Separation Agreement And General Release

     THIS SEPARATION AGREEMENT AND GENERAL RELEASE (this "Agreement") is made and entered into as of the 11^th day of November 2004 by and between SUN HEALTHCARE GROUP, INC., a Delaware corporation (referred to herein, singly and collectively with its subsidiaries, as the "Company") and KEVIN PENDERGEST ("Employee").

     WHEREAS, Employee has been employed by the Company in the capacity of Executive Vice President and Chief Financial Officer pursuant to that certain Employment Agreement (the "Employment Agreement") dated as of February 28, 2002 by and between Company and Employee; and

     WHEREAS, Company and Employee have agreed to the separation of Employee from his employment with the Company and its subsidiaries effective at 12:01 am Pacific Standard Time on January 1, 2005 (the "Termination Date") pursuant to a letter agreement of even date herewith executed between the Company and Employee (the "Letter Agreement"); and

     WHEREAS, the Letter Agreement expressly contemplates that the agreement of the parties express therein will be formalized in a more formal written agreement and the parties wish to enter into this Agreement in fulfillment of that provision of the Letter Agreement and to provide for the release contemplated in Section 6(b) of the Employment Agreement.

     NOW, THEREFORE, in consideration of the foregoing, the following mutual covenants and promises, and for other good, adequate and sufficient consideration, the receipt and adequacy of which are expressly hereby acknowledged, Company and Employee, intending to be fully and legally bound by this Agreement, hereby agree as follows:

     1.     No Pending Actions/Waiver. Employee acknowledges that there are no actions at law or administrative proceedings pending against the Company which arise out of or relate to Employee's employment with the Company. Except where such waivers are prohibited by law, Employee waives the right to voluntarily assist other individuals in bringing any claim against the Company. This waiver does not prevent Employee from pursuing any charge or from participating in any investigation of a charge conducted by any government agency. Employee nevertheless understands and agrees that because of the waiver and release he freely provides by signing this Agreement, he cannot obtain any monetary relief or recovery from any such proceeding, including costs and attorneys' fees.

     2.     Consideration.

            (a)     Amount and Time of Payments. The Company will, as full and complete severance, and as fulfillment of all of Company's obligations under the Employment Agreement, pay to Employee the following payments, less applicable withholdings, taxes and deductions (collectively, the "Consideration") at the times specified below:

The parties acknowledge and agree that the Consideration constitutes the total amount due to Employee in connection with the termination of his Employment pursuant to the Employment Agreement and the Letter Agreement and is expressly in lieu of any severance benefit Employee may have otherwise been entitled to under any prior or existing agreement between Employee and the Company or any severance agreement or policy of the Company.

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            (b)     Other Benefits. In addition to the foregoing, Employee is advised of the following benefit provisions:

     3.     Waiver of Right to Eligible Options.

            (a)      Pursuant to Section 3(c) of the Employment Agreement, Employee received options to purchase 200,000 shares of Common Stock of Sun at an exercise price per share equal to $27. On June 3, 2004, Employee surrendered those options (the "Eligible Options") under an Exchange Program that expressly stated, "if your employment with Sun or its subsidiaries terminates for any reason whatsoever prior to the New Option Grant Date, you will not be granted New Options, and you will not have any rights with respect to the Eligible Options you exchanged."

            (b)     Employee expressly acknowledges and agrees that he shall have no rights whatsoever under the Eligible Options he surrendered in June 2004 and shall also have no right to receive any New Options or other compensation or remuneration with respect to the surrendered Eligible Options, notwithstanding the provisions of the exchange program to the contrary. Employee acknowledges further that the extension of the Termination Date as stated in the Letter Agreement is an accommodation for his sole benefit, that this accommodation is made on the express and mutual condition and understanding that Employee shall have no right to receive the New Options nor any other remuneration in respect of his surrender of the Eligible Options notwithstanding the extension of the Effective Date or the Employee's resulting continued employment by Company on the New Option Grant Date and that Employee hereby waives any right he may have under the Eligible Options or to obtain compensation for his surrender of the Eligible Options.

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     4.     General Release of Claims.  In consideration for the promises contained herein and for the payments more particularly described in Paragraph 0, Employee completely releases, acquits and forever discharges the Company, its affiliated entities, present and former officers, directors and employees, agents, shareholders, attorneys, insurers, any party indemnified by Company, successors and assigns from and against all causes of action, claims, judgments, obligations, damages, or liabilities of whatever kind and character, known or unknown, from the beginning of time through the date this Release is executed, including, without limitation, causes of action arising under any of the following:

     Rehabilitation Act of 1973;
     National Labor Relations Act;
     Fair Labor Standards Act;
     Employee Retirement Income Security Act of 1974;
     Consolidated Omnibus Budget Reconciliation Act (COBRA);
     Civil Rights Act of 1866;
     Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991;
     Pregnancy Discrimination Act of 1978;
     Immigration Reform Control Act;
     Age Discrimination in Employment Act of 1967;
     Equal Pay Act of 1963;
     Americans with Disabilities Act of 1990;
     Family and Medical Leave Act of 1993;
     Occupational Safety and Health Act of 1970;
     California Fair Employment and Housing Act
     Any applicable Federal, state or local statute, law or ordinance; or
     Any other action whether cognizable in law or in equity or arising under any common
     Law, tort or contract theory.

     5.     Release to Include Waiver of Known and Unknown Claims.  This Agreement is a full and final release by Employee covering all unsuspected, unknown, undisclosed, and unanticipated losses, wrongs, injuries, debts, claims or damages to the parties which may have arisen, or may arise from any act or omission prior to the date of execution of this Agreement, and which arises out of or is related, directly or indirectly, to Employee's employment with the Company, his compensation, termination or any matters referred to herein.  Therefore, Employee waives any and all rights or benefits he may now have, or in the future may have, under the terms of Section 1542 of the California Civil Code, which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in her favor at the time of executing the release, which if known by her must have materially affected her settlement with the debtor.

Thus, notwithstanding the provisions of Section 1542 of the Civil Code of the State of California, and for the purpose of implementing a full and complete release and discharge of the Company, Employee expressly acknowledges this Agreement is intended to include in its effect, without limitation, all claims not known or suspected to exist in her favor at the time of signing this Agreement, and that this Agreement contemplates the extinguishment of any such claim or claims.  Employee knows of no actions at law or in equity, nor administrative proceedings

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currently pending against the Company which concern allegations based on or related to Employee's employment relationship with the Company.

     6.     Denial of Liability. The parties expressly recognize and acknowledge that the making of this Agreement does not in any manner constitute an admission or concession of wrongdoing or liability on the part of any party.

     7.     Confidentiality. Until such time as the terms of this Agreement are disclosed by Company in a public statement or filing with the United States Securities and Exchange Commission, Employee agrees to keep the terms and conditions of this Agreement completely and strictly confidential. Neither the terms of this Agreement nor its conditions shall be disclosed by Employee to any person or entity that is not a party to this Agreement. Notwithstanding the foregoing, Employee may disclose the terms of this Agreement: (a) as required by law; (b) as required by order of a court of competent jurisdiction; (c) as required by any governmental body, taxing authority or administrative agency with authority to compel such disclosure; (d) to Employee's attorney; (e) to Employee's financial advisor; (f) to Employee's tax advisor; and (g) to Employee's immediate family. Employee acknowledges and agree that Company has the full right and authority to disclose the terms of this Agreement as required by applicable securities law including without limitation the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations that have been or may from time to time be promulgated under those laws, as the same may from time to time be amended.

     8.     Non-Disclosure of Proprietary and Confidential Information. During the course of his employment, Employee had access to or possession of confidential and/or proprietary information or materials of the Company (including, without limitation, billing rates, marketing and financial information, projections, budgets, estimates, and any and all other information not previously disclosed to the public or to the trade by Sun's management with respect to Sun's products, services, business practices, facilities and methods, salary and benefit information, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, pricing information, customer lists, financial information (including revenues, costs or profits associated with any of Sun's products or lines of business), business plans, prospects or opportunities, compliance and clinical processes, policies and procedures). Employee acknowledges that all such information or materials constitute the sole property of the Company and are the protected trade secrets of the Company. Employee covenants that he will not retain and will, on prior to the Termination Date, return to the Company all originals or copies of such materials in Employee's possession or control. Employee further agrees that he will not, at any time or in any manner, disclose or divulge any such confidential or proprietary information of the Company to any firm, individual or institution. Proprietary information, as used in this paragraph, shall include, without limitation, trade secrets, including all writings, notes, studies and reports prepared, compiled or acquired by Employee during the course or his employment; customer lists, resident information, patient information, Company policies and procedures, employee information, consultant lists; pricing information; marketing techniques; documentation of business plans and opportunities; financial statements; specialized customer information concerning unique, novel or specific purchasing habits; marketing plans or projections; information relating to any special products and services that Company may offer or provide to its customers or consultants from time to time; any data or information maintained or compiled in any form, including information contained on computer disks, that is not generally known to the public.

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     9.     Non-disparagement Employee hereby agrees that he shall not at any time make any public statements that are intended to or that would reasonably be expected to harm any of the Company, its subsidiaries or affiliates, their respective predecessors, successors, assigns and their past, present or future officers, directors, shareholders, employees, trustees, fiduciaries, administrators, agents or representatives.

     10.    Non-Solicitation of Employees. For a period of two (2) years following the Termination Date, Employee shall not disrupt, damage, impair or interfere with Company by soliciting or inducing Company employees to terminate their employment with Company.

     11.    Non-Solicitation of Clients. For a period of one (1) year following the Termination Date, Employee will not personally or as an employee, associate, partner, manager, agent or otherwise, directly or indirectly, induce or attempt to induce any person, firm, corporation or entity that has or has had a contractual relationship with Company at any time for a period of eighteen (18) months prior to Employee's termination of employment with Company to cease or diminish their relationship with the Company.

     12.     Company Property. Employee agrees that from and after the Termination Date he will not access any property of the Company, wherever located, through electronic or computer access. Employee agrees to return all Company property and equipment currently in his possession at least twenty-four (24) hours prior to the Termination Date. For the avoidance of any doubt as to such matter, all business records, papers and documents kept or made by Employee relating to the business of Company shall be and remain the property of Company.

     13.     Future Cooperation. Employee agrees to fully and completely cooperate with Company, and its attorneys, agents, employees, officers, directors and successors with respect to any claims, actions, investigations or litigation that is currently pending or is hereafter asserted against the Company by third parties. Such cooperation shall include Employee making himself available to Company and/or Company's attorneys at reasonable times and places for interviews, reviewing documents, testifying in deposition or at legal or administrative proceedings, and providing input with regard to any defense or claims that the Company might raise or assert, with the reasonable out-of-pocket expenses thereof to be reimbursed by the Company. If Employee is contacted by any person seeking to initiate a claim against the Company, Employee agrees to immediately contact Steven A. Roseman, Esq., General Counsel, at 949.255.7133, or the Company's law department at 1-800-729-6600.

     14.     Return of Consideration. Employee understands and agrees that any violation by Employee of the terms of this Agreement will cause irreparable harm and damage to the Company and will seriously interfere with the purpose of this Agreement, which is to accomplish a full settlement and general release of any and all claims Employee has or may have against the Company. In the event of such violation by Employee, the Company shall have the right to seek and obtain injunctive relief and damages in any court of competent jurisdiction including the right to a return of the entire Consideration, plus any other damages proven, including reasonable attorney's fees and costs. Nothing in this paragraph shall prevent Employee from defending any claim of breach of this Agreement brought by the Company.

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     15.     Severability. The terms of this Agreement are contractual and not mere recitals. If any provision of this Agreement is deemed void or unenforceable, the parties agree that the remaining provisions shall continue in full force and effect; provided, however, that if any portion of paragraphs 0, 0, 0, or 0or any other aspect of the general release provided for in this Agreement is determined to be unenforceable as a result of Employee's challenge thereof, Employee shall immediately return all consideration he has received pursuant to this Agreement, the Letter Agreement or Section 6(b) of the Employment Agreement to the Company.

     16.     Waiver of Breach. Company's failure to exercise any right, power or privilege under this Agreement shall not constitute a waiver thereof.

     17.     Entire Agreement. This Agreement, taken together with the Letter Agreement (which is incorporated herein and made a part hereof by this reference), integrates the entire understanding between the parties and supersedes all prior oral or written agreements between the parties. In the event of any conflict between this Agreement and the Letter Agreement, the provisions of this Agreement shall prevail and control to the exclusion of any inconsistent provision of the Letter Agreement. The Company represents to Employee that its execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all requisite corporate action. The parties expressly disclaim reliance on any representations, written or oral, other than those contained in this Agreement. This Agreement may only be modified by a writing signed by the parties hereto.

     18.     Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of California as applicable to contracts entered into within that State, by residents of that State and which are to be wholly performed therein.

     19.     Acknowledgement of Waiver of Claims under ADEA. Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the effective date of this Agreement. Employee acknowledges that the consideration given for this waiver and release agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least twenty-one (21) days within which to consider this Agreement; (c) he has at least seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (d) this Agreement shall not be effective until the revocation period has expired. If the last day of the revocation period is a Saturday, Sunday, or legal holiday, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday. This Agreement shall not become effective or enforceable until the seven (7) day revocation period has expired. Any revocation within the seven (7) day revocation period must be in writing directed to Steven A. Roseman, Esq., and shall state: "I, __________, hereby revoke my acceptance of our Agreement which I signed and dated on _________________." Any such revocation shall be mailed to Steven A. Roseman, Esq., at Sun Healthcare Group, Inc., 18831 Von Karman Avenue, Ste 400, Irvine, California 92612 by first class mail, postage prepaid, return receipt requested and postmarked within seven

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(7) days after Employee's signing of this Agreement. If Employee revokes this Agreement, he will not be entitled to receive any of the consideration provided for under this Agreement.

     20.     Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective affiliates, heirs, successors, administrators, executors, agents and assigns.

     21.     VOIDING OF AGREEMENT. This Agreement and the Letter Agreement shall become null, void and of no further force and effect if the Company does not receive the executed, notarized Agreement from Employee by Friday, December 3, 2004.

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

Dated:  December 3, 2004                  

Dated:  December 3, 2004                  

STATE OF NEW MEXICO        §
                                                    § ss
COUNTY OF BERNALILLO    §

     On December 3, 2004 before me, Teresa Hartnett, a notary public in and for said county and state, personally appeared KEVIN PENDERGEST personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument he executed the instrument.

STATE OF NEW MEXICO        §
                                                    §  ss
COUNTY OF BERNALILLO    §

     On December 3, 2004 before me, Teresa Hartnett, a notary public in and for said county and state, personally appeared STEVEN A. ROSEMAN personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument he executed the instrument.

Reference:
Security Exchange Commission - Edgar Database, EX-10 2 kpsepagree.htm EXHIBIT 10.1, Viewed October 21, 2021, View Source on SEC.