FORBEARANCE AGREEMENT


         This  Forbearance  Agreement  ("Agreement") is made and entered into on
October 13, 1999 by and between the entities  identified on the  signature  page
hereof (each a "Lessee" and collectively "Lessees");  DELTA INVESTORS I, LLC , a
Michigan limited liability company,  DELTA INVESTORS II, LLC, a Michigan limited
liability company, OMEGA HEALTHCARE INVESTORS,  INC., a Maryland corporation and
OHI (ILLINOIS),  INC., an Illinois corporation (each a "Lessor" and collectively
"Lessors");   and  SUN   HEALTHCARE   GROUP,   INC.,   a  Delaware   corporation
("Guarantor").

                                R E C I T A L S:

         A. Lessees,  each of which is a subsidiary or second tier subsidiary of
Guarantor,  and Lessors are parties to the Leases and  Subleases  identified  on
attached Exhibit A (each a "Lease" and collectively,  the "Leases").  The Leases
relate to certain health care  facilities  also  identified on Exhibit A (each a
"Facility" and collectively,  the "Facilities").  The obligations of the Lessees
under the Leases are secured by the  Security  Agreements  and other  Agreements
identified on attached Exhibit B (each a "Security  Agreement" and collectively,
the "Security Agreements").  Guarantor has executed the Guaranty with respect to
all of the Leases except the Complete Care Lease.

         B. On or about May 28, 1999,  the Lessors  forwarded to the  respective
Lessees and other  persons  required  to receive  notices  under the  applicable
Leases ("Other Persons"),  and the Lessees and Other Persons received Notices of
Default pursuant to which the Lessors advised the Lessees and Other Persons that
the Lessees had failed to pay certain  Minimum Rent and  Additional  Charges (as
defined in the Leases),  and that the failure to cure these defaults  within the
time set forth in the  Notices of  Default  would  constitute  Events of Default
under  all  of  the  Leases,  except  the  Complete  Care  Leases.  The  Lessees
acknowledge  that on or about  September 3, 1999,  the Lessors  forwarded to the
Lessees  and to Other  Persons,  and the  Lessees  and Other  Persons  received,
Notices of  Termination  pursuant to which the  Lessors  advised the Lessees and
Other  Persons that (I) the Lessees had not cured all of the defaults  described
in the  Notices of  Default,  and (II)  pursuant  to the terms of the Leases (a)
Events of Default had occurred  under the Leases,  other than the Complete  Care
Leases, and (b) as a result of the Events of Default, the Leases, other than the
Complete Care Leases, would terminate on September 13, 1999.

         C. Lessors contend that all of the Leases, except for the Complete Care
Lease, were terminated  effective  September 13, 1999 pursuant to the Notices of
Default and Notices of  Termination  identified  in Recital B.  Lessors  further
contend  that  Lessors  are  entitled  to  immediate  possession  of the  Leased
Properties.  Lessees  and  Guarantor  contend  that the  Notices of Default  and
Notices of Termination were ineffective,  and that all of the Leases continue in
full force and effect.

         D.   Guarantor  and  Lessees  are  currently   experiencing   financial
difficulties,  and anticipate  that they will file a Case or Cases under Chapter
11  of  the  United  States  Bankruptcy  Code  on or  before  October  15,  1999
("Filing").  The date on which Guarantor and the Lessees actually file such Case
or Cases is hereinafter  referred to as the "Filing Date" and such Case or Cases
are hereinafter referred to as the "Case or Cases."


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         E. The parties hereto wish to set forth in writing  certain  agreements
which they have reached concerning (i) the continued occupancy of the Facilities
between the date hereof and the Filing Date, (ii) certain actions to be taken by
the parties after the Filing Date, (iii) certain  agreements with respect to the
transition  of  operations  of the  Rejected  Lease  Facilities,  and  (iv)  the
amendment and clarification of certain provisions of the Leases.

         NOW, THEREFORE, the parties hereto hereby agree as follows:

1.       DEFINITIONS

         Terms,  if not  defined  elsewhere  herein,  shall  have  the  meanings
assigned to them in the  Recitals  or in this  Section and include the plural as
well  as the  singular,  all  references  to  designated  "Sections"  and  other
subdivisions  are to the  designated  Sections  and other  subdivisions  of this
Agreement and the words  "herein,"  "hereof" and  "hereunder" and other words of
similar  import  refer to this  Agreement  as a whole and not to any  particular
Section or other subdivision:

                  Affiliate:  Any Person which,  directly or  indirectly,
                    Controls or is Controlled by or is under common Control
                    with another Person.

                  Amended Delta I Facility Leases: The Original Delta I Facility
                    Leases and the February/March 1997 Leases.

                  Assumed Manor Care Leases: The Manor Care Leases so designated
                    on Exhibit A.

                  Assumption  and Rejection  Order:  The Order of the Bankruptcy
                    Court to be entered  granting the Motion to Assume and
                    Reject as contemplated by Sections III and V hereof.  The
                    Assumption  and Rejection  Order shall be in all material
                    respects in the form attached hereto as Exhibit C.

                  Bankruptcy Court:  The United States Bankruptcy Court having
                    jurisdiction over the Case or Cases.

                  Base Rent  Allocable to the Assumed  Manor Care Leases:  The
                    Initial  Base Rent  Allocable to the Assumed  Manor Care
                    Leases,

                              1.    If the Effective Date is prior to January 1,
                                    2000,  prorated  for  the  period  from  the
                                    Effective Date through  December 31, 1999 by
                                    multiplying  the Initial Base Rent Allocable
                                    to  the  Assumed  Manor  Care  Leases  by  a
                                    fraction  in  which  the  numerator  is  the
                                    number  of  days  in  such  period  and  the
                                    denominator is 365;



<PAGE>


                              2.    increased  for the period  commencing on the
                                    later of (i)  January  1,  2000 and (ii) the
                                    Effective  Date and ending on  December  31,
                                    2000 by the  lesser of (y) one and  one-half
                                    times  the  increase  in the Cost of  Living
                                    Index (as  defined in the  Qualicorp  Lease)
                                    during the preceding  Lease Year and (z) two
                                    and one-half  percent  (2.5%) of the Initial
                                    Base Rent  Allocable  to the  Assumed  Manor
                                    Care Leases  (prorated  for such period on a
                                    per  diem  basis  if such  period  commences
                                    after January 1, 2000);

                              3.    increased  thereafter  on each January 1
                                    during the Fixed Term (as defined in the
                                    Qualicorp  Lease) and, if Lessee  exercises
                                    its right to renew the Term (as  defined in
                                    the  Qualicorp  Lease), the First Extension
                                    Term (as defined in the Qualicorp  Lease),
                                    for the following  twelve (12) month period
                                    (or, as to the First Extension  Term,  pro
                                    rata for the  period  between  January 1 of
                                    the last  Lease Year of the First Extension
                                    Term and the  expiration  of the  First
                                    Extension  Term) by the  lesser  of (i) one
                                    and one-half  times the increase in the Cost
                                    of Living Index  during the preceding twelve
                                    (12) month period and (ii) two and one-half
                                    percent  (2.5%) of the Base Rent  Allocable
                                    to the Assumed  Manor Care Leases for the
                                    immediately preceding twelve (12) month
                                    period; and

                             4.     if Lessee exercises its right to renew the
                                    Term for the Second Extension Term (as
                                    defined in the Qualicorp  Lease),  increased
                                    on January 1 during the first Lease Year of
                                    the Second Extension Term, for the following
                                    twelve (12) month period (or, as to the last
                                    Lease Year in the Second  Extension  Term,
                                    pro rata for the period between January 1 of
                                    such Lease Year (as defined in the Qualicorp
                                    Lease) and the Expiration Date (as defined
                                    in the  Qualicorp  Lease)) to the  greater
                                    of (i) the Fair  Market  Value Rent (as
                                    defined in the Qualicorp Lease) for the
                                    Elkhart,  Indiana and Danville,  Illinois
                                    Leased Properties and (ii) the then current
                                    Base Rent  Allocable to the Assumed  Manor
                                    Care Leases,  increased by the lesser of (x)
                                    one and one-half  times the increase in the
                                    Cost of Living Index during the preceding
                                    twelve (12) month period and (y) two and
                                    one-half  percent (2.5%) of the Base Rent
                                    Allocable to the Assumed Manor Care Leases
                                    for the immediately preceding twelve (12)
                                    month period.

                  Business Day: Each Monday,  Tuesday,  Wednesday,  Thursday and
                   Friday which is not a day on which  national  banks in the
                   City of New York, New York are authorized, or obligated, by
                   law or executive order, to close.

                  Complete Care Lease:  The Lease so described on Exhibit A.

                  Control (and its corollaries "Controlled by" and "under common
                   Control with"):  Possession,  directly or indirectly,  of the
                   power to direct or cause the  direction of the  management
                   and  policies of a Person,  through the ownership of voting
                   securities, partnership interests or other equity interests.



<PAGE>


                  Delta I: Delta Investors I, LLC, a Michigan limited  liability
                   company, the sole member of which is Omega Healthcare
                   Investors, Inc.

                  Delta I Letter of Credit  Agreement:  The Amended and Restated
                   Letter of Credit  Agreement  dated as of February 28, 1997
                   between Omega Healthcare Investors, Inc. and Guarantor  with
                   respect to the February/March 1997 Leases.

                  Delta I Master Lease:  The Delta I Master Lease Agreement and
                   the Original Delta I Facility Leases.

                  Delta I Master Lease  Agreement:  The Master  Lease  Agreement
                   between Delta I and the Original  Delta I Lessees,  dated as
                   of October 7, 1997, as amended by the First Delta I Amendment
                   and the Second Delta Amendment.

                  Delta  II:  Delta  Investors  II,  LLC,  a  Michigan   limited
                   liability company, the sole member of which is Omega
                   Healthcare Investors, Inc.

                  Delta II Facility Leases: The Leases so described on Exhibit A

                  Delta II Master Lease:  The Delta II Master Lease Agreement
                   and the Delta II Facility Leases.

                  Delta II Master Lease  Agreement:  The Master Lease  Agreement
                   between Delta II and the Original Delta II Lessees, dated as
                   of October 7, 1997, as amended by the First Delta II
                   Amendment and the Second Delta Amendment.

                  Effective Date:   The date after entry of the Assumption and
                   Rejection Order on which all of Lessees'  Effective Date
                   Obligations have been satisfied.

                  Facility:  As defined in each of the Leases.

                  February/March 1997 Leases: The Leases so described on
                   Exhibit A.

                  First  Delta I  Amendment:  The First  Amendment  of  Purchase
                   Agreement, Master Lease Agreement,  Facility Leases and
                   Guaranty dated April 24, 1998, among Delta I, Guarantor and
                   the Original Delta I Lessees.

                  First  Delta II  Amendment:  The First  Amendment  of Purchase
                   Agreement, Master Lease Agreement,  Facility Leases and
                   Guaranty dated April 24, 1998, among Delta II, Guarantor and
                   the Delta II Lessees.

                  Forbearance  Period:  The period commencing on the date hereof
                   and ending when and if this Agreement is terminated in
                   accordance with its terms.

                  Guaranty:  The  Amended  and  Restated  Guaranty  executed  by
                   Guarantor  in favor of Lessors  as of  October 7, 1997,  as
                   amended by the First Delta I Amendment, the First Delta II
                   Amendment and the Second Delta Amendment.


<PAGE>


                  Initial  Base Rent  Allocable to the Assumed  Manor Care
                   Leases:  Nine  Hundred  Thirty  Three  Thousand  Eighty Four
                   Dollars ($933,084.00).

                  Leased  Property:  Any  and  all of  the  property,  real  and
                   personal,  tangible and intangible,  leased pursuant to a
                   Lease; and, if defined in a Lease, with respect to such Lease
                   as so defined.

                  Lessees'  Effective  Date  Obligations:  (1)  Satisfaction  of
                   Lessees' Monetary  Obligations;  (2) Lessees' transfer and
                   relinquishment of the Rejected Lease Assets as required by
                   this Agreement;  (3) Lessees'  execution of the  agreements
                   that it is  required  by this  Agreement  to  execute;  and
                   (4)Guarantor's  and  Lessees'  release of  Lessors  as set
                   forth in  Section  XI.A. hereof.

                  Lessees'  Monetary  Obligations:  (i)  The  obligation  of the
                   Liberty  Lessees to make an additional  security  deposit of
                   Sixty Nine Thousand Six Hundred Twenty Six and 85/100 Dollars
                   ($69,626.85)  as set forth in Section VIII.D.  hereof;  (ii)
                   the  obligation of the Lessees to pay Lessors Two Hundred
                   Fourteen  Thousand Two Hundred Fifty Eight and 42/100 Dollars
                   ($214,258.42)  to cure the monetary defaults set forth in
                   attached Exhibit D; (iii) the obligation of the Lessees under
                   the Sun Delta I Master Lease, the Sun Delta II Master Lease
                   and the Sun Liberty Master Lease to pay to the Lessors
                   thereunder the Sun Delta I Master Lease Minimum Rent
                   Increase, the Sun Delta II Master Lease Minimum Rent Increase
                   and the Sun Liberty Master Lease Minimum Rent  Increase,
                   respectively, for the period from  November 1, 1999 through
                   the Effective  Date;  and (iv) the obligation of the Lessee
                   under the Rejected  Leases to pay Base Rent pursuant to
                   Section IX.B.3 if any amount thereof shall be unpaid as of
                   the Effective Date.

                  Liberty Leases:  The Leases so described on Exhibit A.

                  Manor Care Leases:  The Leases so described on Exhibit A.

                  Motion Filing Date:  The date of filing with the Bankruptcy
                   Court of the Motion to Assume or Reject.

                  Motion  to  Assume  and  Reject:  A motion  to be filed by the
                   Lessees and  Guarantor  within five (5) Business  Days of the
                   Filing Date which shall seek entry of the Assumption and
                   Rejection Order. The Motion to Assume and Reject  shall be
                   prepared  by counsel  for the Lessees and shall be reasonably
                   acceptable to counsel for Lessors.

                  Notice:  Any written notice given by any party hereto in
                   accordance  with the notice  provisions set forth in Section
                   XII hereof.

                  Operations  Transfer  Agreement:  An agreement in all material
                   respects  in the form  attached  hereto  as  Exhibit  E which
                   shall,  except as otherwise  set forth  herein,  govern the
                   transfer of  operations  of a Rejected Lease Facility from
                   Lessee to Transferee.

                  Original Delta I Facility Leases:  The Leases so described on
                   Exhibit A.

                  Person:  Any natural person,  trust, partnership, corporation,
                   joint venture,  limited  liability company or other legal
                   entity.


<PAGE>



                  Qualicorp Lease:  The Lease so described on Exhibit A.

                  Qualicorp  Letter  of  Credit  Agreement:  The  Letter  of
                   Credit  Agreement  dated  June 1, 1997 by and among  Omega
                   Healthcare Investors, Inc., OHI (Illinois), Inc. and
                   Guarantor entered into with respect to the Qualicorp Lease.

                  Rejected Lease:  Each Lease specified to be rejected in
                   Section III hereof.

                  Rejected  Lease Assets:  With respect to each Rejected  Lease,
                   all of the  real  and  personal  property  covered  thereby
                   or by any  Security Agreement  executed by the Lessee
                   thereunder in favor of the Lessor  thereunder, including
                   without  limitation the Leased Property (with respect to the
                   Rejected Manor Care Leases and as defined therein) and the
                   Demised Premises (with respect to the  Complete  Care  Lease
                   and as defined  therein),  all  tangible  personal property,
                   furniture,  fixtures and equipment owned by a Lessee and used
                   or held for use in  connection  with  or  otherwise  relating
                   to the  operation  of the Rejected Lease Facility or
                   Facilities, and all plans and specifications relating to the
                   buildings  and  improvements  included in the Leased Property
                   or Demised Premises covered thereby, to the extent in the
                   possession of the Lessees; all of the books and records of a
                   Facility covered thereby,  including  patient medical and
                   financial  records and  employee  records;  to the extent
                   assignable,  all intangible personal property of every type,
                   nature and description relating to a Facility covered
                   thereby,  including  utility  deposits, warranties, consents,
                   authorizations,  licenses and permits issued by third parties
                   (provided  that Lessees  shall retain any such  licenses and
                   permits  which they are required to maintain during the
                   period for which the Lessees retain operational  control and
                   responsibility  for  the  applicable  Rejected  Facility
                   hereunder);   and  all inventories  of  every  type,  nature
                   and  description  whatever  (specifically including  all
                   pharmacy supplies, kitchen supplies, linens and  housekeeping
                   supplies,  medical and nursing supplies, office supplies, and
                   other supplies and foodstuffs)  owned by the Lessee on the
                   Effective  Date which inventories  are located at or held for
                   use in any of the Facilities covered by a Rejected Lease.
                   Notwithstanding  anything to the contrary herein, all of the
                   following items are excluded from the term "Rejected Lease
                   Assets:" cash, accounts  receivable,  all leased  equipment
                   and leased motor  vehicles  (other than  equipment  and motor
                   vehicles  leased  from  Affiliates of Lessees and Guarantor),
                   the KRONOS time clock, the Omnicell medical supply dispensing
                   units,  all  computers and computer-related equipment located
                   at a Facility and all computer software used on such
                   equipment.

                  Rejected Lease Facility:  Any Facility subject to a Rejected
                   Lease.

                  Second Delta  Amendment:  The First  Amendment of Security
                   Agreements  and Second  Amendment of Purchase  Agreement,
                   Master Lease Agreement,  Facility Leases and Guaranty among
                   Omega Healthcare Investors,  Inc., Delta I, Delta II and
                   Guarantor,  dated June 15, 1998.

                  Sun Delta I Master Lease: The Delta I Master Lease, as amended
                   as  provided  in  Section V hereof  and  assumed  pursuant
                   the  Assumption  and Rejection Order.



<PAGE>


                  Sun Delta I Master Lease  Minimum Rent  Increase:  The accrued
                   and unpaid  amount of the increase in the Minimum Rent
                   payable under the Delta I Master  Lease,  effective  as of
                   November 7, 1998,  for the Term thereof and any extensions
                   thereof,  subject to annual increases and adjustments as set
                   forth in the Sun Delta I Master Lease,  pursuant to the
                   Agreement Regarding  Post-Closing Matters dated October 7,
                   1997 among the Original Delta I Lessees, Regency Health
                   Services,  Inc., Guarantor,  Delta I and Delta II, which
                   increase annualized for the Lease Year 1998 is Four Hundred
                   Thirty Nine and 04/100  Dollars  ($439.04), annualized  for
                   the Lease  Year  1999 is Four  Hundred  Fifty and 36/10
                   Dollars ($450.36)  and for the Lease Year 2000 shall be
                   adjusted in the same  fashion as Base Rent is adjusted.

                  Sun Delta II Master  Lease:  The  Delta II  Master  Lease,  as
                   amended as provided in Section V hereof and assumed  pursuant
                   to the  Assumption and Rejection Order.

                  Sun Delta II Master Lease Minimum Rent  Increase:  The accrued
                   and unpaid amount of the increase in the Minimum Rent payable
                   under the Delta II Master  Lease,  effective  as of November
                   7, 1998,  for the Term thereof and any extensions thereof,
                   subject to annual increases and adjustments as set forth in
                   the Sun Delta II Master Lease, pursuant to the Agreement
                   Regarding  Post-Closing Matters dated October 7, 1997 among
                   the Original Delta I Lessees, Regency Health Services,  Inc.,
                   Guarantor,  Delta I and Delta II, which increase annualized
                   for the Lease  Year 1998 is  Seventeen Thousand  Sixty Seven
                   and  99/100  Dollars ($17,067.99),  annualized  for the Lease
                   Year 1999 is  Seventeen  Thousand  Five Hundred Six and
                   68/100 Dollars ($17,506.68) and for the Lease Year 2000 shall
                   be adjusted in the same fashion as Base Rent is adjusted.

                  Sun Leases:  Collectively,  the Sun Delta I Master Lease, the
                   Sun Delta II Master Lease, the Sun Liberty Master Lease and
                   the Sun Qualicorp Lease.

                  Sun Liberty Master Lease:  The Liberty Leases,  as amended as
                   provided in Section V hereof and assumed as provided in
                   the Assumption and Rejection Order.

                  Sun Liberty  Master Lease Minimum Rent  Increase:  The accrued
                   and unpaid  amount of the increase in the Minimum Rent
                   payable under the Liberty Leases,  effective  as of  November
                   7,  1998,  for  the  Term thereof and any extensions thereof,
                   subject to annual increases and adjustments as set forth in
                   the Liberty Leases,  pursuant to the Agreement  Regarding
                   Post-Closing  Matters dated  October  7, 1997  among the
                   Original  Delta I  Lessees,  Regency  Health Services,  Inc.,
                   Guarantor,  Delta I and Delta II, which increase annualized
                   for the Lease  Year 1998 is Eight  Thousand  Seven  Hundred
                   Thirty  Four and 02/100 Dollars  ($8,734.02),  annualized for
                   the Lease Year 1999 is Eight Thousand Nine Hundred Fifty
                   Eight and 43/100  Dollars  ($8,958.43)and  for the Lease
                   Year 2000 shall be adjusted in the same fashion as Minimum
                   Rent is adjusted.

                  Sun  Qualicorp  Lease:  The Qualicorp  Lease,  amended as
                   provided in Section V hereof and assumed as provided in the
                   Assumption and Rejection Order.

                  Sun Transaction Documents:  The documents listed on attached
                   Exhibit F.

                  Trade Name:  The name or names under which a Facility is
                   conducting business  on the date hereof.



<PAGE>


                  Transferee: A person or entity designated by the Lessor (which
                   may be such Lessor) under a Rejected  Lease to which such
                   Lessor wishes a Lessee under a Rejected Lease to transfer
                   possession of, or certain  management rights with respect to,
                   the Rejected Lease Facility or Facilities.

2. AGREEMENT TO FORBEAR

           1.     During the Forbearance  Period, the Lessors shall forbear from
                  commencing  any  judicial  or other  action for the purpose of
                  pursuing remedies, including, without limitation, the recovery
                  of  possession  of any  Leased  Property,  on the basis of any
                  default  prior to the  date of this  Agreement  by any  Lessee
                  under any Lease or any default in existence by Guarantor under
                  the  Guaranty.  This  Agreement  shall,  at the  option of the
                  Lessors, terminate upon:

                  1. The failure of any one or more of the Lessees to
                     commence a Case on or  before October 15, 1999;

                  2. The failure of the Lessees to obtain the Assumption
                     and Rejection Order on or before the earlier of

                          1.       45 days after the Motion Filing Date, or

                          2.       the  entry of a final  DIP  Financing  Order
                                   which  provides  that the lender's  security
                                   interest primes any of the collateral of any
                                   of   the   Lessors    under   the   Security
                                   Agreements; or

                 3. The election of Lessors to terminate  this  Agreement
                    pursuant to Section IX hereof; or

                 4. Lessees' failure to satisfy  Lessees'  Effective Date
                    Obligations as and when required herein.

           2.     Upon  execution of this  Agreement by all parties, Lessors
                  shall  immediately  take all steps  reasonably  appropriate
                  under applicable law to withdraw any and all notices to quit
                  (or the  equivalent)  that have been served upon Lessees on or
                  prior to the date  hereof,  and shall  immediately dismiss any
                  and all  lawsuits  commenced  against  any Lessee or Guarantor
                  with respect to the Leases, and during the  Forbearance Period
                  in addition to its agreement to forbear as set forth in
                  Section  II.A.,  above,  shall  also  forbear  from  causing
                  or  permitting  any notice to quit (or the equivalent) to be
                  served upon any Lessee, provided,  however, that Guarantor and
                  each Lessee waives and agrees (which waiver and agreement
                  shall survive the termination of this Agreement
                  notwithstanding  Section II.G,  hereof) that it shall not
                  assert  such  withdrawal  or any  failure  to serve  such
                  notice to quit (or the  equivalent)  during the Forbearance
                  Period in any action brought by a Lessor as a defense to any
                  action by Lessor.



<PAGE>


           3.     During the Forbearance  Period,  Guarantor and each Lessee
                  shall forbear from commencing any judicial or other actions
                  adverse to any Lessor  with  respect to any of the  Leases,
                  other than the  Filing,  or, if  applicable,  seeking any
                  relief adverse to Lessor in any now pending action with
                  respect thereto,  provided,  however, that such agreement to
                  forbear shall not apply to (i) any default by any Lessor under
                  any Lease  occurring  after the date hereof if such default is
                  not cured within the applicable  cure or grace period set
                  forth in the Lease, or (ii) any default by any Lessor under
                  this Agreement  which is not cured within ten (10) days after
                  written notice  thereof,  each of which defaults may be  the
                  subject of a separate  legal action but shall not affect the
                  rights or  obligations  of the Lessees and Guarantor
                  hereunder.

           4.     Each party to this  Agreement  hereby  waives and agrees
                 (which waiver and  agreement  shall survive the  termination
                  of this Agreement  notwithstanding  Section  II.G,  hereof)
                  that it shall not assert at any time that the failure  during
                  the Forbearance  Period of any other party to this Agreement
                  to commence any action or proceed with any steps taken prior
                  to the Forbearance  Period that are or may be required under
                  applicable law prior to the  commencement of any action  is a
                  defense to any claim by  another  party  arising  out of or in
                  connection  with any or all of the  Leases.  The intent of the
                  parties is that compliance during the Forbearance  Period with
                  the forbearance  agreements set forth in Section II.A, Section
                  II.B and Section II.C shall not prejudice or be a waiver of
                  the rights or claims of any of the parties hereto should the
                  Forbearance Period terminate as set forth in Section II.A.

            5.    On the  Effective  Date,  Lessors'  agreement  to  forbear  as
                  provided herein shall be absolute and unconditional and cannot
                  be terminated,  provided,  however, that except as provided in
                  Section XI hereof, nothing contained herein shall be construed
                  as limiting the rights and remedies of any of the Lessors with
                  respect to any default or Event of Default  which occurs under
                  the Sun Leases or the Security Agreements,  as amended,  after
                  entry of the Assumption and Rejection Order.

            6.    Guarantor and Lessees agree (which  agreement  shall survive
                  the termination of this Agreement  notwithstanding  Section
                  II.G, hereof) that neither the acceptance  during the
                  Forbearance  Period by any Lessor of any rent or other payment
                  by any Lessee with respect to any Lease, the continued
                  possession during the Forbearance  Period of Leased Property
                  covered by a Lease by the Lessee  thereof, nor the performance
                  by a Lessee  during the  Forbearance  Period of any of the
                  obligations  set forth in any Lease  without  objection  from
                  the Lessor  thereunder,  shall  constitute  a waiver or
                  otherwise  prejudice either the contention of the Lessors that
                  such Lease has been  terminated or the contention of Guarantor
                  and the Lessees that such Lease has not been terminated and is
                  in full force and effect,  but the foregoing reservation shall
                  be null and void after the Effective Date.



<PAGE>


            7.    In the event this Agreement  terminates  pursuant to the terms
                  hereof,  from and after such termination no party hereto shall
                  have any rights or obligations arising out of or in connection
                  with  this  Agreement,  and no party  shall be  deemed to have
                  waived  any of its  rights  or been  released  from any of its
                  obligations  with  respect to the Leases or the Guaranty or in
                  any way be prejudiced by its execution of, or its  performance
                  of any of its obligations under, this Agreement.

3.       REJECTION OF LEASES

         Guarantor  and the  Lessees  shall (i) file the  Motion  to Assume  and
         Reject within five (5) Business  Days of the Filing Date,  and (ii) use
         good faith  efforts to obtain  entry of the  Assumption  and  Rejection
         Order on or before the  earlier of (y)  forty-five  (45) days after the
         Motion  Filing  Date or (z) the  entry of a final DIP  Financing  Order
         which  provides  that the  security  interest of the lender  primes the
         collateral  of one or more of the Lessors  under a Security  Agreement,
         unless  extended  in writing  by the  Lessors.  During the  Forbearance
         Period and from and after the  Effective  Date,  Lessors  shall support
         entry of the Assumption and Rejection  Order and shall not oppose entry
         of the orders  filed by Lessees  and their  Affiliates  on the date the
         Case or Cases are filed with respect to DIP financing,  cash collateral
         arrangements  and  debtors'  cash  management,  or any orders  filed by
         Lessees and their  Affiliates  thereafter  relating to the same subject
         matter provided in each case such subsequent orders are not at variance
         in any material respect that adversely affects Lessors, the Leases, the
         Facilities covered by the Leases or the rights of the Lessors under the
         Leases or this Agreement, with the orders sought on the day the Case or
         Cases are filed copies of which have been  provided to Lessors prior to
         the date of this Agreement. The Motion to Assume and Reject shall seek,
         among other things, authorization to reject the following Leases:


               LESSOR                    LESSEE                     LEASE DATE

   1. Omega Healthcare Investors, Inc.   SunBridge Healthcare       June 1, 1990
      (successor by merger to Health     Corporation (successor
      Equity Properties, Inc.)           by assignment to Complete
                                         Care, Inc.)

   2. Omega Healthcare Investors, Inc. SunBridge Healthcare February 28, 1997
      (with  respect to the  Facility  in Austin,  Corporation  Texas and the
      Facility in Mason City, Iowa)


4.       CERTAIN AGREEMENTS REGARDING REJECTED LEASE FACILITIES

   1.       BASE RENT WITH RESPECT TO REJECTED LEASE FACILITIES AFTER FILING OF
            MOTION TO ASSUME AND REJECT.



<PAGE>


                  1.       Provided that the Motion to Assume and Reject is
                           filed within the period specified in Paragraph II.A.
                           hereof,  for the period from and after the date on
                           which the Motion to Assume and Reject is filed
                           through  the  earlier of (i) the forty-fifth  day
                           following the Motion Filing Date and (ii) the
                           Effective  Date  ("Accrual  Period") the Base Rent(as
                           defined in each  Rejected  Lease) shall with respect
                           to the Rejected  Lease  Facilities  accrue but except
                           as provided in Section IV.A.2.  hereof and Section IX
                           hereof shall not be payable  ("Accrued  Rent").In the
                           event any  Accrued  Rent shall have been paid by any
                           Lessee on or before the date  hereof,  upon the
                           Effective  Date the amount so paid shall be credited
                           first against any unpaid Base Rent payable with
                           respect to the Rejected  Lease  Facilities for any
                           period after the  expiration of the Accrual  Period,
                           if any, and then to the Lessees' Monetary
                           Obligations.

                  2.       Upon the Effective Date Lessors shall have waived all
                           claims to the Accrued Rent,  but if Lessors  exercise
                           their right to terminate  this  Agreement as provided
                           in Section  II.A.,  Lessors shall retain their claims
                           for payment of the Accrued Rent.

2.       TRANSFER OF THE REJECTED LEASE ASSETS

                  1.       On the date upon which  Lessees  are  required  to
                           satisfy  Lessees'  Effective  Date  Obligations  as
                           set forth in Section IX hereof, the Lessee under each
                           Rejected  Lease shall  relinquish  possession of the
                           Rejected Lease Assets to the Transferee  under such
                           Rejected Lease, as is and where is, in the condition
                           of the Rejected Lease Assets on the date hereof,
                           without any representations or warranties whatsoever,
                           including without limitation without any
                           representations  with respect to title or the
                           condition of title to the Rejected  Lease Assets,
                           the  condition of the  Rejected  Lease  Assets or the
                           compliance  of the  Rejected  Lease  Facilities  with
                           applicable laws, regulations or administrative
                           orders,  provided that if any Rejected Lease Assets
                           shall be damaged or  destroyed  between the date
                           hereof and the  Effective  Date,  the Lessee  under
                           the  applicable Rejected  Lease shall  undertake such
                           repair and  restoration  thereof as may be required
                           by the applicable Lease and be reasonably  feasible
                           during the time period between the date of such
                           damage or destruction and the  Effective  Date and
                           shall  deliver to the Lessor thereunder such proceeds
                           of insurance as such Lessee shall have  received,
                           and assign to Lessor  such  additional  insurance
                           proceeds  as Lessee is entitled to receive,  with
                           respect to such damage or  destruction,  minus such
                           portion of such proceeds as may have been paid by
                           such Lessee for repairs and restoration of such
                           damage or destruction.

                 2.        On the  date  upon  which  Lessees  are  required  to
                           satisfy  Lessees'  Effective Date  Obligations as set
                           forth in Section IX hereof, (i) the Lessee and Lessor
                           under each Rejected Lease shall properly  execute and
                           deliver to each other an  appropriate  instrument  in
                           recordable  form  acknowledging  termination  of  the
                           Rejected Lease and release of the  obligations of the
                           Lessee and Lessor  thereunder,  (ii) the Lessee under
                           each  Rejected  Lease  shall  properly   execute  and
                           deliver to the Lessor  thereunder  a quitclaim of its
                           interests  in and to the  Rejected  Lease  Assets and
                           (iii)  the   Affiliates  of  the  Lessee  under  each
                           Rejected  Lease shall  release any security  interest
                           they may have in the Rejected Lease Assets.



<PAGE>


3.     ECONOMIC RISK AND REWARD FROM AND AFTER THE EFFECTIVE DATE.

                  The Lessor of each of the Rejected Lease  Facilities  shall be
                  entitled to all revenues, and shall be liable for all expenses
                  and  liabilities,  which in each  case  with  respect  to such
                  Rejected  Lease  Facility  relate to the period from and after
                  the  Effective   Date  or  such  earlier  date  on  which  the
                  applicable  Lessee transfers  operational  responsibility  for
                  such  Rejected  Lease  Facility  to the  applicable  Lessor or
                  Transferee  pursuant  to the  request  of such  Lessor and the
                  terms of the Operations Transfer Agreement as provided in this
                  Agreement.

4.       INTERIM MANAGEMENT OF REJECTED LEASE FACILITIES.

                  1.       At the request of the Lessor of a Rejected  Lease
                           Facility,  from and after the  Effective  Date,  the
                           Lessee of the Rejected Lease  Facility  shall  manage
                           the  Rejected  Lease  Facility  pursuant to an
                           interim  management  agreement ("Interim Management
                           Agreement")  reasonably  acceptable to the parties,
                           the term of which shall not exceed six (6) months,
                           provided,  however, that if an appeal is taken from
                           the Assumption and Rejection Order, the term of such
                           Interim Management  Agreement shall be extended until
                           the earlier of (i) the date on which this Agreement
                           is  terminated  or (ii) the date on which the
                           Assumption  and  Rejection  Order becomes final and
                           non-appealable.  Except as provided in Section
                           IV.D.2.  below,  the Lessee  will be paid a
                           management  fee equal to a percentage  of the gross
                           revenues of the Rejected  Lease  Facility  (net of
                           any  recoupments  or charge-backs),  which percentage
                           has been agreed upon by the parties to this
                           Agreement.  The Lessor shall have the right to
                           terminate  the  Interim  Management  Agreement  at
                           any time upon five (5) days  Notice to Lessee. The
                           Interim  Management  Agreement shall require that
                           Lessor provide Lessee with all working capital
                           required for the operation of the Rejected  Lease
                           Facility,  and shall  require that the Lessor
                           indemnify, defend,  and hold Lessee harmless from any
                           and all claims and expenses accruing with respect to
                           the Rejected Lease Facility after the Effective Date,
                           except for claims arising from willful  misconduct or
                           negligence of the Lessee.



<PAGE>


                  2.       From and after the Effective  Date,  if an Interim
                           Management  Agreement  has been entered into,  the
                           Lessee under a Rejected Lease Facility at the request
                           of the Lessor thereunder shall transfer  operational
                           responsibility  for such Facility  to  the Transferee
                           pursuant  to  a  submanagement  agreement
                           ("Submanagement Agreement") with Transferee
                           reasonably  acceptable to the parties.
                           The Submanagement  Agreement will provide that
                           Transferee will manage and perform all functions
                           relating to the operation of the Rejected Lease
                           Facility,  except for those  functions  which Lessee
                           is required to perform as the licensee of the
                           Rejected Lease Facility. If a Submanagement Agreement
                           is entered into, the management fee payable to Lessee
                           under the Interim  Management Agreement shall
                           automatically be changed to One Hundred Dollars
                           ($100.00) per month above the submanagementfee (which
                           submanagement  fee will be paid to the Lessee and
                           passed  through to the  Transferee).  Lessor   shall
                           remain  responsible  for providing  all working
                           capital  required with respect to the Rejected  Lease
                           Facility,  and the indemnification  given to Lessee
                           under the Interim Management Agreement shall be
                           expanded to include any and all acts and  omissions
                           of the  Transferee  including  operation  of the
                           Rejected  Lease Facility under the Lessee's licenses
                           and provider agreements.

                  3.       Any Interim Management  Agreement and Submanagement
                           Agreement entered into as set forth above shall
                           automatically terminate upon Transferee obtaining the
                           necessary licenses for the operation of the Rejected
                           Lease Facility,  provided that  notwithstanding  such
                           termination,  in accordance with the Operations
                           Transfer Agreement the Lessee of the Rejected  Lease
                           Facility  shall allow the Lessor or  Transferee
                           thereof to operate  under the relevant Lessees'
                           Medicare  and Medicaid  Provider  numbers (the "Prior
                           Provider  Numbers")  until such time as the Lessor or
                           Transferee,  in  accordance  with  applicable  law,
                           either (i) obtains a Medicare  and  Medicaid provider
                           number in its own name or (ii) is  authorized  by the
                           applicable  state or  federal  governmental
                           authority to bill under the Prior  Provider  Numbers
                           for services rendered by it after the Effective Date,
                           provided that in no event shall such  obligation of
                           the Lessee of such Rejected Lease Facility  require
                           that such Lessee  assume  pursuant to Section 365 of
                           the  Bankruptcy  Code any  provider  agreement to
                           which such Lessee or any of its Affiliates may be a
                           party.



<PAGE>


                  4.       Prior to the  Effective  Date,  the Lessee  under a
                           Rejected Lease  Facility at the request of the Lessor
                           thereunder shall transfer operational  responsibility
                           for such Facility to the applicable Lessor or
                           Transferee pursuant to an Operations  Transfer
                           Agreement and a management  agreement  between Lessee
                           and Transferee (the "Transferee Management
                           Agreement")  reasonably  acceptable to the parties.
                           The  Transferee  Management  Agreement will provide
                           that  Transferee  will manage and perform all
                           functions  relating to the  operation of the Rejected
                           Lease  Facility,  except for those  functions  which
                           Lessee is required  to perform as the licensee of the
                           Rejected Lease Facility.  If a Transferee  Management
                           Agreement is entered into prior to the Effective Date
                           hereafter,  the Lessor shall bear all  economic risks
                           of and be entitled to all  economic  reward from the
                           Rejected Lease Facility,  as more  particularly  set
                           forth in Subsection 4.C. hereof. Without limiting the
                           foregoing,  if a Transferee  Management  Agreement is
                           entered into prior to the Effective  Date, thereafter
                           Lessor  shall provide Lessee with all working capital
                           required for the  operation of the Rejected  Lease
                           Facility,  and Lessor shall indemnify,  defend and
                           hold Lessee harmless from any and all claims and
                           expenses accruing with respect to the Rejected Lease
                           Facility,  except for claims arising from willful
                           misconduct or negligence of the Lessee.  If a
                           Transferee  Management  Agreement is entered  into,
                           the Lessee shall permit the Lessor to make all
                           decisions required of the Lessee under the Transferee
                           Management  Agreement,  except for those  decisions
                           which Lessee is required to make as the licensee of
                           the Rejected  Lease  Facility.  If from or after the
                           Effective Date Lessor and Lessee enter into an
                           Interim  Management  Agreement pursuant to Subsection
                           4.D.1., any Transferee Management Agreement shall
                           automatically become a Submanagement  Agreement
                           governed by Subsections 4.D.2. and 4.D.3.


5.       COOPERATION WITH RESPECT TO OPERATIONS BETWEEN LESSOR AND LESSEE PRIOR
         TO EFFECTIVE DATE

               Commencing with the execution of this  Agreement,  the Lessee,
               Lessor and  Transferee  (when  identified) of a Rejected Lease
               Facility  shall work  cooperatively  with each other to design
               and implement a program

      1.       to insure  patients and employees  that the rejection of the
               Rejected  Lease and the resulting  change in management  will not
               adversely affect them,

      2.       to encourage all patients to remain patients of the Facility, and

      3.       to encourage all employees of such Facility  (whether
               employed by the Lessee or  employed  under a contract
               with an Affiliate of the Lessee) to remain  employees
               of the Facility.

               Notwithstanding the foregoing,  Lessee shall have no liability
               to Lessor or  Transferee  if  patients or  employees  leave or
               operation of the Facility is otherwise  adversely  affected by
               the Case or Cases.

6.       OPERATIONS TRANSFER AGREEMENT

                  On the  Effective  Date or such  earlier  date upon  which the
                  Lessor of a Rejected Lease  Facility  requests that the Lessee
                  thereunder  turn  over  operational  responsibility  for  such
                  Facility to a  Transferee,  such Lessee and  Transferee  shall
                  enter into an Operations Transfer Agreement.  With the support
                  of Lessors, Guarantor and Lessees shall use good faith efforts
                  to obtain timely approval of the Bankruptcy Court with respect
                  to any provisions of the Operations  Transfer  Agreement as to
                  which such approval is required.

7.       TRADE NAMES

                  The  Lessee  under a  Rejected  Lease  shall be deemed to have
                  assigned to the Lessor under such Rejected Lease the exclusive
                  right to use  without  objection  from any  Affiliate  of such
                  Lessee the Rejected Lease  Facility or Facilities'  Trade Name
                  or Trade Names, excluding the names "Sun" or "Mediplex" or any
                  derivatives  or  variations  thereof,  in  perpetuity  in  the
                  markets in which such  Rejected  Lease  Facility or Facilities
                  are located,  but without any  representation  that any Lessor
                  shall  have  the  right to use any  such  Trade  Name or Trade
                  Names, and no Lessee shall use such Rejected Lease Facility or
                  Facility  Trade Names in any business  that competes with such
                  Facility or Facilities.


<PAGE>


8.       HIGHLAND HILLS (FOUR SEASONS NURSING CENTER)

                  Guarantor and Lessees agree that any and all fines,  penalties
                  as of the date hereof and any interest that may be due thereon
                  with  respect to the Manor Care Lease  applicable  to the Four
                  Seasons  Nursing  Center at  Austin,  Texas  (a/k/a  "Highland
                  Hills"), shall be paid as and when due.


5.  SUN LEASES

      1.    INDUCEMENT FOR OMEGA CONSENTING TO ASSUMPTION OF LEASES

                  Lessees  and  Guarantor   agree  and   acknowledge   that  the
                  willingness of the Lessors to consent to the assumption of the
                  Sun Leases and to waive their  position that all of the Leases
                  have been  terminated is specifically  conditioned  upon their
                  agreement,  and the  finding  of the  Bankruptcy  Court in the
                  Assumption and Rejection  Order,  that,  except as provided in
                  Section XI and Section XII hereof, a default by one or more of
                  the  Lessees  under any of the Sun  Leases  which is not cured
                  after any  required  notice  and within  any  applicable  cure
                  period shall, at Lessors' option, be an Event of Default under
                  each of the Sun Leases, and that the Sun Leases (i) constitute
                  true and bona fide  leases,  (ii) are each part of and subject
                  to one of the four (4) Master  Leases,  i.e.,  the Sun Liberty
                  Master Lease,  Sun Qualicorp  Lease, Sun Delta I Master Lease,
                  and  Sun  Delta  II  Master  Lease,   (iii)  are  collectively
                  integrated and cross-defaulted  pursuant to provisions therein
                  specifically found to be enforceable and (iv) on and after the
                  Effective Date the Sun Leases will  collectively be integrated
                  and the  cross-default  provisions  contained  therein will be
                  enforceable.

2.       ASSUMPTION OF LEASES

                  The  Motion to Assume  and  Reject  shall  seek,  among  other
                  things,  authorization  to assume the Sun Leases.  On the date
                  upon which Lessees are required to satisfy Lessees'  Effective
                  Date  Obligations  as set forth in Section IX hereof,  Lessors
                  and Lessees  shall  execute  appropriate  instruments  in form
                  reasonably acceptable to the parties pursuant to which Lessees
                  assume the Sun Leases and Lessors acknowledge such assumption.

3.       LEASE AMENDMENTS

    1.    INTEGRATION OF ASSUMED MANOR CARE LEASES AND QUALICORP LEASE



<PAGE>


                           The Assumption and Rejection Order shall provide that
                           as of the Effective  Date the Leased  Property  under
                           the  Assumed  Manor Care Leases  shall be  integrated
                           into and become  subject to the Sun Qualicorp  Lease,
                           provided,  however,  that  the  options  to  purchase
                           contained  in the  Assumed  Manor Care  Leases  shall
                           continue  in full force and  effect,  and any and all
                           obligations  and  liabilities of the Lessee under the
                           Assumed  Manor Care Leases shall  become  obligations
                           and   liabilities   of  such  Lessee  under  the  Sun
                           Qualicorp Lease.


2.      ADDITION OF FEBRUARY/MARCH 1997 LEASES TO DELTA I MASTER LEASE AGREEMENT

                           The Assumption and Rejection Order shall provide that
                           as of the  Effective  Date  the  February/March  1997
                           Leases,  amended  as set forth  below,  shall  become
                           subject to the Sun Delta I Master Lease.

3.       AMENDMENTS TO SPECIFIC LEASES

                           Upon  the   assumption   thereof,   pursuant  to  the
                           Assumption and Rejection  Order the following  Leases
                           shall be amended as  hereinafter  set forth as of the
                           Effective Date:

    1.   FEBRUARY/MARCH 1997 LEASES

      (1)Each of the February/March 1997 Leases shall be amended as follows:

         (1) The definition of "Related Leases" shall be changed to include all
             of the Amended Delta I Facility Leases;

         (2) The renewal options shall be changed to be the same as the
             renewal options under the Original Delta I Facility Leases;

         (3) The   Standard   Terms  and  Conditions   shall  be  the
             Standard      Terms     and   Conditions  of the Original
             Delta  I  Facility  Leases, subject to Section V.B.3.d.  hereof.

     2.       DELTA I MASTER LEASE AGREEMENT AND DELTA II MASTER LEASE AGREEMENT

                                    The Delta I Master Lease  Agreement shall be
                                    amended   to  include   the   February/March
                                    Leases,  as  amended,   as  Facility  Leases
                                    thereunder,  and the  Delta I  Master  Lease
                                    Agreement  and the  Delta  II  Master  Lease
                                    Agreement  shall be amended  to  incorporate
                                    the Sun Delta I Master  Lease  Minimum  Rent
                                    Increase  and the Sun Delta II Master  Lease
                                    Minimum   Rent    Increase,    respectively,
                                    thereunder.

3.       LIBERTY LEASES

The  Liberty  Leases  shall  be  amended  to
incorporate the Sun Liberty Leases Minimum Rent Increase.


<PAGE>


4.       QUALICORP LEASE

The  Qualicorp  Lease  shall be  amended  as follows:

(1)      The Leased Property under the Assumed Manor Care Leases shall become
         subject to the Sun Qualicorp Lease;

(2)      From and after the  Effective  Date, the  Base  Rent  shall be the sum
         of the  Base  Rent  payable  under  the Qualicorp  Lease prior to
         amendment and the Base Rent Allocable to the Assumed Manor Care Leases.

5.       ADDITIONAL AMENDMENTS

 The  Sun  Leases  shall  be  further  amended  as may reasonably  be  required
 in  order  to  correct  and confirm  inter-document, intra-document and exhibit
 references  and conform  definitions of terms used in such Sun  Leases in order
 to carry out the  intent of  this Agreement.

6.       GUARANTY; ACCOUNTS RECEIVABLE

  1.              Guarantor and Lessees shall use good faith efforts to seek the
                  restructuring of Lessees as part of the plan of reorganization
                  of the Lessees and Guarantor in the Case or Cases, such that:

     1.                    The  Facilities  covered by the Sun Leases are leased
                           to one or more entities  ("Sun Leases  Subsidiaries")
                           whose only  business  is leasing and  operating  such
                           Facilities, the terms and conditions of such lease or
                           leases with  respect to each  Facility to be the same
                           as  the  terms  and   conditions  of  the  Sun  Lease
                           applicable to such Facility;

     2.                    The Sun Leases  Subsidiaries are owned by one or more
                           single-purpose entities which own only the Sun Leases
                           Subsidiaries (each such entity a "Parent");



<PAGE>


     3.                    The Parent  will  execute a guaranty  of payment and
                           performance  with  respect to such lease or all such
                           leases (and if more than one Parent, the Parents will
                           execute a joint and several  guaranty of payment and
                           performance  with respect to all such Leases) the
                           terms and conditions of which in all material
                           respects shall be the same as the terms and
                           conditions of the Guaranty,  except that it shall
                           (i) exclude the Rejected  Leases,  and (ii)
                           require  compliance with the financial  covenants
                           imposed by the principal working capital lenders upon
                           the ultimate  parent of Lessees upon the effective
                           date of the plan of  reorganization  with respect to
                           the Case or Cases,  as the same may be  amended,
                           modified  or  restated  from time to time  during the
                           term of such guaranty,  provided,  however,  that in
                           the event  that during the term of the guaranty there
                           are no such covenants, Guarantor and Lessees shall in
                           good faith negotiate reasonable financial covenants
                           applicable to the  Guarantor  that shall  provide
                           reasonable assurance to the Lessors that the
                           financial  condition of Guarantor shall be adequate
                           to enable it to  perform its obligations under the
                           guaranty; and

     4.                    Upon  completion of the  restructuring  described in
                           this Section VI.A.,  the Guaranty shall be released.

2.                If approval of the restructuring  described in Section VI.A is
                  denied by any regulatory  agency or agencies with respect to a
                  Sun Lease Facility or Sun Lease  Facilities  over which it has
                  jurisdiction  ("Denied  Facilities"),  then such restructuring
                  shall be  completed  as required  herein  with  respect to all
                  Lessees under the Sun Leases,  and all Sun Lease Facilities as
                  to which such  denial of  approval  is  inapplicable,  and the
                  Guaranty  shall be  reinstated  with respect to the Sun Leases
                  covering  the  Denied  Facilities  pursuant  to  the  plan  of
                  reorganization applicable to Guarantor.

3.                If Guarantor  and Lessees  determine in good faith that the
                  restructuring  described in Section VI.A shall not be part of
                  the plan of  reorganization  of Guarantor  and  Lessees,  then
                  Guarantor  and Lessees  agree that the Guaranty  shall be
                  reinstated  with  respect to all of the Sun Leases and amended
                  to require  compliance  with the  financial  covenants
                  imposed by the principal  working  capital lenders upon the
                  ultimate parent of Lessees upon the effective date of the
                  plan of reorganization with respect to the Case or Cases as
                  such covenants may be amended,  modified or restated from
                  time to time  during  the term of such  guaranty,  and in the
                  event  there are no such  covenants,  to  provide  that
                  Guarantor and Lessees shall in good faith negotiate reasonable
                  financial covenants applicable to the Guarantor that
                  shall  provide  reasonable  assurance to the Lessors that the
                  financial  condition of Guarantor  shall be adequate to
                  enable it to  perform its obligations under the Guaranty.

4.                In any event,  Guarantor and Lessees agree that unless the
                  Guarantor  under the reinstated  Guaranty is the ultimate
                  parent of all of the  Lessees  under the Sun  Leases,  if at
                  any time after the  effective  date of the plan of
                  reorganization applicable  to a Lessee  under a Sun Lease, but
                  only during the Term of such Sun Lease,  such  Lessee  shall
                  grant a security  interest in the accounts  receivable of the
                  Facility or  Facilities covered by such Sun Lease to any party
                  other than the Lessor  under such Sun Lease  ("Third  Party
                  A/R Lien"),  such Lessee shall at such time also use good
                  faith  efforts  to grant the Lessor  under such Sun Lease a
                  security  interest  in the  accounts  receivable  of such
                  Facility or Facilities,  provided, however, that the security
                  interest granted to such Lessor shall be subordinate to
                  such Third Party A/R Lien and be subject to such subordination
                  and  intercreditor  agreements as the holder of such
                  Third Party A/R Lien may in its sole discretion require.



<PAGE>


5.                For  purposes of this Section VI, the  obligations  imposed on
                  Lessees to act in "good faith" or to use "good faith  efforts"
                  shall not  require  the Lessees to take any action or position
                  that  they  determine  in  their  reasonable   judgment  would
                  adversely  affect (i) a  restructuring  by the Guarantor,  the
                  Lessees  or any of their  Affiliates,  or (ii) the  ability of
                  Guarantor,   the  Lessees  or  any  of  their   Affiliates  to
                  effectuate such a restructuring, in the Case or Cases.

7.       SECURITY AGREEMENTS

         On the date on which Lessees are required to satisfy Lessees' Effective
         Date  Obligations  as set forth in Section IX hereof,  (i)  Lessors and
         Lessees  shall  execute and deliver  such  amendments  to the  Security
         Agreements  and  financing   statements   related  thereto  as  may  be
         appropriate  as a  consequence  of the lease  amendments to be executed
         pursuant  to  Section  V  hereof  and the  change  of  name of  SunRise
         Healthcare  Corporation to SunBridge Healthcare  Corporation,  and (ii)
         the Lessor under the Sun Manor Care Leases shall  execute and deliver a
         UCC termination  statement  releasing the Lessor's security interest in
         accounts receivable under the Sun Manor Care Leases.

8.       SECURITY DEPOSITS

         1.       Complete  Care  Lease.  The  Lessor  under the  Complete  Care
                  Lease currently holds a Letter of Credit in the amount of One
                  Hundred  Sixty Two  Thousand  Dollars  ($162,000.00)  (the
                  "Complete  Care Letter of  Credit")  as security  for the
                  performance of the obligations of the Lessees under the
                  Complete Care Lease (the "Complete Care  Lessees").  Upon the
                  earlier to occur of (i) any event which  entitles the Complete
                  Care Lessor to draw upon the Complete  Care Letter of
                  Credit under the Complete Care Lease (other than the
                  Bankruptcy  Related Events (as defined in Section XI hereof)or
                  an Event of Default  arising out of a default under the
                  Complete  Care Lease that occurred  prior to the date of this
                  Agreement),  (ii) the  Effective  Date,  or (iii) the entry of
                  any other order by the  Bankruptcy  Court  authorizing
                  rejection  of the Complete  Care Lease,  the  Complete  Care
                  Lessor shall be entitled to draw upon the Complete  Care
                  Letter of Credit, and shall be entitled to retain the entire
                  proceeds thereof.

         2.       Delta I Master Lease

               1.          Delta I  currently  holds no  security  deposit  with
                           respect to the Delta I Master  Lease;  following  the
                           entry  of the  Assumption  and  Rejection  Order,  no
                           security  deposit  shall be required  with respect to
                           the Original Delta I Facility  Leases,  except if and
                           to the  extent  required  under  the  terms  of those
                           Leases.

               2.          Delta I currently  holds  Letters of Credit  totaling
                           Six Hundred Sixty Nine Thousand Three Hundred Seventy
                           Five Dollars ($669,375.00) (the "February /March 1997
                           Letters of Credit") pursuant to the Delta I Letter of
                           Credit  Agreement.  These Letters of Credit relate to
                           the  February/March   1997  Leases  which  are  being
                           incorporated  into  the  Sun  Delta I  Master  Lease.
                           Following the Effective Date,  Delta I shall continue
                           to hold the February/March  1997 Letters of Credit in
                           accordance  with the  terms of the  Delta I Letter of
                           Credit Agreement.



<PAGE>


3.       Delta II Master Lease.

                  Delta II currently  holds no security  deposit with respect to
                  the  Delta  II  Master  Lease;  following  the  entry  of  the
                  Assumption and Rejection  Order, no security  deposit shall be
                  required  with  respect to the Sun Delta II  Facility  Leases,
                  except if and to the extent  required under the terms of those
                  Leases.

4.       Liberty Leases.

                  The Lessors under the Liberty  Leases (the "Liberty  Lessors")
                  currently  hold cash  security  deposits  (the  "Liberty  Cash
                  Deposits")   pursuant  to  the  terms  of  the  Cash   Deposit
                  Agreements  identified on Exhibit B (the "Liberty Cash Deposit
                  Agreements")  in the amount of Six Hundred Four  Thousand Five
                  Hundred  Forty  Six and  15/100  Dollars (  $604,546.15).  The
                  Liberty Cash Deposit Agreements require a total deposit of Six
                  Hundred  Seventy  Four  Thousand  One  Hundred  Seventy  Three
                  Dollars ($674,173.00),  and on the Effective Date, the Liberty
                  Cash Deposit  shall be restored to the required  amount by the
                  Lessees  under the  Liberty  Leases.  Thereafter,  the Liberty
                  Lessors  shall  continue to hold the Liberty  Cash  Deposit in
                  accordance with the Liberty Cash Deposit Agreements.

5.       Manor Care Leases.

                  The  Lessors  under the Manor Care  Leases  (the  "Manor  Care
                  Lessors")  currently  hold a Letter of Credit in the amount of
                  Four  Hundred  Sixty Four  Thousand  Six Hundred  Seventy Five
                  Dollars  ($464,675.00)  (the "Manor Care Letter of Credit") as
                  security for the performance of the obligations of the Lessees
                  under the Manor Care Leases (the "Manor Care  Lessees").  Upon
                  the earlier to occur of (i) any event which entitles the Manor
                  Care  Lessors  to draw  upon the Manor  Care  Letter of Credit
                  under  the  existing  Security   Agreements  (other  than  the
                  Bankruptcy Related Events (as defined in Section XI hereof) or
                  an Event of Default  arising out of a default  under the Manor
                  Care  Leases  that   occurred   prior  to  the  date  of  this
                  Agreement), (ii) the Effective Date, or (iii) the entry of any
                  other Order by the Bankruptcy Court  authorizing the rejection
                  of one or  more of the  Manor  Care  Leases,  the  Manor  Care
                  Lessors  shall be  entitled to draw upon the Manor Care Letter
                  of Credit, and shall be entitled to retain the entire proceeds
                  thereof. The Manor Care Lessees shall not be obligated to make
                  any new security  deposit in connection with the Assumed Manor
                  Care Leases.

6.       Qualicorp Lease.

                  The Lessors under the Qualicorp  Lease currently hold a Letter
                  of Credit in the  amount of One  Million  Four  Hundred  Forty
                  Three  Thousand  Seven Hundred  Fifty Dollars  ($1,443,750.00)
                  (the "Qualicorp  Letter of Credit")  pursuant to the Qualicorp
                  Letter  of  Credit  Agreement.  The  Qualicorp  Lessors  shall
                  continue to hold the Qualicorp  Letter of Credit in accordance
                  with the terms of the Qualicorp Letter of Credit Agreement.



<PAGE>


         Lessors  acknowledge  and agree that the amounts  received  pursuant to
Paragraphs  VIII(A) and (E) above and the  relinquishment  of the Rejected Lease
Assets as  provided  herein are the only  damages  Lessors  will be  entitled to
receive as a result of the  rejection  of the Rejected  Leases if the  Effective
Date shall have occurred.

9.       SATISFACTION OF LESSEES' EFFECTIVE DATE OBLIGATIONS; STAY

          1.       ENTRY OF ASSUMPTION AND REJECTION ORDER WITHOUT STAY

                  If (i) the Assumption and Rejection  Order is entered prior to
                  Lessor's termination of the Forbearance  Agreement pursuant to
                  Sections  II.A.  1  or  Section   II.A.2   hereof,   and  (ii)
                  implementation  of the Assumption  and Rejection  Order is not
                  stayed by an appeal from the Assumption and Rejection Order or
                  a motion to reconsider  entry of the  Assumption and Rejection
                  Order,  then Lessees shall  satisfy  Lessees'  Effective  Date
                  Obligations  on the second  Business Day  following  the tenth
                  (10th)  day  after  the  date  on  which  the  Assumption  and
                  Rejection  Order is entered or such  earlier date on which the
                  parties may agree in writing,  notwithstanding  that an appeal
                  of  the  Assumption  and  Rejection   Order  or  a  motion  to
                  reconsider the same may have been filed.

          2.       EFFECT OF STAY

                1.         If (i) the Assumption and Rejection  Order is entered
                           prior  to  Lessor's  termination  of the  Forbearance
                           Agreement  pursuant  to Sections  II.A.  1 or Section
                           II.A.2   hereof  and  (ii)   implementation   of  the
                           Assumption and Rejection  Order is stayed upon appeal
                           of the Assumption  and Rejection  Order or the filing
                           of a motion to reconsider entry of the Assumption and
                           Rejection Order ("Stay"):

                      1.            Any party to this Agreement may by Notice to
                                    the other parties to this Agreement given on
                                    or  before  the tenth  (10th)  day after the
                                    effective date of the Stay ("10 Day Period")
                                    terminate this Agreement, effective upon the
                                    giving of such Notice;

                      2.            If this Agreement is not  terminated  within
                                    the  10  Day  Period   pursuant  to  Section
                                    IX.B.1.a.  above,  and  if the  Stay  is not
                                    lifted  on or  before  the one  hundred  and
                                    twentieth  (120th)  day after the  effective
                                    date of the Stay  ("120 Day  Period"),  then
                                    any party to this Agreement may by Notice to
                                    the other  parties to this  Agreement  given
                                    within ten (10) days after the expiration of
                                    the  120  Day  Period  (the  "Second  10 Day
                                    Period") terminate this Agreement, effective
                                    upon the giving of such Notice;



<PAGE>


                      3.            If this Agreement is not  terminated  within
                                    the  10 Day  Period  or  the  Second  10 Day
                                    Period  pursuant  to  Section   IX.B.1.a  or
                                    Section IX.B.1.b. above, respectively,  then
                                    any party to this Agreement may by Notice to
                                    all   other   parties   to  this   Agreement
                                    terminate this Agreement (effective upon the
                                    giving of such Notice) if

                           (1)              the District Court which  considered
                                            the appeal  remands  the  proceeding
                                            back  to the  Bankruptcy  Court  for
                                            further non-ministerial  proceedings
                                            or  vacates   the   Assumption   and
                                            Rejection Order, or

                           (2)              the   District   Court   denies  the
                                            appeal,  the District Court's ruling
                                            is appealed to the  Appellate  Court
                                            for the Third  Circuit and a stay is
                                            entered with respect to that appeal;

                     4.             If this Agreement is not  terminated  within
                                    the  10 Day  Period  or  the  Second  10 Day
                                    Period  pursuant  to  Section   IX.B.1.a  or
                                    Section IX.B.1.b.  above,  respectively,  or
                                    pursuant to Section IX.B.1.C. above:

                           (1)      This Agreement shall terminate at the option
                                    of Lessors, effective upon the giving of
                                    Notice to all other parties, if

                                    (1)      The Stay is lifted,  and  Lessees
                                             fail to satisfy  Lessees' Effective
                                             Date  Obligations  within the time
                                             and as required by Section IX.B.2.,
                                             hereof;

                                    (2)             Guarantor    and    Lessees
                                                     propose or support any plan
                                                     of reorganization  which if
                                                     confirmed would (a) require
                                                     rejection of any of the Sun
                                                     Leases  or  (b)  materially
                                                     and  adversely  affect  (i)
                                                     any   of   the   Facilities
                                                     leased under the Sun Leases
                                                     or (ii)  the  ability  of a
                                                     Lessee under a Sun Lease to
                                                     perform   its   obligations
                                                     under such Lease;

                                    (3)              Any Facility covered by a
                                                     Sun Lease suffers (i) loss
                                                     of licensure or (ii)
                                                     decertification  from
                                                     participation in the
                                                     Medicare and/or Medicaid
                                                     programs.

                         (2)      Without the  termination of the Agreement, the
                                  obligation of a Lessor to forbear,  as set
                                  forth in Section II hereof,  shall
                                  terminate  at the  option  of  Lessors,
                                  effective  upon the  giving of Notice to all
                                  other parties:



<PAGE>


                                     (1)       With  respect to any  Facility
                                               covered by a Sun Lease to which
                                               such Lessor is a party as to
                                               which any  Regulatory  Agency (as
                                               defined in Section  XII hereof)
                                               sets forth in writing a failure
                                               of such  Facility or  the  Lessee
                                               thereof  to  comply  with  an
                                               applicable   law,   regulation or
                                               administrative order with respect
                                               to  which  the scope and severity
                                               of the potential  penalty  for
                                               such  non-compliance  is  one or
                                               more  of  (i)  loss of licensure,
                                               (ii)  decertification  of  the
                                               Facility  from  participation  in
                                               the Medicare and/or Medicaid
                                               programs,  (iii)  appointment of
                                               a temporary  manager or (iv)
                                               denial of payment for new
                                               admissions  (such Facility a
                                               "Threatened  Facility" and such
                                               failure a "Regulatory  Failure"),
                                               and the  Lessee of the Threatened
                                               Facility fails to cure the
                                               Regulatory  Failure within the
                                               period of time required by such
                                               Regulatory  Agency or, if longer,
                                               the period of time set forth in
                                               a Plan of Correction accepted by
                                               such Regulatory Agency, and

                                      (2)      With  respect to the Sun Lease
                                               under  which the  Threatened
                                               Facility  is  leased,  but only
                                               as to the  Threatened  Facility,
                                               provided,  however,  that
                                               notwithstanding the termination
                                               of such forbearance,  no Event of
                                               Default under such Sun Lease that
                                               exists  because  of, or arises or
                                               may arise out of, the  Regulatory
                                               Failure shall constitute an Event
                                               of Default with respect to any
                                               other Facility under such Sun
                                               Lease or under any other Sun
                                               Lease.

           2.              If a  Stay  is  issued  and  this  Agreement  is  not
                           terminated pursuant to Section IX.B.I, the date on or
                           before which Lessees shall satisfy Lessees' Effective
                           Date  Obligations  shall be the second  Business  Day
                           following  the date on which the Stay is lifted.  For
                           purposes of this  Section IX, if a Stay is issued and
                           lifted,  and a new Stay is  issued on or prior to the
                           earlier of the (i) Effective Date, or (ii) the second
                           Business Day after the day on which the original Stay
                           is  lifted,  a Stay  shall  be  deemed  to have  been
                           continuously in effect.

           3.              Notwithstanding  the provisions of Section IV.A, if a
                           Stay is issued and this  Agreement is not  terminated
                           pursuant to Section IX.B.1, Base Rent with respect to
                           the Rejected Lease Facilities for the period from and
                           after  the  end of the  Accrual  Period  through  the
                           earlier of (i) the  termination  of this Agreement or
                           (ii) the Effective Date shall be payable, as and when
                           due according to the terms of such  Rejected  Leases,
                           at the rate of fifty  percent  (50%) of the Base Rent
                           with respect to the Rejected  Lease  Facilities,  and
                           the  remaining  fifty percent (50%) of such Base Rent
                           shall  be  waived  by the  Lessors  of such  Rejected
                           Leases for such period.

3.                Guarantor   and  Lessees   shall  (i)  oppose  any  motion  to
                  reconsider the  Assumption  and Rejection  Order and (ii) seek
                  affirmation  of the  Assumption  and Rejection  Order upon any
                  appeal thereof.

<PAGE>

10.      RIGHT OF FIRST OFFER


         Provided  that (1) the Sun Leases are  assumed  pursuant to a final and
         non-appealable   Assumption  and  Rejection   Order,   (2)  a  plan  of
         reorganization  is  confirmed  with  respect to each of the Lessees and
         Guarantor and (3) no uncured material Event of Default exists under the
         applicable  Sun Lease (s),  the Lessees of the Sun Leases  shall have a
         right of first offer on the following terms and conditions:

      1.          In the event any Lessor or Lessors (such Lessor,  or
                  collectively,  such Lessors  "Seller")  shall wish to sell a
                  Facility or Facilities  then  subject to an Sun Lease or Sun
                  Leases  ("Designated  Assets")  at any time during the Fixed
                  Term of such Sun Lease, it shall first in writing offer to
                  enter into  negotiations  for such sale with the Lessee or
                  Lessees thereof or any  Affiliate of such Lessee or Lessees
                  ("Seller's  Notice").  If such Lessee or Lessees or an
                  Affiliate thereof  ("Buyer")  shall within ten (10) days from
                  receipt of Seller's  Notice give Seller Notice (as defined in
                  the applicable  Lease)("Buyer's  Notice")  that it wishes to
                  enter into good faith  negotiations  for the purchase of the
                  Designated  Assets ("Notice of Interest") within the specified
                  time period,  Seller and Buyer shall enter into good
                  faith  negotiations  for a period of thirty (30) days from
                  Lessor's  receipt of the Notice of Interest  ("Negotiation
                  Period") for the sale and purchase of the Designated  Assets.
                  If during the Negotiation  Period a written  agreement
                  with respect to the purchase and sale of the Designated Assets
                  ("Purchase Agreement") is executed by Seller and Buyer, Seller
                  shall sell and Buyer shall purchase the Designated Assets on
                  the terms and conditions set forth in the Purchase  Agreement.
                  If (i) a Notice of Interest is not given as set forth above,
                  for a period of one (1) year after the  expiration of the time
                  within which a Notice of Interest was required to be given,
                  or (ii) a Notice of Interest is given but Seller and Buyer do
                  not execute a Purchase Agreement during the Negotiation
                  Period, for a period of one (1) year from the expiration of
                  the Negotiation Period, if Seller in its sole discretion
                  continues to desire to sell the Designated  Assets,  Seller
                  shall be free to sell the Designated  Assets to any third
                  party for a Cash Price that is not less than ninety eight
                  percent (98%) of a Cash Price offered  unconditionally  by
                  written  notice to Seller by Buyer during the  Negotiation
                  Period,  free from any claim of any right to purchase the
                  Designated  Assets by Buyer, Guarantor or any Affiliate of
                  Buyer or Guarantor.  For purposes of the  preceding  sentence,
                  a "Cash Price" shall be  the  amount to be  received by Seller
                  in cash or  equivalent  upon the  closing  of the sale net of
                  prorations  and expenses  to be borne by Seller.  If the
                  Designated  Assets are not sold  within  such one (1) year
                  period,  before entering into  negotiations  with any third
                  party for the sale of the  Designated  Assets Seller shall
                  first offer to enter into  negotiations  for the sale thereof
                  to Buyer pursuant to the process  described above. Any sale to
                  a third party shall be subject to the leasehold rights of the
                  applicable Lessee(s).

       2.         The  foregoing  right of first offer is not  assignable by the
                  Lessee to which it is given  hereunder  except to an Affiliate
                  of such Lessee.



<PAGE>


      3.          The foregoing  right of first offer shall  simultaneously  and
                  automatically  terminate  as to any Sun Lease with  respect to
                  which the right of first offer would  otherwise be applicable,
                  upon termination of such Sun Lease, and the foregoing right of
                  first offer  shall not under any  circumstances  be  extended,
                  modified or in any way altered except by a writing executed by
                  the Lessor of the Sun Lease to which such right applies.

11.      RELEASES AND WAIVERS

      1.          Upon the  Effective  Date,  Guarantor and each Lessee does for
                  itself and its  successors  and  assigns  forever  release and
                  discharge  each Lessor and its  current  and former  officers,
                  directors, partners, shareholders, attorneys, agents, parents,
                  Affiliates, employees, successors and assigns from any and all
                  actions,  causes of action,  claims, debts,  demands,  duties,
                  expenses,  judgments,  liabilities and  obligations  whatever,
                  whether known or unknown,  which the releasing  party has, has
                  had or may  have  against  any or all  Lessors  and the  above
                  described  persons and entities,  whether  presently  known or
                  unknown,  whether from contract or tort, from the beginning of
                  time to the Effective Date,  arising out of or connected with,
                  directly or indirectly, any of the Leases.



<PAGE>


       2.         Except for the  Lessees'  Monetary  Obligations,  Lessors
                  acknowledge  and agree that the Lessees  have paid Lessors
                  all Base Rent,  Minimum Rent and other monetary  amounts owing
                  to Lessors under the Leases  through the date hereof. Upon the
                  Effective  Date,  other than with respect to amounts  owing
                  under the  Rejected  Leases which shall be handled as set
                  forth in Section IV hereof and amounts  owing for the period
                  between the date of this  Agreement  and the  Effective
                  Date under the Leases that pursuant to Section V hereof are to
                  be assumed,  each Lessor for itself and its successors
                  and assigns shall  forever  release and  discharge each Lessee
                  and Guarantor and their current and former  officers,
                  directors, partners,  shareholders,  attorneys, agents,
                  parents, Affiliates,  employees, successors and assigns, from
                  any and all actions, claims, debts, demands, duties, expenses,
                  judgments,  liabilities and obligations whatever,whether known
                  or unknown,  whether from contract or tort, from the beginning
                  of time to the Effective  Date,  arising out of or connected
                  with,  directly or indirectly,  any of the Leases or the
                  Guaranty,  including without  limitation amounts owing under
                  the Leases by Lessees to Lessors through the Effective Date,
                  provided,  however,  that except as provided in Section XII
                  hereof,  the  foregoing  release of each Lessee and  Guarantor
                  with respect to  non-monetary obligations  shall apply only to
                  non-monetary  obligations  of the Lessees under the Leases on
                  or before the date of this Agreement,  and as to non-monetary
                  defaults that are subject to the provisions of Section XII
                  hereof there is no release.  In addition,  upon the Effective
                  Date,  Lessors shall have waived (i) their claims that all of
                  the Leases, other than the Complete Care Leases (as to which
                  no claim of  termination  has been made by the  applicable
                  Lessor), have been  terminated (and shall have withdrawn all
                  issued notices of termination  with respect to the Leases),
                  (ii)any and all damage claims relative to the Rejected Leases,
                  (iii) any and all liens against the accounts receivable
                  related to the Facilities  governed by the Sun Leases or
                  Rejected Leases and (iv),  notwithstanding  any provision of
                  any Lease to the contrary,  the right to claim that any of the
                  following conditions  concerning, actions taken by or against,
                  or transactions  entered into by, any Lessee,  Guarantor or
                  Affiliate thereof that exist or occur during the Cases or
                  pursuant to a plan of  reorganization  in the Cases requires
                  the consent of any Lessor,  or constitutes,  or gives rise to,
                  a default or an Event of Default under any of the Leases:
                  (a) the  insolvency or financial  condition of any of the
                  foregoing,  the commencement of a case under Title 11, United
                  States Code, the appointment of or taking possession by a
                  trustee,  custodian or receiver,  or any other act of
                  insolvency,  (b) the liquidation,  dissolution, merger,
                  consolidation or sale of substantially all assets, or the
                  beginning of any process related thereto,  (c) the assignment,
                  pledge or encumbrance of any property, (d) the sale, pledge,
                  hypothecation or transfer of any stock, (e) the  acceleration
                  of any obligation for borrowed money as a result of the
                  commencement  of any case under Title 11, United States Code,
                  (f) the entry into any financing  transaction,  including
                  without limitation exit financing under any plan of
                  reorganization or debtor in possession financing or (g)
                  any restructuring,  whether pursuant to a plan of
                  reorganization  or  otherwise,  of the corporate or capital
                  structure,  or ownership,  of such  entities,  including
                  without  limitation  transfers  of ownership  of the stock
                  or assets of any of the  foregoing  (as to such matters in
                  clause (iv), "Bankruptcy Related Events").

12.      PHYSICAL PLANT REQUIREMENTS

        1.       As used in this Section, the following terms shall
                 mean as follows:

                  Actual Knowledge: The actual knowledge of the administrator of
the Facility in question or, if at the applicable time there is no administrator
of such Facility, the person then acting in such capacity.

                  Citation:  Any physical plant  deficiency set forth in writing
with respect to any Facility by any Regulatory  Agency with respect to which the
scope and severity of the potential  penalty for such  deficiency is one or more
of the  following:  loss of  licensure,  decertification  of the  Facility  from
participation  in  the  Medicare  and/or  Medicaid  programs,  appointment  of a
temporary  manager or denial of payment for new admissions,  provided the Lessee
of such Facility has Actual Knowledge thereof.

                  Pendency of the Case:  With  respect to each Case,  the period
beginning  on the date hereof and  continuing  through  the  earliest of (i) any
party obtaining a  post-confirmation  judgment  against the Lessee or Lessees to
which such Case pertains;  (ii) the "Effective Date" as defined in the confirmed
plan of reorganization  with respect to such Case; (iii) dismissal of such Case;
and (iv) conversion of such Case to a Chapter 7.

                  Physical Plant Abeyance Period:    The  Forbearance  Period,
or if the  Assumption  and Rejection  Order is entered, with respect to each
Case, the Pendency of the Case.

                  Physical Plant  Requirements:  All  obligations of Lessees
under the Sun Leases relating to the  maintenance,  repair and improvement of
the Facilities covered thereby.

                  Regulatory  Agency:  Any governmental body or agency, or
Medicare  intermediary,  having regulatory  oversight over a Facility or a
Lessee.



<PAGE>


                  Tier A Improvements:  The physical plant improvements set
                  forth on attached Exhibit G.

        2.        The  obligations  imposed  on the  Lessee  in each  Sun  Lease
                  relating to Physical Plant Requirements shall continue in full
                  force and  effect  throughout  the  Pendency  of the Case with
                  respect to the Lessee thereunder.

        3.        Notwithstanding  any  provisions  to the  contrary  in the Sun
                  Leases, the Lessees under the Sun Leases shall make the Tier A
                  improvements  within six (6) months from the  Effective  Date,
                  subject  to  delays  beyond  the  reasonable  control  of such
                  Lessees.

        4.        During the Physical Plant Abeyance Period, notwithstanding any
                  provisions of any Sun Lease to the contrary, the rights of the
                  Lessors  of the  Sun  Leases  with  respect  to the  following
                  matters shall be as follows:

            1.             In the event any Facility  covered by a Sun Lease has
                           prior to the date hereof  received,  or shall  during
                           the period from the date hereof to the Effective Date
                           receive, a Citation,  the obligations  imposed on the
                           Lessee  in each  Sun  Lease  relating  thereto  shall
                           continue  in full  force and  effect  throughout  the
                           Pendency  of the  Case  with  respect  to the  Lessee
                           thereunder,   but  the  Lessor's  rights  during  the
                           Pendency of the Case in the event of a breach thereof
                           shall be  subject  to the  limitations  set  forth in
                           Section XI.D.3

            2.             In the event that any  Facility  covered by a Sun
                           Lease shall  receive a Citation  with respect to such
                           Facility  during the Pendency of the Case but after
                           the  Effective  Date, the failure of the Lessee under
                           such Sun Lease to cure the  condition  that is the
                           subject of the Citation  within the period of time
                           required by the issuer of the Citation or, if longer,
                           the period of time set forth in a Plan of Correction
                           accepted by the issuer of the Citation,  shall
                           constitute an Event of Default under such Sun Lease,
                           and in the event such Event of Default is not cured
                           within  thirty (30) days  following  Notice of such
                           Event of Default from the Lessor under such
                           Sun Lease to the Lessee  thereunder,  the Lessor
                           thereunder shall have the right to terminate such Sun
                           Lease with respect to the cited Facility, which right
                           shall be  exercisable  upon ten (10) days' prior
                           Notice to such  Lessee,  provided,  however,  that an
                           Event of Default  described in this  Section  XI.D.2.
                           shall not constitute  an Event of Default with
                           respect to any other  Facility  under such Sun Lease
                           or under any other Sun Lease.



<PAGE>


             3.            In the event that any Facility  covered by a Sun
                           Lease shall  receive a Citation  during the Pendency
                           of the Case and prior to the  Effective  Date,  the
                           Lessor  under such Sun Lease  shall not have the
                           right to (Y) declare an Event of Default with respect
                           to such default,  or (Z) take any other action with
                           respect to terminating the Lease as  a  consequence
                           of such default  until the expiration of the Physical
                           Plant  Abeyance  Period,  provided, however,  that
                           nothing  herein  contained shall  prevent or restrict
                           a Lessor from seeking an order of the Bankruptcy
                           Court  compelling  Lessee to cure the condition that
                           is the subject of the Citation with respect to any
                           such default within the period of time required by
                           the issuer of the  Citation  or, if longer,  the
                           period of time set forth in a Plan of Correction
                           accepted by the issuer of the Citation

         5.       Upon expiration of the Physical Plant Abeyance  Period,  if
                  (i) a default with respect to a Physical Plant  Requirement
                  shall exist or thereafter  occur,  (ii) Notice of such default
                  is given to the  applicable  Lessee after  expiration of the
                  Physical Plant  Abeyance  Period and (iii) such default is not
                  cured within the  applicable  cure period  provided in
                  such Sun Lease (which cure period shall run from the date of
                  the Notice  given after the  expiration  of the Physical
                  Plan Abeyance  Period whether or not a Notice of default has
                  been given to such Lessee prior to the expiration of the
                  Physical Plant Abeyance  Period),  the Lessor under the Lease
                  as to which such default exists shall have the right to
                  declare the same to be an Event of Default  thereunder,  and
                  upon such declaration such Lessor and the Lessors of all
                  other Sun Leases shall have the rights and remedies  provided
                  in the Sun Leases and by law with respect to such Event
                  of Default.

13.      NOTICES

         All notices,  certificates or other  communications  hereunder shall be
sufficiently  given and shall be deemed given upon confirmed  receipt or refusal
of receipt if sent by certified mail, return receipt requested, postage prepaid,
overnight delivery or facsimile  transmission,  with proper address as indicated
below.  Any of the parties  hereto may, by written  notice  given to each of the
other parties, designate any address or addresses to which notices, certificates
or other  communications  shall be sent when  required as  contemplated  by this
Agreement.  Until  otherwise  provided by the respective  parties,  all notices,
certificates and communications to each of them shall be addressed as follows:



         (a)      if to Guarantor and Lessees:
                                 Sun Healthcare Group, Inc.
                                 101 Sun Avenue NE
                                 Albuquerque, NM 87109
                                 Attn: President
                                 Telephone No.: (505) 798-5607
                                 Facsimile No.: (505) 798-6635


         With copy to:           Sun Healthcare Group, Inc.
                                 101 Sun Avenue NE
                                 Albuquerque, NM 87109
                                 Attn: General Counsel and Matthew Patrick
                                 Telephone No.: (505) 798-5607
                                 Facsimile No.: (505) 798-6635



<PAGE>


         And a copy to:          The Nathanson Group PLLC
         (which shall not        1411 Fourth Avenue, Suite 905
         constitute notice):     Seattle, WA 98101
                                 Attn: Randi S. Nathanson
                                 Telephone No.: (206) 623-6239
                                 Facsimile No.: (206) 623-1738


         (b)      If to Lessors:
                                 Omega Healthcare Investors, Inc.
                                 900 Victors Way, Suite 350
                                 Ann Arbor, Michigan 48108
                                 Attn:  F. Scott Kellman and Susan Allene Kovach
                                 Telephone No.:  (734) 887-0200
                                 Facsimile No.:  (734) 887-0201

         With copy to            Dykema Gossett PLLC
         (which shall not        1577 North Woodward Avenue, Suite 300
         constitute notice):     Bloomfield Hills, Michigan 48304
                                 Attn:  Fred J. Fechheimer
                                 Telephone No.:  (248) 203-0743
                                 Facsimile No.:  (248) 203-0763

         And copy to
         (which shall not
         constitute notice):     Greenberg Traurig
                                 227 W. Monroe
                                 Suite 3500
                                 Chicago, IL       60606
                                 Attn:    Keith J. Shapiro
                                 Telephone No.:  (312) 456-8405
                                 Facsimile No.:    (312) 456-8435

14.      INTENTIONALLY DELETED

15.      MISCELLANEOUS

       1.         Entire Agreement.  There are no oral or written  agreements or
                  representations  between the  parties  hereto  affecting  this
                  Agreement.  Except  as  elsewhere  expressly  provided  to the
                  contrary  herein,  this  Agreement   supersedes  any  and  all
                  previous    negotiations,    arrangements,    representations,
                  agreements  and  understandings,   if  any,  between  Lessors,
                  Guarantor  and Lessees with  respect to the subject  matter of
                  this Agreement.

       2.         Amendments in Writing.  No provision of this  Agreement may be
                  amended  except by an agreement in writing  signed by Lessors,
                  Guarantor and Lessees.



<PAGE>


      3.          Counterparts.  This  Agreement  may be  executed  in  separate
                  counterparts,  each of which shall be  considered  an original
                  when each party has executed and delivered to the other one or
                  more copies of this Agreement.

      4.          Headings.  The headings in this Agreement are for  convenience
                  of reference only and shall not limit or otherwise  affect the
                  meaning hereof.

      5.          Governing  Law.  This  Agreement  shall  be  governed  by  and
                  construed  in  accordance  with  the  laws  of  the  state  of
                  Michigan,   except  as  to  matters  which,  under  applicable
                  procedural  conflicts of laws rules require the application of
                  laws of another state.



                                                        SIGNATURE PAGES FOLLOW


<PAGE>




         IN WITNESS  WHEREOF the parties  hereto have executed this Agreement as
of the __ day of October, 1999.


                                           DELTA INVESTORS I, LLC

                                           By:  OMEGA HEALTHCARE INVESTORS, INC.
                                                Its Sole Member




                                           By:     /s/ F. SCOTT KELLMAN
                                                  ----------------------------
                                                   F. Scott Kellman
                                            Its:   Chief Operating Officer


                                           DELTA INVESTORS II, LLC

                                           By:  OMEGA HEALTHCARE INVESTORS, INC.
                                                Its Sole Member




                                           By:    /s/ F. SCOTT KELLMAN
                                                  -----------------------------
                                                     F. Scott Kellman
                                              Its:   Chief Operating Officer



                                           OMEGA HEALTHCARE INVESTORS, INC.





                                            By:    /s/ F. SCOTT KELLMAN
                                                   ----------------------------
                                                      F. Scott Kellman
                                               Its:   Chief Operating Officer





                                                     OHI (ILLINOIS), INC.


<PAGE>






                                           By:   /s/ F. SCOTT KELLMAN
                                                 ------------------------------
                                                     F. Scott Kellman
                                             Its:   Chief Operating Officer



                                               SUN HEALTHCARE GROUP, INC.,
                                                a Delaware corporation




                                            By: /s/ MATTHEW PATRICK
                                               ------------------------------
                                                   Matthew Patrick
                                             Its:  Vice President and Treasurer

                                        SIGNATURES OF LESSEES ON FOLLOWING PAGE


<PAGE>


                                                     LESSEES:

                                                     Care  Enterprises,  Inc., a
                                                     Delaware  corporation  Care
                                                     Enterprises  West,  a  Utah
                                                     corporation     Circleville
                                                     Health Care Corp.,  an Ohio
                                                     corporation  Beckley Health
                                                     Care Corp., a West Virginia
                                                     corporation        Braswell
                                                     Enterprises,     Inc.,    a
                                                     California      corporation
                                                     Coalinga     Rehabilitation
                                                     Center,      a     Delaware
                                                     corporation  Dunbar  Health
                                                     Care   Corp.,   a  Delaware
                                                     corporation       Fullerton
                                                     Rehabilitation   Center,  a
                                                     California      corporation
                                                     Marion Health Care Corp., a
                                                     Delaware        corporation
                                                     Meadowbrook  Rehabilitation
                                                     Center,     a    California
                                                     corporation        Mediplex
                                                     Management  of  Palm  Beach
                                                     County,   Inc.,  a  Florida
                                                     corporation  Newport  Beach
                                                     Rehabilitation   Center,  a
                                                     California      corporation
                                                     Putnam Health Care Corp., a
                                                     West  Virginia  corporation
                                                     Regency  Rehab   Hospitals,
                                                     Inc.,      a     California
                                                     corporation   Regency-North
                                                     Carolina,   Inc.,  a  North
                                                     Carolina        corporation
                                                     Regency-Tennessee,  Inc., a
                                                     Tennessee  corporation  San
                                                     Bernardino   Rehabilitation
                                                     Hospital,      Inc.,      a
                                                     California      corporation
                                                     Salem Health Care Corp.,  a
                                                     West  Virginia  corporation
                                                     Shandin               Hills
                                                     Rehabilitation   Center,  a
                                                     California      corporation
                                                     SunBridge        Healthcare
                                                     Corporation,  a New  Mexico
                                                     corporation   Vista   Knoll
                                                     Rehabilitation      Center,
                                                     Inc.,      a     California
                                                     corporation


                                                     By:  /s/ Matthew Patrick
                                                          ---------------------
                                                     Their:      Agent



<PAGE>



                                LIST OF EXHIBITS

EXHIBIT A -            Leases and Subleases and Names of Health Care Facilities

EXHIBIT B -            Security Agreements

EXHIBIT C -            Assumption and Rejection Order

EXHIBIT D -            Schedule of Amounts Owed

EXHIBIT E -            Operations Transfer Agreement

EXHIBIT F -            Sun Transaction Documents

EXHIBIT G -            Tier A Improvements