employee and from all other positions with Sun
      by written notice to Sun at least thirty (30) calendar days prior to the
      date of termination specified in such notice; provided, however, that Sun
      has not substantially corrected the event or condition that would
      constitute Good Reason prior to the date of termination. Payment to
      Executive upon a termination for Good Reason is set forth in Section
      6(b).

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Good
Reason” shall mean the occurrence of any one of the following events or
conditions without Executive’s written consent:

     

    
      	
               
      

            	
              1.

            	
              A
      meaningful and detrimental reduction, in Executive’s authority, duties or
      responsibilities or a meaningful and detrimental change in his reporting
      responsibilities; or

            


    

     

    
      	
               
      

            	
              2.

            	
              A
      material failure of Sun to comply with the compensation provisions as set
      forth in Sections 3(a) - 3(c) (other than a reduction of compensation
      uniformly applicable to other members of Senior Management or as a result
      of disciplinary action against Executive) or a material failure of Sun to
      comply with the benefits provisions set forth in Sections 3(d) - 3(g)
      (collectively, the “Benefits”) (other than a reduction of Benefits
      uniformly applicable to other senior executives);
  or

            


    

     

    
      	
               
      

            	
              3.

            	
              A
      material breach by Sun of Section
3(h);

            


    

     

    provided that Sun is provided
with notice and opportunity to cure such breach and Executive terminates his
employment with Sun, in each case within the time periods prescribed under this
Section 5(c).

     

    Notwithstanding
any provision of this Section 5(c) to the contrary, the occurrence of a “Change
in Control” (as defined in Section 6 below) shall not, by itself, constitute
Good Reason hereunder.

     

    
      	
              d.  

            	
              Voluntary
      Resignation Without Good Reason.  Executive may, at any
      time at his option with thirty (30) calendar days written notice to Sun,
      voluntarily resign without Good Reason as an officer and employee and from
      all positions with Sun. Payment to Executive upon his voluntary
      resignation without Good Reason is set forth in Section 6(a). Resignation
      from employment shall automatically constitute resignation from all
      positions of any subsidiary or affiliated
  corporation.

            


    

     

    
      	
              e.  

            	
              Death
      or Disability.  Executive’s employment under this
      Agreement shall terminate automatically as of the date of Executive’s
      death. Sun, at any time by written notice to Executive at least five (5)
      business days prior to the date of termination specified in such notice,
      terminate Executive as an officer and employee and from all other
      positions with Sun by reason of his Disability. “Disability” shall mean
      any physical or mental condition or illness that prevents Executive from
      performing the essential duties of his position (where such failure cannot
      be remedied with reasonable accommodation) for a period of 120
      substantially consecutive calendar days, as determined by a physician
      selected by Sun and reasonably acceptable to Executive or, if Executive is
      incapacitated, reasonably acceptable to the Director of Medicine or
      equivalent senior physician at a hospital of Executive’s choice. In
      addition, Executive’s receipt of disability benefits under Sun’s long-term
      disability benefits plan or receipt of
Social

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               

            	
              Security
      disability benefits shall be deemed conclusive evidence of Disability for
      purpose of this Agreement. Payment to Executive upon his termination by
      reason of his death or Disability is set forth in Section
      6(d).

            


    

     

    Section
6:  Payments Upon
Termination.

     

    
      	
              a.  

            	
              Payment
      Upon Termination for Good Cause, or Resignation without Good
      Reason.  In the event of termination of his employment
      pursuant to Sections 5(a) or 5(d), Executive, or his estate where
      applicable, shall be paid any earned but unpaid Base Salary through the
      date of termination and any accrued but unused vacation through the date
      of termination in accordance with Company policy, which shall be paid to
      Executive in a lump sum in cash upon or promptly following (and in all
      events within 30 days after) the date of termination of employment
      (collectively, the “Accrued
Obligations”).

            


    

     

    Executive
also shall receive his vested benefits in accordance with the terms of Sun’s
compensation and benefit plans, and his participation in such plans and all
other perquisites shall cease as of the date of termination, except to the
extent Executive may elect to continue coverage as under any welfare benefit
plans as required by Part 6, Title I of the Employee Retirement Income Security
Act of 1974, as amended. Upon a termination under Section 5(a) or 5(d),
Executive shall not be entitled to any compensation or benefits under this
Agreement except as set forth in this Section 6(a).

     

    
      	
              b.  

            	
              Payment
      Upon Termination by Sun without Good Cause or by Executive for Good
      Reason.  In
      the event of termination of employment pursuant to Sections 5(b) or 5(c),
      Executive shall be entitled to a lump sum severance payment in an amount
      equal to one (1) year Base Salary or, in the event such termination occurs
      on or within two (2) years following the change of a “Change in Control,”
      two (2) years Base Salary, with such amount to be paid to Executive in the
      month immediately following the month in which Executive’s termination of
      employment occurs. Executive also shall be entitled to (i) any earned
      Bonus pursuant to Section 3(b) for the fiscal year prior to the fiscal
      year of termination in the event Executive was employed the entire prior
      fiscal year but is not employed by Sun on the date said Bonus is paid,
      payable to Executive in a lump sum in cash at the time that annual bonuses
      are paid to senior management personnel with respect to that fiscal year,
      but in any event within seventy-five (75) days after the conclusion of the
      fiscal year to which such Bonus relates; (ii) a pro rata portion of the
      Bonus for the fiscal year of termination (determined by multiplying the
      amount Executive would have received based upon actual performance had his
      employment continued through the end of the fiscal year by a fraction, the
      numerator of which is the number of days during the performance year of
      termination that Executive is employed by the Company and the denominator
      of which is 365 or 366, as applicable), payable to Executive at the time
      that annual bonuses are paid to senior management personnel with respect
      to that fiscal year, but in any event within seventy-five (75) days after
      the conclusion of the fiscal year to which such Bonus relates;
      and (iii) any Accrued Obligations payable
  to

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               

            	
              Executive
      as set forth in Section 6(a). Notwithstanding the foregoing, Executive’s
      right to receive the severance payment hereunder shall be conditioned upon
      his execution of a release in favor of Sun, which shall not be
      inconsistent with the terms of this Agreement and such documents and
      instruments as are reasonably requested by Sun, each of which Executive
      shall deliver to the Company within twenty-one (21) days following the
      date of his termination of employment. Executive’s participation in any
      other retirement and benefit plans and perquisites shall cease as of the
      date of termination, except Executive and his eligible dependents (as
      determined under Sun’s health plan) shall be entitled to continuing
      coverage under Sun’s health plans on the same basis as active employees
      until the earlier of (x) the first anniversary of the date of termination
      or (y) the date on which Executive or his eligible dependents become
      eligible to participate in a plan of a successor
  employer.

            


    

     

    
      	
              c.  

            	
              “Change
      in Control.”  For
      purposes of this Agreement, a “Change in Control” shall be deemed to have
      occurred if any of the following events
occurs:

            


    

     

    
      	
              1.  

            	
              Any
      “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of
      the Securities Exchange Act of 1934, as amended (the “1934 Act”)), other
      than a trustee or other fiduciary holding securities under an employee
      benefit plan of Sun (an “Acquiring Person”), is or becomes the “beneficial
      owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
      indirectly, of more than 33 1/3% of the then outstanding voting stock of
      Sun;

            


    

     

    
      	
              2.  

            	
              A
      merger or consolidation of Sun with any other corporation, other than a
      merger or consolidation which would result in the voting securities of Sun
      outstanding immediately prior thereto continuing to represent (either by
      remaining outstanding or by being converted into voting securities of the
      surviving entity) at least 51% of the combined voting power of the voting
      securities of Sun or surviving entity outstanding immediately after such
      merger or consolidation;

            


    

     

    
      	
              3.  

            	
              A
      sale or other disposition by Sun of all or substantially all of Sun’s
      assets;

            


    

     

    
      	
              4.  

            	
              During
      any period of two (2) consecutive years, individuals who at the beginning
      of such period constitute the Board of Directors and any new director
      (other than a director who is a representative or nominee of an Acquiring
      Person) whose election by the Board of Directors or nomination for
      election by Sun’s shareholders was approved by a vote of at least a
      majority of the directors then still in office who either were directors
      at the beginning of the period or whose election or nomination was
      previously so approved, no longer constitute a majority of the Board of
      Directors;

            


    

     

    provided,
however, in no
event shall any acquisition of securities, a change in the composition of the
Board of Directors or a merger or other consolidation pursuant 

    
      
         

      

      
         

        
          

        

      

      
         


    

    to a plan
of reorganization under chapter 11 of the Bankruptcy Code with respect to Sun
(“Chapter 11 Plan”), or a liquidation under the Bankruptcy Code constitute a
Change in Control. In addition, notwithstanding Sections 6(c)(1), 6(c)(2),
6(c)(3) and 6(c)(4), a Change in Control shall not be deemed to have occurred in
the event of a sale or conveyance in which Sun continues as a holding company of
an entity or entities that conduct the business or businesses formerly conducted
by Sun, or any transaction undertaken for the purpose of reincorporating Sun
under the laws of another jurisdiction, if such transaction does not materially
affect the beneficial ownership of Sun’s capital stock. Executive’s continued
employment without objection following a Change in Control shall not, by itself,
constitute consent to or a waiver of rights with respect to any circumstances
constituting Good Reason hereunder.

     

    
      	
              d.  

            	
              Payment
      Upon Termination for Death or Disability.  In the event
      of termination of his employment pursuant to Section 5(e), Executive, or
      his estate where applicable, shall be paid any Accrued Obligations payable
      as set forth in Section 6(a).

            


    

     

    Executive,
or his estate where applicable, also shall receive his vested benefits
(including those that vest by reason of death or disability) in accordance with
the terms of Sun’s compensation and benefit plans, and his participation in such
plans and all other perquisites shall cease as of the date of termination,
except to the extent Executive may elect to continue coverage as under any
welfare benefit plans as required by Part 6, Title I of the Employee Retirement
Income Security Act of 1974, as amended. Upon a termination under Section 5(e),
Executive shall not be entitled to any compensation or benefits under this
Agreement except as set forth in this Section 6(d).

     

    In the
event Employee is unable to work due to death or disability on the date of
payment of Bonus as required by Section 3(b) above, Executive or his estate
shall be paid any unpaid Bonus for the prior fiscal year which shall be prorated
based on the number of days of employment (including holidays, vacation and sick
days and weekends during the period of employment) during the prior fiscal year
divided by 365 or 366, as applicable, which shall be paid in a lump sum in cash
at the time that annual bonuses are paid to senior management personnel with
respect to that fiscal year, but in any event within seventy-five (75) days
after the conclusion of the fiscal year to which such Bonus relates. Executive
also shall receive a pro rata portion (based on the number of days of employment
(including holidays, vacation and sick days and weekends during the period of
employment) in the fiscal year of termination divided by 365 or 366, as
applicable) of the Bonus, if any, for the fiscal year in which the termination
pursuant to Section 5(e) occurs, which shall be paid in a lump sum in cash at
the time that annual bonuses are paid to senior management personnel with
respect to that fiscal year, but in any event within 75 days after the
conclusion of the fiscal year to which such Bonus relates.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
7:   Additional
Payments.

     

    
      	
              a.  

            	
              Gross-Up
      Payments.  Notwithstanding anything herein to the
      contrary, if it is determined that any payment or distribution by Sun to
      or for the benefit of the Executive (whether paid or payable or
      distributed or distributable pursuant to the terms of this Agreement or
      otherwise, but determined without regard to any additional payments
      required under this Section 7) (a “Payment”) would be subject to the
      excise tax imposed by Section 4999 of the Internal Revenue Code or any
      interest or penalties with respect to such excise tax (such excise tax,
      together with any interest or penalties thereon, is herein referred to as
      an “Excise Tax”), then Executive shall be entitled to an additional
      payment (a “Gross-Up Payment”) in an amount that will place Executive in
      the same after-tax economic position that he would have enjoyed if the
      Excise Tax had not applied to the
payment.

            


    

     

    
      	
              b.  

            	
              Determination
      of Gross-Up Payment.  Subject to the provisions of
      Section 7(c), all determinations required under this Section 7, including
      whether a Gross-Up Payment is required, the amount of the payments
      constituting parachute payments, and the amount of the Gross-Up Payment
      and the assumptions to be utilized in arriving at such determination,
      shall be made by Sun’s independent auditors or such other certified public
      accounting firm reasonably acceptable to Executive as may be designated by
      Sun (the “Accounting Firm”), which shall provide detailed supporting
      calculations both to Sun and Executive within fifteen business days of
      Executive’s date of termination or any other date reasonably requested by
      Sun or Executive on which a determination under this Section 7 is
      necessary or advisable. Within five days of the receipt by Executive and
      Sun of the Accounting Firm’s determination of the initial Gross-Up
      Payment, Sun shall pay the amount of such Gross-Up Payment to the
      applicable taxing authorities for the benefit of Executive. If the
      Accounting Firm determines that no Excise Tax is payable by Executive, Sun
      shall cause the Accounting Firm to provide Executive and Sun with an
      opinion that Sun has substantial authority under the Internal Revenue Code
      and regulations thereunder not to report an Excise Tax on Executive’s
      federal income tax return. Any determination by the Accounting Firm shall
      be binding upon Executive and Sun. As a result of the uncertainty in the
      application of Section 4999 of the Code at the time of the initial
      determination by the Accounting Firm hereunder, it is possible that
      Gross-Up Payments which will not have been made by Sun should have been
      made (“Underpayment”), consistent with the calculations required to be
      made hereunder. In the event that Sun exhausts its remedies pursuant to
      Section 7(c) and Executive thereafter is required to make a payment of any
      Excise Tax, the Accounting Firm shall determine the amount of the
      Underpayment that has occurred and any such Underpayment shall be promptly
      paid by Sun to the applicable taxing authorities for the benefit of
      Executive (or directly to Executive in the event Executive previously paid
      the related tax amounts).

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              c.  

            	
              Procedures.  Executive
      shall notify Sun in writing of any claim by the Internal Revenue Service
      that, if successful, would require the payment by Sun of a Gross-Up
      Payment. Such notice shall be given as soon as practicable but not later
      than ten business days after Executive knows of such claim and Executive
      shall apprise Sun of the nature of the claim and the date on which the
      claim is requested to be paid. Executive agrees not to pay the claim until
      the expiration of the thirty-day period following the date on which
      Executive notifies Sun, or such shorter period ending on the date the
      taxes with respect to such claim are due (the “Notice Period”). If Sun
      notifies Executive in writing prior to the expiration of the Notice Period
      that it desires to contest the claim, Executive shall: (i) give Sun any
      information reasonably requested by Sun relating to the claim; (ii) take
      such action in connection with the claim as Sun may reasonably request,
      including, without limitation, accepting legal representation with respect
      to such claim by an attorney reasonably selected by Sun and reasonably
      acceptable to Executive; (iii) cooperate with Sun in good faith in
      contesting the claim; and (iv) permit Sun to participate in any
      proceedings relating to the claim. Executive shall permit Sun to control
      all proceedings related to the claim and, at its sole option, permit Sun
      to pursue or forgo any and all administrative appeals, proceedings,
      hearings, and conferences with the taxing authority in respect of such
      claim. If requested by Sun, Executive agrees either to pay the tax claimed
      and sue for a refund or contest the claim in any permissible manner and to
      prosecute such contest to a determination before any administrative
      tribunal, in a court of initial jurisdiction and in one or more appellate
      courts as Sun shall determine; provided, however, that if Sun directs
      Executive to pay such claim and pursue a refund, Sun shall pay such claim
      to the applicable taxing authorities on Executive’s behalf (the “Claim
      Payment”). Sun’s control of the contest related to the claim shall be
      limited to the issues related to the Gross-Up Payment and Executive shall
      be entitled to settle or contest, as the case may be, any other issue
      raised by the Internal Revenue Service or other taxing authority. If Sun
      does not notify Executive in writing prior to the end of the Notice Period
      of its desire to contest the claim, Sun shall pay to the applicable taxing
      authorities on Executive’s behalf an additional Gross-Up Payment in
      respect of the excess parachute payments that are the subject of the
      claim. Any Gross-Up Payment shall be made without additional tax
      consequences to Executive.

            


    

     

    
      	
              d.  

            	
              Repayments.  If,
      after a Claim Payment is made by Sun, Executive becomes entitled to a
      refund with respect to the claim to which such Claim Payment relates,
      Executive shall pay Sun the amount of the refund (together with any
      interest paid or credited thereon after taxes applicable thereto). If,
      after a Claim Payment is made by Sun, a determination is made that
      Executive shall not be entitled to any refund with respect to the claim
      and Sun does not promptly notify Executive of its intent to contest the
      denial of refund, then the amount of the Claim Payment shall offset the
      amount of the additional Gross-Up Payment then owing to
      Executive.

            


    

     

    
      	
              e.  

            	
              Further
      Assurances.  Sun shall indemnify Executive and hold him
      harmless, on an after-tax basis, from any costs, expenses, penalties,
      fines, interest or other

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               

            	
              liabilities
      (“Losses”) incurred by Executive with respect to the exercise by Sun of
      any of its rights under Section 7, including, without limitation, any
      Losses related to Sun’s decision to contest a claim or any imputed income
      to him resulting from any Claim Payment or action taken on Executive’s
      behalf by Sun hereunder. Sun shall pay all legal fees and expenses
      incurred under Section 7 and shall promptly reimburse Executive for the
      reasonable expenses incurred by him in connection with any actions taken
      by Sun or required to be taken by Executive hereunder. Sun shall also pay
      all of the fees and expenses of the Accounting Firm, including, without
      limitation, the fees and expenses related to the opinion referred to in
      Section 7(b).

            


    

     

     

    
      	
              f.  

            	
              Section
      409A.  Notwithstanding
      anything to the contrary in this Section 7, any payment under this Section
      7 shall be paid to Executive promptly but in no event later than the last
      day of the end of Executive’s taxable year following the taxable year in
      which Executive (or Sun) pays or remits the related
  taxes.

            


    

     

    Section
8:   Protection of Sun’s
Interests.

     

    
      	
              a.  

            	
              Ownership
      of Property.  Executive acknowledges and agrees that any
      and all property developed, discovered or created by him during the
      pendency of his employment by the Company, including, without limitation,
      any and all copyrights, trademarks, trade secrets or other intellectual
      property is and shall remain the sole and exclusive property of the
      Company and Executive hereby sells, assigns and otherwise transfers all of
      his right, title and interest in and to such property, if any, to the
      Company.

            


    

     

    
      	
              b.  

            	
              Confidentiality.  Executive
      agrees that he will not at any time, during or after the term of this
      Agreement, except in performance of his obligations to Sun hereunder or
      with the prior written consent of the Chief Executive Officer of Sun,
      directly or indirectly disclose to any person or organization any secret
      or “Confidential Information” that Executive may learn or has learned by
      reason of his association with Sun. The term “Confidential Information”
      means any information not previously disclosed to the public or to the
      trade by Sun’s management with respect to Sun’s products, services,
      business practices, facilities and methods, salary and benefit
      information, legal matters and claims (asserted and unasserted), trade
      secrets and other intellectual property, systems, procedures, manuals,
      confidential reports, product price lists, pricing information, customer
      lists, financial information (including revenues, costs or profits
      associated with any of Sun’s products or lines of business), business
      plans, prospects or opportunities, compliance and clinical processes,
      policies and procedures.

            


    

     

    
      	
              c.  

            	
              Exclusive
      Property.  Executive confirms that all Confidential
      Information is and shall remain the exclusive property of Sun. All
      business records, papers and documents kept or made by Executive relating
      to the business of Sun shall be and remain the property of Sun. Upon the
      termination of Executive’s employment for any reason or upon the request
      of Sun at any time, Executive shall promptly deliver to Sun, and shall not
      without the consent of the Board of Directors of
  Sun,

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               

            	
              retain
      copies of, Confidential Information, or any written materials not
      previously made available to the public, or records and documents made by
      Executive or coming into Executive’s possession concerning the business or
      affairs of Sun.

            


    

     

    
      	
              d.  

            	
              Nonsolicitation.  Executive
      shall not, during his employment under this Agreement, and for two (2)
      years following the termination of this Agreement, for whatever reason or
      cause, in any manner induce, attempt to induce, or assist others to
      induce, or attempt to induce, any employee, agent, representative or other
      person associated with Sun or any customer, patient or client of Sun to
      terminate his or her association or contract with Sun, nor in any manner,
      directly or indirectly, interfere with the relationship between Sun and
      any of such persons or entities.

            


    

     

    
      	
              e.  

            	
              Non-Disparagement.  Executive
      shall not during his employment under this Agreement and for two years
      following termination of the Agreement, for whatever reason, make any
      statements that are intended to or that would reasonably be expected to
      harm Sun or any of its subsidiaries or affiliates, their respective
      predecessors, successors, assigns and employees and their respective past,
      present or future officers, directors, shareholders, employees, trustees,
      fiduciaries, administrators, agents or representatives. Sun and its
      officers and directors will not make any statements that are intended to
      or that would reasonably be expected to harm Executive or his reputation
      or that reflect negatively on Executive’s performance, skills or
      ability.

            


    

     

    
      	
              f.  

            	
              Relief.  Without
      intending to limit the remedies available to Sun, Executive acknowledges
      that a breach of any of the covenants in Section 8 may result in material
      irreparable injury to Sun for which there is no adequate remedy at law,
      that it will not be possible to measure damages for such injuries
      precisely and that, in the event of such a breach or threat thereof, Sun
      shall be entitled to obtain a temporary restraining order and/or a
      preliminary or permanent injunction restraining Executive from engaging in
      activities prohibited by Section 8 or such other relief as may be required
      to specifically enforce any of the covenants in Section
  8.

            


    

     

    Section
9:   Miscellaneous
Provisions.

     

    
      	
              a.  

            	
              Amendments,
      Waivers, Etc.  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.  

            	
              Validity.  The
      invalidity or unenforceability of any provision of this Agreement shall
      not affect the validity or enforceability of any other provision of this
      Agreement, which shall remain in full force and
  effect.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              c.  

            	
              Entire
      Agreement.  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 this Agreement and this Agreement
      shall supersede all prior agreements, including the Severance Agreement
      between Executive and Sun dated March 22, 2002 (which is hereby
      terminated), negotiations, correspondence, undertakings and communications
      of the parties, oral or written, with respect to the subject matter
      hereof.

            


    

     

    
      	
              d.  

            	
              Resolution
      of Disputes.  Any disputes arising under or in connection
      with this Agreement shall be resolved by binding arbitration, to be held
      in Orange County, California in accordance with the National Rules for the
      Resolution of Employment Disputes and procedures of the American
      Arbitration Association. Executive and Sun shall mutually select the
      arbitrator. If Executive and Sun cannot agree on the selection of an
      arbitrator, each party shall select an arbitrator and the two arbitrators
      shall select a third arbitrator who shall resolve the dispute. The fees of
      the arbitrator and any administrative fees of AAA shall be paid by Sun.
      Judgment upon the award rendered by the arbitrator may be entered in any
      court having jurisdiction thereof. Nothing herein shall limit the ability
      of Sun to obtain the injunctive relief described in Section 8(d) pending
      final resolution of matters that are sent to
  arbitration.

            


    

     

    
      	
              e.  

            	
              Attorneys’
      Fees.  In the event Executive prevails on the merits on
      any claim, action or proceeding: (i) contesting or otherwise relating to
      the existence of Good Cause in the event of Executive’s termination of
      employment during the Term for Good Cause; (ii) enforcing any right,
      benefit or obligation under this Agreement, or otherwise enforcing the
      terms of this Agreement or any provision thereof; or (iii) asserting or
      otherwise relating to the existence of Good Reason in the event of
      Executive’s termination of employment during the Term for Good Reason, Sun
      shall pay or reimburse Executive on an after-tax basis for reasonable
      costs and expenses (including, without limitation, court costs, costs of
      arbitration and reasonable legal fees and expenses which reflect common
      practice with respect to the matters involved) incurred by Executive as a
      result of such claim, action or
proceeding.

            


    

     

    
      	
              f.  

            	
              Governing
      Law.  The validity, interpretation, construction and
      performance of this Agreement shall be governed by the laws of the State
      of California.

            


    

     

    
      	
              g.  

            	
              Notice.  For
      the purpose of this Agreement, notice, demands and all other communication
      provided for in this Agreement shall be in writing and shall be deemed to
      have been duly given when delivered by hand delivery or overnight courier
      or mailed by United States certified or registered mail, return receipt
      requested, postage prepaid, addressed as follows or to other addresses as
      each party may have furnished to the
other:

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    To
Sun:

     

    Attention:
Chief Executive Officer

    18831 Von
Karman Avenue; Suite 400.

    Irvine,
California 92612

     

    To
Executive:

     

    Chauncey
J. Hunker

    3030
Waunona Way

    Madison,
Wisconsin 53713

     

    
      	
              h.  

            	
              Successors
      and Assigns.  This Agreement shall be binding upon and
      shall inure to the benefit of the parties hereto and their respective
      successors and assigns.

            


    

     

    
      	
              i.  

            	
              No
      Claim Against Assets.  Nothing in this Agreement shall be
      construed as giving Executive any claim against any specific assets of Sun
      or as imposing any trustee relationship upon Sun in respect of Executive.
      Sun shall not be required to establish a special or separate fund or to
      segregate any of its assets in order to provide for the satisfaction of
      its obligations under this Agreement. Executive’s rights under this
      Agreement shall be limited to those of an unsecured general creditor of
      Sun and its affiliates.

            


    

     

    
      	
              j.  

            	
              Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which so
      executed shall be deemed to be an original, and such counterparts will
      together constitute but one
Agreement.

            


    

     

    
      	
              k.  

            	
              Section
      409A.

            


    

     

    
    

    
      	
            	
              1.

            	
                    
                If
      Executive is a “specified employee” within the meaning of Treasury
      Regulation Section 1.409A-1(i) as of the date of Executive’s separation
      from service (within the meaning of Treasury Regulation Section
      1.409A-1(h)(1), without regard to the optional alternative definitions
      available thereunder) and any payment or benefit provided in Section 6
      hereof constitutes a “deferral of compensation” within the meaning of
      Section 409A of the Code, Executive shall not be entitled to any such
      payment or benefit until the earlier of: (i) the date which is six (6)
      months after his separation from service for any reason other than death,
      or (ii) the date of his death.  The provisions of this paragraph
      shall only apply if, and to the extent, required to avoid the imputation
      of any tax, penalty or interest pursuant to Section 409A of the
      Code.  Any amounts otherwise payable to Executive upon or in the
      six (6) month period following his separation from service that are not so
      paid by reason of this Section 9(k)(1) shall be paid (without interest) as
      soon as practicable (and in all events within thirty (30) days) after the
      date that is six (6) months after Executive’s separation from service (or,
      if earlier, as soon as practicable, and in all events within thirty (30)
      days, after the date of his
death).

              

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              2.

            	
              To
      the extent that any reimbursements pursuant to Sections 3(h), 6(b), 7(e)
      and 9(e) are taxable to Executive, any reimbursement payment due to
      Executive pursuant to such provision shall be paid to Executive on or
      before the last day of Executive’s taxable year following the taxable year
      in which the related expense was incurred.  The benefits and
      reimbursements pursuant to Sections 3(h), 6(b), 7(e) and 9(e) are not
      subject to liquidation or exchange for another benefit and the amount of
      such benefits and reimbursements that Executive receives in one taxable
      year shall not affect the amount of such benefits and reimbursements that
      Executive receives in any other taxable
year.

            


    

     

    
      	
               
      

            	
              3.

            	
              It
      is intended that any amounts payable under this Agreement and Sun’s and
      Executive’s exercise of authority or discretion hereunder shall comply
      with and avoid the imputation of any tax, penalty or interest under
      Section 409A of the Code.  This Agreement shall be construed and
      interpreted consistent with that
intent.

            


    

     

    IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above
written.

     

    
      
        
          
            
              
                	
                        /s/
      Chauncey
      Hunker                 

                      	
                        ___________________

                      
	
                        Chauncey
      J. Hunker

                      	
                        Date

                      


              

            

          

        

      

    

    


     

    
      
        
          
            
              
                
                  
                    
                      	SUN
      HEALTHCARE GROUP, INC.	 
	 	 
	 	 
	
                              By:/s/
      Richard K.
      Matros           

                            	
                              ___________________

                            
	
                                     Richard
      K. MatrosChairman and CEO

                            	
                              Date