<PAGE>

                                                                   Exhibit 10.69

THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED IN THE MANNER
AND TO THE EXTENT SET FORTH IN SECTION 19 HEREOF TO ALL SENIOR DEBT (AS DEFINED
HEREIN) AT ANY TIME OWED BY THE MAKER OF THIS NOTE AND THE HOLDER OF THIS NOTE,
BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF SECTION 19.

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") AS DEFINED BY SECTION
1273(a)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE FOLLOWING
INFORMATION IS PROVIDED PURSUANT TO THE INFORMATION REPORTING REQUIREMENTS SET
FORTH IN TREASURY REGULATION 1.1275-3.

THE ISSUE PRICE OF THIS NOTE IS $122,883,489.77. THE AMOUNT OF OID ON THIS NOTE
IS $18,116,510.23. THE ISSUE DATE OF THIS NOTE IS FEBRUARY 24, 2005. THE PER
ANNUM YIELD TO MATURITY OF THIS NOTE IS 12.53756% COMPOUNDED SEMI-ANNUALLY.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID LAWS.

                       SELECT MEDICAL HOLDINGS CORPORATION

                          10% Senior Subordinated Note
                              Due December 31, 2015

$141,000,000                                                   February 24, 2005
                                   amended and restated as of September 29, 2005

     Select Medical Holdings Corporation, a Delaware corporation (the "Issuer"),
for value received, hereby promises to pay to WCAS Capital Partners IV, L.P., a
Delaware limited partnership or registered assigns (collectively, the "Holder"),
the principal sum of ONE HUNDRED AND FORTY ONE MILLION DOLLARS ($141,000,000) on
December 31, 2015 (the "Maturity Date"), and to pay interest on the principal
amount hereof as provided in Section 3 of this Note.

     1. Certain Definitions. As used in this Note, the following terms have the
meanings specified below:

     "Business Day" means any day that is not a Saturday, Sunday or other day on
which banks are authorized or required to be closed in New York, New York.

<PAGE>

     "Change of Control" means (a) a "Change of Control", as defined in the
certificate of incorporation of the Issuer or any certificate of designations
relating to any preferred stock of the Issuer or (b) a "Change in Control", as
defined in any of the Senior Debt Documents or under any other indebtedness of
the Issuer or SMC.

     "Credit Agreement" means the Credit Agreement, dated as of February 24,
2005, among the Issuer, SMC, the lenders from time to time parties thereto and
JPMorgan Chase Bank, N.A., and any credit or similar agreement replacing or
refinancing such Agreement, as any of the same may be amended, restated,
extended or otherwise modified from time to time.

     "Designated Senior Debt" means either (a) the Senior Debt under the Credit
Agreement or (b) if the Senior Debt under the Credit Agreement has been paid in
full in cash, the Senior Debt in respect of the Senior Notes.

     "Designated Senior Debt Representative" means the Senior Debt
Representative under the Designated Senior Debt.

     "Permitted Junior Securities" means (1) any equity interests or (2)
unsecured debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
hereunder; provided, that, Permitted Junior Securities shall not include any
securities distributed pursuant to a plan of reorganization if the Senior Debt
is treated as part of the same class as the Notes for purposes of such plan of
reorganization; provided, further, that to the extent that any Senior Debt
outstanding on the date of consummation of any such plan of reorganization is
not paid in full in cash on such date, the holders representing a majority of
the principal amount of any such Senior Debt not so paid in full in cash (or any
Senior Debt Representative thereof) have consented to the terms of such plan of
reorganization.

     "Required Holders" means, on any date of determination, the holders of a
majority of the aggregate principal amount of the Notes then outstanding.

     "Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of February 24, 2005, among the Issuer, the Initial Holder and the
other purchasers listed therein.

     "Senior Debt" means (a) all principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer whether or not a claim
for post-filing interest is allowed or allowable in any such proceedings), fees,
charges, expenses, indemnification and reimbursement obligations and all other
amounts payable under the Issuer's guarantee of the "Obligations" as defined in
the Credit Agreement and (b) all principal, premium (if any) or interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer whether or not a claim
for post-filing interest is allowed or allowable in any such proceedings)
payable under the Senior Notes.


                                        2

<PAGE>

     "Senior Debt Representatives" means (a) JPMorgan Chase Bank, N.A., or any
successor thereto, in its capacity as administrative agent for the lenders under
the Credit Agreement and (b) U.S. Bank National Association, or any successor
thereto, in its capacity as trustee for the holders of the Senior Notes under
the Senior Notes Indenture.

     "Senior Debt Documents" means the Credit Agreement and the Senior Notes
Indenture.

     "Senior Notes" shall mean the Issuer's Senior Floating Rate Notes due 2015,
issued pursuant to the Senior Notes Indenture.

     "Senior Notes Indenture" shall mean the Indenture, dated as of September
29, 2005, between the Issuer and U.S. Bank National Association, as trustee, as
the same may be amended, restated or otherwise modified from time to time.

     "Significant Subsidiary" means any subsidiary of the Issuer that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act of 1933, as amended.

     "SMC" means Select Medical Corporation, a Delaware corporation.

     2. The Notes. This Note is one of a duly authorized issue of Senior
Subordinated Notes in the aggregate principal amount of $150,000,000
(collectively, the "Notes") issued by the Issuer pursuant to the Securities
Purchase Agreement. All references hereunder to the "Notes" include this Note
and each other Note issued pursuant to the Securities Purchase Agreement.

     3. Interest. (a) Subject to Section 3(b), interest will accrue on the
unpaid principal amount of this Note at the rate of 10% per annum, payable
semiannually in arrears on February 1 and August 1 of each year, commencing on
August 1, 2005 (each such payment date being referred to as an "Interest Payment
Date"). The Issuer shall pay interest on overdue principal at the rate of 12%
per annum and it shall pay interest on overdue installments of interest at the
rate of 12% per annum to the extent lawful. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months.

     (b) If

          (1) the Issuer is prohibited by Section 19 of this Note from paying
     all or any portion of the accrued interest that is due and payable on any
     Interest Payment Date, or

          (2) the Required Holders agree in writing to defer all or a portion of
     the accrued interest that is due and payable on any Interest Payment Date,

then such amount of accrued interest shall be multiplied by 1.2 (such product
being referred to as the "PIK Interest") and the PIK Interest shall be added to
the principal amount of this Note on such Interest Payment Date (with the result
that such interest shall have accrued at an effective rate of 12% instead of 10%
through such Interest Payment Date).


                                        3

<PAGE>

     (c) On any Interest Payment Date on or after February 24, 2010, the Issuer
shall pay an amount of accrued original issue discount on this Note as shall be
necessary to ensure that this Note shall not be considered an "applicable high
yield discount obligation" within the meaning of Section 163(i) of the Internal
Revenue Code of 1986, as amended, or any successor provision. The amount of
principal payable at maturity of this Note shall be reduced by the amount of any
accrued original issue discount that is paid pursuant to this paragraph.

     4. Manner and Time of Payment. All payments of principal and cash interest
on this Note shall be in money of the United States of America that at the time
of payment is legal tender for payment of public and private debts. If any
payment on this Note is due on a day which is not a Business Day, it shall be
due on the next succeeding Business Day. The Issuer will make all payments in
respect of this Note by mailing a check to the registered address of the Holder;
provided, however, that payments on this Note will be made by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such Holder elects payment by wire transfer by giving written notice to the
Issuer to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Issuer
may accept in its discretion).

     5. Transfer, Etc. of Notes. (a) The Issuer shall keep at its principal
office a register (the "Register") in which the Issuer shall provide for the
registration of this Note and for the registration of each transfer and/or
exchange of this Note.

     (b) In connection with any transfer of this Note, the Holder may, at its
option, and either in person or by its duly authorized attorney, (1) provide
written notice of such transfer to the Issuer (which transfer shall be recorded
by the Issuer on the Register) which notice shall be accompanied by a copy of
the written instrument of transfer, satisfactory in form to the Issuer and duly
executed by the Holder, or (2) surrender this Note for exchange at the principal
office of the Issuer and, without expense to the Holder (except for taxes or
governmental charges imposed in connection therewith), receive in exchange
therefor a new Note or Notes each in such denomination or denominations as the
Holder may request, dated as of the date to which interest has been paid on the
Note or Notes so surrendered for transfer or exchange, for the same aggregate
principal amount as the then unpaid aggregate principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person as may be designated by the Holder.

     (c) Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or shall be accompanied by a written instrument
of transfer, satisfactory in form to the Issuer and duly executed by the Holder
or its attorney duly authorized in writing. Every Note so made and delivered in
exchange for a Note so surrendered for exchange shall in all other respects be
in the same form and have the same terms as such Note. No transfer or exchange
of a Note shall be valid unless recorded in the Register as set forth in this
Section 5.

     6. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of any
Note, and, in the case of any such loss, theft or destruction, upon receipt of
an affidavit of loss and indemnity


                                        4

<PAGE>

from the Holder reasonably satisfactory to the Issuer, or, in the case of any
such mutilation, upon surrender and cancellation of any Note, the Issuer will
make and deliver, in lieu of such Note, a new Note of like tenor and unpaid
principal amount and dated as of the date to which interest has been paid on
such Note.

     7. Prepayments.

     (a) Optional Prepayment. The Issuer may prepay all or any part of the
principal amount of the Notes, at any time and from time to time, without
premium or penalty.

     (b) Mandatory Prepayment on Initial Public Offering. Except as otherwise
agreed by the Required Holders, if the Issuer or any of its subsidiaries
consummates a public offering of equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended, (an
"IPO"), the Issuer shall prepay the Notes, without penalty or premium, in an
aggregate amount equal to the net proceeds of such public offering, less the
portion of such net proceeds that is required to be applied to prepay the Senior
Debt pursuant to the Senior Debt Documents.

     (c) Mandatory Prepayment on Change of Control. Except as otherwise agreed
by the Required Holders, if a Change of Control occurs, the Issuer shall prepay
in full the outstanding principal amount of the Notes, without penalty or
premium. Prior to complying with this Section 7(c), but in any event within 90
days following a Change of Control, the Issuer will either repay all its
outstanding Senior Debt or obtain the requisite consents, if any, under the
Senior Debt Documents to permit the prepayment of the Notes.

     8. Notice of Prepayment and Other Notices. The Issuer shall give written
notice of any prepayment of any of the Notes or any portion thereof pursuant to
Section 7 not less than five Business Days prior to the date fixed for such
prepayment. The Issuer shall give such notice of prepayment and all other
notices to be given to the Holder to the person in whose name this Note is
registered at its address designated on the Register on the date of mailing such
notice of prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Issuer shall be irrevocably obligated to prepay, on the date
therein fixed for prepayment, this Note or the portion hereof, as the case may
be, so called for prepayment, at the principal amount thereof so called for
prepayment, together with interest accrued thereon to the date fixed for such
prepayment. A prepayment of less than all of the outstanding principal amount of
this Note shall not relieve the Issuer of its obligation to make scheduled
payments of interest payable in respect of the principal remaining outstanding
on any Interest Payment Date.

     9. Allocation of All Payments. In the case of a partial prepayment,
purchase, redemption or retirement of less than all of the Notes then
outstanding, such prepayment, purchase, redemption or retirement shall be made
pro rata among all the Notes then outstanding by principal amount.

     10. Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall cease to bear interest on and after the date fixed for such prepayment
unless, upon presentation for the


                                        5

<PAGE>

purpose, the Issuer shall fail to pay this Note or such portion, as the case may
be, in which event this Note or such portion, as the case may be, and, so far as
may be lawful, any overdue installment of interest, shall bear interest on and
after the date fixed for such prepayment and until paid at the rate per annum
provided herein for overdue principal.

     11. Surrender of Note; Notation Thereon. Upon any prepayment of a portion
of the principal amount of this Note, the Holder, at its option, may require the
Issuer to execute and deliver at the expense of the Issuer (except for taxes or
governmental charges imposed in connection therewith), upon surrender of this
Note, a new Note registered in the name of the Holder or such other persons as
may be designated by the Holder for the principal amount of this Note then
remaining unpaid, dated as of the date to which interest has been paid on the
principal amount of this Note then remaining unpaid, or may present this Note to
the Issuer for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid.

     12. Covenants. The Issuer covenants and agrees that, so long as any Note
shall be outstanding:

     (a) Financial Reporting. The Issuer shall furnish to the Holder:

          (1) all of the documents, financial statements, notices and other
     information required to be provided to any Senior Debt Representative
     under, and at the times required by, the Senior Debt Documents
     (notwithstanding any termination of the Senior Debt Documents); and

          (2) such other information as the Required Holders reasonably request.

     (b) Maintenance of Office. The Issuer shall maintain an office or agency in
such place in the United States of America as the Issuer may designate in
writing to the Holder, where the Notes may be presented for registration of
transfer and exchange as herein provided, where notices and demands to or upon
the Issuer in respect of the Notes may be served and where the Notes shall be
presented for payment. Until the Issuer otherwise notifies the Holder, said
office shall be the office of the Issuer at 4718 Old Gettysburg Road, P.O. Box
2034, Mechanicsburg, PA 17055.

     (c) Corporate Existence. The Issuer shall do or cause to be done all things
necessary and lawful to preserve and keep in full force and effect its corporate
existence, rights and franchises and the corporate existence, rights and
franchises of each of its subsidiaries; provided, however, that nothing in this
paragraph (d) shall prevent the abandonment or termination of any rights or
franchises of the Issuer, or the liquidation or dissolution of, or a sale,
transfer or disposition (whether through merger, consolidation, sale or
otherwise) of all or any substantial part of the property and assets of, any
subsidiary or the abandonment or termination of the corporate existence, rights
and franchises of any subsidiary if such abandonment, termination, liquidation,
dissolution, sale, transfer or disposition is, in the good faith business
judgment of the Issuer, in the best interests of the Issuer and is not
disadvantageous in any material respect to the holders of the Notes.


                                        6

<PAGE>

     (d) Maintenance of Property. The Issuer and its subsidiaries will keep and
maintain all property material to the conduct of their business in good working
order and condition, ordinary wear and tear excepted; provided, however, that
nothing in this paragraph (c) shall require (1) the making of any repair or
renewal, (2) the continuance of the operation and maintenance of any property or
(3) the retention of any assets if such action (or inaction) is, in the good
faith business judgment of the Issuer, in the best interests of the Issuer and
is not disadvantageous in any material respect to the holders of the Notes.

     (e) Notice of Default. If any one or more events which constitute, or which
with notice or lapse of time or both would constitute, an Event of Default under
Section 15 of this Note shall occur, or if the Required Holders shall demand
payment or take any other action permitted upon the occurrence of any such Event
of Default, the Issuer shall, immediately after it becomes aware that any such
event has occurred or that such demand has been made or that any such action has
been taken, give notice to all holders of the Notes, specifying the nature of
such event or of such demand or action, as the case may be; provided, however,
that if such event, in the good faith judgment of the Issuer, will be cured
within ten days after the Issuer has knowledge of such event, no such notice
need be given if such Event of Default shall be cured within such ten-day
period.

     13. Merger or Consolidation. If (a) the Issuer merges or is consolidated
with any person, (b) the Issuer is not the surviving corporation and (c) such
transaction is not a Change of Control requiring mandatory prepayment of the
Notes pursuant to Section 7(c), then the Issuer shall take such action as may be
necessary, as a condition to consummating such transaction, to cause the
surviving entity to assume all of the Issuer's obligations under the Notes, as
if such entity had been the original issuer thereof, and such entity shall
acknowledge in writing its obligation to fully and timely honor the Issuer's
obligations under the Notes.

     14. Modification by Holders; Waiver. (a) Any provision of the Notes may be
amended, modified or waived only with the written consent of the Required
Holders and the Issuer; provided that no amendment, modification, waiver or
consent shall, unless in writing and signed by the Holder, do any of the
following: (1) reduce the principal amount of or interest rate on this Note or
(2) amend Section 9 or this Section 14. Any waiver shall be effective only in
the specific instance and for the specific purpose for which it was given.

     (b) Any amendment, modification or waiver effected in accordance with this
Section 14 shall apply equally to each holder of the Notes and shall be binding
upon them, upon each future holder of any Note and upon the Issuer, whether or
not such Note shall have been marked to indicate such amendment, modification or
waiver, but any Note issued thereafter shall bear a notation referring to any
such amendment, modification or waiver. Promptly after obtaining the written
consent of the holders of the Notes as herein provided, the Issuer shall
transmit a copy of such amendment, modification or waiver to the holders of the
Notes at the time outstanding.

     15. Events of Default. If any one or more of the following events (each, an
"Event of Default") occurs and is continuing:


                                        7

<PAGE>

     (a) default in the payment of the principal of this Note when and as the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise; or

     (b) default in the payment of any interest or any other amount (other than
an amount referred to in (a) above) due under this Note, when and as the same
becomes due and payable, and such default continues for a period of three
Business Days; or

     (c) default in the due observance or performance by the Issuer of any
covenant, condition or agreement contained in Sections 12(c) or 13; or

     (d) default in the due observance or performance by the Issuer of any
covenant, condition or agreement contained in this Note or the Securities
Purchase Agreement (other than those specified in (a), (b) or (c) above) and
such default continues unremedied for a period of 30 days after notice thereof
from the Required Holders to the Issuer; or

     (e) any representation or warranty made or deemed made in or in connection
with the Securities Purchase Agreement or the issuance of the Note, or any
representation, warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished pursuant to the
Securities Purchase Agreement or this Note, proves to have been false in any
material respect when so made, deemed made or furnished; or

     (f) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any Significant
Subsidiary in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or other similar laws, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Issuer or any Significant Subsidiary for any substantial part of any of
their respective properties, or ordering the winding-up or liquidation of any of
their affairs and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or

     (g) the commencement by the Issuer or any Significant Subsidiary of a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or the consent by any of them to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Issuer or a
Significant Subsidiary for any substantial part of their respective properties,
or the making by any of them of any assignment for the benefit of creditors, or
the failure of the Issuer or any Significant Subsidiary generally to pay its
debts as such debts become due; or

     (h) default occurs under the terms of any indebtedness of the Issuer or any
Significant Subsidiary in an aggregate principal amount exceeding $25,000,000
and such default (1) consists of the failure to pay any amount of such
indebtedness when due, whether by acceleration or otherwise or (2) results in
the acceleration of the maturity of such indebtedness;


                                        8

<PAGE>

     (i) one or more judgments for the payment of money in an aggregate amount
(in each case to the extent not paid or covered by insurance provided by a
carrier who has acknowledged coverage in writing and has the ability to perform)
in excess of $25,000,000 is rendered against the Issuer, any Significant
Subsidiary, or any combination thereof and the same remains undischarged for a
period of 30 consecutive days during which execution is not effectively stayed,
or any action is legally taken by a judgment creditor to levy upon assets or
properties of the Issuer or any Significant Subsidiary to enforce any such
judgment;

then, the Required Holders may, at their option, by notice to the Issuer,
declare all the Notes to be forthwith due and payable, whereupon the principal
of the Notes, together with accrued interest thereon, shall become forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by the Issuer; provided, however, that in any
event described in paragraph (f) or (g) above, all the Notes, together with
interest accrued thereon, shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Issuer.

     At any time after any declaration of acceleration as to this Note has been
made as provided in this Section 15, the Required Holders may, by notice to the
Issuer, rescind such declaration and its consequences, if (1) the Issuer has
paid all overdue installments of interest on this Note and all principal that
has become due otherwise than by such declaration of acceleration and (2) all
other defaults and Events of Default under this Note (other than nonpayments of
principal and interest that have become due solely by reason of acceleration)
have been remedied or cured or have been waived pursuant to this paragraph;
provided, however, that no such rescission will extend to or affect any
subsequent default or Event of Default or impair any right consequent thereon.

     16. Suits for Enforcement. If an Event of Default specified in paragraph
(a) or (b) of Section 15 occurs and is continuing or the Notes become
immediately due and payable in accordance with Section 15, the Holder may
proceed to protect and enforce its rights by suit in equity, action at law
and/or by other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the Holder; provided,
however, that the Holder may not pursue any remedy with respect to this Note
other than (i) a suit for the enforcement of payment of the principal of, and
premium, if any, or interest on, the Note on or after the applicable due date or
(ii) any other remedy authorized in writing by the Required Holders. In case of
any default under this Note, the Issuer will pay to the Holder such amounts as
shall be sufficient to cover the costs and expenses of such Holder due to said
default, including, without limitation, collection costs and reasonable
attorneys' fees.

     17. Remedies Cumulative. No remedy herein conferred upon the Holder is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.


                                        9

<PAGE>

     18. Remedies Not Waived. No course of dealing between the Issuer and the
Holder or any delay on the part of the Holder in exercising any rights hereunder
shall operate as a waiver of any right of the Holder.

     19. Subordination. This Note is subordinated in right of payment to all
Senior Debt to the extent and in the manner provided in this Section 19.

     (a) Liquidation, Dissolution, or Bankruptcy. Upon any payment or
distribution to creditors of the Issuer in a liquidation or dissolution of the
Issuer, in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Issuer or its property, in an assignment for the
benefit of the Issuer's creditors, or in any marshaling of the Issuer's assets
and liabilities:

          (1) holders of Senior Debt will be entitled to receive payment in full
     in cash of all Senior Debt before the holders of the Notes are entitled
     directly or indirectly to receive any payment of principal of or interest
     on the Notes, except the holders of the Notes may receive and retain
     Permitted Junior Securities; and

          (2) until payment in full in cash of all Senior Debt, any payment to
     which the holders of the Notes would be entitled but for the foregoing
     clause (1) will be made to holders of Senior Debt as their interests may
     appear.

     (b) Senior Debt Default. The Issuer shall not pay principal of, or interest
(other than PIK Interest) on, the Notes, and shall not repurchase, redeem or
otherwise retire any Notes (collectively, "pay the Notes") if (1) any principal,
premium or interest in respect of any Senior Debt is not paid when due after any
applicable grace period or (2) any other default on Senior Debt occurs and the
maturity of such Senior Debt is accelerated in accordance with its terms unless,
in either case, (A) the default has been cured or waived and any such
acceleration has been rescinded or (B) such Senior Debt has been paid in full in
cash; provided, however, that the Issuer may pay the Notes without regard to the
foregoing if the Issuer receives written notice approving such payment from the
Senior Debt Representatives. During the continuation of any default (other than
a default described in clause (1) or (2) of the preceding sentence) with respect
to the Designated Senior Debt pursuant to which the maturity thereof may be
accelerated immediately without further notice (except any notice required to
effect the acceleration) or the expiration of any applicable grace period, the
Issuer shall not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Issuer of written notice of such default from
the Designated Senior Debt Representative specifying an election to effect a
Payment Blockage Period (a "Payment Blockage Notice") and ending 179 days
thereafter. The Payment Blockage Period will end earlier if the Payment Blockage
Period is terminated (a) by written notice to the Issuer from the Designated
Senior Debt Representative, (b) because such default is no longer continuing, or
(c) because the Designated Senior Debt has been repaid in full in cash. Unless
the holders of the Designated Senior Debt or Designated Senior Debt
Representative have accelerated the maturity of the Designated Senior Debt and
not rescinded such acceleration, the Issuer may (unless otherwise prohibited as
described in the first sentence of this paragraph) resume payments on the Notes
after the end of such Payment Blockage Period. Not more than one Payment
Blockage Notice may be given in any


                                       10

<PAGE>

consecutive 360-day period, irrespective of the number of defaults with respect
to the Designated Senior Debt that have occurred during such period.

     (c) When Distribution Must Be Paid Over. If a distribution or payment is
made to the holders of the Notes that is prohibited by paragraph (a) or (b) of
this Section 19, the holders of the Notes who receive such distribution or
payment shall hold it in trust for holders of the Senior Debt and pay it over to
them as their interests may appear.

     (d) Subrogation. After all Senior Debt is paid in full in cash and until
the Notes are paid in full in cash, the holders of the Notes shall be subrogated
to the rights of the holders of Senior Debt to receive distributions applicable
to Senior Debt. A distribution made under this Section 19 to holders of Senior
Debt that otherwise would have been made to the holders of the Notes is not, as
between the Issuer and the holders of the Notes, a payment by the Issuer on such
Senior Debt.

     (e) Subordination May Not Be Impaired. The holders of Senior Debt may, at
any time and from time to time, without the consent of or notice to the holders
of the Notes, without incurring responsibility to the holders of the Notes and
without impairing or releasing the subordination provided in this Section 19 or
the obligations hereunder of the holders of the Notes to the holders of such
Senior Debt, do any one or more of the following: (1) change the manner, place,
terms or time of payment or extend the time of payment of, or renew or alter,
such Senior Debt or any instrument evidencing the same or any agreement under
which such Senior Debt is outstanding; (2) sell, exchange, impair, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Debt; (3) release any person liable in any manner for the collection or
payment of such Senior Debt; and (4) exercise or refrain from exercising any
rights against the Issuer or any other person.

     (f) Distribution or Notice to Senior Debt Representatives. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to the Senior Debt
Representatives.

     (g) Relative Rights; Right To Accelerate. Section 19 defines the relative
rights of the holders of the Notes and holders of Senior Debt. Nothing in this
Note shall (1) impair, as between the Issuer and the holders of the Notes, the
obligation of the Issuer, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms; or (2) prevent any
holder of the Notes from exercising its available remedies upon a an Event of
Default, subject to the rights of holders of Senior Debt to receive
distributions or payments otherwise payable to the holders of the Notes. The
failure to make a payment pursuant to the Notes by reason of any provision in
this Section 19 shall not be construed as preventing the occurrence of an Event
of Default. If payment of the Notes is accelerated when any Senior Debt is
outstanding, the Issuer may not pay the Notes until five Business Days after the
Senior Debt Representatives receive notice of such acceleration and, thereafter,
may pay the Notes only if this Note otherwise permits payment at that time.

     (h) Substantive Consolidation. The Holder acknowledges and agrees, solely
in its, his or her capacity as such, and not as a director, officer or other
agent or representative


                                       11

<PAGE>

of the Issuer or any of its subsidiaries, that, in any proceeding under the U.S.
Bankruptcy Code or any proceeding under any similar law, it will not request,
join in or vote for any request for substantive consolidation of the Issuer with
any one or more of its subsidiaries (other than in connection with a plan of
reorganization that is approved by the requisite majorities of the creditors of
the Issuer and its subsidiaries, excluding the Holders of the Notes in their
capacity as such), and the Holder, by accepting this Note, waives any and all
rights it may have to do so.

     (i) Reliance by Holders of Senior Debt; Reliance by Holders of Senior
Subordinated Notes.

          (1) The Holder acknowledges and agrees that the foregoing
     subordination provisions are, and are intended to be, an inducement and a
     consideration to each holder of any Senior Debt, whether such Senior Debt
     was created or acquired before or after the issuance of the Notes, to
     acquire and continue to hold, or to continue to hold, such Senior Debt and
     such holder of such Senior Debt shall be deemed conclusively to have relied
     on such subordination provisions in acquiring and continuing to hold, or in
     continuing to hold, such Senior Debt.

          (2) The Holder acknowledges and agrees that the foregoing Section
     19(h) is, and is intended to be, an inducement and a consideration to each
     holder of SMC's 7-5/8% Senior Subordinated Notes due 2015 (the "SMC
     Notes"), to acquire and continue to hold, or to continue to hold, such SCM
     Notes and such holders of such SCM Notes shall be deemed conclusively to
     have relied on such Section in acquiring and continuing to hold, or in
     continuing to hold, such SMC Notes.

     20. Notices. Any notice or communication required or permitted hereunder
shall be in writing and shall be delivered personally, delivered by nationally
recognized overnight courier service, sent by certified or registered mail,
postage prepaid, or sent by facsimile (subject to electronic confirmation of
such facsimile transmission). Any such notice or communication shall be deemed
to have been given (a) when delivered, if personally delivered, (b) one Business
Day after it is deposited with a nationally recognized overnight courier
service, if sent by nationally recognized overnight courier service, (c) the day
of sending, if sent by facsimile prior to 5:00 p.m. (New York time) on any
Business Day or the next succeeding Business Day if sent by facsimile after 5:00
p.m. (New York time) on any Business Day or on any day other than a Business Day
or (d) five Business Days after the date of mailing, if mailed by certified or
registered mail, postage prepaid, in each case, to the following address or
facsimile number, or to such other address or addresses or facsimile number or
numbers as such party may subsequently designate to the other parties by notice
given hereunder:

     if to the Issuer, to it at:

          4718 Old Gettysburg Road
          P.O. Box 2034
          Mechanicsburg, PA 17055
          Attention: Martin F. Jackson


                                       12

<PAGE>

          Facsimile: (717) 303-0824

     if to the Holder, to it at:

          WCAS Capital Partners IV, L.P.
          c/o Welsh, Carson, Anderson & Stowe
          320 Park Avenue, Suite 2500
          New York, New York 10022
          Attention: Sean M. Traynor
          Facsimile: (212) 893-9566

     21. Governing Law; Waiver of Right to Trial by Jury; Etc. This Note shall
be governed by, and construed in accordance with, the laws of the State of New
York. The Issuer hereby waives any right to trial by jury in any legal
proceeding related in any way to this Note and agrees that any such proceeding
may, if the Holder so elects, be brought and enforced in the Supreme Court of
the State of New York for New York County or the United States District Court
for the Southern District of New York, and the Issuer hereby waives any
objection to jurisdiction or venue in any such proceeding commenced in such
court. The Issuer further agrees that any process required to be served on it
for purposes of any such proceeding may be served on it, with the same effect as
personal service on it within the State of New York, by registered mail
addressed to it at its office or agency set forth in Section 20 for purposes of
notices hereunder.

     22. Headings. The headings contained in this Note are inserted only as a
matter of convenience and for reference only and in no way define, limit or
describe the scope or intent of this Note.

                                    * * * * *


                                       13

<PAGE>

     IN WITNESS WHEREOF, the Issuer has caused this Note to be signed in its
corporate name by one of its officers thereunto duly authorized and to be dated
as of the day and year first above written.

                                        SELECT MEDICAL HOLDINGS CORPORATION


                                        By: /s/ Michael E. Tarvin
                                            ------------------------------------
                                        Name: Michael E. Tarvin
                                              ----------------------------------
                                        Title: Senior Vice President, General
                                               Counsel and Secretary
                                               ---------------------------------


                   Signature Page to Amended and Restated Note