| a.   | Employment.  Sun agrees      to employ Executive and Executive agrees to accept employment with Sun,      subject to the terms and conditions of this  Agreement. |
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| 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. |
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| 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 |
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|   | 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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: |
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| 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. |
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| 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 suchdemand; |
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| 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 |
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| 4.   | Breach      of any of the covenants set forth in Section 8 of this      Agreement. |
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| 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). |
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| 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). |
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|   | 1. | A      meaningful and detrimental reduction, in Executive’s authority, duties or      responsibilities or a meaningful and detrimental change in his reporting      responsibilities; or |
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|   | 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 |
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|   | 3. | A      material breach by Sun of Section3(h); |
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| 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. |
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| 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 ofSocial |
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|   | 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). |
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| 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 “AccruedObligations”). |
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| 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 |
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|   | 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. |
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| c.   | “Change      in Control.”  For      purposes of this Agreement, a “Change in Control” shall be deemed to have      occurred if any of the following eventsoccurs: |
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| 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; |
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| 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; |
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| 3.   | A      sale or other disposition by Sun of all or substantially all of Sun’s      assets; |
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| 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; |
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| 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). |
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| 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 thepayment. |
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| 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). |
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| 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. |
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| 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. |
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| 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 |
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|   | 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). |
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| 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. |
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| 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. |
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| 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. |
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| 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, |
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|   | 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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 orproceeding. |
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| f.   | Governing      Law.  The validity, interpretation, construction and      performance of this Agreement shall be governed by the laws of the State      of California. |
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| 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 theother: |
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| 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. |
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| 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. |
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| 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 oneAgreement. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 hisdeath). |
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|   | 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 taxableyear. |
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|   | 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 thatintent. |
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| /s/      Chauncey      Hunker                  | ___________________ |
|-------------------------------------------------------------------------------------------------------------------------------------|---------------------|
| Chauncey      J. Hunker                                                                                                             | Date                |

| SUN      HEALTHCARE GROUP, INC.                                                                      |                |
|------------------------------------------------------------------------------------------------------|---------------------|
|                                                                                                 |                |
|                                                                                                 |                |
| By:/s/      Richard K.      Matros            | ___________________ |
|        Richard      K. MatrosChairman and CEO                     | Date                |

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