EXHIBIT 10.2

SEVERANCE BENEFITS AGREEMENT

     THIS SEVERANCE BENEFITS AGREEMENT ("Agreement") is entered into as of the
24th day of August, 2004 by and between Sun Healthcare Group, Inc., a Delaware
corporation ("Employer") and Jennifer Botter ("Employee") with reference to the
following facts:

     A.     Employer currently employs Employee as Senior Vice
President/Corporate Controller to provide services to Employer and its
affiliated companies (collectively, "Sun").

     B.     Employer has determined that it is in its best interests to continue
to engage Employee and therefore desires to induce Employee to remain an
employee of Employer.

     NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, Employer and Employee agree as follows:

I.     SEVERANCE BENEFITS.

In the event of a Qualifying Termination as defined in Section II, Employee
shall be entitled to the severance benefits described below upon execution of
Employer's then standard separation agreement and mutual release (the
"Release"). Payment of the severance benefits shall be made in accordance with
applicable waiting periods set forth in the Release measured from the effective
date of the Qualifying Termination.

     A.     Cash Payments

.

The following cash payments shall be made to Employee following the Qualifying
Termination:

1.     Lump Sum Severance Payment.

Employee shall be entitled to a lump sum severance payment in an amount equal to
one hundred percent (100%) of her annual base salary, at the rate then in
effect, less applicable federal and state tax withholding and any other
deductions authorized by Employee.

2.     Earned Salary; Reimbursable Expenses.

Employer shall pay Employee the full amount of any earned but unpaid salary
through the date of such termination, plus a cash payment (calculated on the
basis of Employee's salary at the rate then in effect) for all unused vacation
that Employee has earned as of the date of such termination, together with a
cash payment for any unreimbursed expenses.

B.     Health Care coverage. Employee and Employee's eligible dependents shall
be entitled to continued coverage under Employer's health insurance plans on the
same basis as active employees until the earlier of (1) the last day of the
twelfth month to commence on or after the date of termination; or (2) the date
Employee

--------------------------------------------------------------------------------

or Employee's eligible dependents become eligible to participate in a plan of a
successor employer.

C.     Other Plans.

Except as expressly provided to the contrary in Section I.B, upon any
termination of employment, including without limitation a Qualifying
Termination, Employee's right to participate in any retirement or benefits plans
and perquisites shall cease as of the date of termination.

II.     QUALIFYING TERMINATION.

Employee will have incurred a Qualifying Termination for purposes of this
Agreement if either of the following events occurs during the term of Employee's
employment.

A.     Termination by Employer

. Any termination of Employee's employment by Employer other than for "Good
Cause" or "Disability" (as each such term is defined in Section IV, below); or,

B.     Termination by Employee

. Employee's termination of her employment with Employer for "Good Reason" (as
such term is defined in Section IV below). .

III.     EFFECT OF NON-QUALIFYING TERMINATIONS.

If Employee's employment with Employer terminates for any reason other than a
Qualifying Termination, Employer shall pay Employee the full amount of any
earned but unpaid salary through the date of such termination, plus a cash
payment (calculated on the basis of Employee's salary at the rate then in
effect) for all unused paid time off which Employee has earned as of the date of
such termination and a cash payment for any unreimbursed expenses. As of the
date of such termination, Employee shall immediately relinquish the right to any
additional payments of benefits from Employer under this Agreement or otherwise.
Employee's right to participate in any retirement or benefits plans and
perquisites shall cease as of the date of termination. Employee and Employee's
eligible dependents may elect to continue coverage under COBRA of any health,
dental and vision plans in effect at the time.

IV.    DEFINITIONS.

The following capitalized terms shall have the meanings specified below:

A.     "Good Cause"

shall mean any one of the following:

(1)     Any criminal conviction of the Employee under the laws of the United
States or any state or other political subdivision thereof which, in the good
faith determination of the Chief Executive Officer of Employer (the "CEO"),
renders Employee unsuitable as an officer or employee of Sun.

2

--------------------------------------------------------------------------------

(2)     Employee's continued failure substantially to perform the duties
reasonably requested by the CEO of Employer and commensurate with Employee's
position and within Employee's control as a corporate officer (other than any
such failure resulting from Employee's incapacity due to Employee's physical or
mental condition) after a written demand for substantial performance is
delivered to Employee by the CEO of Employer, which demand specifically
identifies the manner in which the CEO of Employer believes that Employee has
not substantially performed Employee's duties, and which performance is not
substantially corrected by Employee within thirty (30) days of receipt of such
demand; and

(3)     Any material workplace misconduct or willful failure to comply with
Sun's general policies and procedures as they may exist from time to time by
Employee which, in the good faith determination of the CEO of Employer, renders
Employee unsuitable as an officer or employee.

B.     "Disability"

means Employee's inability to engage in substantial gainful activity by reason
of any medically determinable mental or physical impairment which can be
expected to result in death or which has lasted or can be expected to last for a
period of 120 substantially consecutive calendar days.

C.     "Good Reason"

means a resignation of Employee's employment with Sun (or any person succeeding
to the assets of Sun or any substantial portion thereof) as a result and within
60 days after the occurrence of any of the following: (1) a meaningful and
detrimental alteration in Employee's position or the nature of Employee's
responsibilities, or a meaningful and detrimental change in Employee's reporting
responsibilities or titles, as in effect immediately prior to Employee's
termination of employment; (2) a reduction in Employee's annual base salary as
in effect immediately prior to the Employee's delivery of notice to Employer
stating the basis of Employee's allegation that "Good Reason" exists (the "Good
Reason Notice"), a reduction in Employee's target annual bonus (expressed as a
percentage of base salary) as in effect immediately prior to the circumstances
described in the Good Reason Notice, or a failure to provide Employee with any
other form of compensation or material employment benefit being provided to
Employee immediately prior to the circumstances described in the Good Reason
Notice (excluding however, any reduction in the amount of any annual bonus or
the granting or withholding of incentive compensation (including without
limitation options or stock units) but including a reduction to the target
amount of the bonus as stated above); or (3) the relocation of Employee's
regular office worksite to a location outside the State of New Mexico without
Employee's prior consent. For any of the foregoing circumstances to constitute
"Good Reason" hereunder, Employee must deliver the Good Reason Notice to
Employer

3

--------------------------------------------------------------------------------

within 60 days of the date on which the circumstances creating "Good Reason"
have first occurred.

Provided, however

, that an event described in the clauses above shall not constitute Good Reason
unless it is communicated by Employee to Employer and to its successor in
writing and is not corrected by Employer or such successor in a manner which is
reasonably satisfactory to Employee (including full retroactive correction with
respect to any monetary matter) within 20 days of Employer's receipt of such
written notice from Employee.

 

V.     PROTECTION OF SUN'S INTERESTS.

 

A.     Confidentiality.

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

B.     Exclusive Property.

Employee confirms that all Confidential Information is and shall remain the
exclusive property of Sun. All business records, papers and documents kept or
made by Employee relating to the business of Sun shall be and remain the
property of Sun. Upon the termination of Employee's employment for any reason or
upon the request of Sun at any time, Employee shall promptly deliver to Sun, and
shall not without the consent of the President of Employer, retain copies of,
Confidential Information, or any written materials not previously made available
to the public, or records and documents made by Employee or coming into
Employee's possession concerning the business or affairs of Sun.

C.     Nonsolicitation.

Employee shall not, during Employee's employment under this Agreement, and for
twelve (12) months following the termination of this Agreement, for whatever
reason, in any manner induce, attempt to induce, or assist others to induce, or
attempt to induce, any employee, agent, representative or other person
associated with Sun or any customer, patient or client of Sun to terminate her
association or contract with Sun, nor in any manner, directly or

 

4

--------------------------------------------------------------------------------

indirectly, interfere with the relationship between Sun and any of such persons
or entities.

D.     Non-Disparagement.

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

E.     Relief.

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

 

 

 

5

--------------------------------------------------------------------------------

VI.     MISCELLANEOUS.

A.     Governing Law.

The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Mexico applicable to contracts
entered into and performed in such State.

B.     Dispute Resolution; Jurisdiction.

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively in arbitration conducted in Albuquerque, New Mexico
in accordance with the commercial rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Punitive damages shall not be awarded.

C.     Legal Fees and Expenses.

Employer shall pay or reimburse Employee on an after-tax basis for all costs and
expenses (including, without limitation, court costs and reasonable legal fees
and expenses which reflect common practice with respect to the matters involved)
incurred by Employee as a result of any claim, action or proceeding (a)
contesting, disputing, or enforcing any right, benefits, or obligations under
this Agreement, or (b) arising out of or challenging the validity, advisability,
or enforceability of this Agreement or any provision thereof; provided, however,
that this provision shall not apply if the arbitrator(s) rule in Sun's favor
with respect to Employee's claim or position.

D.     Successors; Binding Agreement.

This Agreement shall be binding upon and inure to the benefit of Employee (and
Employee's personal representatives and heirs), Sun, and any organization that
succeeds to substantially all of the business or assets of Sun, or any portion
thereof. For the avoidance of any doubt as to such matters, there shall be no
termination of Employee's employment for purposes of this Agreement if Employee
shall continue to be employed or engaged by any person or entity that purchases
or otherwise succeeds to the assets of Sun (or any portion thereof). This
Agreement shall inure to the benefit of and be enforceable by Sun's and the
Employer's successors and assigns and by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If Employee should die while any amount would still be
payable to Employee hereunder if Employee had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Employee's devisee, legatee, or other designee or, if
there is no such designee, to Employee's estate.

E.     Effectiveness and Term

. On execution by Sun and Employee, this Agreement shall be effective and shall
continue so long as Employee remains employed by Sun.

F.     Prior Severance Benefits Agreement.

This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof and any prior agreement, arrangement or
understanding between Employee and Sun,

6

--------------------------------------------------------------------------------

relating to or in connection with the possible payment of severance to Employee
upon termination of her employment, is hereby terminated and superseded its
entirety by this Agreement.

G.     Notices.

For purpose of this Agreement, notices and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:

If to Sun:

 

Sun HealthCare Group, Inc.

Attention: General Counsel

18831 Von Karman Avenue, Ste 400

Irvine, California 92612

   

If to Employee:

 

Ms. Jennifer Botter

4528 Salerno Circle

Plano, Texas 75093

 

H.     Amendments, Waivers, Etc.

No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.

I.     Validity.

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

J.     Counterparts.

This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original but all of which together will constitute one and the
same instrument.

K.     Source of Payments.

Except as expressly provided herein, all payments provided under this Agreement
shall be paid in cash from the general funds of Sun and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. Employee will have no right, title, or interest

7

--------------------------------------------------------------------------------

whatsoever in or to any investments that Sun may make to aid in it meeting its
obligations hereunder. To the extent that any person acquires a right to receive
payments from Sun hereunder, such right shall be not greater than the right of
an unsecured creditor of Sun whose claim arose on the date such right to receive
payments from Sun arose.

L.     Headings.

The headings contained in this Agreement are intended solely for convenience of
reference and shall not affect the rights of the parties to this Agreement.

M.     Entire Agreement.

This Agreement sets forth the entire agreement and understanding of the parties
hereto with respect to the matters covered hereby and supersedes all prior
agreements and understandings of the parties with respect to the subject matter
hereof.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.

"Employer"
SUN HEALTHCARE GROUP, INC.
a Delaware corporation

By:  /s/ Steven Roseman                          
       Steven Roseman
       Executive Vice President

Dated: December 7, 2004

"Employee"

  /s/ Jennifer Botter                                 

Jennifer Botter

Dated: December 7, 2004

 

 

 

8