Exhibit 10.1

CHANGE IN CONTROL

SEVERANCE BENEFITS AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE BENEFITS AGREEMENT (“Agreement”) is entered
into as of the [            ]th day of [            ], 2012 by and between Sun
Healthcare Group, Inc. (“Sun”) or one of its subsidiaries (collectively,
“Employer”) and [            ] (“Employee”) to provide severance benefits to the
Employee on the terms set forth below.

I. SEVERANCE BENEFITS.

In the event of a “Qualifying Termination” as defined in Section II, Employee
shall be entitled to the severance benefits described below upon execution of
Employer’s then standard separation agreement and release (the “Separation
Agreement”) and delivery of such executed Separation Agreement to Employer
within 21 days following the date of his or her Qualifying Termination.

A. Lump Sum Severance Payment. Employee shall be entitled to a lump sum cash
severance payment in an amount equal to [            ] months of pay at his or
her base salary then in effect, with such amount to be paid to Employee in the
month immediately following the month in which Employee’s Qualifying Termination
occurs.

B. Group Medical Insurance. Employer shall pay premiums pursuant to COBRA for
continuing coverage under Employer’s (or its applicable subsidiary’s) health
plans for Employee and his or her eligible dependents (as determined under the
applicable health plans) until the earlier of (1) the [            ]-month
anniversary of the last day of the month in which the Qualifying Termination
occurs or (2) the date Employee or Employee’s eligible dependents become
eligible to participate in a plan of a successor employer.

C. Pro-Rata Bonus. Employee shall be entitled to a lump sum cash payment equal
to a pro rata portion of Employee’s annual incentive bonus for the fiscal year
in which the Qualifying Termination occurs, with such pro rata portion
determined by multiplying the annual incentive bonus Employee would have
received for the full fiscal year based upon Employer’s estimate of actual
performance through the date of the Qualifying Termination by a fraction, the
numerator of which is the number of days during the year of termination that
Employee is employed and the denominator of which is 365 or 366, as applicable.
Any pro rata portion of Employee’s annual incentive bonus that becomes payable
shall be paid to Employee in the month immediately following the month in which
Employee’s Qualifying Termination occurs.

D. Accrued Benefits. Employee shall be entitled to receive payment for any
earned but unpaid base salary and unused vacation, reimbursement for any
unreimbursed expenses in accordance with Employer’s reimbursement policies, and
to receive any other accrued or vested benefits and bonuses, if any, to which
Employee is entitled to receive pursuant to the terms of Employer’s retirement
or other benefit plans and arrangements (all of the foregoing, the “Accrued
Benefits”).

 

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The benefits set forth above shall be the only compensation or benefits that
Employee shall have the right to receive or retain following Employee’s
Qualifying Termination. If Employee’s employment terminates for any reason other
than a Qualifying Termination, Employee shall have no right to receive or retain
any compensation or benefits other than the Accrued Benefits. Upon any
termination of employment, including without limitation a Qualifying
Termination, Employee’s right to participate in any retirement or benefit plans
and perquisites shall cease as of the date of termination.

II. QUALIFYING TERMINATION.

Employee will have incurred a Qualifying Termination for purposes of this
Agreement if a Change in Control (as defined in Section III) occurs on or prior
to March 31, 2013 and either of the following events occurs upon or during the
one year period following the date of the Change in Control.

A. Termination by Employer Without Good Cause. Termination of Employee’s
employment by Employer or the subsidiary of Employer that employs Employee other
than for “Good Cause” as defined in Section III (and other than by reason of
Employee’s death or “Disability” as defined in Section III); or

B. Termination by Employee. Employee’s termination of employment for “Good
Reason” as such term is defined in Section III.

III. DEFINITIONS.

The following capitalized terms shall have the meanings specified below:

A. “Change in Control” shall be deemed to occur if any of the following events
occurs:

(1) Any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of Sun (an “Acquiring Person”), is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 33 1/3%
of the then outstanding voting stock of Sun;

(2) A merger or consolidation of Sun with any other corporation, other than a
merger or consolidation which would result in the voting securities of Sun
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 51% of the combined voting power of the voting
securities of Sun or surviving entity outstanding immediately after such merger
or consolidation; or

(3) A sale or other disposition by Sun of all or substantially all of Sun’s
assets.

B. “Good Cause” shall mean any one of the following:

(1) Any criminal conviction of the Employee under the laws of the United States
or any state or other political subdivision thereof which, in the good faith
determination of the Chief Executive Officer (“CEO”) of Employer, or the CEO’s
designee, renders Employee unsuitable as an employee or officer of Employer;

 

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(2) Employee’s continued failure to substantially perform the duties reasonably
requested by the CEO, or the CEO’s designee, and commensurate with Employee’s
position and within Employee’s control (other than any such failure resulting
from Employee’s incapacity due to Employee’s Disability) after a written demand
for substantial performance is delivered to Employee by the CEO, or the CEO’s
designee, which demand specifically identifies the manner in which the CEO or
such designee believes that Employee has not substantially performed Employee’s
duties, and which performance is not substantially corrected by Employee within
thirty (30) days of receipt of such demand; or

(3) Any material workplace misconduct or willful failure by Employee to comply
with the general policies and procedures of Employer as they may exist from time
to time which, in the good faith determination of the CEO, or the CEO’s
designee, renders Employee unsuitable as an employee or officer of Employer.

C. “Disability” means Employee’s inability to engage in substantial gainful
activity by reason of any medically determinable mental or physical impairment
which can be expected to result in death or which has lasted or can be expected
to last for a period of 120 substantially consecutive calendar days.

D. “Good Reason” means a resignation of Employee’s employment with Employer as a
result of and within 60 days after the occurrence of any of the following
without Employee’s written consent:

(1) A meaningful and detrimental reduction in Employee’s authority, duties or
responsibilities as in effect immediately prior to Employee’s termination of
employment;

(2) A material reduction in Employee’s (i) annual base salary as in effect
immediately prior to the Employee’s delivery of notice to Employer stating the
basis of Employee’s allegation that “Good Reason” exists (the “Good Reason
Notice”), (ii) target annual bonus (expressed as a percentage of base salary) as
in effect immediately prior to the circumstances described in the Good Reason
Notice, or (iii) total annual compensation opportunity (consisting of Employee’s
annual base salary, target annual bonus (expressed as a percentage of base
salary), and grant-date value of Employee’s regular annual equity award grant
from Employer (if any), with such grant-date value reasonably determined by
Employer based on its customary equity award valuation principles) as in effect
immediately prior to the circumstances described in the Good Reason Notice; or

(3) A relocation of Employee’s principal place of employment by more than fifty
(50) miles (or the requirement that Employee be based at a different location),
provided that such relocation results in a longer commute (measured by actual
mileage) for Employee from his primary residence to such new location.

 

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Notwithstanding the foregoing, for any of the foregoing circumstances to
constitute “Good Reason” hereunder, (A) Employee must deliver the Good Reason
Notice to Employer within 30 days of the date on which the circumstances
creating “Good Reason” have first occurred, (B) such circumstances are not
corrected by Employer in a manner that is reasonably satisfactory to Employee
(including full retroactive correction with respect to any monetary matter)
within 30 days of Employer’s receipt of the Good Reason Notice from Employee
and, (C) Employee thereafter resigns his or her employment within the 60 day
time period described above.

IV. PARACHUTE PAYMENT CUT-BACK

Notwithstanding anything contained in this Agreement or any other plan,
arrangement or agreement to the contrary, if upon or following a change in the
“ownership or effective control” of Sun or in the “ownership of a substantial
portion of the assets” of Sun (each within the meaning of Section 280G of the
Code), the tax imposed by Section 4999 of the Code or any similar or successor
tax (the “Excise Tax”) applies, solely because of such transaction, to any
payments, benefits and/or amounts received by the Employee pursuant to this
Agreement, in payment of outstanding option, restricted stock unit or other
equity awards or pursuant to any other plan, agreement or arrangement or
otherwise (collectively, the “Total Payments”), then the Total Payments shall be
reduced (but not below zero) so that the maximum amount of the Total Payments
(after reduction) shall be one dollar ($1.00) less than the amount which would
cause the Total Payments to be subject to the Excise Tax; provided that such
reduction to the Total Payments shall be made only if the total after-tax
benefit to the Employee is greater after giving effect to such reduction than if
no such reduction had been made. If such a reduction is required, Sun shall
reduce or eliminate the Total Payments by first reducing or eliminating any cash
severance benefits, then by reducing or eliminating any equity awards the
vesting or payment of which depends on an event other than the performance of
services, then by reducing or eliminating any accelerated vesting of any other
equity awards other than stock options, then by reducing or eliminating any
accelerated vesting of stock options, then by reducing or eliminating any other
remaining Total Payments, in each case in reverse order beginning with the
payments which are to be paid the farthest in time from the date of the
transaction triggering the Excise Tax. The preceding provisions of this Section
IV shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Employee’s rights and entitlements to any benefits or
compensation.

V. MISCELLANEOUS.

A. No Duplication of Benefits. The benefits under this Agreement are in lieu of,
and not in addition to, any other severance or separation benefits for which
Employee may be eligible under any other plan, policy, agreement or arrangement
of Employer or any of its affiliates, including, without limitation, benefits
provided under any severance benefit agreement, employment agreement, change in
control agreement or any other plan, policy, agreement or arrangement
(collectively, “Severance Plans”). In the event Employee becomes entitled to
receive the benefits provided under Section I of this Agreement, Employee shall
not be entitled to receive any payments or benefits under any other Severance
Plans, and Employee’s receipt of the benefits provided under Section I of this
Agreement shall constitute Employee’s agreement to that effect.

 

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B. Withholding Taxes. Employer may withhold (or cause there to be withheld, as
the case may be) from any benefits provided under this Agreement such federal,
state, and local income, employment or other taxes as may be required to be
withheld pursuant to any applicable law or regulation.

C. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New Mexico
applicable to contracts entered into and performed in such State.

D. Dispute Resolution; Jurisdiction. Any dispute or controversy arising in
connection with this Agreement shall be settled exclusively in arbitration
conducted in Bernalillo County, New Mexico in accordance with the Employment
Arbitration Rules and Mediation Procedures of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator’s award in
any court having jurisdiction. Punitive damages shall not be awarded.

E. Successors; Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of Employee (and Employee’s personal representatives and heirs),
Employer and any affiliated parent or subsidiary entities, and any organization
that succeeds to substantially all of the business or assets of the foregoing,
or any portion thereof, including, without limitation, as the result of a Change
in Control.

F. Effectiveness and Term. On execution by Employer and Employee, this Agreement
shall be effective. If a Change in Control occurs on or prior to March 31, 2013,
this Agreement shall not terminate until the date that is one day following the
first anniversary of the Change in Control. This Agreement shall automatically
terminate if no Change in Control has occurred on or prior to March 31, 2013.

G. Amendments, Waivers, Etc. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing.

H. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

I. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument. PDF or other photographic copies of such
signed counterparts may be used in lieu of the originals for any purpose.

J. Section 409A. If Employee is a “specified employee” within the meaning of
Treasury Regulation Section 1.409A-1(i) as of the date of Employee’s separation
from service (within the meaning of Treasury Regulation Section 1.409A-1(h)(1),
without regard to the optional alternative definitions available thereunder) and
any payment or benefit provided in Section I hereof constitutes a “deferral of
compensation” within the meaning of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), Employee shall not be entitled to any such
payment or benefit until the earlier

 

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of: (i) the date which is six (6) months after his or her separation from
service for any reason other than death, or (ii) the date of his or her death.
The provisions of this paragraph shall only apply if, and to the extent,
required to avoid the imputation of any tax, penalty or interest pursuant to
Section 409A of the Code. Any amounts otherwise payable to Employee upon or in
the six (6) month period following his or her separation from service that are
not so paid by reason of this Section shall be paid (without interest) as soon
as practicable (and in all events within thirty (30) days) after the date that
is six (6) months after Employee’s separation from service (or, if earlier, as
soon as practicable, and in all events within thirty (30) days, after the date
of his or her death). To the extent that any reimbursements pursuant to Sections
I(B) or I(D), are taxable to Employee, any reimbursement payment due to Employee
pursuant to such provision shall be paid to Employee on or before the last day
of Employee’s taxable year following the taxable year in which the related
expense was incurred. The benefits and reimbursements pursuant to Sections I(B)
and I(D) are not subject to liquidation or exchange for another benefit and the
amount of such benefits and reimbursements that Employee receives in one taxable
year shall not affect the amount of such benefits and reimbursements that
Employee receives in any other taxable year. It is intended that any amounts
payable under this Agreement and Employer’s and Employee’s exercise of authority
or discretion hereunder shall comply with and avoid the imputation of any tax,
penalty or interest under Section 409A of the Code. This Agreement shall be
construed and interpreted consistent with that intent, including by treating
references to a Qualifying Termination as a reference to a separation from
service for purposes of determining the timing of any payments or benefits
provided pursuant to Section I to the extent necessary for such compliance.

***

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

 

EMPLOYER. By:      

[Name]

[Title]

[Company]

 

“Employee”    [Name]

 

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