| a.   | Annual      Base Salary.  Sun shall pay to Mr. Shaul a base salary at      an annual rate of $400,000 ("Base Salary"), such salary to be payable in      accordance with Sun's customary payroll practices as in effect from time      to time (but not less frequently than monthly).  The annual base      salary will be reviewed at least annually for possible merit increases and      any increase in Mr. Shaul's annual base salary rate shall thereafter      constitute "Base Salary" for purposes of this  Agreement. |
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| b.   | Cash      Bonus/Incentive Compensation.  In addition to the Base      Salary provided for in Section 3(a) above, Mr. Shaul shall be entitled to      receive an annual bonus (“Bonus”) in accordance with the Sun Healthcare      Group, Inc.  Executive Bonus Plan, as it may be amended from      time to time by the Compensation Committee of the Board of Directors;      provided, however, that no amendment shall be  effective |
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----

|   | if      it reduces the percentage of Base Salary that would constitute the minimum      or maximum potential amount of the Bonus as compared to the prior year,      unless such amendment has been agreed to in writing by Mr. Shaul. The      Bonus shall be payable at the same time as other annual bonuses are paid      to senior management personnel with respect to that fiscal year. Subject      to the provisions of Section 6, in order to have earned and to be paid any      such Bonus, Mr. Shaul must be employed by Sun on the date of such      payment.  It is intended that the Bonus described in this      Section 3(b) qualify as “performance based compensation” under Section      162(m) of the Code to the extent necessary to preserve Sun’s ability to      deduct such Bonus. |
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| c.   | Equity      Incentive.  Mr. Shaul shall be entitled to the following      equity incentive as of the date his employment  begins: |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | A      non-qualified stock option ("Stock Option") to purchase 150,000 shares of      Common Stock of Sun at an exercise price per share equal to the fair      market value of the Common Stock on the date of this      Agreement.  One-fifth of the shares of Common Stock underlying      the Stock Option will vest effective as of February 14, 2005, and      one-fifth will vest on each of the next four anniversaries of February 14,      2005 thereafter, provided that Mr. Shaul is employed by Sun or any of its      subsidiaries on each such date of vesting.  The Stock Option      shall have a 7 year term.  Mr. Shaul acknowledges that Sun has      satisfied its obligation to grant such Stock  Option. |
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| 2.   | Restricted      stock units ("RSUs") with respect to 20,000 shares of Sun common      stock.  One-fourth of the restricted stock units will vest on      February 14, 2006, and one-fourth will vest on each of the next three      anniversaries of February 14, 2006 thereafter.  Mr. Shaul      acknowledges that Sun has satisfied its obligation to grant such      RSUs. |
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| 3.   | If,      during the Term, Mr. Shaul's employment with Sun is terminated for any      reason other than his death or Disability (as defined in Section 5(e)),      Good Cause (as defined in Section 5(a)) or his voluntary resignation      without Good Reason (as defined in Section 5(c)), then the unvested      portion of his Stock Options and RSUs will thereupon immediately be      vested. |
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| d.   | Retirement      and Benefit Plans.  During his employment, Mr. Shaul      shall be entitled to participate in all retirement plans, health benefit      programs, insurance programs and other similar employee welfare benefit      arrangements available generally to senior executive officers of      Sun.  Such plans, programs and arrangements are subject to      change during employment at the sole discretion of the      Company. |
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| e.   | Paid      Time Off.  Mr. Shaul shall be entitled to paid time off      in addition to holiday and sick time, of not less than 160 hours per      year. |
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----

| f.   | Indemnification      Liability/Insurance.  Mr. Shaul shall be entitled to      indemnification by Sun to the fullest extent permitted by applicable law      and the charter and bylaws of Sun.  In addition, Sun shall      maintain during Mr. Shaul's employment customary director's and officers'      liability insurance and Mr. Shaul shall be covered by such      insurance. |
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| g.   | Taxes.  All      compensation payable to Mr. Shaul shall be subject to withholding for all      applicable federal, state and local income taxes, occupational taxes,      Social Security and similar mandatory  withholdings. |
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| a.   | Termination      by Sun for "Good Cause." Sun may at any time, by written notice to      Mr. Shaul at least five (5) business days prior to the date of termination      specified in such notice and specifying the acts or omissions believed to      constitute Good Cause (as defined below), terminate Mr. Shaul as an      officer and employee and from all other positions with Sun for Good      Cause.  Sun may relieve Mr. Shaul of his duties and      responsibilities pending a final determination of whether Good Cause      exists, and such action shall not constitute Good Reason (as defined      below) for purposes of this Agreement.  Payment to Mr. Shaul      upon a termination for Good Cause is set forth in Section      6(a).  "Good Cause" for termination shall mean any one of the      following: |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | Any      criminal conviction under the laws of the United States or any state or      other political subdivision thereof which, in the good faith determination      of the Chief Executive Officer of Sun, renders Mr. Shaul unsuitable as an      officer or employee of Sun. |
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----

| 2.   | Mr.      Shaul's continued failure to substantially perform the duties reasonably      requested by the Chief Executive Officer of Sun and commensurate with his      position as Executive Vice President and Chief Financial Officer of Sun      (other than any such failure resulting from his incapacity due to his      physical or mental condition) after a written demand for substantial      performance is delivered to him by the Chief Executive Officer of Sun,      which demand specifically identifies the manner in which the Chief      Executive Officer of Sun believes that he has not substantially performed      his duties, and which performance is not substantially corrected by him      within ten (10) days of receipt of such demand;  and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Any      material workplace misconduct or willful failure to comply with Sun's      general policies and procedures as they may exist from time to time by Mr.      Shaul which, in the good faith determination of the Chief Executive      Officer of Sun, renders Mr. Shaul unsuitable as an officer or      employee. |
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| b.   | Termination      by Sun without Good Cause.  Sun may at any time, by      written notice to Mr. Shaul at least five (5) business days prior to date      of termination specified in such notice, terminate Mr. Shaul as an officer      or employee and from all other positions with Sun.  If such      termination is made by Sun other than by reason of Mr. Shaul's death,      Disability (as defined in Section 5(e)) and Good Cause does not exist,      such termination shall be treated as a termination without Good Cause and      Mr. Shaul shall be entitled to payment in accordance with Section      6(b). |
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| c.   | Termination      by Mr. Shaul for Good Reason.  Mr. Shaul may, at any time      at his option within sixty (60) days following an event or condition that      constitutes Good Reason (as defined below), resign for Good Reason as an      officer and employee and from all other positions with Sun by written      notice to Sun at least thirty (30) days prior to the date of termination      specified in such notice; provided, however, that Sun has not      substantially corrected the event or condition that would constitute Good      Reason prior to the date of termination.  Payment to Mr. Shaul      upon a termination for Good Reason is set forth in Section      6(b). |
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|   | 1. | A      meaningful and detrimental reduction in Mr. Shaul’s authority, duties or      responsibilities or a meaningful and detrimental change in his reporting      responsibilities; |
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|   | 2. | A      material failure of Sun to comply with the compensation provisions as set      forth in Sections 3(a) - 3(c) or the benefit provisions as set forth in      Sections 3(d) - 3(f) (collectively, the “Benefits”) (other than a      reduction of Benefits uniformly applicable to other members of senior      management); or |
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----

|   | 3. | A      material relocation of Mr. Shaul’s principal work location to a place      other than Orange County or Los Angeles County,  California; |
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| d.   | Voluntary      Resignation.  Mr. Shaul may, at any time at his option      with thirty (30) calendar days written notice to Sun, voluntarily resign      without Good Reason as an officer and employee and from all positions with      Sun.  Payment to Mr. Shaul upon his voluntary resignation      without Good Reason is set forth in Section 6(a).  Resignation      from employment shall automatically constitute resignation from all      positions of any subsidiary or affiliated  corporation. |
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| e.   | Death      or Disability.  Mr. Shaul's employment under this      Agreement shall terminate automatically as of the date of Mr. Shaul's      death.  Sun, at any time by written notice to Mr. Shaul at least      five (5) business days prior to the date of termination specified in such      notice, terminate Mr. Shaul as an officer and employee and from all other      positions with Sun by reason of his Disability.  “Disability”      shall mean any physical or mental condition or illness that prevents Mr.      Shaul from performing his duties hereunder in any material respect for a      period of 120 substantially consecutive calendar days, as determined by a      physician selected by Sun and reasonably acceptable to Mr. Shaul or, if      Mr. Shaul is incapacitated, reasonably acceptable to the Director of      Medicine or equivalent senior physician at a hospital of Mr. Shaul's      choice.  Payment to Mr. Shaul upon his termination by reason of      his death or Disability is set forth in Section  6(a). |
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| a.   | Payment      Upon Termination for Good Cause, Resignation without Good Reason, Death or      Disability.  In the event of termination of his      employment pursuant to Sections 5(a), 5(d) or 5(e), Mr. Shaul, or his      estate where applicable, shall be paid any earned but unpaid Base Salary      through the date of termination and any accrued and unused paid time off      through the date of termination in accordance with Company policy, which      shall be paid to Mr. Shaul or his estate or beneficiary, as applicable, in      a lump sum in cash upon or promptly following (and in all events within 30      days after) the date of termination of employment (collectively, the      “Accrued Obligations”).  In addition, in the case of a      termination of employment pursuant to Sections 5(e), but not Sections 5(a)      or 5(d), Mr. Shaul or his estate shall be paid (i) any accrued and unpaid      bonus for any prior fiscal year, which shall be paid to Mr. Shaul or his      estate or beneficiary, as applicable, in a lump sum in cash at the time      that annual bonuses are paid to senior management personnel with respect      to that fiscal year, but in any event within |
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----

|   | seventy-five      (75) days after the conclusion of the fiscal year to which such Bonus      relates; and (ii) a pro rata portion (based on the number of days of      employment in the fiscal year of termination divided by 365 or 366, as      applicable) of the bonus, if any, for the fiscal year in which the      termination occurs, which shall be paid at the time that annual bonuses      are paid to senior management personnel with respect to that fiscal year,      but in any event within seventy-five (75) days after the conclusion of the      fiscal year to which such Bonus relates.  Mr. Shaul shall also      receive his vested benefits in accordance with the terms of Sun's      compensation and benefit plans, and his participation in such plans and      all other perquisites shall cease as of the date of termination, except to      the extent Mr. Shaul may elect to continue coverage as under any welfare      benefit plans as required by Part 6, Title I of the Employee Retirement      Income Security Act of 1974, as amended.  Upon a termination      under Section 5(a), 5(d) or 5(e), Mr. Shaul shall not be entitled to any      compensation or benefits under this Agreement except as set forth in this      Section 6(a). |
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| b.   | Payment      Upon Termination by Sun without Good Cause or by Mr. Shaul for Good      Reason.  In the event of termination of employment      pursuant to Sections 5(b) or 5(c), Mr. Shaul shall be entitled to a lump      sum severance payment in an amount equal to two year's Base Salary, with      such amount to be paid to Mr. Shaul in the month immediately following the      month in which Mr. Shaul’s termination of employment      occurs.  Mr. Shaul shall also be entitled to: (i) any earned      Bonus pursuant to Section 3(b) for the fiscal year prior to the fiscal      year of termination in the event Mr. Shaul was employed the entire prior      fiscal year but is not employed by Sun on the date said Bonus is paid,      payable to Mr. Shaul in a lump sum in cash at the time that annual bonuses      are paid to senior management personnel with respect to that fiscal year,      but in any event within seventy-five (75) days after the conclusion of the      fiscal year to which such Bonus relates; (ii) an amount equal to the      annual bonus compensation which he would have earned for the year in which      his termination occurs (determined by multiplying the amount Mr. Shaul      would have received based upon actual performance had his employment      continued through the end of the fiscal year by a fraction, the numerator      of which is the number of days during the year of termination that Mr.      Shaul is employed by the Company and the denominator of which is 365 or      366, as applicable), payable to Mr. Shaul at the time that annual bonuses      are paid to senior management personnel with respect to that fiscal year,      but in any event within seventy-five (75) days after the conclusion of the      fiscal year to which such Bonus relates; and (iii) payment of any Accrued      Obligations payable as set forth in Section      6(a).  Notwithstanding the foregoing, Mr. Shaul's right to      receive the severance payment hereunder shall be conditioned upon his      execution of a release in favor of Sun, which shall not be inconsistent      with the terms of this Agreement and which Mr. Shaul shall deliver to the      Company within twenty-one (21) days following the date of his termination      of employment.  Mr. Shaul's participation in any other      retirement and benefit plans and perquisites shall cease as of the date of      termination, except Mr. Shaul and his eligible dependents (as determined      under Sun's health plan) shall be entitled to continuing coverage under      Sun's health plans on the same basis as active employees until the earlier      of (i) the first |
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|   |  anniversary      of the date of termination or (ii) the date on which Mr. Shaul or his      eligible dependents become eligible to participate in a plan of a      successor employer. |
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| c.   | "Change      in Control." For purposes of this Agreement, a "Change in Control"      shall be deemed to have occurred if any of the following events      occurs: |
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| 1.   | Any      "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of      the Securities and Exchange Act of 1934, as amended (the "1934 Act")),      other than a trustee or other fiduciary holding securities under an      employee benefit plan of Sun (an "Acquiring Person"), is or becomes the      "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly      or indirectly, of more than 33 1/3% of the then outstanding voting stock      of Sun; |
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| 2.   | A      merger or consolidation of Sun with any other corporation, other than a      merger or consolidation which would result in the voting securities of Sun      outstanding immediately prior thereto continuing to represent (either by      remaining outstanding or by being converted into voting securities of the      surviving entity) at least 51% of the combined voting power of the voting      securities of Sun or surviving entity outstanding immediately after such      merger or consolidation; |
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| 3.   | A      sale or other disposition by Sun of all or substantially all of Sun's      assets; |
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| 4.   | During      any period of two (2) consecutive years, individuals who at the beginning      of such period constitute the Board of Directors and any new director      (other than a director who is a representative or nominee of an Acquiring      Person) whose election by the Board of Directors or nomination for      election by Sun's shareholders was approved by a vote of at least a      majority of the directors then still in office who either were directors      at the beginning of the period or whose election or nomination was      previously so approved, no longer constitute a majority of the Board of      Directors; |
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----

| a.   | Gross-Up      Payments.  Notwithstanding anything herein to the      contrary, if it is determined that any payment to Mr. Shaul pursuant to      this Agreement would be subject to the excise tax imposed by Section 4999      of the Internal Revenue Code or any interest or penalties with respect to      such excise tax (such excise tax, together with any interest or penalties      thereon, is herein referred to as an “Excise Tax”), then Mr. Shaul shall      be entitled to an additional payment (a “Gross-Up Payment”) in an amount      that will place Mr. Shaul in the same after-tax economic position that he      would have enjoyed if the Excise Tax had not applied to the      payment.  The amount of the Gross-Up Payment shall be determined      by an accounting firm retained by Sun (the “Accounting Firm”) using such      formulas as the Accounting Firm deems appropriate.  No Gross-Up      Payment shall be payable hereunder if the Accounting Firm determines that      the payments are not subject to an ExciseTax. |
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| b.   | Determination      of Gross-Up Payment.  Subject to the provisions of      Section 7(c), all determinations required under this Section 7, including      whether a Gross-Up Payment is required, the amount of the payments      constituting parachute payments, and the amount of the Gross-Up Payment,      shall be made by the Accounting Firm, which shall provide detailed      supporting calculations both to Sun and Mr. Shaul within fifteen business      days of Mr. Shaul’s date of termination or any other date reasonably      requested by Sun or Mr. Shaul on which a determination under Section 7 is      necessary or advisable.  Within five days of the receipt by Mr.      Shaul and Sun of the Accounting Firm’s determination of the initial      Gross-Up Payment, Sun shall pay the amount of such Gross-Up Payment to the      applicable taxing authorities for the benefit of Mr. Shaul. If the      Accounting Firm determines that no Excise Tax is payable by Mr. Shaul, Sun      shall cause the Accounting Firm to provide Mr. Shaul and Sun with an      opinion that Sun has substantial authority under the Internal Revenue Code      and regulations thereunder not to report an Excise Tax on Mr. Shaul’s      federal income tax return.  Any determination by the Accounting      Firm shall be binding upon Mr. Shaul and Sun. If the initial Gross-Up      Payment is insufficient to cover the amount of the Excise Tax that is      ultimately determined to be owing by Mr. Shaul with respect to any payment      (hereinafter an “Underpayment”), Sun, after exhausting its remedies under      Section 7(c) below, shall promptly pay to the applicable taxing      authorities for the benefit of Mr. Shaul (or directly to Mr. Shaul in the      event Mr. Shaul previously paid the related tax amounts) an additional      Gross-Up Payment in respect of theUnderpayment. |
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| c.   | Procedures.  Mr.      Shaul shall notify Sun in writing of any claim by the Internal Revenue      Service that, if successful, would require the payment by Sun of a      Gross-Up Payment.  Such notice shall be given as soon as      practicable after Mr. Shaul knows of such claim and Mr. Shaul shall      apprise Sun of the nature of theclaim |
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|   | and      the date on which the claim is requested to be paid.  Mr. Shaul      agrees not to pay the claim until the expiration of the thirty-day period      following the date on which Mr. Shaul notifies Sun, or such shorter period      ending on the date the taxes with respect to such claim are due (the      “Notice Period”).  If Sun notifies Mr. Shaul in writing prior to      the expiration of the Notice Period that it desires to contest the claim,      Mr. Shaul shall: (i) give Sun any information reasonably requested by Sun      relating to the claim; (ii) take such action in connection with the claim      as Sun may reasonably request, including, without limitation, accepting      legal representation with respect to such claim by an attorney reasonably      selected by Sun and reasonably acceptable to Mr. Shaul; (iii) cooperate      with Sun in good faith in contesting the claim; and (iv) permit Sun to      participate in any proceedings relating to the claim.  Mr. Shaul      shall permit Sun to control all proceedings related to the claim and, at      its option, permit Sun to pursue or forgo any and all administrative      appeals, proceedings, hearings, and conferences with the taxing authority      in respect of such claim.  If requested by Sun, Mr. Shaul agrees      either to pay the tax claimed and sue for a refund or contest the claim in      any permissible manner and to prosecute such contest to a determination      before any administrative tribunal, in a court of initial jurisdiction and      in one or more appellate courts as Sun shall determine; provided, however,      that if Sun directs Mr. Shaul to pay such claim and pursue a refund, Sun      shall pay such claim on Mr. Shaul’s behalf (the “Claim      Payment”).  Sun’s control of the contest related to the claim      shall be limited to the issues related to the Gross-Up Payment and Mr.      Shaul shall be entitled to settle or contest, as the case may be, any      other issue raised by the Internal Revenue Service or other taxing      authority.  If Sun does not notify Mr. Shaul in writing prior to      the end of the Notice Period of its desire to contest the claim, Sun shall      pay to the applicable taxing authorities on Mr. Shaul’s behalf an      additional Gross-Up Payment in respect of the excess parachute payments      that are the subject of the claim.  Any Gross-Up Payment shall      be made without additional tax consequences to Mr.  Shaul. |
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| d.   | Repayments.  If,      after a Claim Payment is made by Sun, Mr. Shaul becomes entitled to a      refund with respect to the claim to which such Claim Payment relates, Mr.      Shaul shall pay Sun the amount of the refund (together with any interest      paid or credited thereon after taxes applicable thereto).  If,      after a Claim Payment is made by Sun, a determination is made that Mr.      Shaul shall not be entitled to any refund with respect to the claim and      Sun does not promptly notify Mr. Shaul of its intent to contest the denial      of refund, then the amount of the Claim Payment shall offset the amount of      the additional Gross-Up Payment then owing to Mr.  Shaul. |
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| e.   | Further      Assurances.  Sun shall indemnify Mr. Shaul and hold him      harmless, on an after-tax basis, from any costs, expenses, penalties,      fines, interest or other liabilities (“Losses”) incurred by Mr. Shaul with      respect to the exercise by Sun of any of its rights under Section 7,      including, without limitation, any Losses related to Sun’s decision to      contest a claim or any imputed income to him resulting from any Claim      Payment or action taken on Mr. Shaul’s behalf by Sun      hereunder.  Sun shall pay all legal fees and expenses incurred      under Section 7 and shall promptly |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | reimburse      Mr. Shaul for the reasonable expenses incurred by him in connection with      any actions taken by Sun or required to be taken by Mr. Shaul      hereunder.  Sun shall also pay all of the fees and expenses of      the Accounting Firm, including, without limitation, the fees and expenses      related to the opinion referred to in Section  7(b). |
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| f.   | Section      409A.  Notwithstanding anything to the contrary in this      Section 7, any payment under this Section 7 shall be paid to Mr. Shaul      promptly but in no event later than the last day of the end of Mr. Shaul’s      taxable year following the taxable year in which Mr. Shaul (or Sun) pays      or remits the related taxes. |
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| a.   | Confidentiality.  Mr.      Shaul agrees that he will not at any time, during or after the term of      this Agreement, except in performance of his obligations to Sun hereunder      or with the prior written consent of the Chief Executive Officer of Sun,      directly or indirectly disclose to any person or organization any secret      or “Confidential Information” that Mr. Shaul may learn or has learned by      reason of his association with Sun.  The term “Confidential      Information” means any information not previously disclosed to the public      or to the trade by Sun’s management with respect to Sun’s products,      services, business practices, facilities and methods, salary and benefit      information, trade secrets and other intellectual property, systems,      procedures, manuals, confidential reports, product price lists, pricing      information, customer lists, financial information (including revenues,      costs or profits associated with any of Sun's products or lines of      business), business plans, prospects or opportunities, compliance and      clinical processes, policies andprocedures. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Exclusive      Property.  Mr. Shaul confirms that all Confidential      Information is and shall remain the exclusive property of      Sun.  All business records, papers and documents kept or made by      Mr. Shaul relating to the business of Sun shall be and remain the property      of Sun.  Upon the termination of Mr. Shaul’s employment for any      reason or upon the request of Sun at any time, Mr. Shaul shall promptly      deliver to Sun, and shall not without the consent of the Board of      Directors of Sun, retain copies of, Confidential Information, or any      written materials not previously made available to the public, or records      and documents made by Mr. Shaul or coming into Mr. Shaul’s possession      concerning the business or affairs ofSun. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Nonsolicitation.  Mr.      Shaul shall not, during his employment under this Agreement, and for two      (2) years following the termination of this Agreement, for whatever reason      or cause, in any manner induce, attempt to induce, or assist others to      induce, or attempt to induce, any employee, agent, representative or other      person associated with Sun or any customer, patient or client of Sun to      terminate his or her association or contract with Sun, nor in any manner,      directly or indirectly, interfere with the relationship between Sun and      any of such persons or entities. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| e.   | Relief.  Without      intending to limit the remedies available to Sun, Mr. Shaul acknowledges      that a breach of any of the covenants in Section 8 may result in material      irreparable injury to Sun for which there is no adequate remedy at law,      that it will not be possible to measure damages for such injuries      precisely and that, in the event of such a breach or threat thereof, Sun      shall be entitled to obtain a temporary restraining order and/or a      preliminary or permanent injunction restraining Mr. Shaul from engaging in      activities prohibited by Section 8 or such other relief as may be required      to specifically enforce any of the covenants in Section  8. |
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| a.   | Amendments,      Waivers, Etc.  No provision of this Agreement may be      modified, waived or discharged unless such waiver, modification or      discharge is agreed to in writing signed by both parties.  No      waiver by either party hereto at any time of any breach by the other party      hereto of, or compliance with, any condition or provision of this      Agreement to be performed by such other party shall be deemed a waiver of      similar or dissimilar provisions or conditions at the same or at any prior      or subsequent time. |
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| b.   | Validity.  The      invalidity or unenforceability of any provision of this Agreement shall      not affect the validity or enforceability of any other provision of this      Agreement, which shall remain in full force and  effect. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Entire      Agreement.  This Agreement sets forth the entire      agreement and understanding of the parties hereto with respect to the      matters covered hereby and supersedes all prior agreements and      understandings of the parties with respect to the subject matter      hereof.  No agreements or representations, oral or otherwise,      express or implied, with respect to the subject matter hereof have been      made by either party which are not expressly set forth in this Agreement      and this Agreement shall supersede all prior agreements, negotiations,      correspondence, undertakings and communications of the parties, oral or      written, with respect to the subject matter  hereof. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Resolution      of Disputes.  Any disputes arising under or in connection      with this Agreement may, at the election of Mr. Shaul or Sun, be resolved      by binding |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | arbitration,      to be held in Orange County, California in accordance with the rules and      procedures of the American Arbitration Association.  If      arbitration is elected, Mr. Shaul and Sun shall mutually select the      arbitrator.  If Mr. Shaul and Sun cannot agree on the selection      of an arbitrator, each party shall select an arbitrator and the two      arbitrators shall select a third arbitrator who shall resolve the      dispute.  Judgment upon the award rendered by the arbitrator may      be entered in any court having jurisdiction thereof.  Nothing      herein shall limit the ability of Sun to obtain the injunctive relief      described in Section 8(d) pending final resolution of matters that are      sent to arbitration. |
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| e.   | Attorneys’      Fees.  Sun shall pay or reimburse Mr. Shaul on an      after-tax basis for all costs and expenses (including, without limitation,      court costs, costs of arbitration and reasonable legal fees and expenses      which reflect common practice with respect to the matters involved)      incurred by Mr. Shaul as a result of any claim, action or proceeding (i)      contesting or otherwise relating to the existence of Good Cause in the      event of Mr. Shaul's termination of employment during the Term for Good      Cause; (ii) enforcing any right, benefit or obligation under this      Agreement, or otherwise enforcing the terms of this Agreement or any      provision thereof; or (iii) asserting or otherwise relating to the      existence of Good Reason in the event of Mr. Shaul’s termination of      employment during the Term for Good Reason; provided, however that this      provision shall not apply if the relevant trier-of-fact determines that      Mr. Shaul claim or position was without reasonable    foundation. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Governing      Law.  The validity, interpretation, construction and      performance of this Agreement shall be governed by the laws of the State      of California. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Notice.  For      the purpose of this Agreement, notice, demands and all other communication      provided for in this Agreement shall be in writing and shall be deemed to      have been duly given when delivered by hand delivery or overnight courier      or mailed by United States certified or registered mail, return receipt      requested, postage prepaid, addressed as follows or to other addresses as      each party may have furnished to theother: |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h.   | Successors      and Assigns.  This Agreement shall be binding upon and      shall inure to the benefit of the parties hereto and their respective      successors and assigns. |
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| i.   | Section      409A. |
|----------------|--------------------|

| 1.   | If      Mr. Shaul is a “specified employee” within the meaning of Treasury      Regulation Section 1.409A-1(i) as of the date of Mr. Shaul’s separation      from service (within the meaning of Treasury Regulation Section      1.409A-1(h)(1), without regard to the optional alternative definitions      available thereunder) and any payment or benefit provided in Section 6      hereof constitutes a “deferral of compensation” within the meaning of      Section 409A of the Code, Mr. Shaul shall not be entitled to any such      payment or benefit until the earlier of: (i) the date which is six (6)      months after his separation from service for any reason other than death,      or (ii) the date of his death.  The provisions of this paragraph      shall only apply if, and to the extent, required to avoid the imputation      of any tax, penalty or interest pursuant to Section 409A of the      Code.  Any amounts otherwise payable to Mr. Shaul upon or in the      six (6) month period following his separation from service that are not so      paid by reason of this Section 9(i)(1) shall be paid (without interest) as      soon as practicable (and in all events within thirty (30) days) after the      date that is six (6) months after Mr. Shaul’s separation from service (or,      if earlier, as soon as practicable, and in all events within thirty (30)      days, after the date of his death). |
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| 2.   | To      the extent that any reimbursements pursuant to Sections 4, 6(b), 7(e) and      9(e) are taxable to Mr. Shaul, any reimbursement payment due to Mr. Shaul      pursuant to such provision shall be paid to Mr. Shaul on or before the      last day of Mr. Shaul’s taxable year following the taxable year in which      the related expense was incurred.  The benefits and      reimbursements pursuant to Sections 4, 6(b), 7(e) and 9(e) are not subject      to liquidation or exchange for another benefit and the amount of such      benefits and reimbursements that Mr. Shaul receives in one taxable year      shall not affect the amount of such benefits and reimbursements that Mr.      Shaul receives in any other taxableyear. |
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| 3.   | It      is intended that any amounts payable under this Agreement and Sun’s and      Mr. Shaul’s exercise of authority or discretion hereunder shall comply      with and avoid the imputation of any tax, penalty or interest under      Section 409A of the Code.  This Agreement shall be construed and      interpreted consistent with thatintent. |
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| /s/      L. Bryan Shaul               |
|---------------------------------------|
| L.      BRYAN SHAUL                   |
|                                  |
|                                  |
| SUN      HEALTHCARE GROUP, INC.  |
|                                  |
|                                  |
| By:      /s/ Michael Newman           |
| Michael      Newman                   |
| Its      Executive Vice President     |
|                                  |

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