EXHIBIT 10.18

AMENDED AND RESTATED
SEVERANCE BENEFITS AGREEMENT

THIS AMENDED AND RESTATED SEVERANCE BENEFITS AGREEMENT (“Agreement”) is entered
into as of the 17th day of December, 2008 by and between SunDance Rehabilitation
Corporation (“Employer” or “SunDance”) and Sue Gwyn (“Employee”) with reference
to the following facts:

A.           Employee provides services to Employer as its President; and

B.           Employer and Employee are parties to that certain Severance Benefit
Agreement dated as of November __, 2007 (the “Existing Agreement”); and
 
C.           Employer and Employee wish to amend and restate the Existing
Agreement upon the terms set forth in this Agreement to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), effective as of
the date hereof.
 

NOW THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, Employer and Employee agree as follows:
 
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 “Release”) and
delivery of such executed Release to Employer within 21 days following the
effective date of the Qualifying Termination.

A.           Cash Payments.  The following cash payments shall be made to
Employee:

1.           Lump Sum Severance Payment.

Employee shall be entitled to a lump sum severance payment in an amount equal to
one (1) year of pay at her base salary then in effect, less applicable federal
and state tax withholding and any other deductions authorized by Employee, with
such amount to be paid to Employee in the month immediately following the month
in which the Qualifying Termination occurs.

2.           Earned Salary; Reimbursable Expenses. Employer shall pay Employee
the full amount of any earned but unpaid salary through the date of such
termination, plus payment for all unused vacation (calculated on the basis of
Employee’s salary at the rate then in effect) that Employee has earned as of the
date of such termination.  Payment for any unreimbursed expenses will be made in
accordance with Employer’s normal practice,

 
 

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with such amount to be paid to Employee upon or promptly following (but in all
events within 30 days after) the date of the Qualifying Termination.  Employee
agrees to provide documentation of any such expenses promptly after such
expenses are incurred.

B.           Group Medical Insurance.  Employee and Employee’s eligible
dependents shall be entitled to continued coverage under Employer’s group
medical insurance plans on the same basis as active employees until the earlier
of (1) the last day of the year period commencing on the date of termination; or
(2) the date Employee or Employee’s eligible dependents become eligible to
participate in a plan of a successor employer.

C.           Other Plans.  Except as expressly provided to the contrary in
Section I.B and Section VI.C., 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 either of the following events occurs during the term of Employee’s
employment.

A.           Termination by Employer.  Termination of Employee’s employment by
Employer other than for “Good Cause” or “Disability” (as each such term is
defined in Section V, below); or

B.           Termination by Employee.  Employee’s termination of her employment
with Employer for “Good Reason” (as such term is defined in Section V below).
 
III.     EFFECT OF NON-QUALIFYING TERMINATION.
 
If Employee’s employment with Employer terminates for any reason other than a
Qualifying Termination, Employer shall pay Employee the full amount of any
earned but unpaid salary through the date of such termination, plus payment for
all unused vacation time (calculated on the basis of Employee’s salary at the
rate then in effect) which Employee has accrued as of the date of such
termination and a cash payment for any unreimbursed expenses, with such amounts
to be paid to Employee upon or promptly following (but in all events within 30
days after) the date of such termination. Employee agrees to provide
documentation of any such expenses promptly after such expenses are incurred  As
of the date of such termination, Employee shall immediately relinquish the right
to any additional payments of benefits from Employer under this Agreement or
otherwise.  Employee’s right to participate in any retirement or benefit plans
and perquisites shall cease as of the date of termination, except as provided in
Section VI.C.

 
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IV.     EFFECT OF CHANGE IN CONTROL

A termination of Employee’s employment with SunDance without Good Cause within
the six (6) months preceding a Change In Control (as such term is defined in
Section V below) shall be treated as if such termination occurred on the date of
such Change In Control if it is reasonably demonstrated that the termination was
at the request of a third party that has taken steps reasonably calculated to
effect a Change In Control or otherwise arose in connection with or in
anticipation of a Change In Control.

A Change In Control, in and of itself, does not constitute Good Reason.
 
V.      DEFINITIONS.
 
The following capitalized terms shall have the meanings specified below:

A.         “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 Operating Officer (“COO”) of SHG Services, Inc., the
parent company of Employer, or the COO’s designee, renders Employee unsuitable
as an employee or legal representative of SunDance;

 
(2)  
Employee’s continued failure to substantially perform the duties reasonably
requested by the COO, or the COO’s designee, and commensurate with Employee’s
position and within Employee’s control as President of SunDance (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 COO, or the COO’s designee, which demand specifically identifies the manner
in which the COO 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 to comply with Employer’s
general policies and procedures as they may exist from time to time by Employee
which, in the good faith determination of the COO, or the COO’s designee,
renders Employee unsuitable as an employee or legal representative of SunDance.

 
B.           “Disability” means Employee’s inability to engage in substantial
gainful activity by reason of any medically determinable mental or physical
impairment

 
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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.

C.           “Good Reason” means a resignation of Employee’s employment with
SunDance 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, or a meaningful and detrimental change in Employee’s reporting
responsibilities, as in effect immediately prior to Employee’s termination of
employment;

(2) a material reduction in Employee’s 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”), a material reduction in Employee’s 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 a material failure to provide Employee
with any other form of compensation or material employment benefit being
provided to Employee immediately prior to the circumstances described in the
Good Reason Notice (excluding however, any reduction in the amount of any annual
bonus or the granting or withholding of incentive compensation (including
without limitation options or stock units) but including a material reduction to
the target amount of the bonus as stated above); 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 her primary residence to such new location.

For any of the circumstances listed in clauses (1), (2) or (3) 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 circumstance is 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
terminates her employment with Employer within the 60 day time period described
above.
 
A Change In Control is expressly excluded from the definition of “Good Reason.”

D.          “Change In Control”. means the occurrence of any one or more of the
following events:

(1)           Any “person” or “group” (as that term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than a trustee or other fiduciary
 

 
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holding securities under an employee benefit plan of Sun Healthcare Group, Inc.
(the parent company of SHG Services, Inc. and the ultimate parent company of
Employer; herein referred to as “SHG”), is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 33 1/3% of the then outstanding voting stock of SHG;

 
(2)
A merger or consolidation of SHG with any other corporation or other entity,
other than a merger or consolidation that would result in the voting securities
of SHG outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50.1% of the combined voting power of the voting
securities of SHG or the surviving entity outstanding immediately after such
merger or consolidation;

 
(3)
A sale or other disposition by SHG of all or substantially all of its assets to
any entity that is not a subsidiary of SHG;

 
(4)
A merger or consolidation of Employer with any other entity that is not SHG or a
subsidiary of SHG, other than a merger or consolidation that would result in
beneficial ownership by SHG, after such merger or consolidation, of at least
50.1% of the combined voting power of the voting securities of Employer or such
surviving entity outstanding immediately after the merger or consolidation;

 
(5)
A sale or other disposition of 50.1% or more of the combined voting power of the
voting securities of Employer to any entity that is not SHG or a subsidiary of
SHG;

 
(6)
A sale or other disposition by Employer of all or substantially all of
Employer's assets to any other entity that is not SHG or a subsidiary of SHG.

In addition, notwithstanding clauses (3), (4), (5) and (6), a Change In Control
shall not be deemed to have occurred in the event of a sale or conveyance in
which SHG continues as a holding company of an entity or entities that conduct
the business or businesses formerly conducted by Employer, or any transaction
undertaken for the purpose of reincorporating SHG under the laws of another
jurisdiction, if such transaction does not constitute a Change In Control
pursuant to clauses (1) or (2).

 
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VI.           MISCELLANEOUS.

A.           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.

B.            Dispute Resolution; Jurisdiction.  Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
in arbitration conducted in Albuquerque, New Mexico in accordance with the
commercial rules 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.

C.            COBRA.    Following termination of participation by Employee and
her eligible dependents in Employer’s group medical insurance plans, Employee
and her eligible dependents may elect to continue coverage under COBRA of any
health, dental and vision plans in effect at the time.

D.           Legal Fees and Expenses.  Employer shall pay or reimburse Employee
on an after-tax basis for all costs and expenses (including, without limitation,
court costs and reasonable legal fees and expenses which reflect common practice
with respect to the matters involved) incurred by Employee as a result of any
claim, action or proceeding (a) contesting, disputing, or enforcing any right,
benefits, or obligations under this Agreement, or (b) arising out of or
challenging the validity, advisability, or enforceability of this Agreement or
any provision thereof; provided, however, that this provision shall not apply if
the arbitrator(s) rule in Employer’s favor with respect to Employee’s claim or
position.

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, SHG or 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.  For the avoidance
of any doubt as to such matters, there shall be no termination of Employee’s
employment for purposes of this Agreement if Employee shall continue to be
employed or engaged by any person or entity that purchases or otherwise succeeds
to the assets of Employer, SHG, or an affiliated parent or subsidiary (or any
portion thereof).  Should a Qualifying Termination occur after a Change in
Control described in clause (4), (5) or (6) of the definition thereof is
completed, the payments described in this Agreement shall be made by the
purchasing entity or successor owner of SunDance.

This Agreement shall inure to the benefit of and be enforceable by the
Employer’s successors and assigns and by Employee’s personal or legal
representatives,

 
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executors, administrators, successors, heirs, distributees, devisees, and
legatees.  If Employee should die while any amount would still be payable to
Employee hereunder if Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Employee’s devisee, legatee, or other designee or, if there is no
such designee, to Employee’s estate.

F.           Effectiveness and Term.  On execution by Employer and Employee,
this Agreement shall be effective and shall continue so long as Employee remains
employed by Employer or its successor, or the parties supersede or terminate the
Agreement in writing.

G.           Prior Severance Benefits Agreement.  This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof
and any prior agreement, arrangement or understanding between Employer and
Employee, relating to or in connection with the possible payment of severance to
Employee upon termination of her employment, is hereby terminated and superseded
in its entirety by this Agreement.

H.           Notices.  For purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:

If to SunDance:

SunDance Rehabilitation Corporation c/o
Sun Healthcare Group, Inc.
Attention:  General Counsel
18831 Von Karman Avenue, Suite 400
Irvine, California 92612

If to Employee:

Sue Gwyn
10 Concord Street
Charlestown, MA 02129

I.           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.  No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.  No agreements or representations, oral or otherwise,
express or
 

 
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implied, with respect to the subject matter hereof have been made by either
party that are not expressly set forth in this Agreement.

J.            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.

K.           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.

L.           Source of Payments.  Except as expressly provided herein, all
payments provided under this Agreement shall be paid in cash from the general
funds of Employer or SHG and no special or separate fund shall be established,
and no other segregation of assets made, to assure payment.  Employee will have
no right, title, or interest whatsoever in or to any investments that Employer,
SHG, or any affiliated parent or subsidiary may make to aid in meeting its
obligations hereunder.  To the extent that any person acquires a right to
receive payment from Employer or SHG pursuant to this Agreement, such right
shall be not greater than the right of an unsecured creditor whose claim arose
on the date such right to receive payment arose.

M.           Headings.  The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
 
N.           Entire Agreement.  This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings of the parties
with respect to the subject matter hereof.

O.           Section 409A.  (1)  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 Code, Employee shall not be entitled to any such payment or benefit until
the earlier of: (i) the date which is six (6) months after her separation from
service for any reason other than death, or (ii) the date of 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 her separation from service that are not so paid by
reason of this Section VI.O.(1) shall be paid (without interest) as soon as
practicable (and in all events within thirty (30) days) after the date that is

 
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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 her
death).

(2)           To the extent that any reimbursements pursuant to Sections I.B. or
VI.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 VI.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.

(3)           It is intended that any amounts payable under this Agreement and
Employer’s, SHG’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.

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

“Employer”

SUNDANCE REHABILITATION CORPORATION

By: /s/ Michael Newman
   Michael Newman
   Vice President

“Employee”

   /s/ Sue Gwyn
Sue Gwyn

 
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