Document:

<PAGE>

                                                                   Exhibit 10.41

                            STOCKHOLDERS AGREEMENT
                            ----------------------

          THIS AGREEMENT is made as of February 5, 1997 by and among Select
Medical Corporation, a Delaware corporation (the "Company"), Golder, Thoma,
Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCR"), Welsh,
Carson, Anderson & Stowe VII, L.P., a Delaware limited partnership, and certain
of its partners (collectively, "WCAS" and together with GTCR, the "Investors"),
Select Investments II, a Pennsylvania general partnership (the "Pennsylvania
Partnership"), Select Partners, L.P., a Delaware limited partnership (the
"Delaware Partnership," together with the Pennsylvania Partnership, the
"Partnerships"), and Rocco Ortenzio and Robert Ortenzio (each, an "Executive"
and collectively, the "Executives").  The Investors, the Partnerships and the
Executives are collectively referred to herein as the "Stockholders" and
individually as a "Stockholder." Capitalized terms used but not otherwise
defined herein are defined in Section 6 hereof.

          The Investors will purchase shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), and the Company's Class A Preferred
Stock, par value $.0l per share (the "Class A Preferred"), pursuant to a
purchase agreement between the Investors and the Company dated as of the date
hereof (the "Purchase Agreement").  The Executives and the Partnerships will
purchase shares of Common Stock and Class A Preferred, as applicable, pursuant
to a senior management agreement among the Company, the Partnerships, John
Ortenzio, Martin Ortenzio and each Executive dated as of the date hereof (each,
a "Senior Management Agreement").

          The Common Stock and the Class A Preferred are sometimes collectively
referred to herein as the "Stock."

          The execution and delivery of this Agreement is a condition to the
Investors' purchase of Common Stock and Class A Preferred pursuant to the
Purchase Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

          1.   Board of Directors.
               ------------------

          (a)  From and after the Closing and until the provisions of this
Section 1 cease to be effective, each Stockholder shall vote all of his
Stockholder Shares and any other voting securities of the Company over which
such Stockholder has voting control and shall take all other necessary or
desirable actions within his control (whether in his capacity as a stockholder,
director, member of a board committee or officer of the Company or otherwise,
and including, without
<PAGE>

limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:

               (i)    the authorized number of directors on the Company's board
     of directors (the "Board") shall be established at a maximum of eight
     directors;

               (ii)   the following persons shall be elected to the Board:

                      (A) two representatives designated by GTCR (the "GTCR
               Directors"), who shall initially be Bryan C. Cressey and Donald
               J. Edwards;

                      (B) two members of the Company's management (the
               "Management Directors"), who shall initially be Rocco Ortenzio
               and Robert Ortenzio;

                      (C) two representatives designated by WCAS (the "WCAS
               Directors"), who shall initially be Russell L. Carson and James
               B. Hoover; and

                      (D) two representatives will be jointly chosen by GTCR,
               Rocco Ortenzio, Robert Ortenzio and WCAS (the "Outside
               Directors") at a mutually agreeable time; provided that such
               Outside Directors shall not be a member of the Company's
               management or an employee or officer of the Company or its
               subsidiaries;

               (iii)  if requested by either GTCR or WCAS, the composition of
     the board of directors of each of the Company's subsidiaries (a "Sub
     Board") shall be the same as that of the Board;

               (iv)   the removal from the Board or a Sub Board (with or without
     cause) of any GTCR Director, any Management Director, any WCAS Director or
     any Outside Director shall be only upon the written request of the person
     or persons originally entitled to designate such director pursuant to
     Section 1(a)(ii) above; provided that if GTCR, Rocco Ortenzio, Robert
     Ortenzio and WCAS are unable to agree on the removal of the director
     designated pursuant to Section 1(a)(ii)(D) above, then removal of such
     director will be determined by a majority of the other Board members;
     provided further, that if any Management Director ceases to be an employee
     of the Company and its subsidiaries, he shall be removed as a director
     promptly after his employment ceases on a date specified by GTCR; and

               (v)    in the event that any representative designated hereunder
     for any reason ceases to serve as a member of the Board or a Sub Board
     during his term of office, the resulting vacancy on the Board or the Sub
     Board shall be filled by a representative

                                      -2-
<PAGE>

     designated by the person or persons originally entitled to designate such
     director pursuant to Section 1(a)(ii) above.

          (b)  There shall be at least four meetings of the Board during every
fiscal year, at least one of which shall be held in each 120-day period during
the Company's fiscal year.  The Company shall pay all out-of-pocket expenses
incurred by each director in connection with attending regular and special
meetings of the Board, any Sub Board and any committee thereof.

          (c)  If any party fails to designate a representative to fill a
directorship pursuant to the terms of this Section 1, the election of a person
to such directorship shall be accomplished in accordance with the Company's
bylaws and applicable law.

          (d)  Notwithstanding anything to the contrary contained in this
Section 1, in the event the holder or holders of Class A Preferred exercise
their right to elect a director to the Board upon the occurrence of an Event of
Noncompliance under the Company's Certificate of Incorporation, the provisions
of this Section 1 shall remain in effect; provided that the size of the Board
shall be increased by one member, who shall be elected by the holders of the
Class A Preferred in accordance with the Certificate of Incorporation.

          2.   Irrevocable Proxy; Conflicting Agreements.
               -----------------------------------------

          (a)  In order to secure each Executive's, each Partnership's and each
Additional Executive's obligation to vote its Stockholder Shares and other
voting securities of the Company in accordance with the provisions of Section 1
and Section 4 hereof in the event either of the Partnerships, such Executive or
such Additional Executive fails to comply with its obligations under such
Sections, each of the Partnerships, each Executive, and each Additional
Executive hereby appoints Bryan C. Cressey, as its true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of its
Stockholder Shares and other voting securities of the Company for the election
and/or removal of directors and all such other matters as expressly provided for
in Section 1 and Section 4.  Bryan C. Cressey may exercise the irrevocable proxy
granted to him hereunder at any time (but only at such time as) either of the
Partnerships, such Executive or such Additional Executive fails to comply with
the provisions of this Agreement.  The proxies and powers granted by each of the
Partnerships, each Executive and each Additional Executive pursuant to this
Section 2 are coupled with an interest and are given to secure the performance
of each of the Partnership's, such Executive's and such Additional Executive's
obligations to the Investors under this Agreement.  Such proxies and powers will
be irrevocable for the term of this Agreement and will survive the death,
incompetency and disability of such Executive or such Additional Executive and
the bankruptcy, insolvency or dissolution of either of the Partnerships (and the
respective holders of their Stockholder Shares).

          (b)  Each Stockholder represents that he has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement, and no holder of Stockholder
Shares shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement.

                                      -3-
<PAGE>

          3.   Legend.  Each certificate evidencing Stockholder Shares and each
               ------
certificate issued in exchange for or upon the Transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
Transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

          "The securities represented by this certificate are subject
          to a Stockholders Agreement dated as of February 5, 1997,
          among the issuer of such securities (the "Company") and
          certain of the Company's stockholders. A copy of such
          Stockholders Agreement will be furnished without charge by
          the Company to the holder hereof upon written request."

The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof.  The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares.

          4.   Sale of the Company.
               -------------------

          (a)  If the Board and the holders of a majority of the shares of Class
A Preferred then outstanding (or if no shares of Class A Preferred are
outstanding, then a majority of the shares of Common Stock then outstanding)
approve a Sale of the Company (an "Approved Sale"), each holder of Common Stock
shall vote for, consent to and raise no objections against such Approved Sale.
If the Approved Sale is structured as a (i) merger or consolidation, each holder
of Common Stock shall waive any dissenters' rights, appraisal rights or similar
rights in connection with such merger or consolidation or (ii) sale of stock,
each holder of Common Stock shall agree to sell all of his Common Stock and
rights to acquire Common Stock on the terms and conditions approved by the Board
and the holders of a majority of the Common Stock then outstanding.  Each holder
of Common Stock shall take all necessary or desirable actions in connection with
the consummation of the Approved Sale as requested by the Company, including,
without limitation, executing a sale contract pursuant to which each holder of
Common Stock will severally (and not jointly) make the same representations,
warranties and indemnities regarding the Company and its business.  Each holder
of Common Stock will also be responsible for paying a pro rata share of all fees
and expenses incurred in connection with the Approved Sale.

          (b)  The obligations of the holders of Common Stock with respect to
the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Common Stock shall receive the same form of consideration and the same
amount of consideration; (ii) if any holders of a class of Common Stock are
given an option as to the form and amount of consideration to be received, each
holder of such class of Common Stock shall be given the same option; and (iii)
each holder of then currently exercisable rights to acquire shares of a class of
Common Stock shall be given an opportunity to either (A) exercise such rights
prior to the consummation of the Approved Sale and participate in such sale as
holders of such class of Common Stock or (B) upon the consummation of the
Approved Sale, receive in exchange for such rights consideration equal to the
amount determined by multiplying (1) the same amount of consideration per share
of a class of Common

                                      -4-
<PAGE>

Stock received by holders of such class of Common Stock in connection with the
Approved Sale less the exercise price per share of such class of Common Stock of
such rights to acquire such class of Common Stock by (2) the number of shares of
such class of Common Stock represented by such rights.

          5.   Participation Rights.
               --------------------

          (a)  In the event of a sale of any class of Restricted Securities (as
defined in and in accordance with the terms of the Purchase Agreement) by either
of the Investors, then at least 30 days prior to any such Transfer (other than a
Public Offering), the Investor(s) shall deliver a written notice (the "Investors
Sale Notice") to the Company and each other Stockholder, specifying in
reasonable detail the identity of the prospective transferee(s), the number of
shares of each class to be transferred and the terms and conditions of the
Transfer.  Each other Stockholder may elect to participate in the contemplated
Transfer at the same price per share and on the same terms by delivering written
notice to the Investor(s) within 30 days after delivery of the Investors Sale
Notice.  In the event that more than one class of Stock is being sold by such
Investor(s), then each other Stockholder participating in such sale shall also
sell a pro rata amount of all such classes of Stock being sold by such
Investor(s).  If any other Stockholder has elected to participate in such
Transfer, the Investor(s) and such other Stockholder(s) shall be entitled to
sell in the contemplated Transfer, at the same price and on the same terms, a
number of shares of any class of Stock being sold equal to the product of (i)
the quotient determined by dividing the percentage of such class of Stock (on a
fully-diluted basis) held by such other Stockholder(s) by the aggregate
percentage of such class of Stock (on a fully-diluted basis) owned by each
Person participating in such sale and (ii) the number of shares of such class of
Stock to be sold in the contemplated Transfer.

          For example, if the Investors Sale Notice contemplated a sale of 100
          -----------
          shares of Common Stock by the Investors, and if the Investors at such
          time own 60% of all Common Stock and if only one Executive elects to
          participate and owns 20% of all Common Stock, the Investors would be
          entitled to sell 75 shares (60% / 80% x 100 shares) and such Executive
          would be entitled to sell 25 shares (20% / 80% x 100 shares).

The Investors will use their best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the other Stockholder(s) in
any contemplated Transfer, and will not Transfer any class of its Stock to the
prospective transferee(s) if such prospective transferee(s) refuses to allow the
participation of such other Stockholder(s).

          (b)  Each holder transferring any class of Stock pursuant to this
Section 5 shall pay its pro rata share (based on the number of such shares to be
sold) of the expenses incurred by the holders in connection with such Transfer
and shall be obligated to join on a pro rata basis (based on the number of such
shares to be sold) in any indemnification or other obligations that the
Investor(s) agree(s) to provide in connection with such Transfer (other than any
such obligations that relate specifically to a particular holder such as
indemnification with respect to representations and warranties given by a holder
regarding such holder's title to and ownership of such shares; provided that no
holder shall be obligated in connection with such Transfer to agree to indemnify
or

                                      -5-
<PAGE>

hold harmless the transferees with respect to an amount in excess of the net
cash proceeds paid to such holder in connection with such Transfer).

          6.   Definitions.
               -----------

          "Additional Executive" means any member of the Company's senior
           --------------------
management who becomes a "Stockholder" in accordance with Section 9 of this
Agreement.

          "Affiliate" of either of the Investors means any general or limited
           ---------
partner of such Investor or any other person, entity or investment fund
controlling, controlled by or under common control with such Investor.

          "Closing" shall have the meaning set forth in the Purchase Agreement.
           -------

          "Person" means an individual, a partnership, a limited liability
           ------
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

          "Qualified Public Offering" means a Public Offering having an
           -------------------------
aggregate offering price of at least $20,000,000.

          "Public Offering" means the sale in an underwritten public offering
           ---------------
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.

          "Sale of the Company" means any transaction or series of transactions
           -------------------
pursuant to which any person(s) or entity(ies) (including any Affiliate of the
Investors) other than the Investors in the aggregate acquire(s) (i) capital
stock of the Company possessing the voting power (other than voting rights
accruing only in the event of a default, breach or event of noncompliance) to
elect a majority of the Company's board of directors (whether by merger,
consolidation, reorganization, combination, sale or transfer of the Company's
capital stock, shareholder or voting agreement, proxy, power of attorney or
otherwise) or (ii) all or substantially all of the Company's assets determined
on a consolidated basis.

          "Securities Act" means the Securities Act of 1933, as amended from
           --------------
time to time.

          "Senior Management" means the Company's Chief Executive Officer,
           -----------------
President, Chief Operating Officer, Chief Financial Officer and such other
employees of the Company as approved by the Board.

          "Stockholder Shares" means (i) any Common Stock purchased or otherwise
           ------------------
acquired by any Stockholder, (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in clause
(i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Company held by a Stockholder; provided that Stockholder Shares
shall not include nonvoting stock described in

                                      -6-
<PAGE>

(iii) above for purposes of Section 1 hereof. As to any particular shares
constituting Stockholder Shares, such shares will cease to be Stockholder Shares
when they have been (x) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (y)
sold to the public through a broker, dealer or market maker pursuant to Rule 144
(or any similar provision then in force) under the Securities Act or (z) become
eligible for sale pursuant to Rule 144(k) (or any similar provision then in
force) under the Securities Act.

          "Transfer" means to sell, transfer, assign, pledge or otherwise
           --------
dispose of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).

          7.   Transfers; Transfers in Violation of Agreement.  Prior to
               ----------------------------------------------
transferring any Stockholder Shares to any person or entity (other than a
Transfer following which the Stockholder Shares cease to be Stockholder Shares),
the transferring Stockholder shall cause the prospective transferee to execute
and deliver to the Company and the other Stockholders a counterpart of this
Agreement.  Any Transfer or attempted Transfer of any Stockholder Shares in
violation of any provision of this Agreement shall be void, and the Company
shall not record such Transfer on its books or treat any purported transferee of
such Stockholder Shares as the owner of such shares for any purpose.

          8.   Reservation of Common Stock.  For a period of three years, the
               ---------------------------
Company shall reserve 4.31% of its authorized shares of Common Stock for
issuance to certain senior management employees of the Company and Board members
at a price of $0.50 per share; provided that the time and amount of any such
issuance and the identity of any purchaser thereof shall be determined jointly
by the Board and Senior Management and each such purchaser shall also buy such
amount of Class A Preferred as may be specified by the Board and Senior
Management.

          9.   Additional Stockholders.  In connection with the issuance of any
               -----------------------
additional equity securities of the Company, the Company may permit such person
to become a party to this Agreement and succeed to all of the rights and
obligations of a "Stockholder" under this Agreement by obtaining an executed
counterpart signature page to this Agreement, and, upon such execution, such
person shall for all purposes be a "Stockholder" party to this Agreement.

          10.  Amendment and Waiver.  Except as otherwise provided herein, no
               --------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company, GTCR, WCAS and each
Executive.  The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.

          11.  Severability.  Whenever possible, each provision of this
               ------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any

                                      -7-
<PAGE>

other provision or any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.

          12.  Entire Agreement.  Except as otherwise expressly set forth
               ----------------
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.

          13.  Successors and Assigns.  Except as otherwise provided herein,
               ----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.

          14.  Counterparts.  This Agreement may be executed in separate
               ------------
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

          15.  Remedies.  The Company and each Stockholder shall be entitled to
               --------
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company and each Stockholder may in
its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.

          16.  Notices.  Any notice provided for in this Agreement shall be in
               -------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the Schedule of Stockholders attached
hereto and to any subsequent holder of Common Stock subject to this Agreement at
such address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:

          If to the Company:
          -----------------

          Select Medical Corporation
          4718 Old Gettysburg Road
          P.O. Box 2034
          Mechanicsburg, Pennsylvania 17055
          Attention: Chairman and Chief Executive Officer

                                      -8-
<PAGE>

          17.  Governing Law.  The corporate law of Delaware shall govern all
               -------------
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Illinois, without giving effect to any choice of law or
other conflict of law provision or rule (whether of the State of Illinois or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.

          18.  Descriptive Headings.  The descriptive headings of this Agreement
               --------------------
are inserted for convenience only and do not constitute a part of this
Agreement.

          19.  Term.  Notwithstanding anything herein to the contrary, this
               ----
Agreement shall terminate upon the consummation of a Qualified Public Offering.

                                   * * * * *

                                      -9-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.

                                   SELECT MEDICAL CORPORATION

                                   By: /s/ Rocco A. Ortenzio
                                       -----------------------------------------

                                   Its: Chairman/CEO
                                        ----------------------------------------

                                   GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.

                                   By:   GTCR V, L.P.
                                   Its:  General Partner

                                   By:   Golder, Thoma, Cressey, Rauner, Inc.
                                   Its:  General Partner

                                   By:   /s/ [ILLEGIBLE]
                                         ---------------------------------------
                                   Its:  Principal

                                   WELSH, CARSON, ANDERSON &
                                   STOWE VI, L.P.

                                   By: /s/ Laura VanBuren
                                       -----------------------------------------
                                   Its: General Partner
                                       -----------------------------------------

                                   By: _________________________________________
                                   Its: ________________________________________

                                   WELSH, CARSON, ANDERSON & STOWE
                                   HEALTHCARE PARTNERS, L.P.

                                   By: /s/ Laura VanBuren
                                       -----------------------------------------
                                   Its: General Partner
                                       ----------------------------------------
<PAGE>

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Bruce Anderson

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Russell Carson

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Patrick Welsh

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Richard Stowe

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Andrew Paul

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Thomas McInerney

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Laura VanBuren

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   James Hoover

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Robert Minicucci

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Anthony De Nicola

                                   /s/ Laura VanBuren
                                   ---------------------------------------------
                                   Paul Queally

                                   /s/ David F. Bellet
                                   ---------------------------------------------
                                   David F. Bellet

                                   MSTC, custodian FBO the IRA/Rollover of
                                   James B. Hover

                                   By: /s/ James B. Hoover
                                       -----------------------------------------
<PAGE>

                                   /s/ Rocco A. Ortenzio
                                   ---------------------------------------------
                                   Rocco A. Ortenzio

                                   /s/ Robert A. Ortenzio
                                   ---------------------------------------------
                                   Robert A. Ortenzio

                                   SELECT INVESTMENTS II

                                   By: /s/ Rocco A. Ortenzio
                                   ---------------------------------------------
                                   Its: General Partner
                                   ---------------------------------------------

                                   SELECT PARTNERS, L.P.

                                   By: /s/ Rocco A. Ortenzio
                                   ---------------------------------------------
                                   Its:  General Partner
                                   ---------------------------------------------<PAGE>

                                                                   EXHIBIT 10.42

                   AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
                   -----------------------------------------

          AMENDMENT NO, 1 TO STOCKHOLDERS AGREEMENT, dated as of December 15,
1998 (the "Amendment"), by and among Select Medical Corporation, a Delaware
corporation (the "Company"), the stockholders of the Company whose names appear
in Schedule I annexed hereto (collectively, the "Original Stockholders"), and
the additional stockholders of the Company whose names appear in Schedule II
annexed hereto (collectively, the "Additional Stockholders"), amending the
Stockholders Agreement dated as of February 5, 1997 (the "Agreement") by and
among the Company, the Original Stockholders and the other stockholders of the
Company named as parties thereto at the foot thereof.

          WHEREAS, the Company, the Original Stockholders, the Additional
Stockholders and certain other stockholders of the Company (collectively, the
"December 1998 Investors") are parties to a Securities Purchase Agreement dated
as of December 15, 1998, providing, among other things, for the sale to such
December 1998 Investors of an aggregate 21,224,489 shares (the "December 1998
Shares") of the Company's Common Stock, par value $.01 (the "Common Stock"); and

          WHEREAS, the Company, the Original Stockholders and the other
stockholders of the Company named as parties to the Agreement entered into the
Agreement in order, among other things, to specify certain rights and
obligations of each of the parties thereto with respect to the shares of Common
Stock held by each of them; and

          WHEREAS, the Agreement may be amended by the written consent of the
Company and the Original Stockholders; and

          WHEREAS, the Company and the Original Stockholders now desire to amend
the Agreement in the manner set forth below in order, among other things, to
include the December 1998 Shares as "Stockholder Shares" under the Agreement and
to include the Additional Stockholders as "Investors" and "Stockholders" under
the Agreement;

          NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     Section 1.     Definitions; References.  Unless otherwise specifically
                    -----------------------
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof," "hereunder," "herein," and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from after the date hereof refer to the
Agreement as amended by this Amendment .

     Section 2.     Additional Stockholders as Investors and Stockholders.
                    -----------------------------------------------------
Effective as of the date hereof, each of the Additional Stockholders shall
become an Investor, and thereby a Stockholder, under the Agreement, and by such
Additional Stockholder's execution of this
<PAGE>

Amendment, each of such Additional Stockholders agrees to comply with and be
bound by all of the provisions of the Agreement as an Investor and Stockholder
thereunder, as if an original signatory thereto. For purposes of the Agreement,
the December 1998 Shares shall be deemed to be included in the term "Common
Stock" and "Stockholder Shares".

     Section 3.     Amendment to Second Unnumbered Paragraph.  The first
                    ----------------------------------------
sentence of the second unnumbered paragraph of the Agreement is hereby amended
to read in its entirety as follows:

                    "Certain of the Investors will purchase shares of the
          Company's Common Stock, par value $.01 per share (the "February 1997
          Common"), and the Company's Class A Preferred Stock (the "Class A
          Preferred"), pursuant to a Purchase Agreement, dated as of February 5,
          1997 (the "1997 Purchase Agreement"), among the Company and such
          Investors. Certain of the Investors and the Additional Stockholders
          (as such term is defined in Amendment No. 1 to Stockholders Agreement
          dated as of December 15, 1998 among the Company and the parties
          thereto (the "Amendment")) will also purchase shares of the Company's
          Common Stock, par value $.01 per share (collectively with the February
          1997 Common, the "Common Stock") pursuant to a Securities Purchase
          Agreement, dated as of December 15, 1998 (the "1998 Purchase
          Agreement" and, collectively with the 1997 Purchase Agreement, the
          "Purchase Agreements" or the "Purchase Agreement"), among the Company,
          such Investors and the Additional Stockholders."

     Section 4.     Amendment to Fourth Unnumbered Paragraph.  The fourth
                    ----------------------------------------
unnumbered paragraph of the Agreement is hereby amended to read in its entirety
as follows:

                    "The execution and delivery of this Agreement is a condition
          to certain of the Investors' purchase of Common Stock and Class A
          Preferred pursuant to the 1997 Purchase Agreement. The execution and
          delivery of the Amendment is a condition to the purchase by certain of
          the Investors and the Additional Stockholders of Common Stock pursuant
          to the 1998 Purchase Agreement."

     Section 5.     Addition to Schedule of Stockholders.  The Schedule of
                    ------------------------------------
Stockholders annexed to the Agreement is hereby amended by adding the names and
addresses of each of the Additional Stockholders set forth in Schedule II
hereto.

     Section 6.     Effect of Amendment.  Except as expressly provided in this
                    -------------------
Amendment, nothing herein shall affect or be deemed to affect any provisions of
the Agreement, and except only to the extent that they may be varied hereby, all
of the terms of the Agreement shall remain unchanged and in full force and
effect.

     Section 7.     Applicable Law.  This Amendment shall be construed and
                    --------------
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Delaware without reference to the principles of
conflicts of law.

                                       2
<PAGE>

     Section 8.     Counterparts.  This Amendment may be executed in
                    ------------
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Amendment immediately upon affixing such party's signature hereto.

     IN WITNESS WHEREOF, the Company, the Original Stockholders and the
Additional Stockholders have executed this Amendment as of the day and year
first above written.

                              SELECT MEDICAL CORPORATION

                              By  /s/ Rocco A. Ortenzio
                                -------------------------------------
                              Name:
                              Title:

                              ORIGINAL STOCKHOLDERS:

                              GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
                              By GTCR V, L.P., General Partner
                              By Golder, Thoma, Cressey, Rauner, Inc., General
                              partner

                              By  /s/ Donald Edwards
                                -------------------------------------
                              Name:
                              Title:

                              WELSH, CARSON, ANDERSON & STOWE VII, L.P.
                              By WCAS VII Partners, L.P., General Partner

                              By  /s/ Laura VanBuren
                                -------------------------------------
                              Name:
                              Title:

                                       3
<PAGE>

                              Bruce K. Anderson
                              Russell L. Carson
                              Anthony J. de Nicola
                              Thomas E. Mclnerney
                              James B. Hoover
                              Robert A. Minicucci
                              Andrew M. Paul
                              Paul B. Queally
                              Richard H. Stowe
                              Laura M. VanBuren
                              Patrick J. Welsh

                              By  /s/ Laura VanBuren
                                -----------------------------
                                  Laura M. VanBuren
                                  Individually and as
                                  Attorney-in-fact

                               /s/  Rocco A. Ortenzio
                              -------------------------------
                                  Rocco Ortenzio

                               /s/  Robert A. Ortenzio
                              -------------------------------
                                  Robert Ortenzio

                              ADDITIONAL STOCKHOLDERS:

                              WCAS CAPITAL PARTNERS III, L.P.
                              By WCAS CP III Associates, L.L.C., General Partner

                              By /s/ Laura VanBuren
                                -----------------------------------
                              Name:
                              Title:

                                 /s/ Lawrence B. Sorrel
                              -------------------------------------
                                  Lawrence B. Sorrel

                                       4
<PAGE>

                                 /s/ Priscilla A. Newman
                              --------------------------------
                                  Priscilla A. Newman

                                 /s/ Rudolph Rupert
                              --------------------------------
                                  Rudolph Rupert

                                 /s/ D. Scott Mackesy
                              --------------------------------
                                  D. Scott Mackesy

                              GTCR FUND VI, L.P.
                              By GTCR Partners VI, L.P., General Partner
                              By GTCR Golder Rauner, L.L.C., General Partner

                              By /s/ Donald Edwards
                                ----------------------------------------------
                              Name:
                              Its:  Principal

                              THOMA CRESSEY FUND VI, L.P.
                              By TC Partners VI, L.P., General Partner
                              By Thoma Cressey Equity Partners Inc., General
                              Partner

                              By /s/ [Illegible]
                                ----------------------------------------------
                              Name:
                              Title:

                              SELECT HEALTHCARE INVESTORS I, L.P.

                              By /s/ Rocco A. Ortenzio
                                ----------------------------------------------
                              Name:
                              Title:

                                       5
<PAGE>

                              ANVERS, L.P.

                              By:  FSIP, LLC
                                  General Partner

                              By /s/ Leopold Swergold
                                ----------------------------------------------
                              Name:  Leopold Swergold
                              Title:    Senior Managing Director

                              ANVERS, L.P.

                              By:  FSIP, LLC
                                  General Partner

                              By /s/ Leopold Swergold
                                ----------------------------------------------
                              Name:  Leopold Swergold
                              Title:    Senior Managing Director

                              GTCR VI EXECUTIVE FUND, L.P.
                              By GTCR Partners VI, L.P., General Partner
                              By GTCR Golder Rauner L.L.C. General Partner

                              By /s/ Donald Edwards
                                ----------------------------------------------
                              Name:
                              Its:  Principal

                              GTCR ASSOCIATES VI
                              By GTCR Partners VI, L.P., Managing General
                              Partner
                              By GTCR Golder Rauner, L.L.C., General Partner

                              By /s/ Donald Edwards
                                ----------------------------------------------
                              Name:
                              Its:  Principal

                                  /s/ Bryan C. Cressey
                                ----------------------------------------------
                              Bryan C. Cressey

                                       6

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