MTS Presentation Materials

Attached are copies of the presentation materials provided by MTS Health Partners, L.P. (“MTS”) to the board of directors of Sun Healthcare Group, Inc. (“Sun”) in connection with meetings of the board of directors of Sun on February 17, 2010, March 25, 2010 and June 17, 2010 (collectively, the “MTS Presentations”). The MTS Presentations were prepared collaboratively with Sun’s management solely for use by the board of directors of Sun in connection with its consideration of various strategic alternatives including the Separation and REIT Conversion Merger more fully described in the registration statement on Form S-4 for Sabra Health Care REIT, Inc. (“Sabra”) of which this Exhibit forms a part. The information was not intended for public disclosure or for use by any person or party other than the board of directors of Sun in connection with the aforementioned matters and cannot and should not be relied upon by any such other person or party. At no time did the board of directors of Sun or Sun’s management request that MTS deliver a fairness or other opinion to the board of directors of Sun with respect to the Separation or REIT Conversion Merger (or any other transaction) or to deliver any other specific report to the board of directors of Sun.

In addition, the MTS Presentations include certain financial projections with respect to Sun, SHG Services, Inc. (“New Sun”) and Sabra that were prepared by Sun management. New Sun is referred to in the MTS Presentations as “OpCo” and Sabra is referred to as “PropCo.” MTS did not prepare the projections and takes no responsibility for their accuracy or reasonableness or for whether the projected results will be achieved. The projections were prepared by Sun management in good faith based upon assumptions believed to be reasonable at the time they were prepared. However, the projections and their underlying estimates and assumptions are subject to significant uncertainties related to Sun, New Sun and Sabra’s respective businesses and industries. For a discussion of certain of these risks and uncertainties, see the registration statement on Form S-4 for Sabra of which this Exhibit forms a part. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. For the foregoing reasons, the inclusion of these projections should not be regarded as a representation by MTS or Sun, New Sun, Sabra or their respective boards of directors that any of them considered, or now considers, the projections to be a prediction of actual future results, and such data should not be relied upon as such.

In preparation of revenue projections, Sun made assumptions with respect to future Medicare reimbursement rates, which rates have since been reduced based on the reimbursement rates ultimately implemented. See “Risks Relating to New Sun’s Business — New Sun’s business will be dependent on reimbursement rates under federal and state programs, and legislation or regulatory action may reduce or otherwise materially adversely affect the reimbursement rates” in the registration statement on Form S-4 for Sabra of which this Exhibit forms a part. In addition, the projected number of outstanding shares utilized in the projections substantially underestimated the amount of shares of Sun common stock that were ultimately issued in Sun’s August 2010 equity offering. For these and other reasons, the projections are now outdated and none of MTS, Sun, New Sun or Sabra intends, and each expressly disclaims any responsibility, to update or otherwise revise the projections to reflect circumstances existing after the date the projections were prepared. The internal financial forecasts upon which these projections were based are, in general, prepared solely for internal use, such as budgeting and other management decisions, and are subjective in many respects, and thus are susceptible to various interpretations. The MTS Presentations use certain information provided by Sun’s management that include non-GAAP financial measures and make certain normalizing adjustments. Information provided by Sun’s management and used in the MTS Presentations was not independently verified by MTS and MTS has assumed and relied upon the accuracy of such information. This information was incorporated into the following pages of the MTS presentations:

For a discussion of non-GAAP financial measures used by Sun, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations for Sun and New Sun — Results of Operations” in the registration statement on Form S-4 for Sabra of which this Exhibit forms a part. Normalizing adjustments are adjustments intended to account for transactions or adjustments not related to ongoing operations. Since normalizing adjustments are not measurements determined in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations and interpretations, the information presented in the MTS Presentations may not be comparable to other similarly described information of other companies. The 2010 projections included in the MTS Presentations are based upon the assumption that there would not be any unusual items to normalize. Normalizing adjustments for the years ended December 31, 2009 and 2008 are as follows (in thousands):

The prospective financial information included in the MTS Presentations was not prepared with a view toward public disclosure or with a view toward complying with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither Sun’s independent registered public accounting firm nor any other independent accountants for Sun, New Sun or Sabra have compiled, examined, or performed any procedures with respect to the prospective financial information contained in the MTS Presentations, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The PricewaterhouseCoopers LLP and Ernst & Young LLP reports included in the registration statement on Form S-4 for Sabra, of which this Exhibit forms a part, relate to the Company’s historical financial information. They do not extend to the prospective financial information included in the MTS Presentations and should not be read to do so.

Readers of the MTS Presentations are cautioned not to rely on the financial projections set forth therein. No one has made or makes any representation regarding the projections, including the projections themselves or the assumptions underlying the projections, or the future financial results of Sun, New Sun or Sabra.

MTS Health Partners

Executive Summary

Sun is currently at an important point in its life cycle

Having successfully turned around the business and integrated several large acquisitions, Sun is now faced with a

number of decisions regarding its longer-term corporate strategy and the best way to execute upon it

Sun is also faced with strategic and operating challenges that will dictate direction and timing for implementation

of this strategy

This presentation has been organized to familiarize the board with specific parameters of various alternatives to be

considered, and facilitate a strategic discussion about them, along the following topics:

Current

Situation

–

how

Sun

viewed

capital

markets

and

what

our

current

internal

operational

and

strategic outlook?

Financing

Alternatives

–

how

and

when

can

optimize

covenants,

pricing

and

future

capital

structure

flexibility?

Potential amendment or refinancing of credit facilities through debt, equity or both

Portfolio

Rationalization

Alternatives

–

can

Sun

create

maintain

value

and

strategic

flexibility

eliminating

underperforming or “risky”

assets?

Potential divestiture of Oklahoma portfolio and/or CareerStaff

Portfolio

Expansion

Alternatives

–

are

there

areas

where

Sun

can

accretively

deploy

capital

and

management

resources –

both on an absolute and relative basis?

Potential acquisition of LTC or hospice targets of various sizes

“Transaction-Driven”

Alternatives –

does Sun have actionable non-operations-based opportunities for

shareholders?

Sales to strategic or financial buyers, or spin-off or sale transactions to unlock the value of Sun’s real estate

MTS Health Partners

Current Situation -

Public Market Viewpoint

Public Market Overview

Sources: Company press releases, public documents, and Wall Street research consensus estimates

1)Pro-forma for $16.0mm payment for acquisition of Allegiance on 10/01/09. Cash balance at 12/31/09 was $104.5mm

2)At 12/31/09, net debt was $596.1mm.

3)Adjusted enterprise value calculated by adding 8.0x 2009E rent expense back to enterprise value.

Sun Market Valuation

Stock Price (01/29/10)

$8.74

Fully Diluted Shares Outstanding

44.651

Equity Value

$390.2

Leverage Multiples

Add: Debt (09/30/09)

2009E

2010E

Revolver & Term Loan

1.89x

1.92x

$329.9

Mortgage Notes Payable

0.98x

1.00x

171.7

Senior Sub Notes

1.15x

1.16x

200.0

Capital Leases

0.01x

0.9

Total Debt

4.03x

4.09x

$702.6

Less: Cash (09/30/09)

(0.58x)

(0.59x)

(101.4)

(1)

Net Debt

3.45x

3.50x

$601.2

(2)

Enterprise Value

$991.4

Add: Capitalized 2009E Rent (8.0x)

(3)

592.4

Adjusted Enterprise Value

$1,583.8

Sun Metrics & Trading Multiples

Adj. Ent. Value /

Ent. Value /

Price /

Year

EBITDAR

EBITDA

EPS

2009E

6.4x

5.7x

8.1x

2010E

6.4x

5.8x

9.1x

2011E

6.2x

5.6x

8.3x

Year

EBITDAR

EBITDA

EPS

2009E

$248.5

$174.5

$1.08

2010E

246.5

171.9

0.96

2011E

255.9

178.3

1.05

MTS Health Partners

Current Situation -

Public Market Viewpoint

Summary of Wall Street Research

Current EBITDAR Estimate

Current EPS Estimate

LT Growth

Price

Firm

Analyst

Last Update

2009E

2010E

2011E

2009E

2010E

2011E

Rate

Target

Rec.

Michael Wiederhorn

01/12/10

$248.3

$246.1

N/A

$1.08

$0.95

N/A

14.00

Outperform

Brian Williams

01/07/10

250.4

N/A

1.09

0.96

N/A

9.00

Market Perform

Kevin Fischbeck

01/07/10

247.9

244.9

256.9

1.07

0.94

N/A

10.0%

8.00

Underperform

Arthur Henderson

01/07/10

248.6

236.2

N/A

1.07

0.78

N/A

11.00

Buy

Peter Martin

01/07/10

246.8

246.6

253.4

1.07

0.92

1.10

15.0%

13.50

Outperform

Jason Gurda

01/07/10

249.5

246.9

264.5

1.09

0.96

1.12

N/A

11.50

Outperform

Cooley May

01/07/10

N/A

1.06

1.07

1.14

N/A

14.00

Outperform

Robert Mains

01/07/10

247.8

248.1

$261.7

1.07

0.96

1.02

12.0%

N/A

Outperform

Frank Morgan

01/07/10

250.0

248.9

N/A

1.09

0.95

N/A

11.00

Outperform

A.J. Rice

01/07/10

247.8

247.3

N/A

1.08

0.95

N/A

9.50

Hold

Andreas Dirnagl

01/07/10

249.0

246.0

N/A

1.08

0.95

N/A

12.00

Overweight

Eric Gommel

01/07/10

N/A

1.09

0.93

1.00

N/A

12.00

Buy

Donald Hooker

01/07/10

247.2

249.8

254.6

1.06

0.97

0.94

N/A

12.00

Buy

Ralph Giacobbe

01/06/10

248.6

246.6

258.7

1.08

0.95

1.06

N/A

11.00

Outperform

Gary Taylor

01/04/10

248.5

240.7

241.0

1.08

0.98

0.95

N/A

10.00

Buy / High-Risk

Scott Hansen

12/14/09

N/A

1.08

0.95

1.00

N/A

$10.00

Neutral

Gary Lieberman

10/27/09

249.0

256.1

1.07

1.16

N/A

9.00

Market Peform

Brian Siu

09/09/09

N/A

1.08

0.98

1.15

N/A

13.00

Buy

Maximum

$250.4

$256.1

$264.5

$1.09

$1.16

$1.15

15.0%

$14.00

Mean

248.5

246.5

255.9

1.08

0.96

1.05

12.3%

11.21

Median

248.5

246.6

256.5

1.08

0.95

1.04

12.0%

11.00

Minimum

246.8

236.2

241.0

1.06

0.78

0.94

10.0%

8.00

MTS Health Partners

Current Situation -

Public Market Viewpoint

Selected SNF Transactions

Note: $ in Millions

(1)Calculated as the transaction value plus 8.0x capitalized rent

(2)Transaction to have several closings. The sale of the first 40

long-term care facilities was completed on 12/22/2009

(3) Bid

only

–

Not

accepted

board

Adjusted

Transaction Value /

Date

Acquiror

TransactionTransaction

LTM

1-Day Prior

Ann.

Closed

Target

Acquiror

Type

Value

(1)

EBITDAR

EBITDA

Premium

12/04/09

02/01/10

6 Skilled Nursing Facilities

National Health Investors

Financial

$67

$117

11.0x

15.2x

N/A

11/17/09

CapitalSource

(143

Long-Term

Care

Facilities)

(2)

Omega Healthcare Investors

Financial

860

N/A

06/30/09

07/31/09

4 Texas Skilled Nursing Facilities

National Health Investors

Financial

N/A

07/30/07

09/01/07

10 New Mexico Senior Living Facilities

Skilled Healthcare Group

Strategic

N/A

07/02/07

12/21/07

Manor Care

The Carlyle Group

Financial

6,300

6,478

12.7x

13.0x

20.0%

05/09/07

11/01/07

Tendercare

Extendicare REIT

Strategic

233

N/A

10.6x

N/A

04/30/07

06/29/07

22 Ventas

Facilities

Kindred Healthcare Services

Strategic

172

254

N/A

01/16/07

07/13/07

Genesis HealthCare

Formation Capital LLC, JER Partners

Financial

1,775

1,953

11.3x

11.7x

19.2%

10/20/06

04/19/07

Harborside

Healthcare

Sun Healthcare Group

Strategic

625

784

9.0x

9.3x

N/A

07/12/06

Tandem Health Care

Formation Capital

Financial

620

776

9.5x

N/A

06/26/06

186 SNFs

(Formation Capital LLC)

GE Healthcare Financial Services

Financial

1,400

N/A

02/02/06

Laurel Healthcare

Formation Capital

Financial

200

N/A

11/21/05

03/14/06

Beverly Enterprises

Fillmore Capital

Financial

1,826

2,082

8.5x

8.6x

6.6%

10/24/05

12/27/05

Skilled Healthcare Group

Onex

Financial

679

695

8.1x

N/A

10/24/05

02/28/06

Commonwealth Communities (18 Facilities)

Kindred Healthcare

Strategic

205

N/A

09/12/05

12/12/05

Peak Medical

Sun Healthcare Group

Strategic

150

269

8.5x

9.0x

N/A

01/25/05

Beverly Enterprises

(3)

Formation Capital

Financial

1,776

2,032

8.3x

8.4x

22.6%

11/04/04

01/31/05

Assisted Living Concepts

Extendicare

Strategic

278

N/A

08/01/04

08/31/04

Centennial Healthcare

Formation Capital

Financial

134

N/A

06/29/04

12/10/04

Mariner Health

National Senior Care

Strategic

963

1,244

10.7x

11.8x

49.3%

05/27/04

08/02/04

Hospice USA

Beverly Enterprises

Strategic

N/A

08/20/03

10/10/03

Mariner Health Care (19 Florida Facilities)

Formation Capital Longwing

Real Estate

Financial

N/A

06/17/03

06/30/03

Kindred Healthcare (17 Facilities)

Senior Health Management

Strategic

N/A

Maximum

$6,300

$6,478

12.7x

15.2x

49.3%

Mean

808

1,517

9.8x

10.5x

23.5%

Median

233

784

9.3x

9.5x

20.0%

Minimum

117

8.1x

6.6%

MTS Health Partners

Current Situation -

Public Market Viewpoint

Valuation Matrix

Sources: Company press releases, public documents, and Wall Street research consensus estimates

Note : $ in Millions except per share data. Adjusted enterprise value calculated by adding 8.0x 2009E rent expense back to enterprise value.

(1) Pro-forma for $16.0mm payment for acquisition of Allegiance on 10/01/09.

Sun

% Premium

Stock Price

20%

40%

60%

80%

100%

$8.74

$10.49

$12.24

$13.98

$15.73

$17.48

Diluted S.O.

44.651

44.718

45.459

46.062

46.380

46.502

Market Cap (MC)

$390.2

$469.0

$556.2

$644.1

$729.7

$812.9

Add: Net Debt

(1)

601.2

Enterprise Value (EV)

$991.4

$1,070.2

$1,157.4

$1,245.3

$1,330.8

$1,414.0

Add: Capitalized 2009E Rent (8.0x)

592.4

Adj. Enterprise Value (Adj. EV)

$1,583.8

$1,662.5

$1,749.8

$1,837.7

$1,923.2

$2,006.4

Data

Adj. EV / 2009E EBITDAR

$248.5

6.4x

6.7x

7.0x

7.4x

7.7x

8.1x

Adj. EV / 2010E EBITDAR

246.5

6.4x

6.7x

7.1x

7.5x

7.8x

8.1x

Adj. EV / 2011E EBITDAR

255.9

6.2x

6.5x

6.8x

7.2x

7.5x

7.8x

Data

EV / 2009E EBITDA

$174.5

5.7x

6.1x

6.6x

7.1x

7.6x

8.1x

EV / 2010E EBITDA

171.9

5.8x

6.2x

6.7x

7.2x

7.7x

8.2x

EV / 2011E EBITDA

178.3

5.6x

6.0x

6.5x

7.0x

7.5x

7.9x

Data

Price / 2009E EPS

$1.08

8.1x

9.7x

11.4x

13.0x

14.6x

16.2x

Price / 2010E EPS

0.96

9.1x

10.9x

12.7x

14.5x

16.4x

18.2x

Price / 2011E EPS

1.05

8.3x

10.0x

11.7x

13.3x

15.0x

16.7x

Last Twelve Months Stock Price Performance

Current Situation -

Public Market Viewpoint

Announced 2009

EPS guidance of

$1.15 to $1.19

per diluted share

Announced results for the

fourth quarter and year ended

December 31, 2008. Diluted

earnings per share for the

quarter ended Dec. 31, 2008,

was $1.88 compared to $0.79

for the comparable period one

year ago

Announced results for the first quarter

ended March 31, 2009. Diluted

earnings per share for the quarter

ended March 31, 2009, was $0.23

compared to $0.19 for the comparable

period one year ago

Announced results for the second

quarter ended June 30, 2009.

Normalized diluted earnings per

share from continuing operations

for the quarter ended June 30,

2009, was $0.30 compared to

$0.25 for the comparable period

one year ago

Announced 2010

EPS guidance of

$0.92 to $0.98

per diluted share

SolAmor

Hospice Corporation completed the

acquisition of Allegiance Hospice Group

$8.74

Downgraded by Leerink

Swann on valuation and

Medicare uncertainty

Low

Average

High

3 Months

$8.28

$9.00

$9.70

6 Months

7.90

8.92

9.85

9 Months

7.90

8.99

10.23

12 Months

7.52

9.15

12.58

MTS Health Partners

Source: CapitalIQ as of 1/29/10

Last Three Years Sun Stock Price Performance Vs Long Term Care Index

Current Situation -

Public Market Viewpoint

SolAmor

Hospice Corporation completed the

acquisition of Allegiance Hospice Group

SolAmor

Hospice Corporation completed the

acquisition

Holisticare

Hospice

Sun Healthcare Group completed the

acquisition

Harborside

Healthcare

Sun Healthcare Group announced that variable interest

rates on $154.4 million of its outstanding bank term

loans were reset in late Nov. 2008 at an average nominal

rate of 4.13 percent

Announced the sale of its

75% interest in a home

health subsidiary, which

was acquired as part of the

Harborside

acquisition, for

$1.6 million

MTS Health Partners

Source: CapitalIQ as of 1/29/10

Long Term Care Index: EXE, SKH, ENSG, KND

MTS Health Partners

Current Situation -

Internal Viewpoint

Changes from Budget Case to Base Case

2010 Base Case reflects Sun’s 2010 Budget in all material respects except that interest expense reflects an "Amend"

scenario on Term debt effective July 1, 2010

Reflects revised covenants to address risk of 2011 Leverage Covenant default

Assumes L+350 bps on all Term debt starting in Q310 and holds through 2011

LIBOR grown 20 bps each quarter starting Q2 2010 (1.6% at Q1 2010)

Allows $150M of swapped debt to expire on 7/24/10

2010 Budget Case

2010 Base Case

2010 Case Variance

1H:10

2H:10

2010P

1H:10

2H:10

2010P

1H:10

2H:10

2010P

Revenue

$971.2

$982.8

$1,954.1

$971.2

$982.8

$1,954.1

$0.0

EBITDAR

$125.7

$123.8

$249.5

$125.7

$123.8

$249.5

$0.0

% Margin

12.9%

12.6%

12.8%

12.9%

12.6%

12.8%

0.0%

EBITDA

$88.0

$85.8

$173.8

$88.0

$85.8

$173.8

$0.0

% Margin

9.1%

8.7%

8.9%

9.1%

8.7%

8.9%

Net Income

$22.1

$21.4

$43.5

$22.1

$20.1

$42.2

$0.0

($1.3)

% Margin

2.3%

2.2%

2.3%

2.0%

2.2%

Diluted EPS

$0.50

$0.48

$0.98

$0.50

$0.45

$0.95

$0.00

($0.03)

MTS Health Partners

Note: $ in Millions except per share data.

Source: Street Projections as per consensus Wall Street estimates.

Current Situation -

Internal Viewpoint

Standalone Financials

Internal Projections

Street Projections

Actual

Base Case

2008

2009

2010

2011

2009

2010

2011

Revenue

$1,823.5

$1,881.8

$1,954.1

$2,031.3

$1,879.5

$1,935.7

$1,986.1

% Growth

6.1%

3.2%

3.8%

4.0%

3.1%

3.0%

2.6%

EBITDAR

$236.5

$250.0

$249.5

$261.7

$248.5

$246.5

$255.9

% Margin

13.0%

13.3%

12.8%

12.9%

13.2%

12.7%

12.9%

% Growth

14.8%

5.7%

(0.2%)

4.9%

5.1%

(0.8%)

3.8%

EBITDA

$162.9

$176.8

$173.8

$183.9

$174.5

$171.9

$178.3

% Margin

8.9%

9.4%

8.9%

9.1%

9.3%

8.9%

9.0%

% Growth

25.7%

8.5%

(1.7%)

5.8%

7.1%

(1.5%)

3.7%

Net Income

$40.8

$48.4

$42.2

$45.2

$47.5

$43.1

$47.7

% Margin

2.2%

2.6%

2.2%

2.5%

2.2%

2.4%

% Growth

37.4%

18.6%

(12.8%)

7.1%

16.4%

(9.3%)

10.7%

Diluted EPS

$0.93

$1.10

$0.95

$1.01

$1.08

$0.96

$1.05

% Growth

35.6%

18.5%

(13.8%)

6.2%

16.0%

(10.7%)

9.0%

Diluted Shares Outstanding (mm)

43.963

44.000

44.500

44.900

44.087

44.768

45.495

Cap-Ex

$42.5

$54.3

$55.0

$51.9

$52.9

$47.6

MTS Health Partners

Current

Situation

Internal

Viewpoint

Overview of Sun Debt

Sun Capitalization

2009

2010

2011

Maturity

12/31/2009

Avg. Interest Rate

Interest

(1)

12/31/2010

Avg. Interest Rate

Interest

(1)

12/31/2011

Avg. Interest Rate

Interest

(1)

Capital Leases

$0.8

12.2%

$0.1

$0.5

10.1%

$0.1

$0.2

10.1%

$0.0

Revolver

4/19/13

0.0

L+200 (3.4%)

0.0

L+200 (3.7%)/L+350 (5.6%)

0.0

L+350 (6.2%)

Term Loan

(2)

SWAP

4/19/14

150.0

6.8%

10.4

150.0

6.8%/L+350 (5.6%)

9.6

0.0

L+350 (6.2%)

0.0

Term Loan

(2)

4/19/14

179.1

L+200 (3.4%)

6.2

150.8

L+200 (3.7%)/L+350 (5.6%)

7.4

277.4

L+350 (6.2%)

17.9

Mortgage Debt

170.6

7.1%

12.4

166.0

6.9%

11.6

161.1

6.9%

11.2

Total Bank Debt

$500.5

$29.0

$467.2

$28.7

$438.7

$29.1

Senior Sub Notes

4/15/15

200.0

9.125%

18.3

200.0

9.125%

18.3

200.0

9.125%

18.3

Total Debt

$700.5

$47.2

$667.2

$47.0

$638.7

$47.4

Cash

104.5

Other Interest

(3)

2.1

113.7

Other Interest

(3)

4.7

122.0

Other Interest

(3)

4.3

Net Debt

$596.1

Total Interest Exp.

$49.3

$553.5

Total Interest Exp.

$51.7

$516.8

Total Interest Exp.

$51.7

Adjusted Net Debt

(4)

1,181.2

1,159.5

1,138.9

Letters of Credit

(5)

$69.9

$80.0

$90.0

Net Debt Multiple

(6)

3.37x

3.19x

2.81x

Adjusted Net Debt Multiple

4.73x

4.65x

4.35x

Debt Public Overview

Amount

Issuance

Current Rating

First Call Date

Bid Level as of 01/29/10

Issue

Issued

Outst.

Rate

Date

Mdy's

S&P

Date

Price

YTW

Revolving Credit ($120mm, Due 2013)

L+200

4/19/07

Ba2

B+

94.000

3.964%

Term Loan Due 2014

(2)

$365.0

$329.1

L+200

4/19/07

Ba2

B+

94.250

3.528%

9.125% Senior Sub Notes due 2015

200.0

9.125%

10/10/07

CCC+

4/15/11

104.560

102.500

8.215%

(1)

Interest expense reflects an "Amend" scenario on Term debt effective July 1, 2010. Assumes L+350 bps on all Term debt starting in Q310 and holds through 2011.

LIBOR grown 20 bps each quarter starting Q210 (1.6% at Q1 10)

(2)

$100mm and $50mm of Term Loan Interest Rate locked in through SWAPs at 7.388% and 5.650% respectively through 07/24/10.

(3)

Other Interest Expense includes non-cash amortization, interest income, commitment and other fees.

(4)

Adjusted Net Debt calculated as Total Net Debt plus Capitalized Rent (8.0x 2009E Rent Expense).

(5)

Reflects assumed need for additional $10mm in workers compensation-based letters of credit in each of 2010 and 2011. Current credit agreement limit is $70mm.

(6)

Excludes minor adjustments made for bank covenant calculation.

MTS Health Partners

Note: $ in Millions.

Covenant calculations reflect non-cash add-backs and other adjustments based on credit agreements.

Current

Situation

Internal

Viewpoint

Overview of Debt Covenants –

Using Low, Mid and High-end of 2010 Guidance

COVENANTS:

Leverage Ratio

Covenant Requirement

<4.25x

<3.50x

<3.00x

Leverage Ratio

3.43x

3.30x

3.29x

3.22x

3.00x

2.90x

EBITDA cushion

$33.9

$3.6

$3.4

$9.8

$10.5

($12.6)

($12.7)

$0.1

$6.0

Cash cushion

$144.0

$12.4

$11.8

$34.4

$36.9

($37.9)

($38.0)

$0.3

$18.0

Leverage Ratio

3.43x

3.41x

3.40x

3.25x

3.22x

3.15x

2.93x

2.84x

EBITDA cushion

$33.9

$4.4

$5.1

$12.4

$13.9

($9.0)

$4.0

$10.0

Cash cushion

$144.0

$15.3

$17.9

$43.3

$48.8

($27.1)

($26.9)

$12.0

$30.1

Leverage Ratio

3.43x

3.40x

3.36x

3.20x

3.16x

3.09x

3.08x

2.87x

2.77x

EBITDA cushion

$33.9

$5.2

$6.9

$15.1

$17.6

($5.2)

($5.0)

$8.1

$14.4

Cash cushion

$144.0

$18.3

$24.3

$52.8

$61.5

($15.5)

($15.0)

$24.4

$43.2

Senior Leverage Ratio

Covenant Requirement

<2.75x

<2.50x

<2.00x

Leverage Ratio

2.30x

2.29x

2.28x

2.15x

2.13x

2.07x

1.88x

1.82x

EBITDA cushion

$28.8

$14.9

$15.3

$24.4

$25.7

($6.3)

($6.4)

$10.3

$17.0

Cash cushion

$79.3

$37.3

$38.3

$61.0

$64.3

($12.6)

($12.8)

$20.7

$34.0

Leverage Ratio

2.30x

2.28x

2.26x

2.11x

2.08x

2.03x

1.84x

1.77x

EBITDA cushion

$28.8

$15.8

$17.1

$27.1

$29.3

($2.3)

$14.7

$21.6

Cash cushion

$79.3

$39.5

$42.9

$67.8

$73.3

($4.7)

($4.5)

$29.4

$43.3

Leverage Ratio

2.30x

2.26x

2.23x

2.08x

2.04x

1.98x

1.79x

1.72x

EBITDA cushion

$28.8

$16.7

$19.1

$30.0

$33.2

$1.9

$2.2

$19.4

$26.6

Cash cushion

$79.3

$41.8

$47.7

$75.0

$82.9

$3.8

$4.3

$38.8

$53.2

2009 Actual

2010 Base Case

2011 Base Case

Mid

High

Low

Mid

High

Low

MTS Health Partners

Financing Alternatives

Portfolio Rationalization

Alternatives

Portfolio

Expansion Alternatives

Transaction-

Driven

Alternatives

Cases Considered

•

Amend (covenants)

•

Refi/New Senior

•

New High Yield

•

New Equity

•

New Convert

•

Sale of Oklahoma

Facilities

•

Sale of CareerStaff

•

Small, medium and large

LTC acquisition/merger

•

Small and large

(Odyssey) hospice

acquisitions

•

RE separation/sale-

leaseback

Spin of RE into REIT IPO

Post-spin REIT merger

Sale of RE

•

Sale to strategic or financial

(LBO) buyer

Key

Considerations

•

Expected need for

covenant relief in Q1

2011

•

Current low interest rate

environment

•

Expected dilution from

any capital structure

modification

Payback timing??

•

Oklahoma:

Performance

upside

Existence of buyers

•

CareerStaff:

Downward op. trend

Increasing valuations

Impact of loss on P&L

•

Availability of suitable

targets

•

Execution risk prior to

RUGs

IV implementation

•

Hospice valuations

•

Flexibility of current

capital structure

•

Current/expected LTC

operator and property

valuations

•

Real estate separability-

approvals and taxes

•

Market’s new receptiveness

of lease-focused operators

Timing

•

Amend: Near-term

•

Others: TBD based

upon likelihood of

Portfolio Expansion or

Transaction-Driven

Alternatives

•

Oklahoma –

ongoing

exploration but most

likely 2011 event

•

CareerStaff

–

at least

2011 absent unique

transaction opportunity

•

LTC: early to mid-2011to

prove RUGs

implementation

•

Hospice –

smaller as

available; Odyssey only

if valuation is reduced

•

RE separation: near-term

given disparity in RE

valuations

•

LBO’s: not until Sun

leverage is reduced

2011 Value Creation

(At Midpoints)

•

Amend: 0% Dil. (Base)

(3.0% Dil. vs. Budget)

•

Equity: (18.0%) Dil.

•

HY: (11.1%) Dil.

•

Convert: (13.2%)

Dil.

•

OK: 1.0% Accretion

•

CS: (5.4%) Dilution

•

LTC Large: 17.7% Accr.

•

LTC Small: 5.2% Accr.

•

Lg.Hospice: (13.5%) Dil.

•

Sm.Hospice: 1.9% Accr.

•

RE Spin: 61.5% Accretion

•

RE Sale: (13.5%) Dilution

•

LBO: $9.74 / share -

11.4%

Accretion

Summary of Cases Considered

Summary of Cases Considered

Preliminary Conclusions

Despite the existence of a number of strategic and financial alternatives, only a few of them can currently be expected to create

meaningful value on a time and execution risk-adjusted basis

Financing Alternatives –

flexibility created by restructuring current capital structure must be balanced against the

associated dilution

Acquisition

flexibility

created

capital

structure

refinancing

isn’t

currently

justified

given

limited

near-term

opportunities to acquire significant LTC or related (hospice, etc.) assets

By comparison, numerous near-term accretive acquisition opportunities might justify up-front dilution

Nevertheless, covenant amendment is necessary to address the possibility of Q1 2011 leverage covenant default

Portfolio

Rationalization

Alternatives

–

while

each

these

divestiture

alternatives

has

the

capacity

further

position

Sun

for

future

growth,

none

them

should

pursued

until

least

late

2010

2011

Attractiveness of Oklahoma sale is mitigated by expected improvements in the portfolio and an uncertain buyer

universe, providing impetus for delay

Current

importance

CareerStaff

earnings

P&L

and

low

staffing

valuations

support

delay

any

divestiture

Portfolio Expansion Alternatives:

LTC:

operational

uncertainty

created

RUGs

transition

generally

limits

the

attractiveness

any

LTC

acquisition

prior to mid-2011, at which point LTC operators should have been able to demonstrate success

Hospice: smaller acquisition targets are available and an expected covenant amendment will provide flexibility to

pursue them, although none of them are individually expected to “move the needle”; larger hospice acquisition is too

expensive to be pursued given current valuations

Transaction-Driven Alternatives:

Sale

strategic

buyer:

Sun

size

and

leverage,

acquiror

leverage

and

RUGs

make

cash

acquisition

very

unlikely

LBO: current Sun leverage limits ability to create incremental leverage-based returns and accordingly limits any

material premium for Sun shares

Incremental real-estate-based leverage does not meaningfully increase LBO pricing

MTS Health Partners

MTS Health Partners

Transaction-Driven Alternatives (continued)

RE-Monetization alternatives –

we believe that current market valuations for LTC real estate, despite drops

from highs in the late 2000’s, remains a source of untapped value for Sun shareholders

split/spin

into

public

“OpCo”

and

public

“PropCo”

REIT

–

creates

liquidity

option

for

real

estate

while generating REIT-based valuation that reflects future growth potential; positioning for future

execution can be immediately pursued

RE sale for cash: most immediate potential for cash monetization, but offset by dilution from use of after-

tax sale-leaseback proceeds to repay much lower-cost indebtedness

split/spin

with

subsequent

merger

–

similar

split/spin

but

creates

(i)

upside

from

additional

asset

diversification

and

(ii)

potential

downside

from

expected

lower

growth

than

independent

Sun-

sponsored REIT

All

these

alternatives

can

pursued

and

“de-risked”

through

pursuit

split/spin

strategy

–

spin/merger

sale

can

“dual-tracked”

with,

spin

off

of,

OpCo

REIT

As shown earlier, the “status quo”

is unlikely to generate significant share appreciation in the near to medium term

Despite

operating

improvements,

reimbursement

cuts

result

P&L

that

merely

“treads

water”

Multiple

expansion

isn’t

likely

until

the

industry

has

demonstrated

ability

transition

RUGs

and

state

Medicaid budgets have recovered such that LTC is given traditional market increases

Given these alternatives, management is recommending that Sun begin more in-depth exploration and pursuit of an

OpCo/PropCo

spin

transaction

Limited opportunity cost –

LTC M&A is uncertain until at least mid-2011 and hospice acquisition opportunities

either aren’t meaningful or aren’t executable

Portfolio rationalization opportunities aren’t likely until at least 2011 and aren’t expected to result in

meaningful value creation

“Resetting”

Sun’s

capital

structure

could

attractive

alternative

pursuit

OpCo/PropCo

structures,

but has limited value given an uncertain M&A environment and 12-18 month minimum LTC M&A timing

window

Preliminary Conclusions (continued)

Summary of Cases Considered

OpCo/PropCo

Structures

Overview of Public Spin-Off Transaction

Operations

New “OpCo”

SHG “PropCo”

Spin Off

Surviving

Entity

Leases

Real Estate

Sun Healthcare Group

Shareholders

•

Initially same as SHG

•

Separately tradeable

post-spin

•

No change in shareholders

Board/Management

•

Management essentially intact;

board overlap limited to small

percentage of total board

•

New management team; board

overlap limited to small percentage

of total board (excluding CEO)

Financials

•

Same as SHG other than (i)

addition of rent paid to PropCo

and (ii) new capital structure

•

Revenues from rent paid by OpCo

as well as other healthcare operators

•

Additional costs limited to PropCo

infrastructure

Capital Structure

•

EBITDA-based

•

Loan-to-value on current real estate

Valuation Drivers

•

EBITDAR/EPS growth through

operating improvements and

accretive acquisitions

•

FFO growth through acquisition of

new properties

Transaction Timing

•

6-9 Months

“RemainCo”

“SpinCo”

MTS Health Partners

MTS Health Partners

Corporate Tax:

OpCo

minus

basis:

Est.

due

high

OpCo

basis

Transfer

Tax:

Estimated

$5-10

million

(trx

cost)

State tax consequences: TBD

Shareholder Tax:

Tax

distributed

E&P

–

$86.0m

gain

($1.93/share),

taxed at 15%, for ultimate SH tax of $12.9m, or $0.29/share

Model assumes $12.9m aggregate cash dividend to

fund tax payments by shareholders

In extremely unlikely (and optimistic) event of that OpCo

equity

valuation

exceeds

$1.93

plus

tax

basis

(see

page

72), any such gain would be a capital gain, taxable at 15%

OpCo/PropCo

Structures

Summary Tax Implications

Operations

New OpCo

SHG PropCo

Spin Off

Surviving

Entity

Leases

Need

obtain

IRS

ruling

and/or

opinion

from

law

firm

prior

to advising SHs

of tax-free transaction

IRS ruling preferable, but does not assure tax-free

transaction and may limit PF business operation

Conditions to IRS ruling are so onerous as to limit

the business operations of both companies post-spin

Even with an IRS ruling, tax opinion required on

issues that the IRS refuses to rule on

Law

firm

opinion

can

sufficient

for

privately-

held

entities, but may be insufficient for public SHs

Accordingly, unlikely to achieve tax-free treatment

Real Estate

If Spin Off is to be Tax Free:

Example: Spin Off of OpCo

Ultimate tax treatment is dependent upon whether transaction

spin

“OpCo”

“PropCo”

either

case,

Sun

would

recognize

gain

the

spin

only

the SpinCo

enterprise value exceeds its tax basis

Can

use

expected

remaining

current

year

NOLs

$30M

to offset gain, and would pay

Sun would pay tax on any excess gain above NOLs

Sun shareholders would recognize gain on (i) any earnings and

profits (E&P) of Sun at the time of the spin and (ii) any excess

of SpinCo

equity value above the combined value of E&P and

shareholder basis

E&P is taxed as a dividend (15%) to shareholders

Excess

SpinCo

equity

value

above

Sun

E&P

treated

as a non-taxable return of basis

If Spin Off is a Taxable Distribution:

Tax Consequences of OpCo

as SpinCo:

“RemainCo”

“SpinCo”

Sun Healthcare Group

MTS Health Partners

OpCo/PropCo

Structures

Key Transaction Considerations

Post-Spin Operations / Board (see page 23)

Financial Performance

Lease

terms,

leverage,

pro

forma

G&A

load

and

capex

(maintenance

and

acquisition)

requirements

Pro Forma Leverage

OpCo

–

additional lease costs create additional capitalized leverage that limits incremental debt load

PropCo

–

potential single-operator structure may limit debt levels

Execution Options

Split into two public companies

Sale

OpCo

and/or

REIT

third

party

–

with

one

operating

REIT

transaction

partners

Sale of real estate for cash or public shares of another REIT

Valuation

Single-operator vs. diversified REIT

Potential downward pressure post-spin

–

Different shareholder bases / risk profiles

Timing of a transaction

Tax leakage –

corporate, shareholders, potential loss of NOLs

Transaction Costs –

structuring, consents, cash dividend to shareholders for tax payments

MTS Health Partners

OpCo/PropCo

Structures

Spin Transaction Overview

have

examined

the

execution

“OpCo

PropCo”

transaction

that

would

result

the

division

Sun

into two distinct corporate entities:

An operating company (“OpCo”) that continues to manage the operations of Sun’s currently owned

SNFs, its leased SNFs

and its Ancillary businesses

A property-focused company (“PropCo”), organized as a Real Estate Investment Trust (“REIT”), which

collects rental revenues from the SNFs

that are currently owned by Sun

Would be expected to be an acquiror

of properties in future years

We have constructed separate financial statements based on a sale-leaseback of Sun’s owned properties by

PropCo

Projected lease rates and leverage characteristics are based on current market comparables

New leverage and equity proceeds are used to repay existing Sun indebtedness

We have separately valued each entity and then derived a combined value per share based on a range of

potential valuation scenarios

Primary valuation drivers are EBITDAR (for OpCo) and FFO (for PropCo) multiples, as well as assumed

leverage

OpCo/PropCo

Structures

Spin Transaction Overview

Operations

New OpCo

SHG PropCo

REIT

Spin Off

Surviving

Entity

Leases

Real Estate

“RemainCo”

“SpinCo”

Sun Healthcare Group

Current

Step #1:

Issue Equity

Step #1:

Issue Equity

Step #2:

Spin & Refi

Debt

Step #2:

Spin & Refi

Debt

•

Equity would be issued to de-lever Sun

balance sheet prior to Spin

•

Offering would be commenced following

transaction announcement

•

$150.4mm Equity Need (Illustrative Case)

•

17.209mm new shares issued (@ $8.74)

(1)

o

61.709mm Pro Forma Shares

(1) Reflects 4.0% underwriting discount.

Enterprise Value

$991.4

Net Debt (3.4x 2009E EBITDA)

(601.2)

Equity Value

$390.2

Share Price (1/29/10)

$8.74

Enterprise Value (@6.5x FW EBITDAR)

$535.4

New Net Debt (1.1x 2010E EBITDA)

(114.6)

Equity Value

$420.8

Share Price

$6.82

Implied Enterprise Value

$799.1

New Net Debt (5.3x 2010E EBITDA)

(348.9)

Equity Value (@10.5x FW FFO)

$450.2

Share Price

$7.30

MTS Health Partners

MTS Health Partners

OpCo/PropCo

Structures

Spin Transaction Overview

Sources

Uses

–

12/31/10

(1)

Fund Flows / Transaction Steps

After announcement of a transaction and well before any

closing, equity will be raised in an amount sufficient to de-

lever the combined company in preparation for a spin

OpCo, because of implied leverage from leases, will

likely

have

maximum

“Adjusted

Debt”

multiple

5.0x.

PropCo

will have leverage capacity of approximately

45%-55% of the Enterprise Value of PropCo

Within these constraints, the resulting leverage and

equity issuance will need to be sufficient to fund the

new structure and transaction costs

At the time of the spin, Sun would dividend cash sufficient

cover

shareholders’

expected

taxes

conjunction

with

the spin

Currently estimated at approximately $12.9m, or

$0.21 per pro forma share (after the expected equity

offering)

All Sun cash above $40 million will be used to fund the

transaction,

with

the

remaining

cash

apportioned

75%/25%

between OpCo

and PropCo, respectively

(1)

Based upon projected 12/31/10 Base Case Balance Sheet.

(2)

17.209mm shares issued assuming a share price of $8.74 and a 4.0% underwriting spread.

(3)

Includes redemption fees of 4.563% of face amount ($200.0mm) plus accrued interest that

is not expected to be paid until April 2011 ($6.1mm).

Interest

Dollar

% of

Sources

Rate

Amount

Total

Cash on Hand

$113.7

14.8%

New OpCo

Debt

L+5.00%

144.6

18.8%

New PropCo

Debt

L+4.00%

192.9

25.1%

Existing Mortgages

6.9%

166.0

21.6%

New

Equity

Issuance

(2)

150.4

19.6%

Total Sources

$767.6

100.0%

Dollar

% of

Uses

Amount

Total

Repay Senior Secured Debt

$300.8

39.2%

Existing Mortgages

166.0

21.6%

Repay Senior Subordinated Notes

200.0

26.1%

Cash

Dividend

($0.21/PF

share)

12.9

1.7%

Cash alllocated

to OpCo

30.0

3.9%

Cash alllocated

to PropCo

10.0

1.3%

Transfer Taxes (Est.)

10.0

1.3%

Trx, U/W & Financing Fees

22.8

3.0%

Senior

Sub

Redemption

Fees

(3)

15.2

2.0%

Total Uses

$767.6

100.0%

MTS Health Partners

OpCo/PropCo

Structures

Leased and Owned Facilities Analysis

Source: As per Sun Healthcare Group

(1)Management fees are costs designated to the management company which are allocated based on revenues.

2011E

SunBridge

Owned

Leased

Total

Ancillary

Total

Revenues

$793.5

$946.2

$1,739.7

$291.6

$2,031.3

EBITDARM

$154.7

$187.9

$342.5

$54.9

$397.4

% margin

19.5%

19.9%

19.7%

18.8%

19.6%

Rent

0.0

(75.9)

(1.9)

(77.8)

EBITDAM

$154.7

$112.0

$266.7

$53.0

$319.6

% margin

19.5%

11.8%

15.3%

18.2%

15.7%

rent coverage

2.5x

4.5x

28.8x

5.1x

Divisional Overhead

$24.6

$29.4

$54.0

$18.6

$72.6

Management Fee

(1)

24.7

29.4

54.1

9.1

63.2

Total Management Fees

$49.3

$58.8

$108.1

$27.6

$135.8

% of revenues

6.2%

9.5%

6.7%

EBITDAR

$105.4

$129.1

$234.4

$27.2

$261.7

% margin

13.3%

13.6%

13.5%

9.3%

12.9%

EBITDA

$105.4

$53.2

$158.6

$25.3

$183.9

% margin

13.3%

5.6%

9.1%

8.7%

9.1%

Number of Facilities

112

205

MTS Health Partners

OpCo/PropCo

Structures

Illustrative OpCo

Financials –

2011-Based Valuation

Illustrative

Derivation

OpCo

Key

Metrics

Calculation

Rent

Capacity

from

Owned

Facilities

Owned SunBridge

2011E Revenue

$793.5

Owned SunBridge

2011E

EBITDARM

154.7

Less: Assumed Mgt Fee of 5.0% of Rev

(39.7)

Owned SunBridge

2011E

EBITDAR

$115.0

Rent Coverage Multiple

1.6x

2011E New Rent

$71.9

Capitalization

Overview

PF Cash Balance

$30.0

New Debt Issued (0.6x 2010E EBITDAR)

$144.6

Capitalized

Rent

(8.0x

2010E

Rent

Exp)

1,165.3

Adjusted Debt

$1,310.0

New Debt 2011E Interest (L+500)

$11.1

New Debt / 2010E EBITDAR

0.58x

Capitalized Rent / 2010E EBITDAR

4.67x

Adj. Debt / 2010E EBITDAR

5.25x

Adj. Net Debt / 2010E EBITDAR

5.13x

New Debt / 2010E EBITDA

(2)

1.39x

Net Debt / 2010E EBITDA

(2)

1.10x

2010E Coverage Ratio

(2)

9.3x

Illustrative

OpCo

Income

Statement

2011E

2012E

2013E

2014E

Revenue

$2,031.3

$2,112.6

$2,197.1

$2,284.9

% growth rate

4.0%

Total EBITDAR

(3)

$249.5

$261.7

$274.2

$287.4

$301.2

% growth rate

4.8%

% margin

12.9%

13.0%

13.1%

13.2%

New Rent

(4)

69.8

$71.9

$74.0

$76.3

$78.5

Existing

SunBridge

Rent

(4)

73.9

75.9

78.1

80.5

82.9

Ancillary Rent

(4)

2.0

1.9

2.0

2.1

EBITDA

103.8

$112.0

$120.1

$128.6

$137.6

% growth rate

7.2%

7.1%

7.0%

% margin

5.5%

5.7%

5.9%

6.0%

Depreciation and Amortization

(5)

$19.4

Interest Expense

(6)

$11.1

$11.6

Taxes (41.0% Tax Rate)

33.4

36.5

40.0

43.7

Net Income

$48.0

$52.6

$57.6

$62.9

% growth rate

9.4%

9.6%

9.2%

% margin

2.4%

2.5%

2.6%

2.8%

Pro-Forma Diluted Shares Outstanding

(7)

61.709

Illustrative E.P.S.

$0.78

$0.85

$0.93

$1.02

% growth rate

9.4%

9.6%

9.2%

(1)

2010E PF Rent of $145.7mm assumes 2010E existing rent of $75.9mm and 2011E New Rent decreased by 3.0% annual growth rate ($69.8mm).

(2)

2010E EBITDA of $103.8mm assumes 2010E EBITDAR of $249.5mm less 2010E PF rent of $145.7.

(3)

Assumes annual EBITDAR margin improvement of 10bps.

(4)

Assumes rent increases at 3.0% annually.

(5)

Assumes 35.0% of 2011E D&A remains with OpCo.

(6)

Interest on New Debt of $145mm (0.6x 2010E EBITDAR, L+500 Interest).

(7)

Reflects issuance of 17.209mm shares for net proceeds of $144.4mm assuming a share price of $8.74, OpCo Adjusted Debt of 5.25x 2010E EBITDAR and PropCo Debt of 5.50x 2010E

EBITDA.

(1)

MTS Health Partners

OpCo/PropCo

Structures

Illustrative OpCo

Valuation –

2011-Based Valuation

(1)

Reflects

issuance

17.209mm

for

net

proceeds

$144.4mm

assuming

price

$8.74,

OpCo

Adjusted

Debt

5.25x

2010E

EBITDAR

and

PropCo

Debt

5.50x

2010E

EBITDA.

Illustrative OpCo

Valuation

Forward EBITDAR Multiple

6.00x

6.25x

6.50x

6.75x

7.00x

PF 2011E OpCo

EBITDAR

$261.7

Implied Adjusted Enterprise Value

$1,569.9

$1,635.3

$1,700.7

$1,766.1

$1,831.6

Less: Capitalized Rent (8.0x 2010E PF Rent Exp)

(1,165.3)

Implied Enterprise Value

$404.6

$470.0

$535.4

$600.8

$666.2

Less: New Debt (0.6x 2010E EBITDAR, L+500)

(144.6)

Plus:

Cash

(75.0%

cash

remaing

post

transaction)

30.0

Implied Equity Value

$290.0

$355.4

$420.8

$486.2

$551.6

Pro

Forma

Diluted

Outstanding

(1)

61.709

Illustrative Per Share Value

$4.70

$5.76

$6.82

$7.88

$8.94

Key Metrics

2011E PF EBITDAR

$261.7

2011E PF EBITDA

112.0

2011E EPS

$0.78

Valuation Multiples

Adj. EV / EBITDAR

6.00x

6.25x

6.50x

6.75x

7.00x

EV / EBITDA

3.6x

4.2x

4.8x

5.4x

5.9x

P / E

6.0x

7.4x

8.8x

10.1x

11.5x

MTS Health Partners

OpCo/PropCo

Structures

Illustrative PropCo

Financials –

2011-Based Valuation

Calculation

Rent

Capacity

from

Owned

Facilities

Owned SunBridge

2011E Revenue

$793.5

Owned

SunBridge

2011E

EBITDARM

154.7

Less: Assumed Mgt Fee of 5.0% of Rev

(39.7)

Owned

SunBridge

2011E

EBITDAR

$115.0

Rent Coverage Multiple

1.6x

2011E New Rent

$71.9

Capitalization

Overview

PF Cash on Hand

$10.0

Rolled Mortgage Debt

$166.0

New Debt Issued

192.9

Total Debt Outstanding

$358.9

Mortgage Annual Interest (6.9% Interest Rate)

$11.4

New Debt Annual Interest (L+400 Interest Rate)

12.9

2011E Interest Expense

$24.3

Mortgage

Debt

2010E

NOI

(EBITDA)

2.54x

New

Debt

2010E

NOI

(EBITDA)

2.96x

Total

Debt

2010E

NOI

(EBITDA)

5.50x

Net

Debt

2010E

NOI

(EBITDA)

5.35x

2010E

Coverage

Ratio

(1)

2.7x

2011E

2012E

2013E

2014E

Revenues

(New

OpCo

Rent)

$69.8

$71.9

$74.0

$76.3

$78.5

% growth rate

3.0%

SG&A (6.5% of revenue)

4.5

4.7

4.8

5.0

5.1

NOI / EBITDA

$65.3

$67.2

$69.2

$71.3

$73.4

% growth rate

3.0%

% margin

93.5%

Depreciation and Amortization

(2)

$36.1

Interest

(3)

24.3

24.9

Net Income

$6.8

$8.2

$10.3

$12.5

% growth rate

21.1%

25.2%

20.7%

% margin

9.5%

11.1%

13.5%

15.9%

FFO Calculation

Net Income

$6.8

$8.2

$10.3

$12.5

Plus: D&A

36.1

FFO

$42.9

$44.3

$46.4

$48.5

Dividend Payable (assumes 80.0% of FFO)

$34.3

$35.5

$37.1

$38.8

Pro Forma Diluted Shares Outstanding

(4)

61.709

Dividend Per Share

$0.56

$0.57

$0.60

$0.63

(1)

Assumes 2010E NOI/EBITDA of $65.3 (calculated as revenues of $69.8mm less $4.5mm (6.5% of revenues)).

(2)

Assumes 65.0% of 2011E D&A remains with PropCo.

(3)

Interest on rolled Mortgage Debt of $166mm (2.5x PF2010E EBITDA, 6.9% Interest) and New Debt of $193mm (3.0x PF2010E EBITDA, L+400).

(1)

Illustrative Derivation of PropCo Key Metrics

Illustrative PropCo Income Statement

MTS Health Partners

OpCo/PropCo

Structures

Illustrative PropCo

Financials –

2011-Based Valuation

(1)

Reflects

issuance

17.209mm

for

net

proceeds

$144.4mm

assuming

price

$8.74,

OpCo

Adjusted

Debt

5.25x

2010E

EBITDAR

and

PropCo

Debt

5.50x

2010E

EBITDA.

Illustrative PropCo

Valuation

Forward FFO Multiple

9.00x

9.75x

10.50x

11.25x

12.00x

2011E FFO

$42.9

Implied Equity Value

$385.9

$418.1

$450.2

$482.4

$514.5

Plus: Old Mortgage Debt (2.5x 2010E EBITDA, 6.9% Interest)

166.0

Plus: New Debt (3.0x 2010E EBITDA, L+400 Interest)

192.9

Less:

Cash

(25.0%

cash

remaing

post

trans.)

(10.0)

Implied Enterprise Value

$734.8

$766.9

$799.1

$831.2

$863.4

Pro Forma Diluted Shares Outstanding

(1)

61.709

Illustrative Per Share Value

$6.25

$6.77

$7.30

$7.82

$8.34

Key

Metrics

2011E PF NOI / EBITDA

$67.2

2011E FFO

42.9

2011E FFO / Share

$0.69

2011E Dividend/Share

0.56

2011E EPS

0.11

Valuation

Multiples

EV / EBITDA

10.9x

11.4x

11.9x

12.4x

12.8x

Cap Rate

9.1%

8.8%

8.4%

8.1%

7.8%

FFO/P

9.00x

9.75x

10.50x

11.25x

12.00x

Dividend Yield

8.9%

8.2%

7.6%

7.1%

6.7%

Loan / Value

48.8%

46.8%

44.9%

43.2%

41.6%

MTS Health Partners

OpCo/PropCo

Structures

Transaction Overview Summary –

2011-Based Valuation

Illustrative

OpCo

Summary

Income

Statement

Illustrative

PropCo

Summary

Income

Statement

2011E

2012E

2013E

2011E

2012E

2013E

Revenues

$2,031.3

$2,112.6

$2,197.1

Revenues

(New

OpCo

Rent)

$71.9

$74.0

$76.3

Total EBITDAR

261.7

274.2

287.4

SG&A (6.5% of revenues)

4.7

4.8

5.0

New Rent

(1)

$71.9

$74.0

$76.3

NOI / EBITDA

$67.2

$69.2

$71.3

Existing Rent

77.8

80.1

82.5

Interest Expense

(4)

24.3

24.9

Consolidated Lease Coverage

1.7x

1.8x

FFO

$42.9

$44.3

$46.4

EBITDA

$112.0

$120.1

$128.6

% margin

59.7%

59.9%

60.8%

% margin

5.5%

5.7%

5.9%

0.0

Illustrative

OpCo

Valuation

Illustrative

PropCo

Valuation

FW EBITDAR Multiple

6.0x

6.5x

7.0x

FW FFO Multiple

9.0x

10.5x

12.0x

PF 2011E OpCo

EBITDAR

$261.7

2011E FFO

$42.9

Implied Adjusted Enterprise Value

$1,569.9

$1,700.7

$1,831.6

Implied Equity Value

$385.9

$450.2

$514.5

Less: Capitalized Rent (8.0x)

(1,165.3)

Plus: Debt

(5)

358.9

Implied Enterprise Value

$404.6

$535.4

$666.2

Less: Cash

(6)

(10.0)

Less:

New

Debt

(2)

(144.6)

Implied Enterprise Value

$734.8

$799.1

$863.4

Plus: Cash

(3)

30.0

Implied Cap Rate (2011E EBITDA/EV)

9.1%

8.4%

7.8%

Implied Equity Value

$290.0

$420.8

$551.6

0.0

Illustrative Per Share Value

$4.70

$6.82

$8.94

Illustrative Per Share Value

$6.25

$7.30

$8.34

Implied Combined Per Share Value

% Premium to Current Share Value ($8.74)

PropCo

FW FFO Multiple

PropCo

FW FFO Multiple

$14.1

9.00x

9.75x

10.50x

11.25x

12.00x

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

$10.95

$11.47

$11.99

$12.52

$13.04

6.00x

25.3%

31.3%

37.2%

43.2%

49.2%

6.25x

12.01

12.53

13.05

13.58

14.10

6.25x

37.4%

43.4%

49.4%

55.3%

61.3%

6.50x

13.07

13.59

14.11

14.64

15.16

6.50x

49.6%

55.5%

61.5%

67.5%

73.4%

6.75x

14.13

14.65

15.17

15.70

16.22

6.75x

61.7%

67.7%

73.6%

79.6%

85.5%

7.00x

15.19

15.71

16.23

16.76

17.28

7.00x

73.8%

79.8%

85.7%

91.7%

97.7%

(5)

Mortgage Debt of $166mm (2.5x PF2010E EBITDA, 6.9% Interest) and New Debt of $193mm

(3.0x PF2010E EBITDA, L+400 Interest).

(6)

Cash equal to 25.0% of PF cash balance of $40.0mm.

(1)

Assumes 1.6x Rent Coverage on owned EBITDARM less management fees (5.0% of revenues).

(2)

New Debt issued at 0.6x 2010E EBITDAR, L+500 interest rate.

(3)

Cash equal to 75.0% of PF cash balance of $40.0mm..

(4)

Interest on rolled Mortgage Debt of $166mm (2.5x PF2010E EBITDA, 6.9% Interest) and

New Debt of $193mm (3.0x PF2010E EBITDA, L+400 Interest).

MTS Health Partners

OpCo/PropCo

Structures

Transaction Overview Summary –

Valuation Sensitivity

% Premium to Current Share Value ($8.74)

PropCo

FW FFO Multiple

PropCo

FW FFO Multiple

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

25.3%

31.3%

37.2%

43.2%

49.2%

6.25x

37.4%

43.4%

49.4%

55.3%

61.3%

6.50x

49.6%

55.5%

61.5%

67.5%

73.4%

6.75x

61.7%

67.7%

73.6%

79.6%

85.5%

7.00x

73.8%

79.8%

85.7%

91.7%

97.7%

% Premium to Current Share Value ($8.74)

% Premium to Implied Share Value @ 12/31/10 ($11.74)

PropCo

Debt/EBITDA Multiple

PropCo

Debt/EBITDA Multiple

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

42.0%

45.5%

49.4%

53.6%

58.3%

5.00x

46.2%

50.3%

54.8%

59.8%

65.4%

5.25x

51.3%

56.1%

61.5%

67.6%

74.5%

5.50x

57.6%

63.4%

70.0%

77.6%

86.5%

5.75x

65.5%

72.7%

81.1%

87.9%

88.1%

Equity Financing Needed ($)

PropCo

Debt/EBITDA Multiple

$150.4

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

$344.4

$311.1

$277.8

$244.5

$211.2

5.00x

280.7

247.4

214.1

180.8

147.5

5.25x

217.0

183.7

150.4

117.1

83.8

5.50x

153.3

120.0

86.7

53.4

20.1

5.75x

89.7

56.4

23.1

0.0

PropCo

Loan to Value @ Debt/EBITDA multiple of:

PropCo

Loan to Value @ Debt/EBITDA multiple of:

44.9%

4.50x

5.00x

5.50x

6.00x

6.50x

Ent.Value-Based

(3)

37.7%

41.3%

44.9%

48.4%

51.8%

Prop. Value-Based

(3)

44.9%

49.9%

54.9%

59.9%

64.9%

$358.9

4.50x

5.00x

5.50x

6.00x

6.50x

$293.6

$326.3

$358.9

$391.5

$424.1

% Premium to Implied Share Value @ 12/31/10 ($11.74)

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

0.5%

5.3%

10.0%

14.8%

19.6%

6.25x

10.2%

15.0%

19.8%

24.5%

29.3%

6.50x

19.9%

24.7%

29.5%

34.3%

39.0%

6.75x

29.6%

34.4%

39.2%

44.0%

48.8%

7.00x

39.4%

44.1%

48.9%

53.7%

58.5%

% Premium to Implied Share Value @ 12/31/10 ($11.74)

PropCo

Debt/EBITDA Multiple

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

20.2%

22.2%

24.5%

26.9%

29.5%

5.00x

22.0%

24.3%

26.8%

29.5%

32.5%

5.25x

24.0%

26.6%

29.5%

32.6%

36.1%

5.50x

26.5%

29.5%

32.8%

36.5%

40.6%

5.75x

29.4%

32.9%

36.8%

39.9%

40.1%

Equity Financing Needed ($)

PropCo

Debt/EBITDA Multiple

$150.4

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

$344.4

$311.1

$277.8

$244.5

$211.2

5.00x

280.7

247.4

214.1

180.8

147.5

5.25x

217.0

183.7

150.4

117.1

83.8

5.50x

153.3

120.0

86.7

53.4

20.1

5.75x

89.7

56.4

23.1

0.0

PropCo

Loan to Value @ Debt/EBITDA multiple of:

44.9%

4.50x

5.00x

5.50x

6.00x

6.50x

Ent.Value-Based

(3)

37.7%

41.3%

44.9%

48.4%

51.8%

Prop. Value-Based

(3)

44.9%

49.9%

54.9%

59.9%

64.9%

(1)

Implied share value calculated by using 12/31/10E balance sheet data and share count and applying Sun’s current forward EBITDAR multiple to 2011E EBITDAR to derive 12/31/10E Adj.

Ent. Val.

(2)

Assumes PropCo Valuation based on FFO multiple of 10.5x and OpCo valuation based on EBITDAR Multiple of 6.5x.

(3)

Enterprise Value based upon PropCo valuation at 10.5x FW FFO. Property Value of $653.5mm based upon 2011E SunBridge Owned EBITDAR of $115.0mm, 1.6x coverage and 11.0% cap

rate.

MTS Health Partners

OpCo/PropCo

Structures

“Has-Gets”

Analysis

(1)

Implied share value calculated by using 12/31/10E balance sheet data and share count and applying Sun’s current forward EBITDAR multiple to 2011E EBITDAR to derive 12/31/10E Adj. Ent. Val.

(2)

Reflects Accretion assuming share issuance at $11.74 per share

(3)

See page 75 for NOL treatment.

(1)

Sun Healthcare Group

At December 2010

Today

At Dec. 2010

OpCo

(@ mid-point)

PropCo

(@ mid-point)

Total

(@ mid-point)

Stock Price

$8.74

$11.74

$6.82

$7.30

$14.11

FW EBITDAR/FFO Multiple

6.4x

6.5x

10.5x

Accretion/(Dilution) -

vs. $8.74

61.5%

Accretion/(Dilution) -

vs. $11.74

(2)

29.5%

Proportion of Combined Value

48.3%

51.7%

100.0%

Tax Treatment

(3)

Double Taxation

Tax Advantaged Structure

Leverage

Net Debt

$601.2

$553.0

$114.6

$348.9

$463.5

LTM Net Debt Multiple

3.45x

3.18x

1.10x

5.35x

LTM Adjusted Net Debt Multiple

4.80x

4.64x

5.13x

Valuation Drivers

LTC reimbursement

Acquisition of new properties

Operational execution

Credit quality of lessee counterparties

Delevering

through attractive

Acquisition growth

Capital struture

optimization

capital structure

Investor yield

Acquisition growth

MTS Health Partners

OpCo/PropCo

Structures

Public REIT Comparables

P / 2010E FFO

P / 2011E FFO

Debt / Undepreciated

Assets

(% Loan to Value)

Debt / 2009E EBITDA

Sources: Company press releases, public documents, and Wall Street research consensus estimates as of 1/29/10.

Note: Consensus FFO Estimates obtained from Wall Street Research as of 1/26/10.

(1) Calculated as 2010E EBITDA divided by total enterprise value

2010E Cap Rate

(1)

Dividend Yield

Mean = 13.0x

Mean = 13.9x

Mean = 7.3%

Mean = 4.4x

(38.1%)

Mean = 5.9x

(43.8%)

(27.3%)

(30.0%)

(21.4%)

(27.3%)

(1.4%)

Key

HCP, Inc.

HCP

Nationwide Health Properties Inc.

NHP

Healthcare Realty Trust Inc.

Omega Healthcare Investors Inc.

OHI

Health Care REIT Inc.

HCN

Senior Housing Properties Trust

SNH

LTC Properties Inc.

LTC

Ventas

Inc.

VTR

MTS Health Partners

OpCo/PropCo

Structures

Conclusions/Next Steps

Next Steps

Conclusions

Management has used the last 2 months to intensively explore the

feasibility and consequences of a real estate-driven transaction

Split of real estate from operating assets has the potential to create

meaningful value for Sun shareholders

Would provide for two separately traded public companies

that together are expected to be valued in excess of Sun’s

standalone equity valuations

Partially

eliminates

Federal

“double

taxation”

profits

driven from Sun’s real estate, providing for regular cash

dividends to shareholders

Provides Sun shareholders with a separately traded, high

growth REIT vehicle

However, will require execution of a series of complex

transactions to position monetization in the form of a real

estate spin (or a simultaneous) real estate merger transaction

We believe that a spin should be the baseline transaction

pursued

Execution simplicity vs. merger transaction

Work to facilitate such spin would likewise facilitate

exploration

merger

could

executed

concert

with

or following a spin transaction

Management is requesting board approval to take all steps

necessary

provide

“execution-ready”

transaction

for

consideration and approval of the board

Further refinement of current operating and financial

model by project team

Finalization of tax work to finalize expected tax

impact to Sun and its shareholders upon spin

Procurement of preliminary term sheets for

OpCo/PropCo

debt

Further investigation / discussions with

counterparties

for

internal

“split”

transaction

Detailed preparation of separation plan, including

balance sheet development for each entity

Integration of corporate restructuring flexibility

into

“Amend”

discussions

with

bank

group

Legal and financial advisor discussions with

independent board committees

Finalization of PropCo business plan

MTS Health Partners

Financing Alternatives

Current Capital Structure

Potential Solutions

The Challenges

Sun’s

current

capital

structure

–

specifically

its

$330

million term loan, priced at L+200bps (current 3MO

LIBOR = 0.2491%), continues to be an asset for Sun

as it battles reimbursement headwinds

$150 million LIBOR swap (@ 6.8% avg.)

expires in July 2010

However, the term facility presents several significant

near and medium-term challenges:

Risks of covenant default

Q1/Q2 2011 due to

the impact of reimbursement cuts

Risks of exceeding L/C baskets that finance

workers’

comp insurance

Currently at capacity

Previous cash-funded program reduced

cash and negatively impacted covenants

Limited acquisition flexibility

Acquisition basket of $75 million has been

reduced to $31.7 million

Transactions financed entirely with equity

or equity proceeds count against this basket

Sun has a range of potential term loan and broader

capital structure solutions

Each can be done standalone or with a

transaction

Each

must

considered

alongside

the

timing

and

probability

other

options

presented

today

Term Loan Amendment Options

“Amendment”

–

revises

financial

covenants

and

baskets in exchange for increased pricing and

consent fee

Term Loan Refinancing Options

Partial Refinancing –

partial payoff of term loan

with high yield, equity or converts in connection

with Amend or Amend and Extend

Full Refinancing

Full re-syndication of term loan

Potential to de-lever through additional

high yield, equity or convert issuance

MTS Health Partners

Financing Alternatives

Overview of Alternatives

Amend

Senior Debt Refinancing Alternatives

$100mm Equity

$150mm HY Notes

$100mm Convert

100% Senior / High Yield

Repay w/ HY

Rate: L+300-350 bps

LIBOR floor: 1.5%

25 bps consent free

Underwriting spread

of 4.0%

Discount to market

price of 5.0%

9.0% Interest Rate

3.0% Interest Rate

Convertible strike price

of $12.00/share (37%

premium to current)

9.0% Interest Rate

Current capital structure

remains intact

$100mm new equity

$25mm to pre-pay

term loan

Issue $150mm new

Tack-on Notes

$75mm to pre-pay term

loan

$100mm new

Convertible Notes

$25mm to pre-pay term

loan

Issue $600mm new High

Yield Notes to replace

term loan and outstanding

High Yield Notes

Provide financial

covenant relief

Delay step downs in

current covenant levels –

TBD

Fulfills current

covenant

requirements

Covenants must be

renegotiated

Covenants must be

renegotiated

Relieves covenant issues

2.26x

1.98

1.74x

1.46

1.42x

1.18

2.27x

2.00

0.15x

(0.07)

3.40x

3.12

2.88x

2.60

3.42x

3.18x

3.41x

3.14

3.57x

3.36

0.0% (3.0% vs

Budg.)

(18.4%)

(18.0%)

(13.5%)

(11.1%)

(1.9%)

(13.2%)

(26.4%)

(21.3%)

Terms

Capital

Structure

Impact

Covenant

Impact

Sr. Lev –

Q1’10

Sr. Lev –

Q1’11

Tot

Lev

–

Q1’10

Tot

Lev

–

Q1’11

Acc/(Dil)

–

2010

Acc/(Dil)

–

2011

MTS Health Partners

Financing Alternatives

Combination Analysis –

Equity vs. High Yield Issuance

Note: 25% and 50% of Equity Issuance and High Yield Issuance respectively used to pay down term loan. Leverage multiples in red denote violations of current covenants.

2010 EPS A/(D) Sensitivity-$

2011 EPS A/(D) Sensitivity-$

High Yield Issuance

($0.17)

$0.0

$75.0

$150.0

($0.18)

$0.0

$75.0

$150.0

$0.0

$0.00

($0.06)

($0.13)

$0.0

$0.00

($0.06)

($0.11)

50.0

(0.10)

(0.15)

(0.21)

50.0

(0.10)

(0.15)

(0.20)

100.0

(0.17)

(0.23)

(0.28)

100.0

(0.18)

(0.23)

(0.27)

2010 EPS A/(D) Sensitivity-%

2011 EPS A/(D) Sensitivity-%

High Yield Issuance

-18.4%

$0.0

$75.0

$150.0

-18.1%

$0.0

$75.0

$150.0

$0.0

0.0%

(6.8%)

(13.5%)

$0.0

0.0%

(5.6%)

(11.2%)

50.0

(10.3%)

(16.3%)

(22.2%)

50.0

(10.1%)

(15.1%)

(20.0%)

100.0

(18.4%)

(23.8%)

(29.2%)

100.0

(18.1%)

(22.6%)

(27.0%)

Q1 2010 Senior Leverage

Q1 2011 Senior Leverage

High Yield Issuance

1.74x

$0.0

$75.0

$150.0

1.46x

$0.0

$75.0

$150.0

$0.0

2.26x

1.84x

1.42x

$0.0

1.98x

1.58x

1.18x

50.0

2.00x

1.58x

1.16x

50.0

1.72x

1.32x

0.92x

100.0

1.74x

1.32x

0.90x

100.0

1.46x

1.06x

0.65x

Q1 2010 Total Leverage

Q1 2011 Total Leverage

High Yield Issuance

2.88x

$0.0

$75.0

$150.0

2.60x

$0.0

$75.0

$150.0

$0.0

3.40x

3.41x

3.42x

$0.0

3.12x

3.15x

3.18x

50.0

3.14x

3.15x

3.16x

50.0

2.86x

2.89x

2.91x

100.0

2.88x

2.89x

2.90x

100.0

2.60x

2.62x

2.65x

MTS Health Partners

Portfolio Rationalization Alternatives

Oklahoma Portfolio

Oklahoma Financials

Overview

Sun’s Oklahoma portfolio was acquired from Peak in 2005

Consists of 9 properties –

5 owned and 4 leased

Owned properties –

2009 EBITDA of $3.0 million with mortgage

debt of $18.6 (6.2x leverage)

Leased properties –

2009 EBITDA of $0.3m

Regional management is projecting significant improvement in

2010 due to improving operating trends and more focused

marketing

Significant GLPL upside for regional and mom/pop acquirors

Next Steps

Note: Oklahoma projections are net of budget shell and regional management allocations.

(1)

Includes additional $1.2mm of unallocated self-insurance expense currently allocated to states other than Oklahoma, that would be saved under a divestiture of OK.

Divestiture of the portfolio should be pursued due to low quality mix,

high GLPL costs and OK state reimbursement environment

Proceeds would be used to retire debt and could be recycled to acquire

other facilities within existing acquisition basket

Sun has engaged a local broker to assess the market to determine

likely buyers, potential pricing and optimal timing:

Most recent sale of facilities was by Sun in 2008

for 9.5x EBITDAR and $25,000 per bed

Current financials have both operating and GLPL upside that

would be easily realized by a more localized operator

Given expected 2010 operating improvements and a somewhat tepid

M&A environment, any sale efforts are expected to be reactive until

2010 performance can be demonstrated

2009

2010

2011

Quality

Mix

Owned

59.3%

60.7%

60.8%

Quality

Mix

Leased

36.7%

40.7%

40.9%

Total Quality Mix

47.9%

50.8%

51.1%

Revenue -

Owned

$30.2

$30.8

$32.4

Revenue -

Leased

28.4

29.7

29.9

Total Revenue

$58.6

$60.4

$62.4

% YOY Growth

3.2%

EBITDAR

Owned

$3.3

$3.7

$4.1

EBITDAR

Leased

2.2

3.1

Total EBITDAR

$5.5

$6.8

$7.2

% Margin

9.4%

11.2%

11.6%

% YOY Growth

22.9%

6.8%

Rent

2.2

2.1

EBITDA

Owned

$3.0

$3.7

EBITDA

Leased

0.3

1.0

1.4

Total EBITDA

$3.3

$4.7

$5.1

Less: Unallocated Self Insurance Exp.

(1)

1.2

Adj. EBITDA (Marginal to Sun)

$2.1

$3.5

$3.9

% Margin

3.6%

5.7%

6.2%

MTS Health Partners

Portfolio Rationalization Alternatives

Oklahoma Portfolio –

Sale Matrix

Purchase Price

$40.0

$45.0

$50.0

$55.0

$60.0

$65.0

EBITDAR Multiples:

Metric

2009

$5.5

7.3x

8.2x

9.1x

10.0x

10.9x

11.8x

Adjusted 2009

(1)

6.5

6.2x

6.9x

7.7x

8.5x

9.2x

10.0x

2010

6.8

5.9x

6.7x

7.4x

8.1x

8.9x

9.6x

Adjusted 2010

(1)

7.8

5.2x

5.8x

6.4x

7.1x

7.7x

8.4x

Per Bed Multiple

1,313

$30,465

$34,273

$38,081

$41,889

$45,697

$49,505

2010 A/(D) @ Sun Interest of:

(2)

3.7%

1.0%

1.2%

1.4%

1.5%

1.7%

1.8%

4.7%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

5.7%

1.4%

1.7%

1.9%

2.1%

2.4%

2.6%

2011 A/(D) @ Sun Interest of:

(2)

5.2%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

6.2%

0.8%

1.0%

1.2%

1.5%

1.7%

1.9%

7.2%

0.9%

1.2%

1.5%

1.8%

2.0%

2.3%

Net Leverage

Cur./Covenant

Q1 2011

3.09x / 3.00x

2.98x

2.97x

2.95x

2.93x

2.91x

2.89x

Q4 2011

2.77x / 3.00x

2.68x

2.66x

2.64x

2.63x

2.61x

2.59x

Senior Leverage

Q1 2011

1.98x / 2.00x

1.82x

1.80x

1.78x

1.77x

1.75x

1.73x

Q4 2011

1.72x / 2.00x

1.56x

1.55x

1.53x

1.51x

1.50x

1.48x

Adjusted EBITDAR includes additional $1.0mm of self-insurance expense that could be saved by a regional/local buyer.

Represents the projected interest rate on Sun’s term loan debt that can be repaid with sale proceeds. Net Income adjustments for the removal of Oklahoma Facilities calculated as

reduction in tax-affected EBITs of $1.9mm and $2.4mm in 2010E and 2011E, respectively, plus a reduction of Mortgage and Term Loan interest expense for the repayment of

associated debt. Reduction in interest expense calculated by applying proceeds from sale (net of taxes, based on a tax basis of $20.6mm and tax rate of 41.0%) to Term Loan with a

2010E average interest rate of 4.7% and 2011E average interest rate of 6.2%.

MTS Health Partners

Portfolio Rationalization Alternatives

CareerStaff

Divestiture

CareerStaff

Financials

Overview

Next Steps

(1)

Corporate costs estimated based on 2010 projection and 2.0% annual cost increases.

Management previously commenced initial exploration of

marketing

CareerStaff

2007

Decided to wait given deteriorating credit markets and

staffing trends

Staffing continues to be in an industry-wide slump

While Allied staffing is seen as a higher-quality staffing

model, it has been similarly affected

Despite

industry

trends,

CareerStaff

management

counteracted negative 2009 revenue growth with increased

margins

Nevertheless, likely strategic buyers continue to face

revenue erosion, depressed equity valuations and, for some

entities, liquidity issues

While

CareerStaff

may

not

“core”

Sun

operations,

the

loss of its associated margin contribution would be materially

(5-8%) dilutive assuming a wide range of sale prices/multiples

Dilution is primarily driven by the limited benefit of using

sale proceeds to pay low-cost senior credit facility debt,

combined with tax inefficiencies from a sale

Given a strong management team and improving industry

fundamentals,

believe

that

CareerStaff

process

should

delayed until further operating visibility is achieved, and/or its

sale can be used to facilitate some other transaction

2008A

2009E

2010E

2011E

Revenue

$120.4

$102.6

$104.7

$107.9

% YOY Growth

(14.8%)

2.1%

3.0%

Operating Expenses

$109.0

$92.2

$95.1

$97.9

% of Revenue

90.5%

89.9%

90.8%

EBITDAR

$11.5

$10.3

$9.6

$10.0

% Margin

9.5%

10.1%

9.2%

% YOY Growth

(10.0%)

(6.5%)

3.3%

Rent

1.0

0.9

0.8

EBITDA

$10.5

$9.4

$8.8

$9.1

% Margin

8.7%

9.2%

8.4%

% YOY Growth

(10.4%)

(6.7%)

4.1%

Corporate Costs

(1)

1.0

1.1

Adjusted EBITDA

$9.4

$8.3

$7.7

$8.0

% Margin

7.8%

8.1%

7.3%

7.4%

MTS Health Partners

Portfolio Rationalization Alternatives

CareerStaff

Divestiture –

Sale Matrix

Purchase Price

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

EBITDA Multiples:

Metric

2009

$9.4

5.3x

6.4x

7.5x

8.5x

9.6x

10.7x

Adj. 2009 (w/Corp.Costs)

8.3

6.0x

7.2x

8.4x

9.6x

10.8x

12.0x

2010

8.8

5.7x

6.8x

8.0x

9.1x

10.3x

11.4x

Adj. 2010 (w/Corp.Costs)

7.7

6.5x

7.8x

9.1x

10.4x

11.7x

13.0x

2010 A/(D) @ Sun Interest of:

(1)

3.7%

(7.7%)

(7.4%)

(7.1%)

(6.8%)

(6.5%)

(6.2%)

4.7%

(7.1%)

(6.7%)

(6.3%)

(5.9%)

(5.5%)

(5.2%)

5.7%

(6.5%)

(6.0%)

(5.6%)

(5.1%)

(4.6%)

(4.2%)

2011 A/(D) @ Sun Interest of:

(1)

5.2%

(6.9%)

(6.5%)

(6.1%)

(5.7%)

(5.3%)

(4.9%)

6.2%

(6.3%)

(5.8%)

(5.4%)

(4.9%)

(4.4%)

(3.9%)

7.2%

(5.8%)

(5.2%)

(4.7%)

(4.1%)

(3.6%)

(3.0%)

Net Leverage

Cur./Covenant

Q1 2011

3.09x / 3.00x

3.03x

2.99x

2.96x

2.92x

2.88x

2.85x

Q4 2011

2.77x / 3.00x

2.71x

2.68x

2.64x

2.61x

2.57x

2.50x

Senior Leverage

Q1 2011

1.98x / 2.00x

1.84x

1.80x

1.76x

1.73x

1.69x

1.65x

Q4 2011

1.72x / 2.00x

1.57x

1.54x

1.50x

1.47x

1.43x

1.37x

Represents the projected interest rate on Sun’s term loan debt that can be repaid with sale proceeds. Net Income adjustments for the removal of CareerStaff calculated as reduction

in tax affected EBITs of $7.0mm and $7.5mm in 2010E and 2011E, respectively, plus a reduction of Term Loan interest expense for the repayment of associated debt. Reduction

in interest expense calculated by applying proceeds from sale net of taxes (assessed on a Net Tax Basis of $30.0mm, and tax rate of 41.0%) to Term Loan with a 2010E average

interest rate of 4.7% and 2011E average interest rate of 6.2%.

MTS Health Partners

Portfolio Expansion Alternatives

Comparison of Alternatives

(1) Acquisition currency consists of cash on hand, new debt issued at 4.0x target EBITDA (6.0% interest rate), and Sun Equity raised at $8.74 per share less a 5.0% discount to market price

and a 4.0% underwriting spread ($7.97/share).

LTC Acquisition Alternatives

Hospice Acqusition

Alternatives

Base Case

Small

Medium

Large

Small

Medium

Large

2009E Revenue

$1,881.8

$166.7

$666.7

$1,000.0

$25.0

$100.0

$689.4

2009E EBITDAR/EBITDA

176.8

20.0

80.0

120.0

5.0

20.0

75.1

% Margin

9.4%

12.0%

20.0%

10.9%

2009E EBITDAR/EBITDA (w/synergies)

21.7

93.3

150.0

5.3

21.0

80.1

% Margin

13.0%

14.0%

15.0%

21.0%

11.6%

Purchase

Price

(Enterprise

Value)

$140.0

$560.0

$840.0

$47.5

$190.0

$686.0

Purchase

Price

EBITDAR/EBITDA

Mult.

7.0x

9.5x

9.1x

Acquisition Currency

Cash on Hand

13.9%

3.5%

2.3%

40.9%

10.2%

15.0%

Debt

55.4%

40.9%

37.5%

Equity

(1)

30.7%

41.1%

42.3%

18.1%

48.8%

47.5%

PF Cap Structure

Capital Leases

$0.8

Revolver

0.0

Term Loan

329.1

409.1

649.1

809.1

349.1

409.1

629.7

Mortgage Debt

170.6

179.1

170.6

Total Bank Debt

$500.5

$589.1

$829.1

$989.1

$529.1

$589.1

$801.1

Senior Sub Notes

200.0

Total Debt

$700.5

$789.1

$1,029.1

$1,189.1

$729.1

$789.1

$1,001.1

Sr.Lev

Q1 '10

2.26x

2.52x

2.74x

2.75x

2.41x

2.53x

3.15x

Sr.Lev

Q1 '11

1.98x

2.28x

2.58x

2.62x

2.15x

2.29x

3.94x

Tot.Lev

Q1 '10

3.40x

3.53x

3.48x

3.37x

3.52x

3.54x

3.13x

Tot.Lev

Q1 '11

3.09x

3.29x

3.31x

3.23x

3.26x

3.30x

2.34x

Acc/(Dil) -

2010

4.8%

9.3%

17.1%

1.9%

(6.0%)

(17.4%)

Acc/(Dil) -

2011

5.2%

10.1%

17.7%

1.9%

(5.8%)

(13.5%)

MTS Health Partners

Portfolio Expansion Alternatives

Comparison of LTC Alternatives

Potential for broader array of strategic

alternatives upon reimbursement visibility

Impact of RUGs

IV can be better assessed

Potential for deteriorating reimbursement

outlook

Limits ability to pursue/finance transactions

Potential covenant issues in out-years –

exacerbated by reimbursement and/or higher

healthcare costs

Synergies

–

potential

cost/operating

More digestible than large acquisition

Current acquisition basket limits

Timing

RUGs

implementation

Large trx. distraction, with more limited

impact

Potential for meaningful accretion

Synergies

–

cost

and

potential

operating

Potential upside relative to standalone

projections and associated risks

Reimbursement uncertainty could provide

impetus for all parties to do a trx. now

Improved share liquidity in stock

transaction

Loss of current capital structure

Timing

RUGs

implementation

Delays, or makes more challenging, potential

for Sun change of control premium

Potential for inefficient span of control

ATTRACTIONS

CONSIDERATIONS

Medium Or

Large/Transformative

Transaction

Maintain

Status Quo

(for now)

Smaller

Transaction

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

2011 Accretion/(Dilution) Analysis

$20.0mm EBITDAR Purchase

$80.0mm EBITDAR Purchase

$120.0mm EBITDAR Purchase

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

$8.74

10.8%

5.2%

0.1%

(4.5%)

10.74

12.1%

7.4%

3.0%

(1.0%)

12.74

13.0%

9.0%

5.2%

1.6%

14.74

13.7%

10.1%

6.8%

3.6%

16.74

14.2%

11.0%

8.0%

5.2%

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

1.0%

10.8%

5.2%

0.1%

(4.5%)

2.0%

12.8%

7.1%

1.9%

(2.7%)

3.0%

14.9%

9.1%

3.8%

(1.0%)

4.0%

16.9%

11.0%

5.6%

0.8%

5.0%

19.0%

12.9%

7.5%

2.5%

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

2.5x

5.1%

0.1%

(4.4%)

(8.5%)

3.0x

6.9%

1.7%

(3.0%)

(7.3%)

3.5x

8.8%

3.4%

(1.5%)

(5.9%)

4.0x

10.8%

5.2%

0.1%

(4.5%)

4.5x

12.9%

7.0%

1.8%

(3.0%)

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

$8.74

27.6%

10.1%

(3.2%)

(13.6%)

10.74

35.2%

18.9%

6.1%

(4.2%)

12.74

41.0%

25.9%

13.7%

3.6%

14.74

45.6%

31.4%

19.8%

10.1%

16.74

49.2%

36.0%

25.0%

15.6%

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

1.0%

21.5%

4.9%

(7.8%)

(17.7%)

2.0%

27.6%

10.1%

(3.2%)

(13.6%)

3.0%

33.6%

15.3%

1.4%

(9.5%)

4.0%

39.7%

20.6%

6.0%

(5.4%)

5.0%

45.8%

25.8%

10.6%

(1.3%)

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

2.5x

9.5%

(3.0%)

(13.0%)

(21.1%)

3.0x

14.7%

0.8%

(10.1%)

(18.8%)

3.5x

20.7%

5.2%

(6.8%)

(16.3%)

4.0x

27.6%

10.1%

(3.2%)

(13.6%)

4.5x

35.6%

15.7%

0.9%

(10.5%)

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

$8.74

41.6%

17.7%

0.6%

(12.1%)

10.74

53.1%

29.9%

12.8%

(0.4%)

12.74

62.2%

39.9%

22.9%

9.6%

14.74

69.6%

48.2%

31.6%

18.3%

16.74

75.6%

55.2%

39.0%

25.9%

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

1.0%

26.1%

4.8%

(10.4%)

(21.7%)

2.0%

33.8%

11.2%

(4.9%)

(16.9%)

3.0%

41.6%

17.7%

0.6%

(12.1%)

4.0%

49.3%

24.1%

6.2%

(7.2%)

5.0%

57.1%

30.5%

11.7%

(2.4%)

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

2.5x

16.4%

0.6%

(11.5%)

(20.9%)

3.0x

23.4%

5.5%

(7.9%)

(18.3%)

3.5x

31.7%

11.1%

(3.9%)

(15.4%)

4.0x

41.6%

17.7%

0.6%

(12.1%)

4.5x

53.6%

25.4%

5.9%

(8.4%)

Note: Base case assumes targets have 12.0% EBITDA margins. Acquisition currency consists of $20.0mm of Sun cash on hand, new debt issued at 4.0x target EBITDA (6.0%

interest rate), and Sun Equity raised at $8.74 per share less a 5.0% discount to market price and a 4.0% underwriting spread ($7.97/share).

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

2011 Accretion/(Dilution) Analysis

$20.0mm EBITDA Purchase

Orleans $75.0mm EBITDA Purchase

$5mm EBITDA Purchase

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

$8.74

4.8%

.4%(1.3%)

1.9%

0.5%

10.74

4.8%

3.6%

2.4%

1.2%

12.74

4.7%

3.7%

2.7%

1.7%

14.74

4.7%

3.8%

2.9%

2.1%

16.74

4.7%

3.9%

3.1%

2.4%

(0.8%)

0.1%

0.8%

1.3%

1.6%

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

1.0%

4.8%

3.4%

1.9%

0.5%

2.0%

5.2%

3.7%

2.2%

0.8%

3.0%

5.5%

4.0%

2.6%

1.2%

4.0%

5.8%

4.3%

2.9%

1.5%

5.0%

6.2%

4.7%

3.2%

1.8%

(0.8%)

(0.5%)

(0.2%)

0.1%

0.4%

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

2.5x

3.3%

1.9%

0.5%

(0.8%)

3.0x

3.8%

2.4%

1.0%

(0.4%)

3.5x

4.3%

2.9%

1.5%

0.1%

4.0x

4.8%

3.4%

1.9%

0.5%

4.5x

5.4%

3.9%

2.4%

1.0%

(2.1%)

(1.7%)

(1.3%)

(0.8%)

(0.4%)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

$8.74

3.6%

(5.8%)

(9.8%)

(13.6%)

10.74

6.2%

2.0%

(1.9%)

(5.5%)

(8.9%)

12.74

8.0%

4.3%

0.9%

(2.3%)

(5.4%)

14.74

9.4%

6.2%

3.1%

0.1%

(2.6%)

16.74

10.5%

7.6%

4.8%

2.1%

(0.4%)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

1.0%

3.6%

(1.3%)

(5.8%)

(9.8%)

(13.6%)

2.0%

4.7%

(0.3%)

(4.7%)

(8.8%)

(12.6%)

3.0%

5.8%

0.8%

(3.7%)

(7.9%)

(11.7%)

4.0%

6.9%

1.9%

(2.7%)

(6.9%)

(10.7%)

5.0%

8.1%

3.0%

(1.6%)

(5.9%)

(9.8%)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

2.5x

(1.3%)

(5.7%)

(9.7%)

(13.3%)

(16.7%)

3.0x

0.2%

(4.3%)

(8.4%)

(12.2%)

(15.7%)

3.5x

1.9%

(2.8%)

(7.1%)

(11.0%)

(14.6%)

4.0x

3.6%

(1.3%)

(5.8%)

(9.8%)

(13.6%)

4.5x

5.3%

0.3%

(4.4%)

(8.6%)

(12.4%)

% Premium Paid / Implied EBITDA Mult.

9.1x

15.0%

20.0%

25.0%

30.0%

35.0%

7.8x

8.1x

8.4x

8.8x

9.1x

$8.74

1.5%

(2.7%)

(6.6%)

(10.1%)

(13.5%)

10.74

10.5%

6.4%

2.6%

(0.9%)

(4.3%)

12.74

17.7%

13.7%

10.0%

6.5%

3.2%

14.74

23.5%

19.7%

16.1%

12.7%

9.5%

16.74

28.4%

24.7%

21.3%

18.0%

14.8%

% Premium Paid / Implied EBITDA Mult.

15.0%

20.0%

25.0%

30.0%

35.0%

7.8x

8.1x

8.4x

8.8x

9.1x

$0.0

(2.2%)

(6.2%)

(10.0%)

(13.4%)

(16.7%)

2.5

(0.3%)

(4.4%)

(8.3%)

(11.8%)

(15.1%)

5.0

1.5%

(2.7%)

(6.6%)

(10.1%)

(13.5%)

7.5

3.4%

(0.9%)

(4.8%)

(8.5%)

(11.9%)

10.0

5.2%

0.9%

(3.1%)

(6.9%)

(10.3%)

% Premium Paid / Implied EBITDA Mult.

15.0%

20.0%

25.0%

30.0%

35.0%

7.8x

8.1x

8.4x

8.8x

9.1x

2.5x

(9.0%)

(12.3%)

(15.3%)

(18.1%)

(20.8%)

3.0x

(5.9%)

(9.4%)

(12.7%)

(15.7%)

(18.6%)

3.5x

(2.4%)

(6.2%)

(9.8%)

(13.1%)

(16.2%)

4.0x

1.5%

(2.7%)

(6.6%)

(10.1%)

(13.5%)

4.5x

5.9%

1.3%

(3.0%)

(6.9%)

(10.5%)

MTS Health Partners

Portfolio Expansion Alternatives

Hospice

Acquisition

–

Overview

Orleans

(as

standalone

entity)

ATTRACTIONS

CONSIDERATIONS

Hospice industry leader

Demonstrated success in navigating caps

Company has been successful in integrating the

VistaCare

acquisition which has resulted in

significant improvement in margins

Even with the impending CMS 4.0% negative

adjustment to the wage index, the Company

believes it can push margins into the 9.0-11.0%

range over the next 3-5 years

Continued increase in Orleans stock price

Relative equity valuations would result in Orleans

shareholders having majority of combined entity

(absent unlikely highly leveraged transaction by Sun)

Regulatory environment risk; heavy reliance on

Medicare (over 90%)

Generally exposed to adverse potential changes

in hospice reimbursement stemming from

healthcare reform

Declines in patient census growth

Increased competition from local, regional and

national players

Pending qui tam complaint filed by a former

VistaCare

employee

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Orleans Public Market Overview

Sources: Company press releases, public documents, and Wall Street research consensus estimates

Note : $ in Millions except per share data.

Orlean's

Market Valuation

Stock Price (01/29/10)

$14.68

Fully Diluted Shares Outstanding

33.130

Equity Value

$486.4

Leverage Multiples

Add: Debt (09/30/09)

2009E

2010E

Long-Term Debt

1.55x

1.46x

$116.8

Less: Cash (09/30/09)

(1.31x)

(1.23x)

(98.8)

Net Debt

0.24x

0.22x

$18.0

Enterprise Value

$506.6

Orlean's

Metrics & Trading Multiples

Ent. Value /

Price /

Year

EBITDA

EPS

2009E

6.7x

12.6x

2010E

6.3x

11.6x

2011E

6.1x

10.8x

Year

EBITDA

EPS

2009E

$75.1

$1.17

2010E

80.0

1.26

2011E

83.1

1.36

Hospice Acquisition –

Orleans LTM Stock Price Performance

Portfolio Expansion Alternatives

Acquired the Flint, Michigan-

based Avalon Hospice

program, expanding Orleans's

geographic coverage

northward into Genesee and

surrounding counties

Announced financial results for the first quarter ended March

31, 2009. The Company’s EBITDA from continuing

operations for the first quarter of 2009 was $17.0 million as

compared with $7.9 million for the first quarter of 2008

Announced financial results

for the third quarter and nine

months ended September 30,

2009. The Company’s

EBITDA from continuing

operations for the third quarter

of 2009 was $22.3 million,

compared with $13.6 million

for the third quarter of 2008

$14.68

Low

Average

High

3 Months

$13.90

$15.23

$16.70

6 Months

11.01

13.93

16.70

9 Months

9.44

12.67

16.70

12 Months

8.21

11.95

16.70

MTS Health Partners

Note: As per CapitalIQ 1/29/10

MTS Health Partners

Hospice Acquisition –

Orleans Valuation Matrix

Portfolio Expansion Alternatives

Sources: Company press releases, public documents, and Wall Street research consensus estimates

Note : $ in Millions except per share data.

Orlean's

Sun

% Premium

Stock Price

10%

20%

30%

40%

50%

At Market

$14.68

$16.15

$17.62

$19.08

$20.55

$22.02

$8.74

Diluted S.O.

33.130

33.287

33.423

33.538

33.636

33.722

44.651

Market Cap (MC)

$486.4

$537.5

$588.8

$640.0

$691.3

$742.6

$390.2

Add: Debt

$116.8

$702.6

Less: Cash

(98.8)

(101.4)

Add: Minority Interest / Pref. Stock

2.3

0.0

Enterprise Value (EV)

$506.6

$557.8

$609.1

$660.3

$711.6

$762.8

$991.4

Add: Capitalized LTM Rent (8.0x)

584.4

Adj. Enterprise Value (Adj. EV)

$1,585.6

Data

EV / 2009E EBITDA

$75.1

6.7x

7.4x

8.1x

8.8x

9.5x

10.2x

5.7x

EV / 2010E EBITDA

80.0

6.3x

7.0x

7.6x

8.3x

8.9x

9.5x

5.8x

EV / 2011E EBITDA

83.1

6.1x

6.7x

7.3x

7.9x

8.6x

9.2x

5.6x

Data

Price / 2009E EPS

$1.17

12.6x

13.8x

15.1x

16.3x

17.6x

18.8x

8.1x

Price / 2010E EPS

1.26

11.6x

12.8x

14.0x

15.1x

16.3x

17.5x

9.1x

Price / 2011E EPS

1.36

10.8x

11.9x

13.0x

14.1x

15.2x

16.3x

8.4x

MTS Health Partners

Other Transaction-Based Alternatives

Overview

addition

the

OpCo/PropCo

structure

previously

discussed,

have

examined

other

potential

alternatives for creating immediate transaction-based value for Sun shareholders:

Sale

strategic

buyer

–

whole

separate

regional

transactions

–

Reviewed potential strategic buyers and their willingness and ability to pursue a transaction

–

Sun

size,

existing

Sun

leverage,

leverage

potential

acquirors

and

RUGs

transition

overhang

make cash acquisition unlikely by any strategic acquiror

Sale for acquiror

stock would be accretive and more actionable (see $120 million EBITDAR

stock-driven

purchase

page

55),

but

Sun

shareholders

would

still

own

acquiror’s

RUGs

transition risk as they would retain shares of the combined company

–

Given

Sun

infrastructure,

execution

smaller

“split-up”

transaction

would

challenging

absent

unified bid for all regions (highly unlikely)

Sale

real

estate

assets

(sale-leaseback)

–

the

absence

split/spin

transaction

–

Transaction would be dilutive as higher cost lease financing is being swapped for after-tax

proceeds that will be used to pay-off low cost debt

Leveraged buyout by Sun’s management team in connection with a financial sponsor

–

MTS examined both traditional as well as real estate-based financing structures

–

Given already-high Sun leverage, implied sponsor returns do not generate a meaningful premium

to Sun’s current share price

MTS Health Partners

Transaction-Based Alternatives

Sale of Sun Real Estate Assets for Cash

We have considered the potential sale of Sun's owned portfolio for cash as part of a sale-leaseback in lieu of

OpCo/PropCo

transaction

Post-sale, Sun would pay additional rent on the sale properties

Property would be valued by most buyers based upon an assumed coverage ratio and cap rate

We have used a coverage ratio of 1.6x and a cap rate of 11% in our example to derive a property value of

$635.5 million

Net

proceeds

(after

40%

tax

proceeds

above

“inside”

property

basis

$378

million)

would

used to repay mortgage indebtedness and term loans, and to redeem high yield securities (including

redemption penalty), in that order

Net effect to Sun shares would be dilutive since higher cost lease financing is being swapped for after-tax

proceeds that will be used to pay-off low cost debt

Nevertheless,

some

that

dilution

could

partially

offset

Sun

were

maintain

targeted

leverage

ratio

(5.25x

adjusted

EBITDAR

(i.e.

lease

adjusted)

our

example)

–

which

case

some

proceeds

from

the sale could be used to fund a dividend to shareholders

MTS Health Partners

Transaction-Based Alternatives

Sale of Sun Real Estate Assets for Cash (cont’d)

Property Valuation

(1)

Implied Share Price Post-Sale (from A/(D))

(5)

Potential Dividend if Adj. Net Debt of 5.25x

Cap Rate

10.0%

10.5%

11.0%

11.5%

12.0%

###

10.0%

10.5%

11.0%

11.5%

12.0%

###

10.0%

10.5%

11.0%

11.5%

12.0%

1.4x

$821.5

$782.4

$746.8

$714.3

$684.6

1.4x

$5.64

$5.42

$5.21

$5.03

$4.86

1.4x

$220.1

$198.6

$179.1

$161.3

$145.0

1.5x

766.7

730.2

697.0

666.7

638.9

1.5x

5.33

5.12

4.93

4.76

4.60

1.5x

190.0

170.0

151.8

135.2

120.0

1.6x

718.8

684.6

653.5

625.0

599.0

1.6x

5.05

4.86

4.68

4.52

4.37

1.6x

163.8

145.0

127.9

112.3

98.1

1.7x

676.5

644.3

615.0

588.3

563.8

1.7x

4.81

4.63

4.46

4.31

4.17

1.7x

140.6

122.9

106.8

92.2

78.7

1.8x

638.9

608.5

580.9

555.6

532.4

1.8x

4.60

4.43

4.27

4.12

3.99

1.8x

120.0

103.3

88.1

74.3

61.6

After-Tax Proceeds

(2)

12/31/10 Net Debt/2010E PF EBITDA

(4)

Potential Dividend/Share

(6)

Cap Rate

0.0%

Cap Rate

10.0%

10.5%

11.0%

11.5%

12.0%

###

10.0%

10.5%

11.0%

11.5%

12.0%

10.0%

10.5%

11.0%

11.5%

12.0%

1.4x

$639.5

$616.4

$595.4

$576.3

$558.7

1.4x

(0.71x)

(0.51x)

(0.32x)

(0.15x)

0.01x

1.4x

$4.95

$4.46

$4.02

$3.62

$3.26

1.5x

607.2

585.6

566.1

548.2

531.8

1.5x

(0.43x)

(0.23x)

(0.06x)

0.10x

0.25x

1.5x

4.27

3.82

3.41

3.04

2.70

1.6x

578.9

558.7

540.4

523.6

508.2

1.6x

(0.17x)

0.01x

0.17x

0.32x

0.46x

1.6x

3.68

3.26

2.87

2.52

2.20

1.7x

554.0

535.0

517.7

501.9

487.4

1.7x

0.05x

0.22x

0.37x

0.52x

0.64x

1.7x

3.16

2.76

2.40

2.07

1.77

1.8x

531.8

513.8

497.5

482.6

469.0

1.8x

0.25x

0.41x

0.55x

0.69x

0.81x

1.8x

2.70

2.32

1.98

1.67

1.38

2011 Accretion/Dilution (%)

(3)

12/31/10 Adj. Net Debt/2010E EBITDAR

Share "Accretion" Post-Dividend

(7)

0.0%

Cap Rate

###

10.0%

10.5%

11.0%

11.5%

12.0%

###

10.0%

10.5%

11.0%

11.5%

12.0%

10.0%

10.5%

11.0%

11.5%

12.0%

1.4x

(35.5%)

(38.0%)

(40.3%)

(42.5%)

(44.4%)

1.4x

4.37x

4.45x

4.53x

4.60x

4.67x

1.4x

21.1%

13.1%

5.7%

(1.0%)

(7.1%)

1.5x

(39.0%)

(41.4%)

(43.6%)

(45.6%)

(47.4%)

1.5x

4.49x

4.57x

4.64x

4.71x

4.77x

1.5x

9.8%

2.3%

(4.6%)

(10.8%)

(16.5%)

1.6x

(42.2%)

(44.4%)

(46.4%)

(48.3%)

(50.0%)

1.6x

4.59x

4.67x

4.74x

4.80x

4.86x

1.6x

(0.1%)

(7.1%)

(13.5%)

(19.4%)

(24.8%)

1.7x

(44.9%)

(47.0%)

(48.9%)

(50.7%)

(52.3%)

1.7x

4.69x

4.76x

4.82x

4.88x

4.93x

1.7x

(8.8%)

(15.4%)

(21.5%)

(27.0%)

(32.0%)

1.8x

(47.4%)

(49.4%)

(51.2%)

(52.8%)

(54.3%)

1.8x

4.77x

4.84x

4.90x

4.95x

5.00x

1.8x

(16.5%)

(22.8%)

(28.5%)

(33.7%)

(38.5%)

(1)

Based on dividing 2011E EBITDAR of $115.0mm ($154.7mm of EBITDARM less 5% management fee) by indicated Coverage Ratio to derive an expected rent, and then further dividing by

the indicated Cap Rate to derive an expected property value.

(2)

Based on assumed property basis of $377.6mm and tax rate of 41.0%

(3)

Net Income adjustments calculated as reduction in tax affected New Rent and Term Loan interest expense. Reduction in interest expense calculated by applying After-Tax Proceeds to base

case assumption of 2011E average interest rates.

(4)

2010E PF EBITDA calculated as current 2010E EBITDA less 2010E new rent of $69.8mm (calculated by applying a corresponding coverage ratio to 2011E EBITDAR of $115.0mm and

assuming a year over year 3.0% increase in EBITDA).

(5)

Assumes Accretion/(Dilution) percentage applied to current share price of $8.74 per share.

(6)

Assumes 44.500 shares outstanding as of 12/31/10.

(7)

Calculated as percentage increase/(decrease) of new share price plus dividend per share vs. current share price of $8.74 per share.

MTS Health Partners

Transaction-Based Alternatives

Traditional Leveraged Buyout

Summary Financials

FYE December 31,

2009E

2010E

2011E

2012E

2013E

2014E

Revenues

$1,881.8

$1,954.1

$2,031.3

$2,112.6

$2,197.1

$2,284.9

% Growth

3.8%

4.0%

EBITDA

176.8

173.8

183.9

192.0

200.5

209.3

% Margin

9.4%

8.9%

9.1%

9.2%

EBIT

131.2

123.0

128.2

136.4

144.8

153.7

Less: Pro-Forma Net Interest Expense

(51.4)

(51.3)

(51.1)

(50.6)

(49.8)

EBT

$79.8

$71.6

$76.9

$85.3

$94.3

$103.9

Less: Tax @ 41.0%

(32.7)

(29.4)

(31.5)

(35.0)

(38.7)

(42.6)

Net Income

$47.1

$42.3

$45.4

$50.3

$55.6

$61.3

Plus: D&A

52.6

57.5

Less: Investment in Working Capital

(38.0)

(45.5)

Less: Capital Expenditures

(55.0)

Cash Flow Available for Debt Repayments

$6.7

$1.9

$2.4

$7.4

$12.7

$18.4

Ending Debt Balance

$795.8

$793.9

$791.4

$784.1

$771.4

$753.0

Net Debt / EBITDA

4.3x

4.1x

3.9x

3.6x

3.4x

Sources & Uses

Interest

LTM

Dollar

Sources of Funds

Rate

Multiple

Amount

Uses of Funds

Amount

New Credit Facility

L+5.00%

0.0x

$0.0

Purchase Price of Equity

$434.9

New Senior Notes

L+5.00%

3.0

530.5

Debt Outstanding

700.5

New Senior Sub Notes

9.00%

1.5

265.3

Trx

Fees & Exp.

43.8

Sponsor Equity

319.0

Excess Cash on Hand

64.5

Total Sources

$1,179.2

Total Uses

$1,179.2

Sponsor Equity as % of Sources

27.0%

Implied Five Year IRR

Purchase

EBITDAR

Exit EBITDAR Multiples

Price

Multiple

6.0x

6.5x

7.0x

7.5x

$8.74

6.3x

4.1%

11.3%

17.0%

21.7%

9.74

6.5x

1.0%

8.0%

13.5%

18.1%

10.74

6.6x

(1.6%)

5.1%

10.5%

15.0%

11.74

6.8x

(4.0%)

2.6%

7.9%

12.2%

12.74

7.0x

(6.0%)

0.4%

5.6%

9.9%

13.74

7.2x

(7.8%)

(1.5%)

3.6%

7.8%

MTS Health Partners

Transaction-Based Alternatives

Real Estate-Financed Leveraged Buyout

Summary Financials

FYE December 31,

2009E

2010E

2011E

2012E

2013E

2014E

Revenus

$1,881.8

$1,954.1

$2,031.3

$2,112.6

$2,197.1

$2,284.9

% Growth

3.8%

4.0%

EBITDA

176.8

173.8

183.9

192.0

200.5

209.3

% Margin

9.4%

8.9%

9.1%

9.2%

EBIT

131.2

123.0

128.2

136.4

144.8

153.7

Less: Pro-Forma Net Interest Expense

(50.6)

(50.8)

(50.7)

(50.2)

(49.2)

EBT

$80.6

$72.4

$77.5

$85.7

$94.7

$104.5

Less: Tax @ 41.0%

(33.0)

(29.7)

(31.8)

(35.1)

(38.8)

(42.8)

Net Income

$47.5

$42.7

$45.7

$50.5

$55.9

$61.6

Plus: D&A

51.0

55.9

Less: Investment in Working Capital

(38.0)

(45.5)

Less: Capital Expenditures

(55.0)

Cash Flow Available for Debt Repayments

$5.6

$0.7

$1.1

$6.0

$11.3

$17.1

Ending Debt Balance

$812.7

$811.9

$810.8

$804.8

$793.5

$776.5

Net Debt / EBITDA

4.4x

4.2x

4.0x

3.8x

3.5x

Sources & Uses

Interest

Sources of Funds

Rate

Uses of Funds

New Credit Facility

L+5.00%

$0.0

Purchase Price of Equity

$434.9

Real Estate Financing

6.50%

705.1

Debt Outstanding

700.5

New Senior Notes

L+5.00%

107.6

Transaction Fees & Expenses

27.6

New Senior Sub Notes

8.00%

0.0

Sponsor Equity

285.9

Excess Cash on Hand

64.5

Total Sources

$1,163.1

Total Uses

$1,163.1

Sponsor Equity as % of Sources

24.6%

Financing Assumptions

2010

PropCo

EBITDAR

$110.8

Assumed Cap Rate

11.0%

Value of Owned Real Estate

$1,007.3

Loan to Value %

70.0%

Leverageable

Real Estate Assests

$705.1

LTM EBITDA

$176.8

Less New Rent (1.6x Coverage)

(69.2)

Leverageable

EBITDA

$107.6

Max Leverage

1.0x

Total Allowable Debt

$107.6

Implied Five Year IRR

Purchase

EBITDAR

Exit EBITDAR Multiples

Price

Multiple

6.0x

6.5x

7.0x

7.5x

$8.74

6.3x

5.5%

13.1%

19.1%

24.1%

9.74

6.5x

1.9%

9.3%

15.2%

20.0%

10.74

6.6x

(1.1%)

6.1%

11.8%

16.5%

11.74

6.8x

(3.6%)

3.4%

8.9%

13.5%

12.74

7.0x

(5.8%)

1.0%

6.4%

10.9%

13.74

7.2x

(7.8%)

(1.1%)

4.2%

8.6%

MTS Health Partners

Note: $ in Millions except per share data.

Current Situation -

Internal Viewpoint

2008 –

2011 Internal Quarterly Model

Actual

2009

2010

2011

2008

Q1A

Q2A

Q3A

Q4P

Total

Q1P

Q2P

Q3P

Q4P

Total

Revenue

$468.1

$468.7

$470.9

$474.1

$481.2

$490.0

$491.3

$491.5

EBITDAR

$61.5

$64.5

$60.4

$63.6

$60.5

$65.2

$61.2

$62.6

% Margin

13.1%

13.8%

12.8%

13.4%

12.6%

13.3%

12.5%

12.7%

EBITDA

$43.1

$46.3

$42.2

$45.3

$41.7

$46.3

$42.2

$43.6

% Margin

9.2%

9.9%

9.0%

9.5%

8.7%

9.5%

8.6%

8.9%

Net Income

$11.6

$13.4

$10.9

$12.5

$9.7

$12.4

$9.7

$10.4

% Margin

2.5%

2.8%

2.3%

2.6%

2.0%

2.5%

2.0%

2.1%

Diluted EPS

$0.26

$0.30

$0.25

$0.28

$0.22

$0.28

$0.22

$0.23

Diluted

Outstanding

(mm)

43.9

44.0

44.5

Cap-Ex

$1,823.5

$236.5

13.0%

$162.9

8.9%

$40.8

2.2%

$0.93

44.0

$42.5

$11.9

$13.1

$16.5

$12.9

$1,881.8

$250.0

13.3%

$176.8

9.4%

$48.4

2.6%

$1.10

44.0

$54.3

$12.0

$15.5

$14.5

$13.0

$1,954.1

$249.5

12.8%

$173.8

8.9%

$42.2

2.2%

$0.95

44.5

$55.0

$2,031.3

$261.7

12.9%

$183.9

9.1%

$45.2

2.2%

$1.01

44.9

$55.0

MTS Health Partners

Current Situation -

Public Market Viewpoint

Top 50 Shareholders Estimated Cost Basis Analysis

Sources: Factset

Research Systems

(1)Percent ownership calculated using a fully diluted share count of 44,651,001

(2)Calculated as the weighted average cost of significant historical share purchases using a quarterly VWAP as purchase price

Current

Estimated

Current

Estimated

Cost

Rank

Shareholder

Held

Ownership

(1)

Basis

Rank

Shareholder

Held

Ownership

(1)

Basis

OppenheimerFunds, Inc.

2,783,058

6.23%

$9.20

26.

Soundpost

Partners LP

450,000

1.01%

$8.85

Rainier Investment Management, Inc.

2,438,785

5.46%

13.81

27.

Tygh

Capital Management, Inc.

432,945

0.97%

14.14

Westfield Capital Management Co. LP

2,412,509

5.40%

10.98

28.

SunAmerica

Asset Management Corp.

418,500

0.94%

9.36

BlackRock

Global Investors

2,301,507

5.15%

11.72

29.

MATROS RICHARD K

380,504

0.85%

9.80

Fidelity Management & Research

2,190,600

4.91%

11.97

30.

GlobeFlex

Capital LP

373,723

0.84%

14.23

Pyramis

Global Advisors LLC

1,863,470

4.17%

11.09

31.

RCM Capital Management LLC

365,318

0.82%

12.26

Vanguard Group, Inc.

1,675,550

3.75%

13.13

32.

Jacobs Levy Equity Management, Inc.

357,603

0.80%

8.93

BAMCO, Inc.

1,503,700

3.37%

8.99

33.

Delaware Management Business Trust

342,066

0.77%

12.73

Cortina Asset Management LLC

1,381,421

3.09%

11.41

34.

Ohio Public Employees Retirement System

331,493

0.74%

10.83

10.

Wells Capital Management, Inc.

1,378,942

3.09%

11.68

35.

Aberdeen Asset Management, Inc.

323,630

0.72%

9.87

11.

Dimensional Fund Advisors, Inc.

1,246,699

2.79%

9.63

36.

TIAA-CREF Asset Management LLC

319,987

0.72%

11.35

12.

Schroder Investment Management NA

1,187,700

2.66%

6.97

37.

BlackRock

Investment Management (UK) Ltd.

306,432

0.69%

13.06

13.

Granahan

Investment Management, Inc.

929,261

2.08%

14.44

38.

Rice, Hall, James & Associates LLC

289,894

0.65%

8.93

14.

State Street Global Advisors

915,772

2.05%

11.49

39.

Goldman Sachs & Co.

265,954

0.60%

15.55

15.

Integrity Asset Management LLC

873,063

1.96%

8.87

40.

Russell Investment Group

259,738

0.58%

9.94

16.

Aberdeen Asset Managers Ltd.

685,740

1.54%

10.67

41.

Kennedy Capital Management, Inc.

258,113

0.58%

8.81

17.

Denver Investment Advisors LLC

631,900

1.42%

10.95

42.

Technical Financial Services LLC

195,419

0.44%

8.90

18.

RiverSource

Investments LLC

588,480

1.32%

9.35

43.

UBS Global Asset Management

192,824

0.43%

10.27

19.

Evercore

Asset Management

569,456

1.28%

8.81

44.

Paradigm Capital Corp.

180,000

0.40%

9.11

20.

AQR Capital Management LLC

555,838

1.24%

8.88

45.

Norges

Bank Investment Management

166,242

0.37%

11.63

21.

Palisade Capital Management LLC

550,490

1.23%

8.91

46.

Shell Asset Management Co. BV

153,900

0.34%

15.22

22.

Northern Trust Investments

524,676

1.18%

10.95

47.

Putnam Investment Management, Inc.

150,479

0.34%

10.67

23.

Skyline Asset Management LP

499,490

1.12%

9.80

48.

Trinity Investment Management Corp.

148,490

0.33%

8.90

24.

Decade Capital Management LLC

498,000

1.12%

8.81

49.

Bank of New York Mellon Asset Management

146,022

0.33%

11.77

25.

Renaissance Technologies LLC

468,545

1.05%

9.24

50.

T. Rowe Price Associates, Inc.

125,300

0.28%

15.25

Weighted

% of Shares

Average

Outstanding

Cost Basis

Top 25

68.7%

$10.86

Top 50

84.2%

10.91

MTS Health Partners

OpCo/PropCo

–

Tax Considerations

Sun currently has the following net operating losses available in years 2011 and forward

Pursuant

382

limitations,

availability

these

NOLs

may

further

limited

Sun's

shareholder

base

turns

over naturally or

pursuant to M&A-driven equity offerings

Accordingly,

the

value

the

NOLs

could

reduced

We also believe that the market does not value the future (or current) cash flow generation of the NOLs, instead preferring to

focus on EBITDA-based valuations

Accordingly, while tax structuring in connection with a spin transaction may impose some limitation on the future use of

the NOLs, we believe such limit is already priced into the stock price or ignored altogether by the market

(1) Assumes usage of $150 mil in Gross NOLs in 2009 and 2010.

Gross

After-Tax

Year

NOLs

Value

(1)

2011

(1)

$44.3

$26.1

2012-2025

7.4

4.4

Total Utilizeable

NOLs

$147.9

$87.3

Discounted @ 10%

$89.8

$53.0

MTS Health Partners

OpCo/PropCo

Source: Company press releases, public documents, and Wall Street research consensus estimates as of 1/29/10

(1)

Enterprise value represents equity value plus any outstanding debt, minority interest and preferred stock less cash and cash equivalents.

(2)

Consensus FFO Estimates obtained from Wall Street Research.

Note: $ in millions, except per share amounts

Public Healthcare REIT Comparables

'09-'10

Last Q

Price as of

Equity

Total

Enterprise

FFO

P/FFO

Debt /

Ann. Div.

LTM

Rent Coverage

5-Year

EBITDA / NOI Cap Rate

Company

1/29/10

Value

Preferred

Debt

Value

(1)

Growth

2009E

2010E

2011E

2009E

FFO

Div.

Yield

ROE

EBITDARM

EBITDAR

Growth Rate

2009E

2010E

HCP, Inc.

$30.35

$8,910.8

$285.2

$5,683.5

$14,914.8

8.10%

14.5x

13.9x

13.4x

8.8x

6.1%

1.8%

2.1x

1.6x

6.5%

5.8%

6.2%

Healthcare Realty Trust Inc.

21.62

1,283.9

0.0

997.0

2,278.8

(4.2%)

13.1x

15.6x

13.7x

10.2x

5.6%

3.9%

N/A

3.0%

6.3%

6.5%

Health Care REIT Inc.

44.30

5,451.8

288.7

2,420.5

8,069.1

7.05%

14.2x

13.9x

13.3x

6.0x

6.1%

4.6%

2.2x

1.6x

5.4%

5.9%

6.7%

LTC Properties Inc.

27.65

643.0

186.8

12.0

839.8

13.23%

14.6x

13.8x

12.9x

0.2x

5.6%

9.4%

N/A

4.0%

7.4%

7.6%

Nationwide Health Properties Inc.

35.27

3,963.9

74.9

1,428.1

5,232.8

0.80%

14.2x

13.4x

14.1x

5.0x

5.0%

7.0%

2.0x

N/A

6.9%

6.4%

6.8%

Omega Healthcare Investors Inc.

20.00

1,703.1

108.5

493.7

2,304.7

25.17%

13.6x

11.8x

10.9x

3.7x

6.4%

10.1%

2.0x

1.6x

7.0%

7.2%

9.8%

Senior Housing Properties Trust

21.25

2,706.8

0.0

984.2

3,618.5

8.82%

12.5x

12.3x

11.5x

4.5x

6.7%

6.0%

N/A

1.7x

5.0%

7.2%

8.1%

Ventas

Inc.

44.67

7,006.1

0.0

2,615.1

9,567.8

15.47%

16.9x

16.5x

14.6x

6.3x

4.6%

8.1%

2.0x

N/A

5.5%

6.2%

6.4%

Maximum

16.9x

16.5x

14.6x

10.2x

0.1%

2.2x

1.7x

7.0%

7.4%

9.8%

Mean

14.2x

13.9x

13.0x

5.6x

0.1%

2.1x

1.6x

5.4%

6.5%

7.3%

Median

14.2x

13.8x

13.3x

5.5x

0.1%

2.0x

1.6x

5.5%

6.3%

6.8%

Minimum

12.5x

11.8x

10.9x

0.2x

0.0%

2.0x

1.6x

3.0%

5.8%

6.2%

MTS Health Partners

OpCo/PropCo

Source: Company press releases, public documents, and Wall Street research

Public Healthcare REIT Precedent Transaction Comparables

NOI

Date

Property

Equity

Enterprise

Cap

Equity Value

Properties

Ann.

Closed

Target

Acquiror

Type

Value

Rate

/ FFO

Acquired

01/14/07

04/26/07

Ventas, Inc.

Healthcare

$1,036

$1,800

6.2%

N/A

12/20/06

10/31/07

National Health Realty, Inc.

National HealthCare Corp.

Healthcare

268

275

N/A

15.6x

09/12/06

12/20/06

Windrose

Medical Properties Trust

Health Care REIT, Inc.

Healthcare

447

877

6.9%

23.5x

05/01/06

10/05/06

CNL Retirement Properties, Inc.

Healthcare

3,567

5,320

6.4%

15.1x

257

04/12/05

06/07/05

Provident Senior Living Trust

Ventas, Inc.

Healthcare

608

1,218

7.0%

N/M

Maximum

$3,567

$5,320

7.0%

23.5x

257

Mean

1,185

1,898

6.6%

18.1x

Median

608

1,218

6.6%

15.6x

Minimum

268

275

6.2%

15.1x

Sunrise Senior Living Real Estate Investment Trust

Health Care Property Investors, Inc.

MTS Health Partners

OpCo/PropCo

Health Care REIT Shareholder Overlap –

Institutional Fund Families: Shares Held

Source: Factset

Research Systems as of 01/29/2010

Shares Held

Sun Healthcare

Healthcare

LTC

Nationwide

Omega HC

Senior Housing

Total Peer

# of

Top 35 Sun Holders

Group

HCP

Realty Trust

REIT

Properties

Health Properties

Investors

Properties Trust

Ventas

Holdings

Peers Held

OppenheimerFunds, Inc.

2,783,058

736,608

4,300

379,342

939,148

585,724

347,941

468,159

562,507

4,023,729

Rainier Investment Management, Inc.

2,438,785

Westfield Capital Management Co. LP

2,412,509

BlackRock

Global Investors

2,301,507

21,001,751

5,407,541

8,910,932

1,791,074

7,717,399

6,655,327

8,885,138

11,951,796

72,320,958

Fidelity Management & Research

2,190,600

5,947,706

2,065,994

88,900

1,673,480

84,000

2,947,506

6,648,407

19,455,993

Pyramis

Global Advisors LLC

1,863,470

640,121

319,868

89,068

94,500

196,900

897,766

2,238,223

Vanguard Group, Inc.

1,675,550

27,782,312

5,548,512

11,476,867

2,098,030

8,738,594

7,314,279

11,811,052

14,905,510

89,675,156

BAMCO, Inc.

1,503,700

Cortina Asset Management LLC

1,381,421

Wells Capital Management, Inc.

1,378,942

93,281

37,235

39,929

14,539

79,648

44,078

308,710

Dimensional Fund Advisors, Inc.

1,246,699

3,105,757

690,356

1,310,316

1,175,499

954,039

1,370,353

1,734,842

10,341,162

Schroder Investment Management North America, Inc.

1,187,700

546,117

3,300

7,400

556,817

State Street Global Advisors

915,772

15,138,554

2,234,294

5,908,638

533,455

3,457,097

2,596,919

3,534,300

7,946,866

41,350,123

Integrity Asset Management LLC

873,063

156,505

446,707

603,212

Aberdeen Asset Managers Ltd.

685,740

28,300

196,978

23,030

14,900

263,208

Denver Investment Advisors LLC

631,900

32,335

12,780

45,115

RiverSource

Investments LLC

588,480

332,859

87,228

90,082

30,867

161,932

91,047

430,013

676,908

1,900,936

Evercore

Asset Management

568,158

AQR Capital Management LLC

555,838

25,480

234,989

83,455

79,784

33,000

195,293

40,414

692,415

Palisade Capital Management LLC

550,490

22,488

21,560

830,200

36,650

910,898

The Boston Company Asset Management LLC

525,425

117,315

953,014

1,070,329

Northern Trust Investments

524,676

3,734,088

1,161,521

1,448,904

659,088

758,849

1,279,347

608,595

1,952,500

11,602,892

Decade Capital Management LLC

498,000

17,700

79,600

97,300

Skyline Asset Management LP

482,300

Renaissance Technologies LLC

468,545

772,263

175,300

454,000

307,100

1,216,000

2,924,663

Soundpost

Partners LP

450,000

Tygh

Capital Management, Inc.

432,945

SunAmerica

Asset Management Corp.

418,500

Ohio Public Employees Retirement System

378,903

2,050,197

376,982

806,371

85,272

713,607

101,138

851,192

998,296

5,983,055

GlobeFlex

Capital LP

373,723

RCM Capital Management LLC

365,318

Jacobs Levy Equity Management, Inc.

357,603

8,700

Delaware Management Business Trust

342,066

759,215

24,300

507,031

106,295

511,122

263,367

22,852

559,455

2,753,637

Aberdeen Asset Management, Inc.

323,630

445,558

374,658

142,190

45,616

325,335

251,300

498,948

272,624

2,356,229

TIAA-CREF Asset Management LLC

319,987

2,227,860

562,777

1,027,570

277,746

1,025,264

756,292

805,528

1,120,843

7,803,880

MTS Health Partners

OpCo/PropCo

Health Care REIT Shareholder Overlap –

Institutional Fund Families: % Ownership

% Ownership

Sun Healthcare

Healthcare

LTC

Nationwide

Omega HC

Senior Housing

# of

Top 35 Sun Holders

Group

HCP

Realty Trust

REIT

Properties

Health Properties

Investors

Properties Trust

Ventas

Peers Held

OppenheimerFunds, Inc.

6.2%

0.3%

0.0%

0.3%

4.0%

0.5%

0.4%

Rainier Investment Management, Inc.

5.5%

0.0%

Westfield Capital Management Co. LP

5.4%

0.0%

BlackRock

Global Investors

5.2%

7.2%

9.1%

7.2%

7.7%

6.8%

7.8%

7.0%

7.6%

Fidelity Management & Research

4.9%

2.0%

3.5%

0.1%

0.0%

1.5%

0.1%

2.3%

4.2%

Pyramis

Global Advisors LLC

4.2%

0.2%

0.5%

0.1%

0.0%

0.1%

0.2%

0.0%

0.6%

Vanguard Group, Inc.

3.8%

9.5%

9.3%

9.0%

7.7%

8.6%

9.3%

9.5%

BAMCO, Inc.

3.4%

0.0%

Cortina Asset Management LLC

3.1%

0.0%

Wells Capital Management, Inc.

3.1%

0.0%

0.1%

0.0%

0.1%

0.0%

0.1%

0.0%

Dimensional Fund Advisors, Inc.

2.8%

1.1%

1.2%

1.1%

0.0%

1.0%

1.1%

Schroder Investment Management North America, Inc.

2.7%

0.0%

0.4%

0.0%

State Street Global Advisors

2.1%

5.2%

3.8%

4.8%

2.3%

3.0%

3.1%

2.8%

5.1%

Integrity Asset Management LLC

2.0%

0.0%

0.1%

0.0%

0.4%

0.0%

Aberdeen Asset Managers Ltd.

1.5%

0.0%

0.3%

0.0%

Denver Investment Advisors LLC

1.4%

0.0%

RiverSource

Investments LLC

1.3%

0.1%

0.3%

0.4%

Evercore

Asset Management

1.3%

0.0%

AQR Capital Management LLC

1.2%

0.0%

0.4%

0.1%

0.3%

0.0%

0.2%

0.0%

Palisade Capital Management LLC

1.2%

0.0%

1.0%

0.0%

The Boston Company Asset Management LLC

1.2%

0.0%

0.1%

0.0%

1.1%

0.0%

Northern Trust Investments

1.2%

1.3%

2.0%

1.2%

2.8%

0.7%

1.5%

0.5%

1.2%

Decade Capital Management LLC

1.1%

0.0%

0.1%

0.0%

Skyline Asset Management LP

1.1%

0.0%

Renaissance Technologies LLC

1.0%

0.0%

0.6%

0.8%

0.4%

1.0%

0.0%

Soundpost

Partners LP

1.0%

0.0%

Tygh

Capital Management, Inc.

1.0%

0.0%

SunAmerica

Asset Management Corp.

0.9%

0.0%

Ohio Public Employees Retirement System

0.8%

0.7%

0.6%

0.7%

0.4%

0.6%

0.1%

0.7%

0.6%

GlobeFlex

Capital LP

0.8%

0.0%

RCM Capital Management LLC

0.8%

0.0%

Jacobs Levy Equity Management, Inc.

0.8%

0.0%

Delaware Management Business Trust

0.8%

0.3%

0.0%

0.4%

0.5%

0.4%

0.3%

0.0%

0.4%

Aberdeen Asset Management, Inc.

0.7%

0.2%

0.6%

0.1%

0.2%

0.3%

0.4%

0.2%

TIAA-CREF Asset Management LLC

0.7%

0.8%

0.9%

0.8%

1.2%

0.9%

0.6%

0.7%

Source: Factset Research Systems as of 01/29/2010

Note: $ in Millions

MTS Health Partners

OpCo/PropCo

Health Care REIT Shareholder Overlap –

Institutional Funds: Shares Held

Source: Factset

Research Systems as of 01/29/2010

Shares Held

Sun Healthcare

Healthcare

LTC

Nationwide

Omega HC

Senior Housing

Total Peer

# of

Top 35 Sun Holders

Group

HCP

Realty Trust

REIT

Properties

Health Properties

Investors

Properties Trust

Ventas

Holdings

Peers Held

Oppenheimer Main Street Small Cap Fund

1,938,598

652,150

32,500

236,990

332,480

1,254,120

Fidelity Leveraged Company Stock Fund

1,642,522

Rainier Small Mid Cap Equity Portfolio

1,500,945

Fidelity Advisor Leveraged Company Stock Fund

1,357,478

Baron Growth Fund

1,300,000

Fonds

de Reserve pour les Retraites

584,725

35,100

iShares

Russell 2000 Index Fund

570,069

775,274

302,782

1,084,090

2,162,146

Evercore

Asset Management

568,158

AQR Capital Management LLC

555,838

25,480

234,989

83,455

79,784

33,000

195,293

40,414

692,415

Palisade Capital Management LLC

550,490

22,488

21,560

830,200

36,650

910,898

Vanguard Small Cap Index Fund

548,944

745,892

262,409

1,036,569

1,597,681

3,642,551

The Boston Company Asset Management LLC

525,425

117,315

953,014

1,070,329

Decade Capital Management LLC

498,000

17,700

79,600

97,300

Skyline Asset Management LP

482,300

Wells Fargo Small Cap Opportunities Fund

472,800

146,011

Vanguard Explorer Fund

469,657

40,175

15,000

50,396

105,571

Renaissance Technologies LLC

468,545

772,263

175,300

454,000

307,100

1,216,000

2,924,663

Soundpost

Partners LP

450,000

Tygh

Capital Management, Inc.

432,945

Harbor Small Cap Growth Fund

424,250

DFA US Micro Cap Portfolio

420,360

SunAmerica

Asset Management Corp.

418,500

Ohio Public Employees Retirement System

378,903

2,050,197

376,982

806,371

85,272

713,607

101,138

851,192

998,296

5,983,055

Vanguard Total Stock Market Index Fund

375,439

2,762,300

564,260

1,138,004

180,372

979,227

784,381

1,207,631

1,486,759

9,102,934

GlobeFlex

Capital LP

373,723

RCM Capital Management LLC

365,318

Jacobs Levy Equity Management, Inc.

357,603

8,700

Schroder US Smaller Companies Fund

356,300

98,000

Schroder ISF -

US Smaller Companies

347,800

108,181

Oppenheimer Variable-Main Street Small Cap Fund

347,692

124,380

6,400

45,540

54,330

230,650

Delaware Management Business Trust

342,066

759,215

24,300

507,031

106,295

511,122

263,367

22,852

559,455

2,753,637

Aberdeen Small Cap Fund

340,110

105,908

iShares

Russell 2000 Value Index Fund

318,184

429,784

149,383

485,747

1,064,914

Skyline Special Equities Portfolio

298,700

Vanguard Extended Market Index Fund

269,134

347,638

137,421

623,438

487,695

743,705

2,339,897

MTS Health Partners

OpCo/PropCo

Health Care REIT Shareholder Overlap –

Institutional Funds: % Ownership

Source: Factset

Research Systems as of 01/29/2010

Note: $ in Millions

% Ownership

Sun Healthcare

Healthcare

LTC

Nationwide

Omega HC

Senior Housing

# of

Top 35 Sun Holders

Group

HCP

Realty Trust

REIT

Properties

Health Properties

Investors

Properties Trust

Ventas

Peers Held

Oppenheimer Main Street Small Cap Fund

4.3%

0.0%

2.8%

0.0%

0.3%

0.0%

Fidelity Leveraged Company Stock Fund

3.7%

0.0%

Rainier Small Mid Cap Equity Portfolio

3.4%

0.0%

Fidelity Advisor Leveraged Company Stock Fund

3.0%

0.0%

Baron Growth Fund

2.9%

0.0%

Fonds

de Reserve pour les Retraites

1.3%

0.0%

iShares

Russell 2000 Index Fund

1.3%

0.0%

1.3%

0.0%

1.3%

0.0%

1.3%

0.0%

Evercore

Asset Management

1.3%

0.0%

AQR Capital Management LLC

1.2%

0.0%

0.4%

0.1%

0.3%

0.0%

0.2%

0.0%

Palisade Capital Management LLC

1.2%

0.0%

1.0%

0.0%

Vanguard Small Cap Index Fund

1.2%

0.0%

1.3%

0.0%

1.1%

0.0%

1.2%

1.3%

0.0%

The Boston Company Asset Management LLC

1.2%

0.0%

0.1%

0.0%

1.1%

0.0%

Decade Capital Management LLC

1.1%

0.0%

0.1%

0.0%

Skyline Asset Management LP

1.1%

0.0%

Wells Fargo Small Cap Opportunities Fund

1.1%

0.0%

0.1%

0.0%

Vanguard Explorer Fund

1.1%

0.0%

0.1%

0.0%

Renaissance Technologies LLC

1.0%

0.0%

0.6%

0.8%

0.4%

1.0%

0.0%

Soundpost

Partners LP

1.0%

0.0%

Tygh

Capital Management, Inc.

1.0%

0.0%

Harbor Small Cap Growth Fund

1.0%

0.0%

DFA US Micro Cap Portfolio

0.9%

0.0%

SunAmerica

Asset Management Corp.

0.9%

0.0%

Ohio Public Employees Retirement System

0.8%

0.7%

0.6%

0.7%

0.4%

0.6%

0.1%

0.7%

0.6%

Vanguard Total Stock Market Index Fund

0.8%

0.9%

1.0%

0.9%

0.8%

0.9%

GlobeFlex

Capital LP

0.8%

0.0%

RCM Capital Management LLC

0.8%

0.0%

Jacobs Levy Equity Management, Inc.

0.8%

0.0%

Schroder US Smaller Companies Fund

0.8%

0.0%

0.1%

0.0%

Schroder ISF -

US Smaller Companies

0.8%

0.0%

0.1%

0.0%

Oppenheimer Variable-Main Street Small Cap Fund

0.8%

0.0%

0.5%

0.0%

0.1%

0.0%

Delaware Management Business Trust

0.8%

0.3%

0.0%

0.4%

0.5%

0.4%

0.3%

0.0%

0.4%

Aberdeen Small Cap Fund

0.8%

0.0%

0.2%

0.0%

iShares

Russell 2000 Value Index Fund

0.7%

0.0%

0.7%

0.0%

0.6%

0.0%

0.6%

0.0%

Skyline Special Equities Portfolio

0.7%

0.0%

Vanguard Extended Market Index Fund

0.6%

0.0%

0.6%

0.0%

0.6%

0.5%

0.6%

0.0%

MTS Health Partners

Realty Company (PropCo)

Operating Company (OpCo)

Vencor / Ventas

Case Study

Company Situation & Rationale for Reorganization

Company Situation:

Vencor, Inc was one of the largest providers of long-term

healthcare services in the United States, operating:

60 long-term acute care hospitals, containing 5,273 beds

309 nursing centers containing 40,383 beds, and

Vencare, a contract service business offering respiratory

and rehabilitation therapies and medical and pharmacy

management services to 2,900 healthcare facilities

Rationale for Reorganization:

Two primary reasons for pursuing reorganization”

Unlock the value of the real estate, substantially

eliminating

the

Federal

“double

taxation”

earnings

that results from investment in a corporation

–

Shareholders will be able to realize a regular cash

return on the value of the assets

Allow management for the operating company (OpCo) to

focus its time and resources on its healthcare operations

–

Additionally,

the

OpCo

will

able

employ

highly leveraged capital structure, which is more in

line with the expected growth and cash flow

characteristics

Of Note:

This reorganization was taxable at both the shareholder

and Company level

Newly formed holding company which would hold all

assets and liabilities relating to the operation of Vencor’s

historical business, including development properties

OpCo

would operate the 60 long-term acute care hospitals

and 309 nursing centers, as well as operate the Vencare

contract services business

PropCo

was operated as a self-administered, self-managed

realty company (and as a REIT as of January 1, 1999)

Initially held most of the Vencor-owned land, buildings and

other improvements, including

46 of OpCo’s

60 long-term-acute care hospitals

210 of OpCo’s

309 nursing centers

For

three

years

after

the

distribution,

PropCo

had

the

right of first offer for properties sold or mortgaged by

OpCo

Reorganizing the Company

MTS Health Partners

On April 30, 1998, Vencor completed the internal

reorganization and the refinancing of all of its long-term debt

necessary to complete the spinoff of its healthcare operations

through

the

distribution

the

common

stock

“New”

Vencor

The

distribution

one

OPCo

common

stock

for

each

PropCo

common

stock

was

made

May 1, 1998

Following

the

reorganization,

Ventas

(PropCo)

was

operated as a self-administered REIT, however it did not

begin being taxed as a REIT for Federal income tax

purposes until January 1, 1999

Vencor / Ventas

Case Study

Reorganization Overview

Operations

Vencor

(OpCo)

Ventas

(PropCo)

(Spin Off)

(Surviving Entity)

Rent

connection

with

the

reorganization,

Ventas

(PropCo)

would

lease all of its owned hospitals and nursing facilities to

Vencor (OpCo)

The Company also leased 76 nursing centers and seven

hospitals from third parties.

The

Company

assigned

these

leases

OpCo

and

obtained

releases

for

PropCo

from

the

lessors.

If such consents and releases were not obtained, the

Company sublet those properties to OpCo

The

rental

arrangement

between

Ventas

and

Vencor

comprised four long-term triple net leases, under which

Ventas

received an initial annual rent of $221.5 million, with

an annual, fixed rental escalator of 2.0%

Each of the four leases had initial terms of 10 to 15 years

Source:

CapitalIQ

and

Company

Filings

Real Estate

VENCOR

MTS Health Partners

Vencor / Ventas

Case Study

Pro Forma Capitalization

Source:

CapitalIQ

and

Company

Filings

(1)$300M total availability

(2)$250M total availability

Pre-Spin Off

Post Spin Off

Vencor

OpCo

PropCo

12/31/97A

12/31/97 PF

Senior Collateralized Debt

$55.7

Revolving Credit Facility Due 2002

1,129.3

5/8

% Senior Subordinated Notes Due 2007

750.0

Other Debt

12.1

Revolving Credit Facility

$87.5

(1)

$50.5

Term Loans A&B

600.0

500.0

Bridge Loan

200.0

450.0

Private Placement of Subordinated Debt

300.0

Total Debt

$1,947.1

$1,187.5

$1,000.5

Operating Company Series A Prefereed Stock

1.8

Common Stockholders Equity

905.4

894.3

(97.6)

Total Capitalization

$2,852.4

$2,083.6

$902.8

MTS Health Partners

Financing Alternatives

$100.0mm Equity Offering ($25.0mm in Term Loan Paydown)

Equity Financing Overview:

Total Equity Offering

$100.0

Current Share Price

$8.74

Share Price @ Issuance (5.0% Disc.)

($0.44)

U/W Spread (4.0% Disc.)

($0.33)

Implied Equity Proceeds

$7.97

Total Implied Equity Proceeds

$91.2

Shares Issued

11.442

Incremental Analysis:

2010

2011

Sun Standalone Net Income

$42.2

$45.2

Diluted Shares Outstanding

44.5

44.9

Sun Standalone EPS

$0.95

$1.01

Incremental Financing Costs

$1.8

$2.2

Amotization of Financing Fees

0.0

Pre-Tax Incremental Income

$1.8

$2.2

Taxes @ 41.0%

(0.7)

(0.9)

Incremental Net Income

$1.1

$1.3

PF Net Income

$43.3

$46.5

Incremental Shares Issued

11.4

PF Shares

55.9

56.3

PF EPS

$0.77

$0.83

Accretion/(Dilution) - $

($0.17)

($0.18)

Accretion/(Dilution) - %

(18.4%)

(18.0%)

Pro Forma Capital Structure

Incremental

Sun

Trx.

Annual Interest

12/31/09E

Adjs.

Pro-Forma

2010

2011

Cash

$104.5

$66.2

$170.7

(0.7)

Sun Mortgage Debt

$170.6

Sun Capital Leases

0.8

Sun Senior Secured Debt - SWAP

150.0

Sun Senior Secured Debt

179.1

(25.0)

154.1

(1.2)

(1.6)

Sun Senior Subordinated Notes

200.0

New Senior Secured Debt

New Senior Subordinated Notes

New Convertible Notes

Total Debt

$700.5

($25.0)

$675.5

($1.8)

($2.2)

Shareholders Equity - BV

$449.1

100.00

549.1

Pro Forma Leverage Statistics

12/31/09E

Trx. Adjs.

03/31/10E

03/31/11E

Net Debt

$596.1

($91.2)

$504.9

$455.4

LTM EBITDA

176.8

175.4

175.3

LTM Interest Expense

49.3

47.7

49.8

2010

2011

Leverage

3.37x

(0.49x)

2.88x

< 3.50x

2.60x

< 3.00x

Senior Leverage

2.24x

(0.50x)

1.74x

< 2.50x

1.46x

< 2.00x

Interest Coverage

3.59x

0.09x

3.68x

> 2.50x

3.52x

> 2.75x

MTS Health Partners

Financing Alternatives

$150.0mm New Tack-on High Yield Notes ($75.0mm in Term Loan Paydown)

Debt Financing Overview:

HY Notes

Amount Raised

$150.0

Fees

3.8

Cur HY Redemption Fees

0.0

Implied Debt Proceeds

$146.3

Interest Rate

9.0%

Years to Amortize

Convert Price

% premium to current

Annual Interest Expense

$13.5

Amotization of Financing Fees

0.4

Total Annual Interest Expense

$13.9

Incremental Analysis:

2010

2011

Sun Standalone Net Income

$42.2

$45.2

Diluted Shares Outstanding

44.5

44.9

Sun Standalone EPS

$0.95

$1.01

Incremental Financing Costs

($9.3)

($8.1)

Amotization of Financing Fees

(0.4)

Pre-Tax Incremental Income

($9.7)

($8.5)

Taxes @ 41.0%

4.0

3.5

Incremental Net Income

($5.7)

($5.0)

PF Net Income

$36.5

$40.2

Incremental Shares Issued

0.0

PF Shares

44.5

44.9

PF EPS

$0.82

$0.90

Accretion/(Dilution) - $

($0.13)

($0.11)

Accretion/(Dilution) - %

(13.5%)

(11.1%)

Pro Forma Capital Structure

Incremental

Sun

Trx.

Annual Interest

12/31/09E

Adjs.

Pro-Forma

2010

2011

Cash

$104.5

$71.3

$175.7

(0.7)

Sun Mortgage Debt

$170.6

Sun Capital Leases

0.8

Sun Senior Secured Debt - SWAP

150.0

Sun Senior Secured Debt

179.1

(75.0)

104.1

(3.5)

(4.7)

Sun Senior Subordinated Notes

200.0

New Senior Secured Debt

New Senior Subordinated Notes

150.0

13.5

New Convertible Notes

Total Debt

$700.5

$75.0

$775.5

$9.3

$8.1

Shareholders Equity - BV

$449.1

449.1

Pro Forma Leverage Statistics

12/31/09E

Trx. Adjs.

03/31/10E

03/31/11E

Net Debt

$596.1

$3.8

$599.8

$556.9

LTM EBITDA

176.8

175.4

175.3

LTM Interest Expense

49.3

58.8

61.0

2010

2011

Leverage

3.37x

0.05x

3.42x

< 3.50x

3.18x

< 3.00x

Senior Leverage

2.24x

(0.82x)

1.42x

< 2.50x

1.18x

< 2.00x

Interest Coverage

3.59x

(0.60x)

2.98x

> 2.50x

2.87x

> 2.75x

MTS Health Partners

Financing Alternatives

$100.0mm Convertible Notes ($25.0mm in Term Loan Paydown)

Debt Financing Overview:

Convert

Amount Raised

$100.0

Fees

2.5

Cur HY Redemption Fees

Implied Debt Proceeds

$97.5

Interest Rate

3.0%

Years to Amortize

Convert Price

$12.00

% premium to current

37.3%

Annual Interest Expense

$3.0

Amotization

of Financing Fees

0.3

Total Annual Interest Expense

$3.3

Pro Forma Capital Structure

Incremental

Sun

Trx.

Annual Interest

12/31/09E

Adjs.

Pro-Forma

2010

2011

Cash

$104.5

$72.5

$177.0

(0.7)

Sun Mortgage Debt

$170.6

Sun Capital Leases

0.8

Sun Senior Secured Debt -

SWAP

150.0

Sun Senior Secured Debt

179.1

(25.0)

154.1

(1.2)

(1.6)

Sun Senior Subordinated Notes

200.0

New Senior Secured Debt

New Senior Subordinated Notes

New Convertible Notes

100.0

3.0

Total Debt

$700.5

$75.0

$775.5

$1.1

($2.3)

Shareholders Equity -

$449.1

449.1

Convert Share Price Analysis

Current

12/31/10

12/31/11

Share Price

$8.74

$10.31

$12.17

% growth rate

18.0%

Additional Shares Outsanding

0.000

8.217

Pro Forma Leverage Statistics

12/31/09E

Trx. Adjs.

03/31/10E

03/31/11E

Net Debt

$596.1

$2.5

$598.6

$550.8

LTM EBITDA

176.8

175.4

175.3

LTM Interest Expense

49.3

50.6

52.8

2010

2011

Leverage

3.37x

0.04x

3.41x

< 3.50x

3.14x

< 3.00x

Senior Leverage

2.24x

0.03x

2.27x

< 2.50x

2.00x

< 2.00x

Interest Coverage

3.59x

(0.12x)

3.47x

> 2.50x

3.32x

> 2.75x

Incremental Analysis:

2010

2011

Sun Standalone Net Income

$42.2

$45.2

Diluted Shares Outstanding

44.5

44.9

Sun Standalone EPS

$0.95

$1.01

Incremental Financing Costs

($1.1)

$2.3

Amortization of Financing Fees

(0.3)

Pre-Tax Incremental Income

($1.4)

$2.0

Taxes @ 41.0%

0.6

(0.8)

Incremental Net Income

($0.8)

$1.2

PF Net Income

$41.4

$46.4

Incremental Shares Issued

0.0

8.2

PF Shares

44.5

53.1

PF EPS

$0.93

$0.87

($0.02)

($0.13)

(1.9%)

(13.2%)

Accretion/(Dilution) - $

Accretion/(Dilution) - %

MTS Health Partners

Financing Alternatives

Full High Yield Refinancing

Debt Financing Overview:

HY Notes

Amount Raised

$600.0

Fees

15.0

Cur HY Redemption Fees

15.2

Implied Debt Proceeds

$569.8

Interest Rate

9.0%

Years to Amortize

Convert Price

% premium to current

Annual Interest Expense

$54.0

1.5

Total Annual Interest Expense

$55.5

Pro Forma Capital Structure

Incremental

Sun

Trx.

Annual Interest

12/31/09E

Adjs.

Pro-Forma

2010

2011

Cash

$104.5

$40.7

$145.2

(0.4)

Sun Mortgage Debt

$170.6

Sun Capital Leases

0.8

Sun

Senior

Secured

Debt

SWAP

150.0

(150.0)

(9.6)

(9.4)

Sun Senior Secured Debt

179.1

(179.1)

(8.3)

(11.1)

Sun Senior Subordinated Notes

200.0

(200.0)

(18.3)

New Senior Secured Debt

New Senior Subordinated Notes

600.0

54.0

New Convertible Notes

Total Debt

$700.5

$70.9

$771.4

$17.4

$14.8

Shareholders Equity -

$449.1

449.1

Incremental Analysis:

2010

2011

Sun Standalone Net Income

$42.2

$45.2

Diluted Shares Outstanding

44.5

44.9

Sun Standalone EPS

$0.95

$1.01

Incremental Financing Costs

($17.4)

($14.8)

(1.5)

Pre-Tax Incremental Income

($18.9)

($16.3)

Taxes @ 41.0%

7.8

6.7

Incremental Net Income

($11.2)

($9.6)

PF Net Income

$31.0

$35.6

Incremental Shares Issued

0.0

PF Shares

44.5

44.9

PF EPS

$0.70

$0.79

($0.25)

($0.21)

(26.4%)

(21.3%)

Pro Forma Leverage Statistics

12/31/09E

Trx. Adjs.

03/31/10E

03/31/11E

Net Debt

$596.1

$30.2

$626.3

$588.1

LTM EBITDA

176.8

175.4

175.3

LTM Interest Expense

49.3

66.9

69.1

2010

2011

Leverage

3.37x

0.20x

3.57x

< 3.50x

3.36x

< 3.00x

Senior Leverage

2.24x

(2.09x)

0.15x

< 2.50x

(0.07x)

< 2.00x

Interest Coverage

3.59x

(0.96x)

2.62x

> 2.50x

2.54x

> 2.75x

Accretion/(Dilution) - $

Accretion/(Dilution) - %

Amotization of Financing Fees

MTS Health Partners

Oklahoma Facilities –

Financial Impact at $45mm (8.2x 2009E EBITDAR of $5.5mm)

Portfolio Rationalization Alternatives

Base Case Projections

Adjustments

Pro-Forma Projections

2010

2011

2010

2011

2010

2011

Revenue

$1,954.1

$2,031.3

($60.4)

($62.4)

$1,893.6

$1,968.9

EBITDAR

$249.5

$261.7

($6.8)

($7.2)

$242.8

$254.4

% Margin

12.8%

12.9%

11.2%

11.6%

12.8%

12.9%

Adj. EBITDA

$173.8

$183.9

($3.5)

(1)

($3.9)

(1)

$170.3

$180.0

% Margin

8.9%

9.1%

5.7%

6.2%

9.0%

9.1%

Net Income

(2)

$42.2

$45.2

$0.6

$0.4

$42.8

$45.7

% Margin

2.2%

2.3%

Diluted EPS

$0.95

$1.01

$0.01

$0.96

$1.02

Diluted Shares Outstanding (mm)

44.500

44.900

44.500

44.900

44.500

44.900

Cap-Ex

$55.0

($1.0)

($1.2)

$54.0

$53.8

EPS

Accretion/(Dilution)

$0.01

EPS

Accretion/(Dilution)

1.4%

1.0%

Q1 2011

Q4 2011

Leverage

3.12x

2.81x

(0.16x)

(0.15x)

2.97x

2.66x

Senior Leverage

1.98x

1.72x

(0.18x)

(0.17x)

1.80x

1.55x

Interest Coverage

3.39x

3.55x

0.06x

0.07x

3.45x

3.63x

(1)

EBITDA adjustment calculated as Oklahoma Facilities EBITDA of $4.7mm and $5.1mm in 2010 and 2011 respectively less unallocated insurance expenses of $1.2mm and $1.2mm of

GLPL annual cost savings Sun would gain from the disposal of the Oklahoma facilities.

(2)

Net Income adjustments for the removal of Oklahoma Facilities calculated as reduction in tax affected EBITs of $1.9mm and $2.4mm in 2010E and 2011E respectively plus a reduction of

Mortgage and Term Loan interest expense. Reduction in interest expense calculated by applying proceeds from sale net of taxes (assessed on a Net Tax Basis of $20.6mm, and tax rate of

41.0%) to base case assumptions of 2010E average interest rate of 4.7% and 2011E average interest rate of 6.2%.

MTS Health Partners

Divestiture of CareerStaff

–

Assumes sale at $70.0mm (7.5x 2009E EBITDA of $9.4mm)

Portfolio Rationalization Alternatives

Base Case Projections

Adjustments

Pro-Forma Projections

2010

2011

2010

2011

2010

2011

Revenue

$1,954.1

$2,031.3

($104.7)

($107.9)

$1,849.4

$1,923.4

EBITDAR

$249.5

$261.7

($9.6)

($10.0)

$239.9

$251.7

% Margin

12.8%

12.9%

9.2%

13.0%

13.1%

Adj. EBITDA

$173.8

$183.9

($7.7)

(1)

($8.0)

(1)

$166.1

$175.9

% Margin

8.9%

9.1%

7.3%

7.4%

9.0%

9.1%

Net Income

(2)

$42.2

$45.2

($2.7)

($2.4)

$39.5

$42.8

% Margin

2.2%

2.1%

2.2%

Diluted EPS

$0.95

$1.01

($0.06)

($0.05)

$0.89

$0.95

Diluted Shares Outstanding (mm)

44.500

44.900

44.500

44.900

44.500

44.900

Cap-Ex

$55.0

($0.3)

($0.5)

$54.7

$54.5

EPS

Accretion/(Dilution)

($0.06)

($0.05)

EPS

Accretion/(Dilution)

(6.3%)

(5.4%)

Q1 2011

Q4 2011

Leverage

3.12x

2.81x

(0.17x)

2.96x

2.64x

Senior Leverage

1.98x

1.72x

(0.22x)

1.76x

1.50x

Interest Coverage

3.39x

3.55x

0.02x

0.08x

3.41x

3.63x

(1)

EBITDA adjustment calculated as CareerStaff EBITDA of $8.8mm and $9.1mm in 2010E and 2011E respectively less Corporate Overhead savings of $1.1mm.

(2)

Net Income adjustments for the removal of CareerStaff calculated as reduction in tax affected EBITs of $7.0mm and $7.5mm in 2010E and 2011E respectively plus a reduction of

Term Loan interest expense. Reduction in interest expense calculated by applying proceeds from sale net of taxes (assessed on a Net Tax Basis of $30.0mm, and tax rate of 41.0%) to

base case assumptions of 2010E average interest rate of 4.7% and 2011E average interest rate of 6.2%.

MTS Health Partners

Portfolio Rationalization Alternatives

U.S Staffing Public Comparables

Sources: Company press releases, public documents, and Wall Street research consensus estimates as of 1/29/10

(1)Enterprise value represents equity value plus any outstanding debt, minority interest and preferred stock less cash and cash equivalents.

Preferred

Price as of

52 Week

Equity

Stock & Min.

Enterprise

LT Growth

1/29/10

High

% of

Value

Debt

Interest

Cash

Value

Rate

AMN Healthcare Services Inc.

$8.70

$11.00

79.1%

$283.9

$77.3

$0.0

$22.6

$338.6

14.0%

Cross Country Healthcare, Inc.

9.06

10.23

88.6%

279.4

69.5

0.0

12.0

336.9

12.0%

On Assignment Inc.

6.98

7.59

92.0%

254.2

82.9

0.0

35.1

302.0

15.0%

Medical Staffing Network Holdings Inc.

0.33

0.72

45.8%

10.6

107.0

0.4

9.2

108.7

N/A

Operating Metrics

Revenue

EBITDA

EPS

2009E

2010E

2011E

2009E

2010E

2011E

2009E

2010E

2011E

AMN Healthcare Services Inc.

$760.2

$621.8

$650.9

$46.3

$34.9

$40.9

$0.30

$0.28

$0.42

Cross Country Healthcare, Inc.

576.4

537.3

555.1

31.6

28.1

35.0

0.24

0.43

On Assignment Inc.

412.3

402.5

444.9

28.9

28.4

36.9

0.11

0.18

0.35

Medical Staffing Network Holdings Inc.

414.6

385.6

N/A

17.2

17.0

N/A

0.06

0.1

N/A

Trading Multiples

Leverage Ratios

EV/Revenue

EV/EBITDA

Price/Earnings

2010E

Cur. Debt / EBITDA

2010E

2011E

2010E

2011E

2010E

2011E

PEG

2010E

2011E

AMN Healthcare Services Inc.

0.54x

0.52x

9.7x

8.3x

31.4x

21.0x

2.24x

2.2x

1.9x

Cross Country Healthcare, Inc.

0.63x

0.61x

12.0x

9.6x

37.8x

21.1x

3.15x

2.5x

2.0x

(Invalid Identifier)

0.75x

0.68x

10.6x

8.2x

39.2x

19.9x

2.61x

2.9x

2.3x

Medical Staffing Network Holdings Inc.

0.28x

6.4x

2.8x

6.3x

Maximum

0.75x

0.68x

12.0x

9.6x

39.2x

21.1x

3.15x

6.3x

2.3x

Mean

0.55x

0.60x

9.7x

8.7x

27.8x

20.7x

2.67x

3.5x

2.0x

Median

0.59x

0.61x

10.2x

8.3x

34.6x

21.0x

2.61x

2.7x

2.0x

Minimum

0.28x

0.52x

6.4x

8.2x

2.8x

19.9x

2.24x

2.2x

1.9x

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDAR

Overview of key assumptions

7.0x Acquisition Multiple ($140mm)

Financed through

$20mm of cash on hand (14% of funds)

$80mm (4.0x EBTIDAR, 6.0% interest) in

new debt (55% of funds)

$44mm (after discount and fees) from new

equity offering (31% of funds) assuming

Sun’s current per share value of $8.74

Assumed Synergies of 1.0% of revenues

($1.7mm)

2011 Accretion/(Dilution)

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

$8.74

10.8%

5.2%

0.1%

(4.5%)

10.74

12.1%

7.4%

3.0%

(1.0%)

12.74

13.0%

9.0%

5.2%

1.6%

14.74

13.7%

10.1%

6.8%

3.6%

16.74

14.2%

11.0%

8.0%

5.2%

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

1.0%

10.8%

5.2%

0.1%

(4.5%)

2.0%

12.8%

7.1%

1.9%

(2.7%)

3.0%

14.9%

9.1%

3.8%

(1.0%)

4.0%

16.9%

11.0%

5.6%

0.8%

5.0%

19.0%

12.9%

7.5%

2.5%

EBITDAR Multiple Paid

5.2%

6.0x

7.0x

8.0x

9.0x

2.5x

5.1%

0.1%

(4.4%)

(8.5%)

3.0x

6.9%

1.7%

(3.0%)

(7.3%)

3.5x

8.8%

3.4%

(1.5%)

(5.9%)

4.0x

10.8%

5.2%

0.1%

(4.5%)

4.5x

12.9%

7.0%

1.8%

(3.0%)

100

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDAR

Sources & Uses

Sun Existing Cash

$20.0

13.5%

Assumed Mortgage Debt

0.0

0.0%

New Senior Secured Debt

80.0

53.8%

Sun Equity Proceeds

48.7

32.7%

Sources of Cash

$148.7

100.0%

Purchase Price

$140.0

94.2%

Transaction Costs

8.7

5.8%

Use of Cash

$148.7

100.0%

Pro Forma Leverage Statistics

PF 01/31/10E

PF 01/31/11E

Net Debt

$696.1

650.9

PF LTM EBITDA

197.1

197.8

PF LTM Interest Expense

55.0

57.2

2010

Leverage

3.53x

< 3.50x

3.29x

< 3.00x

Senior Leverage

2.52x

< 2.50x

2.28x

< 2.00x

Interest Coverage

3.58x

> 2.50x

3.46x

> 2.75x

Pro Forma Capital Structure

Incremental

Sun

Transaction

Interest

Annual Interest

12/31/09E

Adjustments

Combined

Rate

PF 2009

2010

2011

Cash

$104.5

($20.0)

$84.5

0.4

Sun Mortgage Debt

$170.6

n/a

Sun Capital Leases

0.8

n/a

Sun Senior Subordinated Notes

200.0

n/a

Sun

Senior

Secured

Debt -

SWAP

150.0

n/a

Sun Senior Secured Debt

179.1

n/a

Mortgage Debt Assumed

0.0

0.0%

New Senior Secured Debt

80.0

6.0%

4.8

Total Debt

$700.5

$80.0

$780.5

$5.2

Amort. of Financing Fees

0.3

$5.5

101

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDAR

Incremental Analysis:

Acquisition Overview:

2010

2011

Revenues

$166.7

Sun Standalone Net Income

$42.2

$45.2

LTM EBITDAR

20.0

12.00%

Margin

Diluted Shares Outstanding

44.5

44.9

Acquisition Multiple

7.0x

Sun Standalone EPS

$0.95

$1.01

Purchase Price

$140.0

Trx. Fees & Expenses

4.4

2.00%

Trx

Fees + Fin Fees

Incremental EBITDA

$20.8

$22.0

Net Purchase Price

$144.4

Incremental O/H Synergies

1.7

PF Incremental EBITDA

$22.5

$23.7

Existing Cash

20.0

1.0x

EBITDA

Incremental D&A

(4.2)

Incremental Financing Costs

(5.5)

Debt Assumed

0.0x

EBITDA

Pre-Tax Incremental Income

12.8

14.0

New Debt

80.0

4.0x

EBITDA

Taxes @

41.0%

(5.2)

(5.7)

Total Debt

80.0

4.0x

EBITDA

Incremental Net Income

$7.5

$8.2

Sources of Cash

100.0

5.0x

EBITDA

PF Net Income

$49.7

$53.5

Debt Financing Overview:

Incremental Shares Issued

5.6

Repricing

Costs -

Old Debt

$0.0

0.00%

on $329.1 of Sr. Debt

PF Shares

50.1

50.5

Loss of Interest Income

0.4

2.00%

on $20.0mm of Cash

Amort. of Financing Fees

0.3

2.00%

Amortized over 5 years

PF EPS

$0.99

$1.06

Assumed Debt Interest

0.0

0.00%

Rate

Accretion/(Dilution)

$0.05

New Debt Interest

4.8

6.00%

Rate (L+350, hedged)

Accretion/(Dilution)

4.8%

5.2%

Incremental Financing Costs

$5.5

Sensitivity on Covenants:

PF 01/31/10E

PF 01/31/11E

Equity Financing Overview:

Requirement

< 3.50x

< 3.00x

Equity Offering Proceeds Needed

$44.4

Leverage Ratio -

PF Trx

3.53x

3.29x

Current Share Price

$8.74

EBITDA Shortfall

($1.8)

($19.2)

Share Price @ Issuance (5.0% Disc.)

($0.44)

5.00%

Discount to Mkt. Price

Cash Shortfall

($6.4)

($57.6)

U/W Spread

($0.33)

4.00%

U/W Spread

Implied Equity Proceeds

$7.97

Implied Shares Issued

Requirement

< 2.50x

< 2.00x

Shares Issued

5.6

13%

of outstanding shares

Senior Leverage Ratio -

PF Trx

2.52x

2.28x

Total Equity Offering

$48.7

EBITDA Shortfall

($1.4)

($27.7)

Cash Shortfall

($3.4)

($55.4)

Synergies Analysis

Incremental O/H Synergies

$1.7

1.00%

of Revenues

102

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $80mm EBITDAR

Overview of key assumptions

7.0x Acquisition Multiple ($560mm)

Financed through

$20mm of cash on hand (4% of funds)

$320mm (4.0x EBTIDAR, 6.0% interest) in

new debt (55% of funds)

$238mm (after discount and fees) from new

equity offering (41% of funds) assuming

Sun’s current per share value of $8.74

Assumed Synergies of 2.0% of revenues

($13.3mm)

2011 Accretion/(Dilution)

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

$8.74

27.6%

10.1%

(3.2%)

(13.6%)

10.74

35.2%

18.9%

6.1%

(4.2%)

12.74

41.0%

25.9%

13.7%

3.6%

14.74

45.6%

31.4%

19.8%

10.1%

16.74

49.2%

36.0%

25.0%

15.6%

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

1.0%

21.5%

4.9%

(7.8%)

(17.7%)

2.0%

27.6%

10.1%

(3.2%)

(13.6%)

3.0%

33.6%

15.3%

1.4%

(9.5%)

4.0%

39.7%

20.6%

6.0%

(5.4%)

5.0%

45.8%

25.8%

10.6%

(1.3%)

EBITDAR Multiple Paid

10.1%

6.0x

7.0x

8.0x

9.0x

2.5x

9.5%

(3.0%)

(13.0%)

(21.1%)

3.0x

14.7%

0.8%

(10.1%)

(18.8%)

3.5x

20.7%

5.2%

(6.8%)

(16.3%)

4.0x

27.6%

10.1%

(3.2%)

(13.6%)

4.5x

35.6%

15.7%

0.9%

(10.5%)

103

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $80mm EBITDAR

Sources & Uses

Sun Existing Cash

$20.0

3.3%

Assumed Mortgage Debt

0.0

0.0%

New Senior Secured Debt

320.0

53.3%

Sun Equity Proceeds

260.5

43.4%

Sources of Cash

$600.5

100.0%

Purchase Price

$560.0

93.3%

Transaction Costs

40.5

6.7%

Use of Cash

$600.5

100.0%

Pro Forma Leverage Statistics

PF 01/31/10E

PF 01/31/11E

Net Debt

$936.1

900.0

PF LTM EBITDA

268.7

271.8

PF LTM Interest Expense

70.4

72.6

2010

Leverage

3.48x

< 3.50x

3.31x

< 3.00x

Senior Leverage

2.74x

< 2.50x

2.58x

< 2.00x

Interest Coverage

3.82x

> 2.50x

3.75x

> 2.75x

Pro Forma Capital Structure

Incremental

Sun

Transaction

Interest

Annual Interest

12/31/09E

Adjustments

Combined

Rate

PF 2009

2010

2011

Cash

$104.5

($20.0)

$84.5

0.4

Sun Mortgage Debt

$170.6

n/a

Sun Capital Leases

0.8

n/a

Sun Senior Subordinated Notes

200.0

n/a

Sun Senior Secured Debt -

SWAP

150.0

n/a

Sun Senior Secured Debt

179.1

n/a

Mortgage Debt Assumed

0.0

0.0%

New Senior Secured Debt

320.0

6.0%

19.2

Total Debt

$700.5

$320.0

$1,020.5

$19.6

Amort. of Financing Fees

1.3

$20.9

104

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $80mm EBITDAR

Incremental Analysis:

Acquisition Overview:

2010

2011

Revenues

$666.7

Sun Standalone Net Income

$42.2

$45.2

LTM EBITDAR

80.0

12.00%

Margin

Diluted Shares Outstanding

44.5

44.9

Acquisition Multiple

7.0x

Sun Standalone EPS

$0.95

$1.01

Purchase Price

$560.0

Trx. Fees & Expenses

17.6

2.00%

Trx

Fees + Fin Fees

Incremental EBITDA

$83.2

$88.0

Net Purchase Price

$577.6

Incremental O/H Synergies

13.3

PF Incremental EBITDA

$96.5

$101.3

Existing Cash

20.0

0.3x

EBITDA

Incremental D&A

(16.7)

Incremental Financing Costs

(20.9)

Debt Assumed

0.0x

EBITDA

Pre-Tax Incremental Income

59.0

63.8

New Debt

320.0

4.0x

EBITDA

Taxes @

41.0%

(24.2)

(26.1)

Total Debt

320.0

4.0x

EBITDA

Incremental Net Income

$34.8

$37.6

Sources of Cash

340.0

4.3x

EBITDA

PF Net Income

$77.0

$82.8

Debt Financing Overview:

Incremental Shares Issued

29.8

Repricing

Costs -

Old Debt

$0.0

0.00%

on $329.1 of Sr. Debt

PF Shares

74.3

74.7

Loss of Interest Income

0.4

2.00%

on $20.0mm of Cash

Amort. of Financing Fees

1.3

2.00%

Amortized over 5 years

PF EPS

$1.04

$1.11

Assumed Debt Interest

0.0

0.00%

Rate

Accretion/(Dilution) -

$0.09

$0.10

New Debt Interest

19.2

6.00%

Rate (L+350, hedged)

Accretion/(Dilution) -

9.3%

10.1%

Incremental Financing Costs

$20.9

Sensitivity on Covenants:

PF 01/31/10E

PF 01/31/11E

Equity Financing Overview:

Requirement

< 3.50x

< 3.00x

Equity Offering Proceeds Needed

$237.6

Leverage Ratio -

PF Trx

3.48x

3.31x

Current Share Price

$8.74

EBITDA Shortfall

$1.3

($28.2)

Share Price @ Issuance (5.0% Disc.)

($0.44)

5.00%

Discount to Mkt. Price

Cash Shortfall

$4.5

($84.5)

U/W Spread

($0.33)

4.00%

U/W Spread

Implied Equity Proceeds

$7.97

Implied Shares Issued

Requirement

< 2.50x

< 2.00x

Shares Issued

29.8

68%

of outstanding shares

Senior Leverage Ratio -

PF Trx

2.74x

2.58x

Total Equity Offering

$260.5

EBITDA Shortfall

($25.7)

($78.2)

Cash Shortfall

($64.3)

($156.3)

Synergies Analysis

Incremental O/H Synergies

$13.3

2.00%

of Revenues

105

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $120mm EBITDAR

Overview of key assumptions

7.0x Acquisition Multiple ($840mm)

Financed through

$20mm of cash on hand (2% of funds)

$480mm (4.0x EBTIDAR, 6.0% interest) in

new debt (56% of funds)

$366mm (after discount and fees) from new

equity offering (42% of funds) assuming

Sun’s current per share value of $8.74

Assumed Synergies of 3.0% of revenues

($30.0mm)

2011 Accretion/(Dilution)

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

$8.74

41.6%

17.7%

0.6%

(12.1%)

10.74

53.1%

29.9%

12.8%

(0.4%)

12.74

62.2%

39.9%

22.9%

9.6%

14.74

69.6%

48.2%

31.6%

18.3%

16.74

75.6%

55.2%

39.0%

25.9%

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

1.0%

26.1%

4.8%

(10.4%)

(21.7%)

2.0%

33.8%

11.2%

(4.9%)

(16.9%)

3.0%

41.6%

17.7%

0.6%

(12.1%)

4.0%

49.3%

24.1%

6.2%

(7.2%)

5.0%

57.1%

30.5%

11.7%

(2.4%)

EBITDAR Multiple Paid

17.7%

6.0x

7.0x

8.0x

9.0x

2.5x

16.4%

0.6%

(11.5%)

(20.9%)

3.0x

23.4%

5.5%

(7.9%)

(18.3%)

3.5x

31.7%

11.1%

(3.9%)

(15.4%)

4.0x

41.6%

17.7%

0.6%

(12.1%)

4.5x

53.6%

25.4%

5.9%

(8.4%)

106

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $120mm EBITDAR

Pro Forma Capital Structure

Incremental

Sun

Transaction

Interest

Annual Interest

12/31/09E

Adjustments

Combined

Rate

PF 2009

2010

2011

Cash

$104.5

($20.0)

$84.5

0.4

Sun Mortgage Debt

$170.6

n/a

Sun Capital Leases

0.8

n/a

Sun Senior Subordinated Notes

200.0

n/a

Sun

Senior

Secured

Debt

SWAP

150.0

n/a

Sun Senior Secured Debt

179.1

n/a

Mortgage Debt Assumed

0.0

0.0%

New Senior Secured Debt

480.0

6.0%

28.8

Total Debt

$700.5

$480.0

$1,180.5

$29.2

Amort. of Financing Fees

1.9

$31.1

Sources & Uses

Sun Existing Cash

$20.0

2.2%

Assumed Mortgage Debt

0.0

0.0%

New Senior Secured Debt

480.0

53.2%

Sun Equity Proceeds

401.8

44.6%

Sources of Cash

$901.8

100.0%

Purchase Price

$840.0

93.2%

Transaction Costs

61.8

6.8%

Use of Cash

$901.8

100.0%

Pro Forma Leverage Statistics

PF 01/31/10E

PF 01/31/11E

Net Debt

$1,096.1

1,066.0

PF LTM EBITDA

325.4

330.1

PF LTM Interest Expense

80.6

82.8

2010

Leverage

3.37x

< 3.50x

3.23x

< 3.00x

Senior Leverage

2.75x

< 2.50x

2.62x

< 2.00x

Interest Coverage

4.04x

> 2.50x

3.99x

> 2.75x

107

MTS Health Partners

Portfolio Expansion Alternatives

LTC Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $120mm EBITDAR

Incremental Analysis:

Acquisition Overview:

2010

2011

Revenues

$1,000.0

Sun Standalone Net Income

$42.2

$45.2

LTM EBITDAR

120.0

12.00%

Margin

Diluted Shares Outstanding

44.5

44.9

Acquisition Multiple

7.0x

Sun Standalone EPS

$0.95

$1.01

Purchase Price

$840.0

Trx. Fees & Expenses

26.4

2.00%

Trx

Fees + Fin Fees

Incremental EBITDA

$124.8

$132.0

Net Purchase Price

$866.4

Incremental O/H Synergies

30.0

PF Incremental EBITDA

$154.8

$162.0

Existing Cash

20.0

0.2x

EBITDA

Incremental D&A

(25.0)

Incremental Financing Costs

(31.1)

Debt Assumed

0.0x

EBITDA

Pre-Tax Incremental Income

98.7

105.8

New Debt

480.0

4.0x

EBITDA

Taxes @

41.0%

(40.5)

(43.4)

Total Debt

480.0

4.0x

EBITDA

Incremental Net Income

$58.2

$62.4

Sources of Cash

500.0

4.2x

EBITDA

PF Net Income

$100.4

$107.7

Debt Financing Overview:

Incremental Shares Issued

46.0

Repricing

Costs -

Old Debt

$0.0

0.00%

on $329.1 of Sr. Debt

PF Shares

90.5

90.9

Loss of Interest Income

0.4

2.00%

on $20.0mm of Cash

Amort. of Financing Fees

1.9

2.00%

Amortized over 5 years

PF EPS

$1.11

$1.18

Assumed Debt Interest

0.0

0.00%

Rate

Accretion/(Dilution) -

$0.16

$0.18

New Debt Interest

28.8

6.00%

Rate (L+350, hedged)

Accretion/(Dilution) -

17.1%

17.7%

Incremental Financing Costs

$31.1

Sensitivity on Covenants:

PF 01/31/10E

PF 01/31/11E

Equity Financing Overview:

Requirement

< 3.50x

< 3.00x

Equity Offering Proceeds Needed

$366.4

Leverage Ratio -

PF Trx

3.37x

3.23x

Current Share Price

$8.74

EBITDA Shortfall

$12.2

($25.2)

Share Price @ Issuance (5.0% Disc.)

($0.44)

5.00%

Discount to Mkt. Price

Cash Shortfall

$42.8

($75.7)

U/W Spread

($0.33)

4.00%

U/W Spread

Implied Equity Proceeds

$7.97

Implied Shares Issued

Requirement

< 2.50x

< 2.00x

Shares Issued

46.0

104%

of outstanding shares

Senior Leverage Ratio -

PF Trx

2.75x

2.62x

Total Equity Offering

$401.8

EBITDA Shortfall

($33.0)

($102.9)

Cash Shortfall

($82.6)

($205.8)

Synergies Analysis

Incremental O/H Synergies

$30.0

3.00%

of Revenues

108

MTS Health Partners

Portfolio Expansion Alternatives

Sources: Company press releases, public documents, and Wall Street research consensus estimates

Note : Data as of 1/29/10. Adjusted enterprise value calculated by adding 8.0x LTM rent expense back to enterprise value. Skilled balance sheet data as of 6/30/09, Sun data as of 9/30/09

and pro-forma for $15.5mm payment for acquisition of Allegiance on 10/1/09.

Note: $ in millions, except per share data

Selected Publicly Traded SNF Companies

Adj.

Trading Multiples

Price as of

Equity

Prf. Stock &

Enterprise

EV/EBITDA

Adj. EV/EBITDAR

Price/Earnings

LT Growth

Company

1/29/10

Value

Debt

Min. Interest

Cash

Value

(1)

Value

(2)

2009E

2010E

2011E

2009E

2010E

2011E

2009E

2010E

2011E

Rate

Extendicare REIT

$8.71

$636.9

$1,170.6

$0.0

$123.5

$1,684.0

$1,795.6

6.5x

7.0x

7.2x

6.6x

7.0x

7.3x

11.1x

15.0x

17.4x

N/A

Kindred Healthcare Inc.

16.91

677.9

274.9

0.0

39.7

913.1

3,681.2

3.4x

3.5x

3.8x

5.9x

11.3x

13.3x

10.8x

11.4%

Skilled Healthcare Group, Inc.

6.54

244.1

472.5

0.0

3.2

713.4

860.7

6.4x

6.1x

6.0x

6.5x

6.3x

6.1x

6.6x

6.7x

6.3x

12.8%

Sun Healthcare Group Inc.

8.74

390.2

702.6

0.0

101.4

991.4

1,575.8

5.5x

5.6x

6.3x

6.4x

6.2x

8.1x

8.9x

8.2x

11.7%

The Ensign Group, Inc.

17.09

365.5

59.8

0.0

21.4

403.9

521.5

5.6x

4.9x

N/A

6.0x

5.4x

N/A

10.9x

9.8x

N/A

16.7%

Maximum

6.5x

7.0x

7.2x

6.6x

7.0x

7.3x

11.3x

15.0x

17.4x

16.7%

Mean

5.5x

5.4x

5.6x

6.3x

6.2x

6.4x

9.6x

10.7x

13.1%

Median

5.6x

5.5x

5.8x

6.3x

6.1x

10.9x

9.8x

9.5x

12.3%

Minimum

3.4x

3.5x

3.8x

5.9x

5.4x

5.9x

6.6x

6.7x

6.3x

11.4%

109

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $5mm EBITDA

Overview of key assumptions

9.5x Acquisition Multiple ($48mm)

Financed through

$20mm of cash on hand (41% of funds)

$20mm (4.0x EBTIDA, 6.0% interest) in new

debt (41% of funds)

$9mm (after discount and fees) from new

equity offering (18% of funds) assuming

Sun’s current per share value of $8.74

Assumed Synergies of 1.0% of revenues

($0.3mm)

2011 Accretion/(Dilution)

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

$8.74

4.8%

3.4%

1.9%

0.5%

(0.8%)

10.74

4.8%

3.6%

2.4%

1.2%

0.1%

12.74

4.7%

3.7%

2.7%

1.7%

0.8%

14.74

4.7%

3.8%

2.9%

2.1%

1.3%

16.74

4.7%

3.9%

3.1%

2.4%

1.6%

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

1.0%

4.8%

3.4%

1.9%

0.5%

(0.8%)

2.0%

5.2%

3.7%

2.2%

0.8%

(0.5%)

3.0%

5.5%

4.0%

2.6%

1.2%

(0.2%)

4.0%

5.8%

4.3%

2.9%

1.5%

0.1%

5.0%

6.2%

4.7%

3.2%

1.8%

0.4%

EBITDA Multiple Paid

1.9%

7.5x

8.5x

9.5x

10.5x

11.5x

2.5x

3.3%

1.9%

0.5%

(0.8%)

(2.1%)

3.0x

3.8%

2.4%

1.0%

(0.4%)

(1.7%)

3.5x

4.3%

2.9%

1.5%

0.1%

(1.3%)

4.0x

4.8%

3.4%

1.9%

0.5%

(0.8%)

4.5x

5.4%

3.9%

2.4%

1.0%

(0.4%)

110

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $5mm EBITDA

Sources & Uses

Sun Existing Cash

$20.0

40.2%

Assumed Mortgage Debt

0.0

0.0%

New Senior Secured Debt

20.0

40.2%

Sun Equity Proceeds

9.7

19.5%

Sources of Cash

$49.7

100.0%

Purchase Price

$47.5

95.6%

Transaction Costs

2.2

4.4%

Use of Cash

$49.7

100.0%

Pro Forma Leverage Statistics

PF 01/31/10E

PF 01/31/11E

Net Debt

$636.1

588.6

PF LTM EBITDA

180.6

180.7

PF LTM Interest Expense

51.2

53.4

2010

Leverage

3.52x

< 3.50x

3.26x

< 3.00x

Senior Leverage

2.41x

< 2.50x

2.15x

< 2.00x

Interest Coverage

3.53x

> 2.50x

3.39x

> 2.75x

Pro Forma Capital Structure

Incremental

Sun

Transaction

Interest

Annual Interest

12/31/09E

Adjustments

Combined

Rate

PF 2009

2010

2011

Cash

$104.5

($20.0)

$84.5

0.4

Sun Mortgage Debt

$170.6

n/a

Sun Capital Leases

0.8

n/a

Sun Senior Subordinated Notes

200.0

n/a

Sun Senior Secured Debt -

SWAP

150.0

n/a

Sun Senior Secured Debt

179.1

n/a

Mortgage Debt Assumed

0.0

0.0%

New Senior Secured Debt

20.0

6.0%

1.2

Total Debt

$700.5

$20.0

$720.5

$1.6

Amort. of Financing Fees

0.1

$1.7

111

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $5mm EBITDA

Incremental Analysis:

Acquisition Overview:

2010

2011

Revenues

$25.0

Sun Standalone Net Income

$42.2

$45.2

LTM EBITDA

5.0

20.00%

Margin

Diluted Shares Outstanding

44.5

44.9

Acquisition Multiple

9.5x

Sun Standalone EPS

$0.95

$1.01

Purchase Price

$47.5

Trx. Fees & Expenses

1.4

2.00%

Trx

Fees + Fin Fees

Incremental EBITDA

$5.2

$5.5

Net Purchase Price

$48.9

Incremental O/H Synergies

0.3

PF Incremental EBITDA

$5.5

$5.7

Existing Cash

20.0

4.0x

EBITDA

Incremental D&A

(0.6)

Incremental Financing Costs

(1.7)

Debt Assumed

0.0x

EBITDA

Pre-Tax Incremental Income

3.1

3.4

New Debt

20.0

4.0x

EBITDA

Taxes @

41.0%

(1.3)

(1.4)

Total Debt

20.0

4.0x

EBITDA

Incremental Net Income

$1.9

$2.0

Sources of Cash

40.0

8.0x

EBITDA

PF Net Income

$44.1

$47.2

Debt Financing Overview:

Incremental Shares Issued

1.1

Repricing

Costs -

Old Debt

$0.0

0.00%

on $329.1 of Sr. Debt

PF Shares

45.6

46.0

Loss of Interest Income

0.4

2.00%

on $20.0mm of Cash

Amort. of Financing Fees

0.1

2.00%

Amortized over 5 years

PF EPS

$0.97

$1.03

Assumed Debt Interest

0.0

0.00%

Rate

Accretion/(Dilution) -

$0.02

New Debt Interest

1.2

6.00%

Rate (L+350, hedged)

Accretion/(Dilution) -

1.9%

Incremental Financing Costs

$1.7

Sensitivity on Covenants:

PF 01/31/10E

PF 01/31/11E

Equity Financing Overview:

Requirement

< 3.50x

< 3.00x

Equity Offering Proceeds Needed

$8.9

Leverage Ratio -

PF Trx

3.52x

3.26x

Current Share Price

$8.74

EBITDA Shortfall

($1.1)

($15.5)

Share Price @ Issuance (5.0% Disc.)

($0.44)

5.00%

Discount to Mkt. Price

Cash Shortfall

($3.8)

($46.4)

U/W Spread

($0.33)

4.00%

U/W Spread

Implied Equity Proceeds

$7.97

Implied Shares Issued

Requirement

< 2.50x

< 2.00x

Shares Issued

1.1

of outstanding shares

Senior Leverage Ratio -

PF Trx

2.41x

2.15x

Total Equity Offering

$9.7

EBITDA Shortfall

$6.2

($13.6)

Cash Shortfall

$15.5

($27.2)

Synergies Analysis

Incremental O/H Synergies

$0.3

1.00%

of Revenues

112

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDA

Overview of key assumptions

9.5x Acquisition Multiple ($190mm)

Financed through

$20mm of cash on hand (10% of funds)

$80mm (4.0x EBTIDA, 6.0% interest) in new

debt (41% of funds)

$95mm (after discount and fees) from new

equity offering (49% of funds) assuming

Sun’s current per share value of $8.74

Assumed Synergies of 1.0% of revenues

($1.0mm)

2011 Accretion/(Dilution)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

$8.74

3.6%

(1.3%)

(5.8%)

(9.8%)

(13.6%)

10.74

6.2%

2.0%

(1.9%)

(5.5%)

(8.9%)

12.74

8.0%

4.3%

0.9%

(2.3%)

(5.4%)

14.74

9.4%

6.2%

3.1%

0.1%

(2.6%)

16.74

10.5%

7.6%

4.8%

2.1%

(0.4%)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

1.0%

3.6%

(1.3%)

(5.8%)

(9.8%)

(13.6%)

2.0%

4.7%

(0.3%)

(4.7%)

(8.8%)

(12.6%)

3.0%

5.8%

0.8%

(3.7%)

(7.9%)

(11.7%)

4.0%

6.9%

1.9%

(2.7%)

(6.9%)

(10.7%)

5.0%

8.1%

3.0%

(1.6%)

(5.9%)

(9.8%)

EBITDA Multiple Paid

-5.8%

7.5x

8.5x

9.5x

10.5x

11.5x

2.5x

(1.3%)

(5.7%)

(9.7%)

(13.3%)

(16.7%)

3.0x

0.2%

(4.3%)

(8.4%)

(12.2%)

(15.7%)

3.5x

1.9%

(2.8%)

(7.1%)

(11.0%)

(14.6%)

4.0x

3.6%

(1.3%)

(5.8%)

(9.8%)

(13.6%)

4.5x

5.3%

0.3%

(4.4%)

(8.6%)

(12.4%)

113

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDA

Pro Forma Capital Structure

Incremental

Sun

Transaction

Interest

Annual Interest

12/31/09E

Adjustments

Combined

Rate

PF 2009

2010

2011

Cash

$104.5

($20.0)

$84.5

0.4

Sun Mortgage Debt

$170.6

n/a

Sun Capital Leases

0.8

n/a

Sun Senior Subordinated Notes

200.0

n/a

Sun

Senior

Secured

Debt

SWAP

150.0

n/a

Sun Senior Secured Debt

179.1

n/a

Mortgage Debt Assumed

0.0

0.0%

New Senior Secured Debt

80.0

6.0%

4.8

Total Debt

$700.5

$80.0

$780.5

$5.2

Amort. of Financing Fees

0.3

$5.5

Pro Forma Leverage Statistics

PF 01/31/10E

PF 01/31/11E

Net Debt

$696.1

650.9

PF LTM EBITDA

196.4

197.1

PF LTM Interest Expense

55.0

57.2

2010

Leverage

3.54x

< 3.50x

3.30x

< 3.00x

Senior Leverage

2.53x

< 2.50x

2.29x

< 2.00x

Interest Coverage

3.57x

> 2.50x

3.45x

> 2.75x

Sources & Uses

Sun Existing Cash

$20.0

9.8%

Assumed Mortgage Debt

0.0

0.0%

New Senior Secured Debt

80.0

39.1%

Sun Equity Proceeds

104.6

51.1%

Sources of Cash

$204.6

100.0%

Purchase Price

$190.0

92.9%

Transaction Costs

14.6

7.1%

Use of Cash

$204.6

100.0%

114

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Accretion/(Dilution) Analysis –

Purchase of $20mm EBITDA

Incremental Analysis:

Acquisition Overview:

2010

2011

Revenues

$100.0

Sun Standalone Net Income

$42.2

$45.2

LTM EBITDA

20.0

20.00%

Margin

Diluted Shares Outstanding

44.5

44.9

Acquisition Multiple

9.5x

Sun Standalone EPS

$0.95

$1.01

Purchase Price

$190.0

Trx. Fees & Expenses

5.4

2.00%

Trx

Fees + Fin Fees

Incremental EBITDA

$20.8

$21.8

Net Purchase Price

$195.4

Incremental O/H Synergies

1.0

PF Incremental EBITDA

$21.8

$22.8

Existing Cash

20.0

1.0x

EBITDA

Incremental D&A

(2.5)

Incremental Financing Costs

(5.5)

Debt Assumed

0.0x

EBITDA

Pre-Tax Incremental Income

13.8

14.8

New Debt

80.0

4.0x

EBITDA

Taxes @

41.0%

(5.6)

(6.1)

Total Debt

80.0

4.0x

EBITDA

Incremental Net Income

$8.1

$8.7

Sources of Cash

100.0

5.0x

EBITDA

PF Net Income

$50.3

$54.0

Debt Financing Overview:

Incremental Shares Issued

12.0

Repricing

Costs -

Old Debt

$0.0

0.00%

on $329.1 of Sr. Debt

PF Shares

56.5

56.9

Loss of Interest Income

0.4

2.00%

on $20.0mm of Cash

Amort. of Financing Fees

0.3

2.00%

Amortized over 5 years

PF EPS

$0.89

$0.95

Assumed Debt Interest

0.0

0.00%

Rate

Accretion/(Dilution) -

($0.06)

New Debt Interest

4.8

6.00%

Rate (L+350, hedged)

Accretion/(Dilution) -

(6.0%)

(5.8%)

Incremental Financing Costs

$5.5

Sensitivity on Covenants:

PF 01/31/10E

PF 01/31/11E

Equity Financing Overview:

Requirement

< 3.50x

< 3.00x

Equity Offering Proceeds Needed

$95.4

Leverage Ratio -

PF Trx

3.54x

3.30x

Current Share Price

$8.74

EBITDA Shortfall

($2.5)

($19.9)

Share Price @ Issuance (5.0% Disc.)

($0.44)

5.00%

Discount to Mkt. Price

Cash Shortfall

($8.7)

($59.6)

U/W Spread

($0.33)

4.00%

U/W Spread

Implied Equity Proceeds

$7.97

Implied Shares Issued

Requirement

< 2.50x

< 2.00x

Shares Issued

12.0

27%

of outstanding shares

Senior Leverage Ratio -

PF Trx

2.53x

2.29x

Total Equity Offering

$104.6

EBITDA Shortfall

($2.0)

($28.4)

Cash Shortfall

($5.1)

($56.7)

Synergies Analysis

Incremental O/H Synergies

$1.0

1.00%

of Revenues

116

MTS Health Partners

Portfolio Expansion Alternatives

Hospice Acquisition –

Deal Overview

We analyzed the transaction assuming a 100% cash deal financed using 4.0x leverage on Orleans’s 2009E

EBITDA

$74mm

($300mm)

6.0%

and

$380mm

new

equity

raised

from

Sun

investors

35% premium on Orleans shares (9.1x 2009E EBITDA multiple)

$80.0mm in pro-forma cash balance

$5mm in Synergies

Share issuance at a 5.0% discount to the market and a 4.0% underwriting spread

Debt wavier fees of $2.0mm amortized over 5 years

41% Marginal Tax Rate

Rollover of Capital Leases, Mortgage Debt and Other Debt

Despite the ~2.5x differential in 2010E EPS multiples between Orleans (11.6x) and Sun (9.1x) a number of key

factors mitigate the deal’s overall dilution, especially in a cash transaction

Orleans’s current capital structure consists of ~$100mm in cash and $116mm of outstanding debt (1.6x of

$74.3mm 2009E EBITDA)

Assuming a post-transaction pro-forma cash balance of $80.0mm, approximately $120mm of the combined

company cash balances can be used as a source of cash, reducing the need to issue shares and dilute current

shareholders

Additionally, an increase in Orleans leverage ratios from 1.6x to 4.0. provides ~$185mm in sources of cash

117

MTS Health Partners

Hospice Acquisition –

Orleans Acc./Dil

(35% Premium, 100% Cash (4.0x Leverage))

Portfolio Expansion Alternatives

Pro Forma Accretion / (Dilution)

FYE December 31,

2009E

2010E

2011E

Projected Orlean's

Standalone EPS

$1.17

$1.26

$1.36

Projected SUNH Standalone EPS

1.10

0.95

1.01

Pro

Forma

Net

Income

Calculation

Projected Orlean's

Standalone Net Income

$39.2

$42.6

$47.7

Projected SUNH Standalone Net Income

48.4

42.2

45.2

Pro Forma Net Income

$87.6

$84.8

$92.9

After

Tax

Adjustments:

Net Interest Expense

($12.1)

Synergies (pre-tax synergies of $5.0)

3.0

Amortization of Intangible Assets

(3.5)

Amortization of Financing Fees (including waiver fees)

(0.9)

Orlean's

Interest Expense

3.2

1.1

Total

($10.3)

($12.5)

Pro Forma Net Income

$77.2

$72.3

$80.4

Pro Forma Shares Outstanding

92.321

Pro Forma EPS

$0.84

$0.78

$0.87

Projected SUNH Standalone EPS

$1.10

$0.95

$1.01

$ Accretion / (Dilution)

($0.26)

($0.16)

($0.14)

% Accretion / (Dilution)

(23.9%)

(17.4%)

(13.5%)

MTS Health Partners

Executive Summary

the

Board’s

last

meeting

February,

Sun

management

and

MTS

were

asked

provide

specific

detail

around

certain

aspects of a proposed OpCo/PropCo

transaction, including:

detailed

long-term

models

for

OpCo

and

PropCo,

including

full

income

statements,

balance

sheets

and

cash

flows

The expected strategic and financial profile of OpCo, as opposed to that of Sun today

A preliminary transaction timeline, as well as the costs expected to be incurred by Sun up to each point in that timeline

Any

revised

OpCo/PropCo

analysis

that

results

from

this work

Accordingly, Sun management and MTS are pleased to present an update to last month’s presentation, including:

Revised

long-term

Sun/OpCo

projections,

reflecting

extension

the

model

through

the

2012-2014

periods

Expanded

PropCo

financials,

reflecting

both

base

“no

growth”

case,

well

various

acquisition

cases

and their

potential

effect

PropCo

equity values

A preliminary transaction timeline and expenses schedule, reflecting preliminary estimates by each of Sun’s proposed

advisors

A preliminary “Omega strategy”

A quantitative and qualitative comparison of Sun today vs. OpCo

Based on these materials, Sun management is seeking approval from the Board to take all steps necessary to pursue a

proposed OpCo/PropCo

transaction structure in accordance with the enclosed timeline

Sun

management

and

MTS

will

continue

provide

periodic

updates

the

Board

progress

against

the

timeline,

as well

as any positive or negative developments against the business case previously presented

MTS Health Partners

Current Situation -

Public Market Viewpoint

Public Market Overview

Sources: Company press releases, public documents, and Wall Street research consensus estimates

1)Adjusted enterprise value calculated by adding 8.0x 2009A rent expense back to enterprise value.

Sun Market Valuation

Stock Price (03/15/10)

$9.30

Fully Diluted Shares Outstanding

44.765

Equity Value

$416.3

2009A Leverage Multiples

Add: Debt (12/31/09)

EBITDA

EBITDAR

Revolver & Term Loan

1.86x

1.32x

$329.1

Mortgage Notes Payable

0.96x

0.68x

170.6

Senior Sub Notes

1.13x

0.80x

200.0

Leases

2.34x

0.8

Total Debt

3.96x

5.14x

$700.5

Less: Cash (12/31/09)

(0.59x)

(0.42x)

(104.5)

Net Debt

3.37x

4.72x

$596.1

Enterprise Value

$1,012.4

Add: Capitalized 2009A Rent (8.0x)

(1)

585.2

Adjusted Enterprise Value

$1,597.6

Sun Metrics & Trading Multiples

Adj. Ent. Value /

Ent. Value /

Price /

Year

EBITDAR

EBITDA

EPS

2009A

6.4x

5.7x

8.4x

2010E

6.5x

5.9x

9.8x

2011E

6.3x

5.7x

9.2x

Year

EBITDAR

EBITDA

EPS

2009A

$250.1

$176.9

$1.10

2010E

247.0

170.9

0.95

2011E

255.3

176.9

1.01

MTS Health Partners

Current Situation -

Internal Viewpoint

Revised Long-Term Sun Base Case -

Assumptions

Following the February board meeting, management constructed a longer-term forecast to assist in the board’s

assessment of the long-term viability of Sun “OpCo”

–

relative to the more conservative “Illustrative”

projections

previously provided

Management remains comfortable with previous 2011 projections, and accordingly all material changes were

limited to 2012-2014

2011

2012

2013

2014

SUNBRIDGE

Occupancy

+0.4%

+0.2%

Customer Mix:

Medicare

15.1%

15.2%

15.3%

15.4%

Managed Care

2.9%

3.0%

3.1%

Commercial Ins

0.8%

0.9%

Skilled bps change

0.4%

0.2%

Medicaid

59.4%

59.3%

59.1%

59.0%

bps change

-0.3%

-0.1%

Private & Other

21.7%

21.6%

bps change

-0.1%

0.0%

Rates

Medicare

+3.0%

Mgd

/ Commercial Ins

+2.5%

Medicaid

+1.6%

+3.0%

Private

+4.0%

Labor

Weighted Average Wage Rate

+2.0%

+2.2%

Hours of Labor PPD

5.21

5.20

5.19

2011

2012

2013

2014

SOLAMOR

YOY Revenue Growth

+5.0%

EBITDA Growth (in $Ms)

1.0

1.1

1.2

EBITDA Margin Growth

1.0%

REHAB

YOY Revenue Growth

+9.5%

+10.5%

+11.0%

+11.5%

EBITDA Growth (in $Ms)

1.9

2.0

2.4

2.9

EBITDA Margin Growth

0.3%

0.2%

STAFFING

YOY Revenue Growth

+3.0%

+6.0%

EBITDA Growth (in $Ms)

0.4

0.8

0.9

EBITDA Margin Growth

0.1%

0.2%

CORPORATE

% of Consolidated Revenue

3.1%

ALL

SEGMENTS

GPL

+6%

+5%

+4%

Workers' Comp

+3%

+2%

Health Insurance

+8%

MTS Health Partners

Current Situation -

Internal Viewpoint

Revised Long-Term Sun Base Case –

2011-2014

(1) Adjusted for 8x rent

Actual

Base Case -

Internal Projections

2009

2010

2011

2012

2013

2014

Revenue

$1,881.8

$1,954.1

$2,030.8

$2,119.5

$2,203.3

$2,296.9

% Growth

3.2%

3.8%

3.9%

4.4%

4.0%

4.2%

EBITDAR

$250.1

$249.5

$261.7

$282.6

$301.2

$324.4

% Margin

13.3%

12.8%

12.9%

13.3%

13.7%

14.1%

Margin Growth

2.5%

-3.9%

0.9%

3.5%

2.5%

3.3%

EBITDA

$176.9

$173.8

$183.8

$202.7

$219.4

$240.5

% Margin

9.4%

8.9%

9.1%

9.6%

10.0%

10.5%

5.2%

-5.4%

1.8%

5.7%

4.1%

5.2%

Net Income

$48.4

$42.8

$46.0

$56.1

$65.7

$78.9

% Margin

2.6%

2.2%

2.3%

2.6%

3.0%

3.4%

14.9%

-14.9%

3.4%

16.9%

12.8%

15.2%

Diluted EPS

$1.10

$0.96

$1.02

$1.23

$1.43

$1.70

% Growth

18.6%

(12.7%)

6.5%

20.4%

16.0%

76.6%

Diluted Shares Outstanding (mm)

43.963

44.500

44.900

45.500

46.000

46.500

Cap-Ex

$54.3

$55.0

Free Cash Flow

54.6

50.7

43.7

65.0

72.4

91.7

Net Debt /EBITDA

3.37x

3.16x

2.76x

1.84x

1.70x

1.17x

Adjusted Net Debt

(1)

/ EBITDAR

4.72x

4.63x

4.32x

3.64x

3.41x

2.94x

Margin Growth

*2011 – 2014 projections assume cash generated in excess of $100MM each year is used to pay down debt

MTS Health Partners

Current Situation -

Internal Viewpoint

Changes from Previous Long-Term Sun/”OpCo”

Base Case

2011E

2012E

2013E

2014E

Revenue

February Projection

$2,031.3

$2,112.6

$2,197.1

$2,284.9

Revised Projection

2,030.8

2,119.5

2,203.3

2,296.9

Change

($0.5)

$6.9

$6.2

$12.0

EBITDAR

February Projection

$261.7

$274.2

$287.4

$301.2

Revised Projection

261.7

282.6

301.2

324.4

Change

$0.0

$8.4

$13.8

$23.2

EBITDA

February Projection

$112.0

$120.1

$128.6

$137.6

Revised Projection

111.9

128.7

143.1

161.9

Change

($0.1)

$8.6

$14.5

$24.3

Rent Coverage

February Projection

1.75x

1.78x

1.81x

1.84x

Revised Projection

1.75x

1.84x

1.90x

2.00x

Change

0.00x

0.06x

0.09x

0.16x

OpCo

Income

Statement

Changes

Projections

"February projection" reflects the Feb 17, 2010 board presentation, which used a high-level model of 4% annual revenue growth and 10 bps EBITDAR margin improvement

“Revised projection” reflects a fuller more detailed model developed using the assumptions listed on slide 8

(1) Assumes $55MM in annual capex spend and an $9.2M payment in 2011 to the former Harborside shareholders related to NOLs

MTS Health Partners

OpCo/PropCo

Structures

Spin Transaction Overview

Operations

New OpCo

SHG PropCo

REIT

Spin Off

Surviving

Entity

Leases

Real Estate

“RemainCo”

“SpinCo”

Sun Healthcare Group

•

Equity would be issued to de-lever Sun

balance sheet prior to Spin

•

Offering would be commenced following

transaction announcement

•

$159.9mm Equity Need (Illustrative Case)

•

17.192mm

new

issued

$8.93)

(1)

o

61.692mm Pro Forma Shares

(1) Reflects 4.0% underwriting discount to current share price of $9.30 per share.

Enterprise Value

$1,012.4

Net Debt (3.4x 2009A EBITDA)

(596.1)

Equity Value

$416.3

Share Price (3/15/10)

$9.30

Enterprise

Value

(@6.5x

EBITDAR)

$536.8

New Net Debt (1.0x 2010E EBITDA)

(105.6)

Equity Value

$431.2

Share Price

$6.99

Implied Enterprise Value

$803.3

New Net Debt (5.3x 2010E EBITDA)

(348.9)

Equity

Value

(@10.5x

FFO)

$454.5

Share Price

$7.37

Step #2:

Spin & Refi

Debt

Current

Step #1:

Issue Equity

MTS Health Partners

OpCo/PropCo

Structures

Spin Transaction Overview

Sources

Uses

–

12/31/10

(1)

Fund Flows / Transaction Steps

After announcement of a transaction and well before

any closing, equity will be raised in an amount

sufficient to de-lever the combined company in

preparation for a spin

OpCo, because of implied leverage from leases,

will likely have a maximum “Adjusted Net Debt”

multiple of 5.1x.

PropCo

will have leverage capacity of

approximately 45%-55% of the Enterprise Value

of PropCo

Within these constraints, the resulting leverage

and equity issuance will need to be sufficient to

fund the new structure and transaction costs

At the time of the spin, Sun would dividend cash

sufficient to cover shareholders’

expected taxes in

conjunction with the spin

Currently estimated at approximately $12.9m, or

$0.21 per pro forma share (after the expected

equity offering)

All Sun cash above $50 million will be used to fund

the transaction, with the remaining cash apportioned

between OpCo

($40m) and PropCo

($10m),

respectively

(1)

Based upon projected 12/31/10 Base Case Balance Sheet.

(2)

17.192mm shares issued assuming a share price of $9.30 and a 4.0% underwriting spread.

(3)

Includes redemption fees of 4.563% of face amount ($200.0mm) plus accrued interest that

is not expected to be paid until April 2011 ($6.1mm).

Interest

Dollar

% of

Sources

Rate

Amount

Total

Cash on Hand

$124.8

15.8%

New OpCo

Debt

L+5.00%

145.6

18.4%

New PropCo

Debt

L+4.00%

192.9

24.4%

Existing Mortgages

6.9%

166.0

21.0%

New Equity Issuance

(2)

159.9

20.3%

Total Sources

$789.1

100.0%

Dollar

% of

Uses

Amount

Total

Repay Senior Secured Debt

$306.9

38.9%

Existing Mortgages

166.0

21.0%

Repay Senior Subordinated Notes

200.0

25.3%

Cash Dividend to SH ($0.21/PF share)

12.9

1.6%

Cash allocated to OpCo

40.0

5.1%

Cash allocated to PropCo

10.0

1.3%

Transfer Taxes (Est.)

10.0

1.3%

Trx, U/W & Financing Fees

28.2

3.6%

Senior Sub Redemption Fees

(3)

15.2

1.9%

Total Uses

$789.1

100.0%

MTS Health Partners

OpCo/PropCo

Structures

Leased and Owned Facilities Analysis

Source: As per Sun Healthcare Group

(1)Management fees are costs designated to the management company which are allocated based on revenues.

2011E

SunBridge

Owned

Leased

Total

Ancillary

Total

Revenues

$794.0

$946.7

$1,740.7

$290.1

$2,030.8

EBITDARM

$154.7

$187.9

$342.6

$54.9

$397.5

% margin

19.5%

19.8%

19.7%

18.9%

19.6%

Rent

(75.9)

(2.0)

(77.9)

EBITDAM

$154.7

$112.0

$266.7

$52.8

$319.6

% margin

19.5%

11.8%

15.3%

18.2%

15.7%

rent coverage

2.5x

4.5x

26.8x

5.1x

Divisional Overhead

$24.6

$29.4

$54.0

$18.6

$72.6

Management

Fee

(1)

24.7

29.5

54.2

9.0

63.2

Total Management Fees

$49.3

$58.8

$108.2

$27.6

$135.8

% of revenues

6.2%

9.5%

6.7%

EBITDAR

$105.4

$129.1

$234.4

$27.3

$261.7

% margin

13.3%

13.6%

13.5%

9.4%

12.9%

EBITDA

$105.4

$53.2

$158.5

$25.2

$183.8

% margin

13.3%

5.6%

9.1%

8.7%

9.1%

Number of Facilities

112

205

MTS Health Partners

OpCo/PropCo

Structures

Illustrative OpCo

Financials –

2011-Based Valuation

(1)

Illustrative

Derivation

OpCo

Key

Metrics

Calculation of Rent Capacity from Owned Facilities

Owned SunBridge

2011E Revenue

$794.0

Owned SunBridge

2011E EBITDARM

154.7

Less: Assumed Mgt Fee of 5.0% of Rev

(39.7)

Owned SunBridge

2011E EBITDAR

$115.0

Rent Coverage Multiple

1.6x

2011E New Rent

$71.9

Capitalization Overview

PF Cash Balance

$40.0

New Debt Issued (0.6x 2010E EBITDAR)

$145.6

Capitalized Rent (8.0x 2010E PF Rent Exp)

1,164.3

Adjusted Debt

$1,309.9

2011E Net Interest Expense

$11.0

New Debt / 2010E EBITDAR

0.58x

Capitalized Rent / 2010E EBITDAR

4.67x

Adj. Debt / 2010E EBITDAR

5.25x

Adj. Net Debt / 2010E EBITDAR

5.09x

New Debt / 2010E EBITDA

(2)

1.40x

Net Debt / 2010E EBITDA

(2)

1.02x

2010E Coverage Ratio

(2)

9.5x

Illustrative

OpCo

Income

Statement

2011E

2012E

2013E

2014E

Revenue

$1,954.1

$2,030.8

$2,119.5

$2,203.3

$2,296.9

% growth rate

3.9%

4.4%

4.0%

4.2%

Total EBITDAR

$249.5

$261.7

$282.6

$301.2

$324.4

% growth rate

4.9%

8.0%

6.6%

7.7%

% margin

12.9%

13.3%

13.7%

14.1%

New Rent

(3)

69.8

$71.9

$74.0

$76.3

$78.6

Existing SunBridge

Rent

(3)

73.6

75.9

77.8

79.7

81.7

Ancillary Rent

2.1

2.0

2.1

2.2

EBITDA

104.0

$111.9

$128.7

$143.1

$161.9

% growth rate

7.6%

15.0%

11.2%

13.2%

% margin

5.5%

6.1%

6.5%

7.0%

Depreciation and Amortization

35.6

$40.6

$45.8

$51.1

$56.4

Net Interest Expense

(4)

12.2

$11.0

$9.9

$7.4

$3.7

Taxes (41.0% Tax Rate)

23.0

24.7

29.9

34.7

41.7

Net Income

33.1

$35.6

$43.1

$49.9

$60.1

% growth rate

7.3%

21.1%

15.9%

20.4%

% margin

1.8%

2.0%

2.3%

2.6%

Pro-Forma Diluted Shares Outstanding

(5)

61.692

Illustrative E.P.S.

$0.58

$0.70

$0.81

$0.97

% growth rate

21.1%

15.9%

20.4%

Capital Expenditures

$55.0

FCF (After CapEx)

14.6

28.3

37.6

52.1

(3)

(1)

2010E PF Rent of $145.5mm assumes 2010E existing rent of $75.7mm and 2011E New Rent decreased by 3.0% annual growth rate ($69.8mm).

(2)

2010E EBITDA of $104.0mm assumes 2010E EBITDAR of $249.5mm less 2010E PF rent of $145.5mm.

(3)

Assumes annual rent increases of 3.0%, 2.5%, 3.0% for New Rent, Existing SunBridge Rent and Ancillary Rent respectively.

(4)

Includes interest on New Debt of $145.6mm (0.6x 2010E EBITDAR, L+500 Interest)

(5)

Reflects issuance of 17.192mm shares for net proceeds of $153.5mm assuming a share price of $9.30, OpCo Adjusted Debt of 5.25x 2010E EBITDAR and PropCo Debt of 5.50x 2010E EBITDA

MTS Health Partners

OpCo/PropCo

Structures

Illustrative OpCo

Valuation –

2011-Based Valuation

(1)

Reflects

issuance

17.192mm

for

net

proceeds

$153.5mm

assuming

price

$9.30,

OpCo

Adjusted

Debt

5.25x

2010E

EBITDAR

and

PropCo

Debt

5.50x

2010E

EBITDA

Illustrative OpCo

Valuation

Forward EBITDAR Multiple

6.00x

6.25x

6.50x

6.75x

7.00x

PF 2011E OpCo

EBITDAR

$261.7

Implied Adjusted Enterprise Value

$1,570.2

$1,635.7

$1,701.1

$1,766.5

$1,831.9

Less: Capitalized Rent (8.0x 2010E PF Rent Exp)

(1,164.3)

Implied Enterprise Value

$405.9

$471.4

$536.8

$602.2

$667.6

Less: New Debt (0.6x 2010E EBITDAR, L+500)

(145.6)

Plus: Cash (80.0% of cash remaining post transaction)

40.0

Implied Equity Value

$300.4

$365.8

$431.2

$496.6

$562.1

Pro Forma Diluted Shares Outstanding

(1)

61.692

Illustrative Per Share Value

$4.87

$5.93

$6.99

$8.05

$9.11

Key Metrics

2011E PF EBITDAR

$261.7

2011E PF EBITDA

111.9

2011E EPS

$0.58

Valuation Multiples

Adj. EV / EBITDAR

6.00x

6.25x

6.50x

6.75x

7.00x

EV / EBITDA

3.6x

4.2x

4.8x

5.4x

6.0x

P / E

8.4x

10.3x

12.1x

14.0x

15.8x

MTS Health Partners

OpCo/PropCo

Structures

Illustrative PropCo

Financials –

2011-Based Valuation –

No Acquisitions

Illustrative

Derivation

PropCo

Key

Metrics

Calculation of Rent Capacity from Owned Facilities

Owned SunBridge

2011E Revenue

$794.0

Owned SunBridge

2011E EBITDARM

154.7

Less: Assumed Mgt Fee of 5.0% of Rev

(39.7)

Owned SunBridge

2011E EBITDAR

$115.0

Rent Coverage Multiple

1.6x

2011E New Rent

$71.9

Capitalization Overview

PF Cash on Hand

$10.0

Rolled Mortgage Debt

$166.0

New Debt Issued

192.9

Total Debt Outstanding

$358.9

Mortgage Annual Interest (6.9% Interest Rate)

$11.2

New Debt Annual Interest (L+400 Interest Rate)

12.5

Other Interest

0.8

Net Interest Expense

$24.5

Mortgage Debt / 2010E NOI (EBITDA)

(1)

2.54x

New Debt / 2010E NOI (EBITDA)

(1)

2.96x

Total Debt / 2010E NOI (EBITDA)

(1)

5.50x

Net Debt / 2010E NOI (EBITDA)

(1)

5.35x

2010E Coverage Ratio

(1)

2.7x

Illustrative PropCo

Income Statement

2011E

2012E

2013E

2014E

Revenues

(New

OpCo

Rent)

$69.8

$71.9

$74.0

$76.3

$78.5

% growth rate

3.0%

SG&A (6.5% of revenue)

4.5

4.7

4.8

5.0

5.1

NOI / EBITDA

$65.2

$67.2

$69.2

$71.3

$73.4

% growth rate

3.0%

% margin

93.5%

Depreciation and Amortization

$15.1

$14.8

$14.5

$14.3

Interest

(3)

$24.5

24.5

24.9

24.6

24.2

Net Income

$25.6

$27.5

$29.5

$32.2

$35.0

% growth rate

7.7%

7.1%

9.1%

8.8%

% margin

38.3%

39.8%

42.2%

44.5%

FCF -

Pre Dividends

$42.9

$40.0

$42.2

$44.9

FCF -

Post Dividends

8.2

4.1

4.3

5.0

FFO Calculation

Net Income

$27.5

$29.5

$32.2

$35.0

Plus: D&A

15.1

14.8

14.5

14.3

Plus: Amort

of Fin Fees

0.6

FFO

$43.3

$44.9

$47.3

$49.9

Dividend Payable (assumes 80.0% of FFO)

$34.6

$35.9

$37.9

$39.9

Pro Forma Diluted Shares Outstanding

(3)

61.692

FFO Per Share

$0.70

$0.73

$0.77

$0.81

Dividend Per Share

$0.56

$0.58

$0.61

$0.65

(1)

Assumes 2010E NOI/EBITDA of $65.2mm (calculated as revenues of $69.8mm less $4.5mm (6.5% of revenues))

(2)

Interest on rolled Mortgage Debt of $166.0mm (2.5x PF2010E EBITDA, 6.9% Interest) and New Debt of $192.9mm (3.0x PF2010E EBITDA, L+400)

(3)

Reflects issuance of 17.192mm shares for proceeds of $153.5mm assuming OpCo Adjusted Debt of 5.25x 2010E EBITDAR and PropCo Debt of 5.50x 2010E EBITDA

MTS Health Partners

OpCo/PropCo

Structures

Illustrative PropCo

Financials –

2011-Based Valuation –

No Acquisitions

Illustrative

PropCo

Valuation

Forward FFO Multiple

9.00x

9.75x

10.50x

11.25x

12.00x

2011E FFO

$43.3

Implied Equity Value

$389.6

$422.0

$454.5

$486.9

$519.4

Plus: Existing Mortgages (2.5x 2010E EBITDA, 6.9% Int.)

166.0

Plus: New Debt (3.0x 2010E EBITDA, L+400 Int.)

192.9

Less:

Cash

(20.0%

cash

remaing

post

trans.)

(10.0)

Implied Enterprise Value

$738.4

$770.9

$803.3

$835.8

$868.3

Pro Forma Diluted Shares Outstanding

(1)

61.692

Illustrative Per Share Value

$6.31

$6.84

$7.37

$7.89

$8.42

Key Metrics

2011E PF NOI / EBITDA

$67.2

2011E FFO

43.3

2011E FFO / Share

$0.70

2011E Dividend/Share

0.56

2011E EPS

0.45

Valuation Multiples

EV / EBITDA

11.0x

11.5x

12.0x

12.4x

12.9x

Cap Rate

9.1%

8.7%

8.4%

8.0%

7.7%

FFO/P

9.00x

9.75x

10.50x

11.25x

12.00x

Dividend Yield

8.9%

8.2%

7.6%

7.1%

6.7%

Loan / Value

48.6%

46.6%

44.7%

42.9%

41.3%

(1)

Reflects issuance of 18.293mm shares for net proceeds of $153.5mm assuming a share price of $8.74, OpCo Adjusted Debt of 5.25x 2010E EBITDAR and PropCo Debt of 5.50x 2010E

EBITDA

MTS Health Partners

OpCo/PropCo

Structures

Transaction Overview Summary –

2011-Based Valuation

(1)

Assumes

1.6x

Rent

Coverage

owned

EBITDARM

less

management

fees

(5.0%

revenues).

(2)

New Debt issued at 0.6x 2010E EBITDAR, L+500 interest rate.

(3)

Cash

equal

80.0%

cash

balance

$50mm.

(4)

Interest

rolled

Mortgage

Debt

$166mm

(2.5x

PF2010E

EBITDA,

6.9%

Interest)

and

New

Debt

$193mm (3.0x PF2010E EBITDA, L+400 Interest)

(5)

Mortgage Debt of $166mm (2.5x PF2010E EBITDA, 6.9% Interest) and

New Debt of $193mm (3.0x PF2010E

EBITDA, L+400 Interest)

(6)

Cash equal to 20.0% of PF cash balance of $50mm.

Illustrative

OpCo

Summary

Income

Statement

Illustrative

PropCo

Summary

Income

Statement

2011E

2012E

2013E

2011E

2012E

2013E

Revenues

$2,030.8

$2,119.5

$2,203.3

Revenues (New OpCo

Rent)

$71.9

$74.0

$76.3

Total EBITDAR

261.7

282.6

301.2

SG&A (6.5% of revenues)

4.7

4.8

5.0

New Rent

(1)

$71.9

$74.0

$76.3

NOI / EBITDA

$67.2

$69.2

$71.3

Existing Rent

77.9

79.9

81.9

Interest Expense

(4)

24.5

24.9

24.6

Consolidated Lease Coverage

1.7x

1.8x

1.9x

FFO

$42.7

$44.3

$46.7

EBITDA

$111.9

$128.7

$143.1

% margin

59.4%

59.9%

61.3%

% margin

5.5%

6.1%

6.5%

0.0

(0.6)

Illustrative

OpCo

Valuation

Illustrative

PropCo

Valuation

FW EBITDAR Multiple

6.0x

6.5x

7.0x

FW FFO Multiple

9.0x

10.5x

12.0x

PF 2011E OpCo

EBITDAR

$261.7

2011E FFO

$43.3

Implied Adjusted Enterprise Value

$1,570.2

$1,701.1

$1,831.9

Implied Equity Value

$389.6

$454.5

$519.4

Less: Capitalized Rent (8.0x)

(1,164.3)

Plus: Debt

(5)

358.9

Implied Enterprise Value

$405.9

$536.8

$667.6

Less: Cash

(6)

(10.0)

Less: New Debt

(2)

(145.6)

Implied Enterprise Value

$738.4

$803.3

$868.3

Plus: Cash

(3)

40.0

Implied Cap Rate (2011E EBITDA/EV)

9.1%

8.4%

7.7%

Implied Equity Value

$300.4

$431.2

$562.1

0.0

Illustrative Per Share Value

$4.87

$6.99

$9.11

Illustrative Per Share Value

$6.31

$7.37

$8.42

Implied Combined Per Share Value

% Premium to Current Share Value ($9.30)

PropCo

FW FFO Multiple

PropCo

FW FFO Multiple

$14.4

9.00x

9.75x

10.50x

11.25x

12.00x

9.00x

9.75x

10.50x

11.25x

12.00x

$11.18

$11.71

$12.24

$12.76

$13.29

6.00x

20.2%

25.9%

31.6%

37.2%

42.9%

12.24

12.77

13.30

13.82

14.35

6.25x

31.7%

37.3%

43.0%

48.6%

54.3%

13.30

13.83

14.36

14.88

15.41

6.50x

43.1%

48.7%

54.4%

60.0%

65.7%

14.36

14.89

15.42

15.94

16.47

6.75x

54.5%

60.1%

65.8%

71.4%

77.1%

6.00x

6.25x

6.50x

6.75x

7.00x

15.43

15.95

16.48

17.00

17.53

7.00x

65.9%

71.5%

77.2%

82.8%

88.5%

MTS Health Partners

OpCo/PropCo

Structures

Transaction Overview Summary –

2011-Based Valuation Sensitivity

% Premium to Current Share Value ($9.30)

PropCo

FW FFO Multiple

PropCo

FW FFO Multiple

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

20.2%

25.9%

31.6%

37.2%

42.9%

6.25x

31.7%

37.3%

43.0%

48.6%

54.3%

6.50x

43.1%

48.7%

54.4%

60.0%

65.7%

6.75x

54.5%

60.1%

65.8%

71.4%

77.1%

7.00x

65.9%

71.5%

77.2%

82.8%

88.5%

Premium

Current

Value

($9.30)

PropCo

Debt/EBITDA Multiple

PropCo

Debt/EBITDA Multiple

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

37.6%

40.7%

44.1%

47.9%

52.0%

5.00x

41.2%

44.8%

48.7%

53.1%

58.0%

5.25x

45.5%

49.7%

54.4%

59.6%

65.5%

5.50x

50.8%

55.8%

61.4%

67.8%

75.2%

5.75x

57.3%

63.4%

70.5%

78.5%

80.0%

Equity

Financing

Needed

($)

PropCo

Debt/EBITDA Multiple

PropCo

Debt/EBITDA Multiple

$159.9

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

$353.8

$320.5

$287.2

$253.9

$220.6

5.00x

290.2

256.9

223.6

190.3

157.0

5.25x

226.5

193.2

159.9

126.6

93.3

5.50x

162.8

129.5

96.2

62.9

29.6

5.75x

99.1

65.8

32.5

0.0

PropCo

Loan

Value

Debt/EBITDA

multiple

of:

44.7%

4.50x

5.00x

5.50x

6.00x

6.50x

Ent.Value-Based

(3)

37.4%

41.1%

44.7%

48.2%

51.6%

Prop.

Value-Based

(3)

44.9%

49.9%

54.9%

59.9%

64.9%

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

(1.2%)

3.4%

8.1%

12.7%

17.3%

6.25x

8.1%

12.8%

17.4%

22.1%

26.7%

6.50x

17.5%

22.1%

26.8%

31.4%

36.1%

6.75x

26.9%

31.5%

36.1%

40.8%

45.4%

7.00x

36.2%

40.9%

45.5%

50.2%

54.8%

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

18.4%

20.3%

22.3%

24.6%

27.0%

5.00x

20.0%

22.1%

24.4%

26.9%

29.6%

5.25x

21.8%

24.2%

26.8%

29.7%

32.8%

5.50x

23.9%

26.7%

29.7%

33.0%

36.7%

5.75x

26.5%

29.7%

33.2%

37.1%

38.3%

$159.9

4.50x

5.00x

5.50x

6.00x

6.50x

4.75x

$353.8

$320.5

$287.2

$253.9

$220.6

5.00x

290.2

256.9

223.6

190.3

157.0

5.25x

226.5

193.2

159.9

126.6

93.3

5.50x

162.8

129.5

96.2

62.9

29.6

5.75x

99.1

65.8

32.5

0.0

44.7%

4.50x

5.00x

5.50x

6.00x

6.50x

Ent.Value-Based

(3)

37.4%

41.1%

44.7%

48.2%

51.6%

Prop.

Value-Based

(3)

44.9%

49.9%

54.9%

59.9%

64.9%

(2)

(1)

(1)(2)

Equity

Financing

Needed

($)

(1)(2)

PropCo

Loan

Value

Debt/EBITDA

multiple

of:

(1)

Implied share value calculated by using 12/31/10E balance sheet data and share count and applying Sun’s current forward EBITDAR multiple to 2011E EBITDAR to derive 12/31/10E Adj. Ent. Val.

(2)

Assumes PropCo Valuation based on FFO multiple of 10.5x and OpCo valuation based on EBITDAR Multiple of 6.5x.

(3)

Enterprise Value based upon PropCo valuation at 10.5x FW FFO. Property Value of $653.4mm based upon 2011E SunBridge Owned EBITDAR of $115.0mm, 1.6x coverage and 11.0% cap rate.

Premium

Implied

Value

12/31/10

($12.11)

Premium

Implied

Value

12/31/10

($12.11)

MTS Health Partners

OpCo/PropCo

Structures

PropCo

Acquisition Case –

Overview

(1)

(1)(2)

(2)

Base PropCo

Acquisition Case assumes property acquisitions valued at $100mm, $150mm, $200mm and $200mm on January 1 of 2012,

2013, 2014 and 2015, respectively

Portfolios purchased assuming 10.5% yields

Acquisition funding assumes

50% of deal funding from new term loans issued at L+400

50% of deal funding from new equity issuances assuming 11.5x PF Forward FFO

92% of acquisition purchase price allocated to PP&E with remaining purchase price allocated to other assets

No maintenance CapEx

requirements assumed post-purchase given triple-net-lease structures

2010PF

2011E

2012E

2013E

2014E

2015E

Existing Portfolio

$69.8

$71.9

$74.0

$87.1

$105.9

$130.7

New Acquisitions

10.5

15.8

21.0

Total Revenues

$69.8

$71.9

$84.5

$102.8

$126.9

$151.7

% growth

3.0%

17.6%

21.6%

23.4%

19.5%

NOI / EBITDA

$65.2

$67.2

$79.0

$96.1

$118.7

$141.8

Interest Expense

24.5

28.7

34.2

41.8

48.5

FFO

41.3

43.3

51.1

63.0

78.2

94.9

% growth

4.7%

18.2%

23.1%

24.2%

21.4%

FFO / Share

$0.67

$0.70

$0.75

$0.82

$0.89

$0.98

% growth

4.7%

7.1%

9.1%

9.0%

9.1%

New Revolving Credit Facility

$0.0

Existing Mortgage Debt

166.0

161.1

156.1

150.8

145.7

141.0

Initial Term Loan

192.9

184.6

180.7

175.3

167.2

155.5

Cumulative Leverage from Acquisitions

50.0

125.0

225.0

325.0

Total Debt

$358.9

$345.8

$386.8

$451.0

$537.9

$621.4

Cash Balance

10.0

Net Debt

$348.9

$335.8

$376.8

$441.0

$527.9

$611.4

Total Debt/EBITDA

5.5x

5.1x

4.9x

4.7x

4.5x

4.4x

Net Debt/EBITDA

5.3x

5.0x

4.8x

4.6x

4.4x

4.3x

MTS Health Partners

OpCo/PropCo

Structures

PropCo

Acquisition Case –

Base Case Sensitivities

(1)

(1)(2)

(2)

Value Per Share -

December 2010

Annual

FFO Multiple

Acq.

9.5x

10.0x

10.5x

11.0x

11.5x

No Impact in 2011

$6.67

$7.02

$7.37

$7.72

$8.07

Value Per Share -

December 2012

Value Per Share -

December 2012

Annual

FFO Multiple

Annual

Yield on Acquisitions

Acq.

9.5x

10.5x

11.5x

12.5x

13.5x

Acq.

9.50%

10.00%

10.50%

11.00%

11.50%

($ -)

$7.29

$8.06

$8.82

$9.59

$10.36

($ -)

$8.82

100.0

7.55

8.43

9.31

10.19

11.08

100.0

8.97

9.14

9.31

9.49

9.66

200.0

7.81

8.79

9.77

10.75

11.73

200.0

9.11

9.44

9.77

10.11

10.44

300.0

8.07

9.14

10.21

11.27

12.34

300.0

9.24

9.72

10.21

10.69

11.18

Value Per Share -

December 2013

Value Per Share -

December 2013

Annual

FFO Multiple

Annual

Yield on Acquisitions

Acq.

9.5x

10.5x

11.5x

12.5x

13.5x

Acq.

9.50%

10.00%

10.50%

11.00%

11.50%

($ -)

$7.68

$8.49

$9.29

$10.10

$10.91

($ -)

$9.29

100.0

8.12

9.05

9.98

10.92

11.85

100.0

9.48

9.73

9.98

10.24

10.49

200.0

8.53

9.56

10.59

11.63

12.66

200.0

9.64

10.12

10.59

11.07

11.55

300.0

8.91

10.03

11.15

12.27

13.39

300.0

9.80

10.47

11.15

11.84

12.53

Value Per Share -

December 2014

Value Per Share -

December 2014

Annual

FFO Multiple

Annual

Yield on Acquisitions

Acq.

9.5x

10.5x

11.5x

12.5x

13.5x

Acq.

9.50%

10.00%

10.50%

11.00%

11.50%

($ -)

$8.13

$8.99

$9.85

$10.70

$11.56

($ -)

$9.85

100.0

8.77

9.76

10.76

11.76

12.75

100.0

10.09

10.43

10.76

11.10

11.43

200.0

9.32

10.42

11.53

12.63

13.73

200.0

10.30

10.91

11.53

12.15

12.77

300.0

9.82

11.02

12.21

13.40

14.59

300.0

10.49

11.34

12.21

13.09

13.98

Stock Price CAGR Dec. '10 -

Dec '14

Stock Price CAGR Dec. '10 -

Dec '14

Annual

FFO Multiple

Annual

FFO Multiple

Acq.

9.5x

10.5x

11.5x

12.5x

13.5x

Acq.

9.50%

10.00%

10.50%

11.00%

11.50%

($ -)

5.1%

6.4%

7.5%

8.5%

9.4%

($ -)

10.2%

8.8%

7.5%

6.3%

5.1%

100.0

7.1%

8.6%

9.9%

11.1%

12.1%

100.0

10.9%

10.4%

9.9%

9.5%

9.1%

200.0

8.7%

10.4%

11.8%

13.1%

14.2%

200.0

11.5%

11.7%

11.8%

12.0%

12.2%

300.0

10.2%

11.9%

13.5%

14.8%

16.0%

300.0

12.0%

12.8%

13.5%

14.1%

14.7%

MTS Health Partners

OpCo/PropCo

Follow-Up Items

Comparison of Sun Today vs. OpCo

OPERATIONS

One of nation’s largest diversified LTC

operators

No Change

FINANCIAL

PERFORMANCE

Revenue growth of 3.9% and 4.4% in 2011

and 2012, with EBITDAR margins of

12.9% and 13.3%, respectively

Free cash flow (after $55m of capex) of

$43.7m in 2011 and $65.0m in 2012

Revenue and EBITDAR, associated margins

and growth are unchanged

Free cash flow (after $55m of capex) of

$14.6m in 2011 and $28.3m in 2012

FINANCIAL RISK

Downside case results in loss of

approximately $9-10m of after-tax FCF

Drain on cash relative to based case can

offset

$10m

CapEx

reduction

Covenant risk in the case of downside case

(may be partially mitigated by “Amend”)

Adjust. net debt of 4.6x; net debt of 3.2x

Downside case results in loss of

approximately $9-10m of after-tax FCF

Drain on cash relative to based case

can

offset

$10m

CapEx

reduction

Availability of asset-based loan reduces

covenant risks of current Sun financing

Adjust. net debt of 5.1x; net debt of 0.6x

ACQUISITION

OPPORTUNITIES

Current leverage limits any transaction of

size absent significant equity consideration

Current

lease-adj.

leverage

limits

trx

size

absent significant equity consideration

SALE

OPPORTUNITIES

Few –

given size, limited strategic buyer

universe and existing leverage levels

RE-driven leverage not expected to return

Few –

given size, limited strategic buyer

universe and existing leverage levels

Sun Today

OpCo

Structure

However, reduced “re-financing” need

may make a transaction easier to finance

MTS Health Partners

OpCo/PropCo

Follow-Up Items

Project Timeline

(1)

(1)(2)

(2)

(1)

Includes approximately $1.5m of tax/audit costs, $4.5m of legal costs and $22m of underwriting, financing and advisory fees (2 debt offerings and 1 equity offering). Does not include $5-10m of

estimated transfer taxes and $9.1m associated with the prepayment of $200m of subordinated notes. See page 12.

(1)

March

& Prior

Action Item

Periods

April

May

Jun

July

Aug

Sept

Oct

Nov

Dec

Jan

Initial Transaction Feasibility Analysis

Seek Omega Consent

Independent Committees to approve terms of master leases

Press Release / 8-K to Announce Spin-Off

State Licensing Application Process

HUD Application Process

Seek Landlords/Mortgagor Consents

File Form 10 and Preliminary Proxy with SEC

Board

meeting

Update

Finalize Prospectus Supp. for Equity Offering (Start Offering)

Close equity offering

Board Meeting to Declare Distribution, etc.

File/Mail Definitive Proxy Statement

Commence Debt Marketing

Complete LLC Conversions/Intercompany Property Transfers

Stockholder Meeting

Close Distribution / Execute New Debt Agreements

PropCo

elects REIT status

Transaction Fees and Expenses

$230

$830

$1,095

$1,467

$878

$890

$6,989

$489

$220

$15,112

Cumulative Total

230

1,060

2,155

3,623

4,500

5,390

12,379

12,868

13,088

28,200

$28,200

Board Approval - Spin-Off & Related Matters

Prepare Form 10, Proxy Stmt. and Distribution Agt.

Prepare Pro Forma OpCo Audit and Unaudited PropCo Stmts.

Board meeting - Update

Obtain financing commitments for PropCo & OpCo

Nominating Committee Approval of PropCo / OpCo Boards/Officers

Submit Preliminary Nasdaq Listing Application - OpCo

MTS Health Partners

OpCo/PropCo

Follow-Up Items

Omega Strategy

(1)

(1)(2)

(2)

Background

The

existing

Omega

lease

–

comprising

facilities

–

contracted

with

SunBridge

Healthcare

Corporation

and

guaranteed

Sun

Healthcare

Group

(which

will

legally

become

PropCo

post-spin)

Any internal restructuring does not require consent because transfers among affiliates are permitted

While

not

entirely

clear,

the

spin-off

OpCo

will

arguably

not

require

consent

because

there

will

not

be a

change

voting

control

(at

the

time

immediately

following

the

spin-off,

the

stockholders

OpCo

and

PropCo

will be identical)

However, given this ambiguity, we would expect that Omega would require (or litigate) that the existing

guarantee

Sun

(which

will

become

PropCo)

remain

post-spin

–

essentially

maintaining

the

same

collateral package that Omega had prior to the spin

Given the importance of the Omega portfolio, we believe it is prudent to discuss the spin-off with Omega early

in the transaction process, and to come to agreement with them prior to any public announcement given the size

of the Omega portfolio

Strategy

In approaching Omega, we will take the position that we do not require any consents under the Lease

However, given some ambiguity under the lease, we may have to ultimately offer (after some negotiation) to

provide

Omega

with

guarantees

from

both

OpCo

and

PropCo

order

prevent

Omega

from

arguing

that

their

position is diminished by the spin-off

will

also

explore

methods

eliminating

the

PropCo

guarantee

over

time

and/or

financial

benchmarks

are achieved by OpCo

are

the

process

determining

whether

PropCo

guarantee

triggers

any

tax/acctg.(e.g.

VIE)

issues

for

OpCo

MTS Health Partners

OpCo/PropCo

Follow-Up Items

GLPL Liability Post-Spin

(1)

(1)(2)

(2)

Sun Healthcare Group, Inc., which is expected to be the “PropCo”

entity upon the spin, is currently a

named defendant in 77 negligence lawsuits

Upon the spin-off of OpCo, PropCo

and OpCo

would enter into an agreement for OpCo

to assume,

defend and indemnify PropCo

for any such claims

This agreement would be analogous to indemnification that Sun currently provides to leasehold

landlords, many of which are also sued, specifically as landlords, alongside Sun for negligence claims

Although any pre-claims would likely remain pending against PropCo, PropCo

would not be required

to reserve for such claims because PropCo

is indemnified by OpCo, as well as because OpCo

and its

subsidiaries are the primary targets in any negligence action

MTS Health Partners

Appendix

OpCo

Detailed Income Statement

(1)

(1)(2)

(2)

OpCo

Income Statement

2011E

2012E

2013E

2014E

Revenue

$2,030.8

$2,119.5

$2,203.3

$2,296.9

% growth

3.9%

4.4%

4.0%

4.2%

Operating expenses

$1,769.1

$1,836.9

$1,902.0

$1,972.5

% of revenue

87.1%

86.7%

86.3%

85.9%

% growth

3.8%

3.5%

3.7%

EBITDAR

$261.7

$282.6

$301.2

$324.4

% margin

12.9%

13.3%

13.7%

14.1%

% growth

4.9%

8.0%

6.6%

7.7%

New SunBridge

rent

$71.9

$74.0

$76.3

$78.6

Existing SunBridge

rent

75.9

77.8

79.7

81.7

Existing Ancillary rent

2.0

2.1

2.2

EBITDA

$111.9

$128.7

$143.1

$161.9

% margin

5.5%

6.1%

6.5%

7.0%

% growth

7.6%

15.0%

11.2%

13.2%

Depreciation & Amortization

40.6

45.8

51.1

56.4

Interest expense, net

11.0

9.9

7.4

3.7

Pretax

$60.3

$73.0

$84.6

$101.8

Taxes (41%)

24.7

29.9

34.7

41.7

Net Income

$35.6

$43.1

$49.9

$60.1

% margin

1.8%

2.0%

2.3%

2.6%

% growth

7.3%

21.1%

15.9%

20.4%

Pro forma diluted shares outstanding

61.692

Illustrative E.P.S.

0.58

0.70

0.81

0.97

% growth

7.3%

21.1%

15.9%

20.4%

MTS Health Partners

Appendix

OpCo

Detailed Balance Sheet

(1)

(1)(2)

(2)

OpCo

Balance Sheet

2011E

2012E

2013E

2014E

Cash

$40.0

Restricted Cash, current

23.0

Net AR

252.5

269.8

289.8

315.1

Inventory

8.0

Other Receivables

4.9

Prepaids

& Other

15.8

18.8

21.6

24.1

Deferred tax assets

61.0

59.3

58.3

57.5

Current Assets

$405.2

$423.8

$445.6

$472.6

Net PP&E

$263.2

$274.2

$279.9

$280.1

Net Intangibles

32.5

29.7

27.0

24.4

Goodwill

338.3

Restricted Cash, non-current

3.3

Deferred tax assets

66.9

61.6

58.6

56.1

Other

5.0

Total Assets

$1,114.4

$1,136.0

$1,157.6

$1,179.8

Accounts Payable

$69.7

$72.1

$74.7

$77.4

Accrued Comp

62.5

63.5

64.5

65.5

Other Accrued Liabilities & Interest Payable

40.0

35.0

29.5

23.5

Self Insurance Accrual, current portion

47.5

49.0

51.0

53.5

Capital Leases, current

0.3

Current Liabilities

$219.9

$219.8

$220.0

$220.2

Long-Term Debt, net of current portion

131.0

102.6

65.0

12.9

Self Insurance Accrual, net of current portion

121.9

Unfavorable Lease Obligations

5.9

3.5

1.1

0.0

Capital Leases, net of current portion

0.5

Other

56.4

56.9

58.9

63.6

Total Liabilities

$535.6

$505.3

$467.4

$419.2

Shareholders' Equity

578.8

630.6

690.2

760.6

Total Liabilities & Shareholders' Equity

$1,114.4

$1,136.0

$1,157.6

$1,179.8

MTS Health Partners

Appendix

OpCo

Detailed Cash Flows

(1)

(1)(2)

(2)

OpCo

Cash Flow Statements

2011E

2012E

2013E

2014E

Net Income

$35.6

$43.1

$49.9

$60.1

D&A

40.6

45.8

51.1

56.4

Amortization of Lease Intangibles

(1.4)

(0.1)

Provision for losses on accounts receivable

21.7

22.7

22.0

20.7

Stock based compensation expense

8.0

8.8

9.6

10.4

Deferred taxes

14.4

7.0

4.1

3.2

$118.9

$125.9

$135.3

$150.7

(Increase)/Decrease in Net AR

($36.8)

($40.0)

($42.0)

($46.0)

(Increase)/Decrease in PPDs

& Other

(3.2)

(3.0)

(2.8)

(2.5)

Increase/(Decrease) in Accounts Payable

2.5

2.4

2.6

2.7

Increase/(Decrease) in Accrued Comp

0.6

1.0

Increase/(Decrease) in Self Insurance

1.4

1.5

2.0

2.5

Increase/(Decrease) in Other Accrueds

(4.8)

(5.0)

(5.5)

(6.0)

Increase/(Decrease) in Other LT Liabilities

(9.0)

0.5

2.0

4.7

(Increase)/Decrease in Net Working Capital

($49.3)

($42.6)

($42.7)

($43.6)

Cash Flow from Operating Activities

$69.6

$83.3

$92.6

$107.1

Capital Expenditures, net

(55.0)

Cash Flow from Investing Activities

($55.0)

Voluntary (Repayments) on Term Loan

(14.6)

(28.3)

(37.6)

(52.1)

Cash Flow from Financing Activities

($14.6)

($28.3)

($37.6)

($52.1)

Free Cash Flow

$14.6

$28.3

$37.6

$52.1

Beginning Cash Balance

$40.0

Cash Flow

0.0

Ending Cash Balance

$40.0

MTS Health Partners

Appendix

PropCo

Detailed Income Statement –

Base Acquisitions Case

(1)(2)

(2)

Income Statement

2010PF

2011E

2010PF

2011E

2012E

2013E

2014E

2015E

Revenues

Existing Portfolio

$17.4

$69.8

$18.0

$71.9

$74.0

$87.1

$105.9

$130.7

New Acquisitions

10.5

15.8

21.0

Total Revenues

$17.4

$69.8

$18.0

$71.9

$84.5

$102.8

$126.9

$151.7

% Growth

YOY

Existing Portfolio Rent Escalator

3.0%

New Acquisitions

50.0%

33.3%

0.0%

Operating Expenses

General and Administrative

$1.1

$4.5

$1.2

$4.7

$5.5

$6.7

$8.2

$9.9

Total Operating Expenses

$1.1

$4.5

$1.2

$4.7

$5.5

$6.7

$8.2

$9.9

Growth

YOY

General and Administrative

3.0%

17.6%

21.6%

23.4%

19.5%

% of

Revenues

General and Administrative

6.5%

Total Operating Expenses

6.5%

NOI / EBITDA

$16.3

$65.2

$16.8

$67.2

$79.0

$96.1

$118.7

$141.8

Depreciation

$3.8

15.0

$3.8

$15.0

$17.8

$22.1

$27.9

$34.1

Amortization

0.0

0.1

0.0

0.1

EBIT

$12.5

$50.1

$13.0

$52.1

$61.1

$73.9

$90.6

$107.7

Other Expenses

Interest

$6.0

$6.1

$6.2

$24.5

$6.0

$6.1

$6.2

$24.5

$28.7

$34.2

$41.8

$48.5

Other

Expenses

Acquisition

Costs

3.2

4.8

6.4

Total Expenses

$6.0

$6.1

$6.2

$24.5

$6.0

$6.1

$6.2

$24.5

$31.9

$39.0

$48.1

$54.9

Net Income

$6.5

$6.4

$6.3

$25.6

$7.0

$6.9

$6.8

$27.5

$29.3

$35.0

$42.4

$52.7

Earnings

Per

Diluted

$0.11

$0.10

$0.41

$0.11

$0.45

$0.43

$0.46

$0.49

$0.54

% growth

7.5%

7.6%

7.7%

7.8%

7.7%

(3.6%)

5.8%

6.6%

11.7%

PF WA Shares Outstanding

61.692

68.048

76.791

87.486

97.286

MTS Health Partners

Appendix

PropCo

Detailed Balance Sheet –

Base Acquisitions Case

(1)(2)

Balance Sheet

2011E

2010PF

2011E

2012E

2013E

2014E

2015E

Assets

Real Estate Properties

Land and Buildings (includes CapEx)

$448.7

$540.7

$678.7

$862.7

Plus: Acquisitions

92.0

138.0

184.0

Less: Accumulated Depreciation

(51.2)

(55.0)

(58.7)

(62.5)

(66.2)

(84.0)

(106.1)

(134.0)

(168.1)

Real Estate Properties -

Net

$397.5

$393.8

$390.0

$386.2

$382.5

$456.7

$572.6

$728.7

$878.6

Cash and Equivalents

$10.0

Receivables

6.0

7.0

8.6

10.6

12.6

Goodwill

399.5

Intangible Assets

2.0

1.9

1.8

1.7

1.6

1.4

1.3

Deferred Financing Fees

4.4

4.2

4.0

3.9

3.7

4.0

4.5

5.2

5.7

Other Acquired Assets

8.0

20.0

36.0

52.0

Other Assets

0.7

0.8

1.0

1.3

1.5

Total Assets

$813.3

$816.1

$812.2

$808.2

$804.3

$887.8

$1,017.8

$1,192.7

$1,361.3

Liabilities

Stockholders

Equity

New Revolving Credit Facility

$0.0

Existing Mortgage Debt

166.0

164.8

163.6

162.4

161.1

156.1

150.8

145.7

141.0

Initial Term Loan

192.9

187.4

186.5

185.5

184.6

180.7

175.3

167.2

155.5

Year 2 Acquisitions Leverage

50.0

Year 3 Acquisitions Leverage

75.0

Year 4 Acquisitions Leverage

100.0

Year 5 Acquisitions Leverage

100.0

New Senior Sub Notes

Accounts Payable

9.0

10.6

12.9

15.9

19.0

Accrued Expenses

2.2

2.5

3.1

3.8

4.6

Total Liabilities

$358.9

$363.4

$361.2

$359.1

$356.9

$399.9

$467.0

$557.6

$644.9

Stockholders Equity

$454.5

$452.7

$451.0

$449.2

$447.4

$487.9

$550.8

$635.1

$716.4

Total Liabilities and Stockholders Equity

$813.3

$816.1

$812.2

$808.2

$804.3

$887.8

$1,017.8

$1,192.7

$1,361.3

0.000

Balance

Sheet

Assumptions

Asset Assumptions

Receivables (days receivable)

30.0

Other Assets (% of

revenues)

0.0%

1.0%

Liabilities Assumptions

Accounts Payable (days payable)

45.0

Accrued Expenses (% of revenues)

0.0%

3.0%

MTS Health Partners

Appendix

PropCo

Detailed Cash Flows –

Base Acquisitions Case

(1)

(1)(2)

(2)

Cash Flow Statement

2011E

2012E

2013E

2014E

2015E

Cash Flow from Operations

Net Income

$7.0

$6.9

$6.8

$27.5

$29.3

$35.0

$42.4

$52.7

Plus: Depreciation

$3.8

$15.0

$17.8

$22.1

$27.9

$34.1

Plus: Amortization of Intangibles

0.0

0.1

Plus: Amortization of Transaction Fees

0.2

0.6

0.8

1.0

1.3

1.6

Fund Flows from Operations

$10.9

$10.8

$10.7

$43.3

$47.9

$58.2

$71.8

$88.5

(Increase) Decrease in Accounts Receivable

($6.0)

$0.0

($6.0)

($1.1)

($1.5)

($2.0)

($2.1)

(Increase) Decrease in Other Current Assets

(0.7)

(0.1)

(0.2)

(Increase) Decrease in Current Assets

($6.7)

$0.0

($6.7)

($1.2)

($1.7)

($2.2)

($2.3)

Increase (Decrease) in Accounts Payable

$9.0

$0.0

$9.0

$1.6

$2.3

$3.0

$3.1

Increase (Decrease) in Accrued Expenses

2.2

0.4

0.5

0.7

Increase (Decrease) in Current Liabilities

$11.1

$0.0

$11.1

$2.0

$2.8

$3.7

$3.8

(Increase) Decrease in Working Capital

$4.4

$0.0

$4.4

$0.8

$1.1

$1.5

Total Cash Flow From Operations

$15.4

$10.9

$10.8

$10.7

$47.7

$48.7

$59.3

$73.3

$90.0

Cash Flow from Investing Activities

Capital

Expenditures

Maintenance

Acquisitions

(100.0)

(150.0)

(200.0)

Total Cash Flow From Investing Activities

$0.0

($100.0)

($150.0)

($200.0)

Cash Flow from Financing Activities

Mandatory Debt Repayments

($1.2)

($4.9)

($5.1)

($5.3)

($5.1)

($4.7)

Non Expensed Financing Costs

(1.0)

(1.5)

(2.0)

Dividends to Common Shareholders

(8.7)

(8.6)

(34.6)

(40.9)

(50.4)

(62.5)

(75.9)

Proceeds from Issuance of Common Stock

52.2

78.3

104.4

Proceeds from Issuance of Long-Term Debt

50.0

75.0

100.0

Proceeds / (Repayments) from Revolver

(Repayments) from Long-Term Debt

(5.4)

(1.0)

(0.9)

(8.2)

(3.9)

(5.4)

(8.0)

(11.8)

Total Cash Flow From Financing Activities

($15.4)

($10.9)

($10.8)

($10.7)

($47.7)

$51.3

$90.7

$126.7

$110.0

Beginning Cash Balance

$10.0

Total Change in Cash

Ending Cash Balance

$10.0

MTS Health Partners

Executive Summary

To Come

On May 24, 2010, Sun announced the proposed transaction to separate its owned facilities from its operations to create

a New Sun operating company (“OpCo”) and real estate investment trust (“PropCo”)

Analyst and Wall Street reaction has been overwhelmingly positive

The

stock

has

traded

high

13%

over

the

closing

price

prior

the

announcement,

outperforming

the

major

indices and the skilled nursing group

Several analysts have upgraded their price targets and ratings with even those analysts bearish on either the

company or sector acknowledging the value the transaction creates

Analysts

estimates

range

from

$8.00

$14.00

with

multiple

Adjusted

Enterprise

EBITDAR

(5.0x-6.7x) being the methodology of choice for valuing OpCo

For PropCo, Analysts are looking at capitalization rates (10%-13%) and multiples of Funds from Operations

(9.0x-11.0x)

Valuations

for

selected

skilled

nursing

and

healthcare

REITs

are

trading

relatively

consistent

where

they

were

trading at the time of the March board meeting

Skilled nursing companies are trading at approximately 6.3x 2010E EBITDAR vs. 6.5x in March

Healthcare REITS are trading at approximately 13.8x 2010E FFO vs. 13.9x previously

The remainder of this presentation provides an update on the transaction including timing, financial analysis and

sensitivities

MTS Health Partners

Current Situation

Public Market Overview

Sun Market Valuation

As of 3/15/2010

(1)

Current

(1)

Stock Price

As of (3/15/10)

$9.30

As of (06/04/10)

$8.79

Fully Diluted Shares Outstanding

44.765

44.592

Equity Value

$416.3

$392.0

2009A Leverage Multiples

3/31/10 LTM Leverage Multiples

Add: Debt

EBITDA

EBITDAR

EBITDA

EBITDAR

Revolver & Term Loan

1.86x

1.32x

$329.1

1.76x

1.24x

$309.4

Mortgage Notes Payable

0.96x

0.68x

170.6

0.96x

0.68x

169.5

Senior Sub Notes

1.13x

0.80x

200.0

1.14x

0.80x

200.0

Leases

2.34x

0.8

2.36x

0.7

Total Debt

3.96x

5.14x

$700.5

3.86x

5.08x

$679.6

Less: Cash

(0.59x)

(0.42x)

(104.5)

(0.58x)

(0.41x)

(102.5)

Net Debt

3.37x

4.72x

$596.0

3.28x

4.67x

$577.2

Enterprise Value

$1,012.3

$969.1

Add: Capitalized LTM Rent (8.0x)

(2)

585.2

587.1

Adjusted Enterprise Value

$1,597.5

$1,556.2

Sun Metrics & Trading Multiples

As of 3/15/2010

(1)

Current

(1)

Adj. Ent. Value /

Ent. Value /

Price /

Adj. Ent. Value /

Ent. Value /

Price /

Year

EBITDAR

EBITDA

EPS

EBITDAR

EBITDA

EPS

LTM

6.4x

5.7x

6.2x

5.5x

2010E

6.5x

5.9x

9.8x

6.3x

5.7x

9.2x

2011E

6.3x

5.7x

9.2x

6.1x

5.5x

8.8x

Year

EBITDAR

EBITDA

EPS

EBITDAR

EBITDA

EPS

LTM

$250.1

$176.9

$1.10

$249.4

$176.1

$1.07

2010E

247.0

170.9

0.95

245.6

170.4

0.95

2011E

255.3

176.9

1.01

254.0

176.4

1.00

Sources: Company press releases, public documents, and Wall Street research consensus estimates

LTM as of 3/31/10 and 12/31/09 for respective scenarios

Adjusted enterprise value calculated by adding 8.0x 2009E and LTM 3/31/10 rent expense, respectively, back to enterprise value.

MTS Health Partners

Current Situation

Selected Public Company Multiples

Change in Trading Multiples Since March 2010

Note: Adjusted enterprise value calculated by adding 8.0x LTM rent expense back to enterprise value.

As of 03/15/10. LTM as 12/31/09

Unaffected market data based on closing

price prior

to announcement.

As of 06/04/10. LTM as of 3/31/10

As of 01/29/10.

As of March

Board Presentation

(1)

Current

(3)

Unaffected

Skilled Nursing Facilities

SUNH

Comps

SUNH

(2)

SUNH

Comps

EV/EBITDAR Multiples

Adjusted EV / LTM EBITDAR

6.4x

6.6x

6.1x

6.2x

6.4x

Adjusted EV / 2010E EBITDAR

6.5x

6.2x

6.3x

P/E Multiples

Price / 2010E Earnings

9.8x

10.5x

8.6x

9.2x

9.9x

Price / 2011E Earnings

9.2x

10.3x

8.1x

8.8x

9.6x

Leverage Multiples

Adjusted Net Debt / LTM EBITDAR

4.7x

4.1x

4.7x

4.1x

Debt / LTM EBITDA

4.0x

3.0x

3.3x

2.6x

As of Feb.

Board Pres.

(4)

Current

Healthcare REITs

Comps

Price / 2010E FFO

13.9x

13.8x

Price / 2011E FFO

13.0x

13.5x

MTS Health Partners

OpCo/PropCo

Financial Summary

Summary Comparisons of March Presentation vs. Current Scenario

March

Presentation

Current

LTM as of:

12/31/2010

9/30/2010

Mortgages and Leases

New

OpCo

Debt

(1)

146

143

OpCo

PF Debt

$146

Capitalized LTM Rent

1,164

1,176

OpCo

Adj. PF Debt

$1,310

$1,323

Adj. Debt / EBITDAR

5.25x

5.28x

LTM

EBITDAR

(2)

$250

$251

Rolled Mortgage Debt

$166

$162

New

PropCo

Debt

(1)

193

215

PropCo

PF Debt

$359

$377

Debt / EBITDA

5.50x

5.61x

PF LTM EBITDA

$65

$67

Equity

OpCo

Equity Issuance

$160

OpCo

Illustrative

Price

(3)

$6.99

$6.47

PropCo

Illustrative

Price

(3)

7.37

6.84

PF Illustrative Share Price

$14.36

$13.31

Premium

Current

(4)

54.4%

51.4%

Premium

Unaffected

Price

(5)

63.1%

Owned SunBridge

2011E EBITDAR

$115

Rent

Rent Coverage

1.6x

Coverage

2011E New Rent

$72

LTM Total Rent

(6)

$146

$147

PropCo

Debt

OpCo

Debt

Illustrative

Value

Creation

New credit facilities. OpCo at L+500 and PropCo at L+400.

Current estimated LTM as of 09/30/10 vs. 2010 year end for the March presentation.

Under current scenario, assumes 20.225 million shares issued at $7.91 per share, a 10% discount to the current trading price of $8.79 on 06/04/10.

Current share price of $8.79 as of 06/04/10.

The unaffected share price of $8.16 represents the closing price on 05/24/10.

The primary difference between the March presentation and current is that the March presentation assumed a 3% escalator, while the current estimate assumes flat new rent expense between 2010 and 2011.

MTS Health Partners

OpCo/PropCo

Financial Summary

September 30, 2010 Pro Forma Analysis

Pro Forma Capitalization

Sources & Uses –

At 9/30/10

Sources of Funds

Amount

Cash on Hand

$121

15%

Existing Capital Leases (OpCo)

Existing Mortgages (OpCo)

Existing Mortgages (PropCo)

162

20%

New OpCo

Debt

(1)

143

18%

New PropCo

Debt

(1)

215

27%

Sun Equity Issuance

160

20%

Total Sources

$804

100%

Uses of Funds

Amount

Cash allocated to OpCo

$40

Cash allocated to PropCo

Existing Capital Leases (OpCo)

Existing Mortgages (OpCo)

Existing Mortgages (PropCo)

162

20%

Repay Sr. Secured Debt

308

38%

Repay Sr. Subordinated Notes

200

25%

Cash Dividend to SH ($0.20/PF share)

Transfer Taxes (Est.)

Trx, U/W & Financing Fees

Sr. Sub Notes Redemption Fees

(2)

Total Uses

$804

100%

Estimated

Pro Forma

9/30/2010

New Sun

Sabra

Capital Leases

Revolving Credit Facility

Credit Facilities

308

143

215

Existing Mortgage Debt

165

162

Total Secured Debt

$473

$146

$377

Senior Sub Notes

200

Total Debt

$673

$146

$377

2010E Capitalized Leases

601

1,176

Adjusted Debt

$1,274

$1,323

$377

Cash Balance

(121)

(40)

(10)

Adjusted Net Debt

$1,154

$1,283

$367

LTM EBITDAR

$251

LTM EBITDA

$176

$104

$67

Adjusted Debt/EBITDAR

5.08x

5.28x

Adjusted Net Debt/EBITDAR

4.60x

5.12x

Total Secured Debt/EBITDA

2.70x

1.41x

5.61x

Total Debt/EBITDA

3.84x

1.41x

5.61x

Net Debt/EBITDA

3.15x

1.03x

5.46x

Interest Expense

$50

$11

$26

Interest Coverage

3.5x

9.7x

2.6x

New credit facilities. OpCo at L+500 and PropCo at L+400.

Includes estimated redemption fees associated with redemptions costs at 104.6%, additional interest due, and accrued and unpaid interest as of 09/30/10.

MTS Health Partners

OpCo/PropCo

Financial Summary

Transaction Overview –

$160mm Equity Raise at Current Sun

Illustrative OpCo

Summary Income Statement

Illustrative PropCo

Summary Income Statement

2010E

2011E

2012E

2013E

2010E

2011E

2012E

2013E

Revenues

$1,954

$2,031

$2,120

$2,203

Revenues

(1)

$72

$74

$76

Total EBITDAR

250

262

283

301

SG&A (6.5% of revenues)

New Rent

(1)

NOI / EBITDA

$67

$69

$71

Existing Rent

Cash Interest Expense

Consolidated Lease Coverage

1.7x

1.8x

1.9x

FFO

$42

$43

$45

EBITDA

$102

$112

$129

$144

% margin

58.7%

58.8%

60.0%

% margin

5.2%

5.5%

6.1%

6.5%

0.0

Illustrative OpCo

Valuation

Illustrative PropCo

Valuation

FW EBITDAR Multiple

6.0x

6.5x

7.0x

FW FFO Multiple

9.0x

10.5x

12.0x

PF 2011E OpCo

EBITDAR

$262

2011E FFO

$42

Implied Adjusted Enterprise Value

$1,570

$1,701

$1,832

Implied Equity Value

$380

$443

$506

Less: Capitalized Rent (8.0x)

(1,176)

Plus: Debt

(3)

377

Implied Enterprise Value

$394

$525

$656

Less: Cash

(10)

Less: Existing Mortgages & Capital Leases

(4)

Implied Enterprise Value

$747

$810

$873

Less: New Debt

(2)

(143)

Implied Cap Rate (2011E EBITDA/EV)

9.0%

8.3%

7.7%

Plus: Cash

0.0

Implied Equity Value

$288

$419

$549

Current Shares Outstanding

44.500

Current Shares Outstanding

44.500

Shares Issued

20.225

Shares Issued

20.225

Total PF Shares Outstanding

64.725

Total PF Shares Outstanding

64.725

Illustrative Per Share Value

$4.44

$6.47

$8.49

Illustrative Per Share Value

$5.86

$6.84

$7.82

Implied 2011E P/E

7.4x

10.8x

14.2x

Implied 2011E P / FFO

9.0x

10.5x

12.0x

Implied Combined Per Share Value

% Premium to Current Share Value ($8.79)

PropCo

FW FFO Multiple

PropCo

FW FFO Multiple

9.00x

9.75x

10.50x

11.25x

12.00x

9.00x

9.75x

10.50x

11.25x

12.00x

6.00x

$10.31

$10.80

$11.29

$11.77

$12.26

6.00x

17.3%

22.8%

28.4%

34.0%

39.5%

6.25x

11.32

11.81

12.30

12.79

13.27

6.25x

28.8%

34.3%

39.9%

45.5%

51.0%

6.50x

12.33

12.82

13.31

13.80

14.29

6.50x

40.3%

45.8%

57.0%

62.5%

6.75x

13.34

13.83

14.32

14.81

15.30

6.75x

51.8%

57.3%

62.9%

68.5%

74.0%

7.00x

14.35

14.84

15.33

15.82

16.31

7.00x

63.3%

68.8%

74.4%

80.0%

85.5%

51.4%

(1) Assumes 1.6x Rent Coverage on owned EBITDARM less management fees (5.0% of revenues). Assumes flat rent through 2011 and 2.5% annual increases thereafter.

(2) New Debt issued at 0.6x 2010E EBITDAR, L+500 interest rate.

(3) Mortgage Debt of $162mm (2.4x PF2010E EBITDA, 6.8% Interest) and New Debt of $215mm (3.2x PF2010E EBITDA, L+400bps Interest)

MTS Health Partners

The proposed “Base Case”

transaction assumes $518 million of capital raised to generate net financing

proceeds (after financing fees) of $502 million

$143 million PF OpCo

Debt

$215 million PF PropCo

Debt

$160 million in Equity

$16 million financing fees

This

analysis

allows

for

quick

sensitivity

the

mix

debt

from

OpCo

and

PropCo

various

levels

equity

capital raised

The net proceeds always total $502 million

Gross financing size changes between $515 million and $520 million based on financing fees being different for

equity and debt

OpCo/PropCo

Financial Summary

Potential Equity Raise at Various OpCo

and PropCo

Debt Levels

DEBT / EQUITY MIX TO ACHIEVE $502 MILLION IN NET FINANCING PROCEEDS

PF PropCo Leverage

(1)

/ Debt

PF OpCo

$176

$196

$215

$234

$254

Debt

Leverage

(2)

5.03x

5.32x

5.61x

5.90x

6.19x

$104

5.12x

$240

220

200

180

$160

124

5.20x

220

200

180

160

140

$143

5.28x

200

180

$160

140

120

162

5.35x

180

160

140

120

100

182

5.43x

160

140

120

$100

Note: Assumes 2% in fees for OpCo and PropCo debt, and 5.25% underwriters spread on equity.

Based on Total Debt/EBITDA

Based on Adjusted Debt/EBTIDAR, with rent expense capitalized at 8.0x.

MTS Health Partners

OpCo/PropCo

Financial Summary

Share Issuance and ProForma

Ownership Sensitivity

Note: Current share price of $8.79 as of 06/04/10.

OpCo

Shares Issued and PF Ownership of Existing Shareholders at Various

Equity Issuance Prices and (Discount) / Premium to Current ($8.79)

Equity

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

(15%)

(10%)

(3%)

14%

$200

26.667

25.281

23.529

22.222

21.053

20.000

62.5%

63.8%

65.4%

66.7%

67.9%

69.0%

180

24.000

22.753

21.176

20.000

18.947

18.000

65.0%

66.2%

67.8%

69.0%

70.1%

71.2%

160

21.333

20.225

18.824

17.778

16.842

16.000

67.6%

68.8%

70.3%

71.5%

72.5%

73.6%

140

18.667

17.697

16.471

15.556

14.737

14.000

70.4%

71.5%

73.0%

74.1%

75.1%

76.1%

120

16.000

15.169

14.118

13.333

12.632

12.000

73.6%

74.6%

75.9%

76.9%

77.9%

78.8%

MTS Health Partners

OpCo/PropCo

Financial Summary

Pro Forma Illustrative Share Price Sensitivity

Illustrative

Price

Based

Varying

OpCo

Debt

and

Equity Issuance Price

Illustrative

Price

Based

Varying

PropCo

Debt

and

Equity Issuance Price

Illustrative

Premium

Based

Varying

OpCo

Debt

and

Equity Issuance Price

Illustrative

Premium

Based

Varying

PropCo

Debt

and

Equity Issuance Price

Total PF Illustrative Share Price at

Various Equity Issuance

Equity

OpCo

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

Lev.

(15%)

(10%)

(3%)

14%

$200

5.12x

$12.65

$12.90

$13.23

$13.49

$13.73

$13.95

180

5.20x

12.86

13.10

13.41

13.65

13.88

14.09

160

5.28x

13.08

13.31

13.60

13.83

14.04

14.24

140

5.35x

13.33

13.54

13.81

14.02

14.21

14.39

120

5.43x

13.60

13.79

14.03

14.22

14.40

14.56

(Discount) / Premium of

Total PF Illustrative Share Price to Current ($8.79)

Equity

OpCo

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

Lev.

(15%)

(10%)

(3%)

14%

$200

5.12x

43.9%

46.7%

50.5%

53.5%

56.2%

58.7%

180

5.20x

46.3%

49.0%

52.6%

55.3%

57.9%

60.3%

160

5.28x

48.8%

51.4%

54.7%

57.3%

59.7%

62.0%

140

5.35x

51.6%

54.0%

57.1%

59.5%

61.7%

63.7%

120

5.43x

54.7%

56.9%

59.7%

61.8%

63.8%

65.6%

Equity

PropCo

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

Lev.

(15%)

(10%)

(3%)

14%

$200

5.03x

42.1%

44.9%

48.6%

51.5%

54.2%

56.8%

180

5.32x

45.3%

48.0%

51.6%

54.3%

56.9%

59.3%

160

5.61x

48.8%

51.4%

54.7%

57.3%

59.7%

62.0%

140

5.90x

52.7%

55.0%

58.2%

60.6%

62.8%

64.8%

120

6.19x

56.8%

59.0%

61.9%

64.1%

66.1%

67.9%

Total PF Illustrative Share Price at

Various Equity Issuance

Equity

PropCo

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

Lev.

(15%)

(10%)

(3%)

14%

$200

5.03x

$12.49

$12.74

$13.06

$13.32

$13.56

$13.78

180

5.32x

12.77

13.01

13.32

13.57

13.79

14.00

160

5.61x

13.08

13.31

13.60

13.83

14.04

14.24

140

5.90x

13.42

13.63

13.90

14.11

14.31

14.49

120

6.19x

13.78

13.98

14.23

14.42

14.60

14.76

(Discount) / Premium of

Total PF Illustrative Share Price to Current ($8.79)

Note: Assumes OpCo valued at 6.5x 2011E EBITDAR and PropCo valued at 10.5x 2011E FFO

Note: Current share price of $8.79 as of 06/04/10.

MTS Health Partners

OpCo/PropCo

Financial Summary

Pro Forma Illustrative EPS Sensitivity

Note: Current share price of $8.79 as of 06/04/10.

The

above

sensitivity

shows

Pro-forma

Earnings

Per

for

New

Sun

assuming

the

transaction

funded

by:

PropCo

leverage of $215mm (5.61x EBITDA, L+400bps)

OpCo

leverage

between

$104-$182mm

(5.12x

–

5.43x

EBITDAR,

L+500bps)

Current Sun Equity raise of $120mm-$200mm at various per share prices

Base Case (highlighted) represents

PropCo

leverage of $215mm (5.61x EBITDA)

OpCo

leverage of $143mm (5.28x EBITDAR)

Current Sun Equity raise of $160mm at $7.91 per share (a 10% discount 06/04/10 price of $8.79 per share),

resulting in 20.225mm shares being issued (PF shares of 64.725mm)

PF OpCo

2011E EPS Sensitivity

PF OpCo

EPS at Various Equity Issuance Prices and

Discount / (Premium) to Current ($8.79)

Equity

OpCo

$7.50

$7.91

$8.50

$9.00

$9.50

$10.00

Raise

Leverage

(15%)

(10%)

(3%)

14%

$200

5.12x

$0.57

$0.58

$0.60

$0.61

$0.62

$0.63

180

5.20x

0.58

0.59

0.60

0.62

0.63

0.64

160

5.28x

0.59

0.60

0.61

0.62

0.63

0.64

140

5.35x

0.60

0.61

0.62

0.63

0.64

0.65

120

5.43x

0.61

0.62

0.63

0.64

0.65

MTS Health Partners

Appendix

Selected Publicly Traded SNF Companies –

Current

(1)

(1) Market data as of 6/04/10

Note: Adjusted enterprise value and debt calculated by adding 8.0x 2009E rent expense back to enterprise value.

Sources: Company press releases, public documents, and Wall Street research consensus estimates

Adj. EV / LTM (3/31) EBITDAR

Adj. EV / 2010E EBITDAR

Adj. Net Debt / LTM (3/31) EBITDAR

Price / 2010E Earnings

Price / 2011E Earnings

Debt / LTM (3/31) EBITDA

Mean = 9.9x

Mean = 9.6x

Mean = 6.4x

Mean = 6.3x

Mean = 2.6x

Mean = 4.1x

0.4x

1.1x

2.4x

4.9x

1.1x

3.8x

3.4x

2.4x

0.3x

0.6x

2.7x

2.2x

1.6x

1.0x

3.8x

6.9x

6.6x

6.3x

6.2x

5.6x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

EXE

SKH

SUNH

KND

ENSG

Cap. Rent

Net Debt

Equity

4.9x

1.2x

2.4x

0.3x

1.3x

0.3x

3.6x

2.3x

3.5x

0.7x

5.3x

4.8x

4.7x

3.8x

2.0x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

KND

SKH

SUNH

EXE

ENSG

Cap. Rent

Net Debt

11.1x

10.5x

10.0x

9.2x

8.6x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

KND

EXE

ENSG

SUNH

SKH

11.6x

10.6x

9.2x

8.8x

7.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

EXE

KND

ENSG

SUNH

SKH

4.2x

3.6x

3.3x

0.9x

0.8x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

SKH

EXE

SUNH

ENSG

KND

1.2x

0.3x

4.9x

1.3x

2.4x

3.6x

3.5x

0.3x

0.7x

2.3x

2.5x

1.0x

4.2x

1.5x

7.1x

6.3x

6.2x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

SKH

EXE

KND

ENSG

SUNH

Cap. Rent

Net Debt

Equity

MTS Health Partners

Appendix

Detail of Analyst Viewpoints

Source: Wall Street equity research.

Price Target

Rating

Valuation

Methodology

Firm

Current

New Sun

Sabra

Combined

New Sun

Sabra

Avondale Partners

$9.00

Market Perform

$8.00-$10.00

$2.00-$3.00

$8.00-$10.00

5.0-5.5x 2011 EBITDA

12-13% Cap Rate

Bank of America

8.50

8.00

Underperform

N/A

9.82

6.0x 2010 EBITDAR

10% Cap Rate

Citi

12.00

10.00

Buy/High Risk

5.60

6.84

12.11

10.0x 2010 P/E

9.0x 2010 FFO

Credit Suisse

11.00

Outperform

7.44

3.80

11.23

5.5x 2011 EBITDA

12% Cap Rate

Jefferies

11.00

Buy

N/A

JMP

13.50

Outperform

10.90

6.61

17.51

6.7x 2011 EBITDA

10% Cap Rate

Leerink

Swann

12.00-14.00

11.00-12.00

Outperform

5.00-6.00

7.00-8.00

12.00-14.00

6.3-6.5x 2011 EBITDAR

9.0-10.0x 2011 FFO

Macquarie

14.00

$14.00

Outperform

8.00

6.00

14.00

5.5x 2011 EBITDA

10% Cap Rate

Morgan Keegan

9.70

N/A

Outperform

2.48

7.22

9.70

6.3x 2011 EBITDAR

9.5x 2011 FFO

Oppenheimer

14.00

Outperform

7.91

5.64

13.55

6.0x 2011 EBITDA

10% Cap Rate

RBC

11.00

Outperform

$4.70

$8.21

12.91

6.5x 2010 EBITDAR

10.5x 2010 FFO

Stephens

12.00

Overweight

7.00-8.00

~5.00

12.00

13.0x P/E, 6.5x EBITDA, 7x EBITDAR

9.0x EBITDA, 14x P/E

Stifel

Nicolaus

10.00

N/A

Buy

Hold

2.00-6.00

6.00-8.00

8.00-11.50

5.6-6.0x 2011 EBITDAR

9.0-10.0x 2011 FAD

Susquehanna

N/A

Neutral

6.35

7.08

13.43

5.0x 2011 EBITDA

9.2x 2011 FFO

Wells Fargo

9.00-12.00

8.00-10.00

Outperform

Market Perform

2.00-4.00

6.50-8.00

9.00-12.00

6.0-6.4x 2010 EBITDAR

9.0-11.0x 2010 FFO

MTS Health Partners

Appendix

Potential Equity Raise at Various OpCo

and PropCo

Debt Levels

The

proposed

“Base

Case”

transaction

assumes $518 million of capital raised

to generate net financing proceeds

(after financing fees) of $502 million

$143 million PF OpCo

Debt

$215 million PF PropCo

Debt

$160 million in Equity

$16 million financing fees

This analysis allows for a quick

sensitivity of the mix of debt from

OpCo

and PropCo

at various levels of

equity capital

The net proceeds always total $502

million

Gross financing size changes between

$515 million and $520 million based

on financing fees being different for

equity and debt

DEBT / EQUITY MIX TO ACHIEVE $502 MILLION IN NET FINANCING PROCEEDS

PF PropCo

Leverage

(1)

/ Debt

PF OpCo

$176

$196

$215

$234

$254

Debt

Leverage

(2)

5.03x

5.32x

5.61x

5.90x

6.19x

$104

5.12x

$240

220

200

180

$160

124

5.20x

220

200

180

160

140

$143

5.28x

200

180

$160

140

120

162

5.35x

180

160

140

120

100

182

5.43x

160

140

120

$100

ILLUSTRATIVE CHANGE IN DEBT AND EQUITY MIX

PF PropCo

Debt

$176

$39

$215

$39

$254

PF Opco

Debt

182

(39)

143

(39)

104

Equity Issuance

160

Fees

(16)

Net Financing Proceeds

$502

PF PropCo

Debt

$176

$39

$215

$39

$254

PF Opco

Debt

104

143

182

Equity Issuance

240

(80)

160

(80)

Fees

(18)

(16)

(13)

Net Financing Proceeds

$502

Note: Assumes 2% in fees for OpCo and PropCo debt, and 5.25% underwriters spread on equity.

Based on Total Debt/EBITDA

Based on Adjusted Debt/EBTIDAR, with rent expense capitalized at 8.0x.


MTS Presentation		Page Numbers on Which Information from Sun Management was Utilized
February 27, 2010		Pages 6, 8, 10, 14, 16-17, 43, 47, 49, 66-67, 70, 89-92, 97, 100-101, 103-104, 106-107, 110-111 and 113-115

March 25, 2010		Pages 5-9, 13, 20 and 24

June 17, 2010		Pages 6, 12 and 19-20


	2009		2008
Transaction costs related to an acquisition	$	485	$	—
Prior periods’ self-insurance costs		8,220		3,550
Release of insurance reserves related to prior periods		—		(2,650	)
Acquisition integration costs		—		1,469

Normalizing Adjustments to Adjusted EBITDAR and Adjusted EBITDA	$	8,705	$	2,369

Tax-Effected Normalizing Adjustments to Adjusted EBITDAR and Adjusted EBITDA (normalized effective tax rate of 41% for 2009 and 40% for 2008)	$	5,136	$	1,421
Restructuring costs		769		—
Gain on sale of property		—		(540	)
Benefit for income taxes		—		(74,012	)

Normalizing Adjustments to Income from Continuing Operations *	$	5,905	$	(73,131	)