Exhibit 10.76
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of August 12, 2003 (the
"Agreement"), among Select Medical Corporation, a Delaware corporation (the
"Company"), Select Medical Escrow, Inc. ("Select Medical Escrow"), U.S. Bank
Trust National Association, as escrow agent (in such capacity, the "Escrow
Agent") and U.S. Bank Trust National Association, as Trustee (in such capacity,
the "Trustee") under the Indenture (the "Indenture"), dated as of August 12,
2003, between Select Medical Escrow and the Trustee.
This Agreement is being entered into in connection with the
Purchase Agreement, dated July 29, 2003 (the "Purchase Agreement") among the
Company and J.P. Morgan Securities Inc. ("JP Morgan"), Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Wachovia Capital Markets, LLC, SG
Cowen Securities Corporation, CIBC World Markets Corp., Fleet Securities, Inc.
and Jefferies & Company, Inc. (collectively, the "Initial Purchasers"), and the
Indenture. Capitalized terms used but not defined herein have the respective
meanings specified in the Indenture.
Pursuant to the Purchase Agreement, Select Medical Escrow is
selling $175,000,000 aggregate principal amount of its 7 1/2% Senior
Subordinated Notes due 2013 (the "Securities"). Concurrently with the closing of
such sale, Select Medical Escrow will deposit with the Escrow Agent, as
hereinafter provided, the net proceeds thereof, together with other funds (in
both cases, in the form of cash and/or Permitted Investments (as defined below))
in an amount sufficient to pay when due the Special Redemption Price (as defined
below), assuming redemption of the Securities occurs on December 11, 2003. Such
funds will be used (i) to fund, in part, the acquisition (the "Kessler
Acquisition") of Kessler Rehabilitation Corporation, a Delaware corporation
("Kessler"), pursuant to the Stock Purchase Agreement, dated as of June 30, 2003
(the "Stock Purchase Agreement") by and among the Company, Kessler and the Henry
H. Kessler Foundation, a New Jersey non-profit organization, or (ii) to fund the
Special Redemption Price.
In connection with the consummation of the Kessler
Acquisition, (i) the Company will assume all of Select Medical Escrow's
obligations under the Securities, the Indenture, this Agreement and the Purchase
Agreement pursuant to the assumption documentation referred to in clauses (i)
and (ii) of Section 2(a) (the "Assumption"), (ii) Select Medical Escrow will
merge with and into the Company (the "Select Medical Escrow Merger") and in
connection therewith Select Medical Escrow will be released from any further
liability with respect thereto by operation of law.
If the conditions to the closing of the Kessler Acquisition
have been satisfied or waived and the consummation of the Kessler Acquisition
and the Assumption are proposed to occur on or prior to November 27, 2003 (the
"Deadline Date"), Select
Medical Escrow will so notify the Escrow Agent in writing and all Escrowed
Property (as defined below) will be released to Select Medical Escrow and/or the
Company immediately prior to such closing as set forth herein. If, for any
reason, (a) the Kessler Acquisition and the Assumption are not consummated on or
prior to the Deadline Date or (b) the Stock Purchase Agreement is terminated on
or prior to the Deadline Date, Select Medical Escrow will so notify the Escrow
Agent in writing and the Escrow Agent will transfer to the Paying Agent an
amount of Escrowed Property sufficient to pay the Special Redemption Price for
the Special Redemption pursuant to paragraph 5(c) of the Securities and Section
1001(c) of the Indenture (the "Special Redemption"), and any excess Escrowed
Property will be released to Select Medical Escrow.
Accordingly, the Company, Select Medical Escrow and the Escrow
Agent agree as follows:
1. Delivery and Acceptance of Escrowed Property.
(a) (i) Concurrently with the execution and delivery
hereof, the Escrow Agent shall establish a trust account in the name of "Escrow
Account by Select Medical Escrow, Inc. to U.S. Bank Trust National Association,
as Trustee" Account No. 743324001 Select Medical Corp. (the "Escrow Account")
and Select Medical Escrow shall deposit the Initial Deposit with the Escrow
Agent to be deposited into the Escrow Account by the Escrow Agent. The Escrow
Account shall be maintained by the Escrow Agent as a Securities Account. The
Escrow Agent, the Trustee, the Company and Select Medical Escrow shall execute
and deliver, on the date hereof, a Securities Account Control Agreement in the
form attached hereto as Exhibit D (the "Securities Account Control Agreement")
which, when so executed and delivered, shall be deemed to have been made a part
of this Agreement. Until the release of all Escrowed Property pursuant to this
Section 1 or Section 2, all funds, including, without limitation, the Initial
Deposit and any other cash and/or Permitted Investments accepted by the Escrow
Agent pursuant to this Agreement, shall be held by the Escrow Agent for the
exclusive benefit of the Trustee, any predecessor Trustee under the Indenture
and holders of the Securities, as secured parties hereunder (collectively, the
"Beneficiaries") and shall be treated as Financial Assets. All such funds shall
be held in the Escrow Account until disbursed or paid in accordance with the
terms hereof. Without limiting the foregoing, and notwithstanding anything
herein to the contrary, if at any time the Escrow Agent shall receive an
"entitlement order" (as such term is defined in Section 8-102(a)(8) of the UCC)
issued by the Trustee and relating to the Escrow Account, the Escrow Agent shall
comply with such entitlement order without further consent of the Company,
Select Medical Escrow or any other person and will accept "entitlement orders"
from no other party.
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"Book-Entry Securities" means securities maintained in the
form of entries (including, without limitation, the Security Entitlements in
such securities) in the commercial book-entry system of the Federal Reserve Bank
of New York.
"Cash Equivalents" has the meaning given to such term in the
Indenture.
"Entitlement Holder" means an "entitlement holder" as defined
(i) in Section 8-102(a)(7) of the UCC and (ii) with respect to Book-Entry
Securities governed by the Federal Book-Entry Regulations, in 31 C.F.R. Section
357.2.
"Fed Member Securities Account" means, in respect of any
person, an account in the name of such person in the commercial book-entry
system of the Federal Reserve Bank of New York.
"Federal Book-Entry Regulations" means (i) the federal
regulations contained in Subpart B ("Treasury/Reserve Automated Debt Entry
System (TRADES)") governing Book-Entry Securities consisting of U.S. Treasury
bonds, notes and bills and Subpart D ("Additional Provisions") of 31 C.F.R. Part
357, 31 C.F.R. Section 357.10 through Section 357.41 and Section 357.41 through
Section 357.44, including related defined terms in 31 Section 357.27; and (ii)
to the extent substantially identical to the Federal Book-Entry Regulations
referred to in clause (i) above, the federal regulations governing other
Book-Entry Securities.
"Financial Asset" has the meaning set forth in Section
8-102(a) of the UCC.
"Initial Deposit" means an amount of cash and/or Permitted
Investments in an amount sufficient to pay, on the date of such Initial Deposit,
the Special Redemption Price, assuming that December 11, 2003 is the Special
Redemption Date, pursuant to Section 2(b) hereof (the "Required Amount"), but
solely to the extent that the Securities become subject to Special Redemption
pursuant to the terms of the Indenture or the Securities.
"Notice of Sole Control" shall have the meaning ascribed
thereto in the Securities Account Control Agreement.
"Permitted Investments" means Cash Equivalents; provided that
no such investment shall mature later than November 27, 2003 and for all periods
following November 27, 2003, no such investment shall mature later than December
11, 2003. For all purposes hereunder, money market deposits will be deemed to
mature upon 24 hours notice.
"Secured Obligations" shall mean all obligations for the
payment of principal, premium, interest, liquidated damages, charges, fees, fees
and expenses of
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counsel, indemnities, damages, claims and other liabilities payable under the
Securities or the Indenture in respect of the Securities, in each case whether
(i) such obligations are direct or indirect, secured or unsecured, joint or
several, absolute or contingent, due or to become due whether at stated
maturity, by acceleration or otherwise, (ii) arising in the regular course of
business or otherwise (iii) for payment or performance and/or (iv) now existing
or hereafter arising (including, without limitation, interest and other
obligations arising or accruing after the commencement of any bankruptcy,
insolvency, reorganization or similar proceeding with respect to the Company,
Select Medical Escrow or any other person, or which would have arisen or accrued
but for the commencement of such proceeding, even if such obligation or the
claim therefor is not enforceable or allowable in such proceeding).
"Securities Account" shall have the meaning set forth in UCC
Section 8-501(a).
"Security Entitlements" shall have the meaning set forth in
UCC Section 8-102(a).
"Securities Intermediary" has the meaning specified (i) in
Section 8-102(a) of the UCC and (ii) with respect to Book-Entry Securities
governed by the Federal Book-Entry Regulations, in 31 C.F.R. Section 357.2.
"Special Redemption Date" means the earlier of (a) December
11, 2003, if the Kessler Acquisition and the Assumption have not occurred on or
prior to the Deadline Date, or (b) the twelfth Business Day following the
termination of the Stock Purchase Agreement on or prior to the Deadline Date.
"Special Redemption Price" means 101% of the principal amount
of the Securities plus accrued and unpaid interest up to and including the
Special Redemption Date.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
(i) In satisfaction of its obligation to deposit the
Initial Deposit, Select Medical Escrow may deposit with the Escrow Agent cash in
an amount sufficient to purchase, by the second Business Day following the date
hereof, Permitted Investments to be deposited in the Escrow Account by such
second Business Day in an amount (together with any other amounts in the Escrow
Account) at least equal to the Required Amount on the Special Redemption Date
(assuming that December 11, 2003 is the Special Redemption Date). In such event,
Select Medical Escrow shall, concurrently with such cash deposit, deliver (A) a
written confirmation or sales order for delivery to the Escrow Account of such
Permitted Investments and (B) irrevocable instructions
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directing the Escrow Agent to release to the seller of such Permitted
Investments the purchase price thereof against delivery of such Permitted
Investments. The Escrow Agent agrees to invest any portion of the Escrowed
Property that is comprised of cash in Permitted Investments as directed in
writing by Select Medical Escrow until the Escrow Agent is required to release
such cash against delivery of such Permitted Investments. If any Escrowed
Property consisting of Permitted Investments for any reason ceases to meet the
requirements set forth in the definition of "Permitted Investments," the Escrow
Agent will dispose of such Escrowed Property as directed in writing by Select
Medical Escrow and invest the proceeds thereof in Permitted Investments as
directed in writing by Select Medical Escrow. Any such Escrowed Property shall
continue to be deemed a "Permitted Investment" hereunder so long as such
Escrowed Property is reinvested in Permitted Investments promptly upon discovery
of the failure of such Escrowed Property to meet the requirements set forth in
the definition of "Permitted Investments."
(b) If the Securities become subject to Special
Redemption, Select Medical Escrow shall provide at least 10 Business Days
written notice thereof (a "Redemption Notice") to the Escrow Agent, together
with an officer's certificate certified as to its mathematical accuracy by the
Chief Accounting Officer of the Company setting forth (i) a calculation of the
amount of cash that will be available to the Escrow Agent, based on the Escrowed
Property then held with the Escrow Agent, without any reinvestment thereof or
sale prior to maturity, on the third Business Day prior to the date fixed for
such Special Redemption and (ii) a calculation of the Special Redemption Price
payable on the date fixed for such Special Redemption. Notwithstanding the
foregoing, the Escrow Agent and the Trustee shall not notify the holders of the
Securities of a Special Redemption unless Select Medical Escrow confirms with
the Escrow Agent and the Trustee in writing that the Special Redemption shall
occur at least 8 Business Days prior to a Special Redemption. If such
certificate reveals that the amount of cash so available, together with the
market value of any Permitted Investments in the Escrowed Property that will not
mature on or prior to the third Business Day prior to the date fixed for such
Special Redemption, will be insufficient to pay the Special Redemption Price,
then Select Medical Escrow shall within one Business Day after receipt by the
Escrow Agent of such notice, deposit with the Escrow Agent an amount of cash
that equals the amount of such deficiency. In connection with any Redemption
Notice received from Select Medical Escrow relating to a date fixed for Special
Redemption that is prior to December 11, 2003, the Escrow Agent is hereby
authorized to promptly liquidate in any manner it deems reasonable any Permitted
Investments that will not mature on or prior to the third Business Day prior to
the date fixed for Special Redemption; provided that the Escrow Agent shall
reinvest any portion of the proceeds so realized by the Escrow Agent in
Permitted Investments that shall mature on or prior to the date fixed for
Special Redemption as may be directed by Select Medical Escrow in writing
pursuant to Section 1(d). To the extent that the proceeds realized by the Escrow
Agent from liquidating such Permitted Investments are less than the market value
thereof calculated by Select Medical Escrow as evidenced in the certificate
described above, the Escrow Agent shall so notify
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Select Medical Escrow, and Select Medical Escrow shall promptly but in any event
within one Business Day after receiving such notice, deposit cash in an amount
that equals the amount of such deficiency.
(c) Select Medical Escrow shall deliver to the Escrow
Agent, in conjunction with the Initial Deposit and as a condition to any
investment of cash in Permitted Investments (other than during the two Business
Day period following the date hereof) a written statement setting forth a
calculation showing that the amount of cash that would be available to the
Escrow Agent would at least be equal to the Required Amount on the Special
Redemption Date (assuming that December 11, 2003 is the Special Redemption
Date). Select Medical Escrow shall deliver with each deposit with the Escrow
Agent under Section 1(b) a written statement, certified as to its mathematical
accuracy by the Chief Accounting Officer of the Company, setting forth a
calculation showing that the amount of cash that would be available to the
Escrow Agent, together with the Permitted Investments included in the Escrowed
Property, would be at least equal to (i) the Required Amount on the Special
Redemption Date (assuming that December 11, 2003 is the Special Redemption
Date), or (ii) if a date shall have been fixed for the Special Redemption at the
time such statement is delivered, an amount sufficient to pay the Special
Redemption Price on the date fixed for such Special Redemption. If Select
Medical Escrow has made a cash deposit with the Escrow Agent pursuant to Section
1(a)(ii), such cash deposit shall be accompanied by an officer's certificate
containing a verification by Select Medical Escrow that the cash so deposited is
sufficient to provide the Required Amount. The Escrow Agent shall be under no
obligation to independently confirm the calculations contained in, or the
conclusions reached by, such statements or officer's certificate.
(d) The Escrow Agent shall accept the Initial Deposit and
any amounts deposited pursuant to Section 1(b) and shall hold such securities,
funds and the proceeds thereof in the Escrow Account. The Initial Deposit and
any amounts deposited pursuant to Section 1(b) hereof, and the proceeds of any
such deposits, together with any other property in the Escrow Account, shall
constitute the "Escrowed Property." The Escrow Agent further agrees to invest
any portion of the Escrowed Property that is comprised of cash in Permitted
Investments as may be directed by Select Medical Escrow in writing from time to
time. In selecting any Permitted Investments, Select Medical Escrow shall
determine that the market value thereof, together with the market value of the
balance of the Escrowed Property, shall be in an amount at least equal to the
Required Amount on the assumed Special Redemption Date. Temporarily uninvested
funds shall not earn or accrue interest. No investment of funds in the Escrow
Account shall be made unless Select Medical Escrow has certified to the Escrow
Agent and the Trustee that, upon such investment, the Trustee will have a first
priority perfected security interest in the applicable investment.
Notwithstanding anything herein to the contrary, the Escrow Agent shall have no
duty nor any liability whatsoever with respect to selecting the
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Permitted Investments hereunder but shall simply comply with the written
instructions it receives from Select Medical Escrow in accordance with this
Agreement.
(e) The obligation of the Escrow Agent to make the
payments and transfers required by this Escrow Agreement shall be limited to the
Escrowed Property and any other moneys on deposit with it pursuant to this
Escrow Agreement. The Escrow Agent shall not be liable for any loss resulting
from any investment made pursuant to this Agreement in compliance with the
provisions hereof or from the sale of any Permitted Investment required by the
terms hereof.
2. Disbursement of Escrowed Property. (a) If the Escrow
Agent receives notice from Select Medical Escrow that the closing of the Kessler
Acquisition and the Assumption will occur on or prior to the Deadline Date, the
Escrow Agent shall release an amount equal to the net proceeds of the offering
of the Securities and all other Escrowed Property then held by it to Select
Medical Escrow and/or the Company, as Select Medical Escrow may direct, upon
presentation and receipt by the Escrow Agent of (i) a copy of the executed
counterparts of a supplemental indenture (the "Supplemental Indenture"),
substantially in the form of Exhibit A hereto, pursuant to which the Company
assumes Select Medical Escrow's obligations under the Indenture and the
Securities and each of the Company's Domestic Subsidiaries (as defined in the
Indenture) other than specified Existing Joint Venture Subsidiaries (as defined
in the Indenture) and New Joint Venture Subsidiaries (as defined in the
Indenture) (including, without limitation, Kessler and Kessler's wholly-owned
subsidiaries following consummation of the Kessler Acquisition, it being
understood, however, that the Company shall not be required to deliver any
signature page of Kessler or any of its subsidiaries to the Supplemental
Indenture or any other document until immediately following the Kessler
Acquisition) (collectively, the "Subsidiary Guarantors") guarantee the Company's
obligations under the Indenture and the Securities (the "Guarantees"), (ii) an
executed counterpart of an assumption agreement (the "Assumption Agreement"),
substantially in the form of Exhibit B hereto, pursuant to which the Company
assumes, and the Subsidiary Guarantors guarantee, the Company's obligations
under the Purchase Agreement, the Registration Rights Agreement, the Indenture
and this Agreement, (iii) an Officer's Certificate, substantially in the form of
Exhibit C hereto, certifying to the Escrow Agent as to the matters specified
therein, and (iv) opinions of counsel as to the due authorization and
enforceability of the Assumption Agreement and the Supplemental Indenture
(including as to the Guarantees) and opinions as to such other matters as may be
required by the Indenture in connection with the execution and delivery of the
Supplemental Indenture. The Escrow Agent hereby agrees that upon the Escrow
Agent's receipt of executed copies of the Assumption Agreement and the
Supplemental Indenture, Select Medical Escrow shall be automatically released
from, and the Company shall assume from Select Medical Escrow, any further
liability under this Agreement. The Company and Select Medical Escrow hereby
agree, for the benefit of the Trustee and the holders of the Securities, that,
upon consummation of the Kessler Acquisition, the
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Company and Select Medical Escrow shall cause the Assumption and the Select
Medical Escrow Merger to occur and shall cause each of the Subsidiary Guarantors
to enter into the Assumption Agreement and the Supplemental Indenture.
Notwithstanding the foregoing, (i) Kessler and Kessler's wholly-owned
subsidiaries shall execute the Assumption Agreement, provided that such
execution of the Assumption Agreement may occur immediately following
consummation of the Kessler Acquisition, and (ii) Kessler and Kessler's
wholly-owned subsidiaries shall execute either the same Supplemental Indenture
as the Company or a separate Supplemental Indenture, substantially in the form
of Exhibit A hereto (provided that any reference herein to the Supplemental
Indenture shall include any such separate Supplemental Indenture), and such
execution of the same or a separate Supplemental Indenture may occur immediately
following consummation of the Kessler Acquisition.
(a) If the Escrow Agent receives a notice from Select
Medical Escrow and/or the Trustee that a Special Redemption is to occur, the
Escrow Agent shall on or before the Business Day prior to the date fixed for
such Special Redemption release to the Paying Agent an amount of Escrowed
Property in cash equal to the Special Redemption Price specified in such notice
from Select Medical Escrow or the Trustee. Two Business Days following the
Special Redemption Date, the Escrow Agent shall release any excess of Escrowed
Property over the Special Redemption Price to Select Medical Escrow.
(b) Notwithstanding paragraphs 2(a) and (b) above, if the
Escrow Agent receives a notice from the Trustee, Select Medical Escrow or any
holder or otherwise becomes aware that a Default has occurred and is continuing,
the Escrow Agent shall not release any Escrowed Property to Select Medical
Escrow unless and until the Escrow Agent receives a notice from the Trustee that
such Default is not continuing.
(c) If the Escrow Agent receives a notice from the
Trustee that the principal of and accrued interest on the Securities (the
"Default Amount") has become immediately due and payable pursuant to Section 602
of the Indenture (an "Acceleration Event,") and either (i) a court of competent
jurisdiction determines that the acceleration of the Securities was appropriate
as a result of a bona fide Event of Default under the Indenture or (ii) such
acceleration is not rescinded on or prior to the Deadline Date (either such
event, a "Remedies Trigger Event"), the Escrow Agent shall liquidate all
Escrowed Property then held by it within one Business Day after it receives
notice of such court determination or on the Business Day after the Deadline
Date, as the case may be, and shall release to the Paying Agent for payment to
the holders of the Securities an amount of Escrowed Property sufficient to pay
the Default Amount. The Escrow Agent shall release all remaining Escrowed
Property in excess of such Default Amount to Select Medical Escrow. If the
Escrow Agent receives a notice that a Special Redemption is to occur, this
Section 2(d) and Section 2(c) shall be of no further effect and all Escrowed
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Property then held by the Escrow Agent shall be released in accordance with
Section 2(b).
(d) The Company hereby agrees, for the benefit of the
Trustee and the holders of the Securities, not to take or fail to take, and to
cause each of the Subsidiary Guarantors not to take or fail to take, any action
if such action or failure to act would constitute or result in, with or without
the passage of time, a breach of any of the provisions in Article 4 of the
Indenture that would apply to the Company or any Subsidiary Guarantor, as the
case may be, following the Assumption.
3. Termination. Upon the release of any Escrowed
Property pursuant to Section 1 or 2, such Escrowed Property shall be delivered
to Select Medical Escrow or the Company, as applicable, free and clear of any
and all interests and liens of any Person, including, without limitation, the
Escrow Agent, the Trustee and the holders of the Securities. Upon the release of
all Escrowed Property in accordance with Section 1 or Section 2 hereof, this
Agreement shall terminate; provided, however, that it is expressly agreed that
the provisions of Sections 4 and 7 hereof shall survive any such termination.
4. Indemnity. The Company and Select Medical Escrow
agree, jointly and severally, to indemnify the Escrow Agent, and its officers,
directors, employees and agents, for, and to hold it and each of them harmless
against, any loss, liability or expense arising out of or in connection with
this Agreement and carrying out its duties hereunder, including the cost and
expenses of defending itself against any claim of liability including but not
limited to reasonable attorneys fees; provided, however, that the Company and
Select Medical Escrow will not be liable for indemnification or otherwise for
any loss, liability or expense to the extent arising out of the gross
negligence, willful misconduct or bad faith of the Escrow Agent or any of its
officers, directors, employees or agents.
5. Modifications, Waivers and Amendments. The Escrow
Agent shall not be bound by any modification, amendment, termination (except as
provided in Section 3), cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by the parties hereto,
and, if its rights, duties, immunities or indemnities as Escrow Agent are
affected thereby, unless it shall have given its prior written consent thereto.
This Agreement may not be modified, amended or terminated (except as provided in
Section 3) without the written consent of the Company, JP Morgan and Merrill
Lynch. Notwithstanding anything herein to the contrary, the parties hereto may
not amend or modify the provisions in this Agreement and the Assumption
Agreement relating to the Select Medical Escrow Merger and Select's assumption
of the obligations under the Indenture if such change would adversely affect the
rights of any holder of the Securities without the consent of each Holder of
outstanding Securities so affected.
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6. Grant of Security Interests; Instructions to Escrow
Agent. As security for the full and timely payment and performance of the
Secured Obligations, Select Medical Escrow hereby irrevocably grants a perfected
first priority (subject to liens arising by operation of law) security interest
in and pledges, assigns and sets over to the Trustee for its benefit and the
benefit of the holders of the Securities all of Select Medical Escrow's right,
title and interest in, to and under the following whether now or hereafter
existing or acquired (collectively, the "Collateral"): (i) the Escrow Account,
and all Financial Assets and other property from time to time placed or
deposited in, or delivered to the Escrow Agent for placement or deposit in, the
Escrow Account, including, without limitation, all funds held therein, and all
Permitted Investments held by (or otherwise maintained in the name of) the
Escrow Agent pursuant to Section 1; (ii) all Security Entitlements (as such term
is defined in Section 8-102(a) of the UCC) from time to time credited to the
Escrow Account; (iii) all claims and rights of whatever nature which Select
Medical Escrow may now have or hereafter acquire against any third party(ies) in
respect of any of the Collateral described in this Section 6 (including, without
limitation, any claims or rights in respect of any Security Entitlements
credited to an account of the Escrow Agent maintained at The Depository Trust
Company or any other clearing corporation or any other Securities Intermediary);
(iv) all rights which Select Medical Escrow may now have or hereafter acquire
against the Escrow Agent in respect of its holding and managing all or any part
of the Collateral; and (v) all proceeds (as such term is defined in Section
9-102(a) of the UCC) of any of the foregoing. The Escrow Agent hereby
acknowledges the Trustee's security interest as set forth in this Section 6.
Select Medical Escrow shall take all actions and shall direct the Trustee in
writing to take all actions reasonably necessary on its part to ensure (i) the
continuance of a security interest in the Collateral in favor of the Trustee for
its benefit and for the benefit of the holders of the Securities in order to
secure all the Secured Obligations and (ii) that such security interest is at
all times a perfected first priority (subject to liens arising by operation of
law) security interest. Select Medical Escrow shall not grant to any other
Person or cause any other person to obtain a security interest, encumbrance,
lien or other claim, direct or indirect, in Select Medical Escrow's right, title
or interest in the Escrow Account or any Collateral.
Upon receipt of written instructions from Select Medical
Escrow, the Escrow Agent shall execute any instruments or other documents
delivered to it that Select Medical Escrow has determined to be reasonably
necessary to cause the Trustee to enjoy a continuous perfected first priority
(subject to liens arising by operation of law) security interest under the UCC,
any other applicable statutory or case law or regulation of the State of New
York and any applicable law or regulation of the United States in the
Collateral. Except as otherwise required by law, the Escrow Agent shall (i)
maintain the Collateral free and clear of all liens, security interests,
safekeeping or other charges, demands and claims of any nature now or hereafter
existing in favor of anyone other than the Trustee; (ii) promptly notify the
Trustee if the Escrow Agent receives written notice that any person other than
the Trustee has a lien, security interest, charge, demand or
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claim of any nature upon any portion of the Collateral; and (iii) in addition to
disbursing the Escrowed Property and all other Collateral held in the Escrow
Account pursuant to this Agreement, upon receipt of a Notice of Sole Control,
the Escrow Agent shall, as promptly as practicable, disburse all Escrowed
Property and other Collateral held in the Escrow Account to or as directed by
the Trustee and, to the extent permissible by applicable law, transfer title to
all treasury securities held by the Escrow Agent hereunder to or as directed by
the Trustee. The Trustee covenants and agrees that it shall not deliver a Notice
of Sole Control except upon the occurrence and during the continuation of a
Remedies Trigger Event.
The security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
the Trustee shall have no security interest in, any property constituting
Collateral disbursed by the Escrow Agent pursuant to this Agreement.
The Escrow Agent shall act solely as the Trustee's agent in
connection with its duties under this Section 6, notwithstanding any other
provision contained in this Agreement, without any right to receive compensation
from the Trustee and without any authority to obligate the Trustee or to
compromise or pledge its security interest hereunder. Accordingly, the Escrow
Agent is hereby directed to cooperate with the Trustee in the exercise of its
rights in the Collateral provided for in this Section 6.
Select Medical Escrow shall execute and deliver to the Trustee
such instruments and documents as are reasonably necessary or advisable to
confirm or perfect the rights of the Trustee under this Agreement and the
Trustee's interests in the Collateral. The Trustee shall be entitled but not
obligated to take all necessary action to preserve and protect the lien and
security interest created hereby upon the Collateral. Select Medical Escrow and
the Company, jointly and severally, will pay all reasonable costs and expenses
incurred in connection with any of the foregoing.
Upon the occurrence of an Event of Default under the Indenture
and for so long as such Event of Default continues, Select Medical Escrow hereby
appoints the Trustee as its attorney-in-fact with full power of substitution to
do any act which Select Medical Escrow is obligated hereunder to do, and the
Trustee may, but shall not be required to, exercise such rights as Select
Medical Escrow might exercise with respect to the Collateral and take any action
in Select Medical Escrow's name to protect the Trustee's security interest and
lien granted hereunder. In addition to the rights provided under this Section 6,
upon the occurrence of an Event of Default under the Indenture and for so long
as such Event of Default continues, the Trustee may, but shall not be required
to, exercise in respect of the Collateral in addition to other rights and
remedies provided for herein or in the Securities Account Control Agreement or
otherwise available to it its right to issue "entitlement orders" (within the
meaning of Section 8-102(a)(8) of the UCC) upon the occurrence and during the
continuation of a Remedies Trigger Event and
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all other rights and remedies of secured parties under the UCC or other
applicable law, and the Trustee may also upon obtaining possession of the
Collateral as set forth herein, without notice to Select Medical Escrow or the
Company except as required by law, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange, broker's board
or at any of the Trustee's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Trustee may deem commercially
reasonable. Notwithstanding the foregoing, the Trustee covenants and agrees that
it shall not issue any entitlement order except upon the occurrence and during
the continuation of a Remedies Trigger Event. Select Medical Escrow and the
Company agree (to the extent they lawfully can do so) that, to the extent notice
of sale shall be required by law, at least ten days' notice to Select Medical
Escrow of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Trustee
shall not be obligated to make any sale regardless of notice of sale having been
given. The Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice (except as required by law), be made at the time and place to
which it was so adjourned.
If at any time the Escrow Agent shall receive an "entitlement
order" (within the meaning of Section 8-102(a)(8) of the UCC) issued by the
Trustee and relating to the Escrow Account, the Escrow Agent shall comply with
such entitlement order without further consent by Select Medical Escrow, the
Company or any other person.
7. Concerning the Escrow Agent. (a) The Escrow Agent
shall be paid a fee hereunder as Select Medical Escrow, the Company and the
Escrow Agent shall from time to time agree in writing. Select Medical Escrow and
the Company also agree, jointly and severally, to pay on demand the reasonable
costs and expenses of the Escrow Agent, including the reasonable fees and
expenses of one outside counsel selected by the Escrow Agent, other than the
costs and expenses reimbursed pursuant to Section 4, incurred in connection with
its duties hereunder.
(a) The Escrow Agent shall exercise the same degree of
care toward the Escrowed Property as it exercises toward its own similar
property and shall not be held to any higher standard of care under this
Agreement, nor be deemed to owe any fiduciary duty to Select Medical Escrow, the
Company or any other person.
(b) The Escrow Agent may act upon any instrument or other
writing believed by it in good faith to be genuine and to have been signed or
presented by the proper person, and shall not be liable to any party hereto in
connection with the performance of its duties hereunder, except for its own
gross negligence, willful misconduct or bad faith. The duties of the Escrow
Agent shall be determined only with reference to this Agreement and applicable
laws and the Escrow Agent is not charged
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with any knowledge of, or any duties or responsibilities in connection with, any
other document or agreement, including but not limited to the Purchase
Agreement, the Stock Purchase Agreement or the Indenture. If in doubt as to its
duties and responsibilities hereunder, the Escrow Agent may consult with counsel
of its choice and shall be protected in any action taken or omitted in good
faith in reliance on the advice or opinion of such counsel.
(c) The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys.
(d) Nothing in this Agreement shall be deemed to impose
upon the Escrow Agent any duty to qualify to do business or to act as agent or
otherwise in any jurisdiction other than the State of New York.
(e) The Escrow Agent shall not be responsible for and
shall not be under a duty to examine into or pass upon the validity, binding
effect, execution or sufficiency of, this Agreement, any agreement amendatory or
supplemental hereto or of any certificates delivered to it hereunder.
(f) The Escrow Agent makes no representation as to the
validity, value, genuineness or collectability of any security or other document
or instrument held by or delivered to it.
(g) The Escrow Agent shall not be called upon to advise
any party as to selling or retaining, or taking or refraining from taking any
action with respect to, any securities or other property deposited hereunder.
(h) The Escrow Agent shall have the right at any time to
resign hereunder by giving written notice of its resignation to Select Medical
Escrow at the address set forth herein or at such other address as Select
Medical Escrow shall provide in writing, at least 30 days prior to the date
specified for such resignation to take effect. Upon the effective date of such
resignation, all cash and other payments and all other property then held by the
Escrow Agent hereunder shall be delivered by it to a successor escrow agent. If
no successor escrow agent is appointed, the Escrow Agent may apply to a court of
competent jurisdiction for such appointment.
(i) If the Escrow Agent should at any time be confronted
with inconsistent claims or demands to the Escrowed Property, the Escrow Agent
shall have the right in its sole discretion to retain in its possession without
liability to anyone, all or any of said Escrowed Property until such dispute
shall have been settled either by the mutual written agreement of the parties
involved or by a final order, decree or judgment of a court in the United States
of America, the time for perfection of an appeal of such
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order, decree or judgment having expired. The Escrow Agent shall have the right,
but not the duty, to interplead the parties in any court of competent
jurisdiction and request that such court determine the respective rights of the
parties with respect to the Escrowed Property. In the event the Escrow Agent no
longer holds any Escrowed Property, it shall be released from any obligation or
liability as a consequence of any such claims or demands, except to the extent
of its own gross negligence, willful misconduct or bad faith.
(j) The Escrow Agent shall not be required to use its own
funds in the performance of any of its obligations or duties, or in the exercise
of any rights or powers, and shall not be required to take any action which, in
the Escrow Agent's judgment, could involve it in expense or liability unless
furnished with security and indemnity which the Escrow Agent deems to be
satisfactory.
(k) The Escrow Agent shall not be liable to anyone for
any action taken or omitted to be taken by it hereunder except in the case of
the Escrow Agent's gross negligence, willful misconduct or bad faith. In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damage or loss (including but not limited to lost profits)
whatsoever, even if the Escrow Agent has been informed of the likelihood of such
loss or damage and regardless of the form of action.
(l) The Escrow Agent is hereby authorized, in making or
disposing of any investment permitted by this Agreement, to deal with itself (in
its individual capacity) or with any one or more if its affiliates, whether it
or such affiliate is acting as a subagent of the Escrow Agent or for any third
person or dealing as principal for its own account.
8. Notices; Wiring Instructions. (a) All notices
required to be given hereunder shall be in writing and shall be deemed
sufficiently given when actually received if given by hand delivery, by telex,
by telecopier (receipt confirmed) or registered or certified mail, postage
prepaid, return receipt requested at the following addresses until such time as
the parties hereto designate a different or additional address or addresses:
If to the Company or Select Medical Escrow:
Select Medical Corporation
4718 Old Gettysburg Road
P.O. Box 2034
Mechanicsburg, Pennsylvania
Attn: Michael E. Tarvin, Esq.
Telephone: (717) 972-1132
Facsimile: (717) 975-9981
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With a copy to:
Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attn: Christopher G. Karras, Esq.
Telephone: (215) 994-2412
Facsimile: (215) 665-2412
To the Escrow Agent:
U.S. Bank Trust National Association
Corporate Trust Services
100 Wall Street, 16th Floor
New York, NY 10005
Attention: Jean Clarke
To the Trustee:
U.S. Bank Trust National Association
100 Wall Street, 16th Floor
New York, NY 10005
Attention: Jean Clarke
(a) Any funds to be paid to or by the Escrow Agent
hereunder shall be sent by wire transfer pursuant to the following instructions
(or by such method of payment and pursuant to such instruction as may have been
given in advance and in writing to or by the Escrow Agent, as the case may be,
in accordance with Section 8(a) above):
To the Company:
Select Medical Corporation
PNC Bank NA
Routing #: 031000053
Acct #: 5000749057
Attn: Dale Anglemeyer
Phone: 717.730.2367
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To Select Medical Escrow: pursuant to directions provided in
writing by Select Medical Escrow.
To the Escrow Agent:
Wiring instructions for incoming funds
BBK: US Bank (ABA 091000022)
BNF: U.S. Bank Trust N.A. St. Paul, MN
A/C: 173103321092
OBI Corporate Trust
Ref#: 743324001 Select Medical Corp.
Attn: Andrew Sinasky
9. Miscellaneous. (a) This Agreement may be executed in
any number of counterparts, each of which shall be an original and all of which
when taken together shall constitute one agreement. The exchange of copies of
this Agreement and of signature pages by facsimile shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to their original signatures for all
purposes.
(a) This Agreement shall be governed by the laws of the
State of New York but without giving effect to applicable principles of
conflicts of law to the extent that such principles are not mandatorily
applicable by statute and the application of the laws of an other jurisdiction
would be required thereby. Each of the parties hereby absolutely and irrevocably
consents and submits to the jurisdiction of the courts in the State of New York
and any Federal court located in said State in connection with any actions or
proceedings arising out of or relating to this Agreement.
(b) This Agreement shall be binding upon the respective
parties hereto and their heirs, executors, successors and assigns. If the Escrow
Agent consolidates, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Escrow Agent.
(c) The Escrow Agent shall not be responsible for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots, acts
of war, terrorist attacks, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power
failures, earthquakes or other disasters.
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(d) The parties hereto agree that, for tax reporting
purposes, all interest and other income earned from the investment of the
Escrowed Property in any tax year shall be reported as allocated to Select
Medical Escrow. Select Medical Escrow agrees to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form W-9 to the
Escrow Agent upon the execution and delivery of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day first written above.
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Escrow Agent
By: /s/ Jean Clarke
_________________________________________
Name: Jean Clarke
Title: Assistant Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By: /s/ Jean Clarke
_________________________________________
Name: Jean Clarke
Title: Assistant Vice President
SELECT MEDICAL CORPORATION
By: /s/ Michael E. Tarvin
_________________________________________
Name: Michael E. Tarvin
Title: Senior Vice President and Secretary
SELECT MEDICAL ESCROW, INC.
By: /s/ Michael E. Tarvin
_________________________________________
Name: Michael E. Tarvin
Title: Vice President
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