No, signing the draconian contract was a condition of receiving the severance, so (as explained by our attorney) by not signing she was not bound by that contract. It didn't amount to much money wise, not even a whole paycheck, and we were fortunate enough to be able to pass it up.
Sure. They could sue but they cannot sue for a slam dunk "breach of contract" suit. They would actually have to prove damages which makes any case much more expensive for the company.