----

| a.   | Annual      Base Salary.  SHSS      shall pay to Mr. Mathies a base salary at an annual rate of $400,000      (“Base Salary”), such salary to be payable in accordance with SHSS’s      customary payroll practices (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. Mathies’ annual base salary rate shall      thereafter constitute “Base Salary” for purposes of this      Agreement. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Cash      Bonus/Incentive Compensation.  In addition to the Base      Salary provided for in Section 3(a) above, Mr. Mathies 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 of SHG; provided,      however, that no amendment shall be effective 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. Mathies.  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. Mathies must be employed by SHSS 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 the ability to deduct such Bonus.      In the event the minimum financial performance threshold is met as set      forth in the Plan, Mr. Mathies’ minimum Bonus shall be no less than 10% of      his Base Salary for the applicable fiscalyear. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Equity      Incentive.  Mr. Mathies 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 100,000 shares of      Common Stock of SHG at an exercise price per share equal to the fair      market value of the Common Stock. One-fifth of the shares of Common Stock      underlying the Stock Option will vest on the later of (x) the date on      which the Stock Option is issued or (y) the date on which Sun Healthcare      Group, Inc. emerges from Chapter 11 bankruptcy proceedings (the “Initial      Vesting Date”) and thereafter an additional 20% of the shares of Common      Stock underlying the Stock Option will vest on each of the first four      anniversaries of the Initial Vesting Date provided Mr. Mathies is employed      by SHSS or any other subsidiary of SHG on each such date of vesting. The      Stock Option shall have a 7 year term.  Mr. Mathies acknowledges      that SHG has satisfied its obligation to grant such Stock      Option. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2.   | If,      during the Term, Mr. Mathies’ employment with SHSS 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 will thereupon immediately be      vested. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Retirement      and Benefit Plans.  During the Term, Mr. Mathies 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 SHSS providing      services to SunBridge from time to time. Such plans, programs and      arrangements are subject to change during the Term at the sole discretion      of the Company. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Paid      Time Off.  Mr. Mathies shall      be entitled to paid time off, in addition to holiday and sick time, of not      less than 160 hours per year, in accordance with SunBridge’s policy for      paid time off. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Indemnification      Liability/Insurance.  Mr. Mathies shall be entitled to      indemnification by SunBridge and/or SHSS to the fullest extent permitted      by applicable law and the charter and by laws of SunBridge and/or SHSS. In      addition, SunBridge shall maintain during Mr. Mathies’ employment      customary director’s and officers’ liability insurance and Mr. Mathies      shall be covered by such insurance. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Taxes.  All      compensation payable to Mr. Mathies shall be subject to withholding for      all applicable federal, state and local income taxes, occupational taxes,      Social Security and similar mandatory  withholdings. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Termination      by SHSS for “Good Cause.  SunBridge and/or SHSS may at      any time, by written notice to Mr. Mathies 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. Mathies as      an officer and employee and from all other positions with SHSS, SunBridge      and the other LTC subsidiaries for Good Cause. SunBridge and/or SHSS may      relieve Mr. Mathies 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. Mathies 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 Compensation Committee of SHG, renders Mr. Mathies unsuitable as an      officer of SunBridge and the other LTC subsidiaries or      employee. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Mr.      Mathies’ continued failure to substantially perform the duties reasonably      requested by the Chief Executive Officer (“CEO”) of SHG and commensurate      with his position as President of SunBridge and the other LTC subsidiaries      (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 CEO of SHG, which demand      specifically identifies the manner in which the CEO of SHG believes that      he has not substantially performed his duties, and which performance is      not substantially corrected by him within a mutually agreed upon period of      time for performance of such demand;and |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Any      material workplace misconduct or willful failure to comply with      SunBridge’s general policies and procedures as they may exist from time to      time by Mr. Mathies which, in the good faith determination of the      Compensation Committee of SHG, renders Mr. Mathies unsuitable as an      officer or employee. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Termination      by SunBridge without Good Cause.  SunBridge      and/or SHSS may at any time, by written notice to Mr. Mathies at least      five (5) business days prior to date of termination specified in such      notice, terminate Mr. Mathies as an officer or employee and from all other      positions with SHSS, SunBridge and the other LTC subsidiaries. If such      termination is made by SunBridge and/or SHSS other than by reason of Mr.      Mathies’ 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. Mathies shall be entitled to payment in accordance with      Section 6(b). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Termination      by Mr. Mathies for Good Reason.  Mr. Mathies 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 SHSS, SunBridge      and the other LTC subsidiaries by written notice to SunBridge at least      thirty (30) days prior to the date of termination specified in such      notice; provided, however, that |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | SunBridge      and/or SHSS has not substantially corrected the event or condition that      would constitute Good Reason prior to the date of termination. Payment to      Mr. Mathies upon a termination for Good Reason is set forth in Section      6(b). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | A      meaningful and detrimental reduction in Mr. Mathies’ authority, duties or      responsibilities or a meaningful and detrimental change in his reporting      responsibilities (including being required to report to someone other than      the Richard K. Matros); |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | A      material failure of SunBridge and/or SHSS to comply with the compensation      provisions set forth in Sections 3(a) - 3(c) or the benefits provisions      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 |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | A      material relocation of Mr. Mathies’ principal work location from its      location in Orange County,California; |
|--------|----|------------------------------------------------------------------------------------------------------------------------------|

| d.   | Voluntary      Resignation.  Mr. Mathies may, at any time at his option      with thirty (30) calendar days written notice to SunBridge, voluntarily      resign without Good Reason as an officer and employee and from all      positions with SHSS, SunBridge and the other LTC subsidiaries. Payment to      Mr. Mathies 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Death      or Disability.  Mr. Mathies’ employment under this      Agreement shall terminate automatically as of the date of Mr. Mathies’      death. SunBridge and/or SHSS may, at any time by written notice to Mr.      Mathies at least five (5) business days prior to the date of termination      specified in such notice, terminate Mr. Mathies as an officer and employee      and from all other positions with SHSS, SunBridge and the other LTC      subsidiaries by reason of his Disability. “Disability” shall mean any      physical or mental condition or illness that prevents Mr. Mathies’ 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 SunBridge and/or SHSS and reasonably acceptable to Mr. Mathies      or, if Mr. Mathies is incapacitated, reasonably acceptable to the Director      of Medicine or equivalent senior physician at Hoag Hospital. Payment to      Mr. Mathies upon his termination by reason of his death or Disability is      set forth in Section 6(a). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 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. Mathies, 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. Mathies 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. Mathies or his estate shall be paid (i) any      accrued and unpaid bonus for any prior fiscal year, which shall be paid to      Mr. Mathies 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      seventy-five (75) days after the conclusion of the fiscal year to which      such Bonus relates, and (ii) a pro rata portion (determined by multiplying      the bonus compensation he would have earned had he been employed for the      full year by a fraction the numerator of which shall be the number of      calendar days in the year in which his termination occurs that precede      such termination, and the denominator of which shall be the total number      of days in such year) of the bonus, if any, for the fiscal year in which      the termination occurs, which shall be paid at the same time as other      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. Mathies shall also receive his vested      benefits in accordance with the terms of SHG’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. Mathies 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.      Mathies shall not be entitled to any compensation or benefits under this      Agreement except as set forth in this Section  6(a). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Payment      Upon Termination by SunBridge without Good Cause or by Mr. Mathies      for Good Reason. In the event of termination of employment pursuant      to Sections 5(b) or 5(c), Mr. Mathies shall be entitled to the      following payments and benefits: |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | Mr.      Mathies shall be entitled to a lump sum severance payment in the amount of      two year’s Base Salary or, in the event such termination occurs on or      within two years following the date of a Change in Control, three year’s      Base Salary, with      such amount to be paid to Mr. Mathies on the date which is six (6) months      and one day after the date on which such termination      occurs.  Notwithstanding the foregoing, Mr. Mathies’      right to receive the severance payment hereunder shall be conditioned upon      his |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  |   | execution      of a release in favor of SHG, which shall not be inconsistent with the      terms of this Agreement and which Mr. Mathies shall deliver to SHG within      twenty-one (21) days following the date of his termination of      employment. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Mr.      Mathies shall be entitled to: (i) any earned but unpaid Bonus pursuant to      Section 3(b), payable to Mr. Mathies 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 Bonus which he would have earned for the year in which      his termination occurs (based upon actual performance had his employment      continued through the end of the fiscal year), payable to Mr. Mathies 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) any Accrued Obligations payable to Mr. Mathies as set forth in      Section 6(a). |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Mr.      Mathies’ participation in any other retirement and benefit plans and      perquisites shall cease as of the date of termination, except Mr. Mathies      and his eligible dependents (as determined under SHG’s health plan) shall      be entitled to continuing coverage under SHG’s health plans on the same      basis as active employees until the earlier of (i) the first anniversary      of the date of termination or (ii) the date of Mr. Mathies or his      eligible dependents become eligible to participate in a plan of a      successor employer. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Change      in Control.  For purposes of this Section 6, a “Change in      Control” shall be deemed to have occurred if any of the following events      occurs: |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 SHG (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 SHG; |
|--------|-----------------------------------------------------------------------------------------------------------|

| 2.   | A      merger or consolidation of SHG with any other corporation, other than a      merger or consolidation which would result in the voting securities of SHG      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 SHG or surviving entity outstanding immediately after such      merger or consolidation; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | A      sale or other disposition by SHG of all or substantially all of SHG’s      assets; |
|----------------|-------------------------------------------------------------------------------------------------|

| 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 SHG’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; |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Gross-Up      Payments.  Notwithstanding anything herein to the      contrary, if it is determined that any payment to Mr. Mathies 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. Mathies shall      be entitled to an additional payment (a  “Gross-Up |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Payment”)      in an amount that will place Mr. Mathies 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 SHG (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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 SHG and Mr. Mathies within fifteen      business days of Mr. Mathies’ date of termination or any other date      reasonably requested by SHG or Mr. Mathies on which a determination under      Section 7 is necessary or advisable. Within five days of the receipt by      Mr. Mathies and SHG of the Accounting Firm’s determination of the initial      Gross-Up Payment, SHG shall pay the amount of such Gross-Up Payment to the      applicable taxing authorities for the benefit of Mr. Mathis. If the      Accounting Firm determines that no Excise Tax is payable by Mr. Mathies,      SHG shall cause the Accounting Firm to provide Mr. Mathies and SHG with an      opinion that SHG has substantial authority under the Internal Revenue Code      and regulations thereunder not to report an Excise Tax on Mr. Mathies’      federal income tax return. Any determination by the Accounting Firm shall      be binding upon Mr. Mathies and SHG. 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. Mathies with respect to any payment      (hereinafter an “Underpayment”), SHG, after exhausting its remedies under      Section 7(c) below, shall promptly pay to the applicable taxing      authorities for the benefit of Mr. Mathies (or directly to Mr. Mathies in      the event Mr. Mathies previously paid the related tax amounts) an      additional Gross-Up Payment in respect of the  Underpayment. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Procedures.  Mr.      Mathies shall notify SHG in writing of any claim by the Internal Revenue      Service that, if successful, would require the payment by SHG of a      Gross-Up Payment. Such notice shall be given as soon as practicable after      Mr. Mathies knows of such claim and Mr. Mathies shall apprise SHG of the      nature of the claim and the date on which the claim is requested to be      paid. Mr. Mathies agrees not to pay the claim until the expiration of the      thirty-day period following the date on which Mr. Mathies notifies SHG, or      such shorter period ending on the date the taxes with respect to such      claim are due (the “Notice Period”). If SHG notifies Mr. Mathies in      writing prior to the expiration of the Notice Period that it desires to      contest the claim, Mr. Mathies shall: (i) give SHG any information      reasonably requested by SHG relating to the claim; (ii) take such action      in connection with the claim as SHG may reasonably request, including,      without limitation, accepting legal representation with respect to such      claim by an attorney reasonably selected by SHG and reasonably acceptable      to Mr. Mathies; (iii) cooperate with SHG in good faith in contesting the      claim; and (iv) permit |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | SHG      to participate in any proceedings relating to the claim. Mr. Mathies shall      permit SHG to control all proceedings related to the claim and, at its      option, permit SHG 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 SHG, Mr. Mathies 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 SHG shall determine; provided, however, that      if SHG directs Mr. Mathies to pay such claim and pursue a refund, SHG      shall pay such claim on Mr. Mathies’ behalf (the “Claim Payment”). SHG’s      control of the contest related to the claim shall be limited to the issues      related to the Gross-Up Payment and Mr. Mathies 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 SHG does not notify      Mr. Mathies in writing prior to the end of the Notice Period of its desire      to contest the claim, SHG shall pay to the applicable taxing authorities      on Mr. Mathies’ 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.      Mathies. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Repayments.  If,      after a Claim Payment is made by SHG, Mr. Mathies becomes entitled to a      refund with respect to the claim to which such Claim Payment relates, Mr.      Mathies shall pay SHG 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. Mathies      shall not be entitled to any refund with respect to the claim and SHG does      not promptly notify Mr. Mathies 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.  Mathies. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Further      Assurances.  SHSS shall indemnify Mr. Mathies and hold      him harmless, on an after-tax basis, from any costs, expenses, penalties,      fines, interest or other liabilities (“Losses”) incurred by Mr. Mathies      with respect to the exercise by SHG of any of its rights under Section 7,      including, without limitation, any Losses related to SHG’s decision to      contest a claim or any imputed income to him resulting from any Claim      Payment or action taken on Mr. Mathies’ behalf by SHSS hereunder. SHSS      shall pay all legal fees and expenses incurred under Section 7 and shall      promptly reimburse Mr. Mathies for the reasonable expenses incurred      by him in connection with any actions taken by SHSS or SHG or required to      be taken by Mr. Mathies hereunder. SHSS 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). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Section      409A.  Notwithstanding anything to the contrary in this      Section 7, any payment under this Section 7 shall be paid to Mr. Mathies      promptly but in no event later than the last day of the end of Mr.      Mathies’ taxable year following the taxable year in which Mr. Mathis (or      SHG) pays or remits the relatedtaxes. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| a.   | Confidentiality.  Mr.      Mathies agrees that he will not at any time, during or after the term of      this Agreement, except in performance of his obligations to SHG, SunBridge      and the other LTC subsidiaries, hereunder or with the prior written      consent of the Board of Directors of SHG, directly or indirectly disclose      to any person or organization any secret or “Confidential Information”      that Mr. Mathies may learn or has learned by reason of his association      with SHG. For purposes of all of this Section 8 only, SHG shall also      include all of its direct and indirect subsidiaries. The term      “Confidential Information” means any information not previously disclosed      to the public or to the trade by SHG’s management with respect to SHG’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 SHG’s products or lines      of business), business plans, prospects or  opportunities. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| c.   | Nonsolicitation.  Mr.      Mathies shall not, during his employment under this Agreement, and for one      (1) year 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 SHG or any customer, patient or client of SHG to      terminate his or her association or contract with SHG, nor in any manner,      directly or indirectly, interfere with the relationship between SHG and      any of such persons or entities. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Non-Disparagement.  Mr.      Mathies 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 SHG 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. SHG and its      officers and directors will not make any statements that are intended to      or that would |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  reasonably      be expected to harm Mr. Mathies or his reputation or that reflect      negatively on Mr. Mathies’ performance, skills or  ability. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Relief.  Without      intending to limit the remedies available to SHG, Mr. Mathies      acknowledges that a breach of any of the covenants in Section 8 may result      in material irreparable injury to SHG 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, SHG shall be entitled to obtain a temporary restraining order      and/or a preliminary or permanent injunction restraining Mr. Mathies 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. Mathies or SHG or      SunBridge, be resolved by binding 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. Mathies      and SHG and SunBridge shall mutually select the arbitrator. If Mr. Mathies      and SHG and SunBridge 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 SHG and SunBridge to      obtain the injunctive relief |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | described      in Section 8(d) pending final resolution of matters that are sent to      arbitration. |
|--------|-------------------------------------------------------------------------------------------------------|

| e.   | Attorneys’      Fees.  SunBridge shall pay or reimburse Mr. Mathies 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. Mathies 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. Mathies’ 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. Mathies’ 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. Mathies’ 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.   | Section      409A. |
|----------------|--------------------|

| 1.   | If      Mr. Mathies is a “specified employee” within the meaning of Treasury      Regulation Section 1.409A-1(i) as of the date of Mr. Mathies’ 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. Mathies 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. Mathies upon or in the six (6) month      period following his separation from service that are not so paid by      reason of this Section 9(h)(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. Mathies’ separation from service (or, if      earlier, as soon as practicable, and in all events within thirty (30)      days, after the date of his death). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | To      the extent that any reimbursements pursuant to Sections 4, 6(b)(3), 7(e)      and 9(e) are taxable to Mr. Mathies, any reimbursement payment due to Mr.      Mathies pursuant to such provision shall be paid to Mr. Mathies on or      before the last day of Mr. Mathies’ taxable year following the taxable      year in which the related expense was incurred.  The benefits      and reimbursements pursuant to Sections 4, 6(b)(3), 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. Mathies receives in one taxable      year shall not affect the amount of such benefits and      reimbursements  that Mr. Mathies receives in any other taxable      year. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | It      is intended that any amounts payable under this Agreement and Sun’s and      Mr. Mathies’ 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. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| /s/ Willaim A.      Mathies                                |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| William      A. Mathies                                                                                                                                                                      |
|                                                                                                                                                                                              |
|                                                                                                                                                                                              |
| SUN      HEALTH SPECIALTY SERVICES, INC.                                                                                                                                                          |
|                                                                                                                                                                                              |
|                                                                                                                                                                                              |
| By      /s/ Michael      Newman                            |
| Its      VicePresident                                                                                                                                                                            |

----