SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

EXHIBIT 10.1

THIS SIXTH AMENDMENT to Loan and Security Agreement ("Amendment") is made and entered into and effective as of August 10, 2005, by and among SUN HEALTHCARE GROUP, INC., a Delaware corporation (the "Company"), and each direct or indirect Subsidiary of the Company identified on the signature pages of this Amendment as a borrower (individually "Borrower"; all Borrowers together with the Company, collectively, "Borrowers"), the financial institution(s) listed on the signature pages hereof, and their respective successors and assignees (each, a "Lender" and, collectively, "Lenders"), and CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (in its individual capacity as a Lender, "CapitalSource", and in its capacity as collateral agent, "Collateral Agent").

R E C I T A L S

WHEREAS, Borrowers, the Company, Lenders and Collateral Agent entered into that certain Loan and Security Agreement (the "Loan and Security Agreement"), dated as of September 5, 2003, as amended by those certain post-closing letter agreements dated as of September 5, 2003 (the "First Letter Agreement"), dated as of November 5, 2003 (the "Second Letter Agreement"), dated as of January 21, 2004 (the "Third Letter Agreement"), dated as of January 22, 2004 (the "Fourth Letter Agreement"), dated as of March 2, 2004 (the "Fifth Letter Agreement"), and dated as of December 6, 2004 (the "Special Advance Letter"), and as amended by that certain First Amendment to Loan and Security Agreement dated as of May 6, 2004 (the "First Amendment"), that certain Second Amendment to Loan and Security Agreement dated as of August 2, 2004 (the "Second Amendment"), that certain Third Amendment to Loan and Security Agreement dated as of January, 2005 (the "Third Amendment"), and that certain Fourth Amendment to Loan and Security Agreement dated as of March 1, 2005 (the "Fourth Amendment") and that certain Fifth Amendment to Loan and Security Agreement (the "Fifth Amendment") dated as of April 8, 2005. The Loan and Security Agreement, as amended by the First Letter Agreement, the Second Letter Agreement, the Third Letter Agreement, the Fourth Letter Agreement, the Fifth Letter Agreement, the Special Advance Letter, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment is herein referred to as the "Loan Agreement". All capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings assigned to such terms in the Loan Agreement;

WHEREAS, Borrower has requested that Collateral Agent and Lenders provide an additional $4,000,000 as an overadvance under the Revolving Facility, and Collateral Agent and Lenders have agreed to do so upon the terms and subject to the conditions set forth herein and in the Loan Agreement provided (among other things) that the parties hereto execute and deliver this Amendment and otherwise comply with the agreements set forth herein and in the Loan Agreement.

WHEREAS, Borrowers, Collateral Agent and Lenders have agreed to modify and amend the Loan Agreement on the terms and conditions contained herein.

NOW, THEREFORE, in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby amend the Loan Agreement as follows:

Section 1. Definitions. Unless otherwise defined herein, all capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

Section 2. Amendments to Loan Agreement. Effective as of the Effective Date, the Loan Agreement is hereby amended as follows:

a. Amendment to Section 2.1(B). Section 2.1(B) is hereby amended by deleting the paragraphs that were added to this Section by the Fifth Amendment and replacing them in their entirety with the following paragraph.

Subject to the provisions of this Agreement, Borrower may request additional Advances under the Revolving Facility, in addition to the Maximum Revolving Loan Amount, up to Four Million Dollars ($4,000,000) (as adjusted as provided for herein, the "Maximum Overadvance Availability") subject to the terms and conditions of the Revolving Facility, and subject at all times to the Facility Cap (the "Overadvance Facility"); except that Lenders shall not honor requests for Advances under the Overadvance Facility if any Default or Event of Default has occurred and is continuing or would be caused thereby. Except as expressly modified by the terms hereof, amounts drawn under the Overadvance Facility will be treated for all purposes as an Advance under the Revolving Loan, and all principal, interest, fees and other costs and expenses relating to any such amounts drawn shall be treated as additional Obligations under the Loan Agreement and the other Loan Documents and secured by all Collateral. In no event shall the amount of all Advances outstanding at any one time under the Revolving Loan, including those made under the Overadvance Facility, exceed the Facility Cap. All amounts outstanding under the Overadvance Facility and other Obligations related to the Overadvance Facility shall be due and payable in full, if not earlier in accordance with this Agreement, on August 19, 2005.

b. Amendment to Section 2.3(D). Section 2.3(D) is hereby deleted in its entirety and replaced with the following:

"(D) Collateral Management Fees. Borrowers shall pay to Collateral Agent, as additional interest, for its own account, a monthly fee in an amount equal to the average daily principal balance of the Loan (including the Overadvance Facility) during any calendar month multiplied by 0.042%. Such fee shall be payable monthly in arrears on the first day of each month following the Closing Date."

c. Amendment to Section 2.4(B)(1). Section 2.4(B)(1) is hereby deleted in its entirety and replaced with the following:

"(1) Overadvance. Except for the Overadvance Facility or as otherwise provided herein, at any time that the Revolving Loan exceeds the Maximum Revolving Loan Amount (an "Overadvance"), Borrowers shall immediately repay the Revolving Loan to the extent necessary to reduce the aggregate principal balance to an amount equal to or less than the Maximum Revolving Loan Amount. Any balance of the Revolving Loan (including the Overadvance Facility and including the Letter of Credit Reserve) outstanding at any time in excess of the lesser of (i) the Facility Cap and (ii) the sum of

(x) the Borrowing Base plus (y) the Maximum Overadvance Availability, shall be immediately due and payable by Borrowers without the necessity of any demand whether or not a Default or Event of Default has occurred or is continuing."

Section 3. [Reserved]

Section 4. Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Lenders, unless specifically waived in writing by Lenders:

(a) Lenders shall have received all of the following, each in form and substance satisfactory to each of the Lenders in its sole discretion, and, where applicable, each duly executed by each party thereto, other than Lenders:

(i) This Amendment, duly executed by Borrowers;

(ii) All other documents Lenders may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby.

(b) The representations and warranties contained herein and in the Loan Agreement and the other Loan Documents, as each is amended hereby, shall be true and correct in all material respects as of the date hereof, as if made on the date hereof, except for such representations and warranties as are by their express terms limited to a specific date and taking into account any amendment to schedules or exhibits as a result of any disclosure made by Borrowers to Collateral Agent after the Closing Date and approved in writing by the Collateral Agent.

(d) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by Lenders.

(e) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be duly authorized and executed.

(f) Payment by Borrowers of all fees and costs incurred by Collateral Agent in preparation and execution of this Amendment (including attorneys' fees and costs); provided, however, that Borrowers shall only be required to pay such fees and costs that are invoiced to Borrowers no later than one business day prior to funding in order to comply with this condition to effectiveness (but in all events, such fees and costs shall be immediately due and payable when invoiced to Borrowers regardless as to whether such invoice is delivered later than one business day prior to funding).

Section 5. No Waiver. Nothing contained herein shall be construed as a waiver by the Lenders of any covenant or provision of the Loan Agreement, the other Loan Documents, this Amendment or any other contract or instrument between the Lenders and the Borrowers, and the failure of the Lenders at any time or times hereafter to require strict performance by the Borrowers of any provision thereof shall not waive, affect or diminish any right of the Lenders to

thereafter demand strict compliance therewith. The Lenders hereby reserve all rights granted under the Loan Agreement, the other Loan Documents, this Amendment, and any other contract or instrument between the Borrowers and the Lenders.

Section 6. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other Loan Documents, and, except as expressly modified by this Amendment, each and every covenant, warranty and other provision of the Notes and the other Loan Documents is hereby ratified and reaffirmed (as though restated in this Amendment as of the date hereof) and shall remain in full force and effect. The Borrowers and Lenders agree that the Loan Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. This Amendment is not intended and shall in no way act as a novation of the Loans or a release, relinquishment, alteration or reissue of the liens and security interests securing the payment of the Notes.

Section 7. Representations and Warranties. Each of the Borrowers hereby represents and warrants to Lenders that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and delivered in connection herewith (i) have been authorized by all requisite corporate or partnership action on the part of each Borrower, (ii) are within its powers, (iii) have been duly authorized, and (iv) do not contravene (A) its articles of incorporation or bylaws or other organization documents or (B) any applicable law; (b) each Borrower is authorized to execute, deliver and perform this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Loan Agreement, as amended hereby, and any other Loan Documents are true and correct in all material respects on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date, except for such representations and warranties as are by their express terms limited to a specific date and taking into account any amendment to schedules or exhibits as a result of any disclosure made by Borrowers to Collateral Agent after the Closing Date and approved in writing by the Collateral Agent; (d) no Default or Event of Default under the Loan Agreement, as amended hereby, has occurred and is continuing; (e) each Borrower is in full compliance with all covenants and agreements contained in the Loan Agreement and the other Loan Documents, as amended hereby; (f) no Borrower has amended its articles of incorporation or bylaws or other organization documents since the date of the Loan Agreement; and (g) no consent, license, permit, approval or authorization of, or registration, filing or declaration with any governmental authority or other Person, is required in connection with the execution, delivery, performance, validity or enforceability of this Amendment or the Loan Documents executed in connection herewith, as applicable, by or against such Borrower.

Section 8. Survival of Representations and Warranties. All representations and warranties made herein and in the Loan Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by the Lenders or any closing shall affect the representations and warranties or the right of the Lenders to rely upon them.

Section 9. Release.

(a) As of the date hereof, each of the Borrowers and the Company, for themselves and their successors and assigns (collectively, the "Borrower Parties") hereby fully and forever

releases, discharges and acquits each of the Lenders, the Collateral Agent and their parent, subsidiary, affiliate and predecessor corporations, and their respective past and present officers, directors, shareholders, partners, attorneys, legal representatives, agents and employees, and their successors, heirs and assigns and each of them, of and from and against any and all claims, demands, obligations, duties, liabilities, damages, expenses, indebtedness, debts, breaches of contract, duty or relationship, acts, omissions, misfeasance, malfeasance, causes of action, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and remedies therefor, choses in action, rights of indemnity or liability of any type, kind, nature, description or character whatsoever, and irrespective of how, why or by reason of what facts, whether liquidated or unliquidated, known or unknown, to any of the Borrowers (collectively, "Claims"), which any of such Borrower Parties may now have against any of said persons, firms or entities, by reason of, arising out of or based upon conduct, events or occurrences on or before the date hereof relating to: (i) any of the Loans or the Loan Documents; (ii) the review, approval or disapproval of any and all documents, instruments, projections, advances, estimates, plans, specifications, drawings and all other items submitted to any of the Lenders or Collateral Agent in connection with the Loans or the Loan Documents; (iii) the disbursements of funds under the Loan Documents; (iv) the amendment or modification of the Loan Agreement made pursuant to this Amendment; (v) any Lender's or Collateral Agent's acts, statements, conduct, representations and omissions made in connection with the Loans or Loan Documents and any amendment or modification relating thereto; or (vi) any fact, matter, transaction or event relating as of the date hereof, provided that nothing contained herein shall be deemed a release of any Lender's or Collateral Agent's obligations under this Amendment or (to the extent first arising and accruing after the date hereof) the Loan Agreement, as modified, or (to the extent first arising and accruing after the date hereof) a release of any Lender's or Collateral Agent's obligations under the Loan Documents as expressly set forth therein.

(b) Each of the Borrower Parties represents and warrants that it has not heretofore assigned or transferred, or purported to assign or to transfer, to any person or entity any matter released hereunder or any portion thereof or interest therein, and each of the Borrower Parties agrees, jointly and severally, to indemnify, defend and hold the parties set forth hereinabove harmless from and against any and all claims based on or arising out of any such assignment or transfer or purported assignment or transfer.

(c) It is hereby further understood and agreed that the acceptance of delivery of this release by the parties released hereby shall not be deemed or construed as an admission of liability of any nature whatsoever arising from or related to the subject of the within release.

(d) Each of the Borrower Parties hereby agrees, represents and warrants that it has had advice of counsel of its own choosing in negotiations for and the preparation of this Amendment, including the foregoing release and waivers, that it has read the provisions of this Amendment, including the foregoing release and waivers, that it has had the foregoing release and waivers fully explained by such counsel, and that it is fully aware of its contents and legal effect.

Section 10. Entire Agreement. This Amendment, the Loan Documents and the exhibits attached thereto constitute the entire agreement of the Company, Collateral Agent, the Borrowers and Lenders concerning the transactions contemplated by this Amendment and supersede and cancel any and all previous negotiations, arrangements, agreements, understandings or letters of interest or intent.

Section 11. Governing Law. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York.

Section 12. Counterparts. This Amendment may be executed via telecopier or facsimile transmission in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument. This Amendment shall become effective upon the execution and delivery of an executed counterpart hereof by each of the parties hereto.

Please acknowledge your agreement to be bound by the foregoing by signing this Amendment and delivering it to Collateral Agent.

CAPITALSOURCE FINANCE LLC, as

Collateral Agent and as Lender

By: /s/ Xxxxx X. Xxxxxx

Name: Xxxxx X. Xxxxxx

Title: General Counsel HealthCare and Specialty Finance Business

Xxxxx Fargo Foothill, Inc.,

as Lender

By: /s/ Xxxx Xxxxxxxx

Name: Xxxx Xxxxxxxx

Title: AVP

ACKNOWLEDGED AND AGREED TO

as of the __ day of August, 2005 on

behalf of all Borrowers

SUN HEALTHCARE GROUP, INC.,

a Delaware corporation

By: /s/ L. Xxxxx Xxxxx

Name: L. Xxxxx Xxxxx

Title: CFO

Advantage Health Services, Inc.

Americare Health Services Corp.

Atlantic Medical Supply Company, Inc.

Bergen Eldercare, Inc.

BP Sun Alliance, Inc.

Xxxxx-Lox Hall Nursing Home, Inc.

Care Home Health Services

CareerStaff Management, Inc.

CareerStaff Services Corporation

CareerStaff Unlimited, Inc.

Coalinga Rehabilitation Center

Covina Rehabilitation Center

Xxxxx Healthcare Center, Inc.

Fairfield Rehabilitation Center

First Class Pharmacy, Inc.

Fullerton Rehabilitation Center

Grand Terrace Rehabilitation Center

Heritage Rehabilitation Center

HoMed Convalescent Equipment, Inc.

HTA of New York, Inc.

Huntington Beach Convalescent Hospital

Xxxxxx Rehabilitation Center, Inc.

Manatee Springs Nursing Center, Inc.

Masthead Corporation

Mediplex Management of Palm Beach County, Inc.

Mediplex Management, Inc.

Mediplex of Concord, Inc.

Mediplex of Connecticut, Inc.

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary

Mediplex of Kentucky, Inc.

Mediplex of Maryland, Inc.

Mediplex of Massachusetts, Inc.

Mediplex of New Jersey, Inc.

Mediplex Rehabilitation of Massachusetts, Inc.

New Bedford Nursing Center, Inc.

Newport Beach Rehabilitation Center

Orange Rehabilitation Hospital, Inc.

P.M.N.F. Management, Inc.

Pacific Health Care, Inc.

PRI, Inc.

Quality Care Holding Corporation

Quality Nursing Care of Massachusetts, Inc.

Regency Health Services, Inc.

Regency High School, Inc.

Regency Rehab Hospitals, Inc.

Rose Rehabilitation Center

San Xxxxxxx G. P. Corporation

SHG Services, Inc.

SRT, Inc.

Sun Lane Purchase Corporation

SunAlliance Healthcare Services, Inc.

SunBridge Xxxxxxx Health Care Corp.

SunBridge Xxxxxxxx Enterprises, Inc.

SunBridge Brittany Rehabilitation Center, Inc.

SunBridge Care Enterprises, Inc.

SunBridge Care Enterprises West

SunBridge Xxxxxxxxxx Rehabilitation Center

SunBridge Charlton Healthcare, Inc.

SunBridge Circleville Health Care Corp.

SunBridge Clipper Home of North Xxxxxx, Inc.

SunBridge Clipper Home of Portsmouth, Inc.

SunBridge Clipper Home of Rochester, Inc.

SunBridge Clipper Home of Wolfeboro, Inc.

SunBridge Xxxxxx Health Care Corp.

SunBridge Gardendale Health Care Center, Inc.

SunBridge Glenville Health Care, Inc.

SunBridge Xxxxxxx Nursing Home, Inc.

SunBridge G. P. Corporation

SunBridge Hallmark Health Services, Inc.

SunBridge Harbor View Rehabilitation Center

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary

SunBridge Healthcare Corporation

SunBridge, Inc.

SunBridge Xxxx Xxxxx Healthcare, Inc.

SunBridge Maplewood Healthcare Center of Jackson, Tennessee, Inc.

SunBridge Xxxxxx Health Care Corp.

SunBridge Meadowbrook Rehabilitation Center

SunBridge Mountain Care Management, Inc.

SunBridge Nursing Home, Inc.

SunBridge Paradise Rehabilitation Center, Inc.

SunBridge Xxxxxx Health Care Corp.

SunBridge Regency Rehab Hospitals, Inc.

SunBridge Regency-North Carolina, Inc.

SunBridge Regency-Tennessee, Inc.

SunBridge Rehab of Colorado, Inc.

SunBridge Retirement Care Associates, Inc.

SunBridge Salem Health Care Corp.

SunBridge San Bernardino Rehabilitation Hospital, Inc.

SunBridge Shandin Hills Rehabilitation Center

SunBridge Statesboro Health Care Center, Inc.

SunBridge Stockton Rehabilitation Center, Inc.

SunBridge Xxxxxxx Landing, Inc.

SunBridge West Tennessee, Inc.

SunCare Respiratory Services, Inc.

SunDance Rehabilitation Agency, Inc.

SunDance Rehabilitation Corporation

SunDance Services Corporation

SunHealth Specialty Services, Inc.

SunMark Nevada, Inc.

SunMark of New Mexico, Inc.

SunPlus Home Health Services, Inc.

SunScript Medical Services, Inc.

SunScript Pharmacy Corporation

SunSolution, Inc.

The Mediplex Group, Inc.

U.S. Laboratory Corp.

Vista Xxxxx Rehabilitation Center, Inc.

Worcester Nursing Center, Inc.

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary

Therapists Unlimited - Chicago II, L.P.

Therapists Unlimited - Detroit II, L.P.

Therapists Unlimited - Fresno, L.P.

Therapists Unlimited - Indianapolis, L.P.

Therapists Unlimited - Seattle, L.P.

HSR Partners, L.P. (I)

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary of CareerStaff Management, Inc., as general

partner of the above named partnerships

SunDance Rehabilitation Texas, Limited Partnership

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary of SunDance Rehabilitation Corporation, as

general partner of the above named partnership

West Jersey/Mediplex Rehabilitation, Limited Partnership

By: /s/ Xxxxxxx Xxxx

Name: Xxxxxxx Xxxx

Title: Secretary of Mediplex of New Jersey, Inc., as general

partner of the above named partnership

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Table of Contents

SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

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