| (a)   | Employment.  Sun      agrees to employ Executive and Executive agrees to accept employment with      Sun, subject to the terms and conditions of this  Agreement. |
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| (b)   | Term      of Employment.  The period of Executive’s employment      under this Agreement commenced as of March 22, 2005 (the effective date of      the Existing Agreement, referred to herein as the “Effective Date”) and      shall continue until terminated in accordance with Section 5      below.  As used in this Agreement, the phrase “Employment Term”      refers to Executive's period of employment from the Effective Date until      the date his employment isterminated. |
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| (a)   | Annual      Base Salary.  During the Employment Term, Sun shall pay      to Executive a base salary at an annual rate of $280,000 ("Base Salary"),      such salary to be payable in accordance with Sun's customary payroll      practices as in effect from |
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|   | 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 Executive'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, Executive 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 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 Executive.  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, Executive 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.  During the Employment Term, Executive shall      be eligible to be granted equity incentive awards during his employment on      the same basis as other senior executive officers of Sun.  Such      equity incentive awards may include stock options and restricted      units.  Executive's eligibility, rights and entitlement to such      equity incentive awards shall be governed by the applicable equity      incentive plan, award agreement, award and/or  grant. |
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| (d)   | Retirement      and Benefit Plans.  During the Employment Term, Executive      shall be eligible to participate in or receive benefits under any pension      plan, 401(k) savings plan, nonqualified deferred compensation plan,      supplemental executive retirement plan, medical and dental benefits plan,      life insurance plan, short-term and long-term disability plans, or any      other employee benefit or fringe benefit plan, generally made available by      Sun to senior executives in accordance with the eligibility requirements      of such plans and subject to the terms and conditions set forth in this      Agreement.  Such plans, programs and arrangements are subject to      change during employment at the sole discretion of the      Company. |
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| (e)   | Sick,      Holiday and Vacation Pay.  Executive is entitled to      holiday and sick pay consistent with Sun's Employee Handbook or other      policy applicable to senior executives.  Sick and Holiday Pay is      subject to change during employment at the sole discretion of the      Company.  Executive shall be entitled to up to 160 hours of      vacation per year, which shall accrue at the rate of 6.152 hours per pay      period (26 pay periods).  However, in accordance with Sun's      Employee Handbook or other policy applicable to senior executives,      vacation hours shall be subject to an accrual cap of two times Executive's      annual allotment of vacation hours and shall be subject to change during      employment at the sole discretion of the  Company. |
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| (f)   | Indemnification,      Liability/Insurance.  Executive shall be entitled to      indemnification by Sun to the extent required by applicable law and the      charter and bylaws of Sun.  In addition, Sun shall maintain      during Executive's employment customary directors and officers' liability      insurance and Executive shall be covered by such  insurance. |
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| (g)   | Taxes.  All      compensation payable to Executive 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 Executive 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      Executive as an officer and employee and from all other positions with Sun      for Good Cause.  Sun may relieve Executive of his duties and      responsibilities pending a final determination of whether Good Cause      exists, and such action shall not constitute Good Reason (as defined in      Section 5(c) below) for purposes of this Agreement.  Payment to      Executive upon a termination for Good Cause is set forth in Section      6(a).  "Good Cause" for termination shall mean any one of the      following: |
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| (1)   | Any      criminal conviction (including conviction on a nolo  contendere      plea) under the laws of the United States or any state or other political      subdivision thereof which, in the sole discretion of the Chief Executive      Officer of Sun, renders Executive unsuitable as an officer or employee of      Sun. |
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| (2)   | Executive'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 General Counsel 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 Executive has not |
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|   | substantially      performed his duties, and which performance, in the sole discretion of the      Chief Executive Officer is determined to not be substantially corrected by      Executive  within ten (10) calendar days of receipt of such      demand; |
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| (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      Executive which, in the sole discretion of the Chief Executive Officer of      Sun, renders Executive unsuitable as an officer or employee;      and |
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| (4)   | Breach      of any of the covenants set forth in Section 8 of this      Agreement. |
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| (b)   | Termination      by Sun without Good Cause.  Sun may at any time in its      sole discretion, by written notice to Executive at least five (5) business      days prior to date of termination specified in such notice, terminate      Executive as an officer and employee and from all other positions with      Sun.  If such termination is made by Sun other than by reason of      Executive's death or 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 Executive shall be entitled to payment in      accordance with Section 6(b). |
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| (c)   | Termination      by Executive for Good Reason.  Executive may, at any time      at his option within sixty (60) calendar 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) calendar 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 Executive upon a termination for Good      Reason is set forth in Section6(b). |
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|   | (1) | A      meaningful and detrimental reduction in Executive’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) (other than a reduction of compensation      uniformly applicable to other members of Senior Management or as a result      of disciplinary action against Executive) or a material failure of      Sun |
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|  |   | to      comply with the benefits provisions as set forth in Sections 3(d) - 3(g)      (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 Executive's principal work location to a place      other than Orange County or Los Angeles County,  California; |
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| (d)   | Voluntary      Resignation Without Good Reason.  Executive 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 Executive 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.  Executive's employment under this      Agreement shall terminate automatically as of the date of Executive's      death.  Sun, at any time by written notice to Executive at least      five (5) business days prior to the date of termination specified in such      notice, terminate Executive 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      Executive from performing the essential duties of his position (where such      failure cannot be remedied with reasonable accommodation) for a period of      120 substantially consecutive calendar days, as determined by a physician      selected by Sun and reasonably acceptable to Executive or, if Executive is      incapacitated, reasonably acceptable to the Director of Medicine or      equivalent senior physician at a hospital of Executive's      choice.  In addition, Executive's receipt of disability benefits      under Sun's long-term disability benefits plan or receipt of Social      Security disability benefits shall be deemed conclusive evidence of      Disability for purpose of this Agreement.  Payment to Executive      upon his termination by reason of his death or Disability is set forth in      Section 6(d). |
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| (a)   | Payment      Upon Termination for Good Cause, or Resignation without Good      Reason.  In the event of termination of his employment      pursuant to Sections 5(a) or 5(d), Executive, or his estate where      applicable, shall be paid any earned but unpaid Base Salary through the      date of termination and any accrued but unused vacation through the date      of termination in accordance with Company  policy, |
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|   | which      shall be paid to Executive 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”). |
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|   | Executive      also shall 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 Executive 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) or 5(d), Executive 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 Executive for Good      Reason.  In the event of termination of employment      pursuant to Sections 5(b) or 5(c), Executive shall be entitled to a lump      sum severance payment in an amount equal to one (1) year Base Salary or,      in the event such termination occurs on or within two (2) years following      the change of a “Change in Control,” two (2) years Base Salary, with such      amount to be paid to Executive in the month immediately following the      month in which Executive’s termination of employment      occurs.  Executive also shall 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 Executive was employed the entire prior      fiscal year but is not employed by Sun on the date said Bonus is paid,      payable to Executive 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) a pro rata portion of the      Bonus for the fiscal year of termination (determined by multiplying the      amount Executive 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 Executive is employed by the Company and the denominator of which is      365 or 366, as applicable), payable to Executive 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 Executive as set forth in Section      6(a).  Notwithstanding the foregoing, Executive'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 Executive shall deliver to the      Company within twenty-one (21) days following the date of his termination      of employment.  Executive's participation in any other      retirement and benefit plans and perquisites shall cease as of the date of      termination, except Executive 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 (x) the first anniversary of the date of termination or (y) the date on      which Executive or his |
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|   | 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 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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| (d)   | Payment      Upon Termination for Death or Disability.  In the event      of termination of his employment pursuant to Section 5(e), Executive, or      his |
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|   | estate      where applicable, shall be paid any Accrued Obligations payable as set      forth in Section 6(a). |
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|   | Executive,      or his estate where applicable, also shall receive his vested benefits      (including those that vest by reason of death or disability) 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 Executive 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(e), Executive shall      not be entitled to any compensation or benefits under this Agreement      except as set forth in this Section6(d). |
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|   | In      the event Employee is unable to work due to death or disability on the      date of payment of Bonus as required by Section 3(b) above, Executive or      his estate shall be paid any unpaid Bonus for the prior fiscal year which      shall be prorated based on the number of days of employment (including      holidays, vacation and sick days and weekends during the period of      employment) during the prior fiscal year divided by 365 or 366, as      applicable, which shall be paid 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.  Executive also shall receive a pro rata portion (based      on the number of days of employment (including holidays, vacation and sick      days and weekends during the period 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 pursuant to Section 5(e)      occurs, which shall be paid 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 75 days after the conclusion of the      fiscal year to which such Bonusrelates. |
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| (a)   | Gross-Up      Payments.  Notwithstanding anything herein to the      contrary, if it is determined that any payment or distribution by Sun to      or for the benefit of the Executive (whether paid or payable or      distributed or distributable pursuant to the terms of this Agreement or      otherwise, but determined without regard to any additional payments      required under this Section 7) (a "Payment") 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 Executive shall be entitled to an additional      payment (a "Gross-Up Payment") in an amount that will place Executive in      the same after-tax economic position that he would have enjoyed if the      Excise Tax had not applied to thepayment. |
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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      and the assumptions to be utilized in arriving at such determination,      shall be made by Sun’s independent auditors or such other certified public      accounting firm reasonably acceptable to Executive as may be designated by      Sun (the "Accounting Firm") which shall provide detailed supporting      calculations both to Sun and Executive within fifteen business days of      Executive’s date of termination or any other date reasonably requested by      Sun or Executive on which a determination under Section 7 is necessary or      advisable.  Within five days of the receipt by Executive 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 Executive.  If the Accounting      Firm determines that no Excise Tax is payable by Executive, Sun shall      cause the Accounting Firm to provide Executive 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 Executive’s federal      income tax return.  Any determination by the Accounting Firm      shall be binding upon Executive and Sun.  As a result of the      uncertainty in the application of Section 4999 of the Code at the time of      the initial determination by the Accounting Firm hereunder, it is possible      that Gross-Up Payments which will not have been made by Sun should have      been made (“Underpayment”), consistent with the calculations required to      be made hereunder.  In the event that Sun exhausts its remedies      pursuant to Section 7(c) and Executive thereafter is required to make a      payment of any Excise Tax, the Accounting Firm shall determine the amount      of the Underpayment that has occurred and any such Underpayment shall be      promptly paid by Sun to the applicable taxing authorities for the benefit      of Executive (or directly to Executive in the event Executive previously      paid the related tax amounts). |
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| (c)   | Procedures.  Executive      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 Executive knows of such claim and Executive shall apprise Sun of the      nature of the claim and the date on which the claim is requested to be      paid.  Executive agrees not to pay the claim until the      expiration of the thirty-day period following the date on which Executive      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 Executive in writing prior to the expiration of the Notice Period      that it desires to contest the claim, Executive 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 Executive; (iii) cooperate with Sun in good faith in      contesting the claim; and (iv) permit Sun to participate in any      proceedings relating to the claim.  Executive shall permit Sun      to control all proceedings related to the claim and, at its option, permit      Sun to pursue or forgo any and all |
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|   | administrative      appeals, proceedings, hearings, and conferences with the taxing authority      in respect of such claim.  If requested by Sun, Executive 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 Executive to pay such claim and pursue a refund, Sun      shall pay such claim on Executive’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      Executive 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 Executive 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 Executive’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  Executive. |
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| (d)   | Repayments.  If,      after a Claim Payment is made by Sun, Executive becomes entitled to a      refund with respect to the claim to which such Claim Payment relates,      Executive 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 Executive shall not be entitled to any refund      with respect to the claim and Sun does not promptly notify Executive 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 Executive. |
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| (e)   | Further      Assurances.  Sun shall indemnify Executive and hold him      harmless, on an after-tax basis, from any costs, expenses, penalties,      fines, interest or other liabilities (“Losses”) incurred by Executive 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 Executive's behalf by Sun      hereunder.  Sun shall pay all legal fees and expenses incurred      under Section 7 and shall promptly reimburse Executive for the reasonable      expenses incurred by him in connection with any actions taken by Sun or      required to be taken by Executive 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 Executive promptly but in no event later than the last      day of the end of Executive’s taxable year following the taxable year in      which Executive (or Sun) pays or remits the related  taxes. |
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| (a)   | Confidentiality.  Executive      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 Executive 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, legal matters and claims (asserted and unasserted), trade      secrets and other intellectual property, systems, procedures, manuals,      confidential reports, product price lists, pricing information, customer      lists, financial information (including revenues, costs or profits      associated with any of Sun's products or lines of business), business      plans, prospects or opportunities, compliance and clinical processes,      policies and procedures. |
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| (b)   | Exclusive      Property.  Executive confirms that all Confidential      Information is and shall remain the exclusive property of      Sun.  All business records, papers and documents kept or made by      Executive relating to the business of Sun shall be and remain the property      of Sun.  Upon the termination of Executive's employment for any      reason or upon the request of Sun at any time, Executive 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 Executive or coming into Executive's possession      concerning the business or affairs ofSun. |
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| (c)   | Nonsolicitation.  Executive      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. |
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| (d)   | Non-Disparagement.  Executive      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 Executive or his      reputation or that reflect negatively on Executive's performance, skills      or ability. |
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| (e)   | Relief.  Without      intending to limit the remedies available to Sun, Executive acknowledges      that a breach of any of the covenants in Section 8 may result      in |
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|   | 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 Executive 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. |
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| (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. |
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| (d)   | Resolution      of Disputes.  Any disputes arising under or in connection      with this Agreement shall be resolved by binding arbitration, to be held      in Orange County, California in accordance with the National Rules for the      Resolution of Employment Disputes and procedures of the American      Arbitration Association.  Executive and Sun shall mutually      select the arbitrator.  If Executive 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.  The fees of the arbitrator and any administrative fees      of AAA shall be paid by Sun.  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.  In the event Executive prevails on the merits on      any claim, action or proceeding: (i) contesting or otherwise relating to      the existence of Good Cause in the event of Executive'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      Executive's termination of employment during the Term for Good Reason, Sun      shall pay or reimburse Executive on an after-tax basis for reasonable      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 Executive as a      result of such claim, action orproceeding. |
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| (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: |
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| (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. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i)   | No      Claim Against Assets.  Nothing in this Agreement shall be      construed as giving Executive any claim against any specific assets of Sun      or as imposing any trustee relationship upon Sun in respect of      Executive.  Sun shall not be required to establish a special or      separate fund or to segregate any of its assets in order to provide for      the satisfaction of its obligations under this      Agreement.  Executive's rights under this Agreement shall be      limited to those of an unsecured general creditor of Sun and its      affiliates. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (j)   | Counterparts.  This      Agreement may be executed in any number of counterparts, each of which so      executed shall be deemed to be an original, and such counterparts will      together constitute but oneAgreement |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (k)   | Section      409A. |
|-----------------|--------------------|

| (l)   | If      Executive is a “specified employee” within the meaning of Treasury      Regulation Section 1.409A-1(i) as of the date of Executive’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, Executive 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 Executive upon or in the      six (6) month period following his separation from service that are not so      paid by reason of this Section 10(k)(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 Executive’s separation from service      (or, if earlier, as soon as practicable, and in all events within thirty      (30) days, after the date of hisdeath). |
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|   | (2) | To      the extent that any reimbursements pursuant to Sections 4, 6(b), 7(e) and      10(e) are taxable to Executive, any reimbursement payment due to Executive      pursuant to such provision shall be paid to Executive on or before the      last day of Executive’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 10(e) are not      subject to liquidation or exchange for another benefit and the amount of      such benefits and reimbursements that Executive receives in one taxable      year shall not affect the amount of such benefits and reimbursements that      Executive receives in any other taxableyear. |
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|   | (3) | It      is intended that any amounts payable under this Agreement and Sun’s and      Executive’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/      Michael Newman                       |
|-----------------------------------------------|
| MICHAEL      NEWMAN                           |
|                                          |
|                                          |
| SUN      HEALTHCARE GROUP, INC.               |
|                                          |
|                                          |
| By:  /s/      Richard K. Matros     |
| Richard      K. Matros                        |
| Its      Chairman and Chief Executive Officer |
|                                          |

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