| (a)   | Definitions.  For      purposes of this Program, the following definitions shall      apply: |
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| ·   | “Annual Cash Retainer”      shall mean the basic annual retainer (including any additional fees for      serving as a chairperson of the Board or a committee thereof, but      excluding any meeting fees), to the extent otherwise payable in cash,      payable to a Non-Employee Director for services as a member of the      Board. |
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| ·   | “Program Account” shall      mean the unfunded bookkeeping account maintained by the Company on behalf      of each Non-Employee Director to which the Non-Employee Director’s Stock      Units shall be credited. |
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| ·   | “Program Year” shall mean      the 12 consecutive month period beginning January 1 each year and ending      December 31 each year, except that the initial Program Year shall commence      on July 1, 2008 and end on December 31,2008. |
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| ·   | “Stock Unit” shall mean a      non-voting unit of measurement which is deemed for bookkeeping purposes to      be equivalent to one outstanding share of Common Stock (subject to      adjustment as provided in Sections 5(b) and 12 of the Plan) solely for      purposes of the Program.  Stock Units shall be used solely as a      device for the determination of the number of shares of Common Stock      eventually to be delivered to a Non-Employee Director upon payment of such      Stock Units.  Stock |
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|   | Units      shall not be treated as property or as a trust fund of any      kind.  Stock Units granted to a Non-Employee Director pursuant      to the Program shall be credited to the Non-Employee Director’s Program      Account. |
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| (b)   | Election      Form.  A Non-Employee Director may elect to exchange the      right to receive payment of all or a portion of his or her Annual Cash      Retainer payable with respect to a particular Program Year for the right      to receive a grant of Stock Units under this Program in lieu of such      retainer (or portion thereof, as applicable).  Such election      shall be made by completing the election form attached hereto as Exhibit 1 (or      such other form as the Board may prescribe from time to time) (an “Election Form”) and      filing such completed form with the Company by the deadline determined      under Section 3(c), (d) or (e) below, as  applicable. |
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| (c)   | Election for Initial Program      Year.  Any individual who is a Non-Employee Director on      the Effective Date may file an Election Form with the Company no later      than June 30, 2008.  Such Election Form shall be irrevocable and      shall be effective with respect to the Annual Cash Retainer for the      initial Program Year commencing July 1, 2008 and ending December 31,      2008. |
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| (d)   | Election for Subsequent      Program Years.  With respect to any Program Year      commencing on or after January 1, 2009, and except as otherwise provided      in Section 3(e) of this Program, a Non-Employee Director may file an      Election Form with the Company on or before December 31 immediately      preceding the start of such Program Year or any earlier deadline that may      be established with respect to the particular year.  Such      Election Form shall become irrevocable as of such December 31 and shall be      effective with respect to the Annual Cash Retainer for the Program Year      commencing on the January 1 that next follows such December      31. |
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| (e)   | Election for First Year of      Eligibility.  Notwithstanding anything to the contrary in      this Program, any individual who first becomes a Non-Employee Director      after the Effective Date and during the first three (3) quarters of a      particular Program Year may file an Election Form with the Company no      later than thirty (30) days after such individual first becomes a      Non-Employee Director for purposes of this Program.  Such      Election Form shall be irrevocable and shall be effective with respect to      the director’s Annual Cash Retainer paid for services rendered during the      Program Year in which the Election Form is filed for any quarter in such      Program Year that commences after such Election Form is filed with the      Company. |
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| (f)   | Credit of Stock      Units.  Annual Cash Retainers are paid by the Company on      a quarterly basis.  Upon the last business day of each quarter      of a Program Year for which a Non-Employee Director has made a valid and      timely election to receive Stock Units under this Program in lieu of all      or a portion of his or her Annual Cash Retainer for that quarter (each, a      “Crediting Date”)      the Company shall credit the Non-Employee Director’s Program Account with      a number of Stock Units determined by dividing (i) the amount of the      Exchanged Retainer, by (ii) the Fair Market Value of a share of Common      Stock on that Crediting Date, rounded down to the nearest whole      unit.  The “Exchanged Retainer” is      that portion of the Non-Employee Director’s Annual Cash Retainer      that |
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|   | would      have otherwise been paid in cash to the Non-Employee Director for his or      her service on the Board during that quarter but for his or her election      pursuant to this Program.  Any fractional amount less than the      Fair Market Value of a share of the Common Stock as of such Crediting Date      shall be paid in cash.  Not less frequently than annually, the      Company shall provide each Non-Employee Director with a current statement      of his or her Program Account reflecting all credits of Stock Units as of      such date.  The term “Fair Market Value” is used in this Program      as defined in the Plan. |
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| (g)   | Dividend and Voting      Rights. |
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|   | (i) | A      Non-Employee Director shall have no rights as a stockholder of the      Company, no dividend rights (except as expressly provided in Section      3(g)(ii) of this Program with respect to dividend equivalent rights) and      no voting rights, with respect to Stock Units credited under this Program      and any shares of Common Stock underlying or issuable in respect of such      Stock Units until such shares are actually issued to and held of record by      the Non-Employee Director.  No adjustments will be made for      dividends or other rights of a holder for which the record date is prior      to the date of issuance of theshares. |
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|   | (ii) | As      of any date that the Company pays an ordinary cash dividend on its Common      Stock (and in all events no later than two-and-one-half months after such      date), the Company shall pay each Non-Employee Director with a Program      Account balance an amount in cash equal to the per-share cash dividend      paid by the Company on its Common Stock on such date, multiplied by the      number of outstanding and unpaid Stock Units credited to such Non-Employee      Director’s Program Account as of the related dividend payment record      date.  No such payment shall be made with respect to any Stock      Units which, as of such record date, have been paid pursuant to Section      3(h). |
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| (h)   | Payment of Stock      Units.  Any Stock Units credited to a Non-Employee      Director’s Program Account shall be fully vested at all times, and shall      be payable in an equivalent number of shares of Common Stock (either by      delivering one or more certificates, registered in the name of the      Non-Employee Director, for such shares or by entering such shares in the      name of the Non-Employee Director in book-entry form, as determined by the      Company in its discretion) on or within sixty (60) days following the      first to occur of (A) the date of the Non-Employee Director’s Separation      from Service or (B) the fifth (5th) anniversary of the date the Stock Unit      was credited to the Non-Employee Director.  As used herein, a      “Separation from Service” occurs when the Non-Employee Director dies,      retires, or otherwise has a termination of employment with the Company      that constitutes a “separation from service” within the meaning of      Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional      alternative definitions available thereunder.  Notwithstanding      the foregoing, in the event the Non-Employee Director is a “specified      employee” (within the meaning of Treasury Regulation Section 1.409A-1(i))      on the date of the Non-Employee Director’s Separation from Service, the      Non-Employee Director shall not be entitled to payment of any Stock Units      that would otherwise be paid in connection with his or her Separation from      Service until the earlier of (A) the date which is six (6) months after      his or her Separation from Service with the Company for |
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|   | any      reason other than death, or (ii) the date of the Non-Employee Director’s      death (and, in either case, payment will be made within thirty (30) days      following that event); provided that this six-month delay shall apply only      to the extent such delay in payment is required to comply with, and avoid      the imputation of any tax, penalty or interest under, Section 409A of the      Code. |
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|   |  ̈  _____ | I      elect to receive my entire Annual Cash Retainer incash.                                                                                                                                                                                                                                                                                                                                             |
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|   |  ̈  _____ | I      elect to receive _____ % of my Annual Cash Retainer in the form of Units      in accordance with the Program; the balance of my Annual Cash Retainer (if      I elect to receive less than 100% in Units) will be paid in      cash.  The percentage that I elect will apply equally to my      Annual Cash Retainer for any service each quarter during the applicable      ProgramYear. |

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| SUN      HEALTHCARE GROUP, INC.               |
|-----------------------------------------------|
|                                          |
|                                          |
| By___________________________________________ |

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