Document:

ex423.htm

    EXHIBIT 4.2.3

    

      THIRD
SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of October 26,
2009, among Sun Healthcare Group, Inc., a Delaware corporation (the “Issuer”),
each of the parties identified as an Allegiance Guarantor on the schedules to
the signature pages hereto (each, an “Allegiance Guarantor” and collectively,
the “Allegiance Guarantors”) and Wells Fargo Bank, National Association, as
Trustee under the Indenture (the “Trustee”).

       

      W I T N E
S S E T H :

       

      WHEREAS
the Issuer has heretofore executed and delivered to the Trustee an Indenture
(the “Indenture”), dated as of April 12, 2007, providing for the issuance of the
91⁄8% Senior Subordinated Notes due 2015 (the “Securities”);

       

      WHEREAS,
each of the undersigned Allegiance Guarantors has deemed it advisable and in its
best interest to execute and deliver this Supplemental Indenture, and to become
a Subsidiary Guarantor under the Indenture; and

       

      WHEREAS,
pursuant to Section 9.01(4) of the Indenture, the Trustee, the Issuer and the
Allegiance Guarantors are authorized to execute and deliver this Supplemental
Indenture.

       

      WHEREAS,
pursuant to Section 9.06 of the Indenture, the Trustee, may rely upon an
Officers’ Certificate and Opinion of Counsel to the effect that this
Supplemental Indenture is authorized or permitted by the Indenture, which
Officers’ Certificate and Opinion of Counsel have been delivered to the
Trustee.

       

      NOW
THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt of which is hereby acknowledged, the Issuer, the
Allegiance Guarantors and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Securities as follows:

       

      SECTION
1.  Capitalized
Terms.  Capitalized terms used herein but not defined shall
have the meanings assigned to them in the Indenture.

       

      SECTION
2.  Guaranties.  Each
Allegiance Guarantor hereby agrees to guarantee the Issuer’s obligations under
the Securities on the terms and subject to the conditions set forth in Article
11 of the Indenture and to be bound by all other applicable provisions of the
Indenture as a Subsidiary Guarantor.

       

      SECTION
3.  Ratification of Indenture;
Supplemental Indentures Part of Indenture.  Except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect.  This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.

       

      SECTION
4.  Governing
Law.  THIS
SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

      
        
           

        

        
           

          
            

          

        

         

      

       

      SECTION
5.  Trustee
Makes No Representation.  The Trustee makes no representation
as to the validity or sufficiency of this Supplemental Indenture.

       

      SECTION
6.  Counterparts.  The
parties may sign any number of copies of this Supplemental
Indenture.  Each signed copy shall be an original, but all of them
together represent the same agreement.

       

      SECTION
7.  Effect
of Headings.  The Section headings herein are for convenience
only and shall not effect the construction of this Supplemental
Indenture.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly
executed as of the date set forth above.

       

      
 

      
        
          	
                  SUN
      HEALTHCARE GROUP, INC.

                   

                
	 
      
	
                  By:
      /s/ Michael Newman

                  Name:
      Michael Newman

                  Title:   Executive
      Vice President

                   

                
	 
      
	
                  ALLEGIANCE
      HOSPICE GROUP, INC.

                   

                  ALLEGIANCE
      HOSPICE CARE OF 

                  SOUTHEASTERN
      MASSACHUSETTS, 

                  LLC

                   

                  ALLEGIANCE
      HOSPICE CARE OF 

                  MASSACHUSETTS,
      INC.

                   

                  ALLEGIANCE
      HOSPICE CARE OF NEW
      

                  HAMPSHIRE,
      LLC

                   

                  ALLEGIANCE
      HOSPICE CARE OF

                  CONNECTICUT,
      LLC

                   

                
	
                  By:
      Michael
      Newman

                
	 	
                  Name:  Michael
      Newman

                
	 
      	
                  Title:  Vice
      President

                

        

        
          
             

          

          
             

            
              

            

          

          
             

          

        

      
        	
                WELLS
      FARGO BANK, NATIONAL

                ASSOCIATION,

                as
      Trustee

              
	 
      
	
                   
      By:

              	
                /s/ Maddy Hall

              
	
                Name:

              	
                Maddy
      Hall

              
	
                Title:

              	
                Vice
      Presidentex1012.htm

    EXHIBIT 10.12

    
 

    Sun
Healthcare Group, Inc. Executive Bonus Plan

    

    Effective
January 1, 2010, annual incentive bonuses of senior management (“Executives”) of Sun Healthcare
Group, Inc. (“Sun”)
and senior management of SunBridge Healthcare Corporation (“SunBridge”)
shall be determined pursuant to this plan.  This plan is intended to
provide bonuses that qualify for the performance-based compensation exemption of
Section 162(m) (“Section
162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”).  This plan
is adopted under Section 10 of Sun’s Amended and Restated 2004 Equity Incentive
Plan (the “Plan”), and
bonuses awarded under this plan shall be Benefits under the Plan that are
subject to all of the terms and conditions of the Plan.

    

    The
incentive bonus (the “Bonus”)
of an Executive for any fiscal year (the “Applicable
Fiscal Year”) shall be based on the criteria set forth
below.   For Mr. Matros, Mr. Mathies and Dr. Hunker, the Bonus
will be based upon achievement of the EBITDA and quality of care targets as
described below.  For Mr. Shaul, Mr. Newman and Ms. Chrispell, the
Bonus will be determined solely by achievement of the EBITDA target as described
below.

    

    1.           EBITDA.  Within the
first ninety (90) days of the Applicable Fiscal Year, the Compensation Committee
of the Board of Directors of Sun (the “Committee”) shall establish a
target for Sun’s consolidated earnings before interest, taxes, depreciation and
amortization (“EBITDA”)
and the target Bonus for each executive for the Applicable Fiscal
Year.  EBITDA shall be measured using the normalized EBITDA of Sun as
published by Sun in its press release announcing financial results for the
Applicable Fiscal Year,  which normalizing adjustments consist of
actuarial adjustments for self insurance for general and professional liability,
EBITDA of discontinued operations, and nonrecurring costs related to
acquisitions and other similar events. When determining whether
the EBITDA target has been achieved, the Committee shall make adjustments to the
EBITDA target to eliminate the effect of discontinued operations or any change
in accounting policies or practices.

    

    Subject to the provisions of Section 2,
the amount of the Bonus for the Applicable Fiscal Year shall be based
upon normalized EBITDA attained as a percentage of the target normalized EBITDA
as follows (percentages in the tables are percentages of target
Bonus):

    

    
      	
              %
      of 
normalized

              EBITDA

      target

            	
              80%

            	
              90%

            	
              95%

            	
              100%

            	
              105%

            	
              110%

            	
              115%

            
	
              %
      of target 
Bonus 
funded

            	
              30%

            	
              50%

            	
              95%

            	
              100%

            	
              125%

            	
              150%

            	
              175%

            

    

    

    

    If
normalized EBITDA is less than 80% of target normalized EBITDA, no Bonus will be
paid to any Executive.  If normalized EBITDA exceeds 115% of target
normalized EBITDA, each Bonus will equal the percentage of target Bonus set
forth in the last column of the table above.  If normalized EBITDA is
greater than the percentage of target normalized
EBITDA shown in one column but less than the percentage shown in the adjacent
column, the
percentage of target

    
      
         

      

      
         

        
          

        

      

      
         
Bonus
will be prorated on a straight-line basis between the percentages shown in the
applicable columns of the table.

    

    

    In no
case, however, shall the amount of any Executive’s Bonus exceed (i) the amount
that has been accrued for such Bonus in the calculation of normalized EBITDA and
(ii) the applicable limit set forth in Section 10(a) of the Plan.

    

    2.           Quality of Care
Component.    If the quality of care target is met,
the Bonus shall be paid in the amount determined as set forth
above.  If the quality of care target is not met, the Committee shall
deduct such amount of the Bonus for each of Mr. Matros, Mr. Mathies and Dr.
Hunker as it determines in its discretion from the amount otherwise
payable.  The quality of care target is met if quality of care at
skilled nursing centers operated by SunBridge and its subsidiaries is better
than or equal to the quality of care at skilled nursing centers of SunBridge’s
for-profit peer group of companies for the Applicable Fiscal Year (or the twelve
month period ending as close as possible to the end of Applicable Fiscal Year
for which data are available at the time the Committee considers the amount of
the Bonus), in each case as measured by the Health Deficiency Index reported by
PointRight, Inc. or whichever independent reporting entity is then used by Sun
to provide such information.

    

    3.           Committee Certification and Timing of
Payment.  As soon as practicable after the end of the
Applicable Fiscal Year, the Committee shall determine the amount of Sun’s
normalized EBITDA for such year.  No Bonus shall be paid to an
Executive for the Applicable Fiscal Year unless and until the Committee has
certified, by resolution or other appropriate action in writing, the normalized
EBITDA earned by Sun, the normalized EBITDA earned by Sun as a percentage of the
target normalized EBITDA and the amount of the Bonus earned by each
Executive.  Any Bonuses shall be paid to each executive as soon as
practicable after completion of the year-end audit for the Applicable Fiscal
Year and following the Committee’s certification described above  (but
in no event later than March 15 of the calendar year following the Applicable
Fiscal Year to which the Bonus relates).

    

    4.           Recoupment of Bonus
Payments.  A Bonus paid to an Executive is subject to
recoupment, to the extent determined to be appropriate by the Committee, if each
of the following circumstances occur: (1) the amount of the Bonus was calculated
based on the achievement of normalized EBITDA, the calculation of which was
based on financial statements that are subsequently the subject of an accounting
restatement due to noncompliance with any financial reporting requirement under
the securities laws; (2) fraud or intentional misconduct by any Executive, or
any officer or employee that reports to an Executive was a significant
contributing factor to such noncompliance; and (3) the restated financial
statements are issued and completed prior to the issuance and completion of the
financial statements for the third fiscal year following the Applicable Fiscal
Year to which the Bonus relates.  In such circumstances, a Bonus will
be subject to recoupment only to the extent a lesser Bonus would have been paid
to an Executive based upon normalized EBITDA, as restated, and only as to the
net amount of such portion of the Bonus after reduction for the Executive’s tax
liability on that portion of the Bonus.  By accepting a Bonus, each
Executive agrees to promptly make any Bonus reimbursement required by the
Committee in accordance with this section, and that Sun, SunBridge and their
respective affiliates may deduct from any amounts owed to the executive from
time to time (such as wages or other compensation) any amounts the Executive is
required to reimburse Sun and/or

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    SunBridge
pursuant to this section.  This section does not limit any other
remedies Sun, SunBridge or their respective affiliates may have available in the
circumstances, which may include, without limitation, dismissing the executive
or initiating other disciplinary procedures.  The provisions of this
section are in addition to (and not in lieu of) any rights to repayment Sun,
SunBridge or their respective affiliates may have under Section 304 of the
Sarbanes-Oxley Act of 2002 and other applicable laws.

     

    5.           Administration.  This
plan shall be administered by the Committee, which shall consist solely of two
or more members of the Board of Directors of Sun who are “outside directors”
within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section
162(m).  The Committee shall have the same administrative authority
with respect to this plan as provided for under the Plan.

    

    6.           Section
162(m).  This plan is intended to provide bonuses that qualify
for the performance-based compensation exemption of Section
162(m).  Any provision, application or interpretation of this plan
inconsistent with this intent to satisfy the standards in Section 162(m) shall
be disregarded.

    
      
         

      

      
        3

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