Document:

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                                                                   Exhibit 10.75

                           SELECT MEDICAL CORPORATION
                           SELECT MEDICAL ESCROW, INC.

                                  $175,000,000

                    7 1/2% Senior Subordinated Notes due 2013

                               PURCHASE AGREEMENT

                                                                   July 29, 2003
J.P. MORGAN SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER & Smith
                       INCORPORATED
WACHOVIA CAPITAL MARKETS, LLC
SG COWEN SECURITIES CORPORATION
CIBC WORLD MARKETS CORP.
FLEET SECURITIES, INC.
JEFFERIES & COMPANY, INC.
c/o J.P. MORGAN SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York  10017

Ladies and Gentlemen:

                  Select Medical Escrow, Inc. ("Select Medical Escrow"), a
wholly owned subsidiary of Select Medical Corporation, a Delaware corporation
(the "Company"), proposes to issue and sell $175,000,000 aggregate principal
amount of its 7-1/2% Senior Subordinated Notes due 2013 (the "Securities"). The
Securities will be issued pursuant to an Indenture to be dated as of August 12,
2003 (the "Indenture") between Select Medical Escrow and U.S. Bank Trust
National Association, as trustee (the "Trustee"). On or prior to the Closing
Date (as defined herein) Select Medical Escrow will be designated an
Unrestricted Subsidiary under (and as such term is defined in) the Indenture,
dated as of June 11, 2001 (the "Existing Indenture"), among the Company, the
subsidiary guarantors party thereto and State Street Bank and Trust Company, as
trustee.

                  On the Closing Date, (i) Select Medical Escrow will issue the
Securities; (ii) Select Medical Escrow and the Company will enter into an Escrow
Agreement, dated as of the Closing Date (the "Escrow Agreement"), among the
Company, Select Medical

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Escrow, the Trustee and U.S. Bank Trust National Association, as escrow agent
(the "Escrow Agent") in the form attached hereto as Annex A, and Select Medical
Escrow will enter into the Securities Account Control Agreement (the "Securities
Account Control Agreement"), among Select Medical Escrow, as pledgor, the
Trustee, as pledgee, assignee and secured party, and U.S. Bank Trust National
Association as escrow agent and securities intermediary; (iii) the Company will
make an equity contribution to Select Medical Escrow in an amount such that
Select Medical Escrow will have cash and cash equivalents in an amount
sufficient to redeem in cash the Securities at a redemption price equal to 101%
of the aggregate principal amount thereof plus accrued and unpaid interest
thereon to December 11, 2003 (the "Equity Contribution"); and (iv) pursuant to
the Escrow Agreement, Select Medical Escrow will deposit with the Escrow Agent
the proceeds of the issuance of the Securities and of the Equity Contribution
(collectively, the "Escrowed Funds") and will grant a perfected first priority
security interest in the Escrowed Funds to the Trustee for the benefit of the
Holders of the Securities (the "Security Interest"). On the date of the closing
of the Acquisition (defined below), Select Medical Escrow, the Company and each
of the subsidiaries of the Company listed on Schedule I hereto (each a "Company
Guarantor" and together, the "Company Guarantors") will enter into an Assumption
Agreement (the "Assumption Agreement"), in the form attached to the Escrow
Agreement.

                  The net proceeds of the issuance of the Securities will be
used in part to acquire (such acquisition, the "Acquisition") all of the
outstanding capital stock of Kessler Rehabilitation Corporation ("Kessler")
pursuant to a Stock Purchase Agreement, dated June 30, 2003 (the "Stock Purchase
Agreement") by and among the Company, Kessler and Henry H. Kessler Foundation,
Inc. (the "Kessler Foundation").

                  In connection with the consummation of the Acquisition,
pursuant to the Assumption Agreement and a Supplemental Indenture, in the form
attached to the Escrow Agreement, by and among the Trustee, the Company, Select
Medical Escrow and the Company Guarantors (the "Select Medical Escrow
Supplemental Indenture"), the Company will assume the obligations of Select
Medical Escrow, and the Company Guarantors will guarantee the obligations of the
Company under the Notes, the Indenture, this Agreement, the Registration Rights
Agreement (as defined below) and the Escrow Agreement (the "Company
Assumption"). In connection with the consummation of the Acquisition, pursuant
to the Assumption Agreement and a Supplemental Indenture, in the form attached
to the Escrow Agreement, by and among the Trustee, the Company, Kessler and each
wholly-owned subsidiary of Kessler (collectively with Kessler, the "Kessler
Guarantors," and together with the Company Guarantors, the "Guarantors;" and
such Supplemental Indenture, the "Kessler Supplemental Indenture," and, together
with the Select Medical Escrow Supplemental Indenture, the "Supplemental
Indentures"), the Kessler Guarantors will guarantee the obligations of the
Company under the Notes, the

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Indenture, this Agreement, the Registration Rights Agreement and the Escrow
Agreement (the "Kessler Assumption," and together with the Company Assumption,
the "Assumptions"). Upon the satisfaction of certain conditions set forth in the
Escrow Agreement, including the contemporaneous closing of the Acquisition, the
release of the Security Interest (the "Security Interest Release") and the
consummation of the Assumptions, the Escrowed Funds will be released to Select
Medical Escrow or the Company. The date of the consummation of the Acquisition
and the execution of the Supplemental Indentures is referred to as the
"Acquisition Closing Date." Following the Acquisition and the Assumptions, the
Securities will be guaranteed on an unsecured senior subordinated basis by
guarantees (the "Guarantees", and each a "Guarantee") of the Guarantors.
Notwithstanding anything herein to the contrary and for the avoidance of doubt,
the Kessler Guarantors shall execute the Assumption Agreement, and the Kessler
Supplemental Indenture and the Select Medical Escrow Supplemental Indenture may
be pursuant to one supplemental indenture in the form attached to the Escrow
Agreement but are herein referred by separate terms.

                  The Company hereby confirms its agreement with J.P. Morgan
Securities Inc. ("JPMorgan") and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Wachovia Capital Markets, LLC, SG Cowen
Securities Corporation, CIBC World Markets Corp., Fleet Securities, Inc. and
Jefferies & Company, Inc. (collectively, together with JPMorgan and Merrill
Lynch, the "Initial Purchasers") concerning the purchase of the Securities from
Select Medical Escrow by the several Initial Purchasers.

                  The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Company and
Select Medical Escrow prepared a preliminary offering memorandum dated July 21,
2003 (the "Preliminary Offering Memorandum") and will prepare an offering
memorandum dated the date hereof (the "Offering Memorandum") setting forth
information concerning the Company, Select Medical Escrow, the Guarantors and
the Securities. Copies of the Preliminary Offering Memorandum have been, and
copies of the Offering Memorandum will be, delivered by the Company and Select
Medical Escrow to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Company and Select Medical Escrow hereby
confirm that they have authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in accordance with Section 2.

                  Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will, subject to the terms and
conditions thereof, be entitled to

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

                  Prior to the Closing Date, the Company's Credit Agreement will
be amended (the "Credit Agreement Amendment").

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

                  1. Representations, Warranties and Agreements of the Company,
the Company Guarantors and Select Medical Escrow. The Company, the Company
Guarantors and Select Medical Escrow jointly and severally represent and warrant
to, and agree with, the several Initial Purchasers on and as of the date hereof
and the Closing Date (as defined in Section 3) that (provided, however, that in
the case of any representation or warranty regarding Kessler and each of its
subsidiaries only, any such representation or warranty shall be to the knowledge
of the Company):

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

                  (b) Each of the Preliminary Offering Memorandum and the
         Offering Memorandum, as of its respective date, contains all of the
         information that, if

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         requested by a prospective purchaser of the Securities, would be
         required to be provided to such prospective purchaser pursuant to Rule
         144A(d)(4) under the Securities Act.

                  (c) Assuming the accuracy of the representations and
         warranties of the Initial Purchasers contained in Section 2, compliance
         with the agreements set forth herein, compliance by the Initial
         Purchasers with the offering and transfer procedures and restrictions
         described in the Transaction Documents (as defined in Section 1(g)),
         and the accuracy of the representations and warranties made in
         accordance with the Transaction Documents by purchasers to whom the
         Initial Purchasers initially resell the Securities, it is not
         necessary, in connection with the issuance and sale of the Securities
         to the Initial Purchasers and the offer, resale and delivery of the
         Securities by the Initial Purchasers in the manner contemplated by this
         Agreement and the Offering Memorandum, to register the Securities under
         the Securities Act or to qualify the Indenture under the Trust
         Indenture Act of 1939, as amended (the "Trust Indenture Act") (it being
         understood that no representation is made as to any resale subsequent
         to the initial resale of the Securities).

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

                  (e) (1)  Each subsidiary and, in the case of Kessler and each
         of its subsidiaries, each future subsidiary of the Company set forth on
         Schedule III hereto (which lists (a) all Company Guarantors, (b) all
         other subsidiaries of the Company that are either operating entities or
         holding companies, (c) Select Medical Escrow and (d) Kessler and each
         of its subsidiaries, each a "Subsidiary" and, collectively, the
         "Subsidiaries") has been duly organized and is validly existing as a
         corporation or other entity in good standing under the laws of the
         jurisdiction of its incorporation, has corporate or other power and
         authority to own, lease and operate its properties and to conduct its
         business as described in

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         the Offering Memorandum and is duly qualified as a foreign corporation
         or other entity to transact business and is in good standing in each
         jurisdiction in which such qualification is required, whether by reason
         of the ownership or leasing of property or the conduct of business,
         except where the failure so to qualify or to be in good standing would
         not result in a Material Adverse Effect; except as set forth on
         Schedule IV hereto, (a) all of the issued and outstanding capital stock
         of each such Subsidiary that is a corporation has been duly authorized
         and validly issued, is fully paid and non-assessable and is owned, or,
         in the case of the Kessler Guarantors, will be owned after the
         Acquisition Closing Date, by the Company, directly or through
         subsidiaries, free and clear of any security interest, mortgage,
         pledge, lien, encumbrance, claim or equity, and (b) all of the
         ownership interests of each such Subsidiary that is not a corporation
         have been duly authorized and are owned, or, in the case of the Kessler
         Guarantors, will be owned after the Acquisition Closing Date, by the
         Company, directly or through subsidiaries, free and clear of any
         security interest, mortgage, pledge, lien, encumbrance, claim or
         equity; none of the outstanding shares of capital stock of any
         Subsidiary was issued in violation of the preemptive or similar rights
         of any securityholder of such Subsidiary. The only subsidiaries of the
         Company and Kessler are the subsidiaries listed on Schedule I hereto
         and the subsidiaries listed on Schedule V hereto (which lists all
         subsidiaries of the Company and Kessler that are not guaranteeing the
         Securities).

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

                  (f) The authorized, issued and outstanding capital stock of
         the Company is as set forth in the Offering Memorandum in the column
         entitled "Actual" under the caption "Capitalization" (except for
         subsequent issuances by the Company, if

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         any, pursuant to reservations, agreements or employee benefit plans
         referred to in the Offering Memorandum or pursuant to the exercise of
         convertible securities or options referred to in the Offering
         Memorandum or repurchases of an immaterial number of shares of the
         Company's capital stock held by former employees). Select Medical
         Escrow is a wholly-owned subsidiary of the Company. Following
         consummation of the Acquisition, Kessler will be a wholly-owned
         subsidiary of the Company. The shares of issued and outstanding capital
         stock of the Company, Select Medical Escrow and Kessler have been duly
         authorized and validly issued and are fully paid and non-assessable;
         none of the outstanding shares of capital stock of the Company, Select
         Medical Escrow or Kessler were issued in violation of the preemptive or
         other similar rights of any securityholder of the Company, Select
         Medical Escrow or Kessler, respectively, that were not subsequently
         waived. The shares of capital stock of the Company issued or to be
         issued in connection with the exercise of any put right held by any
         prior owner of a Facility that was subsequently acquired by the
         Company, have been issued in compliance, in all material respects, with
         all federal and state securities laws. Except as disclosed in the
         Offering Memorandum, there are no outstanding options or warrants to
         purchase, or any preemptive rights or other rights to subscribe for or
         to purchase, any securities or obligations convertible into, or any
         contracts or commitments to issue or sell, shares of the Company's or
         any of its subsidiaries', or Kessler's or any other Kessler Guarantors'
         capital stock or other ownership interests.

                  (g) (i) The Company, Select Medical Escrow and each of the
         Company Guarantors has full right, power and authority to execute and
         deliver this Agreement, the Indenture (including the Guarantee set
         forth therein), the Registration Rights Agreement, and the Securities
         and (ii) the Company has the full right, power and authority to execute
         and deliver the Credit Agreement Amendment (the documents listed in
         clauses (i) and (ii) above are collectively referred to as the
         "Transaction Documents") and the Company, Select Medical Escrow and
         each of the Company Guarantors has the full right, power and authority
         to perform their respective obligations hereunder and thereunder; and
         all corporate action required to be taken for the due and proper
         authorization, execution and delivery of each of the Transaction
         Documents and the consummation of the transactions contemplated
         thereby, including, without limitation the Equity Contribution, have
         been duly and validly taken. Select Medical Escrow has full right,
         power and authority to execute and deliver and to perform its
         obligations under the Escrow Agreement, the Securities Account Control
         Agreement, the Assumption Agreement and the Select Medical Escrow
         Supplemental Indenture, and all corporate action required to be taken
         for the due and proper authorization, execution and delivery of each of
         the foregoing

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         documents and agreements and the consummation of the transactions
         contemplated thereby, including, without limitation, the granting and
         perfection of the Security Interest, has been duly and validly taken.
         The Company has full right, power and authority to execute and deliver
         and to perform its obligations under the Escrow Agreement, the
         Assumption Agreement, the Supplemental Indentures and the Stock
         Purchase Agreement, and all corporate action required to be taken for
         the due and proper authorization, execution and delivery of each of the
         foregoing documents and agreements and the consummation of the
         transactions contemplated thereby has been duly and validly taken. Each
         of the Company Guarantors has full right, power and authority to
         execute and deliver and to perform its obligations under the Assumption
         Agreement and the Select Medical Escrow Supplemental Indenture, and all
         corporate action required to be taken for the due and proper
         authorization, execution and delivery of each of the foregoing
         documents and agreements and the consummation of the transactions
         contemplated thereby has been duly and validly taken. The Company's
         Board of Directors (the "Board") has taken all action necessary to
         permit the Company to cause each of the Kessler Guarantors, and there
         is no fact or circumstance that would prevent each of the Kessler
         Guarantors from having full right, power and authority, to execute and
         deliver and to perform its obligations under the Kessler Supplemental
         Indenture, and all corporate action required to be taken for the due
         and proper authorization, execution and delivery of each of the
         foregoing documents and agreements and the consummation of the
         transactions contemplated thereby has been duly and validly taken by
         the Company and each of its subsidiaries and upon consummation of the
         Acquisition the Company will cause to be taken by each of the Kessler
         Guarantors.

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

                  (i) Each of the Registration Rights Agreement, the Assumption
         Agreement and the Select Medical Escrow Supplemental Indenture has been
         duly authorized by the Company, Select Medical Escrow and each of the
         Company Guarantors and, when duly executed and delivered in accordance
         with its terms by each of the parties thereto, will constitute a valid
         and legally binding agreement of the Company, Select Medical Escrow and
         each of the Company Guarantors enforceable against the Company, Select
         Medical Escrow and each of the Company Guarantors in accordance with
         its terms, except to the extent that such enforceability may be limited
         by applicable bankruptcy, insolvency, fraudulent conveyance,
         reorganization, moratorium and other similar laws affecting creditors'
         rights generally and by general equitable principles (whether
         considered in a proceeding in equity or at law) and an implied covenant
         of good faith and fair

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         dealing. The Stock Purchase Agreement has been duly authorized,
         executed and delivered in accordance with its terms by the Company, and
         constitutes a valid and legally binding agreement of the Company
         enforceable against the Company in accordance with its terms, except to
         the extent that such enforceability may be limited by applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and other similar laws affecting creditors' rights generally
         and by general equitable principles (whether considered in a proceeding
         in equity or at law) and an implied covenant of good faith and fair
         dealing. The Escrow Agreement has been duly authorized by the Company
         and Select Medical Escrow and, when duly executed and delivered in
         accordance with its terms by each of the parties thereto, will
         constitute a valid and legally binding agreement of the Company and
         Select Medical Escrow, enforceable against the Company and Select
         Medical Escrow in accordance with its terms, except to the extent that
         such enforceability may be limited by applicable bankruptcy,
         insolvency, fraudulent conveyance, reorganization, moratorium and other
         similar laws affecting creditors' rights generally and by general
         equitable principles (whether considered in a proceeding in equity or
         at law) and an implied covenant of good faith and fair dealing. The
         Securities Account Control Agreement has been duly authorized by Select
         Medical Escrow and, when duly executed and delivered in accordance with
         its terms by each of the parties thereto, will constitute a valid and
         legally binding agreement of Select Medical Escrow, enforceable against
         Select Medical Escrow in accordance with its terms, except to the
         extent that such enforceability may be limited by applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and other similar laws affecting creditors' rights generally
         and by general equitable principles (whether considered in a proceeding
         in equity or at law). The Kessler Supplemental Indenture has been duly
         authorized by the Company and, in connection with the Acquisition, the
         Company will upon the consummation of the Acquisition cause the Kessler
         Supplemental Indenture to be duly authorized by each of the Kessler
         Guarantors and, when duly executed and delivered in accordance with its
         terms by each of the parties thereto, will constitute a valid and
         legally binding agreement of the Company and each of the Kessler
         Guarantors enforceable against the Company and each of the Kessler
         Guarantors in accordance with its terms, except to the extent that such
         enforceability may be limited by applicable bankruptcy, insolvency,
         fraudulent conveyance, reorganization, moratorium and other similar
         laws affecting creditors' rights generally and by general equitable
         principles (whether considered in a proceeding in equity or at law) and
         an implied covenant of good faith and fair dealing.

                  (j) The Indenture has been, and in the case of the Company and
         the Company Guarantors, will be, and in the case of the Kessler
         Guarantors, upon the

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

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

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                  (l) The Guarantees have been duly authorized by each of the
         Company Guarantors and the Company will cause the Guarantees to be duly
         authorized by the Kessler Guarantors on the Acquisition Closing Date
         and, when the Securities have been duly executed, authenticated, issued
         and delivered as provided in the Indenture and paid for as provided
         herein (assuming due authorization, execution and delivery of the
         Indenture by the Trustee and due authentication of the Securities by
         the Trustee), and in the case of the Company Guarantors, after the
         execution of the Select Medical Escrow Supplemental Indenture, and in
         the case of the Kessler Guarantors, after the execution of the Kessler
         Supplemental Indenture, will constitute valid and legally binding
         obligations of the Guarantors enforceable against the Guarantors in
         accordance with their terms.

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

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

                  (o) Each of the Transaction Documents, the Escrow Agreement,
         the Assumption Agreement, the Supplemental Indentures and the Stock
         Purchase

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         Agreement (collectively, together with the Securities Account Control
         Agreement, the "Related Documents") conforms in all material respects
         to the description thereof contained in the Offering Memorandum.

                  (p) The execution, delivery and performance by Select Medical
         Escrow, the Company and each of the Guarantors of each of the Related
         Documents to which it is or will be a party, the issuance,
         authentication, sale and delivery of the Securities and compliance by
         Select Medical Escrow, the Company and each of the Guarantors with the
         terms thereof and the consummation of the transactions contemplated by
         the Related Documents will not conflict with or result in a breach or
         violation of any of the terms or provisions of, or constitute a default
         under, or result in the creation or imposition of any lien, charge or
         encumbrance upon any property or assets of the Company or any of its
         subsidiaries, or Kessler or any of its subsidiaries, pursuant to any
         indenture, mortgage, deed of trust, loan agreement or other agreement
         or instrument to which the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, is a party or by which the Company
         or any of its subsidiaries, or Kessler or any of its subsidiaries, is
         bound or to which any of the property or assets of the Company or any
         of its subsidiaries, or Kessler or any of its subsidiaries, is subject
         (except for such conflicts, breaches or defaults or liens, charges or
         encumbrances that would not result in a Material Adverse Effect), nor
         will such actions result in any violation of the provisions of the
         charter or by-laws (or other comparable organizational documents) of
         the Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, or any statute or any judgment, order, decree, rule or
         regulation of any court or arbitrator or governmental agency or body
         having jurisdiction over the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, or any of their properties or
         assets; and no consent, approval, authorization or order of, or filing
         or registration with, any such court or arbitrator or governmental
         agency or body under any such statute, judgment, order, decree, rule or
         regulation is required for the execution, delivery and performance by
         Select Medical Escrow, the Company and each of the Guarantors of the
         Related Documents to which each is a party, the issuance,
         authentication, sale and delivery of the Securities and compliance by
         Select Medical Escrow, the Company and each of the Guarantors with the
         terms thereof and the consummation of the transactions contemplated by
         the Related Documents, except for such consents, approvals,
         authorizations, filings, registrations or qualifications which shall
         have been obtained or made prior to the Closing Date and as may be
         required to be obtained or made under the Securities Act and applicable
         state securities laws as provided in the Registration Rights Agreement.

                                       12
<PAGE>

                  (q) PricewaterhouseCoopers LLP are independent certified
         public accountants with respect to the Company and each of its
         subsidiaries and Kessler and each of its subsidiaries, respectively,
         within the applicable rules and regulations of the Commission. The
         consolidated financial statements included in the Offering Memorandum,
         together with the related notes, comply in all material respects with
         the requirements applicable to a registration statement on Form S-4
         under the Securities Act (except that certain supporting schedules and
         exhibits are omitted), present fairly the financial position of the
         Company and its consolidated subsidiaries and Kessler and its
         consolidated subsidiaries, at the dates indicated and the statement of
         operations, stockholders' equity and cash flows of the Company and its
         consolidated subsidiaries and Kessler and its consolidated subsidiaries
         for the periods specified; said financial statements have been prepared
         in conformity with generally accepted accounting principles ("GAAP")
         applied on a consistent basis throughout the periods involved. The
         selected consolidated financial data and the summary consolidated
         financial information of the Company and Kessler included in the
         Offering Memorandum present fairly the information shown therein and
         have been compiled on a basis consistent with that of the audited
         financial statements included in the Offering Memorandum. The pro forma
         financial statements and the related notes thereto and the other pro
         forma information included in the Offering Memorandum present fairly
         the information shown therein, have been prepared in accordance with
         the Commission's rules and guidelines with respect to pro forma
         financial statements and have been properly compiled on the bases
         described therein, and the assumptions used in the preparation thereof
         are reasonable and the adjustments used therein are appropriate to give
         effect to the transactions and circumstances referred to therein.
         Notwithstanding the foregoing, the parties acknowledge that the column
         entitled pro forma "LTM ended March 31, 2003" set forth on page 34 of
         the Offering Memorandum does not comply with the rules of the
         Commission requiring the Company to include pro forma financial
         statements for and as of the latest quarterly period and the prior
         fiscal year only, and the use of Adjusted EBITDA in the Offering
         Memorandum may not comply with Item 10(e) of Regulation S-K.

                  (r) There is no action, suit, proceeding, inquiry or
         investigation before or brought by any court or governmental agency or
         body, domestic or foreign, now pending (other than any sealed "qui tam"
         actions of which the Company has no knowledge), or, to the knowledge of
         the Company, threatened, against or affecting the Company or any of its
         subsidiaries, or Kessler or any of its subsidiaries, which might
         reasonably be expected to result in a Material Adverse Effect, or which
         might reasonably be expected to materially and adversely affect the
         properties or assets of the Company and its subsidiaries and Kessler
         and its subsidiaries taken

                                       13
<PAGE>

         as a whole; the aggregate of all pending legal or governmental
         proceedings to which the Company or any of its subsidiaries, or Kessler
         or any of its subsidiaries, is a party or of which any of their
         respective properties or assets is the subject which are not described
         in the Offering Memorandum, including ordinary routine litigation
         incidental to the business, could not reasonably be expected to result
         in a Material Adverse Effect.

                  (s) No action has been taken and no statute, rule, regulation
         or order has been enacted, adopted or issued by any governmental agency
         or body which prevents the issuance of the Securities or the
         consummation of the Acquisition or suspends the sale of the Securities
         in any jurisdiction; no injunction, restraining order or order of any
         nature by any federal or state court of competent jurisdiction has been
         issued with respect to the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, which would prevent or suspend the
         issuance or sale of the Securities or the consummation of the
         Acquisition or the use of the Preliminary Offering Memorandum or the
         Offering Memorandum in any jurisdiction; no action, suit or proceeding
         is pending against or, to the best knowledge of the Company, threatened
         against or affecting the Company or any of its subsidiaries, or Kessler
         or any of its subsidiaries, before any court or arbitrator or any
         governmental agency, body or official, domestic or foreign, which could
         reasonably be expected to interfere with or adversely affect the
         issuance of the Securities or the consummation of the Acquisition or in
         any manner draw into question the validity or enforceability of any of
         the Related Documents or any action taken or to be taken pursuant
         thereto; and the Company and Select Medical Escrow have complied with
         any and all requests by any securities authority in any jurisdiction
         for additional information to be included in the Preliminary Offering
         Memorandum and the Offering Memorandum.

                  (t) None of the Company or any of its subsidiaries, or Kessler
         or any of its subsidiaries, is (i) in violation of its charter or
         by-laws (or other comparable organizational documents), (ii) in
         default, and no event has occurred which, with notice or lapse of time
         or both, would constitute a default, in the due performance or
         observance of any term, covenant or condition contained in any
         indenture, mortgage, deed of trust, loan agreement or other agreement
         or instrument to which it is a party or by which it is bound or to
         which any of its property or assets is subject (except for such
         defaults that would not result in a Material Adverse Effect) or (iii)
         in violation in any material respect of any law, ordinance,
         governmental rule, regulation or court decree to which it or its
         property or assets may be subject.

                                       14
<PAGE>

                  (u) The Company and its subsidiaries and Kessler and its
         subsidiaries possess all required permits, licenses, provider numbers,
         certificates, approvals (including without limitation, certificate of
         need approvals), consents, orders, certifications (including, without
         limitation, certification under the Medicare and Medicaid programs),
         accreditations (including, without limitation, accreditation by the
         Joint Commission on Accreditation of Healthcare Organizations) and
         other authorizations (collectively, "Governmental Licenses") issued by,
         and have made all required declarations and filings with, the
         appropriate federal, state, local or foreign regulatory agencies or
         bodies necessary to conduct the business now operated by them
         (including, without limitation, Government Licenses as are required (i)
         under such federal and state healthcare laws as are applicable to the
         Company and its subsidiaries or Kessler and its subsidiaries and (ii)
         with respect to those facilities operated by the Company or any of its
         subsidiaries or Kessler or any of its subsidiaries that participate in
         the Medicare and/or Medicaid programs, to receive reimbursement
         thereunder), except where the failure to possess such Governmental
         Licenses or to make such declarations would not reasonably be expected
         to result in a Material Adverse Effect; the Company and its
         subsidiaries and Kessler and its subsidiaries are in compliance with
         the terms and conditions of all such Governmental Licenses, except
         where the failure so to comply would not, singly or in the aggregate,
         reasonably be expected to result in a Material Adverse Effect; all of
         the Governmental Licenses are valid and in full force and effect,
         except when the invalidity of such Governmental Licenses or the failure
         of such Governmental Licenses to be in full force and effect would not
         reasonably be expected to result in a Material Adverse Effect; and none
         of the Company or any of its subsidiaries or Kessler or any of its
         subsidiaries, has received any notice of proceedings relating to the
         revocation or modification of any such Governmental Licenses which,
         singly or in the aggregate, if the subject of an unfavorable decision,
         ruling or finding, would reasonably be expected to result in a Material
         Adverse Effect. All of the long-term acute care hospitals operated by
         the Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, and all of the Company's and its subsidiaries' and
         Kessler's and its subsidiaries' outpatient clinics that operate as
         "rehabilitation agencies" are "providers of service" as defined in the
         Social Security Act and the regulations promulgated thereunder and are
         eligible to participate in the Medicare and (to the extent disclosed in
         the Offering Memorandum) Medicaid programs.

                  (v) The accounts receivable of the Company and its
         subsidiaries and Kessler and its subsidiaries have been adjusted to
         reflect material changes in the reimbursement policies of third party
         payors such as Medicare, Medicaid, private insurance companies, health
         maintenance organizations, preferred provider organizations, managed
         care systems and other third party payors (including,

                                       15
<PAGE>

         without limitation, Blue Cross plans). The accounts receivable, after
         giving effect to the allowance for doubtful accounts, relating to such
         third party payors do not materially exceed amounts the Company and its
         subsidiaries or Kessler and its subsidiaries are entitled to receive.

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

                                       16
<PAGE>

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

                  (x) None of the Company or any of its subsidiaries or Kessler
         or any of its subsidiaries or any of the Facilities operated by any of
         them has failed to file with applicable regulatory authorities any
         statement, report, information or form required by any applicable law,
         regulation or order, except where the failure to be so in compliance
         could not, individually or in the aggregate, have a Material Adverse
         Effect. Except as described in the Offering Memorandum, all such
         filings or submissions were in compliance with applicable laws when
         filed and no deficiencies have been asserted by any regulatory
         commission, agency or authority with respect to any such filings or
         submissions, except for any such failures to be in compliance or
         deficiencies which would not, singly or in the aggregate, reasonably be
         expected to have a Material Adverse Effect.

                  (y) The Company and its subsidiaries and Kessler and its
         subsidiaries have timely filed all federal, state, local and foreign
         tax returns that are required to be filed or have duly requested
         extensions thereof and all such tax returns are true, correct and
         complete, except to the extent that any failure to file or request an
         extension, or any incorrectness would not reasonably be expected to
         result in a Material Adverse Effect. The Company and its subsidiaries
         and Kessler and its subsidiaries have timely paid all taxes shown as
         due on such filed tax returns (including any related assessments, fines
         or penalties), except to the extent that any such taxes are being
         contested in good faith and by appropriate proceedings, or to the
         extent that any failure to pay would not reasonably be expected to
         result in a Material Adverse Effect; and adequate charges, accruals and
         reserves have been provided for in the financial statements referred to
         in Section 1(q) above in accordance with GAAP in respect of all
         Federal, state, local and foreign taxes for all periods as to which the
         tax liability of the Company and its subsidiaries and Kessler and its
         subsidiaries has not been finally determined or remains open to
         examination by applicable taxing authorities except (A) for taxes
         incurred after the date of the financial statements referred to in
         Section 1(q) or (B) where the failure to provide for such charges,
         accruals and reserves would not reasonably be

                                       17
<PAGE>

         expected to result in a Material Adverse Effect. None of the Company or
         any of its subsidiaries, or Kessler or any of its subsidiaries, is a
         "United States real property holding corporation" within the meaning of
         Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (the
         "Code").

                  (z) None of the Company or any of its subsidiaries, or Kessler
         or any of its subsidiaries, is (i) an "investment company" or a company
         "controlled by" an investment company within the meaning of the
         Investment Company Act of 1940, as amended (the "Investment Company
         Act"), and the rules and regulations of the Commission thereunder or
         (ii) a "holding company" or a "subsidiary company" of a holding company
         or an "affiliate" thereof within the meaning of the Public Utility
         Holding Company Act of 1935, as amended.

                  (aa) The Company and each of its subsidiaries and Kessler and
         each if its subsidiaries maintains a system of internal accounting
         controls sufficient to provide reasonable assurance that (i)
         transactions are executed in accordance with management's general or
         specific authorizations; (ii) transactions are recorded as necessary to
         permit preparation of financial statements in conformity with generally
         accepted accounting principles and to maintain asset accountability;
         (iii) access to assets is permitted only in accordance with
         management's general or specific authorization; and (iv) the recorded
         accountability for assets is compared with the existing assets at
         reasonable intervals and appropriate action is taken with respect to
         any differences. The Company has complied in all material respects with
         all applicable provisions of the Sarbanes-Oxley Act of 2002, including,
         without limitation, any such provisions relating to extensions of
         credit to directors or executive officers and the Company's internal
         controls.

                  (bb) The Company and each of its subsidiaries and Kessler and
         each of its subsidiaries and each of the Facilities owned, leased or
         operated by them are insured by insurers of recognized financial
         responsibility, or self-insured as disclosed in the Offering
         Memorandum, against such losses and risks and in such amounts as are
         prudent and customary in the healthcare industry; none of the Company
         or any of its subsidiaries, or Kessler or any of its subsidiaries, or
         any of the hospitals owned, leased or operated by them, has been
         refused any material insurance coverage sought or applied for since
         January 1, 2001; and the Company has no reason to believe that it or
         any of the Facilities owned, leased or operated by it, any of its
         subsidiaries, or Kessler or any of its subsidiaries, will not be able
         to renew its existing insurance coverage as and when such coverage
         expires or to obtain coverage consistent with such coverage in all
         material respects from insurers with comparable financial strength and
         claims paying ability ratings as may be necessary to continue its
         operations except where the failure to renew or

                                       18
<PAGE>

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

                  (cc) The Company and its subsidiaries and Kessler and its
         subsidiaries own or possess, or can acquire on reasonable terms,
         adequate patents, patent rights, licenses, inventions, copyrights,
         know-how (including trade secrets and other unpatented and/or
         unpatentable proprietary or confidential information, systems or
         procedures), trademarks, service marks, trade names or other
         intellectual property (collectively, "Intellectual Property") necessary
         to carry on the business now operated by them in all material respects,
         and none of the Company or any of its subsidiaries, or Kessler or any
         if its subsidiaries has received any notice or is otherwise aware of
         any infringement of or conflict with asserted rights of others with
         respect to any Intellectual Property or of any facts or circumstances
         which would render any Intellectual Property invalid or inadequate to
         protect the interest of the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, therein, and which infringement or
         conflict (if the subject of any unfavorable decision, ruling or
         finding) or invalidity or inadequacy, singly or in the aggregate, would
         result in a Material Adverse Effect.

                  (dd) The Company and its subsidiaries and Kessler and its
         subsidiaries have good and marketable title to all real property owned
         by them and good title to all other properties owned by them, in each
         case, free and clear of all mortgages, pledges, liens, security
         interests, claims, restrictions or encumbrances of any kind except such
         as (a) are described in the Offering Memorandum or (b) do not, singly
         or in the aggregate, in a manner that would reasonably be expected to
         result in a Material Adverse Effect, affect the value of such property
         or interfere with the use made or proposed to be made of such property
         by the Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries; and all of the leases and subleases of the Company and
         its subsidiaries, and Kessler and its subsidiaries, considered as one
         enterprise, and under which the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, holds properties described

                                       19
<PAGE>

         in the Offering Memorandum, are in full force and effect, and neither
         the Company or any of its subsidiaries, nor Kessler or any of its
         subsidiaries, has any notice of any claim of any sort that has been
         asserted by anyone adverse to the rights of the Company or any of its
         subsidiaries, or Kessler or any of its subsidiaries, under any of the
         leases or subleases mentioned above, or affecting or questioning the
         rights of the Company or any of its subsidiaries, or Kessler or any of
         its subsidiaries, to the continued possession of the leased or
         subleased premises under any such lease or sublease, except where the
         failure to be in full force and effect or such claim would not
         reasonably be expected to have a Material Adverse Effect.

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

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

                                       20
<PAGE>

                  (gg) Except as described in the Offering Memorandum, (A) none
         of the Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, or any of the Facilities owned, leased or operated by
         them, is in violation of any material federal, state, local or foreign
         statute, law, rule, regulation, standard, guide, ordinance, code,
         policy or rule of common law or any judicial or administrative
         interpretation thereof, including any judicial or administrative order,
         consent, decree or judgment, relating to pollution or protection of
         human health, the environment (including, without limitation, ambient
         air, surface water, groundwater, land surface or subsurface strata) or
         wildlife, including, without limitation, laws and regulations relating
         to the release or threatened release of chemicals, pollutants,
         contaminants, wastes, toxic substances, hazardous substances
         (including, without limitation, asbestos, polychlorinated biphenyls,
         urea formaldehyde insulation, petroleum or petroleum products)
         (collectively, "Hazardous Materials") or to the manufacture,
         processing, distribution, use, treatment, storage, disposal, transport
         or handling of Hazardous Materials (collectively, "Environmental
         Laws"), (B) the Company and its subsidiaries and Kessler and its
         subsidiaries and each of the Facilities owned, leased or operated by
         them have all material permits, authorizations and approvals required
         under any applicable Environmental Laws and are each in compliance with
         their requirements, (C) there are no pending or threatened
         administrative, regulatory or judicial actions, suits, demands, demand
         letters, claims, liens, notices of noncompliance or violation,
         investigations or proceedings relating to any Environmental Law against
         the Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, or any of the Facilities owned, leased or operated by
         them, except as would not, singly or in the aggregate, result in a
         Material Adverse Effect and (D) there are no events or circumstances
         that might reasonably be expected to form the basis of an order for
         clean-up or remediation, or an action, suit or proceeding by any
         private party or governmental body or agency, against or affecting the
         Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, or any of the Facilities owned, leased or operated by
         them, relating to Hazardous Materials or any Environmental Laws except
         for such events or circumstances that would not, singly or in the
         aggregate, result in a Material Adverse Effect.

                  (hh) None of the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, or to the best knowledge of the
         Company, any director, officer, agent, employee or other person
         associated with or acting on behalf of the Company or any of its
         subsidiaries, or Kessler or any of its subsidiaries, has used any
         corporate funds for any unlawful contribution, gift, entertainment or
         other unlawful expense relating to political activity, made any direct
         or indirect unlawful payment to any foreign or domestic government
         official or employee

                                       21
<PAGE>

         from corporate funds, violated or is in violation of any provision of
         the Foreign Corrupt Practices Act of 1977, or made any bribe, rebate,
         payoff, influence payment, kickback or other unlawful payment.

                  (ii) On and immediately after the Closing Date, Select Medical
         Escrow, and on and immediately after the effectiveness of the
         Assumptions, the Company and each of its subsidiaries and Kessler and
         each of its subsidiaries (in each case, after giving effect to the
         issuance of the Securities and to the other transactions related
         thereto as described in the Offering Memorandum) will be Solvent. As
         used in this paragraph, the term "Solvent" means, with respect to a
         particular date, that on such date the present fair market value (or
         present fair saleable value) of the assets of Select Medical Escrow,
         the Company, Kessler and each of their respective subsidiaries, as the
         case may be, is not less than the total amount required to pay the
         probable liabilities of Select Medical Escrow, the Company, Kessler and
         each of their respective subsidiaries, as the case may be, on its total
         existing debts and liabilities (including contingent liabilities) as
         they become absolute and matured, Select Medical Escrow, the Company,
         Kessler and each of their respective subsidiaries, as the case may be,
         is able to realize upon its assets and pay its debts and other
         liabilities, contingent obligations and commitments as they mature and
         become due in the normal course of business, assuming the sale of the
         Securities (and in the case of the Company, Kessler and each of their
         respective subsidiaries, the Assumption) as contemplated by this
         Agreement and the Offering Memorandum, Select Medical Escrow, the
         Company, Kessler and each of their respective subsidiaries, as the case
         may be, is not incurring debts or liabilities beyond its ability to pay
         as such debts and liabilities mature and Select Medical Escrow, the
         Company, Kessler and each of their respective subsidiaries, as the case
         may be, is not engaged in any business or transaction, and is not about
         to engage in any business or transaction, for which its property would
         constitute unreasonably small capital after giving due consideration to
         the prevailing practice in the industry in which the Company is
         engaged. In computing the amount of such contingent liabilities at any
         time, it is intended that such liabilities will be computed at the
         amount that, in the light of all the facts and circumstances existing
         at such time, represents the amount that can reasonably be expected to
         become an actual or matured liability.

                  (jj) None of the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries, owns any "margin securities" as
         that term is defined in Regulations G and U of the Board of Governors
         of the Federal Reserve System (the "Federal Reserve Board"), and none
         of the proceeds of the sale of the Securities will be used, directly or
         indirectly, for the purpose of purchasing or carrying any margin
         security, for the purpose of reducing or retiring any

                                       22
<PAGE>

         indebtedness which was originally incurred to purchase or carry any
         margin security or for any other purpose which might cause any of the
         Securities to be considered a "purpose credit" within the meanings of
         Regulation T, U or X of the Federal Reserve Board.

                  (kk) Other than as provided for or contemplated by this
         Agreement, none of the Company or any of its subsidiaries, or Kessler
         or any of its subsidiaries, is a party to any contract, agreement or
         understanding with any person that would give rise to a valid claim
         against the Company or any of its subsidiaries or the Initial
         Purchasers for a brokerage commission, finder's fee or like payment in
         connection with the offering and sale of the Securities.

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

                  (mm) None of Select Medical Escrow, the Company, or any of
         their affiliates or any person acting on any of their behalf has
         engaged or will engage in any directed selling efforts (as such term is
         defined in Regulation S under the Securities Act ("Regulation S")), and
         all such persons have complied and will comply with the offering
         restrictions requirement of Regulation S to the extent applicable.

                  (nn) None of Select Medical Escrow, the Company or any of
         their affiliates has, directly or through any agent, sold, offered for
         sale, solicited offers to buy or otherwise negotiated in respect of,
         any security (as such term is defined in the Securities Act), which is
         or will be integrated with the sale of the Securities in a manner that
         would require registration of the Securities under the Securities Act.

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

                  (pp) None of the Company or any of its subsidiaries, or
         Kessler or any of its subsidiaries or, to the best of the Company's
         knowledge, any of their respective directors, officers or affiliates
         has taken or will take, directly or indirectly, any action designed to,
         or that could be reasonably expected to, cause or result in
         stabilization or manipulation of the price of the Securities in
         violation of Regulation M under the Exchange Act.

                                       23
<PAGE>

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

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

                  (ss) The statistical and market-related data included in the
         Offering Memorandum is derived from sources which Select Medical Escrow
         and the Company reasonably and in good faith believe to be accurate,
         reasonable and reliable in all material respects and the statistical
         and market-related data included in the Offering Memorandum agrees with
         the sources from which it was derived in all material respects. Without
         limitation to the foregoing, the following were derived from
         accounting, financial and/or other appropriate records of the Company
         (the "Company Records"): (i) the pro forma amounts relating to the
         ranking of indebtedness and certain amounts of indebtedness outstanding
         (including Senior Indebtedness, Senior Subordinated Indebtedness,
         Guarantor Senior Indebtedness, Existing Subsidiary Guarantees and other
         indebtedness of Subsidiary Guarantors) disclosed in the Offering
         Memorandum under the headings "Offering memorandum summary -- The
         offering - Ranking", "Risk factors - Despite our level of indebtedness,
         we and our subsidiaries will be able to incur more debt. This could
         further exacerbate the risks described above", "Risk factors - Risks
         relating to the offering - Your right to receive payments on the notes
         will be junior to our existing senior indebtedness and the existing
         senior indebtedness of the subsidiary guarantors and possibly all of
         our and their future indebtedness. Further, claims of creditors of our
         non-guarantor subsidiaries will generally have priority with respect to
         the assets of those subsidiaries over your claims", "Description of
         notes - Ranking and subordination", "Description of notes - Subsidiary
         guarantees", (ii) the amount of availability the Company would have had
         under its senior credit facility as of March 31, 2003 after giving
         effect to the offering, as disclosed under the headings "Offering
         memorandum summary -- The offering - Ranking", "Risk factors - Risks
         relating to our business - Our indebtedness may limit cash flow
         available to invest in the ongoing needs of our

                                       24
<PAGE>

         business to generate future cash flow, which could prevent us from
         fulfilling our obligations under the notes", and "Risk factors - Risks
         relating to our business - Despite our level of indebtedness, we and
         our subsidiaries will be able to incur more debt. This could further
         exacerbate the risks described above", "Description of notes - "Ranking
         and subordination", (iii) the percent, for each of the three months
         ended March 31, 2003 and 2002, of specialty hospital revenues from
         services provided to Medicare patients that was paid by Medicare under
         a cost-based reimbursement methodology, as disclosed in the Offering
         Memorandum under the heading "Management's discussion and analysis of
         financial condition and results of operations - Critical accounting
         matters - Sources of revenues", and (iv) the percent of funding our
         Canadian outpatient rehabilitation clinics receive through workers'
         compensation benefits, as disclosed in the Offering Memorandum under
         the heading "Our business - Government regulations - Canadian
         reimbursement". The Company Records accurately present the
         above-referenced information as disclosed in the Offering Memorandum at
         the dates indicated and for the periods specified.

                  (tt) Since the respective dates as of which information is
         given in the Offering Memorandum, except as otherwise stated therein,
         (A) there has been no material adverse change or any development
         involving a prospective material adverse change in the condition,
         financial or otherwise, or in the earnings, business affairs,
         management or business prospects of the Company and its subsidiaries
         and Kessler and its subsidiaries considered as one enterprise, whether
         or not arising in the ordinary course of business, (B) none of the
         Company or any of its subsidiaries, or Kessler or any of its
         subsidiaries, has incurred any liability or obligation, direct or
         contingent, other than those in the ordinary course of business, which
         are material with respect to the Company and its subsidiaries and
         Kessler and its subsidiaries considered as one enterprise, (C) there
         have been no transactions entered into by the Company or any of its
         subsidiaries, or Kessler or any of its subsidiaries, other than those
         in the ordinary course of business, which are material with respect to
         the Company and its subsidiaries and Kessler and its subsidiaries
         considered as one enterprise, and (D) there has not been any change in
         the capital stock (other than pursuant to issuances of common stock in
         connection with the exercise of options or put rights) or long-term
         debt of the Company or Kessler or any dividend or distribution of any
         kind declared, paid or made by the Company on any class of its capital
         stock.

                  2. Purchase and Resale of the Securities.

(a) On the basis of the representations, warranties and agreements contained
herein, and subject to the terms and conditions set forth herein, Select Medical
Escrow agrees to issue

                                       25
<PAGE>

and sell to each of the Initial Purchasers, severally and not jointly, and each
of the Initial Purchasers, severally and not jointly, agrees to purchase from
Select Medical Escrow, the principal amount of Securities set forth opposite the
name of such Initial Purchaser on Schedule II hereto at a purchase price equal
to 97.60% of the principal amount thereof. Select Medical Escrow shall not be
obligated to deliver any of the Securities except upon payment for all of the
Securities to be purchased as provided herein.

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

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

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

                  (ii)     such Initial Purchaser has offered and sold the
                           Securities, and will offer and sell the Securities,
                           (A) as part of their distribution at any time and (B)
                           otherwise until 40 days after the later of the

                                       26
<PAGE>

                           commencement of the offering of the Securities and
                           the Closing Date, only in accordance with Regulation
                           S or Rule 144A or any other available exemption from
                           registration under the Securities Act;

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

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

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

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

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

(d) Each Initial Purchaser, severally and not jointly, represents, warrants and
agrees that (i) it has not offered or sold and, prior to the date six months
after the Closing Date, will

                                       27
<PAGE>

not offer or sell any Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services and Markets Act
2000 ("FSMA") of the United Kingdom with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom;
and (iii) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to engage
in investment activity (within the meaning of Section 21 of the FSMA) received
by it in connection with the issue or sale of any of the Securities in
circumstances in which Section 21(l) of the FSMA does not apply to the Company.

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

(f) Select Medical Escrow and the Company acknowledge and agree that the Initial
Purchasers may sell Securities to any affiliate of an Initial Purchaser and that
any such affiliate may sell Securities purchased by it to an Initial Purchaser.

                  3. Delivery of and Payment for the Securities.

(a) Delivery of and payment for the Securities shall be made at the offices of
Debevoise & Plimpton, New York, New York, or at such other place as shall be
agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York
City time, on August 12, 2003, or at such other time or date, not later than
seven full business days thereafter, as shall be agreed upon by the Initial
Purchasers and the Company (such date and time of payment and delivery being
referred to herein as the "Closing Date").

                                       28
<PAGE>

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

(c) On the Closing Date, Select Medical Escrow shall deposit the Escrowed funds
in an escrow account in accordance with the Escrow Agreement.

                  4. Further Agreements of Select Medical Escrow, the Company
and the Company Guarantors. Each of Select Medical Escrow, the Company and the
Company Guarantors agree with each of the Initial Purchasers:

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

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

                                       29
<PAGE>

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

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

                  (e) for so long as the Securities are outstanding and are
         "restricted securities" within the meaning of Rule 144(a)(3) under the
         Securities Act, to furnish to holders of the Securities and prospective
         purchasers of the Securities designated by such holders, upon request
         of such holders or such prospective purchasers, the information
         required to be delivered pursuant to Rule 144A(d)(4) under the
         Securities Act, unless the Company is then subject to and in compliance
         with Section 13 or 15(d) of the Exchange Act (the foregoing agreement
         being for the benefit of the holders from time to time of the
         Securities and prospective purchasers of the Securities designated by
         such holders);

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

                  (g) to promptly take from time to time such actions as the
         Initial Purchasers may reasonably request to qualify the Securities for
         offering and sale under the securities or Blue Sky laws of such
         jurisdictions as the Initial Purchasers may designate and to continue
         such qualifications in effect for so long as required

                                       30
<PAGE>

         for the resale of the Securities; and to arrange for the determination
         of the eligibility for investment of the Securities under the laws of
         such jurisdictions as the Initial Purchasers may reasonably request;
         provided that the Company and its subsidiaries, and Kessler and its
         subsidiaries shall not be obligated to qualify as foreign corporations
         in any jurisdiction in which they are not so qualified or to file a
         general consent to service of process in any jurisdiction;

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

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

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

                  (k) until (a) November 27, 2003 if the Acquisition and the
         Assumptions have not been consummated prior to such date, (b) the date
         90 days from the date of the Offering Memorandum if the Acquisition
         and the Assumptions have been consummated prior to such date, or (c)
         the date on which the Acquisition and the Assumptions are consummated
         if such date occurs after the date set forth in clause (b) and before
         the date set forth in clause (a) above, (X) not to seek to finance the
         Acquisition other than with the - proceeds of the issuance of the
         Securities (other than (i) to the extent cash or borrowing under the
         senior credit facility is used to

                                      31
<PAGE>

         finance a portion of the Acquisition as disclosed in the Offering
         Memorandum and (ii) if the closing of the issuance of the Securities
         does not occur within 10 business days of the date of this Agreement),
         and (Y) not to offer for sale, sell, contract to sell or otherwise
         dispose of, directly or indirectly, or file a registration statement
         for, or announce any offer, sale, contract for sale of or other
         disposition of any debt securities issued or guaranteed by the Company
         or any of its subsidiaries, or Kessler or any of its subsidiaries
         (other than the Securities), in each case without the prior written
         consent of JPMorgan and Merrill Lynch, it being understood that the
         foregoing shall not prohibit the Company or any of its subsidiaries,
         or Kessler or any of its subsidiaries, from issuing seller notes to
         the seller in connection with any acquisition (other than the
         Acquisition) by the Company or any of its subsidiaries, or Kessler or
         any of its subsidiaries, as permitted under the Indenture or making
         borrowings under the Credit Agreement, other than to finance the
         Acquisition (except as disclosed in the Offering Memorandum);

                  (l) during the period from the Closing Date until three years
         after the Closing Date or, if earlier, the completion of the Exchange
         Offer, without the prior written consent of the Initial Purchasers,
         not to, and not permit any of its affiliates (as defined in Rule 144
         under the Securities Act) to, resell any of the Securities that have
         been reacquired by them, except for Securities purchased by the
         Company or any of its affiliates and resold in a transaction
         registered under the Securities Act;

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

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

                                      32
<PAGE>

         creating actual, or apparent, active trading in or of raising the
         price of the Securities;

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

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

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

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

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

                  (t) prior to the later of the Closing Date and the date on
         which all of the Securities have been resold by the Initial
         Purchasers, not to issue any press release or other communication
         directly or indirectly or hold any press conference with respect to
         the Company or Kessler or their respective conditions, financial or
         otherwise, or earnings, business affairs or business prospects (except
         for routine oral marketing communications in the ordinary course of
         business and consistent with the past practices of the Company and of
         which the Initial Purchasers are notified), without the prior written
         consent of the Initial Purchasers, which consent shall not be
         unreasonably withheld or delayed, unless in the judgment of the
         Company and its counsel, and after notification to the Initial
         Purchasers, such press release or communication is required by law;

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

                                      33
<PAGE>

                  (v) Immediately upon consummation of the Acquisition, to
         cause the Company, the Company Guarantors and the Kessler Guarantors
         to duly authorize, execute and deliver the respective Supplemental
         Indentures.

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

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

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

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

                  (d) Dechert LLP shall have furnished to the Initial
         Purchasers their written opinion, as counsel to Select Medical Escrow,
         the Company and the Company Guarantors, addressed to the Initial
         Purchasers and dated the Closing Date, in

                                      34
<PAGE>

         form and substance reasonably satisfactory to the Initial Purchasers,
         substantially to the effect set forth in Annex C hereto.

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

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

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

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

                  (i) The Company shall have furnished to the Initial
         Purchasers two letters (one in respect of the Company and the other in
         respect of Kessler) (the "Initial Letters") of PricewaterhouseCoopers
         LLP, addressed to the Initial Purchasers and dated the date hereof, in
         form and substance satisfactory to the Initial Purchasers,
         substantially to the effect set forth in Annex G and Annex H hereto.

                  (j) The Company shall have furnished to the Initial
         Purchasers two letters (the "Bring-Down Letters") of
         PricewaterhouseCoopers LLP, addressed to the Initial Purchasers and
         dated the Closing Date (A) confirming that they are independent public
         accountants with respect to the Company and Kessler, respectively,
         within the applicable rules and regulations adopted by the Commission,
         (B) stating, as of the date of the Bring-Down Letters (or, with
         respect to matters involving changes or developments since the
         respective dates as of which specified financial information is given
         in the Offering Memorandum, as

                                      35
<PAGE>

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

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

                  (l) The Initial Purchasers shall have received a certificate
         of Michael E. Tarvin, Senior Vice President and General Counsel of
         Select Medical Escrow and the Company, dated the Closing Date, in form
         and substance reasonably satisfactory to the Initial Purchasers,
         substantially to the effect set forth in Annex I hereto. The Initial
         Purchasers shall have received a certificate of the Chief Financial
         Officer and the Controller of the Company concerning certain
         information contained in the Offering Memorandum, dated the Closing
         Date, in form and substance reasonably satisfactory to the Initial
         Purchasers, substantially to the effect set forth in Annex J hereto.

                  (m) The Initial Purchasers shall have received a counterpart
         of (i) the Registration Rights Agreement which shall have been
         executed and delivered by a duly authorized officer of Select Medical
         Escrow, the Company and each of the Company Guarantors; (ii) the
         Escrow Agreement which shall have been executed and delivered by a
         duly authorized officer of Select Medical Escrow; and (iii) the Stock
         Purchase Agreement which shall have been executed and delivered by a
         duly authorized officer of the Company, Kessler and the Kessler
         Foundation.

                                      36
<PAGE>

                  (n) The Indenture shall have been duly executed and delivered
         by Select Medical Escrow and the Trustee, and the Securities shall
         have been duly executed and delivered by Select Medical Escrow and
         duly authenticated by the Trustee.

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

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

                  (q) There shall not have occurred any invalidation of Rule
         144A under the Securities Act by any court or any withdrawal or
         proposed withdrawal of any rule or regulation under the Securities Act
         or the Exchange Act by the Commission or any amendment or proposed
         amendment thereof by the Commission which in the judgment of the
         Initial Purchasers would materially impair the ability of the Initial
         Purchasers to purchase, hold or effect resales of the Securities as
         contemplated hereby.

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

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

                                      37
<PAGE>

                  (t) Subsequent to the execution and delivery of this
         Agreement (i) no downgrading shall have occurred in the rating
         accorded the Securities or any of the Company's other debt securities
         or preferred stock by a "nationally recognized statistical rating
         organization", as such term is defined by the Commission for purposes
         of Rule 436(g)(2) of the rules and regulations of the Commission under
         the Securities Act and (ii) no such organization shall have publicly
         announced that it has under surveillance or review, or has changed its
         outlook with respect to (other than an announcement with positive
         implications of a possible upgrading), its rating of the Securities or
         any of the Company's other debt securities or preferred stock.

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

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

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

                  6. Termination. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and

                                      38
<PAGE>

received by the Company prior to delivery of and payment for the Securities if,
(i) prior to that time, any of the events described in Section 5(u) shall have
occurred and be continuing or (ii) as of the Closing Date, any of the terms and
conditions set forth in Section 5 shall not have been satisfied in all
respects.

                  7.Defaulting Initial Purchasers.

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

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

                                      39
<PAGE>

(c) If, after giving effect to arrangements, if any, for the purchase of the
Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and Select Medical Escrow and the Company as
provided in paragraph (a) above, the aggregate principal amount of such
Securities that remains unpurchased exceeds one-tenth of the aggregate
principal amount of all the Securities, or if Select Medical Escrow and the
Company shall not exercise the right described in paragraph (b) above, then
this Agreement shall terminate without liability on the part of the
non-defaulting Initial Purchasers, Select Medical Escrow, the Company or the
Company Guarantors, except that Select Medical Escrow, the Company and each of
the Company Guarantors will continue to be liable for the payment of expenses
as set forth in Sections 8 and 12 hereof and except that the provisions of
Sections 9 or 10 hereof shall not terminate and shall remain in effect.

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

                  8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6 or 7, (b) Select
Medical Escrow shall fail to tender the Securities for delivery to the Initial
Purchasers for any reason permitted under this Agreement or (c) the Initial
Purchasers shall decline to purchase the Securities for any reason permitted
under this Agreement, Select Medical Escrow, the Company and the Company
Guarantors shall reimburse the Initial Purchasers for such out-of-pocket
expenses (including reasonable fees and disbursements of counsel) as shall have
been reasonably incurred by the Initial Purchasers in connection with this
Agreement and the proposed purchase and resale of the Securities. If this
Agreement is terminated pursuant to Section 7 by reason of the default of one
or more of the Initial Purchasers, none of Select Medical Escrow, the Company
or the Company Guarantors shall be obligated to reimburse any defaulting
Initial Purchaser on account of such expenses.

                  9. Indemnification.

(a) Select Medical Escrow, the Company and each of the Company Guarantors shall
jointly and severally indemnify and hold harmless each Initial Purchaser, its
affiliates, their respective officers, directors, employees, representatives
and agents, and each person, if any, who controls any Initial Purchaser within
the meaning of the Securities Act or the Exchange Act (collectively referred to
for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases and sales of the Securities),
to which that Initial Purchaser may become subject, whether commenced or
threatened,

                                      40
<PAGE>

under the Securities Act, the Exchange Act, any other federal or state
statutory law or regulation, at common law or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or in any information provided by Select
Medical Escrow, the Company or any Company Guarantor pursuant to Section 4(e)
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that Select Medical Escrow, the Company and the Company Guarantors shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Initial Purchasers'
Information; and provided, further, that with respect to any such untrue
statement in or omission from the Preliminary Offering Memorandum, the
indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale by such Initial Purchaser and any such loss, claim, damage, liability or
action of or with respect to such Initial Purchaser results from the fact that
both (A) to the extent required by applicable law, a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person and (B) the untrue
statement in or omission from the Preliminary Offering Memorandum was corrected
in the Offering Memorandum unless, in either case, such failure to deliver the
Offering Memorandum was a result of non-compliance by Select Medical Escrow or
the Company with Section 4(b).

(b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold
harmless Select Medical Escrow, the Company, each of the Company Guarantors and
their respective affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 9(b) and Section 10 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which Select Medical Escrow or the Company may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises

                                      41
<PAGE>

out of, or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Initial Purchasers' Information, and shall reimburse Select
Medical Escrow or the Company, as the case may be, for any legal or other
expenses reasonably incurred by Select Medical Escrow or the Company in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.

(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 9(a) or 9(b), notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 9 except to the extent that it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 9. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
an indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the

                                      42
<PAGE>

right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 9(a) and 9(b),
shall use all reasonable efforts to cooperate with the indemnifying party in
the defense of any such action or claim. No indemnifying party shall be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment for the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.

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

                  10. Contribution. If the indemnification provided for in
Section 9 is unavailable or insufficient to hold harmless an indemnified party
under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by Select Medical Escrow, the Company and
the Company Guarantors on the one hand and the Initial Purchasers on the other
from the offering of the Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Select Medical Escrow, the Company and the
Company Guarantors on the one hand and

                                       43
<PAGE>

the Initial Purchasers on the other with respect to the statements or omissions
that resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by Select Medical Escrow, the Company and the Company
Guarantors on the one hand and the Initial Purchasers on the other with respect
to such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities purchased under this Agreement
(before deducting expenses) received by or on behalf of Select Medical Escrow,
the Company and the Company Guarantors, on the one hand, and the total discounts
and commissions received by the Initial Purchasers with respect to the
Securities purchased under this Agreement, on the other, bear to the total gross
proceeds from the sale of the Securities under this Agreement. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Select
Medical Escrow, the Company and the Company Guarantors on the one hand or to any
Initial Purchasers' Information on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omissions. Select Medical Escrow, the Company,
the Company Guarantors and the Initial Purchasers agree that it would not be
just and equitable if contributions pursuant to this Section 10 were to be
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation that does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 10 shall be deemed to include, for purposes of this Section 10, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 10, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
with respect to the Securities purchased by it under this Agreement exceeds the
amount of any damages which such Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute as provided
in this Section 10 are several in proportion to their respective purchase
obligations and not joint.

                  11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, Select
Medical Escrow, the Company, the Company Guarantors and their respective
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except as

                                       44
<PAGE>

provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of Select Medical
Escrow, the Company, the Company Guarantors and the Initial Purchasers and in
Section 4(e) with respect to holders and prospective purchasers of the
Securities. Nothing in this Agreement is intended or shall be construed to give
any person, other than the persons referred to in this Section 11, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.

                  12. Expenses. Select Medical Escrow, the Company and each of
the Company Guarantors agrees with the Initial Purchasers to pay (a) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities and any taxes payable in that connection; (b) the costs incident to
the preparation, printing and distribution of the Preliminary Offering
Memorandum, the Offering Memorandum and any amendments or supplements thereto;
(c) the costs of reproducing and distributing each of the Related Documents; (d)
the costs incident to the preparation, printing and delivery of the certificates
evidencing the Securities, including stamp duties and transfer taxes, if any,
payable upon issuance of the Securities; (e) the fees and expenses of Select
Medical Escrow's and the Company's counsel and independent accountants; (f) the
fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related fees and expenses of counsel
for the Initial Purchasers); (g) any fees charged by rating agencies for rating
the Securities; (h) the fees and expenses of the Trustee and any paying agent
(including related fees and expenses of any counsel to such parties); (i) all
expenses and application fees incurred in connection with the application for
the inclusion of the Securities on the PORTAL Market and the approval of the
Securities for book-entry transfer by DTC; and (j) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement which are not otherwise specifically provided for in this Section 12;
provided, however, that except as provided in this Section 12 and Section 8, the
Initial Purchasers shall pay their own costs and expenses.

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

                                       45
<PAGE>

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

                  (a) if to the Initial Purchasers, shall be delivered or sent
         by mail or telecopy transmission to J.P. Morgan Securities Inc., 270
         Park Avenue, 4th floor, New York, New York 10017, Attention: Steven A.
         Tulip (telecopier no.: (212) 270-0994) with a copy to Debevoise &
         Plimpton, 919 Third Avenue, New York, New York, attention of Steven J.
         Slutzky, facsimile (212) 909-6836; or

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

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

                  15. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.

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

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

                  18. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in

                                       46
<PAGE>

more than one counterpart, the executed agreement counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.

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

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

                                       47
<PAGE>

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

                                       Very truly yours,

                                       SELECT MEDICAL CORPORATION

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

                                       SELECT MEDICAL ESCROW, INC.

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

                                       SELECTMARK, INC.

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

                                       SELECT HOSPITAL INVESTORS, INC.

                                       By: /s/ Andrew T. Panaccione
                                          -----------------------------------
                                       Name: Andrew T. Panaccione
                                       Title: Vice President & Treasurer

                                       SLMC FINANCE CORPORATION

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

                                       48

<PAGE>

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

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

Accepted:

J.P. MORGAN SECURITIES INC.
for itself and on behalf of
the several Initial Purchasers
listed in Schedule II hereto

By /s/ Steve Tulip
   -----------------------------
   Authorized Signatory

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

                                       49
<PAGE>

                                                                      SCHEDULE I
                                                                      GUARANTORS

                               COMPANY GUARANTORS

Affiliated Physical Therapists, Ltd.

Allegany Hearing and Speech, Inc.

American Transitional Hospitals, Inc.

Athens Sports Medicine Clinic, Inc.

Ather Sports Injury Clinic, Inc.

Atlantic Health Group, Inc.

Atlantic Rehabilitation Services, Inc.

Avalon Rehabilitation & Healthcare, LLC

Buendel Physical Therapy, Inc.

C.E.R. - West, Inc.

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

CCISUB, Inc.

CMC Center Corporation

Cenla Physical Therapy & Rehabilitation Agency, Inc.

Center for Evaluation & Rehabilitation, Inc.

Center for Physical Therapy & Sports Rehabilitation, Inc.

CenterTherapy, Inc.

Champion Physical Therapy, Inc.

Connecticut NovaCare Ventures, Inc.

Coplin Physical Therapy Associates, Inc.

Crowley Physical Therapy Clinic, Inc.

Douglas Avery & Associates, Ltd.

Elk County Physical Therapy, Inc.

Fine, Bryant & Wah, Inc.

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

<PAGE>

                                                                      SCHEDULE I

Gallery Physical Therapy Center, Inc.

Georgia NovaCare Ventures, Inc.

Georgia Physical Therapy of West Georgia, Inc.

Georgia Physical Therapy, Inc.

GP Therapy, L.L.C.

Greater Sacramento Physical Therapy Associates, Inc.

Grove City Physical Therapy and Sports Medicine, Inc.

Gulf Breeze Physical Therapy, Inc.

Gulf Coast Hand Specialists

Hand Therapy Associates, Inc.

Hand Therapy and Rehabilitation Associates, Inc.

Hangtown Physical Therapy, Inc.

Hawley Physical Therapy, Inc.

Hudson Physical Therapy Associates, Inc.

Human Performance and Fitness, Inc.

Indianapolis Physical Therapy and Sports Medicine, Inc.

Intensiva Healthcare Corporation

Intensiva Hospital of Greater St. Louis, Inc.

Joyner Sports Science Institute, Inc.

Joyner Sportsmedicine Institute, Inc.

Kentucky Rehabilitation Services, Inc.

Lynn M. Carlson, Inc.

Metro Rehabilitation Services, Inc.

Michigan Therapy Centre, Inc.

MidAtlantic Health Group, Inc.

Monmouth Rehabilitation, Inc.

New England Health Group, Inc

New Mexico Physical Therapists, Inc.

Northside Physical Therapy, Inc.

                                      I-2
<PAGE>

                                                                      SCHEDULE I

NovaCare Health Group, LLC

NovaCare Occupational Health Services, Inc.

NovaCare Outpatient Rehabilitation East, Inc.

NovaCare Outpatient Rehabilitation, Inc.

NovaCare Outpatient Rehabilitation of California, Inc.

NovaCare Outpatient Rehabilitation West, Inc.

NovaCare Rehabilitation, Inc.

NW Rehabilitation Associates, L.P.

P.T. Services Company

P.T. Services, Inc.

P.T. Services Rehabilitation, Inc.

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

Physical Rehabilitation Partners, Inc.

Physical Therapy Enterprises, Inc.

Physical Therapy Institute, Inc.

Physical Therapy Services of the Jersey Cape, Inc.

Physio - Associates, Inc.

Pro Active Therapy, Inc.

Pro Active Therapy of Ahoskie, Inc.

Pro Active Therapy of Gaffney, Inc.

Pro Active Therapy of Greenville, Inc.

Pro Active Therapy of North Carolina, Inc.

Pro Active Therapy of Rocky Mount, Inc.

Pro Active Therapy of South Carolina, Inc.

Pro Active Therapy of Virginia, Inc.

Professional Therapeutic Services, Inc.

Quad City Management, Inc.

RCI (Colorado), Inc.

RCI (Exertec), Inc.

                                      I-3
<PAGE>

                                                                      SCHEDULE I

RCI (Michigan), Inc.

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

RCI (WRS), Inc.

Rebound Oklahoma, Inc.

Redwood Pacific Therapies, Inc.

Rehab Advantage, Inc.

Rehab Managed Care of Arizona, Inc.

Rehab Provider Network - California, Inc.

Rehab Provider Network - East I, Inc.

Rehab Provider Network - East II, Inc.

Rehab Provider Network - Georgia, Inc.

Rehab Provider Network - Indiana, Inc.

Rehab Provider Network - Michigan, Inc.

Rehab Provider Network - New Jersey, Inc.

Rehab Provider Network - Ohio, Inc.

Rehab Provider Network - Oklahoma, Inc.

Rehab Provider Network - Pennsylvania, Inc.

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

Rehab Provider Network of Colorado, Inc.

Rehab Provider Network of Florida, Inc.

Rehab Provider Network of Nevada, Inc.

Rehab Provider Network of New Mexico, Inc.

Rehab Provider Network of North Carolina, Inc.

Rehab Provider Network of Texas, Inc.

Rehab Provider Network of Wisconsin, Inc.

Rehab/Work Hardening Management Associates, Ltd.

RehabClinics, Inc.

RehabClinics (GALAXY), Inc.

RehabClinics (PTA), Inc.

                                      I-4
<PAGE>

                                                                      SCHEDULE I

RehabClinics (SPT), Inc.

RehabClinics Abilene, Inc.

RehabClinics Dallas, Inc.

RehabClinics Pennsylvania, Inc.

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

Select Air II, Inc.

Select Employment Services, Inc.

Select Hospital Investors, Inc.

Select Management Services, LLC

SelectMark, Inc.

Select Medical of Kentucky, Inc.

Select Medical of Maryland, Inc.

Select Medical of New Jersey, Inc.

Select Medical of New York, Inc.

Select Medical of Ohio, Inc.

Select Medical of Pennsylvania, Inc.

Select Medical Rehabilitation Clinics, Inc.

Select Provider Networks, Inc.

Select Rehabilitation Management Services, Inc.

Select Software Ventures, LLC

Select Specialty Hospital - Akron, Inc.

Select Specialty Hospital - Albuquerque

Select Specialty Hospital - Ann Arbor, Inc.

Select Specialty Hospital - Arizona, Inc.

Select Specialty Hospital - Battle Creek, Inc.

Select Specialty Hospital - Beech Grove, Inc.

Select Specialty Hospital - Bloomington, Inc.

Select Specialty Hospital - Boston, Inc.

Select Specialty Hospital - Central Detroit, Inc.

                                      I-5
<PAGE>

                                                                      SCHEDULE I

Select Specialty Hospital - Charleston, Inc.

Select Specialty Hospital - Cincinnati, Inc.

Select Specialty Hospital - Columbus, Inc.

Select Specialty Hospital - Columbus/Grant, Inc.

Select Specialty Hospital - Columbus/University, Inc.

Select Specialty Hospital - Conroe, Inc.

Select Specialty Hospital - Dallas, Inc.

Select Specialty Hospital - Denver, Inc.

Select Specialty Hospital - Durham, Inc.

Select Specialty Hospital - Erie, Inc.

Select Specialty Hospital - Escambia, Inc.

Select Specialty Hospital - Evansville, Inc.

Select Specialty Hospital - Flint, Inc.

Select Specialty Hospital - Fort Smith, Inc.

Select Specialty Hospital - Fort Wayne, Inc.

Select Specialty Hospital - Gadsden, Inc.

Select Specialty Hospital - Greensburg, Inc.

Select Specialty Hospital - Honolulu, Inc.

Select Specialty Hospital - Houston, Inc.

Select Specialty Hospital - Huntsville, Inc.

Select Specialty Hospital - Indianapolis, Inc.

Select Specialty Hospital - Jackson, Inc.

Select Specialty Hospital - Johnstown, Inc.

Select Specialty Hospital - Kansas City, Inc.

Select Specialty Hospital - Knoxville, Inc.

Select Specialty Hospital - Lansing, Inc.

Select Specialty Hospital - Lee, Inc.

Select Specialty Hospital - Leon, Inc.

Select Specialty Hospital - Lexington, Inc.

                                      I-6
<PAGE>

                                                                      SCHEDULE I

Select Specialty Hospital - Little Rock, Inc.

Select Specialty Hospital - Louisville, Inc.

Select Specialty Hospital - Macomb County, Inc.

Select Specialty Hospital - Macon, Inc.

Select Specialty Hospital - Marion, Inc.

Select Specialty Hospital - Memphis, Inc.

Select Specialty Hospital - Milwaukee, Inc.

Select Specialty Hospital - Morgantown, Inc.

Select Specialty Hospital - Nashville, Inc.

Select Specialty Hospital - New Orleans, Inc.

Select Specialty Hospital - North Knoxville, Inc.

Select Specialty Hospital - Northwest Detroit, Inc.

Select Specialty Hospital - Northwest Indiana, Inc.

Select Specialty Hospital - Oklahoma City, Inc.

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

Select Specialty Hospital - Omaha, Inc.

Select Specialty Hospital - Orange, Inc.

Select Specialty Hospital - Palm Beach, Inc.

Select Specialty Hospital - Philadelphia/AEMC, Inc.

Select Specialty Hospital - Phoenix, Inc.

Select Specialty Hospital - Pittsburgh, Inc.

Select Specialty Hospital - Pontiac, Inc.

Select Specialty Hospital - Reno, Inc.

Select Specialty Hospital - Saginow, Inc.

Select Specialty Hospital - San Antonio, Inc.

Select Specialty Hospital - Sarasota, Inc.

Select Specialty Hospital - Sioux Falls, Inc.

Select Specialty Hospital - South Dallas, Inc.

Select Specialty Hospital - Topeka, Inc.

                                      I-7
<PAGE>

                                                                      SCHEDULE I

Select Specialty Hospital - TriCities, Inc.

Select Specialty Hospital - Tulsa, Inc.

Select Specialty Hospital - Western Michigan, Inc.

Select Specialty Hospital - Western Missouri, Inc.

Select Specialty Hospital - Wichita, Inc.

Select Specialty Hospital - Wilmington, Inc.

Select Specialty Hospital - Wyandotte, Inc.

Select Specialty Hospital - Youngstown, Inc.

Select Specialty Hospital - Zanesville, Inc.

Select Specialty Hospitals, Inc.

Select Synergos, Inc.

Select Transport, Inc.

Select Unit Management, Inc.

SLMC Finance Corporation

South Jersey Physical Therapy Associates, Inc.

South Jersey Rehabilitation and Sports Medicine Center, Inc.

South Philadelphia Occupational Health, Inc.

Southpointe Fitness Center, Inc.

Southwest Emergency Associates, Inc.

Southwest Physical Therapy, Inc.

Southwest Therapists, Inc.

Sports & Orthopedic Rehabilitation Services, Inc.

Sports Therapy and Arthritis Rehabilitation, Inc.

Star Physical Therapy, Inc.

Stephenson-Holtz, Inc.

The Center for Physical Therapy and Rehabilitation, Inc.

The Orthopedic Sports and Industrial Rehabilitation Network, Inc.

TJ Partnership I

Treister, Inc.

                                      I-8
<PAGE>

                                                                      SCHEDULE I

Valley Group Physical Therapists, Inc.

Vanguard Rehabilitation, Inc.

Victoria Healthcare, Inc.

Wayzata Physical Therapy Center, Inc.

West Penn Rehabilitation Services, Inc.

West Side Physical Therapy, Inc.

West Suburban Health Partners, Inc.

Yuma Rehabilitation Center, Inc.

                               KESSLER GUARANTORS

Kessler Rehabilitation Corporation

Wholly-Owned Subsidiaries of Kessler Rehabilitation Corporation

Argosy Health, LLC

Atra Services, Inc.

Community Rehab Centers of Massachusetts, Inc.

Core Rehab Management, LLC

CRF Rehabilitation Associates, Inc.

Edgewater Rehabilitation Associates, Inc.

Horizon Health & Rehabilitation, Inc.

Kessler Assisted Living Corporation

Kessler Care Center at Cedar Grove, Inc.

Kessler Care Center at Great Falls, Inc. (dissolution pending)

Kessler Care Center at St. Cloud, Inc. (dissolution pending)

Kessler Institute for Rehabilitation, Inc.

Kessler Occupational Medicine Centers, Inc.

Kessler Physical Therapy & Rehabilitation, Inc.

Kessler Rehab Centers, Inc.

Kessler Rehab of Connecticut, Inc.

                                      I-9
<PAGE>

                                                                      SCHEDULE I

Kessler Rehabilitation of Florida, Inc.

Kessler Rehabilitation of Maryland, Inc.

Kessler Rehabilitation Services, Inc.

Pennsylvania Rehab, Inc.

Physical Therapy Associates, P.C.

Wilpage, Inc.

Wholly-Owned Joint Venture Investment Interests of Kessler Rehabilitation
Corporation

Stamper Physical Therapy & Associates, Inc.

                                      I-10
<PAGE>

                                                                     SCHEDULE II

<TABLE>
<CAPTION>
                                                                    Principal
                                                                     Amount
Initial Purchasers                                                of Securities
------------------                                                -------------
<S>                                                               <C>
J.P. Morgan Securities Inc.                                       $  70,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated                   61,250,000
Wachovia Capital Markets, LLC                                        26,250,000
SG Cowen Securities Corporation                                       7,000,000
CIBC World Markets Corp.                                              3,500,000
Fleet Securities, Inc.                                                3,500,000
Jefferies & Company, Inc.                                             3,500,000
          Total                                                   $ 175,000,000
</TABLE>

<PAGE>

                                                                    SCHEDULE III
                                                             COMPANY GUARANTORS,
                                                          SELECT MEDICAL ESCROW,
                                                           OPERATING AND HOLDING
                                                           COMPANY SUBSIDIARIES,
                                                    KESSLER AND ITS SUBSIDIARIES

                              COMPANY SUBSIDIARIES

1263568 Ontario Limited*

9086-3200 Quebec, Inc.*

Affiliated Physical Therapists, Ltd.

Allegany Hearing and Speech, Inc.

American Transitional Hospitals, Inc.

Athens Sports Medicine Clinic, Inc.

Ather Sports Injury Clinic, Inc.

Atlantic Health Group, Inc.

Atlantic Rehabilitation Services, Inc.

Avalon Rehabilitation & Healthcare, LLC

Buendel Physical Therapy, Inc.

C.E.R. - West, Inc.

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

Canadian Back Institute Limited*

Caritas Rehab Services, LLC*

CBI Barrie Limited Partnership*

CBI Burnaby Limited Partnership*

CBI Cambridge Limited Partnership*

CBI Edmonton Limited Partnership*

CBI Gatineau Limited Partnership*

CBI Kitchener Limited Partnership*

CBI London East Limited Partnership*

CBI London Limited Partnership*

                                     III-1
<PAGE>

                                                                    SCHEDULE III

CBI Mississauga Limited Partnership*

CBI Montreal Limited Partnership*

CBI Niagara Limited Partnership*

CBI Ottawa Limited Partnership*

CBI Ottawa West Limited Partnership*

CBI Port Coquitlam Limited Partnership*

CBI Regina Limited Partnership*

CBI Richmond Limited Partnership*

CBI Sarnia Limited Partnership*

CBI St. Clair West Limited Partnership*

CBI Surrey Limited Partnership*

CBI Windsor Limited Partnership*

CBI Physical Therapy Inc.*

CBI Professional Services, Inc.*

CCISUB, Inc.

CMC Center Corporation

Cenla Physical Therapy & Rehabilitation Agency, Inc.

Center for Evaluation & Rehabilitation, Inc.

Center for Physical Therapy & Sports Rehabilitation, Inc.

CenterTherapy, Inc.

Champion Physical Therapy, Inc.

Clinique De Physiotherapic Du Mediaclub, Inc.*

Connecticut NovaCare Ventures, Inc.

Coplin Physical Therapy Associates, Inc.

Crowley Physical Therapy Clinic, Inc.

Douglas Avery & Associates, Ltd.

Dynamic Rehabilitation, Inc.*

Eastern Rehabilitation, Inc.*

Elk County Physical Therapy, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Fine, Bryant & Wah, Inc.

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

Gallery Physical Therapy Center, Inc.

Georgia NovaCare Ventures, Inc.

Georgia Physical Therapy of West Georgia, Inc.

Georgia Physical Therapy, Inc.

GP Therapy, L.L.C.

Greater Sacramento Physical Therapy Associates, Inc.

Grove City Physical Therapy and Sports Medicine, Inc.

Gulf Breeze Physical Therapy, Inc.

Gulf Coast Hand Specialists

Hand Therapy Associates, Inc.

Hand Therapy and Rehabilitation Associates, Inc.

Hangtown Physical Therapy, Inc.

Hawley Physical Therapy, Inc.

Hudson Physical Therapy Associates, Inc.

Human Performance and Fitness, Inc.

Indianapolis Physical Therapy and Sports Medicine, Inc.

Intensiva Healthcare Corporation

Intensiva Hospital of Greater St. Louis, Inc.

Jeffersontown Physical Therapy, L.L.C.*

Joyner Sports Science Institute, Inc.

Joyner Sportsmedicine Institute, Inc.

Kentucky Orthopedic Rehabilitation, LLC*

Kentucky Rehabilitation Services, Inc.

Lynn M. Carlson, Inc.

Medical Information Management Systems, LLC*

Metro Therapy, Inc.*

Metro Rehabilitation Services, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Michigan Therapy Centre, Inc.

MidAtlantic Health Group, Inc.

Millennium Rehab Services, L.L.C.*

Monmouth Rehabilitation, Inc.

New England Health Group, Inc

New Mexico Physical Therapists, Inc.

Northside Physical Therapy, Inc.

NovaCare Health Group, LLC

NovaCare Occupational Health Services, Inc.

NovaCare Outpatient Rehabilitation East, Inc.

NovaCare Outpatient Rehabilitation, Inc.

NovaCare Outpatient Rehabilitation of California, Inc.

NovaCare Outpatient Rehabilitation West, Inc.

NovaCare Rehabilitation, Inc.

NW Rehabilitation Associates, L.P.

P.T. Services Company

P.T. Services, Inc.

P.T. Services Rehabilitation, Inc.

PCR Physiotherapist Corporation*

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

Physical Rehabilitation Partners, Inc.

Physical Therapy Enterprises, Inc.

Physical Therapy Institute, Inc.

Physical Therapy Services of the Jersey Cape, Inc.

Physio - Associates, Inc.

Pro Active Therapy, Inc.

Pro Active Therapy of Ahoskie, Inc.

Pro Active Therapy of Gaffney, Inc.

Pro Active Therapy of Greenville, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Pro Active Therapy of North Carolina, Inc.

Pro Active Therapy of Rocky Mount, Inc.

Pro Active Therapy of South Carolina, Inc.

Pro Active Therapy of Virginia, Inc.

Professional Therapeutic Services, Inc.

Quad City Management, Inc.

RCI (Colorado), Inc.

RCI (Exertec), Inc.

RCI (Michigan), Inc.

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

RCI (WRS), Inc.

Rebound Oklahoma, Inc.

Redwood Pacific Therapies, Inc.

Rehab Advantage, Inc.

Rehab Advantage Therapy Services, LLC*

Rehab Health, Inc.*

Rehab Managed Care of Arizona, Inc.

Rehab Provider Network - California, Inc.

Rehab Provider Network - East I, Inc.

Rehab Provider Network - East II, Inc.

Rehab Provider Network - Georgia, Inc.

Rehab Provider Network - Indiana, Inc.

Rehab Provider Network - Michigan, Inc.

Rehab Provider Network - New Jersey, Inc.

Rehab Provider Network - Ohio, Inc.

Rehab Provider Network - Oklahoma, Inc.

Rehab Provider Network - Pennsylvania, Inc.

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

Rehab Provider Network of Colorado, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Rehab Provider Network of Florida, Inc.

Rehab Provider Network of Nevada, Inc.

Rehab Provider Network of New Mexico, Inc.

Rehab Provider Network of North Carolina, Inc.

Rehab Provider Network of Texas, Inc.

Rehab Provider Network of Wisconsin, Inc.

Rehab/Work Hardening Management Associates, Ltd.

RehabClinics, Inc.

RehabClinics (GALAXY), Inc.

RehabClinics (PTA), Inc.

RehabClinics (SPT), Inc.

RehabClinics Abilene, Inc.

RehabClinics Dallas, Inc.

RehabClinics Pennsylvania, Inc.

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

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

Select Air II, Inc.

Select Employment Services, Inc.

Select Hospital Investors, Inc.

Select Management Services, LLC

SelectMark, Inc.

Select Medical Escrow, Inc.*

Select Medical of Kentucky, Inc.

Select Medical of Maryland, Inc.

Select Medical of New Jersey, Inc.

Select Medical of New York, Inc.

Select Medical of Ohio, Inc.

Select Medical of Pennsylvania, Inc.

Select Medical Rehabilitation Clinics, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Select Provider Networks, Inc.

Select Rehabilitation Management Services, Inc.

Select Software Ventures, LLC

Select Specialty Hospital - Akron, Inc.

Select Specialty Hospital - Albuquerque

Select Specialty Hospital - Ann Arbor, Inc.

Select Specialty Hospital - Arizona, Inc.

Select Specialty Hospital - Battle Creek, Inc.

Select Specialty Hospital - Beech Grove, Inc.

Select Specialty Hospital - Bloomington, Inc.

Select Specialty Hospital - Boston, Inc.

Select Specialty Hospital - Central Detroit, Inc.

Select Specialty Hospital - Central Pennsylvania, L.P.*

Select Specialty Hospital - Charleston, Inc.

Select Specialty Hospital - Cincinnati, Inc.

Select Specialty Hospital - Columbus, Inc.

Select Specialty Hospital - Columbus/Grant, Inc.

Select Specialty Hospital - Columbus/University, Inc.

Select Specialty Hospital - Conroe, Inc.

Select Specialty Hospital - Dallas, Inc.

Select Specialty Hospital - Denver, Inc.

Select Specialty Hospital - Durham, Inc.

Select Specialty Hospital - Erie, Inc.

Select Specialty Hospital - Escambia, Inc.

Select Specialty Hospital - Evansville, Inc.

Select Specialty Hospital - Flint, Inc.

Select Specialty Hospital - Fort Smith, Inc.

Select Specialty Hospital - Fort Wayne, Inc.

Select Specialty Hospital - Gadsden, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Select Specialty Hospital - Greensburg, Inc.

Select Specialty Hospital - Honolulu, Inc.

Select Specialty Hospital - Houston, Inc.

Select Specialty Hospital - Houston, L.P.*

Select Specialty Hospital - Huntsville, Inc.

Select Specialty Hospital - Indianapolis, Inc.

Select Specialty Hospital - Jackson, Inc.

Select Specialty Hospital - Johnstown, Inc.

Select Specialty Hospital - Kansas City, Inc.

Select Specialty Hospital - Knoxville, Inc.

Select Specialty Hospital - Lansing, Inc.

Select Specialty Hospital - Lee, Inc.

Select Specialty Hospital - Leon, Inc.

Select Specialty Hospital - Lexington, Inc.

Select Specialty Hospital - Little Rock, Inc.

Select Specialty Hospital - Louisville, Inc.

Select Specialty Hospital - Macomb County, Inc.

Select Specialty Hospital - Macon, Inc.

Select Specialty Hospital - Marion, Inc.

Select Specialty Hospital - Memphis, Inc.

Select Specialty Hospital - Milwaukee, Inc.

Select Specialty Hospital - Mississippi Gulf Coast, Inc.*

Select Specialty Hospital - Morgantown, Inc.

Select Specialty Hospital - Nashville, Inc.

Select Specialty Hospital - New Orleans, Inc.

Select Specialty Hospital - North Knoxville, Inc.

Select Specialty Hospital - Northwest Detroit, Inc.

Select Specialty Hospital - Northwest Indiana, Inc.

Select Specialty Hospital - Oklahoma City, Inc.

                                     III-2
<PAGE>

                                                                    SCHEDULE III

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

Select Specialty Hospital - Omaha, Inc.

Select Specialty Hospital - Orange, Inc.

Select Specialty Hospital - Palm Beach, Inc.

Select Specialty Hospital - Philadelphia/AEMC, Inc.

Select Specialty Hospital - Phoenix, Inc.

Select Specialty Hospital - Pittsburgh, Inc.

Select Specialty Hospital - Pontiac, Inc.

Select Specialty Hospital - Reno, Inc.

Select Specialty Hospital - Saginow, Inc.

Select Specialty Hospital - San Antonio, Inc.

Select Specialty Hospital - Sarasota, Inc.

Select Specialty Hospital - Sioux Falls, Inc.

Select Specialty Hospital - South Dallas, Inc.

Select Specialty Hospital - Topeka, Inc.

Select Specialty Hospital - TriCities, Inc.

Select Specialty Hospital - Tulsa, Inc.

Select Specialty Hospital - Western Michigan, Inc.

Select Specialty Hospital - Western Missouri, Inc.

Select Specialty Hospital - Wichita, Inc.

Select Specialty Hospital - Wilmington, Inc.

Select Specialty Hospital - Wyandotte, Inc.

Select Specialty Hospital - Youngstown, Inc.

Select Specialty Hospital - Zanesville, Inc.

Select Specialty Hospitals, Inc.

Select Synergos, Inc.

Select Transport, Inc.

Select Unit Management, Inc.

SLMC Finance Corporation

                                     III-2
<PAGE>

                                                                    SCHEDULE III

South Jersey Physical Therapy Associates, Inc.

South Jersey Rehabilitation and Sports Medicine Center, Inc.

South Philadelphia Occupational Health, Inc.

Southpointe Fitness Center, Inc.

Southwest Emergency Associates, Inc.

Southwest Physical Therapy, Inc.

Southwest Therapists, Inc.

Sports & Orthopedic Rehabilitation Services, Inc.

Sports Therapy and Arthritis Rehabilitation, Inc.

Star Physical Therapy, Inc.

Stephenson-Holtz, Inc.

The Center for Physical Therapy and Rehabilitation, Inc.

The Orthopedic Sports and Industrial Rehabilitation Network, Inc.

TJ Corporation I, LLC*

TJ Partnership I

Treister, Inc.

Valley Group Physical Therapists, Inc.

Vanguard Rehabilitation, Inc.

Victoria Healthcare, Inc.

Wayzata Physical Therapy Center, Inc.

West Penn Rehabilitation Services, Inc.

West Side Physical Therapy, Inc.

West Suburban Health Partners, Inc.

Yuma Rehabilitation Center, Inc.

                          KESSLER AND ITS SUBSIDIARIES

Kessler Rehabilitation Corporation

Wholly-Owned Subsidiaries of Kessler Rehabilitation Corporation

Argosy Health, LLC

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Atra Services, Inc.

Community Rehab Centers of Massachusetts, Inc.

Core Rehab Management, LLC

CRF Rehabilitation Associates, Inc.

Edgewater Rehabilitation Associates, Inc.

Horizon Health & Rehabilitation, Inc.

Kessler Assisted Living Corporation

Kessler Care Center at Cedar Grove, Inc.

Kessler Care Center at Great Falls, Inc. (dissolution pending)

Kessler Care Center at St. Cloud, Inc. (dissolution pending)

Kessler Institute for Rehabilitation, Inc.

Kessler Occupational Medicine Centers, Inc.

Kessler Physical Therapy & Rehabilitation, Inc.

Kessler Rehab Centers, Inc.

Kessler Rehab of Connecticut, Inc.

Kessler Rehabilitation of Florida, Inc.

Kessler Rehabilitation of Maryland, Inc.

Kessler Rehabilitation Services, Inc.

Pennsylvania Rehab, Inc.

Physical Therapy Associates, P.C.

Wilpage, Inc.

Joint Venture Investment Interests of Kessler Rehabilitation Corporation

Center for Health and Fitness at Palisades, LLC*

Kessler Adventist Rehabilitation Hospital, LLC*

Kessler Adventist Rehabilitation Services, LLC*

Kessler Assisted Living Centers, LLC*

Kessler Assisted Living Residence I, LLC*

Kessler Assisted Living Residence III, LLC*

                                     III-2
<PAGE>

                                                                    SCHEDULE III

Stamper Physical Therapy & Associates, Inc.

 *Non-Guarantor Subsidiary

                                     III-2
<PAGE>

                                                                     SCHEDULE IV
                                                             CERTAIN INFORMATION
                                                             REGARDING STOCK AND
                                                             OWNERSHIP INTERESTS

                              COMPANY SUBSIDIARIES

1263568 Ontario Limited**

9086-3200 Quebec, Inc.**

Affiliated Physical Therapists, Ltd.

Allegany Hearing and Speech, Inc.

American Transitional Hospitals, Inc.

Athens Sports Medicine Clinic, Inc.

Ather Sports Injury Clinic, Inc.

Atlantic Health Group, Inc.

Atlantic Rehabilitation Services, Inc.

Avalon Rehabilitation & Healthcare, LLC

Buendel Physical Therapy, Inc.

C.E.R. - West, Inc.

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

Canadian Back Institute Limited*

Caritas Rehab Services, LLC+

CBI Barrie Limited Partnership**

CBI Burnaby Limited Partnership**

CBI Cambridge Limited Partnership**

CBI Edmonton Limited Partnership**

CBI Gatineau Limited Partnership**

CBI Kitchener Limited Partnership**

CBI London East Limited Partnership**

CBI London Limited Partnership**

CBI Mississauga Limited Partnership**

<PAGE>

                                                                     SCHEDULE IV

CBI Montreal Limited Partnership**

CBI Niagara Limited Partnership**

CBI Ottawa Limited Partnership**

CBI Ottawa West Limited Partnership**

CBI Port Coquitlam Limited Partnership**

CBI Physical Therapy Inc.**

CBI Professional Services, Inc.**

CBI Regina Limited Partnership**

CBI Richmond Limited Partnership**

CBI Sarnia Limited Partnership**

CBI St. Clair West Limited Partnership**

CBI Sudbury Limited Partnership**

CBI Surrey Limited Partnership**

CBI Windsor Limited Partnership**

CCISUB, Inc.

CMC Center Corporation

Cenla Physical Therapy & Rehabilitation Agency, Inc.

Center for Evaluation & Rehabilitation, Inc.

Center for Physical Therapy & Sports Rehabilitation, Inc.

CenterTherapy, Inc.

Champion Physical Therapy, Inc.

Clinique De Physiotherapic Du Mediaclub, Inc.**

Connecticut NovaCare Ventures, Inc.

Coplin Physical Therapy Associates, Inc.

Crowley Physical Therapy Clinic, Inc.

Douglas Avery & Associates, Ltd.

Dynamic Rehabilitation, Inc.**

Eastern Rehabilitation, Inc.**

Elk County Physical Therapy, Inc.

                                      IV-2
<PAGE>

                                                                     SCHEDULE IV

Fine, Bryant & Wah, Inc.

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

Gallery Physical Therapy Center, Inc.

Georgia NovaCare Ventures, Inc.

Georgia Physical Therapy of West Georgia, Inc.

Georgia Physical Therapy, Inc.

GP Therapy, L.L.C.

Greater Sacramento Physical Therapy Associates, Inc.

Grove City Physical Therapy and Sports Medicine, Inc.

Gulf Breeze Physical Therapy, Inc.

Gulf Coast Hand Specialists

Hand Therapy Associates, Inc.

Hand Therapy and Rehabilitation Associates, Inc.

Hangtown Physical Therapy, Inc.

Hawley Physical Therapy, Inc.

Hudson Physical Therapy Associates, Inc.

Human Performance and Fitness, Inc.

Indianapolis Physical Therapy and Sports Medicine, Inc.

Intensiva Healthcare Corporation

Intensiva Hospital of Greater St. Louis, Inc.

Jeffersontown Physical Therapy, L.L.C.*

Joyner Sports Science Institute, Inc.

Joyner Sportsmedicine Institute, Inc.

Kentucky Orthopedic Rehabilitation, LLC+

Kentucky Rehabilitation Services, Inc.

Lynn M. Carlson, Inc.

Medical Information Management Systems, LLC+

Metro Therapy, Inc.+

Metro Rehabilitation Services, Inc.

                                      IV-3
<PAGE>

                                                                     SCHEDULE IV

Michigan Therapy Centre, Inc.

MidAtlantic Health Group, Inc.

Millennium Rehab Services, L.L.C.+

Monmouth Rehabilitation, Inc.

New England Health Group, Inc

New Mexico Physical Therapists, Inc.

Northside Physical Therapy, Inc.

NovaCare Health Group, LLC

NovaCare Occupational Health Services, Inc.

NovaCare Outpatient Rehabilitation East, Inc.

NovaCare Outpatient Rehabilitation, Inc.

NovaCare Outpatient Rehabilitation of California, Inc.

NovaCare Outpatient Rehabilitation West, Inc.

NovaCare Rehabilitation, Inc.

NW Rehabilitation Associates, L.P.

P.T. Services Company

P.T. Services, Inc.

P.T. Services Rehabilitation, Inc.

PCR Physiotherapist Corporation**

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

Physical Rehabilitation Partners, Inc.

Physical Therapy Enterprises, Inc.

Physical Therapy Institute, Inc.

Physical Therapy Services of the Jersey Cape, Inc.

Physio - Associates, Inc.

Pro Active Therapy, Inc.

Pro Active Therapy of Ahoskie, Inc.

Pro Active Therapy of Gaffney, Inc.

Pro Active Therapy of Greenville, Inc.

                                      IV-4
<PAGE>

                                                                     SCHEDULE IV

Pro Active Therapy of North Carolina, Inc.

Pro Active Therapy of Rocky Mount, Inc.

Pro Active Therapy of South Carolina, Inc.

Pro Active Therapy of Virginia, Inc.

Professional Therapeutic Services, Inc.

Quad City Management, Inc.

RCI (Colorado), Inc.

RCI (Exertec), Inc.

RCI (Michigan), Inc.

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

RCI (WRS), Inc.

Rebound Oklahoma, Inc.

Redwood Pacific Therapies, Inc.

Rehab Advantage, Inc.

Rehab Advantage Therapy Services, LLC+

Rehab Health, Inc.**

Rehab Managed Care of Arizona, Inc.

Rehab Provider Network - California, Inc.

Rehab Provider Network - East I, Inc.

Rehab Provider Network - East II, Inc.

Rehab Provider Network - Georgia, Inc.

Rehab Provider Network - Indiana, Inc.

Rehab Provider Network - Michigan, Inc.

Rehab Provider Network - New Jersey, Inc.

Rehab Provider Network - Ohio, Inc.

Rehab Provider Network - Oklahoma, Inc.

Rehab Provider Network - Pennsylvania, Inc.

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

Rehab Provider Network of Colorado, Inc.

                                      IV-5
<PAGE>

                                                                     SCHEDULE IV

Rehab Provider Network of Florida, Inc.

Rehab Provider Network of Nevada, Inc.

Rehab Provider Network of New Mexico, Inc.

Rehab Provider Network of North Carolina, Inc.

Rehab Provider Network of Texas, Inc.

Rehab Provider Network of Wisconsin, Inc.

Rehab/Work Hardening Management Associates, Ltd.

RehabClinics, Inc.

RehabClinics (GALAXY), Inc.

RehabClinics (PTA), Inc.

RehabClinics (SPT), Inc.

RehabClinics Abilene, Inc.

RehabClinics Dallas, Inc.

RehabClinics Pennsylvania, Inc.

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

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

Select Air II, Inc.

Select Employment Services, Inc.

Select Hospital Investors, Inc.

Select Management Services, LLC

SelectMark, Inc.

Select Medical of Kentucky, Inc.

Select Medical of Maryland, Inc.

Select Medical of New Jersey, Inc.

Select Medical of New York, Inc.

Select Medical of Ohio, Inc.

Select Medical of Pennsylvania, Inc.

Select Medical Rehabilitation Clinics, Inc.

Select Provider Networks, Inc.

                                      IV-6
<PAGE>

                                                                     SCHEDULE IV

Select Rehabilitation Management Services, Inc.

Select Software Ventures, LLC

Select Specialty Hospital - Akron, Inc.

Select Specialty Hospital - Albuquerque

Select Specialty Hospital - Ann Arbor, Inc.

Select Specialty Hospital - Arizona, Inc.

Select Specialty Hospital - Battle Creek, Inc.

Select Specialty Hospital - Beech Grove, Inc.

Select Specialty Hospital - Bloomington, Inc.

Select Specialty Hospital - Boston, Inc.

Select Specialty Hospital - Central Detroit, Inc.

Select Specialty Hospital - Central Pennsylvania, L.P.+

Select Specialty Hospital - Charleston, Inc.

Select Specialty Hospital - Cincinnati, Inc.

Select Specialty Hospital - Columbus, Inc.

Select Specialty Hospital - Columbus/Grant, Inc.

Select Specialty Hospital - Columbus/University, Inc.

Select Specialty Hospital - Conroe, Inc.

Select Specialty Hospital - Dallas, Inc.

Select Specialty Hospital - Denver, Inc.

Select Specialty Hospital - Durham, Inc.

Select Specialty Hospital - Erie, Inc.

Select Specialty Hospital - Escambia, Inc.

Select Specialty Hospital - Evansville, Inc.

Select Specialty Hospital - Flint, Inc.

Select Specialty Hospital - Fort Smith, Inc.

Select Specialty Hospital - Fort Wayne, Inc.

Select Specialty Hospital - Gadsden, Inc.

Select Specialty Hospital - Greensburg, Inc.

                                      IV-7
<PAGE>

                                                                     SCHEDULE IV

Select Specialty Hospital - Honolulu, Inc.

Select Specialty Hospital - Houston, Inc.

Select Specialty Hospital - Houston, L.P.+

Select Specialty Hospital - Huntsville, Inc.

Select Specialty Hospital - Indianapolis, Inc.

Select Specialty Hospital - Jackson, Inc.

Select Specialty Hospital - Johnstown, Inc.

Select Specialty Hospital - Kansas City, Inc.

Select Specialty Hospital - Knoxville, Inc.

Select Specialty Hospital - Lansing, Inc.

Select Specialty Hospital - Lee, Inc.

Select Specialty Hospital - Leon, Inc.

Select Specialty Hospital - Lexington, Inc.

Select Specialty Hospital - Little Rock, Inc.

Select Specialty Hospital - Louisville, Inc.

Select Specialty Hospital - Macomb County, Inc.

Select Specialty Hospital - Macon, Inc.

Select Specialty Hospital - Marion, Inc.

Select Specialty Hospital - Memphis, Inc.

Select Specialty Hospital - Milwaukee, Inc.

Select Specialty Hospital - Mississippi Gulf Coast, Inc.+

Select Specialty Hospital - Morgantown, Inc.

Select Specialty Hospital - Nashville, Inc.

Select Specialty Hospital - New Orleans, Inc.

Select Specialty Hospital - North Knoxville, Inc.

Select Specialty Hospital - Northwest Detroit, Inc.

Select Specialty Hospital - Northwest Indiana, Inc.

Select Specialty Hospital - Oklahoma City, Inc.

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

                                      IV-8
<PAGE>

                                                                     SCHEDULE IV

Select Specialty Hospital - Omaha, Inc.

Select Specialty Hospital - Orange, Inc.

Select Specialty Hospital - Palm Beach, Inc.

Select Specialty Hospital - Philadelphia/AEMC, Inc.

Select Specialty Hospital - Phoenix, Inc.

Select Specialty Hospital - Pittsburgh, Inc.

Select Specialty Hospital - Pontiac, Inc.

Select Specialty Hospital - Reno, Inc.

Select Specialty Hospital - Saginow, Inc.

Select Specialty Hospital - San Antonio, Inc.

Select Specialty Hospital - Sarasota, Inc.

Select Specialty Hospital - Sioux Falls, Inc.

Select Specialty Hospital - South Dallas, Inc.

Select Specialty Hospital - Topeka, Inc.

Select Specialty Hospital - TriCities, Inc.

Select Specialty Hospital - Tulsa, Inc.

Select Specialty Hospital - Western Michigan, Inc.

Select Specialty Hospital - Western Missouri, Inc.

Select Specialty Hospital - Wichita, Inc.

Select Specialty Hospital - Wilmington, Inc.

Select Specialty Hospital - Wyandotte, Inc.

Select Specialty Hospital - Youngstown, Inc.

Select Specialty Hospital - Zanesville, Inc.

Select Specialty Hospitals, Inc.

Select Synergos, Inc.

Select Transport, Inc.

Select Unit Management, Inc.

SLMC Finance Corporation

South Jersey Physical Therapy Associates, Inc.

                                      IV-9
<PAGE>

                                                                     SCHEDULE IV

South Jersey Rehabilitation and Sports Medicine Center, Inc.

South Philadelphia Occupational Health, Inc.

Southpointe Fitness Center, Inc.

Southwest Emergency Associates, Inc.

Southwest Physical Therapy, Inc.

Southwest Therapists, Inc.

Sports & Orthopedic Rehabilitation Services, Inc.

Sports Therapy and Arthritis Rehabilitation, Inc.

Star Physical Therapy, Inc.

Stephenson-Holtz, Inc.

The Center for Physical Therapy and Rehabilitation, Inc.

The Orthopedic Sports and Industrial Rehabilitation Network, Inc.

TJ Corporation I, LLC+

TJ Partnership I

Treister, Inc.

Valley Group Physical Therapists, Inc.

Vanguard Rehabilitation, Inc.

Victoria Healthcare, Inc.

Wayzata Physical Therapy Center, Inc.

West Penn Rehabilitation Services, Inc.

West Side Physical Therapy, Inc.

West Suburban Health Partners, Inc.

Yuma Rehabilitation Center, Inc.

                          KESSLER AND ITS SUBSIDIARIES

Kessler Rehabilitation Corporation

Wholly-Owned Subsidiaries of Kessler Rehabilitation Corporation

Argosy Health, LLC

Atra Services, Inc.

                                     IV-10
<PAGE>

                                                                     SCHEDULE IV

Community Rehab Centers of Massachusetts, Inc.

Core Rehab Management, LLC

CRF Rehabilitation Associates, Inc.

Edgewater Rehabilitation Associates, Inc.

Horizon Health & Rehabilitation, Inc.

Kessler Assisted Living Corporation

Kessler Care Center at Cedar Grove, Inc.

Kessler Care Center at Great Falls, Inc. (dissolution pending)

Kessler Care Center at St. Cloud, Inc. (dissolution pending)

Kessler Institute for Rehabilitation, Inc.

Kessler Occupational Medicine Centers, Inc.

Kessler Physical Therapy & Rehabilitation, Inc.

Kessler Rehab Centers, Inc.

Kessler Rehab of Connecticut, Inc.

Kessler Rehabilitation of Florida, Inc.

Kessler Rehabilitation of Maryland, Inc.

Kessler Rehabilitation Services, Inc.

Pennsylvania Rehab, Inc.

Physical Therapy Associates, P.C.

Wilpage, Inc.

Joint Venture Investment Interests of Kessler Rehabilitation Corporation

Center for Health and Fitness at Palisades, LLC+

Kessler Adventist Rehabilitation Hospital, LLC+

Kessler Adventist Rehabilitation Services, LLC+

Kessler Assisted Living Centers, LLC+

Kessler Assisted Living Residence I, LLC+

Kessler Assisted Living Residence III, LLC+

Stamper Physical Therapy & Associates, Inc.

                                     IV-11
<PAGE>

                                                                     SCHEDULE IV

All of the above-listed entities have pledged their capital stock or other
ownership interest pursuant to the Company's Amended and Restated Credit
Agreement, unless denoted with an *. The entities denoted with a + are not
wholly-owned by the Company or Kessler, as the case may be. Entities denoted
with ** have pledged their capital stock or ownership interest pursuant to the
Company's Amended and Restated Credit Agreement to the extent permitted by
Canadian law.

                                     IV-12
<PAGE>

                                                                      SCHEDULE V
                                                      NON-GUARANTOR SUBSIDIARIES

                              COMPANY SUBSIDIARIES

1263568 Ontario Limited

9086-3200 Quebec, Inc.

Canadian Back Institute Limited

Caritas Rehab Services, LLC

CBI Barrie Limited Partnership

CBI Burnaby Limited Partnership

CBI Cambridge Limited Partnership

CBI Edmonton Limited Partnership

CBI Gatineau Limited Partnership

CBI Kitchener Limited Partnership

CBI Lethbridge Limited Partnership

CBI London East Limited Partnership

CBI London Limited Partnership

CBI Mississauga Limited Partnership

CBI Montreal Limited Partnership

CBI Niagara Limited Partnership

CBI Ottawa Limited Partnership

CBI Ottawa West Limited Partnership

CBI Port Coquitlam Limited Partnership

CBI Physical Therapy Inc.

CBI Professional Services, Inc.

CBI Regina Limited Partnership

CBI Richmond Limited Partnership

CBI Sarnia Limited Partnership

CBI St. Clair West Limited Partnership

<PAGE>

                                                                      SCHEDULE V

CBI Sudbury Limited Partnership

CBI Surrey Limited Partnership

CBI Windsor Limited Partnership

Clinique De Physiotherapic Du Mediaclub, Inc.

Dynamic Rehabilitation, Inc.

Eastern Rehabilitation, Inc.

Jeffersontown Physical Therapy, L.L.C.

Kentucky Orthopedic Rehabilitation, LLC

Medical Information Management Systems, LLC

Metro Therapy, Inc.

Millennium Rehab Services, L.L.C.

PCR Physiotherapist Corporation

Rehab Advantage Therapy Services, LLC

Rehab Health, Inc.

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

Select Medical Escrow, Inc.

Select Specialty Hospital - Central Pennsylvania, L.P.

Select Specialty Hospital - Houston, L.P.

Select Specialty Hospital - Mississippi Gulf Coast, Inc.

TJ Corporation I, LLC

                              KESSLER SUBSIDIARIES

Non-Wholly Owned Joint Venture Investment Interests of Kessler Rehabilitation
Corporation

Center for Health and Fitness at Palisades, LLC

Kessler Adventist Rehabilitation Hospital, LLC

Kessler Adventist Rehabilitation Services, LLC

Kessler Assisted Living Centers, LLC

Kessler Assisted Living Residence I, LLC

Kessler Assisted Living Residence III, LLC

                                      V-2<PAGE>

                                                                   Exhibit 10.76

                                ESCROW AGREEMENT

                  ESCROW AGREEMENT, dated as of August 12, 2003 (the
"Agreement"), among Select Medical Corporation, a Delaware corporation (the
"Company"), Select Medical Escrow, Inc. ("Select Medical Escrow"), U.S. Bank
Trust National Association, as escrow agent (in such capacity, the "Escrow
Agent") and U.S. Bank Trust National Association, as Trustee (in such capacity,
the "Trustee") under the Indenture (the "Indenture"), dated as of August 12,
2003, between Select Medical Escrow and the Trustee.

                  This Agreement is being entered into in connection with the
Purchase Agreement, dated July 29, 2003 (the "Purchase Agreement") among the
Company and J.P. Morgan Securities Inc. ("JP Morgan"), Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Wachovia Capital Markets, LLC, SG
Cowen Securities Corporation, CIBC World Markets Corp., Fleet Securities, Inc.
and Jefferies & Company, Inc. (collectively, the "Initial Purchasers"), and the
Indenture. Capitalized terms used but not defined herein have the respective
meanings specified in the Indenture.

                  Pursuant to the Purchase Agreement, Select Medical Escrow is
selling $175,000,000 aggregate principal amount of its 7 1/2% Senior
Subordinated Notes due 2013 (the "Securities"). Concurrently with the closing of
such sale, Select Medical Escrow will deposit with the Escrow Agent, as
hereinafter provided, the net proceeds thereof, together with other funds (in
both cases, in the form of cash and/or Permitted Investments (as defined below))
in an amount sufficient to pay when due the Special Redemption Price (as defined
below), assuming redemption of the Securities occurs on December 11, 2003. Such
funds will be used (i) to fund, in part, the acquisition (the "Kessler
Acquisition") of Kessler Rehabilitation Corporation, a Delaware corporation
("Kessler"), pursuant to the Stock Purchase Agreement, dated as of June 30, 2003
(the "Stock Purchase Agreement") by and among the Company, Kessler and the Henry
H. Kessler Foundation, a New Jersey non-profit organization, or (ii) to fund the
Special Redemption Price.

                  In connection with the consummation of the Kessler
Acquisition, (i) the Company will assume all of Select Medical Escrow's
obligations under the Securities, the Indenture, this Agreement and the Purchase
Agreement pursuant to the assumption documentation referred to in clauses (i)
and (ii) of Section 2(a) (the "Assumption"), (ii) Select Medical Escrow will
merge with and into the Company (the "Select Medical Escrow Merger") and in
connection therewith Select Medical Escrow will be released from any further
liability with respect thereto by operation of law.

                  If the conditions to the closing of the Kessler Acquisition
have been satisfied or waived and the consummation of the Kessler Acquisition
and the Assumption are proposed to occur on or prior to November 27, 2003 (the
"Deadline Date"), Select

<PAGE>

Medical Escrow will so notify the Escrow Agent in writing and all Escrowed
Property (as defined below) will be released to Select Medical Escrow and/or the
Company immediately prior to such closing as set forth herein. If, for any
reason, (a) the Kessler Acquisition and the Assumption are not consummated on or
prior to the Deadline Date or (b) the Stock Purchase Agreement is terminated on
or prior to the Deadline Date, Select Medical Escrow will so notify the Escrow
Agent in writing and the Escrow Agent will transfer to the Paying Agent an
amount of Escrowed Property sufficient to pay the Special Redemption Price for
the Special Redemption pursuant to paragraph 5(c) of the Securities and Section
1001(c) of the Indenture (the "Special Redemption"), and any excess Escrowed
Property will be released to Select Medical Escrow.

                  Accordingly, the Company, Select Medical Escrow and the Escrow
Agent agree as follows:

                  1.       Delivery and Acceptance of Escrowed Property.

                  (a)      (i) Concurrently with the execution and delivery
hereof, the Escrow Agent shall establish a trust account in the name of "Escrow
Account by Select Medical Escrow, Inc. to U.S. Bank Trust National Association,
as Trustee" Account No. 743324001 Select Medical Corp. (the "Escrow Account")
and Select Medical Escrow shall deposit the Initial Deposit with the Escrow
Agent to be deposited into the Escrow Account by the Escrow Agent. The Escrow
Account shall be maintained by the Escrow Agent as a Securities Account. The
Escrow Agent, the Trustee, the Company and Select Medical Escrow shall execute
and deliver, on the date hereof, a Securities Account Control Agreement in the
form attached hereto as Exhibit D (the "Securities Account Control Agreement")
which, when so executed and delivered, shall be deemed to have been made a part
of this Agreement. Until the release of all Escrowed Property pursuant to this
Section 1 or Section 2, all funds, including, without limitation, the Initial
Deposit and any other cash and/or Permitted Investments accepted by the Escrow
Agent pursuant to this Agreement, shall be held by the Escrow Agent for the
exclusive benefit of the Trustee, any predecessor Trustee under the Indenture
and holders of the Securities, as secured parties hereunder (collectively, the
"Beneficiaries") and shall be treated as Financial Assets. All such funds shall
be held in the Escrow Account until disbursed or paid in accordance with the
terms hereof. Without limiting the foregoing, and notwithstanding anything
herein to the contrary, if at any time the Escrow Agent shall receive an
"entitlement order" (as such term is defined in Section 8-102(a)(8) of the UCC)
issued by the Trustee and relating to the Escrow Account, the Escrow Agent shall
comply with such entitlement order without further consent of the Company,
Select Medical Escrow or any other person and will accept "entitlement orders"
from no other party.

                                       2

<PAGE>

                  "Book-Entry Securities" means securities maintained in the
form of entries (including, without limitation, the Security Entitlements in
such securities) in the commercial book-entry system of the Federal Reserve Bank
of New York.

                  "Cash Equivalents" has the meaning given to such term in the
Indenture.

                  "Entitlement Holder" means an "entitlement holder" as defined
(i) in Section 8-102(a)(7) of the UCC and (ii) with respect to Book-Entry
Securities governed by the Federal Book-Entry Regulations, in 31 C.F.R. Section
357.2.

                  "Fed Member Securities Account" means, in respect of any
person, an account in the name of such person in the commercial book-entry
system of the Federal Reserve Bank of New York.

                  "Federal Book-Entry Regulations" means (i) the federal
regulations contained in Subpart B ("Treasury/Reserve Automated Debt Entry
System (TRADES)") governing Book-Entry Securities consisting of U.S. Treasury
bonds, notes and bills and Subpart D ("Additional Provisions") of 31 C.F.R. Part
357, 31 C.F.R. Section 357.10 through Section 357.41 and Section 357.41 through
Section 357.44, including related defined terms in 31 Section 357.27; and (ii)
to the extent substantially identical to the Federal Book-Entry Regulations
referred to in clause (i) above, the federal regulations governing other
Book-Entry Securities.

                  "Financial Asset" has the meaning set forth in Section
8-102(a) of the UCC.

                  "Initial Deposit" means an amount of cash and/or Permitted
Investments in an amount sufficient to pay, on the date of such Initial Deposit,
the Special Redemption Price, assuming that December 11, 2003 is the Special
Redemption Date, pursuant to Section 2(b) hereof (the "Required Amount"), but
solely to the extent that the Securities become subject to Special Redemption
pursuant to the terms of the Indenture or the Securities.

                  "Notice of Sole Control" shall have the meaning ascribed
thereto in the Securities Account Control Agreement.

                  "Permitted Investments" means Cash Equivalents; provided that
no such investment shall mature later than November 27, 2003 and for all periods
following November 27, 2003, no such investment shall mature later than December
11, 2003. For all purposes hereunder, money market deposits will be deemed to
mature upon 24 hours notice.

                  "Secured Obligations" shall mean all obligations for the
payment of principal, premium, interest, liquidated damages, charges, fees, fees
and expenses of

                                       3

<PAGE>

counsel, indemnities, damages, claims and other liabilities payable under the
Securities or the Indenture in respect of the Securities, in each case whether
(i) such obligations are direct or indirect, secured or unsecured, joint or
several, absolute or contingent, due or to become due whether at stated
maturity, by acceleration or otherwise, (ii) arising in the regular course of
business or otherwise (iii) for payment or performance and/or (iv) now existing
or hereafter arising (including, without limitation, interest and other
obligations arising or accruing after the commencement of any bankruptcy,
insolvency, reorganization or similar proceeding with respect to the Company,
Select Medical Escrow or any other person, or which would have arisen or accrued
but for the commencement of such proceeding, even if such obligation or the
claim therefor is not enforceable or allowable in such proceeding).

                  "Securities Account" shall have the meaning set forth in UCC
Section 8-501(a).

                  "Security Entitlements" shall have the meaning set forth in
UCC Section 8-102(a).

                  "Securities Intermediary" has the meaning specified (i) in
Section 8-102(a) of the UCC and (ii) with respect to Book-Entry Securities
governed by the Federal Book-Entry Regulations, in 31 C.F.R. Section 357.2.

                  "Special Redemption Date" means the earlier of (a) December
11, 2003, if the Kessler Acquisition and the Assumption have not occurred on or
prior to the Deadline Date, or (b) the twelfth Business Day following the
termination of the Stock Purchase Agreement on or prior to the Deadline Date.

                  "Special Redemption Price" means 101% of the principal amount
of the Securities plus accrued and unpaid interest up to and including the
Special Redemption Date.

                  "UCC" means the Uniform Commercial Code as in effect in the
State of New York.

                  (i)      In satisfaction of its obligation to deposit the
Initial Deposit, Select Medical Escrow may deposit with the Escrow Agent cash in
an amount sufficient to purchase, by the second Business Day following the date
hereof, Permitted Investments to be deposited in the Escrow Account by such
second Business Day in an amount (together with any other amounts in the Escrow
Account) at least equal to the Required Amount on the Special Redemption Date
(assuming that December 11, 2003 is the Special Redemption Date). In such event,
Select Medical Escrow shall, concurrently with such cash deposit, deliver (A) a
written confirmation or sales order for delivery to the Escrow Account of such
Permitted Investments and (B) irrevocable instructions

                                       4

<PAGE>

directing the Escrow Agent to release to the seller of such Permitted
Investments the purchase price thereof against delivery of such Permitted
Investments. The Escrow Agent agrees to invest any portion of the Escrowed
Property that is comprised of cash in Permitted Investments as directed in
writing by Select Medical Escrow until the Escrow Agent is required to release
such cash against delivery of such Permitted Investments. If any Escrowed
Property consisting of Permitted Investments for any reason ceases to meet the
requirements set forth in the definition of "Permitted Investments," the Escrow
Agent will dispose of such Escrowed Property as directed in writing by Select
Medical Escrow and invest the proceeds thereof in Permitted Investments as
directed in writing by Select Medical Escrow. Any such Escrowed Property shall
continue to be deemed a "Permitted Investment" hereunder so long as such
Escrowed Property is reinvested in Permitted Investments promptly upon discovery
of the failure of such Escrowed Property to meet the requirements set forth in
the definition of "Permitted Investments."

                  (b)      If the Securities become subject to Special
Redemption, Select Medical Escrow shall provide at least 10 Business Days
written notice thereof (a "Redemption Notice") to the Escrow Agent, together
with an officer's certificate certified as to its mathematical accuracy by the
Chief Accounting Officer of the Company setting forth (i) a calculation of the
amount of cash that will be available to the Escrow Agent, based on the Escrowed
Property then held with the Escrow Agent, without any reinvestment thereof or
sale prior to maturity, on the third Business Day prior to the date fixed for
such Special Redemption and (ii) a calculation of the Special Redemption Price
payable on the date fixed for such Special Redemption. Notwithstanding the
foregoing, the Escrow Agent and the Trustee shall not notify the holders of the
Securities of a Special Redemption unless Select Medical Escrow confirms with
the Escrow Agent and the Trustee in writing that the Special Redemption shall
occur at least 8 Business Days prior to a Special Redemption. If such
certificate reveals that the amount of cash so available, together with the
market value of any Permitted Investments in the Escrowed Property that will not
mature on or prior to the third Business Day prior to the date fixed for such
Special Redemption, will be insufficient to pay the Special Redemption Price,
then Select Medical Escrow shall within one Business Day after receipt by the
Escrow Agent of such notice, deposit with the Escrow Agent an amount of cash
that equals the amount of such deficiency. In connection with any Redemption
Notice received from Select Medical Escrow relating to a date fixed for Special
Redemption that is prior to December 11, 2003, the Escrow Agent is hereby
authorized to promptly liquidate in any manner it deems reasonable any Permitted
Investments that will not mature on or prior to the third Business Day prior to
the date fixed for Special Redemption; provided that the Escrow Agent shall
reinvest any portion of the proceeds so realized by the Escrow Agent in
Permitted Investments that shall mature on or prior to the date fixed for
Special Redemption as may be directed by Select Medical Escrow in writing
pursuant to Section 1(d). To the extent that the proceeds realized by the Escrow
Agent from liquidating such Permitted Investments are less than the market value
thereof calculated by Select Medical Escrow as evidenced in the certificate
described above, the Escrow Agent shall so notify

                                       5

<PAGE>

Select Medical Escrow, and Select Medical Escrow shall promptly but in any event
within one Business Day after receiving such notice, deposit cash in an amount
that equals the amount of such deficiency.

                  (c)      Select Medical Escrow shall deliver to the Escrow
Agent, in conjunction with the Initial Deposit and as a condition to any
investment of cash in Permitted Investments (other than during the two Business
Day period following the date hereof) a written statement setting forth a
calculation showing that the amount of cash that would be available to the
Escrow Agent would at least be equal to the Required Amount on the Special
Redemption Date (assuming that December 11, 2003 is the Special Redemption
Date). Select Medical Escrow shall deliver with each deposit with the Escrow
Agent under Section 1(b) a written statement, certified as to its mathematical
accuracy by the Chief Accounting Officer of the Company, setting forth a
calculation showing that the amount of cash that would be available to the
Escrow Agent, together with the Permitted Investments included in the Escrowed
Property, would be at least equal to (i) the Required Amount on the Special
Redemption Date (assuming that December 11, 2003 is the Special Redemption
Date), or (ii) if a date shall have been fixed for the Special Redemption at the
time such statement is delivered, an amount sufficient to pay the Special
Redemption Price on the date fixed for such Special Redemption. If Select
Medical Escrow has made a cash deposit with the Escrow Agent pursuant to Section
1(a)(ii), such cash deposit shall be accompanied by an officer's certificate
containing a verification by Select Medical Escrow that the cash so deposited is
sufficient to provide the Required Amount. The Escrow Agent shall be under no
obligation to independently confirm the calculations contained in, or the
conclusions reached by, such statements or officer's certificate.

                  (d)      The Escrow Agent shall accept the Initial Deposit and
any amounts deposited pursuant to Section 1(b) and shall hold such securities,
funds and the proceeds thereof in the Escrow Account. The Initial Deposit and
any amounts deposited pursuant to Section 1(b) hereof, and the proceeds of any
such deposits, together with any other property in the Escrow Account, shall
constitute the "Escrowed Property." The Escrow Agent further agrees to invest
any portion of the Escrowed Property that is comprised of cash in Permitted
Investments as may be directed by Select Medical Escrow in writing from time to
time. In selecting any Permitted Investments, Select Medical Escrow shall
determine that the market value thereof, together with the market value of the
balance of the Escrowed Property, shall be in an amount at least equal to the
Required Amount on the assumed Special Redemption Date. Temporarily uninvested
funds shall not earn or accrue interest. No investment of funds in the Escrow
Account shall be made unless Select Medical Escrow has certified to the Escrow
Agent and the Trustee that, upon such investment, the Trustee will have a first
priority perfected security interest in the applicable investment.
Notwithstanding anything herein to the contrary, the Escrow Agent shall have no
duty nor any liability whatsoever with respect to selecting the

                                       6

<PAGE>

Permitted Investments hereunder but shall simply comply with the written
instructions it receives from Select Medical Escrow in accordance with this
Agreement.

                  (e)      The obligation of the Escrow Agent to make the
payments and transfers required by this Escrow Agreement shall be limited to the
Escrowed Property and any other moneys on deposit with it pursuant to this
Escrow Agreement. The Escrow Agent shall not be liable for any loss resulting
from any investment made pursuant to this Agreement in compliance with the
provisions hereof or from the sale of any Permitted Investment required by the
terms hereof.

                  2.       Disbursement of Escrowed Property. (a) If the Escrow
Agent receives notice from Select Medical Escrow that the closing of the Kessler
Acquisition and the Assumption will occur on or prior to the Deadline Date, the
Escrow Agent shall release an amount equal to the net proceeds of the offering
of the Securities and all other Escrowed Property then held by it to Select
Medical Escrow and/or the Company, as Select Medical Escrow may direct, upon
presentation and receipt by the Escrow Agent of (i) a copy of the executed
counterparts of a supplemental indenture (the "Supplemental Indenture"),
substantially in the form of Exhibit A hereto, pursuant to which the Company
assumes Select Medical Escrow's obligations under the Indenture and the
Securities and each of the Company's Domestic Subsidiaries (as defined in the
Indenture) other than specified Existing Joint Venture Subsidiaries (as defined
in the Indenture) and New Joint Venture Subsidiaries (as defined in the
Indenture) (including, without limitation, Kessler and Kessler's wholly-owned
subsidiaries following consummation of the Kessler Acquisition, it being
understood, however, that the Company shall not be required to deliver any
signature page of Kessler or any of its subsidiaries to the Supplemental
Indenture or any other document until immediately following the Kessler
Acquisition) (collectively, the "Subsidiary Guarantors") guarantee the Company's
obligations under the Indenture and the Securities (the "Guarantees"), (ii) an
executed counterpart of an assumption agreement (the "Assumption Agreement"),
substantially in the form of Exhibit B hereto, pursuant to which the Company
assumes, and the Subsidiary Guarantors guarantee, the Company's obligations
under the Purchase Agreement, the Registration Rights Agreement, the Indenture
and this Agreement, (iii) an Officer's Certificate, substantially in the form of
Exhibit C hereto, certifying to the Escrow Agent as to the matters specified
therein, and (iv) opinions of counsel as to the due authorization and
enforceability of the Assumption Agreement and the Supplemental Indenture
(including as to the Guarantees) and opinions as to such other matters as may be
required by the Indenture in connection with the execution and delivery of the
Supplemental Indenture. The Escrow Agent hereby agrees that upon the Escrow
Agent's receipt of executed copies of the Assumption Agreement and the
Supplemental Indenture, Select Medical Escrow shall be automatically released
from, and the Company shall assume from Select Medical Escrow, any further
liability under this Agreement. The Company and Select Medical Escrow hereby
agree, for the benefit of the Trustee and the holders of the Securities, that,
upon consummation of the Kessler Acquisition, the

                                       7

<PAGE>

Company and Select Medical Escrow shall cause the Assumption and the Select
Medical Escrow Merger to occur and shall cause each of the Subsidiary Guarantors
to enter into the Assumption Agreement and the Supplemental Indenture.
Notwithstanding the foregoing, (i) Kessler and Kessler's wholly-owned
subsidiaries shall execute the Assumption Agreement, provided that such
execution of the Assumption Agreement may occur immediately following
consummation of the Kessler Acquisition, and (ii) Kessler and Kessler's
wholly-owned subsidiaries shall execute either the same Supplemental Indenture
as the Company or a separate Supplemental Indenture, substantially in the form
of Exhibit A hereto (provided that any reference herein to the Supplemental
Indenture shall include any such separate Supplemental Indenture), and such
execution of the same or a separate Supplemental Indenture may occur immediately
following consummation of the Kessler Acquisition.

                  (a)      If the Escrow Agent receives a notice from Select
Medical Escrow and/or the Trustee that a Special Redemption is to occur, the
Escrow Agent shall on or before the Business Day prior to the date fixed for
such Special Redemption release to the Paying Agent an amount of Escrowed
Property in cash equal to the Special Redemption Price specified in such notice
from Select Medical Escrow or the Trustee. Two Business Days following the
Special Redemption Date, the Escrow Agent shall release any excess of Escrowed
Property over the Special Redemption Price to Select Medical Escrow.

                  (b)      Notwithstanding paragraphs 2(a) and (b) above, if the
Escrow Agent receives a notice from the Trustee, Select Medical Escrow or any
holder or otherwise becomes aware that a Default has occurred and is continuing,
the Escrow Agent shall not release any Escrowed Property to Select Medical
Escrow unless and until the Escrow Agent receives a notice from the Trustee that
such Default is not continuing.

                  (c)      If the Escrow Agent receives a notice from the
Trustee that the principal of and accrued interest on the Securities (the
"Default Amount") has become immediately due and payable pursuant to Section 602
of the Indenture (an "Acceleration Event,") and either (i) a court of competent
jurisdiction determines that the acceleration of the Securities was appropriate
as a result of a bona fide Event of Default under the Indenture or (ii) such
acceleration is not rescinded on or prior to the Deadline Date (either such
event, a "Remedies Trigger Event"), the Escrow Agent shall liquidate all
Escrowed Property then held by it within one Business Day after it receives
notice of such court determination or on the Business Day after the Deadline
Date, as the case may be, and shall release to the Paying Agent for payment to
the holders of the Securities an amount of Escrowed Property sufficient to pay
the Default Amount. The Escrow Agent shall release all remaining Escrowed
Property in excess of such Default Amount to Select Medical Escrow. If the
Escrow Agent receives a notice that a Special Redemption is to occur, this
Section 2(d) and Section 2(c) shall be of no further effect and all Escrowed

                                       8

<PAGE>

Property then held by the Escrow Agent shall be released in accordance with
Section 2(b).

                  (d)      The Company hereby agrees, for the benefit of the
Trustee and the holders of the Securities, not to take or fail to take, and to
cause each of the Subsidiary Guarantors not to take or fail to take, any action
if such action or failure to act would constitute or result in, with or without
the passage of time, a breach of any of the provisions in Article 4 of the
Indenture that would apply to the Company or any Subsidiary Guarantor, as the
case may be, following the Assumption.

                  3.       Termination. Upon the release of any Escrowed
Property pursuant to Section 1 or 2, such Escrowed Property shall be delivered
to Select Medical Escrow or the Company, as applicable, free and clear of any
and all interests and liens of any Person, including, without limitation, the
Escrow Agent, the Trustee and the holders of the Securities. Upon the release of
all Escrowed Property in accordance with Section 1 or Section 2 hereof, this
Agreement shall terminate; provided, however, that it is expressly agreed that
the provisions of Sections 4 and 7 hereof shall survive any such termination.

                  4.       Indemnity. The Company and Select Medical Escrow
agree, jointly and severally, to indemnify the Escrow Agent, and its officers,
directors, employees and agents, for, and to hold it and each of them harmless
against, any loss, liability or expense arising out of or in connection with
this Agreement and carrying out its duties hereunder, including the cost and
expenses of defending itself against any claim of liability including but not
limited to reasonable attorneys fees; provided, however, that the Company and
Select Medical Escrow will not be liable for indemnification or otherwise for
any loss, liability or expense to the extent arising out of the gross
negligence, willful misconduct or bad faith of the Escrow Agent or any of its
officers, directors, employees or agents.

                  5.       Modifications, Waivers and Amendments. The Escrow
Agent shall not be bound by any modification, amendment, termination (except as
provided in Section 3), cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by the parties hereto,
and, if its rights, duties, immunities or indemnities as Escrow Agent are
affected thereby, unless it shall have given its prior written consent thereto.
This Agreement may not be modified, amended or terminated (except as provided in
Section 3) without the written consent of the Company, JP Morgan and Merrill
Lynch. Notwithstanding anything herein to the contrary, the parties hereto may
not amend or modify the provisions in this Agreement and the Assumption
Agreement relating to the Select Medical Escrow Merger and Select's assumption
of the obligations under the Indenture if such change would adversely affect the
rights of any holder of the Securities without the consent of each Holder of
outstanding Securities so affected.

                                       9

<PAGE>

                  6.       Grant of Security Interests; Instructions to Escrow
Agent. As security for the full and timely payment and performance of the
Secured Obligations, Select Medical Escrow hereby irrevocably grants a perfected
first priority (subject to liens arising by operation of law) security interest
in and pledges, assigns and sets over to the Trustee for its benefit and the
benefit of the holders of the Securities all of Select Medical Escrow's right,
title and interest in, to and under the following whether now or hereafter
existing or acquired (collectively, the "Collateral"): (i) the Escrow Account,
and all Financial Assets and other property from time to time placed or
deposited in, or delivered to the Escrow Agent for placement or deposit in, the
Escrow Account, including, without limitation, all funds held therein, and all
Permitted Investments held by (or otherwise maintained in the name of) the
Escrow Agent pursuant to Section 1; (ii) all Security Entitlements (as such term
is defined in Section 8-102(a) of the UCC) from time to time credited to the
Escrow Account; (iii) all claims and rights of whatever nature which Select
Medical Escrow may now have or hereafter acquire against any third party(ies) in
respect of any of the Collateral described in this Section 6 (including, without
limitation, any claims or rights in respect of any Security Entitlements
credited to an account of the Escrow Agent maintained at The Depository Trust
Company or any other clearing corporation or any other Securities Intermediary);
(iv) all rights which Select Medical Escrow may now have or hereafter acquire
against the Escrow Agent in respect of its holding and managing all or any part
of the Collateral; and (v) all proceeds (as such term is defined in Section
9-102(a) of the UCC) of any of the foregoing. The Escrow Agent hereby
acknowledges the Trustee's security interest as set forth in this Section 6.
Select Medical Escrow shall take all actions and shall direct the Trustee in
writing to take all actions reasonably necessary on its part to ensure (i) the
continuance of a security interest in the Collateral in favor of the Trustee for
its benefit and for the benefit of the holders of the Securities in order to
secure all the Secured Obligations and (ii) that such security interest is at
all times a perfected first priority (subject to liens arising by operation of
law) security interest. Select Medical Escrow shall not grant to any other
Person or cause any other person to obtain a security interest, encumbrance,
lien or other claim, direct or indirect, in Select Medical Escrow's right, title
or interest in the Escrow Account or any Collateral.

                  Upon receipt of written instructions from Select Medical
Escrow, the Escrow Agent shall execute any instruments or other documents
delivered to it that Select Medical Escrow has determined to be reasonably
necessary to cause the Trustee to enjoy a continuous perfected first priority
(subject to liens arising by operation of law) security interest under the UCC,
any other applicable statutory or case law or regulation of the State of New
York and any applicable law or regulation of the United States in the
Collateral. Except as otherwise required by law, the Escrow Agent shall (i)
maintain the Collateral free and clear of all liens, security interests,
safekeeping or other charges, demands and claims of any nature now or hereafter
existing in favor of anyone other than the Trustee; (ii) promptly notify the
Trustee if the Escrow Agent receives written notice that any person other than
the Trustee has a lien, security interest, charge, demand or

                                       10

<PAGE>

claim of any nature upon any portion of the Collateral; and (iii) in addition to
disbursing the Escrowed Property and all other Collateral held in the Escrow
Account pursuant to this Agreement, upon receipt of a Notice of Sole Control,
the Escrow Agent shall, as promptly as practicable, disburse all Escrowed
Property and other Collateral held in the Escrow Account to or as directed by
the Trustee and, to the extent permissible by applicable law, transfer title to
all treasury securities held by the Escrow Agent hereunder to or as directed by
the Trustee. The Trustee covenants and agrees that it shall not deliver a Notice
of Sole Control except upon the occurrence and during the continuation of a
Remedies Trigger Event.

                  The security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
the Trustee shall have no security interest in, any property constituting
Collateral disbursed by the Escrow Agent pursuant to this Agreement.

                  The Escrow Agent shall act solely as the Trustee's agent in
connection with its duties under this Section 6, notwithstanding any other
provision contained in this Agreement, without any right to receive compensation
from the Trustee and without any authority to obligate the Trustee or to
compromise or pledge its security interest hereunder. Accordingly, the Escrow
Agent is hereby directed to cooperate with the Trustee in the exercise of its
rights in the Collateral provided for in this Section 6.

                  Select Medical Escrow shall execute and deliver to the Trustee
such instruments and documents as are reasonably necessary or advisable to
confirm or perfect the rights of the Trustee under this Agreement and the
Trustee's interests in the Collateral. The Trustee shall be entitled but not
obligated to take all necessary action to preserve and protect the lien and
security interest created hereby upon the Collateral. Select Medical Escrow and
the Company, jointly and severally, will pay all reasonable costs and expenses
incurred in connection with any of the foregoing.

                  Upon the occurrence of an Event of Default under the Indenture
and for so long as such Event of Default continues, Select Medical Escrow hereby
appoints the Trustee as its attorney-in-fact with full power of substitution to
do any act which Select Medical Escrow is obligated hereunder to do, and the
Trustee may, but shall not be required to, exercise such rights as Select
Medical Escrow might exercise with respect to the Collateral and take any action
in Select Medical Escrow's name to protect the Trustee's security interest and
lien granted hereunder. In addition to the rights provided under this Section 6,
upon the occurrence of an Event of Default under the Indenture and for so long
as such Event of Default continues, the Trustee may, but shall not be required
to, exercise in respect of the Collateral in addition to other rights and
remedies provided for herein or in the Securities Account Control Agreement or
otherwise available to it its right to issue "entitlement orders" (within the
meaning of Section 8-102(a)(8) of the UCC) upon the occurrence and during the
continuation of a Remedies Trigger Event and

                                       11

<PAGE>

all other rights and remedies of secured parties under the UCC or other
applicable law, and the Trustee may also upon obtaining possession of the
Collateral as set forth herein, without notice to Select Medical Escrow or the
Company except as required by law, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange, broker's board
or at any of the Trustee's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Trustee may deem commercially
reasonable. Notwithstanding the foregoing, the Trustee covenants and agrees that
it shall not issue any entitlement order except upon the occurrence and during
the continuation of a Remedies Trigger Event. Select Medical Escrow and the
Company agree (to the extent they lawfully can do so) that, to the extent notice
of sale shall be required by law, at least ten days' notice to Select Medical
Escrow of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Trustee
shall not be obligated to make any sale regardless of notice of sale having been
given. The Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice (except as required by law), be made at the time and place to
which it was so adjourned.

                  If at any time the Escrow Agent shall receive an "entitlement
order" (within the meaning of Section 8-102(a)(8) of the UCC) issued by the
Trustee and relating to the Escrow Account, the Escrow Agent shall comply with
such entitlement order without further consent by Select Medical Escrow, the
Company or any other person.

                  7.       Concerning the Escrow Agent. (a) The Escrow Agent
shall be paid a fee hereunder as Select Medical Escrow, the Company and the
Escrow Agent shall from time to time agree in writing. Select Medical Escrow and
the Company also agree, jointly and severally, to pay on demand the reasonable
costs and expenses of the Escrow Agent, including the reasonable fees and
expenses of one outside counsel selected by the Escrow Agent, other than the
costs and expenses reimbursed pursuant to Section 4, incurred in connection with
its duties hereunder.

                  (a)      The Escrow Agent shall exercise the same degree of
care toward the Escrowed Property as it exercises toward its own similar
property and shall not be held to any higher standard of care under this
Agreement, nor be deemed to owe any fiduciary duty to Select Medical Escrow, the
Company or any other person.

                  (b)      The Escrow Agent may act upon any instrument or other
writing believed by it in good faith to be genuine and to have been signed or
presented by the proper person, and shall not be liable to any party hereto in
connection with the performance of its duties hereunder, except for its own
gross negligence, willful misconduct or bad faith. The duties of the Escrow
Agent shall be determined only with reference to this Agreement and applicable
laws and the Escrow Agent is not charged

                                       12

<PAGE>

with any knowledge of, or any duties or responsibilities in connection with, any
other document or agreement, including but not limited to the Purchase
Agreement, the Stock Purchase Agreement or the Indenture. If in doubt as to its
duties and responsibilities hereunder, the Escrow Agent may consult with counsel
of its choice and shall be protected in any action taken or omitted in good
faith in reliance on the advice or opinion of such counsel.

                  (c)      The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys.

                  (d)      Nothing in this Agreement shall be deemed to impose
upon the Escrow Agent any duty to qualify to do business or to act as agent or
otherwise in any jurisdiction other than the State of New York.

                  (e)      The Escrow Agent shall not be responsible for and
shall not be under a duty to examine into or pass upon the validity, binding
effect, execution or sufficiency of, this Agreement, any agreement amendatory or
supplemental hereto or of any certificates delivered to it hereunder.

                  (f)      The Escrow Agent makes no representation as to the
validity, value, genuineness or collectability of any security or other document
or instrument held by or delivered to it.

                  (g)      The Escrow Agent shall not be called upon to advise
any party as to selling or retaining, or taking or refraining from taking any
action with respect to, any securities or other property deposited hereunder.

                  (h)      The Escrow Agent shall have the right at any time to
resign hereunder by giving written notice of its resignation to Select Medical
Escrow at the address set forth herein or at such other address as Select
Medical Escrow shall provide in writing, at least 30 days prior to the date
specified for such resignation to take effect. Upon the effective date of such
resignation, all cash and other payments and all other property then held by the
Escrow Agent hereunder shall be delivered by it to a successor escrow agent. If
no successor escrow agent is appointed, the Escrow Agent may apply to a court of
competent jurisdiction for such appointment.

                  (i)      If the Escrow Agent should at any time be confronted
with inconsistent claims or demands to the Escrowed Property, the Escrow Agent
shall have the right in its sole discretion to retain in its possession without
liability to anyone, all or any of said Escrowed Property until such dispute
shall have been settled either by the mutual written agreement of the parties
involved or by a final order, decree or judgment of a court in the United States
of America, the time for perfection of an appeal of such

                                       13

<PAGE>

order, decree or judgment having expired. The Escrow Agent shall have the right,
but not the duty, to interplead the parties in any court of competent
jurisdiction and request that such court determine the respective rights of the
parties with respect to the Escrowed Property. In the event the Escrow Agent no
longer holds any Escrowed Property, it shall be released from any obligation or
liability as a consequence of any such claims or demands, except to the extent
of its own gross negligence, willful misconduct or bad faith.

                  (j)      The Escrow Agent shall not be required to use its own
funds in the performance of any of its obligations or duties, or in the exercise
of any rights or powers, and shall not be required to take any action which, in
the Escrow Agent's judgment, could involve it in expense or liability unless
furnished with security and indemnity which the Escrow Agent deems to be
satisfactory.

                  (k)      The Escrow Agent shall not be liable to anyone for
any action taken or omitted to be taken by it hereunder except in the case of
the Escrow Agent's gross negligence, willful misconduct or bad faith. In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damage or loss (including but not limited to lost profits)
whatsoever, even if the Escrow Agent has been informed of the likelihood of such
loss or damage and regardless of the form of action.

                  (l)      The Escrow Agent is hereby authorized, in making or
disposing of any investment permitted by this Agreement, to deal with itself (in
its individual capacity) or with any one or more if its affiliates, whether it
or such affiliate is acting as a subagent of the Escrow Agent or for any third
person or dealing as principal for its own account.

                  8.       Notices; Wiring Instructions. (a) All notices
required to be given hereunder shall be in writing and shall be deemed
sufficiently given when actually received if given by hand delivery, by telex,
by telecopier (receipt confirmed) or registered or certified mail, postage
prepaid, return receipt requested at the following addresses until such time as
the parties hereto designate a different or additional address or addresses:

                  If to the Company or Select Medical Escrow:

                           Select Medical Corporation
                           4718 Old Gettysburg Road
                           P.O. Box 2034
                           Mechanicsburg, Pennsylvania
                           Attn: Michael E. Tarvin, Esq.
                           Telephone: (717) 972-1132
                           Facsimile: (717) 975-9981

                                       14

<PAGE>

                  With a copy to:

                           Dechert LLP
                           4000 Bell Atlantic Tower
                           1717 Arch Street
                           Philadelphia, Pennsylvania 19103
                           Attn: Christopher G. Karras, Esq.
                           Telephone: (215) 994-2412
                           Facsimile: (215) 665-2412

                  To the Escrow Agent:

                           U.S. Bank Trust National Association
                           Corporate Trust Services
                           100 Wall Street, 16th Floor
                           New York, NY 10005
                           Attention: Jean Clarke

                  To the Trustee:

                           U.S. Bank Trust National Association
                           100 Wall Street, 16th Floor
                           New York, NY 10005
                           Attention: Jean Clarke

                  (a)      Any funds to be paid to or by the Escrow Agent
hereunder shall be sent by wire transfer pursuant to the following instructions
(or by such method of payment and pursuant to such instruction as may have been
given in advance and in writing to or by the Escrow Agent, as the case may be,
in accordance with Section 8(a) above):

                  To the Company:

                           Select Medical Corporation
                           PNC Bank NA
                           Routing #: 031000053
                           Acct #: 5000749057
                           Attn: Dale Anglemeyer
                           Phone: 717.730.2367

                                       15

<PAGE>

                  To Select Medical Escrow: pursuant to directions provided in
writing by Select Medical Escrow.

                  To the Escrow Agent:

                           Wiring instructions for incoming funds

                           BBK:   US Bank (ABA 091000022)
                           BNF:   U.S. Bank Trust N.A. St. Paul, MN
                           A/C:   173103321092
                           OBI    Corporate Trust
                           Ref#:  743324001 Select Medical Corp.
                           Attn:  Andrew Sinasky

                  9.       Miscellaneous. (a) This Agreement may be executed in
any number of counterparts, each of which shall be an original and all of which
when taken together shall constitute one agreement. The exchange of copies of
this Agreement and of signature pages by facsimile shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes. Signatures of the parties
transmitted by facsimile shall be deemed to their original signatures for all
purposes.

                  (a)      This Agreement shall be governed by the laws of the
State of New York but without giving effect to applicable principles of
conflicts of law to the extent that such principles are not mandatorily
applicable by statute and the application of the laws of an other jurisdiction
would be required thereby. Each of the parties hereby absolutely and irrevocably
consents and submits to the jurisdiction of the courts in the State of New York
and any Federal court located in said State in connection with any actions or
proceedings arising out of or relating to this Agreement.

                  (b)      This Agreement shall be binding upon the respective
parties hereto and their heirs, executors, successors and assigns. If the Escrow
Agent consolidates, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Escrow Agent.

                  (c)      The Escrow Agent shall not be responsible for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots, acts
of war, terrorist attacks, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power
failures, earthquakes or other disasters.

                                       16

<PAGE>

                  (d)      The parties hereto agree that, for tax reporting
purposes, all interest and other income earned from the investment of the
Escrowed Property in any tax year shall be reported as allocated to Select
Medical Escrow. Select Medical Escrow agrees to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form W-9 to the
Escrow Agent upon the execution and delivery of this Agreement.

                                       17

<PAGE>

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

                                  U.S. BANK TRUST NATIONAL
                                  ASSOCIATION, as Escrow Agent

                                  By: /s/ Jean Clarke
                                      _________________________________________
                                      Name: Jean Clarke
                                      Title: Assistant Vice President

                                  U.S. BANK TRUST NATIONAL
                                  ASSOCIATION, as Trustee

                                  By: /s/ Jean Clarke
                                      _________________________________________
                                      Name: Jean Clarke
                                      Title: Assistant Vice President

                                  SELECT MEDICAL CORPORATION

                                  By: /s/ Michael E. Tarvin
                                      _________________________________________
                                      Name: Michael E. Tarvin
                                      Title: Senior Vice President and Secretary

                                  SELECT MEDICAL ESCROW, INC.

                                  By: /s/ Michael E. Tarvin
                                      _________________________________________
                                      Name: Michael E. Tarvin
                                      Title: Vice President

                                       18

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