Document:

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                                                                   EXHIBIT 10.18

                             SPLIT-DOLLAR AGREEMENT
                             ----------------------

                             COLLATERAL ASSIGNMENT
                             ---------------------

          THIS AGREEMENT made this 6th day of October, 2000 by and between
Select Medical Corporation ("Corporation"), and Michael E. Salerno, Trustee of
the irrevocable trust under deed of Rocco A. Ortenzio, Settlor, dated October
20, 1987 ("Owner"), and Rocco A. Ortenzio ("Employee") (the Corporation, Owner
and Employee collectively referred to as "Parties").

                                   BACKGROUND
                                   ----------

          Employee wishes to provide life insurance protection for his family in
the event of his death, under several policies of life insurance (the
"Policies") insuring his life, issued by several life insurance companies (the
"Insurers").  The Policies and the Insurers are identified on Exhibit A.

          The Corporation is willing to pay premiums on the Policies as an
additional employment benefit for Employee, on the terms and conditions
hereinafter set forth.

          Owner is the owner of the Policies and, as such, possesses all
incidents of ownership in and to the Policies.

          Corporation wishes to have the Policies collaterally assigned to it by
Owner, to secure the payment of its Secured Premium Amount as hereinafter
defined.

          Accordingly, in consideration of the premises and of the mutual
promises contained
<PAGE>

herein, and intending to be legally bound hereby, the Parties hereto agree as
follows:

                                   Agreement
                                   ---------
          1.    Definitions:
                -----------

          "Secured Premium Amount":  shall mean an amount equal to the total
           ----------------------
amount paid by Corporation under Article 6 of this Agreement towards the
premiums due on the Policies.

          "Surrender Value":  shall mean the cash value plus Dividend Value, as
           ---------------
defined in each of the Policies, on the date of surrender, less any outstanding
policy loans and accrued interest.

          "Scheduled Premium":  shall the amount to be paid in each year from
           -----------------
2000 through 2009, as specified in Amendment No. 1 to the Employment Agreement
dated March 1, 2000 between the Corporation and the Employee ("Amendment No.
1").

          2.    Policy of Insurance.  Owner has purchased the Policies from the
                -------------------
Insurers as set forth on Exhibit A. The Parties hereto have taken all necessary
action to cause each Insurer to issue the Policy, and shall take any further
action which may be necessary to cause each Policy to conform to the provisions
of this Agreement. The Parties hereto agree that the Policies shall be subject
to the terms and conditions of this Agreement and of the collateral assignments
filed with each Insurer relating to each Policy issued by that Insurer. Owner
and Employee represent and warrant to the Corporation that the cash value of the
Policies is, and will be after the payment of Scheduled Premiums by the
Corporation, sufficient in amount to repay the Corporation the full amount of
its Scheduled Premiums.
<PAGE>

          3.    Ownership of Insurance.
                ----------------------

     (a)  Owner is the sole and absolute owner of each Policy, and may exercise
all ownership rights granted to the owner thereof by the terms of each Policy,
except as hereinafter provided.

     (b)  It is the intention of the Parties to this Agreement and the
collateral assignment executed by Owner to Corporation in connection herewith
that Owner shall retain all rights which each Policy grants to the owner
thereof, except Corporation's right to its Secured Premium Amount. Specifically,
but without limitation, Corporation shall neither have nor exercise any right as
collateral assignee of any Policy which, except as explicitly provided in this
Agreement or the accompanying collateral assignment with respect to the Policy,
could in any way defeat or impair Owner's right to receive the cash Surrender
Value or the death proceeds of the Policy, in excess of the amount due
Corporation hereunder. All provisions of this agreement and of each such
collateral assignment shall be construed so as to carry out such intention.

     (c)  The Corporation shall have the right, at any time, consistent with the
terms of any Policy, to recover its Secured Premium Amount during the Employee's
lifetime by loan, partial surrender or withdrawal of the amount of its Secured
Premium, determined as of the date of such loan, partial surrender or
withdrawal.

          4.    Beneficiary Designation.  Owner may designate a beneficiary or
                -----------------------
beneficiaries to receive any proceeds payable on the death of the Employee,
which are in excess of Corporation's Secured Premium Amount.
<PAGE>

          5.    Dividend Options:  Owner may elect any of the Dividend Options,
                ----------------
as defined in any Policy, and may change such election thereafter.

          6.    Premium Payment:
                ---------------

     (a)  Except as otherwise provided herein, on or before the payment date or
dates requested each year by the Employee pursuant to Amendment No. 1, the
Corporation shall remit the full amount of the Scheduled Premium to Insurer, and
shall, upon request, promptly furnish Employee, and Owner, evidence of timely
payment of such premium. Corporation shall annually furnish Employee a statement
of the amount of income reportable for federal and state income tax purposes, if
any, as a result of Corporation's payment of such portion of the premium.

          7.    Collateral Assignment.  To secure the payment to Corporation of
                ---------------------
its Secured Premium Amount, Owner has, contemporaneously herewith, assigned each
Policy to Corporation as collateral, which collateral assignment specifically
limits the right of Corporation thereunder to payment of its Secured Premium
Amount. Such payment shall be made from the cash portion of the Surrender Value
of each Policy (as defined therein) if Owner surrenders or cancels the Policy,
or from the death proceeds of the Policies if Employee should die while the
Policies and Agreements remain in force.

          In no event shall Corporation have any right to borrow against any
Policy in an amount in excess of the Secured Premium Amount of the Corporation.
The collateral assignment of a Policy to Corporation hereunder shall not be
terminated, altered or amended by Owner, without the express written consent of
Corporation.  The Parties hereto agree to take all
<PAGE>

action necessary to cause such collateral assignment to conform to the
provisions of this Agreement.

          8.    Owner's Retained Incidents of Ownership.
                ---------------------------------------

     (a)  Except as to the limited Policy security rights specifically granted
Corporation herein, Owner retains all incidents of ownership (including the
right to surrender or cancel any Policy, the right to borrow or withdraw against
any Policy, and the rights to change the Dividend Option).

     (b)  Owner's right to borrow shall be limited to an amount equal to the
maximum loan value, reduced by the Secured Premium Amount of the Corporation.

     (c)  Owner's right to withdraw cash values under any Policy's "Withdrawal"
provisions shall be limited to the Surrender Value, reduced by the Secured
Premium Amount of the Corporation, and subject to any Policy surrender
limitations.

          9.    Division of Death Proceeds of Policy.
                ------------------------------------

     (a)  Upon the death of the Employee, Corporation shall be entitled to
receive from the death proceeds an amount equal to its Secured Premium Amount.
The beneficiary designated by Owner in accordance with Article 4 shall be
entitled to the remainder of such proceeds, if any.

     (b)  If any interest is due upon the death proceeds under the terms of the
insurance contract, Owner and Corporation shall share such interest as their
respective share of the death proceeds (as defined in the preceding paragraph)
bears to the total death proceeds, excluding such interest.
<PAGE>

          10.   Division of the Surrender Value of the Policy. Upon surrender
                ---------------------------------------------
of a Policy, Corporation shall be entitled to receive from the Surrender Value
an amount equal to its Secured Premium Amount paid with respect to that Policy.
Owner shall be entitled to any remainder of such Surrender Value.

          11.   Termination of Agreement.  This Agreement shall terminate,
                ------------------------
without notice, upon the occurrence of any of the following events:

     (a)  Total cessation of the business of Corporation;

     (b)  Bankruptcy, receivership or dissolution of Corporation;

     (c)  Termination of Employee's employment by Corporation (other than by
reason of Employee's death);

     (d)  Payment by Owner to Corporation of the Secured Premium Amount.

          12.   Release of Collateral Assignment.
                --------------------------------

     (a)  For sixty (60) days after the date of the termination of this
Agreement, Owner shall have the option of obtaining the release of the
collateral assignment of any or all of the Policies from Corporation. To obtain
such release, Owner shall pay to Corporation the amount of the Corporation's
Secured Premium Amount with respect to the Policies to be so released. Upon
receipt of such amount, Corporation shall release the collateral assignment of
the Policy by the execution and delivery of an appropriate instrument of
release.

     (b)  If Owner fails to exercise such option within sixty (60) day period,
then, Corporation may enforce its rights to be paid the amount of its Secured
Premium Amount; provided that in the event the cash Surrender Value of the
Policy exceeds the amount due
<PAGE>

Corporation and the Owner surrenders the Policy, such excess shall be paid to
Owner. Thereafter, neither Owner nor its respective successors, assigns, or
beneficiaries shall have any further interest in and to the Policy, either under
the terms thereof or under this Agreement.

          13.   Release of Insurers.  Each Insurer shall be fully discharged
                -------------------
from its obligations under a Policy by payment of the Policy death benefit to
the Beneficiary or Beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any modification or amendment hereof, shall in any way be
construed as enlarging, changing, varying, or in any other way affecting the
obligations of Insurer as expressly provided in the Policy; except insofar as
the provisions hereof are made a part of the Policy by the collateral assignment
executed by Owner and filed with Insurer in connection herewith.

          14.   Amendment.  This Agreement may not be amended, altered or
                ---------
modified, except by a written instrument signed by the Parties hereto, or their
respective successors or assigns, and may not be otherwise terminated except as
provided herein.

          15.   Binding Effect.  This Agreement shall be binding upon and inure
                --------------
to the benefits of Corporation, Employee, Owner, and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.

          16.   Notice.  Any notice, consent or demand required or permitted to
                ------
be given under the provisions of this Agreement shall be in writing, and shall
be signed by the party
<PAGE>

giving or making the same. If such notice, consent or demand is mailed to party
hereto, it shall be sent United States certified mail, postage paid, addressed
to such party's last known address as shown on the records of Corporation. The
date of such mail shall be deemed the date of notice, consent or demand.

          17.   Governing Law.  This Agreement and the rights of the Parties
                -------------
hereunder, shall be governed by and construed in accordance with the laws of
Pennsylvania.

          18.   Captions.  The captions appearing in this Agreement are for
                --------
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent or content of any provision thereof.

          IN WITNESS WHEREOF, the Parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written.

Attest:                              SELECT MEDICAL CORPORATION

 /s/ Michael E. Tarvin               By: /s/ Scott A. Romberger
-----------------------------           ------------------------------
Michael E. Tarvin, Secretary             Scott A. Romberger
                                         Vice President and Controller

     [ILLEGIBLE]                     By: /s/ Rocco A. Ortenzio        [Seal]
-----------------------------           ------------------------------
               , Witness                 Rocco A. Ortenzio
                                         Employee

                                     Rocco A. Ortenzio Irrevocable Trust u/d
                                     dated October 20, 1987

     [ILLEGIBLE]                      /s/ Michael E. Salerno
-----------------------------        ----------------------------------
               , Witness             Michael E. Salerno
                                                                         Trustee
<PAGE>

                                                                       Exhibit A

Table of Policies and Insurers Under Split Dollar Agreement among Select Medical
Corporation, Rocco A. Ortenzio and Michael E. Salerno, Trustee, dated August 9,
2000

--------------------------------------------------------------------------------
           Insurer                    Policy Number        Issue Date
--------------------------------------------------------------------------------
    Great West Insurance
           Company                       4995814          October 9, 1995
--------------------------------------------------------------------------------
   Metropolitan Life Insurance
           Company                      951050265A        October 9, 1995

--------------------------------------------------------------------------------
   Metropolitan Life Insurance
           Company                      960150090PR       January 9, 1996

--------------------------------------------------------------------------------
   Metropolitan Life Insurance
            Company                     951150267A        October 9, 1997

--------------------------------------------------------------------------------
       Sun Life Insurance
            Company                      020018770        October 9, 1995
--------------------------------------------------------------------------------<PAGE>

                                                                   Exhibit 10.19

                             EMPLOYMENT AGREEMENT
                             --------------------

          THIS AGREEMENT is made as of the 1st day of March, 2000, by and
between SELECT MEDICAL CORPORATION, a Delaware corporation (the "Employer"), and
PATRICIA A. RICE, an individual (the "Employee").

                                  WITNESSETH:
                                  ----------

          WHEREAS, the Employer wishes to ensure the continued services of the
Employee for the term of this Agreement, and the Employee desires to be employed
by the Employer for such term, upon the terms and conditions set forth below;

          NOW THEREFORE, in consideration of the mutual agreements contained
herein and intending to be legally bound, the parties hereto hereby agree as
follows:
                       Article 1.    CAPACITY AND DUTIES

          1.01. Employment: Acceptance of Employment. The Employer hereby
                ------------------------------------
employs the Employee, and the Employee hereby accepts employment by the
Employer, subject to all the terms and conditions hereafter set forth.

          1.02. Capacity. Employee shall serve as a senior executive of the
                --------
Employer.

          1.03. Duties. During the term of this Agreement, the Employee shall
                ------
devote her full attention and her best efforts to the performance of the
customary duties and responsibilities consistent with the Employee's position as
described in Section 1.02; provided that nothing herein shall be deemed to
prevent the Employee from serving as a director of companies other than the
Employer so long as such service does not unreasonably interfere with the
performance of the Employee's duties hereunder.
<PAGE>

                  Article 2.  TERM OF EMPLOYMENT; TERMINATION

     2.01.  Term. Unless earlier terminated as hereafter provided, this
            ----
Agreement shall commence on the date hereof and shall expire on the third
anniversary of such date, provided that at the end of each 12-month period after
the date hereof, unless either party gives written notice to the other not less
than three months prior to the end of such 12-month period that it or she does
not want the term of this Agreement to continue, such term shall thereafter
automatically extend for an additional period of one year (with the result that,
upon each anniversary of the date hereof, in the absence of such notice, the
term shall be three years in length) (such period, including extensions thereof,
being hereinafter referred to as the "Term").

     2.02.  Termination.

            (a)   Death and Disability. The employment of the Employee under
                  --------------------
this Agreement shall immediately terminate (i) upon the death of the Employee
and (ii) upon written notice to the Employee given by the Board of Directors of
the Employer, in the event that the Employee, in the reasonable opinion of the
Board of Directors, is for any reason during the period of her employment
hereunder unable to perform the duties to be performed by the Employee as
contemplated by Section 1.03 for a period of 120 consecutive days by reason of
the Employee's disability. The term "disability" as used in this Section 2.02(a)
means the inability because of physical or mental injury or sickness to perform
the substantial and material duties of the Employee hereunder. Upon a
termination of employment described in this Section 2.02(a), (i) the Employee or
her estate or beneficiaries, as applicable, shall be entitled to receive any
base salary and other benefits earned and accrued under this Agreement prior to
the date of

                                       2
<PAGE>

termination, and (ii) the Employee and her estate and beneficiaries shall have
no further rights to any other compensation or benefits, or any other rights,
hereunder.

     (b)  Discharge for Cause. The employment of the Employee under this
          -------------------
Agreement shall terminate immediately if the Chief Executive Officer or the
President of the Employer discharges the Employee for cause. For purposes of
this Agreement, "cause" shall mean: (i) the willful and continued failure by the
Employee to substantially perform her duties hereunder (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), (ii) the engaging by the Employee in willful or reckless misconduct
which is demonstrably and materially injurious to Employer monetarily or
otherwise, or (iii) the conviction of the Employee of a felony involving moral
turpitude. For purposes of this Section 2.02(b), an act, or failure to act, on
the Employee's part shall be considered "willful" or "reckless" only if done, or
omitted to be done, by her not in good faith and without a reasonable belief
that her action or omission was in the best interest of the Employer. The
Employee's employment shall not be deemed to have been terminated for cause
unless the Employer shall have given or delivered to the Employee (i) reasonable
notice setting forth the reasons for the Employer's intention to terminate the
Employee's employment for cause, (ii) an opportunity for the Employee to cure
any such breach during the 30-day period after the Employee's receipt of such
notice, (iii) a reasonable opportunity, at any time during the 30-day period
after the Employee's receipt of such notice, for the Employee, together with her
counsel, to be heard before the Board of Directors, and (iv) a Notice of
Termination (as defined in Section 2.02(c)) stating that, in the good faith
opinion of not less than a majority of the entire membership of the Board of
Directors, the Employee was guilty of the conduct set forth in any of clauses
(i), (ii) or

                                       3
<PAGE>

(iii) of the second sentence of this Section 2.02(b). If the Employer terminates
the Employee's employment for cause pursuant to this Section 2.02(b), (i) the
Employer shall pay to the Employee any base salary and other benefits earned and
accrued under this Agreement prior to the termination of employment, excluding
any unpaid bonuses, whether or not earned or accrued, and (ii) the Employee
shall have no further rights to compensation or benefits, or any other rights,
hereunder.

          (c)  Notice of Termination. Any termination of the Employee's
               ---------------------
employment, other than a termination by reason of death, shall be communicated
by Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision of this Agreement relied upon, (ii) if
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Employee's employment under the
provision so indicated, and (iii) specifies the termination date (which date
shall, except as otherwise expressly provided in this Article 2, be not more
than 15 days after the giving of such Notice). In the event of a termination by
the Employer for cause, the Notice of Termination shall not be effective unless
preceded by satisfaction of the procedural requirements set forth in Section
2.02(b) hereof.

          (d)  Certain Terminations. The Employer may terminate the Employee's
               --------------------
employment hereunder at any time for any reason or for no reason by providing a
Notice of Termination in accordance with Section 2.02(c). If the Employee's
services are terminated by the Employer for any reason other than for cause as
defined in Section 2.02(b) hereof and other than due to death or disability: (i)
the Employer shall pay to the Employee any base salary and other benefits earned
and accrued under this Agreement prior the date of termination, (ii) the
Employer

                                       4
<PAGE>

shall pay to the Employee a pro-rated bonus for the year of termination in an
amount equal to the product of(A) the target bonus established with respect to
the Employee for such year, or if no such target is established the bonus paid
or payable to the Employee for the year prior to the year of termination,
multiplied by (B) a fraction, the numerator of which is the number of days in
the year of termination completed prior to such termination and the denominator
of which is 365; provided that if a target bonus had been established with
respect to the year of termination, a pro-rated bonus shall be payable pursuant
to this Section 2.02(d)(ii) only if the performance goals established with
respect to such target bonus have been achieved by the date the bonus would have
been paid in the absence of the Employee's termination of employment (iii) the
Employer agrees that such termination would not be voluntary or a termination
"for cause" as contemplated by any stock option or other incentive plans and any
stock option or other award agreements entered into between the Employer and the
Employee (including agreements that may be entered into after the date hereof),
and that any stock options with respect to the Employer's stock held by the
Employee shall become fully exercisable as of the date of such termination and
shall remain exercisable until the later of three months following the date of
such termination or the expiration date of such option, notwithstanding any
contrary vesting schedules otherwise applicable to such options, (iv) the
Employer will continue to pay the Employee, for the balance of the Term, her
base salary as of the date of such termination, and (v) the Employee shall have
no further rights hereunder. Such continued payments will be made at the times
and in the manner they would have been made to the Employee in the absence of
such termination.

                                       5
<PAGE>

                          Article 3.    COMPENSATION

     3.01.  Cash Compensation. During the period of the Employee's services
            -----------------
hereunder, as compensation for such services to the Employer pursuant to this
Agreement, the Employer shall pay to the Employee a base salary of $325,000 per
year in equal bi-weekly installments. The Board of Directors of the Employer
may, in its sole discretion from time to time, increase the base compensation to
be paid to the Employee as provided in this Article 3. The Employee will also be
eligible to receive bonus compensation, annual or otherwise, in an amount to be
determined by the Employer's Board of Directors in its sole discretion.

     3.02.  Stock Options. The Employee will be eligible to receive such stock
            -------------
options as the Employer's Board of Directors may grant to her from time to time
pursuant to the Employer's stock option plan, on terms and conditions consistent
with such plan.

     3.03.  Disability Insurance. The Employer shall provide the Employee with
            --------------------
long-term disability insurance coverage such that in the event the Employee's
employment by the Employer is terminated pursuant to Section 2.02(a) due to the
Employee's disability, the Employee will be entitled to receive salary
continuation payments at the rate of 50% of the Employee's annual base salary as
of the date of such termination, such payments to commence from the date of such
termination and to continue until the earlier of the tenth anniversary of the
date of such termination, or the date on which the Employee is physically able
to become gainfully employed in any occupation reasonably consistent with her
education, training and experience.

     3.04.  Vacation. The Employee shall receive four (4) weeks paid vacation
            --------
per year, such vacation to be taken when and as desired by the Employee. Any
time spent by the Employee at

                                       6
<PAGE>

professional meetings, instructional courses and other meetings of like nature
so as to better enable the Employee to perform professional services in the
employ of the Employer shall not be considered vacation time.

     3.05.  Other Compensation and Benefits Generally. In addition to the
            -----------------------------------------
foregoing, the Employee shall be permitted during the period of her employment
hereunder to participate in any group life, hospitalization or disability
insurance plans, health programs, retirement plans, fringe benefit programs and
similar benefits that may be available to other senior executives of the
Employer generally, on the same terms and conditions as such other executives,
in each case to the extent that the Employee is eligible under the terms of such
plans or programs.

     3.06.  Expenses. The Employer shall pay or reimburse the Employee for all
            --------
ordinary and reasonable out-of-pocket expenses actually incurred (and, in the
case of reimbursement, paid) by the Employee in the performance of the
Employee's services under this Agreement; provided that the Employee submits
proof of such expenses, with the properly completed forms as prescribed from
time to time by the Employer in accordance with the Employer's policies and
procedures.

                        Article 4.    CERTAIN COVENANTS

     4.01.  Noncompetition. During the period of the Employee's employment
            --------------
hereunder and for two years thereafter, the Employee shall not accept employment
with any employer in competition with, nor engage in any activities in
competition with, the business of the Employer or any of its affiliates if such
employment or activities are carried on within a twenty-five mile radius of any
hospital or outpatient rehabilitation clinic now or hereafter managed by the
Employer or any of its affiliates or owned by the Employer or any of its
affiliates to the extent of

                                       7
<PAGE>

more than 5% of the equity thereof. In addition, this Section 4.01 shall not
prevent the Employee from acquiring as a passive investor up to 5% of the equity
of a competing enterprise so long as the Employee does not participate in the
management thereof.

     4.02.  Confidentiality. The Employee covenants and agrees that she will
            ---------------
not, to the detriment of the Employer, at any time during or after the
termination of her employment hereunder, reveal, divulge or make known to any
person (other than the Employer or its officers, employees or agents who need to
know such information, or as a result of legal process) or use for her own
account or the account of any other person any confidential or proprietary
records, data, trade secrets, customer lists or any other confidential or
proprietary information whatsoever (the "Confidential Information") used by the
Employer and made known (whether or not with the knowledge and permission of the
Employer, and whether or not developed, devised or otherwise created in whole or
in part by the efforts of the Employee) to the Employee by reason of her
association with the Employer. The Employee further covenants and agrees that
she shall retain all such knowledge and information which she shall acquire or
develop respecting such Confidential Information in trust for the sole benefit
of the Employee and its successors and assigns.

     4.03.  Nonsolicitation. The Employee covenants and agrees that, during the
            ---------------
period of the Employee's employment hereunder and for a period of one year after
the termination thereof, she will not whether for her own account or for the
account of any other person, firm, corporation or other business organization
intentionally interfere with the Employer's relationship with, or endeavor to
entice away from the Employer, any person who is, or was at any time during the

                                       8
<PAGE>

one-year period preceding the end of such term, employed by or associated with
the Employer in an executive, managerial or sales capacity.

     4.04.  Property of the Employer. All written materials, records and
            ------------------------
documents made by the Employee or coming into her possession concerning the
business or affairs of the Employer shall be the sole property of the Employer
and, upon the termination of the Employee's employment hereunder or upon request
of the Employer at any time, the Employee shall promptly deliver the same to the
Employer and shall retain no copies thereof.

     4.05.  Enforcement: Remedies. The Employee acknowledges and agrees that any
            ---------------------
breach by her of any of the provisions of Sections 4.01 through 4.04 (the
"Restrictive Covenants") would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Employee
breaches, or threatens to commit a breach of, any of the Restrictive Covenants,
the Employer shall have the right and remedy (upon compliance with any necessary
prerequisites imposed by law upon the availability of such remedy), which shall
be independent and severally enforceable, and which shall be in addition to, and
not in lieu of, any other rights and remedies available to the Employer under
law or in equity (including, without limitation, the recovery of damages), to
have the Restrictive Covenants specifically enforced (without posting bond and
without the need to prove damages) by any court having equity jurisdiction,
including, without limitation, the right to an entry against the Employee of
restraining orders and injunctions (preliminary, mandatory, temporary and
permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants. The existence of any claim or cause of action by
the Employee, whether predicated on this

                                       9
<PAGE>

Agreement or otherwise, shall not constitute a defense to the enforcement of the
Restrictive Covenants.

          4.06.    In General. If any decisionmaker determines that any of the
                   ----------
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, the duration or scope of such
provision, as the case may be, shall be reduced so that such provision becomes
enforceable and, in its reduced form, such provision shall then be enforceable
and shall be enforced. The parties hereto understand that each of the covenants
of the Employee contained in this Article 4 is an essential element of this
Agreement. The Employee's obligations under this Article 4 shall survive the
termination of this Agreement.

                        Article 5.    CHANGE OF CONTROL

          5.01.    Payment Due.
                   -----------

                   (a)    Certain Terminations Following a Change of Control.
                          --------------------------------------------------
If, during the Term, there should be a Change of Control (as defined in Section
5.02), and within the one-year period immediately following the Change of
Control the Employee's employment with the Employer (i) is terminated by the
Employer without cause as defined in Section 2.02(b), or (ii) is terminated by
the Employee as a result of her good faith determination that (w) she is unable
to perform her services effectively or there is any significant, adverse change
in her authority or responsibilities, as performed, or her title as in effect,
immediately prior to such Change of Control, (x) there is a reduction by the
Employer in the Employee's compensation from that in effect prior to such Change
of Control, (y) the Employer has required her to be based at an office or
location more than 25 miles from Mechanicsburg, PA or (z) the Employer has
failed to comply with and satisfy

                                       10
<PAGE>

Section 7.01 of this Agreement, then on or before the Employee's last day of
providing services hereunder, in lieu of any other rights to cash compensation
she may have under this Agreement which have not accrued by such date, including
any compensation pursuant to Section 2.02(d), (A) the Employer will pay to the
Employee any base salary and other benefits earned and accrued under this
Agreement, (B) the Employer will pay to the Employee a lump sum cash payment
equal to her total cash compensation for base salary and bonus for the
immediately preceding three completed calendar years (or equal to three times
her average total annual cash compensation for base salary and bonus for her
years of service to the Employer, if less than three years), (C) the Employer
agrees that such termination would not be voluntary or a termination "for cause"
as contemplated by any stock option or other incentive plans and any stock
option or other award agreements entered into between the Employer and the
Employee (including agreements that may be entered into after the date hereof),
and that all unvested, unexercised stock options to purchase stock of the
Employer held by the Employee shall become fully vested and exercisable as of
the date of such termination, and the Employee will have the right to exercise,
at any time prior to the later of three months after the date of termination or
the expiration date of such option, notwithstanding any contrary vesting
schedule otherwise applicable to such options, and (D) the Employee shall have
no further rights to compensation or benefits, or any other rights, hereunder.

          (b)  Certain Termination Prior to a Change of Control. If(i) the
               ------------------------------------------------
Employee's employment is terminated by the Employer other than for cause during
the Term, (ii) within the one-year period following such termination, a Change
of Control occurs, and (iii) the Employee reasonably demonstrates that such
termination of employment was at the request of a third party

                                       11
<PAGE>

who has taken steps reasonably calculated to effect the Change of Control, then
within 10 days of such Change of Control, in lieu of any other rights to cash
compensation the Employee may have under this Agreement which have not accrued
by such date, including any compensation pursuant to Section 2.02(d), the
Employer shall provide to the Employee all of the compensation and benefits
described in clauses (B) and (C) in Section 5.01(a), provided that the payment
described in such clause (B) shall be reduced by the total of any and all
payments made to the Employee pursuant to Section 2.02(d) hereof, and the
Employee shall have no further rights to compensation or benefits, or any other
rights, hereunder.

          5.02.    Definition of Change of Control.
                   -------------------------------

                   (a)  Prior to a Public Offering. Subject to Section 5.02(c)
                        --------------------------
below, a "Change of Control" shall be deemed to have occurred, prior to a Public
Offering (as defined below), upon (i) any sale, lease, exchange or other
transfer of all or substantially all of the property and assets of the Employer
(on a consolidated basis) to an entity, other than an entity at least 75% of the
combined voting power of the voting securities of which are owned by persons in
substantially the same proportion as their ownership of the Employer immediately
prior to such sale or other transfer, (ii) any merger or consolidation to which
the Employer is a party and as a result of which the holders of the voting
securities of the Employer immediately prior thereto own less than a majority of
the outstanding voting securities of the surviving entity immediately following
such transaction, or (iii) any person's (excluding WCAS, GTCR and Thoma Cressey
Partners, the financial sponsors of the Employer as of the date hereof),
including a group's, becoming the beneficial owner of securities representing
more than 50% of the voting securities of the Employer then outstanding.

                                       12
<PAGE>

          (b)  Following a Public Offering. Subject to Section 5.02(c) below, a
               ---------------------------
"Change of Control" shall be deemed to have occurred if, following a Public
Offering, (i) any person including a group, but excluding any stockholder of the
Employer who immediately prior to the Public Offering beneficially owned 12% or
more of the Employer's outstanding shares, becomes the beneficial owner of
shares of the Employer having more than 50% of the total number of votes that
may be cast for the election of directors of the Employer, (ii) any person
including a group, other than the Employee or any group of which the Employee is
a party, increases its beneficial ownership of shares of the Employer beyond
such person's ownership immediately after the Public Offering by a number of
shares equal to or greater than 33% of the total number of votes that may be
cast for the election of directors; (iii) the individuals who serve on the Board
of Directors of the Employer as of the effective date hereof (the "Incumbent
Directors") cease for any reason to constitute at least a majority of the Board
of Directors of the Employer; provided, however, any person who becomes a
director subsequent to the effective date hereof, whose election or nomination
for election was approved by a vote of at least a majority of the directors then
constituting the Incumbent Directors, shall for purposes of this clause (iii) be
considered an Incumbent Director; (iv) the consummation of a merger or
consolidation of the Employer in which the stockholders of the Employer
immediately prior to such merger or consolidation, would not, immediately after
the merger or consolidation, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of the combined voting power of the
voting securities of the corporation issuing cash or securities in the merger or
consolidation (or of its ultimate parent corporation, if any); or (v) there is
consummated an agreement for the sale or disposition by the Employer of all or
substantially all of the Employer's

                                       13
<PAGE>

assets (on a consolidated basis), other than a sale or disposition by the
Employer of all or substantially all of the Employer's assets to an entity, at
least 50% of the combined voting power of the voting securities of which are
owned by persons in substantially the same proportion as their ownership of the
Employer immediately prior to such sale.

          (c)  Minimum Consideration. Notwithstanding the foregoing, in no event
               ---------------------
shall a "Change of Control" be deemed to occur for purposes of this Agreement,
whether prior to or following a Public Offering, unless the total consideration
for the transaction or transactions which would, absent this paragraph (c)
constitute a Change of Control, has a value that is equal to or greater than
$3.75 per share of common stock of the Employer (the "Minimum Value"); provided
that such Minimum Value shall be adjusted to reflect changes to such common
stock in the event of a stock dividend, stock split, reverse stock split, stock
combination, reclassification, recapitalization, or other similar change in the
structure or capitalization of the Employer, or any other event which in the
discretion of the Board of Directors of the Employer necessitates such an
adjustment.

          (d)  Certain Definitions. For purposes of this Section 5.02, (i) the
               -------------------
terms "person," "group," "beneficial owner," and "beneficially own" have the
same meanings as such terms under Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder, (ii)
the term "Public Offering" shall mean the consummation of the first public
offering of shares of common stock of the Employer in a firm commitment
underwritten offering registered under the Securities Act of 1933, as amended,
on Form S-i or its successor forms, and (iii) the term "voting securities" shall
mean securities, the

                                       14
<PAGE>

holders of which are ordinarily, in the absence of contingencies, entitled to
elect the corporate directors (or persons performing similar functions).

                   Article 6.    CERTAIN ADDITIONAL PAYMENTS

          6.01.  If all, or any portion, of the payments or other benefits
provided under any section of this Agreement (including, without limitation,
Sections 2 and 5 hereof), either alone or together with other payments and
benefits which the Employee receives or is entitled to receive from the Company
or its affiliates, (whether or not under an existing plan, arrangement or other
agreement) (collectively the "Payments") would constitute an excess "parachute
payment" within the meaning of Section 2800 of the Internal Revenue Code of
1986, as amended (the "Code") and would result in the imposition on the Employee
of an excise tax under Section 4999 of the Code, (such excise tax, together with
any interest and penalties related thereto, are hereinafter collectively
referred to as the "Excise Tax") then, in addition to any other benefits to
which the Employee is entitled under this Agreement, the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in cash, in an
amount such that after payment by the Employee of all taxes including, without
limitation, (i) any income taxes (and any interest and penalties imposed with
respect thereto) and (ii) any Excise Tax, imposed upon the Gross-Up Payment, the
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Unless the Employer and the Employee otherwise agree
in writing, any determination required under this Article 6, including without
limitation, the amount of payments under this Article 6 (the "Parachute Gross-
up") shall be computed and made in writing by the Employer's then independent
public accountants (the "Accountants"), whose determination shall be, subject to
the Employee's reasonable approval of the calculations

                                       15
<PAGE>

required under this Article 6, conclusive and binding upon the Employee and the
Employer for all purposes. For purposes of making the calculations required by
this Article 6, the Accountants may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the Code.
The Employee and the Employer shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Article 6. The Employer shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Article 6.

          6.02.   As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accountants
hereunder, it is possible that (i) Gross-Up Payments which will not have been
made by the Company should have been made (an "Underpayment"), consistent with
the calculations required to be made hereunder or that (ii) Gross-Up Payments
that have been made will be determined to have been in excess of the Gross-Up
Payments actually required (an "Overpayment"). In the event that the Employee is
required to make a payment of any Excise Tax, the Accountants shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the Employee. In the
event that it is finally determined that an Overpayment has occurred, the
Employee shall promptly, and in any event within 30 days of such determination,
refund the amount of the Overpayment, plus any interest actually paid to the
Employee with respect to the Overpayment, to the Company. The Company shall have
the right with respect to the determination of either an Underpayment or an
Overpayment to require the Employee to appeal the assertion of any Underpayment
or to claim, and sue for, a refund of any Excise Tax paid by the Employee upon
any Payment or Gross-Up Payment, provided that the

                                       16
<PAGE>

Company shall promptly reimburse the Employee for all expenses, including
counsel and accounting fees, incurred in connection with any such proceeding.
Alternatively, the Company may undertake any such proceeding, and the Employee
shall cooperate with the Company in any such proceeding.

                          Article 7.    MISCELLANEOUS

          7.01.  Assignment and Successors. This Agreement shall not be
                 -------------------------
assignable by the Employee; and shall be assignable by the Employer only to a
person, firm or corporation which may become a successor in interest to the
Employer with respect to the business or a substantial portion of the business
presently operated by it. The Employer will require any purchaser of all or
substantially all of the assets of the Employer to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Employer would be required to perform if no such purchase had taken place. As
used in this Agreement, the Employer shall mean the Employer as hereinbefore
defined and any purchaser of its assets as aforesaid which executed and delivers
the agreement provided for herein.

          7.02.  Release. Upon payment of any amount required under Section
                 -------
2.02(d) or Section 5.01 hereof, the Employee shall deliver to the Employer a
general release of liability of the Employer and its officers and directors in a
form reasonably satisfactory to the Employer.

          7.03.  Withholding. All payments made pursuant to this Agreement shall
                 -----------
be subject to withholding of applicable deductions and income and employment
taxes.

          7.04.  Entire Agreement. This writing represents the entire agreement
                 ----------------
and understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements,

                                       17
<PAGE>

written or oral, with respect thereto. This Agreement may not be altered or
amended except by an agreement in writing.

          7.05.  Binding Effect. Subject to Section 7.01, this Agreement shall
                 --------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs, executors and administrators. If any
provision of this Agreement shall be or become illegal or unenforceable in whole
or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.

          7.06.  Notices. Any notice or other communication required or
                 -------
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails to the following addresses:

                          If to Employee:

                          Patricia A. Rice
                          416 Parkside Rd.
                          Camp Hill, PA 17011

                          If to the Employer:

                          Select Medical Corporation
                          4718 Old Gettysburg Road
                          Mechanicsburg, PA 17055
                          Attention: General Counsel

          7.07.  Waivers and Amendments. This Agreement may be amended,
                 ----------------------
superseded, canceled, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the party
waiving compliance. Except as expressly provided

                                       18
<PAGE>

herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege nor any single or
partial exercise of any such right, power or privilege, preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege.

          7.08.  Governing Law. This Agreement has been negotiated and executed
                 -------------
within the Commonwealth of Pennsylvania, and the validity, interpretation and
enforcement of this Agreement shall be governed by the laws of Pennsylvania.

          7.09.  Headings. The headings of paragraphs in this Agreement are for
                 --------
convenience only; they form no part of this Agreement and shall not affect its
interpretation.

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

                                               SELECT MEDICAL CORPORATION, a
                                               Delaware corporation

                                               By: /s/ Michael E. Tarvin
                                                  ----------------------------
                                                     Michael E. Tarvin,
                                                     Senior Vice President

                                               By: /s/ Patricia A. Rice
                                                  ----------------------------
                                                     Patricia A. Rice

                                       19

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