EXHIBIT 10.18

March 29, 2002

Mary Ousley
51 Pinon Hill Place, NE
Albuquerque, NM 87122

 Re:     Severance Agreement

 Dear Mary:

     SunBridge Healthcare Corporation ("SunBridge") hereby offers you a
severance agreement that will apply in the event of the termination of your
services (hereinafter referred to as "employment") to SunBridge (the
"Agreement"). Capitalized terms not otherwise defined, shall have the meanings
specified in Section 9.

1.     Effectiveness and Term. On execution by SunBridge and you, this Agreement
shall be effective and shall continue so long as you are employed by SunBridge
or one of the long-term care subsidiaries of Sun Healthcare Group, Inc. ("SHG").

2.     Prior Severance Agreement. Except as provided herein, any prior
agreement, arrangement or understanding between you and SunBridge, relating to
or in connection with the possible payment of severance to you upon termination
of your employment, is hereby terminated and superceded in its entirety by this
Agreement.

3.     Effect of Involuntary Termination.

a.   Severance Payment. In the event of your Involuntary Termination, subject to
your execution of a release in favor of SunBridge, SunBridge shall pay you an
amount equal to one times your annual salary at the rate then in effect.

b.   Certain Benefits. In the event of your Involuntary Termination, your right
to participate in any retirement or benefits plans and perquisites shall cease
as of the date of termination, except that you and your eligible dependents (as
determined under SunBridge's health plans) shall be entitled to continuing
coverage under SunBridge's health plans on the same basis as active employees
until the earlier of (1) the first anniversary of the date of termination; or
(2) the date you or your eligible dependents become eligible to participate in a
plan of a successor employer.

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c.   Accrued Wages, Etc. In the event of your Involuntary Termination, SunBridge
shall pay you the full amount of any earned but unpaid salary through the date
of such termination, plus a cash payment (calculated on the basis of your salary
at the rate then in effect) for all unused paid time off which you have earned
as of the date of such termination and a cash payment for any unreimbursed
expenses. As of the date of such termination, you shall immediately relinquish
the right to any additional payments or benefits from SunBridge under this
Agreement.

4.     Effect of Change in Control. In the event of your termination as a result
of a Change in Control, you shall be entitled to an amount equal to two times
your annual salary at the rate then in effect.

5.     Effect of Other Terminations. In the event that your employment with
SunBridge terminates for reasons other than your Involuntary Termination or a
Change in Control, SunBridge shall pay you the full amount of any earned but
unpaid salary through the date of such termination, plus a cash payment
(calculated on the basis of your salary at the rate then in effect) for all
unused paid time off which you have earned as of the date of such termination
and a cash payment for any unreimbursed expenses. As of the date of such
termination, you shall immediately relinquish the right to any additional
payments of benefits from SunBridge under this Agreement. Your right to
participate in any retirement or benefits plans and perquisites shall cease as
of the date of termination. You and your eligible dependents may elect to
continue coverage under COBRA of any health, dental and vision plans in effect
at the time.

6.     Protection of SunBridge's Interests.

a.   Confidentiality. You agree that you will not at any time, during or after
the term of this Agreement, except in performance of you obligations to
SunBridge hereunder or with the prior written consent of the President of
SunBridge, directly or indirectly disclose to any person or organization any
secret or "Confidential Information" that you may learn or have learned by
reason of your association with SunBridge. For purposes of this Section 6,
SunBridge shall also include SHG and any of its subsidiaries and affiliates. The
term "Confidential Information" means any information not previously disclosed
to the public or to the trade by SunBridge's management with respect to
SunBridge's products, services, business practices, facilities and methods,
salary and benefit information, trade secrets and other intellectual property,
systems, procedures, manuals, confidential reports, product price lists, pricing
information, customer lists, financial information (including revenues, costs or
profits associated with any of SunBridge's products or lines of business),
business plans, prospects or opportunities, compliance and clinical processes,
policies and procedures.

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b.   Exclusive Property. You confirm that all Confidential Information is and
shall remain the exclusive property of SunBridge. All business records, papers
and documents kept or made by you relating to the business of SunBridge shall be
and remain the property of SunBridge. Upon the termination of your employment
for any reason or upon the request of SunBridge at any time, you shall promptly
deliver to SunBridge, and shall not without the consent of the President of
SunBridge, retain copies of, Confidential Information, or any written materials
not previously made available to the public, or records and documents made by
you or coming into your possession concerning the business or affairs of
SunBridge.

c.   Nonsolicitation. You shall not, during your employment under this
Agreement, and for two (2) years following the termination of this Agreement,
for whatever reason, in any manner induce, attempt to induce, or assist others
to induce, or attempt to induce, any employee, agent, representative or other
person associated with SunBridge or any customer, patient or client of SunBridge
to terminate his or her association or contract with SunBridge, nor in any
manner, directly or indirectly, interfere with the relationship between
SunBridge and any of such persons or entities.

d.   Non-Disparagement. You shall not during your employment under this
Agreement and for two years following termination of the Agreement, for whatever
reason, make any statements that are intended to or that would reasonably be
expected to harm SunBridge or any of its subsidiaries or affiliates, their
respective predecessors, successors, assigns and employees and their respective
past, present or future officers, directors, shareholders, employees, trustees,
fiduciaries, administrators, agents or representatives. SunBridge and its
officers and directors will not make any statements that are intended to or that
would reasonably be expected to harm your or your reputation or that reflect
negatively on your performance, skills, or ability.

e.   Relief. Without intending to limit the remedies available to SunBridge, you
acknowledges that a breach of any of the covenants in Section 6 may result in
material irreparable injury to SunBridge for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, SunBridge
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining you from engaging in activities prohibited
by Section 6 or such other relief as may be required to specifically enforce any
of the covenants in Section 6.

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7.     Legal Fees and Expenses. SunBridge shall pay or reimburse you 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 you 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 relevant trier-of-fact- determines that your claim or position was frivolous
and without reasonable foundation.

8.     Successors; Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of you (and your personal representatives and heirs),
SunBridge, and any organization which succeeds to substantially all of the
business or assets of SunBridge, or otherwise. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there is no such designee, to
your estate.

9.     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 under the laws of the United States or any state
or other political subdivision thereof which, in the good faith determination of
the President of SunBridge, renders you unsuitable as an officer or employee of
SHG.

(2)   Your continued failure to substantially perform the duties reasonably
requested by the President of SunBridge and commensurate with your position as
Executive Vice President (other than any such failure resulting from your
incapacity due to your physical or mental condition) after a written demand for
substantial performance is delivered to you by the President of SunBridge, which
demand specifically identifies the manner in which the President of SunBridge
believes that you have not substantially performed your duties, and which
performance is not substantially corrected by your within ten (10) days of
receipt of such demand; and

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

b.   "Change in Control" shall be deemed to have occurred 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 and Exchange Act of 1934, as amended (the "1934 Act")), other
than a trustee or other fiduciary holding securities under an employee benefit
plan of SHG (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 SHG;

(2)   A merger or consolidation of SHG with any other corporation, other than a
merger or consolidation which 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 51% of the combined voting power of the voting
securities of SHG or surviving entity outstanding immediately after such merger
or consolidation;

(3)   A sale or other disposition by SHG of all or substantially all of SHG's
assets;

(4)   During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors and any new director
(other than a director who is a representative or nominee of an Acquiring
Person) whose election by the Board of Directors or nomination for election by
SHG's shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination was previously so approved, no longer
constitute a majority of the Board of Directors;

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provided, however, in no event shall any acquisition of securities, a change in
the composition of the Board of Directors or a merger or other consolidation
pursuant to a plan of reorganization under chapter 11 of the Bankruptcy Code
with respect to SHG ("Chapter 11 Plan"), or a liquidation under the Bankruptcy
Code constitute a Change in Control. In addition, notwithstanding Sections
9(b)(1), 9(b)(2), 9(b)(3) and 9(b)(4), 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 SHG, or any transaction undertaken for the
purpose of reincorporating SHG under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of SHG's capital
stock. Your continued employment without objection following a Change in Control
shall not, by itself, constitute consent to or a waiver of rights with respect
to any circumstances constituting Good Reason hereunder. A Change in Control
shall not, by itself, constitute Good Reason hereunder. A termination of your
employment without Good Cause (other than by reason of your death or Disability)
within six (6) months preceding a Change in Control 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 the third party who has
taken steps reasonably calculated to effect such Change in Control or otherwise
arose in connection with or in anticipation of such Change in Control.

c.   "Disability" means your 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 your employment as a result of any of
the following: (1) a meaningful and detrimental alteration in your position or
the nature of your responsibilities, or a meaningful and detrimental change in
your reporting responsibilities or titles, as in effect immediately prior to
your termination of employment; (2) a reduction by SunBridge in your annual base
salary as in effect immediately prior to your termination of employment, a
reduction in your target annual bonus (expressed as a percentage of base salary)
as in effect immediately prior to your termination of employment, or a failure
by SunBridge to provide you with any other form of compensation or benefit being
provided to you immediately prior to your termination of employment; (3) the
relocation of your regular office worksite outside of Albuquerque, New Mexico;
or (4) a material breach by SunBridge of the provisions of this Agreement.

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Provided, however, that an event described in the clauses above shall not
constitute Good Reason unless it is communicated by you to SunBridge in writing
and is not corrected by SunBridge in a manner which is reasonably satisfactory
to you (including full retroactive correction with respect to any monetary
matter) within 10 days of SunBridge's receipt of such written notice from you.

e.   "Involuntary Termination" means (1) your termination of employment by
SunBridge other than for Good Cause or Disability; or (2) your resignation of
employment with SunBridge for Good Reason.

10.     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 SHG:

Sun Healthcare Group, Inc.
Attention: General Counsel
101 Sun Avenue N.E.
Albuquerque, New Mexico 87109

If to you:

                    51 Pinon Hill Place, NE

                    Albuquerque, NM 87122

11.     Miscellaneous.

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

b.   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.

c.   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.

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d.   Withholding. Amounts paid to you hereunder shall be subject to all
applicable federal, state and local withholding taxes.

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

f.   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.

g.   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.

h.   Governing Law; Choice of Forum. 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. Any
judicial action related to the validity, interpretation, construction,
performance, enforcement or breach of this Agreement shall be brought by either
party or other interested party in the State of New Mexico before a court of
competent jurisdiction. The parties to this Agreement each knowingly and
voluntarily submit and consent to the courts of the State of New Mexico
exercising personal jurisdiction over each of them in any action or proceeding
related to the validity, interpretation, construction, performance, enforcement
or breach of this Agreement.

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If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to SunBridge the enclosed copy of this letter which will then
constitute our agreement on this subject.

Sincerely,

SUNBRIDGE HEALTHCARE CORPORATION

 

                     /s/ William A. Mathies                        
                     William A. Mathies
                     President

                     Agreed to as of this ___ day of March, 2002.

                     /s/ Mary Ousley                                   
                    Mary Ousley

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