Document:

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                                                                   EXHIBIT 10.22

                          SELECT MEDICAL CORPORATION

                    4716 Old Gettysburg Road P.O. Box 2034
                       Mechanicsburg, Pennsylvania 17055

                                 March 1, 2000

Michael E. Tarvin, Esq.
Select Medical Corporation
4716 Old Gettysburg Road
P.O. Box 2034
Mechanicsburg, PA 17055

     Re:  Agreement in the Event of a Change of Control of SMC
          ----------------------------------------------------

Dear Mr. Tarvin:

          The following will confirm the agreement of Select Medical
Corporation, a Delaware corporation (the "Company"), with you concerning the
consequences upon certain terminations of your employment in connection with a
change in control of the Company.

          In consideration of your past and continued service to the Company and
in consideration of the mutual covenants and agreements contained in this letter
(this "Letter Agreement"), the Company and you hereby agree, intending to be
legally bound hereby, as follows:

          1.   Covered Termination. A "Covered Termination" shall be deemed to
               -------------------
occur if your employment with the Company terminates under any one of the
following circumstances: (i) within the two-year period immediately following a
Change of Control (as defined below), your employment with the Company (a) is
terminated by the Company without Cause (as defined below), (ii) within the six-
month period immediately following a Change of Control, you terminate your
employment with the Company for Good Reason (as defined below), or (iii) within
the six-month period preceding a Change of Control, your employment is
terminated by the Company other than for Cause, and you reasonably demonstrate
that such termination of employment was at the request of a third party who has
taken steps reasonably calculated to effect the Change of Control.

          2.   Payments Upon a Covered Termination. If a Covered Termination
               -----------------------------------
occurs, then (i) the Company agrees that such termination is not a voluntary
termination or a termination "for cause" as contemplated by any of the Company's
stock option or other incentive plans and any stock option or other award
agreements entered into between you and the Company (including agreements that
may be entered into in the future in connection with additional awards granted
pursuant to any Company plan, the "Award Agreements") and the Company agrees
that all unvested, unexercised stock options held by you which were granted to
you by the Company shall become fully vested and exercisable as of the date of
the Covered Termination and you will have the right to exercise, at any time
prior to the earlier of three months after the date of termination or the
expiration date of such option, all such options to purchase the Company's
<PAGE>

stock notwithstanding any contrary vesting schedule that may be contained in the
applicable plan or Award Agreement, and (ii) the Company will, on or before your
last day as an employee of the Company, pay to you, in lieu of any other rights
to cash compensation other than the payment of your salary for services
performed before the date of termination and as a severance benefit, a lump sum
cash payment equal to your total base salary plus bonus compensation from the
Company for the preceding three years (or, if you shall have been employed for
less than three years, an amount equal to three times your average total annual
cash compensation for base salary and bonus for your years of service to the
Company).

          3.   Definitions.
               -----------

          (a)  Change of Control.
               -----------------

               (i)  Prior to a Public Offering (as defined below), a "Change of
Control" shall be deemed to have occurred, subject to Section 3(a)(iii) below,
upon (i) any sale, lease, exchange or other transfer of all or substantially all
of the property and assets of the Company (on a consolidated basis) to an
entity, other than an entity at least 75% of the combined voting power of the
voting securities of which are owned by persons in substantially the same
proportion as their ownership of the Company immediately prior to such sale or
other transfer, (ii) any merger or consolidation to which the Company is a party
and as a result of which the holders of the voting securities of the Company
immediately prior thereto own less than a majority of the outstanding voting
securities of the surviving entity immediately following such transaction, or
(iii) any person's (excluding WCAS, GTCR and Thoma Cressey Partners, the
financial sponsors of the Company as of the date hereof), including a group's,
becoming the beneficial owner of securities representing more than 50% of the
voting securities of the Company then outstanding.

               (ii) Following a Public Offering,, a "Change of Control" shall be
deemed to have occurred if, subject to Section 3(a)(iii) below, (i) any person
including a group, but excluding any stockholder of the Company who immediately
prior to the Public Offering beneficially owned 12% or more of the Company's
outstanding shares, becomes the beneficial owner of shares of the Company having
more than 50% of the total number of votes that may be cast for the election of
directors of the Company, (ii) any person including a group, other than you or
any group of which you are a party, increases its beneficial ownership of shares
of the Company beyond such person's ownership immediately after the Public
Offering by a number of shares equal to or greater than 33% of the total number
of votes that may be cast for the election of directors; (iii) the individuals
who serve on the Board of Directors of the Company as of the effective date
hereof (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board of Directors of the Company; provided, however, any person
who becomes a director subsequent to the effective date hereof, whose election
or nomination for election was approved by a vote of at least a majority of the
directors then constituting the Incumbent Directors, shall for purposes of this
clause (iii) be considered an Incumbent Director, (iv) the consummation of a
merger or consolidation of the Company in which the stockholders of the Company
immediately prior to such merger or consolidation, would not, immediately after
the merger or consolidation, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of the combined voting power of the
voting securities of the corporation issuing cash or securities in the merger or
consolidation (or of its ultimate parent

                                      -2-
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corporation, if any); or (v) there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
(on a consolidated basis), other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at least 50% of
the combined voting power of the voting securities of which are owned by persons
in substantially the same proportion as their ownership of the Company
immediately prior to such sale.

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

               (iv)   For purposes of this Section 3(a), (A) the terms "person,"
"group," "beneficial owner," and "beneficially own" have the same meanings as
such terms under Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, (B) the term
"Public Offering" shall mean the consummation of the first public offering of
shares of common stock of the Company in a firm commitment underwritten offering
registered under the Securities Act of 1933, as amended, on Form S-1 or its
successor forms, and (C) the term "voting securities" shall mean securities, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect the corporate directors (or persons performing similar functions).

          (b)  Cause. For purposes of this Letter Agreement, "Cause" shall mean
               -----
(i) your willful and continued failure to substantially perform your duties
hereunder (other than any such failure resulting from incapacity due to physical
or mental illness); (ii) your engaging in willful or reckless misconduct which
is demonstrably and materially injurious to `the Company, monetarily or
otherwise; or (iii) your conviction of a felony involving moral turpitude;
provided that an act, or failure to act, on your part shall be considered
"willful" or "reckless" only if done, or omitted to be done, by you not in good
faith and without a reasonable belief that his action or omission was in the
best interest of the Company. Your employment shall not be deemed to have been
terminated for Cause unless the Company shall have given or delivered to you (i)
reasonable notice setting forth the reasons for the Company's intention to
terminate your employment for Cause; (ii) an opportunity to cure any such breach
during the 30-day period after your receipt of such notice; (iii) a reasonable
opportunity, at any time during the 30-day period after your receipt of such
notice, together with your counsel, to be heard before the Board of Directors;
and (iv) a notice of termination stating that, in the good faith opinion of not
less than a majority of the entire membership of the Board of Directors of the
Company, you are guilty of the conduct set forth in any of clauses (i), (ii) or
(iii) of the definition of Cause above.

          (c)  Good Reason. For purposes of this Letter Agreement, you shall
               -----------
have "Good Reason" to terminate your employment after a Change of Control if you
make good faith

                                      -3-
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determination that, as a result of such Change of Control, (x) you are unable to
perform your services effectively or there is any significant adverse change in
your authority or responsibilities, as performed immediately prior to such
Change of Control, (y) there is a reduction by the Company in your compensation
from that in effect prior to such Change of Control, or (z) you are required to
be based anywhere other than the Company's principal executive offices in (or
within 25 miles of) Mechanicsburg, Pennsylvania (except for required travel on
the Company's business to an extent substantially consistent with your business
travel obligations prior to the Change of Control).

          4.   Additional Payments.
               -------------------

          (a)  If all, or any portion, of the payments or other benefits
provided under any section of this Agreement, either alone or together with
other payments and benefits that you receive or are entitled to receive from the
Company or its affiliates, (whether or not under an existing plan, arrangement
or other agreement) (collectively the "Payments") would constitute an excess
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") and would result in the imposition on you
of an excise tax under Section 4999 of the Code, (such excise tax, together with
any interest and penalties related thereto, are hereinafter collectively
referred to as the "Excise Tax") then, in addition to any other benefits to
which you are entitled under this Agreement, you will be entitled to receive an
additional payment (a "Gross-Up Payment") in cash, in an amount such that after
you pay all taxes including, without limitation, (i) any income taxes (and any
interest and penalties imposed with respect thereto) and (ii) any Excise Tax,
imposed upon the Gross-Up Payment, you will retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Unless you and the
Company otherwise agree in writing, any determination required under this
Section 4, including without limitation, the amount of payments under this
Article 6 (the "Parachute Gross-up") shall be computed and made in writing by
the Employer's then independent public accountants (the "Accountants"), whose
determination shall be, subject to the Employee's reasonable approval of the
calculations required under this Article 6, conclusive and binding upon the
Employee and the Employer for all purposes. For purposes of making the
calculations required by this Section 4, the Accountants may rely on reasonable,
good faith interpretations concerning the application of Section 280G and 4999
of the Code. You and the Company shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 4. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.

          (b)  As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accountants
hereunder, it is possible that (i) Gross-Up Payments which will not have been
made by the Company should have been made (an "Underpayment"), consistent with
the calculations required to be made hereunder or that (ii) Gross-Up Payments
that have been made will be determined to have been in excess of the Gross-Up
Payments actually required (an "Overpayment"). In the event that you are
required to make a payment of any Excise Tax, the Accountants shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for your benefit. In the event that it is
finally determined that an Overpayment has occurred, you will promptly, and in
any event within 30 days of such determination, refund the amount of the

                                      -4-
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Overpayment, plus any interest actually paid to you with respect to the
Overpayment, to the Company. The Company shall have the right with respect to
the determination of either an Underpayment or an Overpayment to you to appeal
the assertion of any Underpayment or to claim, and sue for, a refund of any
Excise Tax paid by you upon any Payment or Gross-Up Payment, provided that the
Company shall promptly reimburse you for all expenses, including counsel and
accounting fees, incurred in connection with any such proceeding. Alternatively,
the Company may undertake any such proceeding, and you shall cooperate with the
Company in any such proceeding.

          5.   Miscellaneous.
               -------------

          (a)  The Company will require any purchaser of all or substantially
all of the assets of the Company, by agreement in form and substance reasonably
satisfactory to you, to expressly assume and agree to perform this Letter
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if a Covered Termination had occurred. As used in
this Letter Agreement, "Company" shall mean the Company as hereinbefore defined
and any purchaser of its assets as aforesaid which executed and delivers the
agreement provided for herein.

          (b)  This Letter Agreement shall remain in effect for so long as you
are employed by the Company. This Letter Agreement may not be modified or waived
except in writing and agreed to by the Company and you. This Letter Agreement
shall be governed by the laws of the Commonwealth of Pennsylvania and shall
inure to the benefit of your heirs.

          (c)  The Company represents that this Letter Agreement has been duly
authorized and is binding on and enforceable against the Company. The invalidity
or unenforceability of any provision of this Letter Agreement shall not affect
the validity or enforceability of any other provision, which shall remain in
full force and effect.

          (d)  Upon payment of the amount required under paragraph 1 hereof, you
shall deliver to the Company a general release of liability of the Company and
its officers and directors in a form reasonably satisfactory to the Company.

          (e)  All payments made pursuant to this Letter Agreement shall be
subject to withholding of applicable deductions and income and employment taxes.

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

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               If to Employee:

               Michael E. Tarvin
               140 Winfield Drive
               Camp Hill, PA 17011

               If to the Company:

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

          6.   Entire Agreement. This writing represents the entire agreement
               ----------------
and understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may not be altered or amended except by an agreement in writing.

          Please indicate your acceptance of the above agreement by signing
below in the space indicated.

                              Very truly yours,

                              SELECT MEDICAL CORPORATION, a
                              Delaware corporation

                              By:  /s/ Robert A. Ortenzio
                                  ---------------------------
                                  Robert A. Ortenzio,
                                  President

Agreed to and accepted:

   /s/ Michael E. Tarvin
--------------------------------
       Michael E. Tarvin

                                      -6-<PAGE>

                                                                   EXHIBIT 10.23

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

          THIS AGREEMENT is made as of the 22nd day of May, 2000, by and between
SELECT MEDICAL CORPORATION, a Delaware corporation (the "Employer"), and LEROY
S. ZIMMERMAN, an individual (the "Employee").

                             W I T N E S S E T H:
                             - - - - - - - - - -

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

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

                        Article 1.  CAPACITY AND DUTIES

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

    1.02. Capacity. Employee shall serve as a senior executive of the Employer.
          --------
His duties shall include management and direction of the Employer's public
policy matters.

    1.03. Duties. During the term of this Agreement, the Employee shall devote
          ------
his full attention and his best efforts to the performance of the customary
duties and responsibilities consistent with the Employee's position as described
in Section 1.02 and shall serve as an officer and a member of the Boards of
Directors of the Employer and, if requested by the Employer, its affiliates,
without compensation other than as provided for in this Agreement; provided that
nothing herein shall be deemed to prevent the Employee from serving as a
director or trustee of
<PAGE>

companies other than the Employer, including, without limitation, serving as
special counsel or "of counsel" to the law firm of Eckert Seamans Cherin &
Mellott, LLC during the first twelve (12) months of the term of this Agreement,
so long as such service does not unreasonably interfere with the performance of
the Employee's duties hereunder.

                  Article 2.  TERM OF EMPLOYMENT; TERMINATION

     2.01.  Term. Unless earlier terminated as hereafter provided, this
            ----
Agreement shall commence on September 18, 2000, and shall expire on the third
anniversary of such date. Unless either party gives written notice to the other
not less than three months prior to the end of such three year period that it or
he does not want the term of this Agreement to continue, such term shall
thereafter automatically extend for an additional period of one year. In the
event that the Employer does not renew this Agreement, then all unvested,
unexercised stock options to purchase stock of the Employer held by the Employee
shall become fully vested, and the Employee will have the right to exercise, at
any time prior to the later of three months after the date of termination or the
expiration date of such options, notwithstanding any contrary vesting schedule
otherwise applicable to such option.

     2.02.  Termination.
            -----------

            (a)  Death and Disability. The employment of the Employee under this
                 --------------------
Agreement shall immediately terminate (i) upon the death of the Employee and
(ii) upon written notice to the Employee given by the Board of Directors of the
Employer, in the event that the Employee, in the reasonable opinion of the Board
of Directors, is for any reason during the period of his employment hereunder
unable to perform the duties to be performed by the Employee as contemplated by
Section 1.03 for a period of 120 consecutive days by reason of the

                                      -2-
<PAGE>

Employee's disability. The term "disability" as used in this Section 2.02(a)
means the inability because of physical or mental injury or sickness to perform
the substantial and material duties of the Employee hereunder as generally
described in Section 1.02 above. Upon a termination of employment described in
this Section 2.02(a), (i) the Employee or his estate or beneficiaries, as
applicable, shall be entitled to receive any base salary and other benefits
earned and accrued under this Agreement prior to the date of termination, and
(ii) the Employee and his estate and beneficiaries shall have no further rights
to any other compensation or benefits, or any other rights, hereunder.

          (b)  Discharge for Cause. The employment of the Employee under this
               -------------------
Agreement shall terminate immediately if the Chief Executive Officer or the
President of the Employer discharges the Employee for cause. For purposes of
this Agreement, "cause" shall mean: (i) the willful and continued failure by the
Employee to substantially perform his duties hereunder (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), (ii) the engaging by the Employee in willful or reckless misconduct
which is demonstrably and materially injurious to Employer, monetarily or
otherwise, or (iii) the conviction of the Employee, during the term hereof, of a
felony involving moral turpitude. For purposes of this Section 2.02(b), an act,
or failure to act, on the Employee's part shall be considered "willful" or
"reckless" only if done, or omitted to be done, by him not in good faith and
without a reasonable belief that his action or omission was in the best interest
of the Employer. The Employee's employment shall not be deemed to have been
terminated for cause unless the Employer shall have given or delivered to the
Employee (i) reasonable notice in writing setting forth the reasons for the
Employer's intention to terminate the Employee's

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employment for cause, (ii) an opportunity for the Employee to cure any such
breach during the 30-day period after the Employee's receipt of such notice,
(iii) a reasonable opportunity, at any time during the 30-day period after the
Employee's receipt of such notice, for the Employee, together with his counsel,
to be heard before the Board of Directors, and (iv) a Notice of Termination (as
defined in Section 2.02(c)) stating that, in the good faith opinion of not less
than a majority of the entire membership of the Board of Directors, the Employee
was guilty of the conduct set forth in any of clauses (i), (ii) or (iii) of the
second sentence of this Section 2.02(b). If the Employer terminates the
Employee's employment for cause pursuant to this Section 2.02(b), (i) the
Employer shall pay to the Employee any base salary and other benefits earned and
accrued under this Agreement prior to the termination of employment, excluding
any unpaid bonuses, whether or not earned or accrued, and (ii) the Employee
shall have no further rights to compensation or benefits, or any other rights,
hereunder.

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

                                      -4-
<PAGE>

          (d)  Certain Terminations. The Employer may terminate the Employee's
               --------------------
employment hereunder at any time for any reason or for no reason by providing a
Notice of Termination in accordance with Section 2.02(c). If the Employee's
services are terminated by the Employer for any reason other than for cause as
defined in Section 2.02(b) hereof and other than due to death or disability: (i)
the Employer shall pay to the Employee any base salary and other benefits earned
and accrued under this Agreement prior to the date of termination, (ii) the
Employer shall pay to the Employee a pro-rated bonus for the year of termination
in an amount equal to the product of (A) the target bonus established with
respect to the Employee for such year, or if no such target is established the
bonus paid or payable to the Employee for the year prior to the year of
termination, multiplied by (B) a fraction, the numerator of which is the number
of days in the year of termination completed prior to such termination and the
denominator of which is 365; provided that if a target bonus had been
established with respect to the year of termination, a pro-rated bonus shall be
payable pursuant to this Section 2.02(d)(ii) only if the performance goals
established with respect to such target bonus have been achieved by the date the
bonus would have been paid in the absence of the Employee's termination of
employment (iii) the Employer agrees that such termination would not be
voluntary or a termination "for cause" as contemplated by any stock option or
other incentive plans and any stock option or other award agreements entered
into between the Employer and the Employee (including agreements that may be
entered into after the date hereof), and that any stock options with respect to
the Employer's stock held by the Employee shall become fully exercisable as of
the date of such termination and shall remain exercisable until the later of
three months following the date of such termination or the expiration date of
such option, notwithstanding any

                                      -5-
<PAGE>

contrary vesting schedules otherwise applicable to such options, (iv) the
Employer will continue to pay the Employee, for the balance of the Term, his
base salary as of the date of such termination, and (v) the Employee shall have
no further rights hereunder. Such continued payments will be made at the times
and in the manner they would have been made to the Employee in the absence of
such termination.

                           Article 3.   COMPENSATION

     3.01. Cash Compensation.  During the period of the Employee's services
           -----------------
hereunder, as compensation for such services to the Employer pursuant to this
Agreement, the Employer shall pay to the Employee a base salary of $215,000 per
year in equal bi-weekly installments. The Board of Directors of the Employer
may, in its sole discretion from time to time, increase the base compensation to
be paid to the Employee as provided in this Article 3. The Employee will also be
eligible to receive bonus compensation, annual or otherwise, in an amount to be
determined by the Employer's Board of Directors in its sole discretion.

     3.02. Stock Options. The Employee will be eligible to receive options to
           -------------
purchase 175,000 shares of the Employer's common stock at a purchase price of
$3.75 per share pursuant to the Employer's stock option plan, on terms and
conditions consistent with such plan.  Such options will vest over a period of
five (5) years.

     3.03. Insurance.
           ---------

           (a)  Disability Insurance. The Employer shall provide the Employee
                --------------------
with long-term disability insurance coverage such that in the event the
Employee's employment by the Employer is terminated pursuant to Section 2.02(a)
due to the Employee's disability, the Employee will be entitled to receive
salary continuation payments at the rate of 50% of the

                                      -6-
<PAGE>

Employee's annual base salary as of the date of such termination, such payments
to commence from the date of such termination and to continue until the earlier
of the tenth anniversary of the date of such termination, or the date on which
the Employee is physically able to become gainfully employed in an occupation
consistent with his education, training and experience. Notwithstanding the
foregoing, if the Employer elects not to purchase disability insurance covering
the Employee in an amount necessary to provide salary continuation payments at
the rate of 50% of the Employee's annual base salary as of the date of such
termination for the period set forth above, then the Employer shall be liable to
the Employee for such supplemental amounts, when taken together with the
disability insurance proceeds payable under the terms of policies purchased by
the Employer, as may be required to assure that the Employee receives salary
continuation payments at the rate of 50% of the Employee's annual base salary as
of the date of such termination for the period set forth above.

          (b)  Life Insurance. The Employer shall provide the Employee with life
               --------------
insurance coverage during the Employee's employment with the Employer in an
amount equal to two (2) times the Employee's base salary. Notwithstanding the
foregoing, if the Employer elects not to purchase life insurance covering the
Employee in an amount equal to two (2) times the Employee's base salary, then
the Employer shall be liable for such supplemental amounts as may be required to
assure that, in the event of the Employee's death during the term of this
Agreement, the beneficiaries under the life insurance policy purchased by the
Employer receive in an amount, when taken together with the life insurance
proceeds payable under the terms of policies purchased by the Employer, which is
equal to two (2) times the Employee's base salary.

                                      -7-
<PAGE>

     3.04.  Vacation. The Employee shall receive four (4) weeks paid vacation
            --------
per year, such vacation to be taken when and as desired by the Employee. Any
time spent by the Employee at professional meetings, instructional courses and
other meetings of like nature so as to better enable the Employee to perform
professional services in the employ of the Employer shall not be considered
vacation time.

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

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

                        Article 4.    CERTAIN COVENANTS

     4.01.  Noncompetition.  During the period of the Employee's employment
            --------------
hereunder and for two years thereafter, the Employee shall not accept employment
with any employer in competition with, nor engage in any activities in
competition with, the business of the Employer or any of its affiliates if such
employment or activities are carried on within a twenty-five mile

                                      -8-
<PAGE>

radius of any hospital or outpatient rehabilitation clinic now or hereafter
managed by the Employer or any of its affiliates or owned by the Employer or any
of its affiliates to the extent of more than 5% of the equity thereof. In
addition, this Section 4.01 shall not prevent the Employee from acquiring as a
passive investor up to 5% of the equity of a competing enterprise so long as the
Employee does not participate in the management thereof.

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

     4.03.  Nonsolicitation.  The Employee covenants and agrees that, during the
            ---------------
period of the Employee's employment hereunder and for a period of one year after
the termination thereof, he will not, whether for his own account or for the
account of any other person, firm, corporation or other business organization,
intentionally interfere with the Employer's relationship with, or

                                      -9-
<PAGE>

endeavor to entice away from the Employer, any person who is, or was at any time
during the one-year period preceding the end of such term, employed by or
associated with the Employer in an executive, managerial or sales capacity.

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

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

                                      -10-
<PAGE>

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

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

                        Article 5.    CHANGE OF CONTROL

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

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

                                      -11-
<PAGE>

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

          (b)  Certain Termination Prior to a Change of Control. If (i) the
               ------------------------------------------------
Employee's employment is terminated by the Employer other than for cause during
the Term, (ii) within the one-year period following such termination, a Change
of Control occurs, and (iii) the Employee reasonably demonstrates that such
termination of employment was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control, then within 10 days

                                      -12-
<PAGE>

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

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

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

                                      -13-
<PAGE>

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

                                      -14-
<PAGE>

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

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

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

                                      -15-
<PAGE>

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

                          Article 6.    MISCELLANEOUS

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

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

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

     6.04. Entire Agreement. This writing represents the entire agreement and
           ----------------
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may not be altered or amended except by an agreement in writing.

                                      -16-
<PAGE>

     6.05. Binding Effect. Subject to Section 6.01, this Agreement shall be
           --------------
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors and administrators. If any provision of
this Agreement shall be or become illegal or unenforceable in whole or in part
for any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and subsisting.

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

           If to Employee:

           LeRoy S. Zimmerman
           4525 Custer Terrace
           Harrisburg, PA 17110

           If to the Employer:

           Select Medical Corporation
           4716 Old Gettysburg Road
           Mechanicsburg, PA 17055
           Attention:  General Counsel

     6.07. Waivers and Amendments.  This Agreement may be amended, superseded,
           ----------------------
canceled, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. Except as expressly provided herein, no delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege nor any single or partial exercise of any such right, power
or privilege,

                                      -17-
<PAGE>

preclude any other or further exercise thereof or the exercise of any other such
right, power or privilege.

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

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

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

                              SELECT MEDICAL CORPORATION, a
                              Delaware corporation

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

                               /s/ LeRoy S. Zimmerman
                              --------------------------------
                                      LeRoy S. Zimmerman

                                      -18-

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