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                                                                  EXECUTION COPY


                                                                   Exhibit 10.54

                          SELECT MEDICAL CORPORATION


                                 $175,000,000


                   9 1/2% Senior Subordinated Notes due 2009


                              PURCHASE AGREEMENT
                              ------------------


                                                                    June 6, 2001
J.P. MORGAN SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
FIRST UNION SECURITIES, INC.
C/O J.P. MORGAN SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York  10017


Ladies and Gentlemen:

          Select Medical Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell $175,000,000 aggregate principal amount of its 9 1/2
% Senior Subordinated Notes due 2009 (the "Securities"). The Securities will be
issued pursuant to an Indenture to be dated as of June 11, 2001 (the
"Indenture") between the Company, each of the subsidiaries of the Company listed
on Schedule I hereto (each a "Guarantor" and together, the "Guarantors") and
State Street Bank and Trust Company, as trustee (the "Trustee"). The Securities
will be guaranteed on an unsecured senior subordinated basis by guarantees (the
"Guarantees", and each a "Guarantee") of the Guarantors. The Company hereby
confirms its agreement with J.P. Morgan Securities Inc. ("JPMorgan") and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC World Markets Corp. and First Union Securities, Inc.
(collectively, together with JPMorgan, the "Initial Purchasers") concerning the
purchase of the Securities from the Company by the several Initial Purchasers.

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          The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated May 29, 2001 (the "Preliminary
Offering Memorandum") and will prepare an offering memorandum dated the date
hereof (the "Offering Memorandum") setting forth information concerning the
Company, the Guarantors and the Securities. Copies of the Preliminary Offering
Memorandum have been, and copies of the Offering Memorandum will be, delivered
by the Company to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers in accordance with Section 2.

          Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will, subject to the terms and conditions
thereof, be entitled to the benefits of an Exchange and Registration Rights
Agreement, substantially in the form attached hereto as Annex A (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
file with the Securities and Exchange Commission (the "Commission") a
registration statement under the Securities Act (the "Exchange Offer
Registration Statement") registering an issue of senior subordinated notes of
the Company (the "Exchange Securities") and guarantees of each of the Guarantors
which are identical in all material respects to the Securities (except that the
Exchange Securities will not contain terms with respect to transfer restrictions
or additional interest) and the Guarantors and under certain circumstances, a
shelf registration statement pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement").

          Prior to or on the Closing Date (i) the Company's Amended and Restated
Credit Agreement will be amended (the "Credit Agreement Amendment") and (ii) the
Company will repay all outstanding principal and interest on its 10% Senior
Subordinated Notes due 2009 (the "Senior Subordinated Note Repayment"). The
Credit Agreement Amendment and the Senior Subordinated Note Repayment are
collectively referred to herein as the "Related Transactions".

          Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.

          1. Representations, Warranties and Agreements of the Company and the
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Guarantors. The Company and the Guarantors jointly and severally represent and
----------
warrant to, and agree with, the several Initial Purchasers on and as of the date
hereof and the Closing Date (as defined in Section 3) that:

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          (a) Each of the Preliminary Offering Memorandum and the Offering
     Memorandum, as of its respective date, did not, and on the Closing Date the
     Offering Memorandum will not, contain any untrue statement of a material
     fact or omit to state a material fact required to be stated therein or
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading; provided that the
     Company and the Guarantors make no representation or warranty as to
     information contained in or omitted from the Preliminary Offering
     Memorandum or the Offering Memorandum in reliance upon and in conformity
     with written information relating to the Initial Purchasers furnished to
     the Company or the Guarantors by or on behalf of any Initial Purchaser
     specifically for use therein as specified in section 16 hereof (the
     "Initial Purchasers' Information").

          (b) Each of the Preliminary Offering Memorandum and the Offering
     Memorandum, as of its respective date, contains all of the information
     that, if requested by a prospective purchaser of the Securities, would be
     required to be provided to such prospective purchaser pursuant to Rule
     144A(d)(4) under the Securities Act.

          (c) Assuming the accuracy of the representations and warranties of the
     Initial Purchasers contained in Section 2, compliance with the agreements
     set forth herein, compliance by the Initial Purchasers with the offering
     and transfer procedures and restrictions described in the Transaction
     Documents, and the accuracy of the representations and warranties made in
     accordance with the Transaction Documents by purchasers to whom the Initial
     Purchasers initially resell the Securities, it is not necessary, in
     connection with the issuance and sale of the Securities to the Initial
     Purchasers and the offer, resale and delivery of the Securities by the
     Initial Purchasers in the manner contemplated by this Agreement and the
     Offering Memorandum, to register the Securities under the Securities Act or
     to qualify the Indenture under the Trust Indenture Act of 1939, as amended
     (the "Trust Indenture Act") (it being understood that no representation is
     made as to any resale subsequent to the initial resale of the Securities).

          (d) The Company has been duly organized and is validly existing as a
     corporation in good standing under the laws of the State of Delaware and
     has corporate power and authority to own, lease and operate its properties
     and to conduct its business as described in the Offering Memorandum; and
     the Company is duly qualified as a foreign corporation to transact business
     and is in good standing in each other jurisdiction in which such
     qualification is required, whether by reason of the ownership or leasing of
     property or the conduct of business, except where the failure so to qualify
     or to be in good standing would not result in any material adverse changes
     in the condition, financial or otherwise, or in the

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     earnings, business affairs or business prospects of the Company and its
     subsidiaries considered as one enterprise, whether or not arising in the
     ordinary course of business (a "Material Adverse Effect").

          (e) (1) Each subsidiary of the Company set forth on Schedule III
     hereto (which lists all (a) Guarantors and (b) other subsidiaries of the
     Company that are either operating entities or holding companies, each a
     "Subsidiary" and, collectively, the "Subsidiaries") has been duly organized
     and is validly existing as a corporation or other entity in good standing
     under the laws of the jurisdiction of its incorporation, has corporate or
     other power and authority to own, lease and operate its properties and to
     conduct its business as described in the Offering Memorandum and is duly
     qualified as a foreign corporation or other entity to transact business and
     is in good standing in each jurisdiction in which such qualification is
     required, whether by reason of the ownership or leasing of property or the
     conduct of business, except where the failure so to qualify or to be in
     good standing would not result in a Material Adverse Effect; except as set
     forth on Schedule IV hereto, (a) all of the issued and outstanding capital
     stock of each such Subsidiary that is a corporation has been duly
     authorized and validly issued, is fully paid and non-assessable and is
     owned, by the Company, directly or through subsidiaries, free and clear of
     any security interest, mortgage, pledge, lien, encumbrance, claim or
     equity, and (b) all of the ownership interests of each such Subsidiary that
     is not a corporation have been duly authorized and are owned, by the
     Company, directly or through subsidiaries, free and clear of any security
     interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
     outstanding shares of capital stock of any Subsidiary was issued in
     violation of the preemptive or similar rights of any securityholder of such
     Subsidiary. The only subsidiaries of the Company are the subsidiaries
     listed on Schedule I hereto and the subsidiaries listed on Schedule V
     hereto (which lists all subsidiaries of the Company that are not
     guaranteeing the Securities).

          (2)  Except to the extent disclosed in the Offering Memorandum under
     the caption "Selected Consolidated Financial and Other Data" and in the
     Company's consolidated financial statements included in the Offering
     Memorandum, each of the specialty acute care hospitals, outpatient
     rehabilitation clinics and occupational health centers (collectively, the
     "Facilities") described in the Offering Memorandum as owned by the Company
     is owned or leased and operated by a Subsidiary of which the Company
     directly or indirectly owns 100% of the outstanding ownership interests.
     Except as disclosed in the Offering Memorandum, there are no material
     encumbrances or restrictions on the ability of any Subsidiary (i) to pay
     any dividends or make any distributions on such Subsidiary's capital stock,
     (ii) to make any loans or advances to, or investments in,

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     the Company or any Subsidiary, or (iii) to transfer any of its property or
     assets to the Company or any Subsidiary.

          (f) The authorized, issued and outstanding capital stock of the
     Company is as set forth in the Offering Memorandum in the column entitled
     "Actual" under the caption "Capitalization" (except for subsequent
     issuances, if any, pursuant to reservations, agreements or employee benefit
     plans referred to in the Offering Memorandum or pursuant to the exercise of
     convertible securities or options referred to in the Offering Memorandum or
     repurchases of an immaterial number of shares of the Company's capital
     stock held by former employees). The shares of issued and outstanding
     capital stock of the Company have been duly authorized and validly issued
     and are fully paid and non-assessable; none of the outstanding shares of
     capital stock of the Company was issued in violation of the preemptive or
     other similar rights of any securityholder of the Company that were not
     subsequently waived. The shares of capital stock of the Company issued or
     to be issued in connection with the exercise of any put right held by any
     prior owner of a Facility that was subsequently acquired by the Company,
     have been issued in compliance, in all material respects, with all federal
     and state securities laws. Except as disclosed in the Offering Memorandum,
     there are no outstanding options or warrants to purchase, or any preemptive
     rights or other rights to subscribe for or to purchase, any securities or
     obligations convertible into, or any contracts or commitments to issue or
     sell, shares of the Company's or any of its subsidiaries' capital stock or
     other ownership interests.

          (g) (i) The Company and each of the Guarantors has full right, power
     and authority to execute and deliver this Agreement, the Indenture
     (including the Guarantee set forth therein), the Registration Rights
     Agreement, and the Securities and (ii) the Company has the full right,
     power and authority to execute and deliver the Credit Agreement Amendment
     ((i) and (ii) above are collectively referred to as, the "Transaction
     Documents") and to perform their respective obligations hereunder and
     thereunder; and all corporate action required to be taken for the due and
     proper authorization, execution and delivery of each of the Transaction
     Documents and the consummation of the transactions contemplated thereby
     have been duly and validly taken.

          (h) This Agreement has been duly authorized, executed and delivered by
     the Company and each of the Guarantors.

          (i) The Registration Rights Agreement has been duly authorized by the
     Company and each of the Guarantors and, when duly executed and delivered in
     accordance with its terms by each of the parties thereto, will constitute a
     valid and legally binding agreement of the Company and each of the
     Guarantors enforceable

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     against the Company and each of the Guarantors in accordance with its
     terms, except to the extent that such enforceability may be limited by
     applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws affecting creditors' rights generally and
     by general equitable principles (whether considered in a proceeding in
     equity or at law) and an implied covenant of good faith and fair dealing.

          (j) The Indenture has been duly authorized by the Company and each of
     the Guarantors and, when duly executed and delivered in accordance with its
     terms by each of the parties thereto, will constitute a valid and legally
     binding agreement of the Company and each of the Guarantors enforceable
     against the Company and each of the Guarantors in accordance with its
     terms, except to the extent that such enforceability may be limited by
     applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws affecting creditors' rights generally and
     by general equitable principles (whether considered in a proceeding in
     equity or at law) and an implied covenant of good faith and fair dealing.
     On the Closing Date, the Indenture will conform in all material respects to
     the requirements of the Trust Indenture Act and the rules and regulations
     of the Commission applicable to an indenture which is qualified thereunder.

          (k) The Securities have been duly authorized by the Company and each
     of the Guarantors and, when duly executed, authenticated, issued and
     delivered as provided in the Indenture and paid for as provided herein,
     will be duly and validly issued and outstanding and will constitute valid
     and legally binding obligations of the Company, as issuer and each of the
     Guarantors, as guarantors, entitled to the benefits of the Indenture and
     enforceable against the Company, as issuer, and each of the Guarantors, as
     guarantors, in accordance with their terms, except to the extent that such
     enforceability may be limited by applicable bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and other similar laws
     affecting creditors' rights generally and by general equitable principles
     (whether considered in a proceeding in equity or at law) and an implied
     covenant of good faith and fair dealing; the Securities conform to all
     statements relating thereto contained in the Offering Memorandum and such
     description conforms to the rights set forth in the Transaction Documents.

          (l) The Guarantees have been duly authorized by each of the Guarantors
     and, when the Securities have been duly executed, authenticated, issued and
     delivered as provided in the Indenture and paid for as provided herein
     (assuming due authorization, execution and delivery of the Indenture by the
     Trustee and due authentication of the Securities by the Trustee), will
     constitute valid and legally binding obligations of the Guarantors
     enforceable against the Guarantors in accordance with their terms.

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          (m) The Exchange Securities have been duly authorized by the Company
     and the related guarantees have been duly authorized by each of the
     Guarantors and, when duly executed, authenticated, issued and delivered as
     provided in the Indenture and the Registration Rights Agreement (assuming
     the Indenture is the valid and legally binding obligation of the Trustee)
     will constitute a valid and legally binding agreement of the Company, as
     issuer and each of the Guarantors, as guarantors, enforceable against the
     Company, as issuer and each of the Guarantors, as guarantors, in accordance
     with its terms, except to the extent that such enforceability may be
     limited by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law) and an implied covenant of good faith and
     fair dealing.

          (n) Each of the Transaction Documents not referred to in the preceding
     clauses (h) through (l) has been duly authorized by the Company and, when
     duly executed and delivered in accordance with their terms by each of the
     parties thereto will constitute valid and legally binding obligations of
     the Company enforceable against the Company in accordance with their terms,
     subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws affecting creditors' rights generally and
     to general equitable principles (whether considered in a proceeding in
     equity or at law) and an implied covenant of good faith and fair dealing.

          (o) Each Transaction Document conforms in all material respects to the
     description thereof contained in the Offering Memorandum.

          (p) The execution, delivery and performance by the Company and each of
     the Guarantors of each of the Transaction Documents to which it is a party,
     the issuance, authentication, sale and delivery of the Securities and
     compliance by the Company and each of the Guarantors with the terms thereof
     and the consummation of the transactions contemplated by the Transaction
     Documents will not conflict with or result in a breach or violation of any
     of the terms or provisions of, or constitute a default under, or result in
     the creation or imposition of any lien, charge or encumbrance upon any
     property or assets of the Company or any of its subsidiaries pursuant to,
     any indenture, mortgage, deed of trust, loan agreement or other agreement
     or instrument to which the Company or any of its subsidiaries is a party or
     by which the Company or any of its subsidiaries is bound or to which any of
     the property or assets of the Company or any of its subsidiaries is subject
     (except for such conflicts, breaches or defaults or liens, charges or
     encumbrances that would not result in a Material Adverse Effect), nor will
     such actions result in any violation of the provisions of the charter or
     by-laws of the

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     Company (or other comparable organizational documents) or any of its
     subsidiaries or any statute or any judgment, order, decree, rule or
     regulation of any court or arbitrator or governmental agency or body having
     jurisdiction over the Company or any of its subsidiaries or any of their
     properties or assets; and no consent, approval, authorization or order of,
     or filing or registration with, any such court or arbitrator or
     governmental agency or body under any such statute, judgment, order,
     decree, rule or regulation is required for the execution, delivery and
     performance by the Company and each of the Guarantors of the Transaction
     Documents to which each is a party, the issuance, authentication, sale and
     delivery of the Securities and compliance by the Company and each of the
     Guarantors with the terms thereof and the consummation of the transactions
     contemplated by the Transaction Documents, except for such consents,
     approvals, authorizations, filings, registrations or qualifications which
     shall have been obtained or made prior to the Closing Date and as may be
     required to be obtained or made under the Securities Act and applicable
     state securities laws as provided in the Registration Rights Agreement.

          (q) PricewaterhouseCoopers LLC are independent certified public
     accountants with respect to the Company within the applicable rules and
     regulations of the Commission. The consolidated financial statements
     included in the Offering Memorandum, together with the related notes,
     comply in all material respects with the requirements applicable to a
     registration statement on Form S-1 under the Securities Act (except that
     certain supporting schedules and exhibits are omitted), present fairly the
     financial position of the Company and its consolidated subsidiaries, and
     NovaCare Physical Rehabilitation and Occupational Health Group, Intensiva
     Healthcare Corporation and Subsidiaries, and American Transitional
     Hospitals, Inc. (collectively, the "Acquired Entities"), at the dates
     indicated and the statement of operations, stockholders' equity and cash
     flows of the Company, its consolidated subsidiaries and the Acquired
     Entities and for the periods specified; said financial statements have been
     prepared in conformity with generally accepted accounting principles
     ("GAAP") applied on a consistent basis throughout the periods involved. The
     selected consolidated financial data and the summary consolidated financial
     information of the Company included in the Offering Memorandum present
     fairly the information shown therein and have been compiled on a basis
     consistent with that of the audited financial statements included in the
     Offering Memorandum. The statement of operations data and balance sheet
     data of Sports Orthopedic Rehabilitation Services, PA ("SORS") for December
     31, 1996 and the year then ended and the period January 1, 1997 through
     February 6, 1997 included in the Offering Memorandum under the heading
     "Selected Consolidated Financial and Other Data" (the "SORS Financial
     Information") was derived from the compiled financial statements of SORS.
     The combined financial statements of SORS for the above referenced periods
     (i) fairly

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     present the financial position of SORS at the dates indicated and the
     statement of operations data for the periods specified and (ii) were
     prepared in conformity with GAAP, except for the absence of footnotes,
     statements of cash flows and the exclusion of certain per share
     information. There are no material adjustments that would be required to be
     made to the SORS Financial Information if the above referenced financial
     statements of SORS were reissued to be in conformity with GAAP. The pro
     forma financial information and the related notes thereto included in the
     Offering Memorandum present fairly the information shown therein and the
     assumptions used in the preparation thereof are reasonable and the
     adjustments used therein are appropriate to give effect to the transactions
     and circumstances referred to therein; the as adjusted financial
     information included in the Offering Memorandum has been properly compiled
     on the basis described therein, and the assumptions used in the preparation
     thereof are reasonable and the adjustments used therein are appropriate to
     give effect to the transactions and circumstances referred to therein.

          (r) There is no action, suit, proceeding, inquiry or investigation
     before or brought by any court or governmental agency or body, domestic or
     foreign, now pending (other than any sealed "qui tam" actions of which the
     Company has no knowledge), or, to the knowledge of the Company, threatened,
     against or affecting the Company or any subsidiary which might reasonably
     be expected to result in a Material Adverse Effect, or which might
     reasonably be expected to materially and adversely affect the properties or
     assets of the Company and its subsidiaries taken as a whole; the aggregate
     of all pending legal or governmental proceedings to which the Company or
     any subsidiary is a party or of which any of their respective property or
     assets is the subject which are not described in the Offering Memorandum,
     including ordinary routine litigation incidental to the business, could not
     reasonably be expected to result in a Material Adverse Effect.

          (s) No action has been taken and no statute, rule, regulation or order
     has been enacted, adopted or issued by any governmental agency or body
     which prevents the issuance of the Securities or suspends the sale of the
     Securities in any jurisdiction; no injunction, restraining order or order
     of any nature by any federal or state court of competent jurisdiction has
     been issued with respect to the Company or any of its subsidiaries which
     would prevent or suspend the issuance or sale of the Securities or the use
     of the Preliminary Offering Memorandum or the Offering Memorandum in any
     jurisdiction; no action, suit or proceeding is pending against or, to the
     best knowledge of the Company, threatened against or affecting the Company
     or any of its subsidiaries before any court or arbitrator or any
     governmental agency, body or official, domestic or foreign, which could
     reasonably be expected to interfere with or adversely affect the issuance
     of the Securities or in any manner draw into question the validity or
     enforceability of any

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     of the Transaction Documents or any action taken or to be taken pursuant
     thereto; and the Company has complied with any and all requests by any
     securities authority in any jurisdiction for additional information to be
     included in the Preliminary Offering Memorandum and the Offering
     Memorandum.

          (t) Neither the Company nor any of its subsidiaries is (i) in
     violation of its charter or by-laws (or other comparable organizational
     documents), (ii) in default, and no event has occurred which, with notice
     or lapse of time or both, would constitute a default, in the due
     performance or observance of any term, covenant or condition contained in
     any indenture, mortgage, deed of trust, loan agreement or other agreement
     or instrument to which it is a party or by which it is bound or to which
     any of its property or assets is subject (except for such defaults that
     would not result in a Material Adverse Effect) or (iii) in violation in any
     material respect of any law, ordinance, governmental rule, regulation or
     court decree to which it or its property or assets may be subject.

          (u) The Company and its subsidiaries possess all required permits,
     licenses, provider numbers, certificates, approvals (including without
     limitation, certificate of need approvals), consents, orders,
     certifications (including, without limitation, certification under the
     Medicare and Medicaid programs), accreditations (including, without
     limitation, accreditation by the Joint Commission on Accreditation of
     Healthcare Organizations) and other authorizations (collectively,
     "Governmental Licenses") issued by, and have made all required declarations
     and filings with, the appropriate federal, state, local or foreign
     regulatory agencies or bodies necessary to conduct the business now
     operated by them (including, without limitation, Government Licenses as are
     required (i) under such federal and state healthcare laws as are applicable
     to the Company and its subsidiaries and (ii) with respect to those
     facilities operated by the Company or any of its subsidiaries that
     participate in the Medicare and/or Medicaid programs, to receive
     reimbursement thereunder), except where the failure to possess such
     Government Licenses or to make such declarations would not reasonably be
     expected to result in a Material Adverse Effect; the Company and its
     subsidiaries are in compliance with the terms and conditions of all such
     Governmental Licenses, except where the failure so to comply would not,
     singly or in the aggregate, reasonably be expected to result in a Material
     Adverse Effect; all of the Governmental Licenses are valid and in full
     force and effect, except when the invalidity of such Governmental Licenses
     or the failure of such Governmental Licenses to be in full force and effect
     would not reasonably be expected to result in a Material Adverse Effect;
     and neither the Company nor any of its subsidiaries has received any notice
     of proceedings relating to the revocation or modification of any such
     Governmental Licenses which, singly or in the aggregate, if the subject of
     an unfavorable decision, ruling or finding, would reasonably be expected to
     result in a Material

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          Adverse Effect.  All of the long-term acute care hospitals operated by
          the Company and its subsidiaries and all of the Company's and its
          subsidiaries' outpatient clinics that operate as "rehabilitation
          agencies" are "providers of service" as defined in the Social Security
          Act and the regulations promulgated thereunder and are eligible to
          participate in the Medicare and (to the extent disclosed in the
          Offering Memorandum) Medicaid programs.

               (v)  The accounts receivable of the Company and its subsidiaries
          have been adjusted to reflect material changes in the reimbursement
          policies of third party payors such as Medicare, Medicaid, private
          insurance companies, health maintenance organizations, preferred
          provider organizations, managed care systems and other third party
          payors (including, without limitation, Blue Cross plans). The accounts
          receivable, after giving effect to the allowance for doubtful
          accounts, relating to such third party payors do not materially exceed
          amounts the Company and its subsidiaries are entitled to receive.

               (w)  Neither the Company nor, to the knowledge of the Company,
          any officers, directors or stockholders, employees or other agents of
          the Company or any of its subsidiaries or the hospitals operated by
          them, has engaged in any activities which are prohibited under Federal
          Medicare and Medicaid statutes including, but not limited to, 42
          U.S.C. (S)(S) 1320a-7 (Program Exclusion), (S) 1320a-7a (Civil
          Monetary Penalties), 1320a-7b (the Anti-kickback Statute), (S) 1395nn
          and 1396b (the "Stark" law, prohibiting certain self-referrals), or
          any other federal healthcare law, including, but not limited to, the
          federal TRICARE statute, 10 U.S.C. (S) 1071 et seq., the Federal Civil
          False Claims Act, 31 U.S.C. (S)(S) 3729-32, Federal Criminal False
          Claims Act, 18 U.S.C. (S) 287, False Statements Relating to Health
          Care Matters, 18 U.S.C. (S) 1035, Health Care Fraud, 18 U.S.C. (S)
          1347, or the federal Food, Drug & Cosmetics Act, 21 U.S.C. (S)
          360aaa, or any regulations promulgated pursuant to such statutes, or
          related state or local statutes or regulations or any rules of
          professional conduct, including but not limited to the following: (i)
          knowingly and willfully making or causing to be made a false statement
          or representation of a material fact in any applications for any
          benefit or payment under the Medicare or Medicaid program or from any
          third party (where applicable federal or state law prohibits such
          payments to third parties); (ii) knowingly and willfully making or
          causing to be made any false statement or representation of a material
          fact for use in determining rights to any benefit or payment under the
          Medicare or Medicaid program or from any third party (where applicable
          federal or state law prohibits such payments to third parties); (iii)
          failing to disclose knowledge by a claimant of the occurrence of any
          event affecting the initial or continued right to any benefit or
          payment under the Medicare or Medicaid program or from any third party
          (where applicable federal or state law prohibits such payments to
          third parties) on its own behalf or on behalf of another,

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          with intent to secure such benefit or payment fraudulently; (iv)
          knowingly and willfully offering, paying, soliciting or receiving any
          remuneration (including any kickback, bribe or rebate), directly or
          indirectly, overtly or covertly, in cash or in kind (a) in return for
          referring an individual to a person for the furnishing or arranging
          for the furnishing of any item or service for which payment may be
          made in whole or in part by Medicare or Medicaid or any third party
          (where applicable federal or state law prohibits such payments to
          third parties), or (b) in return for purchasing, leasing or ordering
          or arranging for or recommending the purchasing, leasing or ordering
          of any good, facility, service, or item for which payment may be made
          in whole or in part by Medicare or Medicaid or any third party (where
          applicable federal or state law prohibits such payments to third
          parties); (v) knowingly and willfully referring an individual to a
          person with which they have ownership or certain other financial
          arrangements (where applicable federal law prohibits such referrals);
          and (vi) knowingly and willfully violating any enforcement initiative
          instituted by any governmental agency (including, without limitation,
          the Office of the Inspector General and the Department of Justice),
          except for any such activities which are specifically described in the
          Offering Memorandum or which would not, singly or in the aggregate,
          reasonably be expected to result in a Material Adverse Effect.

               (x)  Neither of the Company or any of its subsidiaries or any of
          the Facilities operated by any of them has failed to file with
          applicable regulatory authorities any statement, report, information
          or form required by any applicable law, regulation or order, except
          where the failure to be so in compliance could not, individually or in
          the aggregate, have a Material Adverse Effect. Except as described in
          the Offering Memorandum, all such filings or submissions were in
          compliance with applicable laws when filed and no deficiencies have
          been asserted by any regulatory commission, agency or authority with
          respect to any such filings or submissions, except for any such
          failures to be in compliance or deficiencies which would not, singly
          or in the aggregate, reasonably be expected to have a Material Adverse
          Effect.

               (y)  The Company and its subsidiaries have timely filed all
          federal, state, local and foreign tax returns that are required to be
          filed or has duly requested extensions thereof and all such tax
          returns are true, correct and complete, except to the extent that any
          failure to file or request an extension, or any incorrectness would
          not reasonably be expected to result in a Material Adverse Effect. The
          Company and its subsidiaries have timely paid all taxes shown as due
          on such filed tax returns (including any related assessments, fines or
          penalties), except to the extent that any such taxes are being
          contested in good faith and by appropriate proceedings, or to the
          extent that any failure to pay would not reasonably be expected to
          result in a Material Adverse Effect; and adequate charges, accruals
          and

                                       12
<PAGE>

          reserves have been provided for in the financial statements referred
          to in Section 1(q) above in accordance with GAAP in respect of all
          Federal, state, local and foreign taxes for all periods as to which
          the tax liability of the Company and its subsidiaries has not been
          finally determined or remains open to examination by applicable taxing
          authorities except (A) for taxes incurred after the date of the
          financial statements referred to in Section 1(q) or (B) where the
          failure to provide for such charges, accruals and reserves would not
          reasonably be expected to result in a Material Adverse Effect. Neither
          the Company nor any of its subsidiaries is a "United States real
          property holding corporation" within the meaning of Section 897(c)(2)
          of the Internal Revenue Code of 1986, as amended (the "Code").

               (z)  Neither the Company nor any of its subsidiaries is (i) an
          "investment company" or a company "controlled by" an investment
          company within the meaning of the Investment Company Act of 1940, as
          amended (the "Investment Company Act"), and the rules and regulations
          of the Commission thereunder or (ii) a "holding company" or a
          "subsidiary company" of a holding company or an "affiliate" thereof
          within the meaning of the Public Utility Holding Company Act of 1935,
          as amended.

               (aa) The Company and each of its subsidiaries maintain a system
          of internal accounting controls sufficient to provide reasonable
          assurance that (i) transactions are executed in accordance with
          management's general or specific authorizations; (ii) transactions are
          recorded as necessary to permit preparation of financial statements in
          conformity with generally accepted accounting principles and to
          maintain asset accountability; (iii) access to assets is permitted
          only in accordance with management's general or specific
          authorization; and (iv) the recorded accountability for assets is
          compared with the existing assets at reasonable intervals and
          appropriate action is taken with respect to any differences.

               (bb) The Company and each of its subsidiaries and each of the
          Facilities owned, leased or operated by them are insured by insurers
          of recognized financial responsibility against such losses and risks
          and in such amounts as are prudent and customary in the healthcare
          industry; neither the Company nor any of its subsidiaries or any of
          the hospitals owned, leased or operated by them has been refused any
          material insurance coverage sought or applied for since January 1,
          1999; and the Company has no reason to believe that it or any of the
          Facilities owned, leased or operated by it or any of its subsidiaries,
          will not be able to renew its existing insurance coverage as and when
          such coverage expires or to obtain coverage consistent with such
          coverage in all material respects from insurers with comparable
          financial strength and claims paying ability ratings as may be
          necessary to continue its operations except where the failure to renew
          or maintain such coverage would not reasonably be expected to result
          in a Material Adverse Effect.

                                       13
<PAGE>

          The officers and directors of the Company are insured by insurers of
          recognized financial responsibility against such losses and risks and
          in such amounts as the Company believes are prudent and customary for
          officers' and directors' liability insurance of a public company and
          as the Company believes would cover claims which would reasonably be
          expected to be made in connection with the issuance of the Securities;
          and the Company has no reason to believe that it will not be able to
          renew its existing directors' and officers' liability insurance
          coverage as and when such coverage expires or to obtain coverage
          consistent with such coverage in all material respects from insurers
          with comparable financial strength and claims paying ability ratings
          as may be necessary to cover its officers and directors.

               (cc) The Company and its subsidiaries own or possess, or can
          acquire on reasonable terms, adequate patents, patent rights,
          licenses, inventions, copyrights, know-how (including trade secrets
          and other unpatented and/or unpatentable proprietary or confidential
          information, systems or procedures), trademarks, service marks, trade
          names or other intellectual property (collectively, "Intellectual
          Property") necessary to carry on the business now operated by them in
          all material respects, and neither the Company nor any of its
          subsidiaries has received any notice or is otherwise aware of any
          infringement of or conflict with asserted rights of others with
          respect to any Intellectual Property or of any facts or circumstances
          which would render any Intellectual Property invalid or inadequate to
          protect the interest of the Company or any of its subsidiaries
          therein, and which infringement or conflict (if the subject of any
          unfavorable decision, ruling or finding) or invalidity or inadequacy,
          singly or in the aggregate, would result in a Material Adverse Effect.

               (dd) The Company and its subsidiaries have good and marketable
          title to all real property owned by them and good title to all other
          properties owned by them, in each case, free and clear of all
          mortgages, pledges, liens, security interests, claims, restrictions or
          encumbrances of any kind except such as (a) are described in the
          Offering Memorandum or (b) do not, singly or in the aggregate, in a
          manner that would reasonably be expected to result in a Material
          Adverse Effect, affect the value of such property or interfere with
          the use made or proposed to be made of such property by the Company or
          any of its subsidiaries; and all of the leases and subleases of the
          Company and its subsidiaries, considered as one enterprise, and under
          which the Company or any of its subsidiaries holds properties
          described in the Offering Memorandum, are in full force and effect,
          and neither the Company or any of its subsidiaries has any notice of
          any claim of any sort that has been asserted by anyone adverse to the
          rights of the Company or any of its subsidiaries under any of the
          leases or subleases mentioned above, or affecting or questioning the
          rights of the Company or such subsidiary to the continued possession
          of the leased or subleased premises under any such lease or sublease,

                                       14
<PAGE>

          except where the failure to be in full force and effect or such claim
          would not reasonably be expected to have a Material Adverse Effect.

               (ee) No labor dispute with the employees of the Company or any
          subsidiary exists or, to the knowledge of the Company, is imminent,
          and the Company is not aware of any existing or imminent labor
          disturbance by the employees of any of its or any subsidiary's
          principal suppliers, manufacturers, customers or contractors, which,
          in either case, may reasonably be expected to result in a Material
          Adverse Effect.

               (ff) No "prohibited transaction" (as defined in Section 406 of
          the Employee Retirement Income Security Act of 1974, as amended,
          including the regulations and published interpretations thereunder
          ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
          amended from time to time (the "Code")) or "accumulated funding
          deficiency" (as defined in Section 302 of ERISA) or any of the events
          set forth in Section 4043(b) of ERISA (other than events with respect
          to which the 30-day notice requirement under Section 4043 of ERISA has
          been waived) has occurred with respect to any employee benefit plan of
          the Company or any of its subsidiaries which could reasonably be
          expected to have a Material Adverse Effect; each such employee benefit
          plan is in compliance in all material respects with applicable law,
          including ERISA and the Code; the Company and each of its subsidiaries
          have not incurred and do not expect to incur liability under Title IV
          of ERISA with respect to the termination of, or withdrawal from, any
          pension plan for which the Company or any of its subsidiaries would
          have any liability; and each such pension plan that is intended to be
          qualified under Section 401(a) of the Code is so qualified in all
          material respects and nothing has occurred, whether by action or by
          failure to act, which could reasonably be expected to cause the loss
          of such qualification.

               (gg) Except as described in the Offering Memorandum, (A) neither
          the Company nor any of its subsidiaries or any of the Facilities
          owned, leased or operated by them is in violation of any material
          federal, state, local or foreign statute, law, rule, regulation,
          standard, guide, ordinance, code, policy or rule of common law or any
          judicial or administrative interpretation thereof, including any
          judicial or administrative order, consent, decree or judgment,
          relating to pollution or protection of human health, the environment
          (including, without limitation, ambient air, surface water,
          groundwater, land surface or subsurface strata) or wildlife,
          including, without limitation, laws and regulations relating to the
          release or threatened release of chemicals, pollutants, contaminants,
          wastes, toxic substances, hazardous substances (including, without
          limitation, asbestos, polychlorinated biphenyls, urea formaldehyde
          insulation, petroleum or petroleum products) (collectively, "Hazardous
          Materials") or to the manufacture, processing,

                                       15
<PAGE>

          distribution, use, treatment, storage, disposal, transport or handling
          of Hazardous Materials (collectively, "Environmental Laws"), (B) the
          Company and its subsidiaries and each of the Facilities owned, leased
          or operated by them have all material permits, authorizations and
          approvals required under any applicable Environmental Laws and are
          each in compliance with their requirements, (C) there are no pending
          or threatened administrative, regulatory or judicial actions, suits,
          demands, demand letters, claims, liens, notices of noncompliance or
          violation, investigations or proceedings relating to any Environmental
          Law against the Company or any of its subsidiaries or any of the
          Facilities owned, leased or operated by them except as would not,
          singly or in the aggregate, result in a Material Adverse Effect and
          (D) there are no events or circumstances that might reasonably be
          expected to form the basis of an order for clean-up or remediation, or
          an action, suit or proceeding by any private party or governmental
          body or agency, against or affecting the Company or any of its
          subsidiaries or any of the Facilities owned, leased or operated by
          them relating to Hazardous Materials or any Environmental Laws except
          for such events or circumstances that would not, singly or in the
          aggregate, result in a Material Adverse Effect.

               (hh) Neither the Company nor any of its subsidiaries, nor to the
          best knowledge of the Company, any director, officer, agent, employee
          or other person associated with or acting on behalf of the Company or
          any of its subsidiaries has used any corporate funds for any unlawful
          contribution, gift, entertainment or other unlawful expense relating
          to political activity, made any direct or indirect unlawful payment to
          any foreign or domestic government official or employee from corporate
          funds, violated or is in violation of any provision of the Foreign
          Corrupt Practices Act of 1977, or made any bribe, rebate, payoff,
          influence payment, kickback or other unlawful payment.

               (ii) On and immediately after the Closing Date, the Company
          (after giving effect to the issuance of the Securities and to the
          other transactions related thereto as described in the Offering
          Memorandum) will be Solvent. As used in this paragraph, the term
          "Solvent" means, with respect to a particular date, that on such date
          the present fair market value (or present fair saleable value) of the
          assets of the Company is not less than the total amount required to
          pay the probable liabilities of the Company on its total existing
          debts and liabilities (including contingent liabilities) as they
          become absolute and matured, the Company is able to realize upon its
          assets and pay its debts and other liabilities, contingent obligations
          and commitments as they mature and become due in the normal course of
          business, assuming the sale of the Securities as contemplated by this
          Agreement and the Offering Memorandum, the Company is not incurring
          debts or liabilities beyond its ability to pay as such debts and
          liabilities mature and the Company is not engaged in any business or
          transaction, and is not about to engage in any business or

                                       16
<PAGE>

          transaction, for which its property would constitute unreasonably
          small capital after giving due consideration to the prevailing
          practice in the industry in which the Company is engaged. In computing
          the amount of such contingent liabilities at any time, it is intended
          that such liabilities will be computed at the amount that, in the
          light of all the facts and circumstances existing at such time,
          represents the amount that can reasonably be expected to become an
          actual or matured liability.

               (jj) Neither the Company nor any of its subsidiaries owns any
          "margin securities" as that term is defined in Regulations G and U of
          the Board of Governors of the Federal Reserve System (the "Federal
          Reserve Board"), and none of the proceeds of the sale of the
          Securities will be used, directly or indirectly, for the purpose of
          purchasing or carrying any margin security, for the purpose of
          reducing or retiring any indebtedness which was originally incurred to
          purchase or carry any margin security or for any other purpose which
          might cause any of the Securities to be considered a "purpose credit"
          within the meanings of Regulation T, U or X of the Federal Reserve
          Board.

               (kk) Other than as provided for or contemplated by this
          Agreement, neither the Company nor any of its subsidiaries is a party
          to any contract, agreement or understanding with any person that would
          give rise to a valid claim against the Company or the Initial
          Purchasers for a brokerage commission, finder's fee or like payment in
          connection with the offering and sale of the Securities.

               (ll) The Securities satisfy the eligibility requirements of Rule
          144A(d)(3) under the Securities Act.

               (mm) None of the Company, nor any of its affiliates or any person
          acting on its or their behalf has engaged or will engage in any
          directed selling efforts (as such term is defined in Regulation S
          under the Securities Act ("Regulation S")), and all such persons have
          complied and will comply with the offering restrictions requirement of
          Regulation S to the extent applicable.

               (nn) Neither the Company nor any of its affiliates has, directly
          or through any agent, sold, offered for sale, solicited offers to buy
          or otherwise negotiated in respect of, any security (as such term is
          defined in the Securities Act), which is or will be integrated with
          the sale of the Securities in a manner that would require registration
          of the Securities under the Securities Act.

               (oo) None of the Company or any of its affiliates or any other
          person acting on its or their behalf has engaged, in connection with
          the offering of the Securities, in any form of general solicitation or
          general advertising within the meaning of Rule 502(c) under the
          Securities Act.

                                       17
<PAGE>

               (pp) Neither the Company nor its subsidiaries or, to the best of
          the Company's knowledge, any of their respective directors, officers
          or affiliates has taken or will take, directly or indirectly, any
          action designed to, or that could be reasonably expected to, cause or
          result in stabilization or manipulation of the price of the Securities
          in violation of Regulation M under the Exchange Act.

               (qq) No forward-looking statement (within the meaning of Section
          27A of the Securities Act and Section 21E of the Exchange Act)
          contained in the Preliminary Offering Memorandum or the Offering
          Memorandum has been made or reaffirmed without a reasonable basis or
          has been disclosed other than in good faith.

               (rr) Except as disclosed in the Offering Memorandum, there are no
          outstanding loans, advances, or guarantees of indebtedness by the
          Company or any of its subsidiaries to or for the benefit of any of the
          executive officers or directors of the Company or any of the members
          of the families of any of them that would be required to be so
          disclosed under the Securities Act, the regulations thereunder of Form
          S-1 pursuant to the Securities Act.

               (ss) The statistical and market-related data included in the
          Offering Memorandum is derived from sources which the Company
          reasonably and in good faith believes to be accurate, reasonable and
          reliable in all material respects and the statistical and market-
          related data included in the Offering Memorandum agrees with the
          sources from which it was derived in all material respects.

               (tt) Since the respective dates as of which information is given
          in the Offering Memorandum, except as otherwise stated therein, (A)
          there has been no material adverse change or any development involving
          a prospective material adverse change in the condition, financial or
          otherwise, or in the earnings, business affairs, management or
          business prospects of the Company and its subsidiaries considered as
          one enterprise, whether or not arising in the ordinary course of
          business, (B) neither the Company nor any of its subsidiaries has
          incurred any liability or obligation, direct or contingent, other than
          those in the ordinary course of business, which are material with
          respect to the Company and its subsidiaries considered as one
          enterprise, (C) there have been no transactions entered into by the
          Company or any of its subsidiaries, other than those in the ordinary
          course of business, which are material with respect to the Company and
          its subsidiaries considered as one enterprise, and (D) there has not
          been any change in the capital stock (other than pursuant to issuances
          of common stock in connection with the exercise of options or put
          rights) or long-term debt of the Company or any dividend or
          distribution of any kind declared, paid or made by the Company on any
          class of its capital stock.

                                       18
<PAGE>

          2.   Purchase and Resale of the Securities.
               -------------------------------------

          (a)  On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to each of the Initial Purchasers, severally
and not jointly, and each of the Initial Purchasers, severally and not jointly,
agrees to purchase from the Company, the principal amount of Securities set
forth opposite the name of such Initial Purchaser on Schedule II hereto at a
purchase price equal to 97.50% of the principal amount thereof. The Company
shall not be obligated to deliver any of the Securities except upon payment for
all of the Securities to be purchased as provided herein.

          (b)  The Initial Purchasers have advised the Company that they propose
to offer the Securities for resale upon the terms and subject to the conditions
set forth herein and in the Offering Memorandum. Each Initial Purchaser,
severally and not jointly, represents, warrants and agrees that (i) it is an
accredited investor within the meaning of Regulation D under the Securities Act
and it is purchasing the Securities pursuant to a private sale exempt from
registration under the Securities Act, (ii) it has not solicited offers for, or
offered or sold, and will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the Securities Act
("Regulation D") or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act and (iii) it has solicited and will
solicit offers for the Securities only from, and has offered or sold and will
offer, sell or deliver the Securities, as part of their initial offering, only
(A) within the United States to persons whom it reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers"), as defined in
Rule 144A under the Securities Act ("Rule 144A"), or if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and in each case,
in transactions in accordance with Rule 144A and (B) outside the United States
to persons other than U.S. persons in reliance on Regulation S under the
Securities Act ("Regulation S").

          (c)  In connection with the offer and sale of Securities in reliance
on Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:

          (i)  the Securities have not been registered under the Securities Act
               and may not be offered or sold within the United States or to, or
               for the account or benefit of, U.S. persons except pursuant to an
               exemption from, or in transactions not subject to, the
               registration requirements of the Securities Act;

                                       19
<PAGE>

          (ii)   such Initial Purchaser has offered and sold the Securities, and
                 will offer and sell the Securities, (A) as part of their
                 distribution at any time and (B) otherwise until 40 days after
                 the later of the commencement of the offering of the Securities
                 and the Closing Date, only in accordance with Regulation S or
                 Rule 144A or any other available exemption from registration
                 under the Securities Act;

          (iii)  none of such Initial Purchaser or any of its affiliates or any
                 other person acting on its or their behalf has engaged or will
                 engage in any directed selling efforts (as such term is defined
                 in Regulation S) with respect to the Securities, and all such
                 persons have complied and will comply with the offering
                 restrictions requirement of Regulation S;

          (iv)   at or prior to the confirmation of sale of any Securities sold
                 in reliance on Regulation S, it will have sent to each
                 distributor, dealer or other person receiving a selling
                 concession, fee or other remuneration that purchases Securities
                 from it during the restricted period a confirmation or notice
                 to substantially the following effect:

                 "The Securities covered hereby have not been
                 registered under the U.S. Securities Act of
                 1933, as amended (the "Securities Act"), and
                 may not be offered or sold within the United
                 States or to, or for the account or benefit of,
                 U.S. persons (i) as part of their distribution
                 at any time or (ii) otherwise until 40 days
                 after the later of the commencement of the
                 offering of the Securities and the date of
                 original issuance of the Securities, except in
                 accordance with Regulation S or Rule 144A or
                 any other available exemption from registration
                 under the Securities Act. Terms used above have
                 the meanings given to them by Regulation S"; and

          (v)    it has not and will not enter into any contractual arrangement
                 with any distributor with respect to the distribution of the
                 Securities, except with its affiliates or with the prior
                 written consent of the Company.

Terms used in this Section 2(c) have the meanings given to them by Regulation S.

                                       20
<PAGE>

          (d)  Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and prior to the date
six months after the Closing Date will not offer or sell any Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996,
as amended, or is a person to whom such document may otherwise lawfully be
issued or passed on.

          (e)  Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Company shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 5(d) and (e), counsel for the Company and for the Initial Purchasers,
respectively, may rely upon the accuracy of the representations and warranties
of the Initial Purchasers and their compliance with their agreements contained
in this Section 2, and each Initial Purchaser hereby consents to such reliance.

          (f)  The Company acknowledges and agrees that the Initial Purchasers
may sell Securities to any affiliate of an Initial Purchaser and that any such
affiliate may sell Securities purchased by it to an Initial Purchaser.

          3.   Delivery of and Payment for the Securities.
               ------------------------------------------

          (a)  Delivery of and payment for the Securities shall be made at the
offices of Debevoise and Plimpton, New York, New York, or at such other place as
shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M.,
New York City time, on June 11, 2001, or at such other time or date, not later
than seven full business days thereafter, as shall be agreed upon by the Initial
Purchasers and the Company (such date and time of payment and delivery being
referred to herein as the "Closing Date").

                                       21
<PAGE>

          (b)  On the Closing Date, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of same-
day funds to such account or accounts as the Company shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Initial Purchasers of the certificates
evidencing the Securities. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligations of the Initial Purchasers hereunder. Upon delivery, the
Securities shall be in global form, registered in such names and in such
denominations as JPMorgan on behalf of the Initial Purchasers shall have
requested in writing not less than two full business days prior to the Closing
Date. The Company agrees to make one or more global certificates evidencing the
Securities available for inspection by JPMorgan on behalf of the Initial
Purchasers in New York, New York no later than 1 P.M. on the day prior to the
Closing Date.

          4.   Further Agreements of the Company. Each of the Company and the
               ---------------------------------
Guarantors agree with each of the Initial Purchasers:

          (a)  to advise the Initial Purchasers promptly and, if requested,
     confirm such advice in writing, of the happening of any event which makes
     any statement of a material fact made in the Offering Memorandum untrue or
     which requires the making of any additions to or changes in the Offering
     Memorandum (as amended or supplemented from time to time) in order to make
     the statements therein, in the light of the circumstances under which they
     were made, not misleading; to advise the Initial Purchasers promptly of any
     order preventing or suspending the use of the Preliminary Offering
     Memorandum or the Offering Memorandum, of any suspension of the
     qualification of the Securities for offering or sale in any jurisdiction
     and of the initiation or threatening of any proceeding for any such
     purpose; and to use its best efforts to prevent the issuance of any such
     order preventing or suspending the use of the Preliminary Offering
     Memorandum or the Offering Memorandum or suspending any such qualification
     and, if any such suspension is issued, to obtain the lifting thereof at the
     earliest possible time;

          (b)  to furnish promptly to each of the Initial Purchasers and counsel
     for the Initial Purchasers, without charge, as many copies of the
     Preliminary Offering Memorandum and the Offering Memorandum (and any
     amendments or supplements thereto) as may be reasonably requested;

          (c)  prior to making any amendment or supplement to the Offering
     Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
     counsel for the Initial Purchasers and not to effect any such amendment or
     supplement to which the Initial Purchasers shall reasonably object by
     notice to the Company after a reasonable period to review;

                                       22
<PAGE>

          (d)  if, at any time prior to completion of the resale of the
     Securities by the Initial Purchasers, any event shall occur or condition
     exist as a result of which it is necessary, in the opinion of counsel for
     the Initial Purchasers or counsel for the Company, to amend or supplement
     the Offering Memorandum in order that the Offering Memorandum will not
     include an untrue statement of a material fact or omit to state a material
     fact necessary in order to make the statements therein, in the light of the
     circumstances existing at the time it is delivered to a purchaser, not
     misleading, or if it is necessary to amend or supplement the Offering
     Memorandum to comply with applicable law, to promptly prepare such
     amendment or supplement as may be necessary to correct such untrue
     statement or omission or so that the Offering Memorandum, as so amended or
     supplemented, will comply with applicable law;

          (e)  for so long as the Securities are outstanding and are "restricted
     securities" within the meaning of Rule 144(a)(3) under the Securities Act,
     to furnish to holders of the Securities and prospective purchasers of the
     Securities designated by such holders, upon request of such holders or such
     prospective purchasers, the information required to be delivered pursuant
     to Rule 144A(d)(4) under the Securities Act, unless the Company is then
     subject to and in compliance with Section13 or 15(d) of the Exchange Act
     (the foregoing agreement being for the benefit of the holders from time to
     time of the Securities and prospective purchasers of the Securities
     designated by such holders);

          (f)  for so long as the Securities are outstanding, to furnish to the
     Initial Purchasers copies of any annual reports, quarterly reports and
     current reports filed by the Company with the Commission on Forms 10-K, 10-
     Q and 8-K, or such other similar forms as may be designated by the
     Commission, and such other documents, reports and information as shall be
     furnished by the Company to the Trustee or to the holders of the Securities
     pursuant to the Indenture or the Exchange Act or any rule or regulation of
     the Commission thereunder;

          (g)  to promptly take from time to time such actions as the Initial
     Purchasers may reasonably request to qualify the Securities for offering
     and sale under the securities or Blue Sky laws of such jurisdictions as the
     Initial Purchasers may designate and to continue such qualifications in
     effect for so long as required for the resale of the Securities; and to
     arrange for the determination of the eligibility for investment of the
     Securities under the laws of such jurisdictions as the Initial Purchasers
     may reasonably request; provided that the Company and its subsidiaries
     shall not be obligated to qualify as foreign corporations in any
     jurisdiction in which they are not so qualified or to file a general
     consent to service of process in any jurisdiction;

                                       23
<PAGE>

          (h)  to assist the Initial Purchasers in arranging for the Securities
     to be designated Private Offerings, Resales and Trading through Automated
     Linkages ("PORTAL") Market securities in accordance with the rules and
     regulations adopted by the National Association of Securities Dealers, Inc.
     ("NASD") relating to trading in the PORTAL Market and for the Securities to
     be eligible for clearance and settlement through The Depository Trust
     Company ("DTC");

          (i)  not to, and to cause its affiliates not to, sell, offer for sale
     or solicit offers to buy or otherwise negotiate in respect of any security
     (as such term is defined in the Securities Act) which could be integrated
     with the sale of the Securities in a manner which would require
     registration of the Securities under the Securities Act;

          (j)  except following the effectiveness of the Exchange Offer
     Registration Statement or the Shelf Registration Statement, as the case may
     be, not to, and to cause its affiliates not to, and not to authorize or
     knowingly permit any person acting on their behalf to, solicit any offer to
     buy or offer to sell the Securities by means of any form of general
     solicitation or general advertising within the meaning of Regulation D or
     in any manner involving a public offering within the meaning of Section
     4(2) of the Securities Act; and not to offer, sell, contract to sell or
     otherwise dispose of, directly or indirectly, any securities under
     circumstances where such offer, sale, contract or disposition would cause
     the exemption afforded by Section 4(2) of the Securities Act to cease to be
     applicable to the offering and sale of the Securities as contemplated by
     this Agreement and the Offering Memorandum;

          (k)  for a period of 90 days from the date of the Offering Memorandum,
     not to offer for sale, sell, contract to sell or otherwise dispose of,
     directly or indirectly, or file a registration statement for, or announce
     any offer, sale, contract for sale of or other disposition of any debt
     securities issued or guaranteed by the Company or any of its subsidiaries
     (other than the Securities) without the prior written consent of JP Morgan,
     it being understood that the foregoing shall not prohibit the Company or
     any subsidiary from issuing seller notes to the seller in connection with
     any acquisition by the Company or any subsidiary as permitted under the
     Indenture or making borrowings under the Credit Agreement;

          (l)  during the period from the Closing Date until three years after
     the Closing Date or, if earlier, the completion of the Exchange Offer,
     without the prior written consent of the Initial Purchasers, not to, and
     not permit any of its affiliates (as defined in Rule144 under the
     Securities Act) to, resell any of the Securities that have been reacquired
     by them, except for Securities purchased by the Company or any of its
     affiliates and resold in a transaction registered under the Securities Act;

                                       24
<PAGE>

          (m)  not to, for so long as the Securities are outstanding or, if
     earlier, until such time as the Securities are not "restricted securities"
     (as defined in Rule 144 under the Securities Act), be or become, or be or
     become owned by, an open-end investment company, unit investment trust or
     face-amount certificate company that is or is required to be registered
     under Section 8 of the Investment Company Act, and not to be or become, or
     be or become owned by, a closed-end investment company required to be
     registered, but not registered thereunder;

          (n)  in connection with the offering of the Securities, until JPMorgan
     on behalf of the Initial Purchasers shall have notified the Company of the
     completion of the resale of the Securities, not to, and to cause its
     affiliated purchasers (as defined in Regulation M under the Exchange Act)
     not to, either alone or with one or more other persons, bid for or
     purchase, for any account in which it or any of its affiliated purchasers
     has a beneficial interest, any Securities, or attempt to induce any person
     to purchase any Securities; and not to, and to cause its affiliated
     purchasers not to, make bids or purchase for the purpose of creating
     actual, or apparent, active trading in or of raising the price of the
     Securities;

          (o)  in connection with the offering of the Securities, to make its
     officers, employees, independent accountants and legal counsel reasonably
     available upon request by the Initial Purchasers;

          (p)  to furnish to each of the Initial Purchasers on the date hereof a
     copy of the independent accountants' report included in the Offering
     Memorandum signed by the accountants rendering such report;

          (q)  to do and perform all things required to be done and performed by
     it under this Agreement that are within its control prior to or after the
     Closing Date, and to use its best efforts to satisfy all conditions
     precedent on its part to the delivery of the Securities;

          (r)  to not take any action prior to the execution and delivery of the
     Indenture which, if taken after such execution and delivery, would have
     violated any of the covenants contained in the Indenture;

          (s)  to not take any action prior to the Closing Date which would
     require the Offering Memorandum to be amended or supplemented pursuant to
     Section 4(d);

          (t)  prior to the Closing Date, not to issue any press release or
     other communication directly or indirectly or hold any press conference
     with respect to the Company, its condition, financial or otherwise, or
     earnings, business affairs or business prospects (except for routine oral
     marketing communications in the

                                       25
<PAGE>

     ordinary course of business and consistent with the past practices of the
     Company and of which the Initial Purchasers are notified), without the
     prior written consent of the Initial Purchasers, which consent shall not be
     unreasonably withheld or delayed, unless in the judgment of the Company and
     its counsel, and after notification to the Initial Purchasers, such press
     release or communication is required by law; and

          (u)  to apply the net proceeds from the sale of the Securities in all
     material respects as set forth in the Offering Memorandum under the heading
     "Use of Proceeds".

          5.   Conditions of Initial Purchasers' Obligations. The respective
               ---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Company and the Guarantors contained
herein, to the accuracy of the statements of the Company, the Guarantors and
their respective officers made in any certificates delivered pursuant hereto, to
the performance by the Company and each of the Guarantors of their obligations
hereunder, and to each of the following additional terms and conditions:

          (a)  The Offering Memorandum (and any amendments or supplements
     thereto) shall have been printed and copies distributed to the Initial
     Purchasers as promptly as practicable on or following the date of this
     Agreement or at such other date and time as to which the Initial Purchasers
     may agree; and no stop order suspending the sale of the Securities in any
     jurisdiction shall have been issued and no proceedings for that purpose
     shall have been commenced or shall be pending or threatened.

          (b)  None of the Initial Purchasers shall have discovered and
     disclosed to the Company on or prior to the Closing Date that the Offering
     Memorandum or any amendment or supplement thereto contains an untrue
     statement of a fact which, in the opinion of counsel for the Initial
     Purchasers, is material or omits to state any fact which, in the opinion of
     such counsel, is material and is required to be stated therein or is
     necessary to make the statements therein not misleading.

          (c)  All corporate proceedings and other legal matters incident to the
     authorization, form and validity of each of the Transaction Documents and
     the Offering Memorandum, and all other legal matters relating to the
     Transaction Documents and the transactions contemplated thereby, shall be
     satisfactory in all material respects to the Initial Purchasers, and the
     Company and the Guarantors shall have furnished to the Initial Purchasers
     all documents and information that they or their counsel may reasonably
     request to enable them to pass upon such matters.

                                       26
<PAGE>

          (d)  Dechert shall have furnished to the Initial Purchasers their
     written opinion, as counsel to the Company and the Guarantors, addressed to
     the Purchasers and dated the Closing Date, in form and substance reasonably
     satisfactory to the Initial Purchasers, substantially to the effect set
     forth in Annex B hereto.

          (e)  Michael E. Tarvin shall have furnished to the Initial Purchasers
     his written opinion, as general counsel to the Company, addressed to the
     Initial Purchasers and dated the Closing Date, in form and substance
     reasonably satisfactory to the Initial Purchasers substantially to the
     effect set forth in Annex C hereto.

          (f)  Reed Smith shall have furnished to the Initial Purchasers their
     written opinion, as special regulatory counsel to the Company and the
     Guarantors, addressed to the Initial Purchasers and dated the Closing Date,
     in form and substance reasonably satisfactory to the Initial Purchasers,
     substantially to the effect set forth in Annex D hereto.

          (g)  Tory's shall have furnished to the Initial Purchasers their
     written opinion, as special Canadian counsel to the Company and the
     Guarantors, addressed to the Initial Purchasers and dated the Closing Date,
     in form and substance reasonably satisfactory to the Initial Purchasers,
     substantially to the effect set forth in Annex E hereto.

          (h)  The Initial Purchasers shall have received from Debevoise &
     Plimpton, counsel for the Initial Purchasers, such opinion or opinions,
     dated the Closing Date, with respect to such matters as the Initial
     Purchasers may reasonably require, and the Company shall have furnished to
     such counsel such documents and information as they request for the purpose
     of enabling them to pass upon such matters.

          (i)  The Company shall have furnished to the Initial Purchasers a
     letter (the "Initial Letter") of PricewaterhouseCoopers LLP, addressed to
     the Initial Purchasers and dated the date hereof, in form and substance
     satisfactory to the Initial Purchasers, substantially to the effect set
     forth in Annex F hereto.

          (j)  The Company shall have furnished to the Initial Purchasers a
     letter (the "Bring-Down Letter") of PricewaterhouseCoopers LLP, addressed
     to the Initial Purchasers and dated the Closing Date (A) confirming that
     they are independent public accountants with respect to the Company within
     the applicable rules and regulations adopted by the Commission, (B)
     stating, as of the date of the Bring-Down Letter (or, with respect to
     matters involving changes or developments since

                                       27
<PAGE>

     the respective dates as of which specified financial information is given
     in the Offering Memorandum, as of a date not more than three business days
     prior to the date of the Bring-Down Letter), that the conclusions and
     findings of such accountants with respect to the financial information and
     other matters covered by the Initial Letter are accurate and (C) confirming
     in all material respects the conclusions and findings set forth in the
     Initial Letter.

          (k)  The Company shall have furnished to the Initial Purchasers a
     certificate, dated the Closing Date, of its chief executive officer, its
     chief operating officer and its chief financial officer stating that as of
     the Closing Date, the representations and warranties of the Company and the
     Guarantors in this Agreement are true and correct in all material respects
     (including without limitation Section 1(a)), the Company and the Guarantors
     have complied with all agreements and satisfied all conditions on its part
     to be performed or satisfied hereunder on or prior to the Closing Date, and
     subsequent to the date of the most recent financial statements contained in
     the Offering Memorandum, there has been no material adverse change in the
     financial position or results of operation of the Company or any of its
     subsidiaries, or any change, or any development including a prospective
     change, in or affecting the condition (financial or otherwise), results of
     operations, business or prospects of the Company and its subsidiaries taken
     as a whole, except as set forth in the Offering Memorandum.

          (l)  The Initial Purchasers shall have received a certificate of the
     Chief Financial Officer and the Controller of the Company concerning the
     financial information of SORS contained in the Offering Memorandum, dated
     the Closing Date, in form and substance reasonably satisfactory to the
     Initial Purchasers, substantially to the effect set forth in Annex G
     hereto.

          (m)  The Initial Purchasers shall have received a certificate of
     Michael E. Tarvin, Senior Vice President and General Counsel of the
     Company, dated the Closing Date, in form and substance reasonably
     satisfactory to the Initial Purchasers, substantially to the effect set
     forth in Annex H hereto.

          (n)  The Initial Purchasers shall have received a counterpart of the
     Registration Rights Agreement which shall have been executed and delivered
     by a duly authorized officer of the Company and each of the Guarantors.

          (o)  The Indenture shall have been duly executed and delivered by the
     Company, the Guarantors and the Trustee, and the Securities shall have been
     duly executed and delivered by the Company and duly authenticated by the
     Trustee.

                                       28
<PAGE>

          (p)  The Securities shall have been approved by the NASD for trading
     in the PORTAL Market.

          (q)  If any event shall have occurred that requires the Company under
     Section 4(d) to prepare an amendment or supplement to the Offering
     Memorandum, then such amendment or supplement shall have been prepared, the
     Initial Purchasers shall have been given a reasonable opportunity to
     comment thereon, and copies thereof shall have been delivered to the
     Initial Purchasers reasonably in advance of the Closing Date.

          (r)  There shall not have occurred any invalidation of Rule144A under
     the Securities Act by any court or any withdrawal or proposed withdrawal of
     any rule or regulation under the Securities Act or the Exchange Act by the
     Commission or any amendment or proposed amendment thereof by the Commission
     which in the judgment of the Initial Purchasers would materially impair the
     ability of the Initial Purchasers to purchase, hold or effect resales of
     the Securities as contemplated hereby.

          (s)  Subsequent to the execution and delivery of this Agreement or, if
     earlier, the dates as of which information is given in the Offering
     Memorandum (exclusive of any amendment or supplement thereto), there shall
     not have been any change in the capital stock (other than pursuant to
     issuances of common stock in connection with the exercise of options or put
     rights) or long-term debt or any change, or any development involving a
     prospective change, in or affecting the condition (financial or otherwise),
     results of operations, business or prospects of the Company and its
     subsidiaries taken as a whole, the effect of which, in any such case
     described above, is, in the judgment of the Initial Purchasers, so material
     and adverse as to make it impracticable or inadvisable to proceed with the
     sale or delivery of the Securities on the terms and in the manner
     contemplated by this Agreement and the Offering Memorandum (exclusive of
     any amendment or supplement thereto).

          (t)  No action shall have been taken and no statute, rule, regulation
     or order shall have been enacted, adopted or issued by any governmental
     agency or body which would, as of the Closing Date, prevent the issuance or
     sale of the Securities; and no injunction, restraining order or order of
     any other nature by any federal or state court of competent jurisdiction
     shall have been issued as of the Closing Date which would prevent the
     issuance or sale of the Securities.

          (u)  Subsequent to the execution and delivery of this Agreement (i) no
     downgrading shall have occurred in the rating accorded the Securities or
     any of the Company's other debt securities or preferred stock by a
     "nationally recognized

                                       29
<PAGE>

     statistical rating organization", as such term is defined by the Commission
     for purposes of Rule 436(g)(2) of the rules and regulations of the
     Commission under the Securities Act and (ii) no such organization shall
     have publicly announced that it has under surveillance or review (other
     than an announcement with positive implications of a possible upgrading),
     its rating of the Securities or any of the Company's other debt securities
     or preferred stock.

          (v)  Subsequent to the execution and delivery of this Agreement there
     shall not have occurred any of the following: (i) trading in securities
     generally on the New York Stock Exchange, the American Stock Exchange, the
     Nasdaq National Market or the over-the-counter market shall have been
     suspended or limited, or minimum prices shall have been established on any
     such exchange or market by the Commission, by any such exchange or by any
     other regulatory body or governmental authority having jurisdiction, or
     trading in any securities of the Company on any exchange (including without
     limitation, the Nasdaq National Market) or in the over-the-counter market
     shall have been suspended or (ii) any moratorium on commercial banking
     activities shall have been declared by Federal or New York state
     authorities or (iii) an outbreak or escalation of hostilities or a
     declaration by the United States of a national emergency or war or (iv) a
     material adverse change in general economic, political or financial
     conditions (or the effect of international conditions on the financial
     markets in the United States shall be such) the effect of which, in the
     case of this clause (iv), is, in the judgment of the Initial Purchasers, so
     material and adverse as to make it impracticable or inadvisable to proceed
     with the sale or the delivery of the Securities on the terms and in the
     manner contemplated by this Agreement and in the Offering Memorandum
     (exclusive of any amendment or supplement thereto).

          (w)  The Credit Agreement Amendment has been executed and delivered by
     all of the parties thereto.

          All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to Debevoise & Plimpton.

          6.   Termination. The obligations of the Initial Purchasers hereunder
               -----------
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Securities if, (i) prior to that time, any of the events described in
Section 5(v) shall have occurred and be continuing or (ii) as of the Closing
Date, any of the terms and conditions set forth in Section 5 shall not have been
satisfied in all respects.

                                       30
<PAGE>

     7.   Defaulting Initial Purchasers.
          ------------------------------

     (a)  If, on the Closing Date, any Initial Purchaser defaults on its
obligation to purchase the Securities that it has agreed to purchase hereunder,
the non-defaulting Initial Purchasers may in their discretion arrange for the
purchase of such Securities by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any Initial Purchaser, the non-defaulting Initial Purchasers do not arrange for
the purchase of such Securities, then the Company shall be entitled to a further
period of 36 hours within which to procure other persons satisfactory to the
non- defaulting Initial Purchasers to purchase such Securities on such terms. If
other persons become obligated or agree to purchase the Securities of a
defaulting Initial Purchaser, either the non-defaulting Initial Purchasers or
the Company may postpone the Closing Date for up to five full Business Days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Initial Purchasers may be necessary in the Offering Memorandum
or in any other document or arrangement, and the Company agrees to promptly
prepare any amendment or supplement to the Offering Memorandum that effects any
such changes. As used in this Agreement, the term "Initial Purchaser" includes,
for all purposes of this Agreement unless the context otherwise requires, any
person not listed in Schedule II hereto that, pursuant to this Section 7,
purchases Securities that a defaulting Initial Purchaser agreed but failed to
purchase.

     (b)  If, after giving effect to any arrangements, if any, for the purchase
of the Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph (a)
above, the aggregate principal amount of such Securities that remains
unpurchased does not exceed one-tenth of the aggregate principal amount of all
the Securities, then the Company shall have the right to require each
non-defaulting Initial Purchaser to purchase the principal amount of Securities
that such Initial Purchaser agreed to purchase hereunder plus such Initial
Purchaser's pro rate share (based on the principal amount of Securities that
such Initial Purchaser agreed to purchase hereunder in relation to the principal
amount of Securities that all non-defaulting Initial Purchasers agreed to
purchase hereunder) of the Securities of such defaulting Initial Purchaser or
Initial Purchasers for which such arrangement have not been made.

     (c)  If, after giving effect to arrangements, if any, for the purchase of
the Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph (a)
above, the aggregate principal amount of such Securities that remains
unpurchased exceeds one-tenth of the aggregate principal amount of all the
Securities, or if the Company shall not exercise the right described in
paragraph (b) above, then this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers, the Company or the
Guarantors, except that the Company and each of the Guarantors will continue to
be liable

                                       31
<PAGE>

for the payment of expenses as set forth in Sections 8 and 12 hereof and except
that the provisions of Sections 9 or 10 hereof shall not terminate and shall
remain in effect.

     (d) Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company, the Guarantors or any
non-defaulting Initial Purchaser for damages caused by its default.

     8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement
        ---------------------------------------------
shall have been terminated pursuant to Section 6 or 7, (b) the Company shall
fail to tender the Securities for delivery to the Initial Purchasers for any
reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company and the Guarantors shall reimburse the Initial Purchasers
for such out-of-pocket expenses (including reasonable fees and disbursements of
counsel) as shall have been reasonably incurred by the Initial Purchasers in
connection with this Agreement and the proposed purchase and resale of the
Securities. If this Agreement is terminated pursuant to Section 7 by reason of
the default of one or more of the Initial Purchasers, neither the Company nor
the Guarantors shall be obligated to reimburse any defaulting Initial Purchaser
on account of such expenses.

          9. Indemnification.
             ---------------

          (a) The Company and each of the Guarantors shall jointly and
severally indemnify and hold harmless each Initial Purchaser, its affiliates,
their respective officers, directors, employees, representatives and agents, and
each person, if any, who controls any Initial Purchaser within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(a) and Section 10 as an Initial Purchaser), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, without limitation, any loss, claim, damage, liability or
action relating to purchases and sales of the Securities), to which that Initial
Purchaser may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or in any information provided by the Company or any Guarantor pursuant
to Section 4(e) or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and shall reimburse each Initial Purchaser promptly upon
demand for any legal or other expenses reasonably incurred by that Initial
Purchaser in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,

                                       32
<PAGE>

however, that the Company and the Guarantors shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with any Initial Purchasers' Information; and provided, further, that
with respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 9(a)
shall not inure to the benefit of any such Initial Purchaser to the extent that
the sale to the person asserting any such loss, claim, damage, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser results
from the fact that both (A) to the extent required by applicable law, a copy of
the Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Company
with Section 4(b).

          (b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, each of the Guarantors and their
respective affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 9(b) and Section 10 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any Initial
Purchasers' Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred.

          (c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to

                                       33
<PAGE>

Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or
the commencement of that action; provided, however, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
under this Section 9 except to the extent that it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such failure; and,
provided, further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 9. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No

                                       34
<PAGE>

indemnifying party shall, without the prior written consent of the indemnified
party (which consent shall not be unreasonably withheld), effect any settlement
of any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

          The obligations of the Company, the Guarantors and the Initial
Purchasers in this Section 9 and in Section 10 are in addition to any other
liability that the Company, the Guarantors or the Initial Purchasers, as the
case may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.

          10. Contribution. If the indemnification provided for in Section 9 is
              ------------
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Guarantors on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Guarantors on the one hand and the Initial Purchasers on the other with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors on the one hand and the Initial Purchasers on the other with respect
to such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by or on behalf of the Company and the
Guarantors, on the one hand, and the total discounts and commissions received by
the Initial Purchasers with respect to the Securities purchased under this
Agreement, on the other, bear to the total gross proceeds from the sale of the
Securities under this Agreement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantors on the one
hand or to any Initial Purchasers' Information on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omissions. The Company, the
Guarantors and the Initial Purchasers agree that it would not be just and
equitable if contributions pursuant to this Section 10 were to be determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation that does not take into

                                       35
<PAGE>

account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 10
shall be deemed to include, for purposes of this Section 10, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be
required to contribute any amount in excess of the amount by which the total
discounts and commissions received by such Initial Purchaser with respect to the
Securities purchased by it under this Agreement exceeds the amount of any
damages which such Initial Purchaser has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute as provided in this Section 10 are several
in proportion to their respective purchase obligations and not joint.

          11. Persons Entitled to Benefit of Agreement. This Agreement shall
              ----------------------------------------
inure to the benefit of and be binding upon the Initial Purchasers, the Company,
the Guarantors and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company, the
Guarantors and the Initial Purchasers and in Section 4(e) with respect to
holders and prospective purchasers of the Securities. Nothing in this Agreement
is intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.

          12. Expenses. The Company and each of the Guarantors agrees with the
              --------
Initial Purchasers to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and any
amendments or supplements thereto; (c) the costs of reproducing and distributing
each of the Transaction Documents; (d) the costs incident to the preparation,
printing and delivery of the certificates evidencing the Securities, including
stamp duties and transfer taxes, if any, payable upon issuance of the
Securities; (e) the fees and expenses of the Company's counsel and independent
accountants; (f) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(g) and of
preparing, printing and distributing Blue Sky Memoranda (including related fees
and expenses of counsel for the Initial Purchasers); (g) any fees charged by
rating agencies for rating the Securities; (h) the fees and expenses of the
Trustee and any paying agent (including related fees and expenses of any counsel
to such parties); (i) all expenses and application fees incurred in connection

                                       36
<PAGE>

with the application for the inclusion of the Securities on the PORTAL Market
and the approval of the Securities for book-entry transfer by DTC; and (j) all
other costs and expenses incident to the performance of the obligations of the
Company under this Agreement which are not otherwise specifically provided for
in this Section 12; provided, however, that except as provided in this Section
12 and Section 8, the Initial Purchasers shall pay their own costs and expenses.

          13. Survival. The respective indemnities, rights of contribution,
              --------
representations, warranties and agreements of the Company, each of the
Guarantors and the Initial Purchasers contained in this Agreement or made by or
on behalf of the Company, each of the Guarantors or the Initial Purchasers
pursuant to this Agreement or any certificate delivered pursuant hereto shall
survive the delivery of and payment for the Securities and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any of them or any of
their respective affiliates, officers, directors, employees, representatives,
agents or controlling persons.

          14. Notices, etc. All statements, requests, notices and agreements
              ------------
hereunder shall be in writing, and:

          (a) if to the Initial Purchasers, shall be delivered or sent by mail
     or telecopy transmission to J.P. Morgan Securities Inc., 270 Park Avenue,
     4th floor, New York, New York 10017, Attention: Steven A. Tulip (telecopier
     no.: (212) 270-0994) with a copy to Debevoise & Plimpton, 875 Third Avenue,
     New York, New York, attention of David A. Brittenham, facsimile (212)
     909-6836; or

          (b) if to the Company, shall be delivered or sent by mail or telecopy
     transmission to the address of the Company set forth in the Offering
     Memorandum, Attention: Michael E. Tarvin, Senior Vice President, Secretary
     and General Counsel (telecopier no.: (717) 975-9981) with a copy to
     Dechert, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia,
     Pennsylvania 19103, attention of Christopher G. Karras, Facsimile (215)
     994-2222;

provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by JPMorgan.

          15. Definition of Terms. For purposes of this Agreement, (a) the term
              -------------------
"business day" means any day on which the New York Stock Exchange, Inc. is open
for

                                       37
<PAGE>

trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule405 under the Securities Act.

          16. Initial Purchasers' Information. The parties hereto acknowledge
              -------------------------------
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: the statements concerning the
Initial Purchasers contained in the (i) the second sentence of the fourth
paragraph on the front cover page, and (ii) the third paragraph, the fourth,
fifth and sixth sentences of the eighth paragraph, the ninth paragraph and the
tenth paragraph under the heading "Plan of Distribution".

          17. Governing Law. This Agreement shall be governed by and construed
              -------------
in accordance with the laws of the State of New York.

          18. Counterparts. This Agreement may be executed in one or more
              ------------
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed agreement counterparts shall
each be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.

          19. Amendments. No amendment or waiver of any provision of this
              ----------
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.

          20. Headings. The headings herein are inserted for convenience of
              --------
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.

                                       38
<PAGE>

           If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company, the Guarantors
and the several Initial Purchasers in accordance with its terms.

                                          Very truly yours,

                                          SELECT MEDICAL CORPORATION

                                          By: Michael E. Tarvin
                                             ------------------------------
                                             Name:  Michael E. Tarvin
                                             Title: Senior Vice President


                                          SELECTMARK, INC.

                                             By: Andrew T. Panaccione
                                                ------------------------------
                                             Name:  Andrew T. Panaccione
                                             Title: Vice President


                                          SELECT HOSPITAL INVESTORS, INC.

                                          By: Andrew T. Panaccione
                                             ------------------------------
                                          Name:  Andrew T. Panaccione
                                          Title: Vice President


                                          SLMC FINANCE CORPORATION

                                          By: Andrew T. Panaccione
                                             ------------------------------
                                          Name:  Andrew T. Panaccione
                                          Title: Treasurer


                                          EACH OF THE GUARANTORS LISTED ON
                                          SCHEDULE I HERETO OTHER THAN
                                          SELECTMARK, INC., SELECT HOSPITAL
                                          INVESTORS, INC. AND SLMC FINANCE
                                          CORPORATION



                                          By Michael E. Tarvin
                                             ------------------------------
                                             Name:  Michael E. Tarvin
                                             Title: Vice President


                                       39
<PAGE>

Accepted:

J.P. MORGAN SECURITIES INC.


By   Steve Tulip
     ----------------------------
     Authorized Signatory



Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention:  Legal Department

MERRILL LYNCH, PIERCE, FENNER & SMITH
                               INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
FIRST UNION SECURITIES, INC.


By       Steve Tulip
         ----------------------------
         Authorized Signatory


Address for notices pursuant to Section 9(c):
Attention:

                                       40
<PAGE>

                                                                      SCHEDULE I

Abel Center for Rehabilitation Therapies, Inc.
Abel Healthcare Network, Inc.
Affiliated Physical Therapists, Ltd.
Allegany Hearing and Speech, Inc.
American Transitional Hospitals, Inc.
Athens Sports Medicine Clinic, Inc.
Ather Sports Injury Clinic, Inc.
Atlantic Health Group, Inc.
Atlantic Rehabilitation Services, Inc.
Avalon Rehabilitation & Healthcare, L.L.C.
Boca Rehab Agency, Inc.
Buendel Physical Therapy, Inc.
C.E.R. - West, Inc.
C.O.A.S.T. Institute Physical Therapy, Inc.
CCISUB, Inc.
CMC Center Corporation
Cenla Physical Therapy & Rehabilitation Agency, Inc.
Center for Evaluation & Rehabilitation, Inc.
Center for Physical Therapy & Sports Rehabilitation, Inc.
CenterTherapy, Inc.
Champion Physical Therapy, Inc.
Connecticut NovaCare Ventures, Inc.
Coplin Physical Therapy Associates, Inc.
Crowley Physical Therapy Clinic, Inc.
Douglas Avery & Associates, Ltd.
Douglas C. Claussen, R.P.T., Physical Therapy, Inc.
Elk County Physical Therapy, Inc.
<PAGE>

Fine, Bryant & Wah, Inc.
Francis Naselli, Jr. & Stewart Rich Physical Therapists, Inc.
Gallery Physical Therapy Center, Inc.
Georgia NovaCare Ventures, Inc.
Georgia Physical Therapy of West Georgia, Inc.
Georgia Physical Therapy, Inc.
GP Therapy, L.L.C.
Greater Sacramento Physical Therapy Associates, Inc.
Grove City Physical Therapy and Sports Medicine, Inc.
Gulf Breeze Physical Therapy, Inc.
Gulf Coast Hand Specialists, Inc.
Hand Therapy Associates, Inc.
Hand Therapy and Rehabilitation Associates, Inc.
Hangtown Physical Therapy, Inc.
Hawley Physical Therapy, Inc.
Human Performance and Fitness, Inc.
Indianapolis Physical Therapy and Sports Medicine, Inc.
Intensiva Healthcare Corporation
Intensiva Hospital of Greater St. Louis, Inc.
Joyner Sports Science Institute, Inc.
Joyner Sportmedicine Institute, Inc.
Kentucky Rehabilitation Services, Inc.
Kesinger Physical Therapy, Inc.
Lynn M. Carlson, Inc.
Mark Butler Physical Therapy Center, Inc.
Metro Rehabilitation Services, Inc.
Michigan Therapy Centre, Inc.
MidAtlantic Health Group, Inc.
Monmouth Rehabilitation, Inc.

                                       2
<PAGE>

New England Health Group, Inc.
New Mexico Physical Therapists, Inc.
Northside Physical Therapy, Inc.
NovaCare Health Group, L.L.C.
NovaCare Occupational Health Services, Inc.
NovaCare Outpatient Rehabilitation, Inc.
NovaCare Outpatient Rehabilitation East, Inc.
NovaCare Outpatient Rehabilitation West, Inc.
NovaCare Rehabilitation, Inc.
NW Rehabilitation Associates, L.P.
Ortho Rehab Associates, Inc.
Orthopedic and Sports Physical Therapy of Cupertino, Inc.
P.T. Services Company
P.T. Services, Inc.
P.T. Services Rehabilitation, Inc.
Peter Trailov R.P.T. Physical Therapy Clinic, Orthopaedic Rehabilitation &
Sports Medicine, Ltd.
Peters, Starkey & Todrank Physical Therapy Corporation
Physical Focus, Inc.
Physical Rehabilitation Partners, Inc.
Physical Therapy Enterprises, Inc.
Physical Therapy Institute, Inc.
Physical Therapy Services of the Jersey Cape, Inc.
Physio - Associates, Inc.
Pro Active Therapy, Inc.
Pro Active Therapy of Ahoskie, Inc.
Pro Active Therapy of Gaffney, Inc.
Pro Active Therapy of Greenville, Inc.
Pro Active Therapy of North Carolina, Inc.

                                       3
<PAGE>

Pro Active Therapy of South Carolina, Inc.
Pro Active Therapy of Virginia, Inc.
Pro Active Therapy of Rocky Mount, Inc.
Professional Therapeutic Services, Inc.
Quad City Management, Inc.
RCI (Colorado), Inc.
RCI (Exertec), Inc.
RCI (Michigan), Inc.
RCI (S.P.O.R.T.), Inc.
RCI (WRS), Inc.
RCI Nevada, Inc.
Rebound Oklahoma, Inc.
Redwood Pacific Therapies, Inc.
Rehab Advantage, Inc.
Rehab Managed Care of Arizona, Inc.
Rehab Provider Network - California, Inc.
Rehab Provider Network - Delaware, Inc.
Rehab Provider Network - Georgia, Inc.
Rehab Provider Network - Indiana, Inc.
Rehab Provider Network - Maryland, Inc.
Rehab Provider Network - Michigan, Inc.
Rehab Provider Network - New Jersey, Inc.
Rehab Provider Network - Ohio, Inc.
Rehab Provider Network - Oklahoma, Inc.
Rehab Provider Network - Pennsylvania, Inc.
Rehab Provider Network - Virginia, Inc.
Rehab Provider Network - Washington, D.C., Inc.
Rehab Provider Network of Colorado, Inc.
Rehab Provider Network of Florida, Inc.

                                       4
<PAGE>

Rehab Provider Network of Nevada, Inc.
Rehab Provider Network of New Mexico, Inc.
Rehab Provider Network of North Carolina, Inc.
Rehab Provider Network of Texas, Inc.
Rehab Provider Network of Wisconsin, Inc.
Rehab World, Inc.
Rehab/Work Hardening Management Associates, Ltd.
RehabClinics, Inc.
RehabClinics (COAST), Inc.
RehabClinics (GALAXY), Inc.
RehabClinics (New Jersey), Inc.
RehabClinics (PTA), Inc.
RehabClinics (SPT), Inc.
RehabClinics Abilene, Inc.
RehabClinics Dallas, Inc.
RehabClinics Pennsylvania, Inc.
Rehabilitation Network, Inc.
Robert M. Bacci, R.P.T. Physical Therapy, Inc.
S.T.A.R.T., Inc.
Select Air Corporation
Select Employment Services, Inc.
Select Hospital Investors, Inc.
SelectMark, Inc.
Select Medical of Kentucky, Inc.
Select Medical of Maryland, Inc.
Select Medical of New Jersey, Inc.
Select Medical of New York, Inc.
Select Medical of Ohio, Inc.
Select Medical of Pennsylvania, Inc.

                                       5
<PAGE>

Select Software Ventures, L.L.C.
Select Specialty Hospital - Akron, Inc.
Select Specialty Hospital - Akron II, Inc.
Select Specialty Hospital - Ann Arbor, Inc.
Select Specialty Hospital - Battle Creek, Inc.
Select Specialty Hospital - Beech Grove, Inc.
Select Specialty Hospital - Camp Hill, Inc.
Select Specialty Hospital - Camp Hill, L.P.
Select Specialty Hospital - Central Detroit, Inc.
Select Specialty Hospital - Charleston, Inc.
Select Specialty Hospital - Cincinnati, Inc.
Select Specialty Hospital - Columbus, Inc.
Select Specialty Hospital - Columbus/University, Inc.
Select Specialty Hospital - Dallas, Inc.
Select Specialty Hospital - Denver, Inc.
Select Specialty Hospital - Durham, Inc.
Select Specialty Hospital - Erie, Inc.
Select Specialty Hospital - Evansville, Inc.
Select Specialty Hospital - Flint, Inc.
Select Specialty Hospital - Fort Smith, Inc.
Select Specialty Hospital - Fort Wayne, Inc.
Select Specialty Hospital - Greensburg, Inc.
Select Specialty Hospital - Houston, Inc.
Select Specialty Hospital - Indianapolis, Inc.
Select Specialty Hospital - Jackson, Inc.
Select Specialty Hospital - Johnstown, Inc.
Select Specialty Hospital - Kansas City, Inc.
Select Specialty Hospital - Knoxville, Inc.
Select Specialty Hospital - Little Rock, Inc.

                                       6
<PAGE>

Select Specialty Hospital - Louisville, Inc.
Select Specialty Hospital - Macomb County, Inc.
Select Specialty Hospital - Memphis, Inc.
Select Specialty Hospital - Mesa, Inc.
Select Specialty Hospital - Miami, Inc.
Select Specialty Hospital - Milwaukee, Inc.
Select Specialty Hospital - Morgantown, Inc.
Select Specialty Hospital - Nashville, Inc.
Select Specialty Hospital - New Orleans, Inc.
Select Specialty Hospital - North Knoxville, Inc.
Select Specialty Hospital - Northwest Detroit, Inc.
Select Specialty Hospital - Northwest Indiana, Inc.
Select Specialty Hospital - Oklahoma City, Inc.
Select Specialty Hospital - Oklahoma City/East Campus, Inc.
Select Specialty Hospital - Omaha, Inc.
Select Specialty Hospital - Philadelphia/AEMC, Inc.
Select Specialty Hospital - Phoenix, Inc.
Select Specialty Hospital - Pittsburgh, Inc.
Select Specialty Hospital - Pontiac, Inc.
Select Specialty Hospital - Reno, Inc.
Select Specialty Hospital - San Antonio, Inc.
Select Specialty Hospital - Sioux Falls, Inc.
Select Specialty Hospital - Topeka, Inc.
Select Specialty Hospital - TriCities, Inc.
Select Specialty Hospital - Tulsa, Inc.
Select Specialty Hospital - West Columbus, Inc.
Select Specialty Hospital - Western Michigan, Inc.
Select Specialty Hospital - Wichita, Inc.
Select Specialty Hospital - Wilmington, Inc.

                                       7
<PAGE>

Select Specialty Hospital - Wyandotte, Inc.
Select Specialty Hospital - Youngstown, Inc.
Select Specialty Hospitals, Inc.
Select Synergos, Inc.
Select Unit Management, Inc.
SLMC Finance Corporation
SMC of Florida, Inc.
South Jersey Physical Therapy Associates, Inc.
South Jersey Rehabilitation and Sports Medicine Center, Inc.
Southpointe Fitness Center, Inc.
Southwest Emergency Associates, Inc.
Southwest Medical Supply Company, Inc.
Southwest Physical Therapy, Inc.
Southwest Therapists, Inc.
Sporthopedics Sports and Physical Therapy Centers, Inc.
Sports & Orthopedic Rehabilitation Services, Inc.
Sports Therapy and Arthritis Rehabilitation, Inc.
Star Physical Therapy, Inc.
Stephenson-Holtz, Inc.
The Center for Physical Therapy and Rehabilitation, Inc.
The Orthopedic Sports and Industrial Rehabilitation Network, Inc.
TJ Partnership I
Treister, Inc.
Union Square Center for Rehabilitation & Sports Medicine, Inc.
Valley Group Physical Therapists, Inc.
Vanguard Rehabilitation, Inc.
Wayzata Physical Therapy Center, Inc.
West Penn Rehabilitation Services, Inc.
West Side Physical Therapy, Inc.

                                       8
<PAGE>

West Suburban Health Partners, Inc.
Yuma Rehabilitation Center, Inc.

                                       9
<PAGE>

                                                                     SCHEDULE II

<TABLE>
<CAPTION>
                                                                  Principal
                                                                  Amount
Initial Purchasers                                                of Securities
------------------                                                -------------
<S>                                                               <C>
J.P. Morgan Securities Inc.                                       $   78,750,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated                    35,000,000
Credit Suisse First Boston Corporation                                26,250,000
CIBC World Markets Corp.                                              17,500,000
First Union Securities Inc.                                           17,500,000
          Total                                                   $  175,000,000
</TABLE>
<PAGE>

                                                                SCHEDULE III

Abel Center for Rehabilitation Therapies, Inc.

Abel Healthcare Network, Inc.

Affiliated Physical Therapists, Ltd.

Allegany Hearing and Speech, Inc.

American Transitional Hospitals, Inc.

Athens Sports Medicine Clinic, Inc.

Ather Sports Injury Clinic, Inc.

Atlantic Health Group, Inc.

Atlantic Rehabilitation Services, Inc.

Avalon Rehabilitation & Healthcare, L.L.C.

Boca Rehab Agency, Inc.

Buendel Physical Therapy, Inc.

Canadian Back Institute Limited*

CBI Brampton Limited Partnership*

CBI Calgary Limited Partnership*

CBI Fraser Valley Limited Partnership*

CBI Holdings Ltd.*

CBI Physiotherapists Corporation*

CBI Professional Services Inc.*

CBI South Calgary Limited Partnership*

CBI Vancouver Limited Partnership*

CBI Victoria Limited Partnership*

CBI Windsor Limited Partnership*

C.E.R. - West, Inc.

C.O.A.S.T. Institute Physical Therapy, Inc.

CCISUB, Inc.

CMC Center Corporation
<PAGE>

Cenla Physical Therapy & Rehabilitation Agency, Inc.

Center for Evaluation & Rehabilitation, Inc.

Center for Physical Therapy & Sports Rehabilitation, Inc.

CenterTherapy, Inc.

Champion Physical Therapy, Inc.

Connecticut NovaCare Ventures, Inc.

Coplin Physical Therapy Associates, Inc.

Crowley Physical Therapy Clinic, Inc.

Douglas Avery & Associates, Ltd.

Douglas C. Claussen, R.P.T., Physical Therapy, Inc.

Dynamic Rehabilitation Inc.*

Elk County Physical Therapy, Inc.

Fine, Bryant & Wah, Inc.

Francis Naselli, Jr. & Stewart Rich Physical Therapists, Inc.

Gallery Physical Therapy Center, Inc.

Georgia NovaCare Ventures, Inc.

Georgia Physical Therapy of West Georgia, Inc.

Georgia Physical Therapy, Inc.

GP Therapy, L.L.C.

Greater Sacramento Physical Therapy Associates, Inc.

Grove City Physical Therapy and Sports Medicine, Inc.

Gulf Breeze Physical Therapy, Inc.

Gulf Coast Hand Specialists, Inc.

Hand Therapy Associates, Inc.

Hand Therapy and Rehabilitation Associates, Inc.

Hangtown Physical Therapy, Inc.

Hawley Physical Therapy, Inc.

Human Performance and Fitness, Inc.

Indianapolis Physical Therapy and Sports Medicine, Inc.

                                       2
<PAGE>

Intensiva Healthcare Corporation

Intensiva Hospital of Greater St. Louis, Inc.

Joyner Sports Science Institute, Inc.

Joyner Sportmedicine Institute, Inc.

Kentucky Orthopedic Rehabilitation, LLC*

Kentucky Rehabilitation Services, Inc.

Kesinger Physical Therapy, Inc.

Lynn M. Carlson, Inc.

Mark Butler Physical Therapy Center, Inc.

Medical Information Management Systems, LLC*

Metro Rehabilitation Services, Inc.

Michigan Therapy Centre, Inc.

MidAtlantic Health Group, Inc.

Millenium Rehab Services, L.L.C.*

Monmouth Rehabilitation, Inc.

New England Health Group, Inc.

New Mexico Physical Therapists, Inc.

Northside Physical Therapy, Inc.

NovaCare Health Group, L.L.C.

NovaCare Occupational Health Services, Inc.

NovaCare Outpatient Rehabilitation, Inc.

NovaCare Outpatient Rehabilitation East, Inc.

NovaCare Outpatient Rehabilitation West, Inc.

NovaCare Rehabilitation, Inc.

NW Rehabilitation Associates, L.P.

1263568 Ontario Limited (London Group)*

Ortho Rehab Associates, Inc.

Orthopedic and Sports Physical Therapy of Cupertino, Inc.

P.T. Services Company

                                       3
<PAGE>

P.T. Services, Inc.

P.T. Services Rehabilitation, Inc.

Peter Trailov R.P.T. Physical Therapy Clinic, Orthopaedic Rehabilitation &

Sports Medicine, Ltd.

Peters, Starkey & Todrank Physical Therapy Corporation

Physical Focus, Inc.

Physical Rehabilitation Partners, Inc.

Physical Therapy Enterprises, Inc.

Physical Therapy Institute, Inc.

Physical Therapy Services of the Jersey Cape, Inc.

Physio - Associates, Inc.

Pro Active Therapy, Inc.

Pro Active Therapy of Ahoskie, Inc.

Pro Active Therapy of Gaffney, Inc.

Pro Active Therapy of Greenville, Inc.

Pro Active Therapy of North Carolina, Inc.

Pro Active Therapy of Rocky Mount, Inc.

Pro Active Therapy Services of South Carolina, Inc.

Pro Active Therapy Services of Virginia, Inc.

Professional Therapeutic Services, Inc.

Quad City Management, Inc.

RCI (Colorado), Inc.

RCI (Exertec), Inc.

RCI (Michigan), Inc.

RCI (S.P.O.R.T.), Inc.

RCI (WRS), Inc.

RCI Nevada, Inc.

Rebound Oklahoma, Inc.

Redwood Pacific Therapies, Inc.

                                       4
<PAGE>

Rehab Advantage, Inc.

Rehab Advantage Therapy Services, LLC*

Rehab Health, Inc.*

Rehab Managed Care of Arizona, Inc.

Rehab Provider Network - California, Inc.

Rehab Provider Network - Delaware, Inc.

Rehab Provider Network - Georgia, Inc.

Rehab Provider Network - Indiana, Inc.

Rehab Provider Network - Maryland, Inc.

Rehab Provider Network - Michigan, Inc.

Rehab Provider Network - New Jersey, Inc.

Rehab Provider Network - Ohio, Inc.

Rehab Provider Network - Oklahoma, Inc.

Rehab Provider Network - Pennsylvania, Inc.

Rehab Provider Network - Virginia, Inc.

Rehab Provider Network - Washington, D.C., Inc.

Rehab Provider Network of Colorado, Inc.

Rehab Provider Network of Florida, Inc.

Rehab Provider Network of Nevada, Inc.

Rehab Provider Network of New Mexico, Inc.

Rehab Provider Network of North Carolina, Inc.

Rehab Provider Network of Texas, Inc.

Rehab Provider Network of Wisconsin, Inc.

Rehab World, Inc.

Rehab/Work Hardening Management Associates, Ltd.

RehabClinics, Inc.

RehabClinics (COAST), Inc.

RehabClinics (GALAXY), Inc.

RehabClinics (New Jersey), Inc.

                                       5
<PAGE>

RehabClinics (PTA), Inc.

RehabClinics (SPT), Inc.

RehabClinics Abilene, Inc.

RehabClinics Dallas, Inc.

RehabClinics Pennsylvania, Inc.

Rehabilitation Network, Inc.

Robert M. Bacci, R.P.T. Physical Therapy, Inc.

S.T.A.R. Rehab, Inc.*

S.T.A.R.T., Inc.

Select Air Corporation

Select Employment Services, Inc.

Select Hospital Investors, Inc.

Select - Houston Partners, L.P.*

Select Management Services, LLC*

SelectMark, Inc.

Select Medical of Kentucky, Inc.

Select Medical of Maryland, Inc.

Select Medical of New Jersey, Inc.

Select Medical of New York, Inc.

Select Medical of Ohio, Inc.

Select Medical of Pennsylvania, Inc.

Select Software Ventures, L.L.C.

Select Specialty Hospital - Akron, Inc.

Select Specialty Hospital - Akron II, Inc.

Select Specialty Hospital - Ann Arbor, Inc.

Select Specialty Hospital - Battle Creek, Inc.

Select Specialty Hospital - Beech Grove, Inc.

Select Specialty Hospital - Biloxi, Inc.*

Select Specialty Hospital - Camp Hill, Inc.

                                       6
<PAGE>

Select Specialty Hospital - Camp Hill, L.P.

Select Specialty Hospital - Central Detroit, Inc.

Select Specialty Hospital - Charleston, Inc.

Select Specialty Hospital - Cincinnati, Inc.

Select Specialty Hospital - Columbus, Inc.

Select Specialty Hospital - Columbus/University, Inc.

Select Specialty Hospital - Dallas, Inc.

Select Specialty Hospital - Denver, Inc.

Select Specialty Hospital - Durham, Inc.

Select Specialty Hospital - Erie, Inc.

Select Specialty Hospital - Evansville, Inc.

Select Specialty Hospital - Flint, Inc.

Select Specialty Hospital - Fort Smith, Inc.

Select Specialty Hospital - Fort Wayne, Inc.

Select Specialty Hospital - Greensburg, Inc.

Select Specialty Hospital - Houston, Inc.

Select Specialty Hospital - Indianapolis, Inc.

Select Specialty Hospital - Jackson, Inc.

Select Specialty Hospital - Johnstown, Inc.

Select Specialty Hospital - Kansas City, Inc.

Select Specialty Hospital - Knoxville, Inc.

Select Specialty Hospital - Little Rock, Inc.

Select Specialty Hospital - Louisville, Inc.

Select Specialty Hospital - Macomb County, Inc.

Select Specialty Hospital - Memphis, Inc.

Select Specialty Hospital - Mesa, Inc.

Select Specialty Hospital - Miami, Inc.

Select Specialty Hospital - Milwaukee, Inc.

Select Specialty Hospital - Morgantown, Inc.

                                       7
<PAGE>

Select Specialty Hospital - Nashville, Inc.

Select Specialty Hospital - New Orleans, Inc.

Select Specialty Hospital - North Knoxville, Inc.

Select Specialty Hospital - Northwest Detroit, Inc.

Select Specialty Hospital - Northwest Indiana, Inc.

Select Specialty Hospital - Oklahoma City, Inc.

Select Specialty Hospital - Oklahoma City/East Campus, Inc.

Select Specialty Hospital - Omaha, Inc.

Select Specialty Hospital - Philadelphia/AEMC, Inc.

Select Specialty Hospital - Phoenix, Inc.

Select Specialty Hospital - Pittsburgh, Inc.

Select Specialty Hospital - Pontiac, Inc.

Select Specialty Hospital - Reno, Inc.

Select Specialty Hospital - San Antonio, Inc.

Select Specialty Hospital - Sioux Falls, Inc.

Select Specialty Hospital - Topeka, Inc.

Select Specialty Hospital - TriCities, Inc.

Select Specialty Hospital - Tulsa, Inc.

Select Specialty Hospital - West Columbus, Inc.

Select Specialty Hospital - Western Michigan, Inc.

Select Specialty Hospital - Wichita, Inc.

Select Specialty Hospital - Wilmington, Inc.

Select Specialty Hospital - Wyandotte, Inc.

Select Specialty Hospital - Youngstown, Inc.

Select Specialty Hospitals, Inc.

Select Synergos, Inc.

Select Unit Management, Inc.

SLMC Finance Corporation

SMC of Florida, Inc.

                                       8
<PAGE>

South Jersey Physical Therapy Associates, Inc.

South Jersey Rehabilitation and Sports Medicine Center, Inc.

Southpointe Fitness Center, Inc.

Southwest Emergency Associates, Inc.

Southwest Medical Supply Company, Inc.

Southwest Physical Therapy, Inc.

Southwest Therapists, Inc.

Sporthopedics Sports and Physical Therapy Centers, Inc.

Sports & Orthopedic Rehabilitation Services, Inc.

Sports Therapy and Arthritis Rehabilitation, Inc.

Star Physical Therapy, Inc.

Stephenson-Holtz, Inc.

The Center for Physical Therapy and Rehabilitation, Inc.

The Orthopedic Sports and Industrial Rehabilitation Network, Inc.

TJ Corporation I, L.L.C.*

TJ Partnership I

Treister, Inc.

Union Square Center for Rehabilitation & Sports Medicine, Inc.

Valley Group Physical Therapists, Inc.

Vanguard Rehabilitation, Inc.

Wayzata Physical Therapy Center, Inc.

West Penn Rehabilitation Services, Inc.

West Side Physical Therapy, Inc.

West Suburban Health Partners, Inc.

Yuma Rehabilitation Center, Inc.

*Non-Guarantor Subsidiary

                                       9
<PAGE>

                                                                     SCHEDULE IV

Abel Center for Rehabilitation Therapies, Inc.

Abel Healthcare Network, Inc.

Affiliated Physical Therapists, Ltd.

Allegany Hearing and Speech, Inc.

American Transitional Hospitals, Inc.

Athens Sports Medicine Clinic, Inc.

Ather Sports Injury Clinic, Inc.

Atlantic Health Group, Inc.

Atlantic Rehabilitation Services, Inc.

Avalon Rehabilitation & Healthcare, L.L.C.

Boca Rehab Agency, Inc.

Buendel Physical Therapy, Inc.

Canadian Back Institute Limited**

CBI Brampton Limited Partnership*

CBI Calgary Limited Partnership**

CBI Fraser Valley Limited Partnership*

CBI Holdings Ltd.*

CBI Physiotherapists Corporation*

CBI Professional Services Inc.*

CBI South Calgary Limited Partnership**

CBI Vancouver Limited Partnership*

CBI Victoria Limited Partnership**

CBI Windsor Limited Partnership*

C.E.R. - West, Inc.

C.O.A.S.T. Institute Physical Therapy, Inc.

CCISUB, Inc.

CMC Center Corporation
<PAGE>

Cenla Physical Therapy & Rehabilitation Agency, Inc.

Center for Evaluation & Rehabilitation, Inc.

Center for Physical Therapy & Sports Rehabilitation, Inc.

CenterTherapy, Inc.

Champion Physical Therapy, Inc.

Connecticut NovaCare Ventures, Inc.

Coplin Physical Therapy Associates, Inc.

Crowley Physical Therapy Clinic, Inc.

Douglas Avery & Associates, Ltd.

Douglas C. Claussen, R.P.T., Physical Therapy, Inc.

Dynamic Rehabilitation Inc.*

Elk County Physical Therapy, Inc.

Fine, Bryant & Wah, Inc.

Francis Naselli, Jr. & Stewart Rich Physical Therapists, Inc.

Gallery Physical Therapy Center, Inc.

Georgia NovaCare Ventures, Inc.

Georgia Physical Therapy of West Georgia, Inc.

Georgia Physical Therapy, Inc.

GP Therapy, L.L.C.

Greater Sacramento Physical Therapy Associates, Inc.

Grove City Physical Therapy and Sports Medicine, Inc.

Gulf Breeze Physical Therapy, Inc.

Gulf Coast Hand Specialists, Inc.

Hand Therapy Associates, Inc.

Hand Therapy and Rehabilitation Associates, Inc.

Hangtown Physical Therapy, Inc.

Hawley Physical Therapy, Inc.

Human Performance and Fitness, Inc.

Indianapolis Physical Therapy and Sports Medicine, Inc.

                                       2
<PAGE>

Intensiva Healthcare Corporation

Intensiva Hospital of Greater St. Louis, Inc.

Joyner Sports Science Institute, Inc.

Joyner Sportmedicine Institute, Inc.

Kentucky Orthopedic Rehabilitation, LLC*

Kentucky Rehabilitation Services, Inc.

Kesinger Physical Therapy, Inc.

Lynn M. Carlson, Inc.

Mark Butler Physical Therapy Center, Inc.

Medical Information Management Systems, LLC*

Metro Rehabilitation Services, Inc.

Michigan Therapy Centre, Inc.

MidAtlantic Health Group, Inc.

Millenium Rehab Services, L.L.C.*

Monmouth Rehabilitation, Inc.

New England Health Group, Inc.

New Mexico Physical Therapists, Inc.

Northside Physical Therapy, Inc.

NovaCare Health Group, L.L.C.

NovaCare Occupational Health Services, Inc.

NovaCare Outpatient Rehabilitation, Inc.

NovaCare Outpatient Rehabilitation East, Inc.

NovaCare Outpatient Rehabilitation West, Inc.

NovaCare Rehabilitation, Inc.

NW Rehabilitation Associates, L.P.

1263568 Ontario Limited (London Group)*

Ortho Rehab Associates, Inc.

Orthopedic and Sports Physical Therapy of Cupertino, Inc.

P.T. Services Company

                                       3
<PAGE>

P.T. Services, Inc.

P.T. Services Rehabilitation, Inc.

Peter Trailov R.P.T. Physical Therapy Clinic, Orthopaedic Rehabilitation &
Sports Medicine, Ltd.

Peters, Starkey & Todrank Physical Therapy Corporation

Physical Focus, Inc.

Physical Rehabilitation Partners, Inc.

Physical Therapy Enterprises, Inc.

Physical Therapy Institute, Inc.

Physical Therapy Services of the Jersey Cape, Inc.

Physio - Associates, Inc.

Pro Active Therapy, Inc.

Pro Active Therapy of Ahoskie, Inc.

Pro Active Therapy of Gaffney, Inc.

Pro Active Therapy of Greenville, Inc.

Pro Active Therapy of North Carolina, Inc.

Pro Active Therapy of Rocky Mount, Inc.

Pro Active Therapy Services of South Carolina, Inc.

Pro Active Therapy Services of Virginia, Inc.

Professional Therapeutic Services, Inc.

Quad City Management, Inc.

RCI (Colorado), Inc.

RCI (Exertec), Inc.

RCI (Michigan), Inc.

RCI (S.P.O.R.T.), Inc.

RCI (WRS), Inc.

RCI Nevada, Inc.

Rebound Oklahoma, Inc.

Redwood Pacific Therapies, Inc.

                                       4
<PAGE>

Rehab Advantage, Inc.

Rehab Advantage Therapy Services, LLC*

Rehab Health, Inc.**

Rehab Managed Care of Arizona, Inc.

Rehab Provider Network - California, Inc.

Rehab Provider Network - Delaware, Inc.

Rehab Provider Network - Georgia, Inc.

Rehab Provider Network - Indiana, Inc.

Rehab Provider Network - Maryland, Inc.

Rehab Provider Network - Michigan, Inc.

Rehab Provider Network - New Jersey, Inc.

Rehab Provider Network - Ohio, Inc.

Rehab Provider Network - Oklahoma, Inc.

Rehab Provider Network - Pennsylvania, Inc.

Rehab Provider Network - Virginia, Inc.

Rehab Provider Network - Washington, D.C., Inc.

Rehab Provider Network of Colorado, Inc.

Rehab Provider Network of Florida, Inc.

Rehab Provider Network of Nevada, Inc.

Rehab Provider Network of New Mexico, Inc.

Rehab Provider Network of North Carolina, Inc.

Rehab Provider Network of Texas, Inc.

Rehab Provider Network of Wisconsin, Inc.

Rehab World, Inc.

Rehab/Work Hardening Management Associates, Ltd.

RehabClinics, Inc.

RehabClinics (COAST), Inc.

RehabClinics (GALAXY), Inc.

RehabClinics (New Jersey), Inc.

                                       5
<PAGE>

RehabClinics (PTA), Inc.

RehabClinics (SPT), Inc.

RehabClinics Abilene, Inc.

RehabClinics Dallas, Inc.

RehabClinics Pennsylvania, Inc.

Rehabilitation Network, Inc.

Robert M. Bacci, R.P.T. Physical Therapy, Inc.

S.T.A.R. Rehab, Inc.*

S.T.A.R.T., Inc.

Select Air Corporation

Select Employment Services, Inc.

Select Hospital Investors, Inc.

Select - Houston Partners, L.P.*

Select Management Services, LLC*

SelectMark, Inc.

Select Medical of Kentucky, Inc.

Select Medical of Maryland, Inc.

Select Medical of New Jersey, Inc.

Select Medical of New York, Inc.

Select Medical of Ohio, Inc.

Select Medical of Pennsylvania, Inc.

Select Software Ventures, L.L.C.

Select Specialty Hospital - Akron, Inc.

Select Specialty Hospital - Akron II, Inc.

Select Specialty Hospital - Ann Arbor, Inc.

Select Specialty Hospital - Battle Creek, Inc.

Select Specialty Hospital - Beech Grove, Inc.

Select Specialty Hospital - Biloxi, Inc.*

Select Specialty Hospital - Camp Hill, Inc.

                                       6
<PAGE>

Select Specialty Hospital - Camp Hill, L.P.

Select Specialty Hospital - Central Detroit, Inc.

Select Specialty Hospital - Charleston, Inc.

Select Specialty Hospital - Cincinnati, Inc.

Select Specialty Hospital - Columbus, Inc.

Select Specialty Hospital - Columbus/University, Inc.

Select Specialty Hospital - Dallas, Inc.

Select Specialty Hospital - Denver, Inc.

Select Specialty Hospital - Durham, Inc.

Select Specialty Hospital - Erie, Inc.

Select Specialty Hospital - Evansville, Inc.

Select Specialty Hospital - Flint, Inc.

Select Specialty Hospital - Fort Smith, Inc.

Select Specialty Hospital - Fort Wayne, Inc.

Select Specialty Hospital - Greensburg, Inc.

Select Specialty Hospital - Houston, Inc.

Select Specialty Hospital - Indianapolis, Inc.

Select Specialty Hospital - Jackson, Inc.

Select Specialty Hospital - Johnstown, Inc.

Select Specialty Hospital - Kansas City, Inc.

Select Specialty Hospital - Knoxville, Inc.

Select Specialty Hospital - Little Rock, Inc.

Select Specialty Hospital - Louisville, Inc.

Select Specialty Hospital - Macomb County, Inc.

Select Specialty Hospital - Memphis, Inc.

Select Specialty Hospital - Mesa, Inc.

Select Specialty Hospital - Miami, Inc.

Select Specialty Hospital - Milwaukee, Inc.

Select Specialty Hospital - Morgantown, Inc.

                                       7
<PAGE>

Select Specialty Hospital - Nashville, Inc.

Select Specialty Hospital - New Orleans, Inc.

Select Specialty Hospital - North Knoxville, Inc.

Select Specialty Hospital - Northwest Detroit, Inc.

Select Specialty Hospital - Northwest Indiana, Inc.

Select Specialty Hospital - Oklahoma City, Inc.

Select Specialty Hospital - Oklahoma City/East Campus, Inc.

Select Specialty Hospital - Omaha, Inc.

Select Specialty Hospital - Philadelphia/AEMC, Inc.

Select Specialty Hospital - Phoenix, Inc.

Select Specialty Hospital - Pittsburgh, Inc.

Select Specialty Hospital - Pontiac, Inc.

Select Specialty Hospital - Reno, Inc.

Select Specialty Hospital - San Antonio, Inc.

Select Specialty Hospital - Sioux Falls, Inc.

Select Specialty Hospital - Topeka, Inc.

Select Specialty Hospital - TriCities, Inc.

Select Specialty Hospital - Tulsa, Inc.

Select Specialty Hospital - West Columbus, Inc.

Select Specialty Hospital - Western Michigan, Inc.

Select Specialty Hospital - Wichita, Inc.

Select Specialty Hospital - Wilmington, Inc.

Select Specialty Hospital - Wyandotte, Inc.

Select Specialty Hospital - Youngstown, Inc.

Select Specialty Hospitals, Inc.

Select Synergos, Inc.

Select Unit Management, Inc.

SLMC Finance Corporation

SMC of Florida, Inc.

                                       8
<PAGE>

South Jersey Physical Therapy Associates, Inc.

South Jersey Rehabilitation and Sports Medicine Center, Inc.

Southpointe Fitness Center, Inc.

Southwest Emergency Associates, Inc.

Southwest Medical Supply Company, Inc.

Southwest Physical Therapy, Inc.

Southwest Therapists, Inc.

Sporthopedics Sports and Physical Therapy Centers, Inc.

Sports & Orthopedic Rehabilitation Services, Inc.

Sports Therapy and Arthritis Rehabilitation, Inc.

Star Physical Therapy, Inc.

Stephenson-Holtz, Inc.

The Center for Physical Therapy and Rehabilitation, Inc.

The Orthopedic Sports and Industrial Rehabilitation Network, Inc.

TJ Corporation I, L.L.C.*

TJ Partnership I

Treister, Inc.

Union Square Center for Rehabilitation & Sports Medicine, Inc.

Valley Group Physical Therapists, Inc.

Vanguard Rehabilitation, Inc.

Wayzata Physical Therapy Center, Inc.

West Penn Rehabilitation Services, Inc.

West Side Physical Therapy, Inc.

West Suburban Health Partners, Inc.

Yuma Rehabilitation Center, Inc.


  All of the above-listed entities have pledged their capital stock or other
  ownership interest pursuant to the Company's Amended and Restated Credit
  Agreement, unless denoted with an *. The entities denoted with an * are not
  wholly-owned by the Company. Entities denoted with ** have pledged their
  capital stock or ownership interest pursuant

                                       9
<PAGE>

  to the Company's Amended and Restated Credit Agreement to the extent permitted
  by Canadian law


                                      10
<PAGE>

                                                                      SCHEDULE V

Canadian Back Institute Limited

CBI Brampton Limited Partnership

CBI Calgary Limited Partnership

CBI Fraser Valley Limited Partnership

CBI Holdings Ltd.

CBI Physiotherapists Corporation

CBI Professional Services Inc.

CBI South Calgary Limited Partnership

CBI Vancouver Limited Partnership

CBI Victoria Limited Partnership

CBI Windsor Limited Partnership

Dynamic Rehabilitation Inc.

Kentucky Orthopedic Rehabilitation, LLC

Medical Information Management Systems, LLC

Millenium Rehab Services, L.L.C.

1263568 Ontario Limited (London Group)

Rehab Advantage Therapy Services, LLC

Rehab Health, Inc.

S.T.A.R. Rehab, Inc.

Select - Houston Partners, L.P.

Select Management Services, LLC

Select Specialty Hospital - Biloxi, Inc.

TJ Corporation I, L.L.C.
<PAGE>


                                                                         ANNEX B

                         [Form of Opinion of Dechert]


                  Dechert shall have furnished to the Initial Purchasers their
written opinion, as counsel to the Company and the Guarantors, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth
below:

                  (i)   the Company has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware.

                  (ii)  the Company has corporate power and corporate authority
         to own, lease and operate its properties and to conduct its business as
         described in the Offering Memorandum and to enter into and perform its
         obligations under the Transaction Documents.

                  (iii) the Company is duly qualified as a foreign corporation
         to transact business and is in good standing in the jurisdictions
         listed on Exhibit A hereto.

                  (iv)  the authorized, issued and outstanding capital stock of
         the Company is as set forth in the Offering Memorandum (except for
         subsequent issuances pursuant to reservations, agreements or employee
         benefit plans referred to in the Offering Memorandum or pursuant to the
         exercise of convertible securities or options referred to in the
         Offering Memorandum or repurchases of an immaterial number of shares of
         the Company's capital stock held by former employees); the shares of
         issued and outstanding capital stock of the Company have been duly
         authorized and validly issued and are fully paid and non-assessable;
         none of the outstanding shares of capital stock of the Company was
         issued in violation of the preemptive or other similar rights (that
         were not subsequently waived) of any securityholder of the Company
         existing by virtue of the DGCL, the restated certificate of
         incorporation of the Company, the restated by-laws of the Company or
         any contract to which the Company is a party identified in a
         certificate of the General Counsel of the Company attached hereto as
         Exhibit B (which purports to identify all material contracts or group
         of similar contracts that are material in the aggregate to the Company
         and its subsidiaries taken as a whole and to which the Company or any
         of its subsidiaries is a party); and the shares of issued and
         outstanding capital stock of the Company have been issued in
         compliance, in all material respects, with all federal securities laws.

                  (v)   based solely on a certificate from the Secretary of
         State or similar government official of the respective jurisdiction of
         incorporation or organization


                                      B-1
<PAGE>


         of each subsidiary of the Company that is either an operating entity or
         holding company listed on Schedule 1 hereto (each a "Subsidiary" and
         collectively, the "Subsidiaries"), each Subsidiary (a) has been duly
         incorporated or organized and is validly existing as a corporation or
         other entity in good standing under the laws of the jurisdiction of its
         incorporation or organization, has corporate or other power and
         authority to own, lease and operate its properties and to conduct its
         business as described in the Offering Memorandum and (b) is duly
         qualified as a foreign corporation to transact business and is in good
         standing in each jurisdiction set forth on Schedule 1 hereto (which
         purports to identify all jurisdictions in which such qualification is
         required, whether by reason of the ownership or leasing of property or
         the conduct of business, except where the failure so to qualify or be
         in good standing would not result in a Material Adverse Effect). Except
         as otherwise disclosed on Schedule 2 hereto, (x)(i) all of the issued
         and outstanding capital stock of each such Subsidiary that is a
         corporation has been duly authorized and validly issued, is fully paid
         and non-assessable and (ii) to our knowledge, is owned by the Company,
         directly or through subsidiaries and (y)(i) all of the ownership
         interests of each such Subsidiary that is not a corporation have been
         duly authorized and (ii) to our knowledge, are owned, by the Company,
         directly or through subsidiaries.


                  (vi)   except as disclosed in the Offering Memorandum, there
         are no encumbrances or restrictions pursuant to any agreement
         identified on a schedule provided by the General Counsel of the Company
         attached hereto as Exhibit C (referencing agreements that impose
         encumbrances or restrictions), on the ability of any Subsidiary (a) to
         pay any dividends or make any distributions on such Subsidiary's
         capital stock, (b) to make any loans or advances to, or investments in,
         the Company or any such Subsidiary, or (c) to transfer any of its
         property or assets to the Company or any such Subsidiary.

                  (vii)  to our knowledge, (a) except as disclosed in the
         Offering Memorandum, there are no material legal or governmental
         proceedings or investigations pending or threatened against the Company
         or any of its subsidiaries, or to which the Company or any of its
         subsidiaries, or any of its properties is subject, and (b) there are no
         legal or governmental proceedings or investigations pending, or
         threatened in writing, that would materially affect the issuance, sale
         or delivery of the Securities to the Initial Purchasers under the
         Purchase Agreement or the performance by the Company of its obligations
         thereunder or question the validity or enforceability of any of the
         Transaction Documents.

                  (viii) the information in the Offering Memorandum under
         "Description of Notes", "Management-Employment Agreements",
         "Management - Select Medical


                                      B-2
<PAGE>


         Corporation 1997 Amended and Restated Stock Option Plan", "Related
         Party Transactions", and "Certain Federal Income Tax Consequences", to
         the extent that it constitutes matters of law, summaries of legal
         matters, summaries of the Company's restated certificate of
         incorporation and bylaws or legal conclusions and, to our knowledge,
         the information with respect to contracts and other documents to which
         the Company is a party (or provisions thereof) referred to in the
         Offering Memorandum, has been reviewed by us and is correct in all
         material respects.

                  (ix)   the Indenture conforms in all material respects with
         the requirements of the Trust Indenture Act and the rules and
         regulations of the Commission applicable to an indenture which is
         qualified thereunder;

                  (x)    each of the Company and each of the Guarantors has full
         right, power and authority to execute and deliver each of the
         Transaction Documents and to perform its obligations thereunder; and
         all corporate action required to be taken for the due and proper
         authorization, execution and delivery of each of the Transaction
         Documents and the consummation of the transactions contemplated thereby
         have been duly and validly taken;

                  (xi)   each of the Purchase Agreement and the Registration
         Rights Agreement has been duly authorized, executed and delivered by
         the Company and each of the Guarantors and, assuming the Registration
         Rights Agreement is the valid and legally binding obligation of the
         Initial Purchasers, the Registration Rights Agreement constitutes a
         valid and legally binding agreement of the Company and each of the
         Guarantors enforceable against the Company and each of the Guarantors
         in accordance with its terms, except to the extent that such
         enforceability may be limited by applicable bankruptcy, insolvency,
         fraudulent conveyance, reorganization, moratorium and other similar
         laws affecting creditors' rights generally and by general equitable
         principles (whether considered in a proceeding in equity or at law) and
         an implied covenant of good faith and fair dealing and except to the
         extent that the indemnification provisions thereof may be
         unenforceable;

                  (xii)  the Indenture has been duly authorized, executed and
         delivered by the Company and each of the Guarantors and, assuming that
         the Indenture is the valid and legally binding obligation of the
         Trustee, constitutes a valid and legally binding agreement of the
         Company and each of the Guarantors enforceable against the Company and
         each of the Guarantors in accordance with its terms, except to the
         extent that such enforceability may be limited by applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and other similar laws affecting creditors' rights
         generally, by general equitable principles (whether considered in a



                                      B-3
<PAGE>


         proceeding in equity or at law) and an implied covenant of good faith
         and fair dealing;

                  (xiii) the Guarantees have been duly authorized by each of the
         Guarantors and, when the Securities have been duly executed,
         authenticated, issued and delivered as provided in the Indenture and
         paid for as provided herein (assuming due authorization, execution and
         delivery of the Indenture by the Trustee and due authentication of the
         Securities by the Trustee), will constitute valid and legally binding
         obligations of the Guarantors enforceable against the Guarantors in
         accordance with their terms;

                  (xiv)  the Securities have been duly authorized and issued by
         the Company and each of the Guarantors and, when duly executed,
         authenticated, issued and delivered as provided in the Indenture and
         paid for as provided herein (assuming the Indenture is the valid and
         legally binding obligation of the Trustee and the due authentication of
         the Securities by the Trustee) and will be duly and validly issued and
         outstanding and will constitute valid and legally binding obligations
         of the Company, as issuer, and each of the Guarantors, as guarantors,
         entitled to the benefits of the Indenture and enforceable against the
         Company and each of the Guarantors in accordance with their terms,
         except to the extent that such enforceability may be limited by
         applicable bankruptcy, insolvency, fraudulent conveyance,
         reorganization, moratorium and other similar laws affecting creditors'
         rights generally, by general equitable principles (whether considered
         in a proceeding in equity or at law) and an implied covenant of good
         faith and fair dealing;

                  (xv)   the Exchange Securities have been duly authorized by
         the Company and each of the Guarantors and, when duly executed,
         authenticated, issued and delivered as provided in the Indenture and
         the Registration Rights Agreement (assuming the Indenture is the valid
         and legally binding obligation of the Trustee and the authentication of
         the Exchange Securities by the Trustee) will constitute a valid and
         legally binding obligation of the Company and each of the Guarantors
         enforceable against the Company and each of the Guarantors in
         accordance with its terms, except to the extent that such
         enforceability may be limited by applicable bankruptcy, insolvency,
         fraudulent conveyance, reorganization, moratorium and other similar
         laws affecting creditors' rights generally, by general equitable
         principles (whether considered in a proceeding in equity or at law) and
         an implied covenant of good faith and fair dealing;

                  (xvi)  the Credit Agreement Amendment has been duly
         authorized, executed and delivered by the Company and (assuming the
         Credit Agreement Amendment is the valid and legally binding obligation
         of the other parties thereto)


                                      B-4
<PAGE>


         constitutes a valid and legally binding obligation of the Company
         enforceable against the Company accordance with its terms, except to
         the extent that such enforceability may be limited by applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and other similar laws affecting creditors' rights
         generally, by general equitable principles (whether considered in a
         proceeding in equity or at law) and an implied covenant of good faith
         and fair dealing;

                  (xvii)  each Transaction Document conforms in all material
         respects to the description thereof contained in the Offering
         Memorandum and the Securities conform in all material respects to the
         description thereof contained in the Offering Memorandum;

                  (xviii) to our knowledge, the Company is not in violation of
         its restated certificate of incorporation or amended and restated by-
         laws, and to our knowledge, none of the U.S. Subsidiaries is in
         violation of its certificate of incorporation, by-laws or analogous
         organizational documents. To our knowledge, no default by the Company
         or any of its subsidiaries exists in the due performance or observance
         of any material obligation, agreement, covenant or condition contained
         in any contract, indenture, mortgage, loan agreement, note, lease or
         other agreement or instrument that is described or referred to in the
         Offering Memorandum.

                  (xix)   no filing with, or authorization, approval, consent,
         license, order, registration, qualification of or with any United
         States, New York, Pennsylvania or with respect to the DGCL, Delaware
         court or governmental authority or agency (other than as may be
         required under the securities or blue sky laws of the various states,
         as to which we express no opinion) is necessary or required in
         connection with the due authorization, execution and delivery and
         performance by the Company and each of the Guarantors of the
         Transaction Documents to which each is a party, the compliance by each
         Guarantor with the terms of the Securities, the issuance,
         authentication, sale and delivery of the Securities and compliance by
         the Company and the Guarantors with the terms thereof and the
         consummation of the transactions contemplated by the Transaction
         Documents, except for such consents, approvals, authorizations,
         filings, registrations, orders or qualifications (i) which shall have
         been obtained or made prior to the Closing Date and (ii) as may be
         required to be obtained or made under the Securities Act and applicable
         state securities laws as provided in the Registration Rights Agreement.

                  (xx)    the execution, delivery and performance by the Company
         and each of the Guarantors of each of the Transaction Documents, the
         issuance, authentication, sale and delivery of the Securities and
         compliance by the Company


                                      B-5
<PAGE>


         and each of the Guarantors with the terms thereof and the consummation
         of the transactions contemplated by the Transaction Documents do not
         and will not, whether with or without the giving of notice or lapse of
         time or both, conflict with or constitute a breach of, or default under
         or result in the creation or imposition of any lien, charge or
         encumbrance upon any property or assets of the Company or any of its
         subsidiaries pursuant to any contract, indenture, mortgage, deed of
         trust, loan or credit agreement, note, lease or any other agreement or
         instrument of the Company or any of its subsidiaries in the Certificate
         of the General Counsel of the Company attached hereto as Exhibit B, to
         which the Company or any of its subsidiaries is a party or by which it
         or any of them may be bound, or to which any of the property or assets
         of the Company or any of its subsidiaries is subject (except for such
         conflicts, breaches or defaults or liens, charges or encumbrances that
         could not reasonably be expected to have a Material Adverse Effect),
         nor will such action result in any violation of the provisions of the
         Certificate of Incorporation or by-laws or analogous organizational
         documents of the Company or any U.S. Subsidiary, or any applicable law,
         statute, rule, regulation, judgment, order, writ or decree, known to
         us, of any government, government instrumentality or court, domestic or
         foreign, having jurisdiction over the Company or any of its
         subsidiaries or any of their respective properties, assets or
         operations;

                  (xxi)   neither the Company nor any of its subsidiaries is
         upon the issuance and sale of the Securities as contemplated in the
         Purchase Agreement and the application of the net proceeds therefrom as
         described in the Offering Memorandum an "investment company" or a
         company "controlled by" an investment company as such terms are defined
         in the Investment Company Act;

                  (xxii)  neither the consummation of the transactions
         contemplated by this Agreement nor the sale, issuance, execution or
         delivery of the Securities will violate Regulation T, U or X of the
         Federal Reserve Board; and

                  (xxiii) assuming the accuracy of the representations and
         warranties and the performance of the agreements of the Company and
         each of the Guarantors and of the Initial Purchasers contained in the
         Purchase Agreement, compliance by the Initial Purchasers with the
         offering and transfer procedures and restrictions described in the
         Transaction Documents, and the accuracy of the representations and
         warranties made in accordance with the Transaction Documents by
         purchasers to whom the Initial Purchasers initially resell the
         Securities, no registration of the Securities under the Securities Act
         or qualification of the Indenture under the Trust Indenture Act is
         required in connection with the issuance and sale of the Securities by
         the Company and the offer, resale and delivery of the Securities by the
         Initial Purchasers in the manner contemplated by the Purchase Agreement
         and


                                      B-6
<PAGE>


         the Offering (it being understood that no opinion shall be expressed as
         to any resale subsequent to the initial resale of the Securities).

                  As for the purposes of paragraphs (v) and (x), with respect to
Subsidiaries or Guarantors not incorporated or organized in Pennsylvania, New
York, New Jersey, Massachusetts or Delaware, we will assume with your permission
that the corporate, limited liability company, partnership or limited
partnership law of the jurisdiction of corporation or organization for such
entities is identical to that of Delaware.

                  As for the purposes of paragraphs (xi), (xii), (xiii), (xiv)
and (xv), with respect to the due authorization of any of the Transaction
Documents or Exchange Securities by any Subsidiary or Guarantor not incorporated
or organized in Pennsylvania, New York, New Jersey, Massachusetts or Delaware,
we will assume with your permission that the corporate, limited liability
company, partnership or limited partnership law of the jurisdiction of
incorporation or organization for such entities is identical to that of
Delaware.

       [The following statement shall be set forth in a separate letter]

         We have participated in conferences with officers and other
representatives of the Company and representatives of the Initial Purchasers and
their counsel during which the contents of the Preliminary Offering Memorandum
and the Offering Memorandum and related matters were discussed and reviewed and,
although we do not pass upon and do not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except as expressly provided in our separate opinion to you dated today), on
the basis of the information that was developed in the course of the services
referred to above, considered in the light of our understanding of the
applicable law, that, nothing has come to our attention that would lead us to
believe that the Offering Memorandum or any amendment or supplement thereto,
(except for financial statements, footnotes and schedules, other financial data
and statistical information derived from the financial statements included
therein or omitted therefrom, as to which we need make no statement), as of the
date thereof and as of the Closing Date, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.


                                      B-7
<PAGE>


                                                                         ANNEX C

                    [Form of Opinion of Michael E. Tarvin]


     (i) To my knowledge, all of the issued and outstanding capital stock of
each of the subsidiaries of the Company set forth below is owned by the Company.


     Allegany Hearing and Speech, Inc.
     American Transitional Hospitals, Inc.
     Athens Sports Medicine Clinic, Inc.
     CCISUB, Inc.
     C.O.A.S.T. Institute Physical Therapy, Inc.
     Center for Evaluation and Rehabilitation, Inc.
     Center for Physical Therapy & Sports Rehabilitation, Inc.
     Center Therapy, Inc.
     CMC Center Corporation
     Coplin Physical Therapy Associates, Inc.
     Fine, Bryant & Wah, Inc.
     Georgia Novacare Ventures, Inc.
     Hand Therapy and Rehabilitation Associates, Inc.
     Hangtown Physical Therapy, Inc.
     Human Performance and Fitness, Inc.
     Indianapolis Physical Therapy and Sports Medicine, Inc.
     Joyner Sportsmedicine Institute, Inc.
     Kesinger Physical Therapy, Inc.
     New Mexico Physical Therapists, Inc.
     NovaCare Occupational Health Services, Inc.
     Ortho Rehab Associates, Inc.
     Orthopedic and Sports Physical Therapy of Cupertino, Inc.
     Pro Active Therapy, Inc.
     Professional Therapeutic Services, Inc.
     RCI (WRS), Inc.
     Rebound Oklahoma, Inc.
     Redcal Information Systems, LLC
     Redwood Pacific Therapies, Inc.
     Rehab Advantage Therapy Services, LLC
     RehabClinics, Inc.
     RehabClinics (GALAXY), Inc.
     RehabClinics (SPT), Inc.
     Robert M. Bacci, R. P. T. Physical Therapy Associates


                                      C-1
<PAGE>


     SelectMark, Inc.
     Select Specialty Hospital - Columbus, Inc.
     Select Specialty Hospital - Camp Hill, L.P.
     South Jersey Physical Therapy Associates, Inc.
     Southwest Emergency Associates, Inc.
     Southwest Medical Supply Company, Inc.
     Southwest Physical Therapy, Inc.
     Southwest Therapists, Inc.
     Valley Group Physical Therapists, Inc.
     Vanguard Rehabilitation, Inc.
     Wayzata Physical Therapy Centers, Inc.
     West Penn Rehabilitation Services, Inc.
     West Side Physical Therapy, Inc.
     West Suburban Health Partners, Inc.


                                      B-2
<PAGE>


                                                                         ANNEX D

                        [Form of Opinion of Reed Smith]


          (i)     The information in the Offering Memorandum under "Risk
Factors --If our hospitals fail to maintain their exemption from the Medicare
prospective payment system or fail to maintain their status as a "hospital
within a hospital," our profitability may decline", "Risk Factors --We conduct
business in a heavily regulated industry, and changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our net operating revenues and profitability", "Risk Factors --If there are
changes in the rates or methods of government reimbursements for our services,
our services, our net operating revenues and income could decline", "Our
Business--Government Regulations", to the extent that it describes any Health
Care Laws, has been reviewed by me and fairly presents the information set forth
therein in all material respects.

          (ii)    Each of the 56 specialty acute care hospitals described in the
Offering Memorandum as owned or operated by the Company or its subsidiaries is
duly licensed as a hospital by the state in which it is located and is certified
to participate in the federal Medicare program. This opinion is based solely
upon our examination of originals or copies of such licenses and certifications
presented to us by the Company, and a Certificate of the General Counsel of the
Company attached hereto as Exhibit A to the effect that such licenses and
certifications are currently in effect.

          (iii)   We have reviewed the Certificate of the General Counsel of the
Company attached hereto as Exhibit A concerning the outpatient therapy clinics
owned, leased or operated by the Company or its subsidiaries. In the course of
our representation of the Company as special regulatory counsel, nothing has
come to our attention that would lead us to believe that the Certificate is not
accurate.

          (iv)    Except as disclosed in the Offering Memorandum, in the course
of our representation of the Company as special regulatory counsel, we have not
become aware of any pending or threatened action, suit, proceeding, inquiry or
investigation, relating to any Health Care Law, to which the Company or any of
its subsidiaries is a party, brought by any court or governmental agency or
body, which could reasonably be expected to result in a Material Adverse Effect.

          (v)     No filing with, or authorization, approval, consent, license,
order, registration, qualification (collectively, "Approvals") of or with any
(A) United States governmental authority or agency, is necessary or required
under any federal Health Care Law, or (B) any Pennsylvania governmental
authority or agency is necessary or required under any Pennsylvania Health Care
Law in connection with the due authorization, execution and delivery of the
Purchase Agreement or for the offering, issuance, sale or


                                      D-1
<PAGE>


delivery of the Securities. Without having investigated the laws of states other
than Pennsylvania for purposes of this opinion, based on our experience as
special regulatory counsel representing other issuers owning and operating other
health care businesses, and our ongoing representation of the Company as special
regulatory counsel, we are not aware of any Approvals under any Health Care Laws
required to be obtained or made in connection with the execution delivery and
performance of the Purchase Agreement, that, if not obtained or made, would
result in a Material Adverse Effect.

          In the course of our representation of the Company as special
regulatory counsel, nothing has come to our attention that would lead us to
believe that the information contained in the Offering Memorandum under "Risk
Factors --If our hospitals fail to maintain their exemption from the Medicare
prospective payment system or fail to maintain their status as a "hospital
within a hospital," our profitability may decline", "Risk Factors --We conduct
business in a heavily regulated industry, and changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our net operating revenues and profitability", "Risk Factors --If there are
changes in the rates or methods of government reimbursements for our services,
our services, our net operating revenues and income could decline", "Our
Business-- Government Regulations" included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

          For purposes of this opinion, the term "Health Care Laws" shall mean
those statutes, rules and regulations, judicial decisions, decrees or orders
specifically regulating health care providers, as such, of the type owned and
operated by the Company and its subsidiaries as described under the headings
"Risk Factors --If our hospitals fail to maintain their exemption from the
Medicare prospective payment system or fail to maintain their status as a
"hospital within a hospital," our profitability may decline", "Risk Factors -We
conduct business in heavily regulated industry, and changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our net operating revenues and profitability", "Risk Factors --If there are
changes in the rates or methods of government reimbursements for our services,
our net operating revenues and income could decline", "Our Business --Government
Regulations" in the Prospectus, including, without limitation, (a) health care
licensure, permit and certificate of need requirements, (b) Title XVIII, XIX and
XXI of the Social Security Act; (c) the Anti-Kickback Amendments (as defined in
the Offering Memorandum) and the regulations promulgated thereunder, (d) the
Stark Laws (as defined in the Offering Memorandum) and the regulations
promulgated thereunder, (e) the False Claims Act, (f) Title II of the Health
Insurance Portability and Accountability Act of 1996, (g) Title IV of the
Balanced Budget Act of 1997, (h) any initiatives under Operation Restore Trust
and (i) state statutes, rules and regulations concerning matters similar to (b)
through (h) above, but specifically


                                      D-2
<PAGE>


excluding statutes, ordinances, administrative decisions, rules and regulations
of counties, towns, municipalities or special political subdivisions.


                                      D-3
<PAGE>


                                                                         ANNEX E

                          [Form of Opinion of Tory's]


          (i)    Each of Canadian Back Institute ("CBI") and Rehab Health Inc.
("Rehab Health") is incorporated and existing under the Business Corporations
Act (Ontario).

          (ii)   Each of CBI Calgary Limited Partnership, CBI Etobicoke Limited
Partnership, CBI Scarborough Limited Partnership, CBI South Calgary Limited
Partnership, CBI Toronto Limited Partnership, CBI Victoria Limited Partnership,
(collectively, the "Limited Partnerships") has been formed and exists as a
limited partnership under the Limited Partnership Act (Ontario).

          (iii)  CBI has the corporate power and capacity to carry on its
business as presently conducted (including, in the case of the Limited
Partnerships, the business of the Limited Partnerships) and to own its
properties and assets.

          (iv)   Rehab Health has the corporate power and capacity to carry on
its business as presently conducted and to own its properties and assets.


                                      E-1