Exhibit 10.1

EXECUTION VERSION

          WAIVER dated as of March 18, 2003 (this “Waiver”) to the Credit
Agreement dated as of September 22, 2000 (the “Credit Agreement”) as heretofore
amended, among Select Medical Corporation, a Delaware corporation (the
“Company”), Canadian Back Institute Limited, an Ontario corporation and a wholly
owned subsidiary of the Company (“CBIL” and, together with the Company, the
“Borrowers”), the Lenders party thereto, JPMorgan Chase Bank (f/k/a The Chase
Manhattan Bank), as US Agent and US Collateral Agent, J.P. Morgan Bank Canada
(f/k/a The Chase Manhattan Bank of Canada), as Canadian Agent and Canadian
Collateral Agent, Banc of America Securities, LLC, as Syndication Agent, and
CIBC, Inc., as Documentation Agent.

               WHEREAS, the Borrowers have requested that the Lenders (such term
and each other capitalized term used but not otherwise defined herein having the
meaning assigned to it in the Credit Agreement) approve waivers of certain
provisions of the Credit Agreement;

               WHEREAS, the undersigned Lenders are willing, on the terms and
subject to the conditions set forth herein, to approve such waivers of the
Credit Agreement;

               NOW, THEREFORE, in consideration of these premises, the Borrowers
and the undersigned Lenders hereby agree as follows:

               SECTION 1. Waivers of Credit Agreement. Effective as of the
Waiver Effective Date (as defined in Section 4 hereof):

               (a)   Section 6.15 is waived to the extent, and only to the
extent, necessary to allow the Company to apply up to $25,000,000 of its surplus
cash to buyback a like amount of Qualified Subordinated Indebtedness; provided
that such buyback may not occur until after the Company has prepaid $25,000,000
of US Term Borrowings as contemplated in paragraph (b) of this Section.

               (b)   Paragraph (e) of Section 2.11 is waived to the extent, and
only to the extent, necessary to allow the Company to prepay an aggregate amount
of up to $25,000,000 (including $13,705,000 representing Excess Cash Flow for
the fiscal year ended December 31, 2002, that is required to be prepaid under
paragraph (d) of Section 2.11) of US Term Borrowings without ratably prepaying
Canadian Term

 

--------------------------------------------------------------------------------

 

2

               prepaying Canadian Term Borrowings and B/As; provided that such
prepayment must occur on or before March 31, 2003.

               SECTION 2.   Representations and Warranties. Each of the
Borrowers represents and warrants to each of the Lenders that, after giving
effect to the waivers contemplated hereby, (a) the representations and
warranties of such Borrower set forth in the Credit Agreement are true and
correct in all material respects on and as of the date of this Waiver, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct in all material respects as of the earlier date) and (b) no Default has
occurred and is continuing.

               SECTION 3.   Effectiveness. This Waiver shall become effective as
of the date (the “Waiver Effective Date”) when the Administrative Agent (or its
counsel) shall have received copies hereof that, when taken together, bear the
signatures of the Borrowers, the Required Lenders, and a majority in interest of
the Canadian Term Lenders.

               SECTION 4.   Applicable Law. THIS WAIVER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

               SECTION 5.   No Other Waivers or Amendments. Except as expressly
set forth herein, this Waiver shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
any party under, the Credit Agreement, nor alter, modify, amend or in any way
affect any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect. This Waiver shall apply
and be effective only with respect to the provisions of the Credit Agreement
specifically referred to herein. This Waiver shall constitute a “Loan Document”
for all purposes of the Credit Agreement and the other Loan Documents.

               SECTION 6.   Counterparts. This Waiver may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one contract. Delivery of an executed
counterpart of a signature page of this Waiver by facsimile transmission shall
be as effective as

--------------------------------------------------------------------------------

 

3

delivery of a manually executed counterpart of this Waiver.

               SECTION 7.   Headings. Section headings used herein are for
convenience of reference only, are not part of this Waiver and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Waiver.

--------------------------------------------------------------------------------

 

4

               IN WITNESS WHEREOF, the Borrowers and the undersigned Lenders
have caused this Waiver to be duly executed by their duly authorized officers,
all as of the date first above written.

            SELECT MEDICAL CORPORATION,               by:   /s/ Martin F.
Jackson

--------------------------------------------------------------------------------

Name: Martin F. Jackson
Title: Senior Vice President & CFO             CANADIAN BACK INSTITUTE LIMITED  
            by:   /s/ Martin F. Jackson

--------------------------------------------------------------------------------

Name: Martin F. Jackson
Title: Vice President             JP MORGAN CHASE BANK,
individually and as US Agent
and US Collateral Agent,               by:   /s/ James S. Ely III        

--------------------------------------------------------------------------------

        Name: James S. Ely III
Title: Managing Director     J.P. MORGAN BANK CANADA,
individually and as Canadian
Agent and Canadian Collateral
Agent,               by:   /s/ Christine Chan        

--------------------------------------------------------------------------------

        Name: Christine Chan
Title: Vice President

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:                                  CIBC Inc.  
 

--------------------------------------------------------------------------------

              by:   /s/ Terence Moore        

--------------------------------------------------------------------------------

        Name: Terence Moore
Title: Executive Director
          CIBC World Markets Corp., As Agent

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Credit Suisse First Boston               by   /s/ Christopher
Lally        

--------------------------------------------------------------------------------

        Name: Christopher Lally         Title: Vice President               by  
/s/ Jennifer A. Rieza        

--------------------------------------------------------------------------------

        Name : Jennifer A. Rieza         Title: Associate

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:               Fleet National Bank            
  by   /s/ Maryann S. Smith        

--------------------------------------------------------------------------------

        Name: Maryann S. Smith         Title: Director

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:               GENERAL ELECTRIC CAPITAL
CORPORATION               by   /s/ Brian Schwinn        

--------------------------------------------------------------------------------

        Name: Brian Schwinn         Title: Duly Authorized Signatory

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:                       PNC Bank, NA

--------------------------------------------------------------------------------

      by   /s/ Jeffrey Delay        

--------------------------------------------------------------------------------

        Name: Jeffrey Delay
Title: Assistant Vice President

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:                              Societe Generale

--------------------------------------------------------------------------------

              by   /s/ Richard Bernap        

--------------------------------------------------------------------------------

        Name: Richard Bernap         Title: Director

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              AERIES FINANCE-II LTD.     By:   INVESCO Senior Secured
Management, Inc.
As Sub-Managing Agent               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               AMARA 2 FINANCE, LTD.     By:   INVESCO Senior Secured
Management, Inc.
As Financial Manager               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               AVALON CAPITAL LTD. 2     By:   INVESCO Senior Secured
Management, Inc.
As Portfolio Advisor               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               CERES II FINANCE LTD.     By:   INVESCO Senior Secured
Management, Inc.
As Sub-Managing Agent (Financial)               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              OASIS COLLATERALIZED HIGH INCOME PORTFOLIOS-1, LTD.     By:  
INVESCO Senior Secured Management, Inc. As Subadvisor               by   /s/
Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               CHARTER VIEW PORTFOLIO     By:   INVESCO Senior Secured
Management, Inc.
As Investment Advisor               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               DIVERSIFIED CREDIT PORTFOLIO LTD.     By:   INVESCO Senior
Secured Management, Inc.
As Investment Advisor               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               AIM FLOATING RATE FUND     By:   INVESCO Senior Secured
Management, Inc.
As Attorney in fact               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               INVESCO EUROPEAN CDO I S.A.     By:   INVESCO Senior Secured
Management, Inc.
As Collateral Manager               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               INVESCO CBO 2000-1 LTD.     By:   INVESCO Senior Secured
Management, Inc.
As Portfolio Advisor               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

                To approve the Waiver dated as of March 18, 2003 (the “Waiver”)
to the Select Medical Corporation Credit Agreement dated as of September 22,
2000:               SEQUILS-LIBERTY, LTD.     By:   INVESCO Senior Secured
Management, Inc.
As Collateral Manager               by   /s/ Scott Baskind        

--------------------------------------------------------------------------------

        Name: Scott Baskind         Title : Authorized Signatory

 

--------------------------------------------------------------------------------

 

              To approve the Waiver dated as of March 18, 2003 (the “Waiver”) to
the Select Medical Corporation Credit Agreement dated as of September 22, 2000:
              Name of Institution:                    Wachovia Bank, National
Association               by   /s/ Jeanette A. Griffin        

--------------------------------------------------------------------------------

        Name: Jeanette A. Griffin         Title: Director