SUMMIT CARE CORP, S-8, 1997-07-09

SUMMIT CARE CORP
S-8, 1997-07-09
SKILLED NURSING CARE FACILITIES

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<PAGE> 1
As filed with the Securities and Exchange Commission on July 9, 1997
Registration Statement No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------

SUMMIT CARE CORPORATION
(Exact Name of Issuer as Specified in Its Charter)

CALIFORNIA 95-3656297
(State of Incorporation) (I.R.S. Employer Identification Number)

2600 WEST MAGNOLIA BLVD.
BURBANK, CALIFORNIA 91505
(Address of Principal Executive Offices) (Zip Code)

SUMMIT CARE CORPORATION
STOCK OPTION PLAN
(Full Title of the Plan)

DERWIN L. WILLIAMS
Senior Vice President - Finance
Summit Care Corporation
22613 Old Canal Road
Yorba Linda, California 92887
(Name and Address of Agent For Service)

(714) 279-1450
(Telephone Number, Including Area Code, of Agent for Service)

---------------

With a copy to:

PETER F. ZIEGLER, ESQ.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
(213) 229-7000

<TABLE>
<CAPTION>
================================================================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================================================================
Proposed Maximum
Title of Securities Proposed Maximum Offering Aggregate Offering Amount of
to be Registered Amount to be Registered Price Per Share (1) Price(1) Registration Fee(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no
par value 1,400,000 $13 9/16 $18,987,500 $5,753.79
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(h) on the basis of the average of the high and low
prices of the Common Stock of Summit Care Corporation as reported on
the NASDAQ National Market on July 7, 1997.

<PAGE> 2

EXPLANATORY NOTE

Summit Care Corporation, a California corporation (the "Company")
adopted the Summit Care Corporation Stock Option Plan (as amended, the "Plan")
in 1992. The shares of the common stock of the Company, no par value per share
(the "Common Stock"), reserved for issuance upon the exercise of options awarded
pursuant to the Plan have not been registered under the Securities Act of 1933,
as amended (the "Act"). However, the Company has awarded options under the Plan,
and certain of these options have been exercised pursuant to a valid exemption
from the registration requirements of the Act, resulting in the sale by the
Company of restricted shares of Common Stock.

This Registration Statement is intended to register the following for
issuance by the Company:

1. 1,020,000 shares of the Company which may be issued by the Company
pursuant to the exercise of outstanding options previously awarded under the
Plan; and

2. 344,000 shares of Common Stock which may be issued by the Company
pursuant to the exercise of options that may be subsequently awarded under the
Plan.

Also, this Registration Statement, and the reoffer prospectus included
herein, is intended to register the following for reoffer and/or resale:

1. 36,000 restricted shares of Common Stock which have been issued by
the Company upon the exercise of options granted under the Plan pursuant to a
valid exemption from the registration requirements of the Act; and

2. Shares of Common Stock that may be acquired in the future under the
Plan by persons who may be considered affiliates of the Company as defined by
Rule 405 under the Act.

The materials constituting the reoffer prospectus have been prepared
pursuant to Part I of Form S-3, in accordance with General Instruction C to Form
S-8.

<PAGE> 3

REOFFER PROSPECTUS

SUMMIT CARE CORPORATION

COMMON STOCK
(NO PAR VALUE)
UP TO 1,400,000 SHARES

This Prospectus relates to up to 1,400,000 shares of Common
Stock, no par value ("Common Stock"), of Summit Care Corporation (the "Company")
which have previously been issued or may in the future be issued pursuant to the
exercise of options awarded to date under the Company's Stock Option Plan (as
amended, the "Plan") to, and which may be offered for resale from time to time
by, certain employees of the Company and its subsidiaries named in Annex 1
hereto (the "Selling Shareholders").

The Company will not receive any of the proceeds from the sale
of the Common Stock offered hereby (hereinafter, the "Securities"). The Company
will pay all of the expenses associated with the registration of the Securities
and this Prospectus. The Selling Shareholders will pay the other costs, if any,
associated with any sale of the Securities.

The Common Stock is quoted on the NASDAQ National Market under
the symbol "SUMC." On July 8, 1997, the last reported sale price per share of
the Common Stock, as quoted on the NASDAQ National Market, was $13 3/4.

----------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

----------------------------

The date of this Prospectus is July 9, 1997.

<PAGE> 4

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-8 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), covering the securities (i) covered by this Prospectus, (ii) issuable
upon the exercise of options previously awarded under the Plan, and (iii)
issuable upon the exercise of options which may be subsequently awarded under
the Plan. This Prospectus omits certain information and exhibits included in the
Registration Statement, copies of which may be obtained upon payment of a fee
prescribed by the Commission or may be examined free of charge at the principal
office of the Commission in Washington, D.C.

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed with
the Commission by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
500 West Madison Street, Room 1400, Chicago, Illinois 60606 and at the Jacob K.
Javits Federal Building, 75 Park Place, New York, New York 10278. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

INCORPORATION BY REFERENCE

The following documents of the Registrant heretofore filed with the
Securities and Exchange Commission are hereby incorporated in this Registration
Statement by reference:

(1) The Company's Annual Report on Form 10-K for the year ended
June 30, 1996, as filed on September 6, 1996 with the Security
and Exchange Commission pursuant to Section 13(a) of the
Securities Exchange Act of 1934, as amended;

(2) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, No. 0-19411, as
filed with the Securities and Exchange Commission on July 17,
1991, and any amendment or report filed with the Commission
for the purpose of updating such description of Common Stock;

(3) The Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1996, as filed with the Securities and
Exchange Commission on November 8, 1996;

(4) The Company's Quarterly Report on Form 10-Q for the period
ended December 31, 1996, as filed with the Securities and
Exchange Commission on February 13, 1997; and

(5) The Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997, as filed with the Securities and
Exchange Commission on May 14, 1997.

All reports and other documents subsequently filed by the
Registrant pursuant to Sections 13(a) and 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended, prior to the filing of a post-effective
amendment which indicates that all securities offered hereunder have been sold
or which deregisters all such securities then remaining unsold shall be deemed
to be

<PAGE> 5

incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing of such reports and documents.

RISK FACTORS

Governmental Regulation

The Company's business is regulated by the federal government and by
various state and local authorities in California, Texas and Arizona. Each of
the Company's centers and its pharmacy is licensed or certified by the state in
which it is located and its state licenses and certifications must be renewed
annually. The Company's centers and its pharmacies are also subject to federal
licensure and/or certification laws. The Company's skilled nursing care and
assisted living centers are subject to periodic inspection by governmental and
other authorities to assure continued compliance with various standards
established for continued licensing under state law and certification under
Medicare and Medicaid programs. The failure to obtain or renew any required
regulatory approvals or licenses could materially and adversely affect the
Company's ability to receive Medicare and Medicaid payments, could prevent the
expansion of the Company or could prevent it from offering its existing
services, any of which could adversely affect the Company's business or results
of operations. Regulatory and licensing requirements are subject to change, and
there can be no assurance that the Company will be able to maintain all
necessary licenses or that it will not incur substantial costs in doing so.

The Company is subject to federal and state laws prohibiting certain
direct and indirect payments between health care providers that are intended,
among other things, to induce or encourage the referral of patients to, or other
recommendation of, a particular provider of products or services. In addition,
certain federal and state laws have recently been enacted to prohibit physician
self-referrals for certain "designated health services" rendered to patients by
a physician who has an ownership interest or other financial relationship with
the provider. The Company contracts with physicians for medical directors'
services and such physicians refer patients to the Company's centers from time
to time. Accordingly, these prohibitions could, among other things, require the
Company to modify its contractual arrangements with its medical directors or
prohibit these physicians from referring patients to the Company.

Dependence on Reimbursement by Third-Party Payors

A substantial portion of the Company's revenues are derived from
government-sponsored health care programs, such as Medicare and Medicaid, and
from managed care organizations. Typically, services provided to Medicare,
managed care and private pay patients are reimbursed at a higher rate than
services provided to Medicaid patients. Accordingly, changes in the mix of
revenue sources of the Company among Medicaid, Medicare, managed care
organizations and private payors can significantly affect the revenues and
profitability of the Company. There can be no assurance that the Company will
continue to attract and retain sufficient Medicare, managed care and private pay
patients to maintain its quality mix.

Governmental and certain third-party payors employ cost-containment
measures designed to limit payments made to health care providers such as the
Company. Those measures include the adoption of initial and continuing recipient
eligibility criteria that may limit payment for services, the adoption of
coverage criteria that limit the services that will be reimbursed and the
establishment of payment ceilings that set the maximum reimbursement that a
provider may receive for services. Furthermore, government reimbursement
programs are subject to statutory and regulatory changes, administrative
rulings, government funding restrictions and, in the case of the Medicare
program, retrospective adjustments, all of which may materially decrease the
rate of reimbursement to the Company for its services. There can be no assurance
that payments under governmental and certain third-party payor programs will
remain at levels comparable to present

<PAGE> 6

levels or will, in the future, be sufficient to cover the costs allocable to
patients eligible for reimbursement pursuant to such programs. In addition, cost
increases which occur without corresponding increases in reimbursement would
adversely affect the Company's business and results of operations. The Company's
operations could also be materially and adversely affected by regulation
developments by governmental payors such as mandatory increases in the scope and
quality of care for skilled nursing care patients or revisions in program
certification standards, unless such developments are accompanied by
corresponding rate increases.

In attempts to limit federal and state budget deficits, there have
been, and the Company expects that there may continue to be, a number of
proposals to limit Medicare and Medicaid reimbursement for health care services.
For example, through its 1994 budget the federal government has placed a freeze
on increasing "routine service costs" at nursing facilities for cost reporting
periods beginning in the Company's 1995 fiscal year and has placed limits on any
exceptions that may be granted to the reimbursement rate freeze The federal
government subsequently lifted the reimbursement rate freeze for cost reporting
periods beginning in the Company's 1997 fiscal year. The Company cannot predict
whether other such proposals will be adopted in the future or, if adopted and
implemented, what effect, if any, such proposals will have on the Company.

The Company's centers that participate in applicable state Medicaid
programs are subject to risk of changes in Medicaid reimbursement and payment
delays resulting from budgetary shortfalls of state Medicaid programs. The
Company received approximately 10% of its revenues during the six months ended
December 31, 1996 from Medi-Cal, the California Medicaid program ("Medi-Cal").
The Company has experienced, and may in the future experience, delays in payment
and in rate increases by Medi-Cal. The Company may also experience delays in
payment and in rate increases by other governmental and third-party payors.
Given the percentage of the Company's revenues derived from Medi-Cal and other
governmental payors, there can be no assurance that rate freezes or future
delays in payments from Medi-Cal or other governmental and third-party payors
will not have a material adverse effect on the Company.

Effect of Health Care Reform Proposals

In recent years, an increasing number of legislative proposals have
been introduced in Congress and various state legislatures that would affect
major reforms of the health care system. Among the proposals under consideration
are insurance market reforms to increase the availability of group health
insurance to small businesses, requirements that all businesses offer health
insurance coverage to their employees, the provision of federal tax credits to
individuals for the purchase of health insurance and the creation of a single
government health insurance plan that would cover all citizens. In addition, the
Clinton administration has promulgated proposals including cutbacks to certain
Medicare and Medicaid programs and has proposed steps to permit greater
flexibility in the administration of Medicaid. In California, the Department of
Health Services has established plans to enroll many Medi-Cal recipients in
managed care plans. These plans have the option of covering long-term care in
addition to other services, which could materially and adversely affect the
Company's revenue. Changes in the reimbursement levels under Medicare or
Medicaid and changes in applicable government regulations could materially and
adversely affect the Company's results of operations. It is uncertain at this
time what health care reform legislation will ultimately be enacted and
implemented or whether other changes in the administration or interpretation of
the governmental health care programs will occur. There can be no assurance that
future health care legislation or other changes in the administration or
interpretation of governmental health care programs, if enacted, will not have a
material adverse effect on the results of operations of the Company.

<PAGE> 7

Dependence on Key Management and Qualified Nursing and Clinical Personnel

The Company's continued success will depend in part upon the management
services of William C. Scott, Chairman of the Board and Chief Executive Officer
of the Company. Although the Board of Directors has authorized an employment
agreement for Mr. Scott, the Company and Mr. Scott have not entered into any
employment agreement or any other agreement that restricts Mr. Scott's ability
to compete with the Company following the termination of his employment. The
loss of Mr. Scott's services or his employment by a competitor of the Company
following the termination of his services could have a material adverse effect
on the Company.

Historically, the health care industry, generally, and to a lesser
extent the Company, have operated with a shortage of licensed nursing personnel,
and the Company has faced difficulties recruiting qualified clinical personnel
for certain facilities in Texas. Any shortage in nursing personnel could require
the Company to pay higher salaries and make greater use of higher cost temporary
nursing personnel. There can be no assurance that the Company will continue to
be able to attract and retain sufficient qualified personnel. A lack of such
personnel could limit the Company's ability to expand and might result in
reduced patient days or require the Company to admit patients requiring lower
levels of care, any or all of which could materially and adversely affect the
Company's results of operations.

Limited Geographic Diversity

All but one of the Company's centers are located in California and
Texas. As a part of its strategy, the Company intends to continue to expand
operations in those states. There can be no assurance, however, that the
regulatory environment or the reimbursement rates paid under Medi-Cal or the
Medicaid program in Texas will not change. Such changes could materially and
adversely affect the Company. In addition, the Company's concentration of
operations increases the risk that any adverse economic, regulatory or other
developments that may occur in these two states may materially and adversely
impact the Company.

Competition

The Company operates in a highly competitive industry. The Company's
skilled nursing care and assisted living centers are located in communities that
also are served by similar centers operated by others. Some competing centers
provide services not offered by the Company and some are operated by entities
having greater financial and other resources than the Company. In addition, some
are operated by non-profit organizations or government agencies supported by
endowments, charitable contributions, tax revenues and other sources not
available to the Company. Furthermore, cost containment efforts, which encourage
more efficient utilization of acute care hospital services, have resulted in
decreased hospital occupancy in recent years. As a result, a significant number
of acute care hospitals have converted portions of their facilities to other
purposes, including specialty and sub-acute units. In California, Texas and
Arizona a certificate of need is no longer required in order to build or expand
a nursing center, which is another factor increasing competition. The Company's
pharmacies also operate in a highly competitive environment and competes with
regional and local pharmacies, medical supply companies and pharmacies operated
by large long-term care chains. The Company may also encounter competition in
acquiring or developing new centers.

Liability and Insurance

The Company's services subject it to liability risk. Malpractice claims
may be asserted against the Company if its services are alleged to have resulted
in patient injury or other adverse effects, the risk of which is greater for
higher acuity patients, such as those treated by the Company's specialty and
sub-acute services, than for traditional long-term care patients. The

<PAGE> 8

Company has from time to time been subject to such malpractice claims and other
litigation in the ordinary course of its business. While the Company believes
that the ultimate resolution of all pending legal proceedings will not have a
material adverse effect on the Company's business or financial condition, there
can be no assurance that future claims will not have a material adverse effect
on the Company's business or financial condition. The Company's current general
and professional liability policy has limits of $9,000,000 per occurrence and
$9,500,000 in the aggregate. Although the Company has not been subject to any
judgments or settlements in excess of its coverage limits, there can be no
assurance that claims for damages in excess of its coverage limits will not
arise in the future.

Volatility of Stock Price

The market for the Common Stock and the stock of other health care
companies has been volatile. The trading price of the Common Stock could be
subject to wide fluctuations resulting from quarter-to-quarter variations in
operating results, news announcements, legislative developments, trading volume,
general market trends and other factors.

SELLING SHAREHOLDERS

The table attached as Annex I hereto sets forth, as of the date of this
Prospectus or a subsequent date if amended or supplemented, (a) the name of each
Selling Shareholder and his or her relationship to the Company; (b) the number
of shares of Common Stock each Selling Shareholder beneficially owns (assuming
that all options to acquire shares are exercisable within 60 days, although
options actually vest over five years); and (c) the number of Securities offered
pursuant to this Prospectus by each Selling Shareholder. The information
contained in Annex I may be amended or supplemented from time to time.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
Securities offered hereby.

PLAN OF DISTRIBUTION

Sales of the Securities offered hereby may be made on the NASDAQ
National Market or the over-the-counter market or otherwise at prices and on
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. The Securities may be sold in (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Securities as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (b) transactions in which a broker or dealer acts as
principal and resells the Securities for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of such
exchange, and (d) ordinary brokerage transactions and transactions in which the
broker solicits purchases. In effecting sales, brokers or dealers engaged by the
Selling Shareholders may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from Selling
Shareholders in amounts to be negotiated immediately prior to sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales and any discounts and commissions received by them and any profit realized
by them on the resale of the Securities may be deemed to be underwriting
discounts and commissions under the Securities Act.

The amount of Securities to be reoffered or resold by means of this
Prospectus by any individual shareholder, and any person with whom such
shareholder is acting in consent for the purpose of selling Securities, may not
exceed, during any three-month period, the greater of (i) one percent of the
shares of Common Stock outstanding as shown by the most recent report of

<PAGE> 9

statement published by the Company or (ii) the average weekly reported volume of
trading in shares of Common Stock reported through the NASDAQ National Market
during the four calendar weeks preceding the date of the reoffer or resale.

There is no assurance that any of the Selling Shareholders will offer
for sale or sell any or all of the Securities covered by this Prospectus.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Gibson,
Dunn & Crutcher LLP, Los Angeles, California.

EXPERTS

The consolidated financial statements of Summit Care Corporation
appearing in Summit Care Corporation's Annual Report on Form 10-K for the year
ended June 30, 1996 have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY, COMMON STOCK BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.

<PAGE> 10

ANNEX I

<TABLE>
<CAPTION>
Selling Shareholder* Shares To Be Offered Hereby
-------------------- ---------------------------
<S> <C>

Neal Maslan 600

Jesse Martinez 13,500

Judy Marolda 5,000

Melodye Stok 5,500

Rochelle Krugler 1,200

Frank Tamba 7,000

Victoria MacKemy 3,200
-------
36,000
=======
</TABLE>

- ----------------

* In addition, certain unnamed shareholders who are not affiliates of the
Company, as defined by Rule 405 under the Act, may also sell shares of
Common Stock pursuant to this Prospectus, provided that each such
shareholder holds less than 1,000 shares.

A-1

<PAGE> 11

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

The following documents of the Registrant heretofore filed
with the Securities and Exchange Commission are hereby incorporated in this
Registration Statement by reference:

(3) The Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1996, as filed with the Securities and
Exchange Commission on November 8, 1996;

(4) The Company's Quarterly Report on Form 10-Q for the period
ended December 31, 1996, as filed with the Securities and
Exchange Commission on February 13, 1997; and

(5) The Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997, as filed with the Securities and
Exchange Commission on May 14, 1997.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

Not applicable.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As allowed by the California General Corporation Law, the
Company's Articles of Incorporation provide that the liability of the directors
of the Company for monetary damages

II-1

<PAGE> 12

shall be eliminated to the fullest extent permissible under California law. This
is intended to eliminate the personal liability of a director for monetary
damages in an action brought by or in the right of the Company for breach of a
director's duties to the Company or its shareholders except for liability: (i)
for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director; (iii) for any
transaction from which a director derived an improper personal benefit; (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders; (v) for
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders; (vi) with respect to certain transactions or the approval of
transactions in which a director has a material financial interest; and (vii)
expressly imposed by statute, for approval of certain improper distributions to
shareholders of certain loans or guarantees. This provision does not limit or
eliminate the rights of the Company or any shareholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care.

The Company's Bylaws permit it to indemnify its directors and officers
to the full extent permitted by law. In addition, the Company's Articles of
Incorporation expressly authorize the use of indemnification agreements, and the
Company has entered into separate indemnification agreements with each of its
directors and its executive officers. These agreements require the Company to
indemnify its officers and directors to the full extent permitted by law,
including circumstances in which indemnification would otherwise be
discretionary. Among other things, the agreements require the Company to
indemnify directors and officers against certain liabilities that may arise by
reason of their status or service as directors and officers and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

The securities to be offered for resale by means of this Prospectus
were originally issued by the Company in reliance upon the exemption from the
registration requirements of the Securities Act provided by Section 4(2) of the
Securities Act. Such securities were issued to certain employees in transactions
not involving public offerings.

ITEM 8. EXHIBITS.

4.1 Summit Care Corporation Stock Option Plan, as amended
(including amendments).

4.2 Form of Summit Care Corporation Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to the Registrant's
Form S-1 Registration Statement No. 33-40778, filed with the
Securities and Exchange Commission on May 23, 1991)

4.3 Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Form

II-2

<PAGE> 13

S-1 Registration Statement No. 33-40778, filed with the
Securities and Exchange Commission on May 23, 1991)

4.4 Amended and Restated Bylaws of the Registrant (incorporated by
reference to Exhibit 3.3 to Amendment No. 2 to the
Registrant's Form S-1 Registration Statement No. 33-40778,
filed with the Securities and Exchange Commission on July 3,
1991)

5.1 Opinion of Gibson, Dunn & Crutcher LLP

23.1 Consent of Ernst & Young, LLP

23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)

24.1 Power of Attorney (included on page II-5 of this Registration
Statement)

ITEM 9. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.

(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d) of the

II-3

<PAGE> 14

Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement.

(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-4

<PAGE> 15

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Burbank, California, on this 30th day of June, 1997.

SUMMIT CARE CORPORATION

By /s/ WILLIAM C. SCOTT
---------------------------
William C. Scott
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints WILLIAM C. SCOTT and DERWIN L. WILLIAMS,
or either of them, his or her attorneys-in-fact and agents, with full power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Registration Statement, including post-effective amendments, and to file
the same, with exhibits thereto and all other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, and hereby ratifying and confirming all that said
attorneys-in-fact, or their substitutes, may do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM C. SCOTT Chairman of the Board, June 30, 1997
- --------------------------- Chief Executive Officer
William C. Scott and Director
(Principal Executive Officer)

/s/ DERWIN L. WILLIAMS Senior Vice President-Finance June 30, 1997
- --------------------------- (Principal Financial Officer)
Derwin L. Williams

/s/ DONALD J. AMARAL Director June 30, 1997
- ---------------------------
Donald J. Amaral

/s/ JOHN A. BRENDE Director June 30, 1997
- ---------------------------
John A. Brende

/s/ WILLIAM J. CASEY Director June 30, 1997
- ---------------------------
William J. Casey

/s/ KEITH B. PITTS Director June 30, 1997
- ---------------------------
Keith B. Pitts

/s/ GARY L. MASSIMINO Director June 30, 1997
- ---------------------------
Gary L. Massimino
</TABLE>

II-5

<PAGE> 16

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION.
----------- ------------

4.1 Summit Care Corporation Stock Option Plan, as amended
(including amendments).

4.3 Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Form S-1 Registration Statement No. 33-40778,
filed with the Securities and Exchange Commission on May 23,
1991)

5.1 Opinion of Gibson, Dunn & Crutcher LLP

23.1 Consent of Ernst & Young, LLP

23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)

24.1 Power of Attorney (included on page II-5 of this Registration
Statement)

<PAGE> 1
Exhibit 4.1

SUMMIT CARE CORPORATION

STOCK OPTION PLAN

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

3. Shares Subject to the Plan . . . . . . . . . . . . . . . . . . . 2

4. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

5. Granting of Options . . . . . . . . . . . . . . . . . . . . . . . 2

6. Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3

6.1 Number of Shares; Type of Option . . . . . . . . . . . . . . 3
6.2 Exercise Period . . . . . . . . . . . . . . . . . . . . . . 3
6.3 Option Price . . . . . . . . . . . . . . . . . . . . . . . . 4
6.4 Investment Representation . . . . . . . . . . . . . . . . . 4
6.5 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 5

7. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

8. Financial Information . . . . . . . . . . . . . . . . . . . . . . 5

9. Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . 5

10. Payment of Option Price . . . . . . . . . . . . . . . . . . . . . 6

11. Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . 6

12. Adjustments in Outstanding Options . . . . . . . . . . . . . . . 7

13. Acceleration Events . . . . . . . . . . . . . . . . . . . . . . . 7

14. Disqualifying Dispositions . . . . . . . . . . . . . . . . . . . 8

15. No Rights as a Shareholder . . . . . . . . . . . . . . . . . . . 8

16. No Right to Continued Employment . . . . . . . . . . . . . . . . 8

17. Compliance With Laws and Regulations . . . . . . . . . . . . . . 8

18. Administration . . . . . . . . . . . . . . . . . . . . . . . . . 9

19. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 10

20. Amendment and Discontinuance . . . . . . . . . . . . . . . . . . 10

21. Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>

-i-
<PAGE> 3
SUMMIT CARE CORPORATION
STOCK OPTION PLAN

1. PURPOSE

The purpose of the Summit Care Corporation Stock Option Plan are to
help Summit Care Corporation to attract, motivate and retain outstanding
personnel and directors, to promote more effectively the business and financial
goals of the Company and its shareholders, and to unify the interests of key
employees and shareholders through increased employee stock ownership.

This is a "tandem" plan providing for both "incentive stock options" and
"nonstatutory" (or "nonqualified") stock options.

2. DEFINITIONS

For purposes of this Plan:

2.1 "BOARD" means the Board of Directors of Summit Care
Corporation.

2.2 "CODE" means the Internal Revenue Code of 1986, as amended.

2.3 "COMMITTEE" means the Summit Care Corporation Stock Option
Plan Committee appointed pursuant to Section 18.1 of this Plan.

2.4 "COMPANY" means Summit Care Corporation, a California
corporation.

2.5 "DIRECTOR" means any person who is a member of the Board
but who is not an Employee.

2.6 "EMPLOYEE" means any employee of the Company, any Parent
Corporation or any Subsidiary Corporation.

2.7 "INCENTIVE STOCK OPTIONS" means an Option which is
intended to qualify as an "incentive stock option" within the meaning of Code
Section 422.

2.8 "NONSTATUTORY OPTION" means an Option which is not
intended to qualify as an Incentive Stock Option.

2.9 "OPTION" means an option granted under this Plan to
purchase shares of Stock. An "Option" may be either an Incentive Stock Option
or a Nonstatutory Option.

2.10 "PARENT Corporation" shall have the meaning set forth in
Code Section 424(e).

<PAGE> 4
2.11 "PARTICIPANT" means a person to whom an Option is granted
under this Plan.

2.12 "STOCK" means the Common Stock of the Company. Unless
the context expressly indicates otherwise, "shares" means shares of Stock.

2.13 "SUBSIDIARY CORPORATION" shall have the meaning set forth
in Code Section 424(f).

3. SHARES SUBJECT TO THE PLAN

Options may be granted under this Plan to acquire an aggregate of
250,000 shares of Stock, subject to adjustment as provided in Section 12 of
this Plan. If an Option terminates, expires or is cancelled with respect to
any share, new Options may thereafter be granted with respect to such share.

4. ELIGIBILITY

Any key employee and any Director of the Company or a Subsidiary
Corporation (other than a member of the Committee or an Employee or Director who
owns Stock possessing more than ten percent of the total combined voting power
of the Company, its parent or subsidiary corporation) shall be eligible to
become a Participant and to acquire an Option to purchase Stock.
Notwithstanding the foregoing, a Director shall not become a Participant unless
Options may be granted to the Director either with the express concurrence of
the California Department of Corporations or through an exemption from the
application of the qualification provisions of the California Corporate
Securities Law. Options may be granted to prospective employees of the
Company, so long as such Options are conditioned on the Participant commencing
employment with the Company and continuing such employment for such time period
as the Committee shall determine. Additional Options may be granted to a
Participant while such Participant continues as an Employee or Director. The
Committee may exclude otherwise eligible persons.

5. GRANTING OF OPTIONS

The Committee shall, from time to time and in its absolute discretion
exercised to achieve the purposes of this Plan, determine which Employees are
key Employees and which eligible persons shall become Participants. Options
granted to Employees may be Incentive Stock Options or Nonstatutory Options,
as determined by the Committee in its absolute discretion provided that
Options granted to Directors shall be Nonstatutory Options. The Committee
also shall determine the number of share of Stock to be subject to each Option
and the price, terms and conditions, consistent with this Plan, of each Option.

-2-
<PAGE> 5
Notwithstanding the foregoing, the following amount shall not exceed
$100,000: the aggregate fair market value (determined on the date an option is
granted) of stock of the Company, any Parent Corporation and any Subsidiary
Corporation for which an Employee is granted incentive stock options (within
the meaning of Code Section 422(b) under all plans of the Company, any Parent
Corporation and any Subsidiary Corporation and which incentive stock options
are exercisable for the first time by such Employee during any calendar year.

6. OPTION AGREEMENT

Each Option shall be evidenced by a written Stock Option Agreement in a
form approved by the Committee. Each Stock Option Agreement shall be executed
by the Company and by the Participant receiving the Option. Each Option shall
be subject to the following terms and conditions and to such other terms and
conditions as the Committee may deem appropriate:

6.1 NUMBER OF SHARES; TYPE OF OPTION

Each Stock Option Agreement shall specify the number of shares of Stock
which are subject to the Option and whether the Options is an Incentive Stock
Options or a Nonstatutory Option.

6.2 EXERCISE PERIOD

No option shall be exercisable until the expiration of one year from
the date of its grant.

Each Stock Option Agreement shall specify the time period during which
the Option may be exercised, which shall not exceed ten years from the date of
grant.

If an optionee ceases to be an Employee or a Director for any reason
other than death or permanent disability, the right to exercise the option
shall expire 90 days after the cessation, but only to the extent that it was
exercisable at such date and in no event after its stated expiration date.

If a Participant ceases to be an Employee or a Director because of a
permanent disability, the Participant may exercise the Participant's Option
within one year of the date he or she ceases to be an Employee but only to the
extent that it was exercisable at such date and in no event after its stated
expiration date.

If a Participant dies while an Employee or a Director or within three
months after ceasing to be an Employee or a Director because of a permanent
disability, the Participant's Option may be exercised at any time with respect
to the entire number of shares remaining under Option, but in no event after
its stated expiration date.

-3-
<PAGE> 6
For this purpose, "PERMANENT DISABILITY" means a permanent and total
disability within the meaning of Code Section 22(e)(3). In the event of an
optionee's death, options may be exercised within the period and to the extent
described above by the optionee's estate or any person who acquired the right
to exercise the option by bequest or inheritance or by reason of the death of
the Participant.

Options may also expire under Section 13.4 of this Plan.

Subject to the foregoing provisions of this Section 6.2, Options shall
be exercisable at such times and in such installments (which may be cumulative)
as the Committee shall provide in each Stock Option Agreement. The Committee
may, after an Option is granted and on such terms and conditions as it
considers appropriate, accelerate the times at which the Option may be
exercised.

6.3 OPTION PRICE

The price of the shares subject to each Option shall be determined by
the Committee and set forth in the Stock Options Agreement, provided that:

(a) in the case of a Nonstatutory Option, the price per
share shall not be less than 85% of the fair market value of a share on the day
the Option is granted; and

(b) in the case of an Incentive Stock Option, the price
per share shall not be less than the fair market value of a share on the day the
Option is granted.

For purposes of this Plan, the fair market value of a share shall be
determined as follows: if Stock is traded on a stock exchange or in the NASDAQ
National Market System ("NASDAQ/NMS"), the fair market value of a share on a
particular date shall be the mean between the highest and lowest quoted selling
prices per share of Stock on such exchange or NASDAQ/NMS on that date. If
Stock is otherwise traded in the over-the-counter market, the fair market value
of a share on a particular date shall be the mean between the closing bid and
asked quotations per share of Stock on that date. If Stock is not traded on a
stock exchange NASDAQ/NMS or in the over-the-counter market or, if traded,
there are no transactions on that date, the fair market value shall be
determined in good faith by the Committee by applying the rules and principles
of valuation set forth in Section 20.2031-2 of the Treasury Regulations
(concerning the valuation of stocks and bonds for purposes of Code Section
2031).

6.4 Investment Representation

Each Stock Option Agreement shall contain a provision that the
Participant represents to the Committee that the Option

-4-

<PAGE> 7
and the shares to be acquired upon exercise of the Option will be acquired for
investment and not for resale or with a view to the distribution thereof.
Making such representation shall be a condition precedent to the grant of any
Option.

6.5 PAYMENT OF TAXES

Each Stock Option Agreement shall contain a provision requiring the
Participant to make any arrangements determined by the Committee to be
necessary to insure that the Participant provides to the Company sufficient
cash to enable the Company, any Parent Corporation or Subsidiary Corporation to
satisfy its federal and state tax withholding obligations, if any, resulting
from the exercise of an Option, a disposition described in Section 14 of this
Plan or from the termination or partial termination of any restriction
applicable to any share of Stock acquired pursuant to the exercise of an
Option.

Upon exercise of a Nonstatutory Option, the Participant may, in lieu
of direct payment of such taxes, direct the Company to withhold from the shares
to be issued the number of shares (based on the market value of the Stock at the
date of exercise determined in accordance with Section 6.3 of this Plan) that
would satisfy the tax withholding amount due.

7. LEGENDS

In connection with the exercise of Options by persons who could be
considered to be "affiliates" as that term is defined in the Rules and
Regulations under the Securities Ace of 1933, the Company may, in order to
insure that resales are made in compliance with that Act, imprint a legend on
certificates representing shares acquired on the exercise of Options to the
effect that the shares may not be resold in the absence of compliance with the
applicable restrictions or a determination that no restriction are applicable.
Any stock certificate evidencing shares of Stock issued pursuant to the
exercise of an Option shall bear such other legends as the Committee, in the
exercise of reasonable discretion, shall require, including a legend regarding
the Participant's duties under Section 14 of this Plan.

8. FINANCIAL INFORMATION

The Company shall provide to each Participant who does not hold Stock
the same financial information that the Company provides to the holders of
Stock, and at the same time.

9. EXERCISE OF OPTION

Subject to the provisions of Section 6 of this Plan, Options shall
become exercisable in the manner designated in the

-5-
<PAGE> 8
Stock Option Agreement or, in the absence of such designation, as follows:

<TABLE>
<CAPTION>
Percentage
From To Exercisable
---- -- -----------
<S> <C> <C>
Date of Grant Day prior to 1st anniversary 0%

1st Anniversary Day prior to 2nd anniversary 20%

2nd Anniversary Day prior to 3rd anniversary 40%

3rd Anniversary Day prior to 4th anniversary 60%

4th Anniversary Day prior to 5th anniversary 80%

5th Anniversary Expiration of Option 100%
</TABLE>

To exercise an Option, the Participant shall give written notice to the
Secretary of the Company specifying the number of shares to be purchased upon
exercise. The notice shall be effective only if accompanied by (a) payment in
full (as provided in Section 10 of this Plan) for the shares being purchased
and (b) such other documents as the Committee in the exercise of its reasonable
discretion may require. For example, the Committee may, but need not, require
the Participant to deliver a signed election under Code Section 83(b). The
Committee may provide in the Stock Option Agreement that Stock acquired by
exercise of an Option shall be issued only at specified intervals, provided
that the first such issuance date occurs within 12 months after the Option
first becomes exercisable and, if the Option remains exercisable for more than
12 months, subsequent issuance dates occur not less frequently than annually.

10. PAYMENT OF OPTION PRICE

The price of the shares transferred to a Participant pursuant to the
exercise of an Option shall be paid to the Company at the time of exercise.
Payment may be made, at the election of the Participant, in cash, or with
previously acquired Stock having a fair market value which together with the
cash is equal to such price. In the discretion of the Committee, payment may
also be made in whole or in part by a Participant's promissory note, which
shall contain such terms and conditions as the Committee shall determine in its
discretion at the time of exercise.

11. NOT TRANSFERABLE

An Option shall be exercisable only by the Participant who received
it. No Option shall be transferrable, other than by Will or the laws of
descent and distribution. No interest of any Participant under this Plan shall
be subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process. During the lifetime of a

-6-
<PAGE> 9
Participant, an Option shall be exercisable only by the Participant who
received it, except as otherwise provided in Section 6.2 of this Plan.

12. ADJUSTMENTS IN OUTSTANDING OPTIONS

If an "Adjustment Change" (as defined below) occurs, the number and
class of shares which thereafter may be acquired under this Plan and the number
and class of shares subject to outstanding Options and the exercise price of
each such share shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent substantial dilution
or enlargement of the rights granted to, or available for, Participants. Any
such adjustment shall be final and binding on each Participant.

For purposes of this Section 12, and "ADJUSTMENT CHANGE" means any
change in the Stock by reason of any stock dividend, recapitalization,
split-up, combination or exchange of shares, or by reason of any similar
change affecting the Stock (but not the issuance of additional shares or
options to acquire shares of Stock or the Company's repurchase of its shares).

13. ACCELERATION EVENTS

13.1 Nothing in this Plan shall in any way prohibit the
Company from merging with or into or consolidating into another corporation, or
from selling or transferring any, all or substantially all of its assets, or
from distributing its assets to its shareholders in liquidation or otherwise,
or from dissolving and terminating its corporate existence. Any such event
(other than a merger or consolidation in which the Company is the surviving
corporation and under the terms of which the shares of Stock outstanding
immediately prior to the merger remain outstanding and unchanged or a
distribution that is not a liquidating distribution) shall be deemed an
"ACCELERATION EVENT" for purposes of this Section 13.

13.2 The Committee shall notify the Participant of the terms
and conditions of the Acceleration Event not less than 20 days prior to its
effective date. Each Participant shall have the right, during the ten-day
period immediately preceding the effective date of an Acceleration Event, to
exercise an Option (and, upon such exercise, to obtain delivery of the shares
so acquired without regard to any provision in the Stock Option Agreement
authorized by the last sentence of Section 9 of this Plan), whether or not the
Option is then otherwise exercisable, except to the extent that any agreement
or undertaking of any party to any such merger, consolidation or sale or
transfer of assets, or any plan pursuant to which such dissolution is effected,
may make specific provision with respect to the assumption of or substitution
for the Option.

-7-
<PAGE> 10
13.3 To the extent that the Participant's right to exercise an
Option is accelerated pursuant to this Section 13, the exercise shall be
contingent upon the consummation of the Acceleration Event. The Committee
shall promptly notify the Participants if an Acceleration Event is delayed or
abandoned. If the Acceleration Event is abandoned, the Participant may rescind
any exercise of an Option during the 20-day exercise period with respect to
shares as to which the right to execute the Option was not accelerated by the
anticipated Acceleration Event.

13.4 Unless terminated earlier pursuant to Section 20 or 21 of
this Plan, this Plan shall terminate, and each unexpired Option shall expire,
at 5:00 p.m. on the say immediately prior to the effective date of the
Acceleration Event.

14. DISQUALIFYING DISPOSITION

All Stock Option Agreements for Incentive Stock Options shall provide
that if the Participant makes a "disposition," within the meaning of Code
Section 424(c), of any shares issued upon exercise of an Incentive Stock Option
within two years after the date the Incentive Stock Option is granted or
within one year after shares are issued to the Participant pursuant to the
exercise of the Incentive Stock Option, the Participant shall notify the
Committee within ten days of the disposition. The Committee may cause an
appropriate legend to be affixed to any stock certificates for such shares to
enable it to receive notice of the disposition.

15. NO RIGHTS AS A SHAREHOLDER

No Participant shall have any rights as a shareholder with respect to
any shares subject to Options prior to the date of issuance to him or her of a
certificate for such shares.

16. NO RIGHT TO CONTINUED EMPLOYMENT

Neither this Plan nor any Option granted under this Plan shall confer
upon any Participant or any other person any right to continued employment by
the Company, any Parent Corporation or any Subsidiary, nor shall it interfere
in any way with the right of his or her employer to terminate his or her
employment at any time.

17. COMPLIANCE WITH LAWS AND REGULATIONS

This Plan, the grant and exercise of Options under this Plan and the
obligations of the Company to sell and deliver shares under Options shall be
subject to all applicable federal and state laws, rules and regulations and to
any approvals by any government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificate for shares of
Stock either (a) prior to (1) the listing of such shares on any stock exchange
on which the Stock may then be listed and (2) the com-

-8-
<PAGE> 11
pletion of any registration or qualification of such shares which is required
under any federal or state law, or any ruling or regulation of any government
body, and which the Company shall, in its sole discretion, determine to be
necessary or advisable or (b) until exemptions from such registration and
qualification requirements are established to the reasonable satisfaction of
the Company and its counsel.

18. ADMINISTRATION

18.1 The Board shall appoint a Stock Option Plan Committee to
administer this Plan. Members of the Committee shall serve without
compensation for their services as members, but all expenses and liabilities
they incur in connection with the administration of the Plan shall be borne by
the Company. If the Board does not appoint a Committee, the Board shall
administer the Plan and shall have the powers and duties granted to the
Committee in this Plan.

18.2 The Committee shall act by a majority of its members by
vote in a meeting or by written instrument signed by a majority of its members.

18.3 If Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended, no Option shall be granted to any person
subject to Section 16(a) of that Act unless all of the Committee's members are
Disinterested Persons (as defined below). For purposes of this paragraph,
"DISINTERESTED PERSON" means an individual who, at the time of the grant of an
Option (or any other action by the Committee or the Board with respect to any
person subject to Section 16(a) of the Act), is not eligible, and has not been
eligible for at least one year prior to such action, to participate in the Plan
or any other plan of the Company, any Parent Corporation or any Subsidiary
Corporation which plan entitles such individual to acquire Stock, Stock Options
or stock appreciation rights with respect to Stock.

18.4 The Committee shall administer this Plan in accordance
with its provisions and shall interpret this Plan, prescribe, amend and rescind
any rules and regulations necessary or appropriate for the administration of
this Plan and make such other determinations and take such other action as it
deems necessary or advisable, except as otherwise expressly reserved to the
Board in this Plan. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion, determine that for Option purposes a
Participant remains an Employee during all or any portion of a leave of absence
approved by the Company. Any interpretation, determination, or other action
made or taken by the Committee shall be final and binding upon all Participants.

18.5 The Committee members, the directors, the officers of the
Company and the employees of the Company shall not

-9-
<PAGE> 12
be under any duty to provide to any Participant tax or legal advice concerning
any Option or any other matter.

18.6 No member of Committee and no officer of the Company
shall be personally liable for any action, determination or interpretation made
in good faith with respect to this Plan or any Option, and all such persons
shall be fully protected by the Company, to the full extent that the Company is
permitted to provide such protection, in respect to any such action,
determination or interpretation.

19. EFFECTIVE DATE

This Plan shall be effective as of July 1, 1991.

20. AMENDMENT AND DISCONTINUANCE

The Board may from time to time amend, suspend or discontinue this
Plan; provided that without approval of the shareholders of the Company no
action of the Company shall (a) increase the number of shares reserved for
Options pursuant to Section 3 or this Plan (b) permit the granting of any
Option at a price less than that determined in accordance with Section 6.3 of
this Plan, or (c) permit the granting of Options which expire beyond the
periods provided for in Section 6.2 of this Plan. Without the written consent
of a Participant, no amendment or suspension of this Plan shall alter or impair
any Option previously granted to such Participant pursuant to this Plan.

21. TERMS OF THE PLAN

Unless terminated earlier pursuant to Section 13.4 or 20 of this Plan,
this Plan shall expire of, and no further Options shall be granted pursuant to
this Plan on or after, June 30, 2010.

EXECUTED at Burbank, California

SUMMIT CARE CORPORATION

By ______________________________

Its __________________________

-10-
<PAGE> 13
Amendment to
Summit Care Corporation
Stock Option Plan

The following constitute amendments to the Summit Care Corporation
"Stock Option Plan (the "Plan"):

1. The following is substituted for the first sentence of Section
18.1 of the Plan: "The Board shall appoint a Stock Option Committee consisting
of two or more directors of the Company to administer this Plan."

2. Section 18.3 of the Plan is amended to read, in its entirety,
as follows:

18.3 If Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Act"), no director of the Company shall
be appointed to, or serve on, the Committee unless he or she shall be an
"disinterested person" within the meaning of Rule 16b-3 under the Act as
presently in effect or hereinafter amended. No options may be granted to a
Committee member during his or her tenure on the Committee.

3. The date "June 30, 2010" appearing at the end of Section 21 of
this Plan is deleted and the date "June 30, 2001" is substituted in its place.

Except as specifically set forth above, this Amendment does not in any
way alter or affect the terms and conditions of the Plan, which remain in full
force and effect.

The foregoing amendments were adopted by the Board of Directors and
sole shareholder of Summit Care Corporation on March 9, 1992.

EXECUTED at Burbank, California

Dated: March 9, 1992 SUMMIT CARE CORPORATION

By
------------------------------
Its
---------------------------
<PAGE> 14
AMENDMENT NO. 2 TO
SUMMIT CARE CORPORATION
STOCK OPTION PLAN

The Board of Directors of Summit Care Corporation (the "Company") has
adopted this Amendment No. 2 to the Stock Option Plan of the Company, subject
to ratification and approval by the shareholders of the Company at the next
annual meeting of shareholders. Capitalized terms not otherwise defined herein
shall have meanings given such terms in the Stock Option Plan.

RECITALS

A. The Stock Option Plan of the Company dated July 1, 1991, as amended
by that certain Amendment to Summit Care Corporation Stock Option Plan dated
March 9, 1992 (the "Plan"), currently authorizes options to be granted under
the Plan to acquire an aggregate of 250,000 share of Stock of the Company.

B. The Board of Directors of the Company desires to amend the Plan to
authorize options to acquire additional shares of Stock.

C. The Board also desires to amend the Plan to provide for the grant
of a specified number of options each year to each director of the Company who
is not also an employee of the Company (each, a "Nonemployee Director").

IN WITNESS WHEREOF, the Plan is hereby amended as follows, subject to
the receipt of shareholder approval of this Amendment No. 2, as described in
Section 5, below.

1. INCREASE IN SHARES AVAILABLE UNDER PLAN.

In order to increase the number of shares of Stock issuable under
Options granted under the Plan, Section 3 of the Plan is hereby amended in its
entirety to read as follows:

"Options may be granted under this Plan to acquire an aggregate of
350,000 shares of Stock, subject to adjustment as provided in Section 12
of the Plan. If an Option terminates, expires or is canceled with
respect to any share, new Options may thereafter be granted with respect
to such share."

2. NONEMPLOYEE DIRECTOR OPTIONS.

In order to provide for the grant of Options to purchase shares of
Stock to Nonemployee Directors, a new Section 22 is hereby added to the Plan,
which shall read in its entirety as follows:

"22. Nonemployee Director Options

(a) Each year, on the date of the annual meeting of
shareholders of the Company, or any adjournment thereof, at which directors of
the Company are elected (the "Date of Grant"), each Nonemployee Director shall
automatically be granted an option (a "Nonemployee Director Option") to
purchase 2,500 shares of Stock. Each person who becomes a Nonemployee Director
after the Effective Date (as defined in Section 5 of this Amendment No. 2) but
prior to the first Date of Grant shall automatically be granted upon the date
he or she becomes a Nonemployee Director, a Nonemployee Director Option to
purchase 2,500 shares of Stock.

<PAGE> 15
(b) If, on any date upon which Nonemployee Director Options are
to be automatically granted pursuant to this Section 22, the number of shares
of Stock remaining available for option under this Plan is insufficient for the
grant to each Nonemployee Director of a Nonemployee Director Option to purchase
the entire number of shares of Stock specified in this Section 22, then a
Nonemployee Director Option to purchase a proportionate amount of such
available number of shares of Stock (rounded to the nearest whole share) shall
be granted to each Nonemployee Director on such date.

(c) Subject to Section 13 of the Plan, Nonemployee Director
Options granted under this Plan shall not be exercisable until the first
anniversary of the Date of Grant of such Nonemployee Director Option and
thereafter shall become exercisable to purchase shares of Stock pursuant to the
schedule for vesting set forth in Section 9 of the Plan, provided, however, that
each Nonemployee Director Option shall expire ten years after the Date of Grant
of such Nonemployee Director Option.

(d) Each Nonemployee Director Option shall have an exercise
price equal to the aggregate Fair Market Value of the shares of Stock on the
Date of Grant of such option.

(e) The "Fair Market Value" of a share of Stock on any date
(the "Determination Date") for the purposes of this Section 22 shall be equal
to the closing price per share of Stock on the business day immediately
preceding the Determination Date, as reported in The Wall Street Journal,
Western Edition, or, if no closing price was so reported for such immediately
preceding business day, the closing pice for the next preceding business day
for which a closing price was so reported, or, if no closing price was so
reported for any of the 30 business days immediately preceding the
Determination Date, the average of the high bid and low asked prices per share
of Stock on the business day immediately preceding the Determination Date in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if the shares of Stock were not quoted by any such
organization on such immediately preceding business day, the average of the
closing bid and asked prices on such day as furnished by a professional market
maker making a market in the shares of Stock selected by the Board.

(f) Payment of the exercise price of any Nonemployee Director
Option granted under this Plan and the optionee's tax withholding obligation,
if any, with respect to such Nonemployee Stock Option shall be made in
accordance with Section 6.5 and Section 10 of the Plan; provided, however, that
payment of the exercise price may not be made by promissory note.

(g) This Section 22 shall not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code,
and the Employee Retirement Income Security Act, or the rules thereunder.

(h) Each Nonemployee Director Option shall be evidenced by a
written Stock Option Agreement in a form approved by the Committee not
inconsistent with the provisions of this Section 22.

(i) Nonemployee Director Options are not intended to qualify as
Incentive Stock Options."

3. AMENDMENTS TO THE PLAN TO INTEGRATE NONEMPLOYEE DIRECTOR
OPTIONS INTO EXISTING PLAN.

In order to integrate the Nonemployee Director Options into the Plan,
the following additional amendments to the Plan are hereby adopted:

2
<PAGE> 16
(a) Section 4 of the Plan is hereby amended to read in its entirety as
follows:

"Any person, including any director of the Company, who is an
Employee of the Company shall be eligible to become a Participant and to
acquire Options to purchase Stock. Any director of the Company who is
not an Employee (a "Nonemployee Director") shall automatically receive
Nonemployee Director Options (as hereinafter defined) pursuant to
Section 22 hereof, but shall not be eligible to receive any other
Options to purchase Stock pursuant to the Plan. Sections 5, 6 (other
than Section 6.2 and 6.5), 9 (other than the vesting schedule set forth
in the first paragraph thereof), 14 and 16 shall not apply to
Nonemployee Director Options granted pursuant to Section 22 of the Plan,
but in all other respects the provisions of the Plan shall be applicable
to Nonemployee Director Options granted pursuant, to Section 22 of the
Plan. Options may be granted to prospective employees of the Company, so
long as such Options are conditioned on the Participant commencing
employment for such time period as the Committee shall determine.
Additional Options may be granted to a Participant while such
Participant continues as an Employee or Director. The Committee may
exclude otherwise eligible persons."

(b) Section 18.3 of the Plan is hereby amended to read in its entirety
as follows:

"If Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Act"), no director of the Company
shall be appointed to, or serve, the Committee unless he or she shall be
a "disinterested person" within the meaning of Rule 16b-3 under the Act
as presently in effect or hereinafter amended. Except for Nonemployee
Director Options issued pursuant to Section 22 of the Plan, no Options
may be granted to a Committee member during his or her tenure on the
Committee.

4. COMPLIANCE WITH RULE 16b-3.

A new Section 23 is hereby added to the Plan, which shall read in its
entirety as follows:

"With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), transactions under
this Plan are intended to comply with all applicable provisions of Rule
16(b)-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or any action by the Plan administrators fails to
so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Plan administrators."

5. EFFECTIVE DATE OF AMENDMENT.

This Amendment No. 2 shall be effective as of December 9, 1994 (the
"Effective Date"), the date upon which it was approved by the Board; provided,
however, that no shares of Stock may be issued under this Plan upon exercise of
Nonemployee Director Options issued after the Effective Date (and no such
Nonemployee Director Options or other Options may be sold or transferred by the
grantee thereof) until this Amendment No. 2 has been approved directly or
indirectly, by the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the laws of the State of California.
Except as specifically set forth above, this Amendment No. 2 does not in any
way alter or affect the terms and conditions of the Plan, which remain in full
force and effect.

3
<PAGE> 17
EXECUTED at Burbank, California

DATED: , 1995

SUMMIT CARE CORPORATION

By ______________________________

Its __________________________

4
<PAGE> 18
AMENDMENT NO. 3 TO
SUMMIT CARE CORPORATION
STOCK OPTION PLAN

The Board of Directors of Summit Care Corporation (the "Company") has
adopted this Amendment No. 3 to the Stock Option Plan of the Company, subject
to ratification and approval by the shareholders of the Company at the next
annual meeting of shareholders. Capitalized terms not otherwise defined herein
shall have meanings given such terms in the Stock Option Plan.

RECITALS

A. The Stock Option Plan of the Company date July 1, 1991, as amended
by that certain Amendment No. 2 to Summit Care Corporation Stock Option Plan
dated December 9, 1994 (the "Plan"), currently authorizes options to be
granted under the Plan to acquire an aggregate of 600,000 shares of Stock of
the Company.

B. The Board of Directors of the Company desires to amend the Plan to
authorize options to acquire additional shares of Stock.

IN WITNESS WHEREOF, the Plan is hereby amended as follows, subject to
the receipt of shareholder approval of this Amendment No. 3, as described in
Section 5, below.

1. INCREASE IN SHARES AVAILABLE UNDER PLAN.

In order to increase the number of shares of Stock issuable under
options granted under the Plan, Section 3 of the Plan is hereby amended in its
entirety to read as follows:

"Options may be granted under this Plan to acquire an aggregate of
1,400,000 shares of Stock, subject to adjustment as provided in Section
12 of the Plan. If an Option terminates, expires or is canceled with
respect to any share, new Options may thereafter be granted with respect
to such share."

2. EFFECTIVE DATE OF AMENDMENT.

This Amendment No. 3 shall be effective as of December 8, 1995 (the
"Effective Date"), provided, however, that no shares of Stock may be issued
under this Plan (and no such Options may be sold or transferred by the grantee
thereof) until this Amendment No. 3 has been approved, directly or indirectly,
by the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held in
accordance with the laws of the State of California. Except as specifically
set forth above, this Amendment No. 3 does not in any way alter or affect the
terms and conditions of the Plan, which remain in full force and effect.

EXECUTED at Burbank, California

DATED: , 1995

SUMMIT CARE CORPORATION

By ______________________________

Its _____________________________

<PAGE> 1
EXHIBIT 5.1

[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP]

July 8, 1997

(213) 229-7000 C 88483-00007

Summit Care Corporation
2600 West Magnolia Boulevard
Burbank, California 91505

Re: Summit Care Corporation Stock Option Plan -- Registration
Statement on Form S-8

Ladies and Gentlemen:

As special counsel to Summit Care Corporation, a California corporation
("Summit Care"), we are familiar with the activities of Summit Care and its
corporate records. We have participated in the preparation of the Registration
Statement on Form S-8 (the "Registration Statement") being filed by Summit Care
under the Securities Act of 1933, as amended, for the purpose of registering
1,400,000 shares of common stock, no par value, of Summit Care for issuance
under the Stock Option Plan of Summit Care (the "Shares").

On the basis of our knowledge of Summit Care's activities and its
corporate records, we are of the opinion that the Shares will be legally
issued, fully paid and nonassessable when issued and paid for in accordance
with the Plan.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our opinion in the Registration
Statement.

Very truly yours,

/s/ GIBSON, DUNN & CRUTCHER LLP

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-XXXXX) pertaining to the Summit Care Corporation Stock Option Plan
of our report dated August 19, 1996, with respect to the consolidated financial
statements and schedule of Summit Care Corporation included in its Annual
Report (Form 10-K) for the year ended June 30, 1996, filed with the Securities
and Exchange Commission.

/s/ Ernst & Young LLP

Los Angeles, California
June 13, 1997