Document:

<PAGE>

                                                                     EXHIBIT 4.3

                          SELECT MEDICAL CORPORATION

                                 $175,000,000

                   9 1/2% Senior Subordinated Notes due 2009

                  EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

                                                                   June 11, 2001

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

Ladies and Gentlemen:

          Select Medical Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to J.P. Morgan Securities Inc. ("JP Morgan"), Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation, CIBC World Markets Corp. and First Union Securities, Inc.
(collectively, together with JPMorgan, the "Initial Purchasers"), upon the terms
and subject to the conditions set forth in a purchase agreement dated June 6,
2001 (the "Purchase Agreement"), $175,000,000 aggregate principal amount of its
9 1/2% Senior Subordinated Notes due June 11, 2009 (the "Securities") to be
jointly and severally guaranteed on a senior subordinated basis by the
subsidiaries of the Company listed on Schedule I and signatories hereto
(collectively, the "Guarantors"). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Purchase Agreement.

     As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company and the Guarantors agree with the Initial
Purchasers, for the benefit of the holders (including the Initial Purchasers) of
the Securities, the Exchange Securities (as defined herein) and the Private
Exchange Securities (as defined herein) (collectively, the "Holders"), as
follows:
<PAGE>

          1.   Registered Exchange Offer. The Company and the Guarantors shall
               -------------------------
(i) prepare and, not later than 75 days following the date of original issuance
of the Securities (the "Issue Date"), file with the Commission a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer to the Holders of the
Securities (the "Registered Exchange Offer") who are not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer
to issue and deliver to such Holders, in exchange for the Securities, a like
aggregate principal amount of debt securities of the Company (the "Exchange
Securities") that are identical in all material respects to the Securities,
except for the transfer restrictions relating to the Securities and the
provisions related to the matters described in Section 3 hereof, (ii) use their
reasonable best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act no later than 150 days after the Issue
Date and the Registered Exchange Offer to be consummated no later than 180 days
after the Issue Date and (iii) keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "Exchange Offer Registration Period"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") between the Company, the Guarantors and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such
indenture to be identical in all material respects to the Indenture, except for
the transfer restrictions relating to the Securities (as described above) and
the provisions related to the matters described in Section 3 hereof.

          Upon the effectiveness of the Exchange Offer Registration Statement,
the Company and the Guarantors shall promptly commence the Registered Exchange
Offer, it being the objective of such Registered Exchange Offer to enable each
Holder electing to exchange Securities for Exchange Securities (assuming that
such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as
defined herein) not complying with the requirements of the next sentence, (b) is
not an Initial Purchaser holding Securities that have, or that are reasonably
likely to have, the status of an unsold allotment in an initial distribution,
(c) acquires the Exchange Securities in the ordinary course of such Holder's
business and (d) has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities and is not prohibited
by any law or policy of the Commission from participating in the Registered
Exchange Offer) and to trade such Exchange Securities from and after their
receipt without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several states of
the United States. The Company, the Guarantors, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer.

                                       2
<PAGE>

          If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.

          In connection with the Registered Exchange Offer, the Company shall:

          (a)  mail to each Holder a copy of the prospectus forming part of the
     Exchange Offer Registration Statement, together with an appropriate letter
     of transmittal and related documents;

          (b)  keep the Registered Exchange Offer open for not less than 30 days
     (or longer, if required by applicable law) after the date on which notice
     of the Registered Exchange Offer is mailed to the Holders;

          (c)  utilize the services of a depositary for the Registered Exchange
     Offer with an address in the Borough of Manhattan, The City of New York,
     which may be the Trustee or an affiliate of the Trustee;

          (d)  permit Holders to withdraw tendered Securities at any time prior
     to the close of business, New York City time, on the last business day on
     which the Registered Exchange Offer shall remain open; and

          (e)  otherwise comply in all respects with all laws that are
     applicable to the Registered Exchange Offer.

          As soon as practicable after the close of the Registered Exchange
     Offer and any Private Exchange, as the case may be, the Company shall:

          (a)  accept for exchange all Securities validly tendered and not
     validly withdrawn pursuant to the Registered Exchange Offer and the Private
     Exchange;

          (b)  deliver to the Trustee for cancellation all Securities so
     accepted for exchange; and

          (c)  cause the Trustee or the Exchange Securities Trustee, as the case
     may be, promptly to authenticate and deliver to each Holder, Exchange
     Securities or Private Exchange Securities, as the case may be, equal in
     principal amount to the Securities of such Holder so accepted for exchange.

                                       3
<PAGE>

          The Company and the Guarantors shall use their reasonable best efforts
to keep the Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein in order to permit such prospectus
to be used by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided that (i) in
the case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them and (ii) the
Company shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Securities for a period of not less than 90 days after the consummation
of the Registered Exchange Offer.

          The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class from one
another on any matter.

          Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.

          Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company in writing that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act, (iii) such Holder is not an affiliate
of the Company or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of the Exchange
Securities and (v) if such Holder is a broker-dealer, that it will receive
Exchange Securities for its own account in exchange for Securities that were
acquired as a result of market-making activities or other trading activities and
that it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities.

          Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to

                                       4
<PAGE>

such prospectus, does not, as of the consummation of the Registered Exchange
Offer, 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 under which they were made, not misleading.

          2.   Shelf Registration. If (i) because of any change in law or
               ------------------
applicable interpretations thereof by the Commission's staff the Company and the
Guarantors are not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, or (ii) any Securities validly tendered
pursuant to the Registered Exchange Offer are not exchanged for Exchange
Securities within 180 days after the Issue Date, or (iii) any Initial Purchaser
so requests with respect to Securities or Private Exchange Securities not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, or (iv) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Securities in exchange for tendered Securities, or (vi)
the Company so elects, then the following provisions shall apply:

          (a)  The Company and the Guarantors shall use their reasonable best
     efforts to file as promptly as practicable (but in no event more than 30
     days after so required or requested pursuant to this Section 2) with the
     Commission, and thereafter shall use their reasonable best efforts to cause
     to be declared effective, a shelf registration statement on an appropriate
     form under the Securities Act relating to the offer and sale of the
     Transfer Restricted Securities (as defined below) by the Holders thereof
     from time to time in accordance with the methods of distribution set forth
     in such registration statement (hereafter, a "Shelf Registration Statement"
     and, together with any Exchange Offer Registration Statement, a
     "Registration Statement") provided, however, that no Holder (other than an
                               --------  -------
     Initial Purchaser) shall be entitled to have the Securities, the Exchange
     Securities or the Private Exchange Securities held by it covered by the
     Shelf Registration Statement unless such Holder agrees in writing to be
     bound by all the provisions of this Agreement applicable to such Holder.

          (b)  The Company and the Guarantors shall use their reasonable best
     efforts to keep the Shelf Registration Statement continuously effective in
     order to permit the prospectus forming part thereof to be used by Holders
     of Transfer Restricted Securities for a period ending on the earlier of (i)
     two years from the Issue Date or such shorter period that will terminate
     when all the Transfer Restricted Securities covered by the Shelf
     Registration Statement have been sold pursuant thereto and (ii) the date on
     which the Securities become eligible for resale without volume restrictions
     pursuant to Rule 144 under the Securities Act (in any such case, such
     period being called the "Shelf Registration Period"). The Company and the
     Guarantors shall be deemed not to have used their reasonable best efforts
     to keep the Shelf Registration Statement effective during the requisite
     period if they voluntarily take any action that would result in Holders of
     Transfer Restricted Securities covered thereby not being able to offer and
     sell such Transfer Restricted Securities during that period, unless such
     action is required by applicable law.

          (c)  Notwithstanding any other provisions hereof, the Company and the
     Guarantors will ensure that (i) any Shelf Registration Statement and any
     amendment thereto and any

                                       5
<PAGE>

     prospectus forming part thereof and any supplement thereto complies in all
     material respects with the Securities Act and the rules and regulations of
     the Commission thereunder, (ii) any Shelf Registration Statement and any
     amendment thereto (in either case, other than with respect to information
     included therein in reliance upon or in conformity with written information
     furnished to the Company by or on behalf of any Holder specifically for use
     therein (the "Holders' Information")) does not contain an untrue statement
     of a material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading and
     (iii) any prospectus forming part of any Shelf Registration Statement, and
     any supplement to such prospectus (in either case, other than with respect
     to Holders' Information), does 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 under which they
     were made, not misleading.

          3.   Additional Interest.
               -------------------

          (a)  The parties hereto agree that the Holders of Transfer Restricted
Securities will suffer damages if the Company and the Guarantors fail to fulfill
their obligations under Section 1 or Section 2, as applicable, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, if (i) the
Exchange Offer Registration Statement is not filed with the Commission on or
prior to 75 days after the Issue Date or the Shelf Registration Statement is not
filed with the Commission on or prior to 30 days after required to be filed or
requested to be filed pursuant to Section 2 hereof, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 150 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretation of the Commission's staff, if later,
within 60 days after publication of the change in law or interpretation), (iii)
the Registered Exchange Offer is not consummated on or prior to 180 days after
the Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 150 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretation of the Commission's staff, if later, within 60
days after publication of the change in law or interpretation) but shall
thereafter cease to be effective (at any time that the Company and the
Guarantors are obligated to maintain the effectiveness thereof) without being
succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantors will be jointly and
severally obligated to pay additional interest to each Holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Offer Registration Statement
is declared effective and the Registered Exchange Offer is consummated, (iii)
the Shelf Registration Statement is declared effective or (iv) the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of additional interest will
cease. As used herein, the term "Transfer Restricted Securities" means each
Security or Private Exchange Security, until the earliest to occur of: (i) the
date on which such Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) the date on which such
Security or Private Exchange Security has

                                       6
<PAGE>

been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) the date on which such
Security or Private Exchange Security is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act. Notwithstanding anything to the contrary in this Section
3(a), neither the Company nor the Guarantors shall be required to pay additional
interest to a Holder of Transfer Restricted Securities if such Holder failed to
comply with its obligations to make the representations set forth in the second
to last paragraph of Section 1 or failed to provide the information required to
be provided by it, if any, pursuant to Section 4(n).

          (b)  The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company and the Guarantors shall pay the additional interest due on
the Transfer Restricted Securities by depositing with the Paying Agent (which
may not be the Company for these purposes), in trust, for the benefit of the
Holders thereof, prior to 10:00 a.m., New York City time, on the next interest
payment date specified by the Indenture and the Securities, sums sufficient to
pay the additional interest then due. The additional interest due shall be
payable on each interest payment date specified by the Indenture and the
Securities to the record holder entitled to receive the interest payment to be
made on such date. Each obligation to pay additional interest shall be deemed to
accrue from and including the date of the applicable Registration Default.

          (c)  The parties hereto agree that the additional interest provided
for in this Section 3 constitutes a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.

          4.   Registration Procedures.  In connection with any Registration
               -----------------------
Statement, the following provisions shall apply:

          (a)  The Company shall (i) furnish to each Initial Purchaser and
     counsel for the Initial Purchasers, prior to the filing thereof with the
     Commission, a copy of the Registration Statement and each amendment thereof
     and each supplement, if any, to the prospectus included therein and shall
     use its reasonable best efforts to reflect in each such document, when so
     filed with the Commission, such comments as any Initial Purchaser may
     reasonably propose; (ii) include the information set forth in Annex A
     hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
     section and the "Purpose of the Exchange Offer" section and in Annex C
     hereto in the "Plan of Distribution" section of the prospectus forming a
     part of the Exchange Offer Registration Statement, and include the
     information set forth in Annex D hereto in the Letter of Transmittal
     delivered pursuant to the Registered Exchange Offer; and (iii) if requested
     by any Initial Purchaser, include the information required by Items 507 or
     508 of Regulation S-K, as applicable, in the prospectus forming a part of
     the Exchange Offer Registration Statement.

                                       7
<PAGE>

          (b)  The Company shall advise each Initial Purchaser, each Exchanging
     Dealer and the Holders (if applicable) and, if requested by any such
     person, confirm such advice in writing (which advice pursuant to clauses
     (ii) -(v) hereof shall be accompanied by an instruction to suspend the use
     of the prospectus until the requisite changes have been made):

                    (i)   when any Registration Statement and any amendment
               thereto has been filed with the Commission and when such
               Registration Statement or any post-effective amendment thereto
               has become effective;

                    (ii)  of any request by the Commission for amendments or
               supplements to any Registration Statement or the prospectus
               included therein or for additional information;

                    (iii) of the issuance by the Commission of any stop order
               suspending the effectiveness of any Registration Statement or the
               initiation of any proceedings for that purpose;

                    (iv)  of the receipt by the Company of any notification with
               respect to the suspension of the qualification of the Securities,
               the Exchange Securities or the Private Exchange Securities for
               sale in any jurisdiction or the initiation or threatening of any
               proceeding for such purpose; and

                    (v)   of the happening of any event that requires the making
               of any changes in any Registration Statement or the prospectus
               included therein in order that the statements or material facts
               therein are true and do not omit to state a material fact
               required to be stated therein or necessary to make the statements
               therein (in case of the prospectus, in light of the circumstances
               under which they were made) not misleading.

               (c)  The Company and the Guarantors will make every reasonable
          effort to obtain the withdrawal at the earliest possible time of any
          order suspending the effectiveness of any Registration Statement.

               (d)  The Company will furnish to each Holder of Transfer
          Restricted Securities included within the coverage of any Shelf
          Registration Statement, without charge, at least one conformed copy of
          such Shelf Registration Statement and any post-effective amendment
          thereto, including financial statements and schedules and, if any such
          Holder so requests in writing, all exhibits thereto (including those,
          if any, incorporated by reference).

               (e)  The Company will, during the Shelf Registration Period,
          promptly deliver to each Holder of Transfer Restricted Securities
          included within the coverage of any Shelf Registration Statement,
          without charge, as many copies of the prospectus (including each
          preliminary prospectus) included in such Shelf Registration Statement
          and any amendment or supplement thereto as such Holder may reasonably
          request; and the Company consents,

                                       8
<PAGE>

          subject to the provisions of this Agreement to the use of such
          prospectus or any amendment or supplement thereto by each of the
          selling Holders of Transfer Restricted Securities in connection with
          the offer and sale of the Transfer Restricted Securities covered by
          such prospectus or any amendment or supplement thereto.

               (f)  The Company will furnish to each Initial Purchaser and each
          Exchanging Dealer, and to any other Holder who so requests, without
          charge, at least one conformed copy of the Exchange Offer Registration
          Statement and any post-effective amendment thereto, including
          financial statements and schedules and, if any Initial Purchaser or
          Exchanging Dealer or any such Holder so requests in writing, all
          exhibits thereto (including those, if any, incorporated by reference).

               (g)  The Company will, during the Exchange Offer Registration
          Period or the Shelf Registration Period, as applicable, promptly
          deliver to each Initial Purchaser, each Exchanging Dealer and such
          other persons that are required to deliver a prospectus following the
          Registered Exchange Offer, without charge, as many copies of the final
          prospectus included in the Exchange Offer Registration Statement or
          the Shelf Registration Statement and any amendment or supplement
          thereto as such Initial Purchaser, Exchanging Dealer or other persons
          may reasonably request; and the Company and the Guarantors consent to
          the use of such prospectus or any amendment or supplement thereto by
          any such Initial Purchaser, Exchanging Dealer or other persons, as
          applicable, as aforesaid. Any information designated in good faith by
          the Company as confidential shall be kept confidential by the
          Inspector or their agents and representatives.

               (h)  Prior to the effective date of any Registration Statement,
          the Company and the Guarantors will use their reasonable best efforts
          to register or qualify, or cooperate with the Holders of Securities,
          Exchange Securities or Private Exchange Securities included therein
          and their respective counsel in connection with the registration or
          qualification of, such Securities, Exchange Securities or Private
          Exchange Securities for offer and sale under the securities or blue
          sky laws of such jurisdictions as any such Holder reasonably requests
          in writing and do any and all other acts or things necessary or
          advisable to enable the offer and sale in such jurisdictions of the
          Securities, Exchange Securities or Private Exchange Securities covered
          by such Registration Statement; provided that the Company and the
          Guarantors will not be required to qualify generally to do business in
          any jurisdiction where it is not then so qualified or to take any
          action which would subject it to general service of process or to
          taxation in any such jurisdiction where it is not then so subject.

               (i)  The Company and the Guarantors will cooperate with the
          Holders of Securities, Exchange Securities or Private Exchange
          Securities to facilitate the timely preparation and delivery of
          certificates representing Securities, Exchange Securities or Private
          Exchange Securities to be sold pursuant to any Registration Statement
          free of any restrictive legends and in such denominations and
          registered in such names as the Holders thereof may request in writing
          prior to sales of Securities, Exchange Securities or Private Exchange
          Securities pursuant to such Registration Statement.

                                       9
<PAGE>

               (j)  If any event contemplated by Section 4(b)(ii) through (v)
          occurs during the period for which the Company and the Guarantors are
          required to maintain an effective Registration Statement, the Company
          will promptly prepare and file with the Commission a post-effective
          amendment to the Registration Statement or a supplement to the related
          prospectus or file any other required document so that, as thereafter
          delivered to purchasers of the Securities, Exchange Securities or
          Private Exchange Securities from a Holder, the prospectus 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 under which they were made, not
          misleading.

               (k)  Not later than the effective date of the applicable
          Registration Statement, the Company will provide a CUSIP number for
          the Securities, the Exchange Securities and the Private Exchange
          Securities, as the case may be, and provide the applicable trustee
          with printed certificates for the Securities, the Exchange Securities
          or the Private Exchange Securities, as the case may be, in a form
          eligible for deposit with The Depository Trust Company.

               (l)  The Company and the Guarantors will comply with all
          applicable rules and regulations of the Commission and will make
          generally available to its security holders as soon as practicable
          after the effective date of the applicable Registration Statement an
          earning statement satisfying the provisions of Section 11(a) of the
          Securities Act; provided that in no event shall such earning statement
          be delivered later than 45 days after the end of a 12-month period (or
          90 days, if such period is a fiscal year) beginning with the first
          month of the Company's first fiscal quarter commencing after the
          effective date of the applicable Registration Statement, which
          statement shall cover such 12-month period.

               (m)  The Company and the Guarantors will cause the Indenture or
          the Exchange Securities Indenture, as the case may be, to be qualified
          under the Trust Indenture Act as required by applicable law in a
          timely manner.

               (n)  The Company may require each Holder of Transfer Restricted
          Securities to be registered pursuant to any Shelf Registration
          Statement to furnish to the Company such information concerning the
          Holder and the distribution of such Transfer Restricted Securities as
          the Company may from time to time reasonably require for inclusion in
          such Shelf Registration Statement, and the Company may exclude from
          such registration the Transfer Restricted Securities of any Holder
          that fails to furnish such information within a reasonable time after
          receiving such request.

               (o)  In the case of a Shelf Registration Statement, each Holder
          of Transfer Restricted Securities to be registered pursuant thereto
          agrees by acquisition of such Transfer Restricted Securities that,
          upon receipt of any notice from the Company pursuant to Section
          4(b)(ii) through (v), such Holder will discontinue disposition of such
          Transfer Restricted Securities until such Holder's receipt of copies
          of the supplemental or amended prospectus contemplated by Section 4(j)
          or until advised in writing (the "Advice") by the Company that the use
          of the applicable prospectus may be resumed. If the Company shall give
          any notice under Section 4(b)(ii) through (v) during the period that
          the Company is

                                       10
<PAGE>

          required to maintain an effective Registration Statement (the
          "Effectiveness Period"), such Effectiveness Period shall be extended
          by the number of days during such period from and including the date
          of the giving of such notice to and including the date when each
          seller of Transfer Restricted Securities covered by such Registration
          Statement shall have received (x) the copies of the supplemental or
          amended prospectus contemplated by Section 4(j) (if an amended or
          supplemental prospectus is required) or (y) the Advice (if no amended
          or supplemental prospectus is required).

               (p)  In the case of a Shelf Registration Statement, the Company
          and the Guarantors shall enter into such customary agreements
          (including, if requested, an underwriting agreement in customary form)
          and take all such other action, if any, as Holders of a majority in
          aggregate principal amount of the Securities, Exchange Securities and
          Private Exchange Securities being sold or the managing underwriters
          (if any) shall reasonably request in order to facilitate any
          disposition of Securities, Exchange Securities or Private Exchange
          Securities pursuant to such Shelf Registration Statement.

               (q)  In the case of a Shelf Registration Statement, the Company
          shall (i) make reasonably available for inspection by a representative
          of, and Special Counsel (as defined below) acting for, Holders of a
          majority in aggregate principal amount of the Securities, Exchange
          Securities and Private Exchange Securities being sold and any
          underwriter participating in any disposition of Securities, Exchange
          Securities or Private Exchange Securities pursuant to such Shelf
          Registration Statement, all relevant financial and other records,
          pertinent corporate documents and properties of the Company and its
          subsidiaries and (ii) use its reasonable best efforts to have its
          officers, directors, employees, accountants and counsel supply all
          relevant information reasonably requested by such representative,
          Special Counsel or any such underwriter (an "Inspector") in connection
          with such Shelf Registration Statement.

               (r)  In the case of a Shelf Registration Statement, the Company
          shall, if requested by Holders of a majority in aggregate principal
          amount of the Securities, Exchange Securities and Private Exchange
          Securities being sold, their Special Counsel or the managing
          underwriters (if any) in connection with such Shelf Registration
          Statement, use its reasonable best efforts to cause (i) its counsel to
          deliver an opinion relating to the Shelf Registration Statement and
          the Securities, Exchange Securities or Private Exchange Securities, as
          applicable, in customary form, (ii) its officers to execute and
          deliver all customary documents and certificates requested by Holders
          of a majority in aggregate principal amount of the Securities,
          Exchange Securities and Private Exchange Securities being sold, their
          Special Counsel or the managing underwriters (if any) and (iii) its
          independent public accountants to provide a comfort letter or letters
          in customary form, subject to receipt of appropriate documentation as
          contemplated, and only if permitted, by Statement of Auditing
          Standards No. 72.

               5.   Registration Expenses. The Company and the Guarantors will
                    ---------------------
bear all expenses incurred in connection with the performance of its obligations
under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial
Purchasers and the Holders for the reasonable fees and disbursements of one firm
of attorneys (in addition to any local counsel) chosen by the

                                       11
<PAGE>

Holders of a majority in aggregate principal amount of the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be, to
be sold pursuant to each Registration Statement (the "Special Counsel") acting
for the Initial Purchasers or Holders in connection therewith.

          6. Indemnification.
             ---------------

          (a) In the event of a Shelf Registration Statement or in connection
with any prospectus delivery pursuant to an Exchange Offer Registration
Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the
Company and each of the Guarantors shall jointly and severally indemnify and
hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) 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
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof 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, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder 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 the Company and
the Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with any Holders'
Information; and provided, further, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement contained in this Section 6(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Securities, Exchange Securities or Private Exchange Securities
to the extent that such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that both (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities, Exchange Securities or Private
Exchange Securities to such person and (B) the untrue statement in or omission
from the related preliminary prospectus was corrected in the final prospectus
unless, in either case, such failure to deliver the final prospectus was a
result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).

          (b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, each Guarantor and their respective
affiliates, their respective

                                       12
<PAGE>

officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company or any Guarantor within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof 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 Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.

          (c) Promptly after receipt by an indemnified party under this Section
6 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 6(a) or 6(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 6 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 6. 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 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the 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

                                       13
<PAGE>

party, (3) a conflict or potential conflict exists (based upon advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(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.

          7. Contribution. If the indemnification provided for in Section 6 is
             ------------
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Guarantors from the offering and sale
of the Securities, on the one hand, and a Holder with respect to the sale by
such Holder of Securities, Exchange Securities or Private Exchange Securities,
on the other, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors on the one hand and such Holder on the
other with respect to the statements or omissions that resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Guarantors on the one hand and a Holder on the other with respect to
such offering and such sale shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) received by or on behalf of the Company as set forth in the table on
the cover of the Offering Memorandum, on the one hand, bear to the total
proceeds received by such Holder with respect to its sale of Securities,
Exchange Securities or Private Exchange Securities, on the other. 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 the information supplied by

                                       14
<PAGE>

the Company and the Guarantors on the one hand or to any Holders' Information
supplied by such Holder 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 omission. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this Section 7 were to be
determined by pro rata allocation 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 7 shall be deemed to include, for purposes of this Section 7, 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 7, an indemnifying party that is
a Holder of Securities, Exchange Securities or Private Exchange Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party 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.

          8. Rules 144 and 144A. So long as any Transfer Restricted Securities
             ------------------
remain outstanding, the Company shall use its reasonable best efforts to file
the reports required to be filed by it under Rule 144(c)(1) under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company is
not required to file such reports, it will, upon the written request of any
Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that
they will take such further action as any Holder of Transfer Restricted
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer
Restricted Securities, the Company and the Guarantors shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.

          9. Underwritten Registrations. If any of the Transfer Restricted
             --------------------------
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.

          No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve

                                       15
<PAGE>

such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.

          10. Miscellaneous.
              -------------

          (a) Amendments and Waivers. The provisions of this Agreement may not
              ----------------------
     be amended, modified or supplemented, and waivers or consents to departures
     from the provisions hereof may not be given, unless the Company has
     obtained the written consent of Holders of a majority in aggregate
     principal amount of the Securities, the Exchange Securities and the Private
     Exchange Securities, taken as a single class. Notwithstanding the
     foregoing, a waiver or consent to depart from the provisions hereof with
     respect to a matter that relates exclusively to the rights of Holders whose
     Securities, Exchange Securities or Private Exchange Securities are being
     sold pursuant to a Registration Statement and that does not directly or
     indirectly affect the rights of other Holders may be given by Holders of a
     majority in aggregate principal amount of the Securities, the Exchange
     Securities and the Private Exchange Securities being sold by such Holders
     pursuant to such Registration Statement.

          (b) Notices. All notices and other communications provided for or
              -------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:

               (i)    if to a Holder, at the most current address given by such
          Holder to the Company in accordance with the provisions of this
          Section 10(b), which address initially is, with respect to each
          Holder, the address of such Holder maintained by the Registrar under
          the Indenture, with a copy in like manner to JPMorgan, Merrill Lynch,
          Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
          Corporation, CIBC World Markets Corp. and First Union Securities,
          Inc.;

               (ii)   if to an Initial Purchaser, initially at its address set
          forth in the Purchase Agreement; and

               (iii)  if to the Company or the Guarantors, initially at the
          address of the Company set forth in the Purchase Agreement.

          All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.

          (c) Successors And Assigns. This Agreement shall be binding upon the
              ----------------------
Company, the Guarantors and their respective successors and assigns.

          (d) Counterparts. This Agreement may be executed in any number of
              ------------
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate

                                       16
<PAGE>

counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

          (e) 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.

          (f) Headings. The headings in this Agreement are for convenience of
              --------
reference only and shall not limit or otherwise affect the meaning hereof.

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

          (h) Remedies. In the event of a breach by the Company or any of the
              --------
Guarantors or by any Holder of any of their respective obligations under this
Agreement, each Holder or the Company or any Guarantor, as the case may be, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages (other than the recovery of damages for a breach by the
Company or any Guarantor of their obligations under Sections 1 or 2 hereof for
which additional interest has been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The
Company, each Guarantor and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.

          (i) No Inconsistent Agreements. The Company and each Guarantor
              --------------------------
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii)
without limiting the generality of the foregoing, without the written consent of
the Holders of a majority in aggregate principal amount of the then outstanding
Transfer Restricted Securities, it shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are not in conflict or inconsistent
with the provisions of this Agreement.

          (j) No Piggyback on Registrations. Neither the Company nor the
              -----------------------------
Guarantors nor any of its security holders (other than the Holders of Transfer
Restricted Securities in such capacity) shall have the right to include any
securities of the Company in any Shelf Registration or Registered Exchange Offer
other than Transfer Restricted Securities.

          (k) Severability. The remedies provided herein are cumulative and not
              ------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the

                                       17
<PAGE>

remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable best efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

                                       18
<PAGE>

          Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Initial Purchasers.

                                        Very truly yours,

                                        SELECT MEDICAL CORPORATION

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

                                        SELECTMARK, INC.

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

                                        SELECT HOSPITAL INVESTORS, INC.

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

                                        SLMC FINANCE CORPORATION

                                        By   Andrew Panaccione
                                             ------------------------------
                                             Name:  Andrew Panaccione
                                             Title: CFO

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

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

                                       19
<PAGE>

Accepted:

J.P. MORGAN SECURITIES INC.

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

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

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

                                       20
<PAGE>

                                                                      SCHEDULE I

                                   GUARANTORS

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

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

NovaCare Occupational Health Services, Inc.
NovaCare Outpatient Rehabilitation, Inc.
NovaCare Outpatient Rehabilitation East, Inc.
NovaCare Outpatient Rehabilitation West, Inc.
NovaCare Rehabilitation, Inc.
NW Rehabilitation Associates, L.P.
Ortho Rehab Associates, Inc.
Orthopedic and Sports Physical Therapy of Cupertino, Inc.
P.T. Services Company
P.T. Services, Inc.
P.T. Services Rehabilitation, Inc.
Peter Trailov R.P.T. Physical Therapy Clinic, Orthopaedic Rehabilitation &
Sports Medicine, Ltd.
Peters, Starkey & Todrank Physical Therapy Corporation
Physical Focus, Inc.
Physical Rehabilitation Partners, Inc.
Physical Therapy Enterprises, Inc.
Physical Therapy Institute, Inc.
Physical Therapy Services of the Jersey Cape, Inc.
Physio - Associates, Inc.
Pro Active Therapy, Inc.
Pro Active Therapy of Ahoskie, Inc.
Pro Active Therapy of Gaffney, Inc.
Pro Active Therapy of Greenville, Inc.
Pro Active Therapy of North Carolina, Inc.
Pro Active Therapy of South Carolina, Inc.
Pro Active Therapy of Virginia, Inc.
Pro Active Therapy of Rocky Mount, Inc.
Professional Therapeutic Services, Inc.
Quad City Management, Inc.
RCI (Colorado), Inc.
RCI (Exertec), Inc.
<PAGE>

RCI (Michigan), Inc.
RCI (S.P.O.R.T.), Inc.
RCI (WRS), Inc.
RCI Nevada, Inc.
Rebound Oklahoma, Inc.
Redwood Pacific Therapies, Inc.
Rehab Advantage, Inc.
Rehab Managed Care of Arizona, Inc.
Rehab Provider Network - California, Inc.
Rehab Provider Network - Delaware, Inc.
Rehab Provider Network - Georgia, Inc.
Rehab Provider Network - Indiana, Inc.
Rehab Provider Network - Maryland, Inc.
Rehab Provider Network - Michigan, Inc.
Rehab Provider Network - New Jersey, Inc.
Rehab Provider Network - Ohio, Inc.
Rehab Provider Network - Oklahoma, Inc.
Rehab Provider Network - Pennsylvania, Inc.
Rehab Provider Network - Virginia, Inc.
Rehab Provider Network - Washington, D.C., Inc.
Rehab Provider Network of Colorado, Inc.
Rehab Provider Network of Florida, Inc.
Rehab Provider Network of Nevada, Inc.
Rehab Provider Network of New Mexico, Inc.
Rehab Provider Network of North Carolina, Inc.
Rehab Provider Network of Texas, Inc.
Rehab Provider Network of Wisconsin, Inc.
Rehab World, Inc.
Rehab/Work Hardening Management Associates, Ltd.
RehabClinics, Inc.
RehabClinics (COAST), Inc.
RehabClinics (GALAXY), Inc.
<PAGE>

RehabClinics (New Jersey), Inc.
RehabClinics (PTA), Inc.
RehabClinics (SPT), Inc.
RehabClinics Abilene, Inc.
RehabClinics Dallas, Inc.
RehabClinics Pennsylvania, Inc.
Rehabilitation Network, Inc.
Robert M. Bacci, R.P.T. Physical Therapy, Inc.
S.T.A.R.T., Inc.
Select Air Corporation
Select Employment Services, Inc.
Select Hospital Investors, Inc.
SelectMark, Inc.
Select Medical of Kentucky, Inc.
Select Medical of Maryland, Inc.
Select Medical of New Jersey, Inc.
Select Medical of New York, Inc.
Select Medical of Ohio, Inc.
Select Medical of Pennsylvania, Inc.
Select Software Ventures, L.L.C.
Select Specialty Hospital - Akron, Inc.
Select Specialty Hospital - Akron II, Inc.
Select Specialty Hospital - Ann Arbor, Inc.
Select Specialty Hospital - Battle Creek, Inc.
Select Specialty Hospital - Beech Grove, Inc.
Select Specialty Hospital - Camp Hill, Inc.
Select Specialty Hospital - Camp Hill, L.P.
Select Specialty Hospital - Central Detroit, Inc.
Select Specialty Hospital - Charleston, Inc.
Select Specialty Hospital - Cincinnati, Inc.
Select Specialty Hospital - Columbus, Inc.
Select Specialty Hospital - Columbus/University, Inc.
<PAGE>

Select Specialty Hospital - Dallas, Inc.
Select Specialty Hospital - Denver, Inc.
Select Specialty Hospital - Durham, Inc.
Select Specialty Hospital - Erie, Inc.
Select Specialty Hospital - Evansville, Inc.
Select Specialty Hospital - Flint, Inc.
Select Specialty Hospital - Fort Smith, Inc.
Select Specialty Hospital - Fort Wayne, Inc.
Select Specialty Hospital - Greensburg, Inc.
Select Specialty Hospital - Houston, Inc.
Select Specialty Hospital - Indianapolis, Inc.
Select Specialty Hospital - Jackson, Inc.
Select Specialty Hospital - Johnstown, Inc.
Select Specialty Hospital - Kansas City, Inc.
Select Specialty Hospital - Knoxville, Inc.
Select Specialty Hospital - Little Rock, Inc.
Select Specialty Hospital - Louisville, Inc.
Select Specialty Hospital - Macomb County, Inc.
Select Specialty Hospital - Memphis, Inc.
Select Specialty Hospital - Mesa, Inc.
Select Specialty Hospital - Miami, Inc.
Select Specialty Hospital - Milwaukee, Inc.
Select Specialty Hospital - Morgantown, Inc.
Select Specialty Hospital - Nashville, Inc.
Select Specialty Hospital - New Orleans, Inc.
Select Specialty Hospital - North Knoxville, Inc.
Select Specialty Hospital - Northwest Detroit, Inc.
Select Specialty Hospital - Northwest Indiana, Inc.
Select Specialty Hospital - Oklahoma City, Inc.
Select Specialty Hospital - Oklahoma City/East Campus, Inc.
Select Specialty Hospital - Omaha, Inc.
Select Specialty Hospital - Philadelphia/AEMC, Inc.
<PAGE>

Select Specialty Hospital - Phoenix, Inc.
Select Specialty Hospital - Pittsburgh, Inc.
Select Specialty Hospital - Pontiac, Inc.
Select Specialty Hospital - Reno, Inc.
Select Specialty Hospital - San Antonio, Inc.
Select Specialty Hospital - Sioux Falls, Inc.
Select Specialty Hospital - Topeka, Inc.
Select Specialty Hospital - TriCities, Inc.
Select Specialty Hospital - Tulsa, Inc.
Select Specialty Hospital - West Columbus, Inc.
Select Specialty Hospital - Western Michigan, Inc.
Select Specialty Hospital - Wichita, Inc.
Select Specialty Hospital - Wilmington, Inc.
Select Specialty Hospital - Wyandotte, Inc.
Select Specialty Hospital - Youngstown, Inc.
Select Specialty Hospitals, Inc.
Select Synergos, Inc.
Select Unit Management, Inc.
SLMC Finance Corporation
SMC of Florida, Inc.
South Jersey Physical Therapy Associates, Inc.
South Jersey Rehabilitation and Sports Medicine Center, Inc.
Southpointe Fitness Center, Inc.
Southwest Emergency Associates, Inc.
Southwest Medical Supply Company, Inc.
Southwest Physical Therapy, Inc.
Southwest Therapists, Inc.
Sporthopedics Sports and Physical Therapy Centers, Inc.
Sports & Orthopedic Rehabilitation Services, Inc.
Sports Therapy and Arthritis Rehabilitation, Inc.
Star Physical Therapy, Inc.
Stephenson-Holtz, Inc.
<PAGE>

The Center for Physical Therapy and Rehabilitation, Inc.
The Orthopedic Sports and Industrial Rehabilitation Network, Inc.
TJ Partnership I
Treister, Inc.
Union Square Center for Rehabilitation & Sports Medicine, Inc.
Valley Group Physical Therapists, Inc.
Vanguard Rehabilitation, Inc.
Wayzata Physical Therapy Center, Inc.
West Penn Rehabilitation Services, Inc.
West Side Physical Therapy, Inc.
West Suburban Health Partners, Inc.
Yuma Rehabilitation Center, Inc.
<PAGE>

                                                                         ANNEX A

          Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution"
<PAGE>

                                                                         ANNEX B

          Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>

                                                                         ANNEX C

                             PLAN OF DISTRIBUTION

          Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company and
the Guarantors have agreed that, for a period of 180 days after the Expiration
Date, they will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, until
_______________, 200_, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.

          The Company and the Guarantors will not receive any proceeds from any
sale of Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the Exchange Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.

          For a period of 180 days after the Expiration Date the Company and the
Guarantors will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and the Guarantors have
agreed to pay all expenses incident to the Registered Exchange Offer (including
the expenses of one counsel for the Holders of the Securities) other than
commissions or concessions of any broker-dealers and will indemnify the Holders
of the Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
<PAGE>

                                                                         ANNEX D

         [_]      CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
                  ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
                  AMENDMENTS OR SUPPLEMENTS THERETO.

                  Name:
                  Address:

If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.<PAGE>

                                                                   Exhibit 10.49

                                    THIRD AMENDMENT dated as of May 31, 2001
                  (this "Amendment") to the Credit Agreement dated as of
                         ---------
                  September 22, 2000 (the "Credit Agreement") as amended by the
                                           ----------------
                  First Amendment dated as of December 28, 2000 and the Second
                  Amendment dated as of January 18, 2001, among Select Medical
                  Corporation, a Delaware corporation (the "Company"), Canadian
                                                            -------
                  Back Institute Limited, an Ontario corporation and a wholly
                  owned subsidiary of the Company ("CBIL" and, together with the
                                                    ----
                  Company, the "Borrowers"), the Lenders party thereto, The
                                ---------
                  Chase Manhattan Bank, as US Agent and US Collateral Agent, The
                  Chase Manhattan Bank of Canada, as Canadian Agent and Canadian
                  Collateral Agent, Banc of America Securities, LLC, as
                  Syndication Agent, and CIBC, Inc., as Documentation Agent.

                  WHEREAS, the Borrowers have requested that the Lenders (such
term and each other capitalized term used but not otherwise defined herein
having the meaning assigned to it in the Credit Agreement) approve amendments to
certain provisions of the Credit Agreement;

                  WHEREAS, the undersigned Lenders are willing, on the terms and
subject to the conditions set forth herein, to approve such amendments to the
Credit Agreement;

                  NOW, THEREFORE, in consideration of these premises, the
Borrowers and the undersigned Lenders hereby agree as follows:

                  SECTION 1. Amendments. Effective as of the Amendment Effective
                             ----------
Date (as defined in Section 4 hereof), the Credit Agreement is hereby amended as
follows:

                  (a) Clause (d) of the definition of "Prepayment Event" in
Section 1.01 is amended by inserting the words "(but in any event the term
"Prepayment Event" shall include Indebtedness incurred under Section
6.05(d)(iii))" at the end of such clause.

                  (b) The following definition is inserted in an appropriate
alphabetical position in Section 1.01:

                           "Qualified Subordinated Indebtedness" means
                            -----------------------------------
         Subordinated Indebtedness of the Company (a) that shall contain
         covenants and events of default in the aggregate not less favorable to
         the Company than those set forth in the Preliminary Offering Memorandum
         dated May [ ], 2001 (the "Offering Memorandum") relating to
<PAGE>

                                                                               2

         the offering of senior subordinated notes by the Company, (b) that
         shall contain subordination provisions in the aggregate at least as
         favorable to the Lenders as those set forth in the Offering Memorandum
         and (c) that shall mature no earlier than, and, except as set forth in
         the Offering Memorandum, require no amortization, redemption,
         repurchase, prepayment or defeasance earlier than, six months following
         the latest of the US Term Maturity Date, the Canadian Term Maturity
         Date and the Revolving Maturity Date and (d) 100% of the Net Proceeds
         of which shall be applied as set forth in Section 2.11(c).

                  (c) Section 2.11(c) is amended by amending and restating in
its entirety the last sentence of such Section as follows:

         Notwithstanding the foregoing, (a) in the event that Net Proceeds of
         the Planned IPO are received by or on behalf of the Company or any
         Subsidiary, the prepayment requirements of this Section 2.11(c) with
         respect to such Net Proceeds shall be limited to the prepayment of US
         Term Loans in an amount equal to the sum of (i) US$24,000,000 plus (ii)
         50% of the excess of such Net Proceeds over US$138,000,000 and (b) in
         the event that Net Proceeds of the issuance of Qualified Subordinated
         Indebtedness are received by or on behalf of the Company, the
         prepayment requirements of this Section 2.11(c) with respect to such
         Net Proceeds shall be as follows: (i) first, within five Business Days
         after such Net Proceeds are received, US$90,000,000 shall be applied to
         repay the Senior Subordinated Notes; (ii) second, within five Business
         Days after such Net Proceeds are received, an amount not less than
         US$35,000,000 shall be applied to prepay US Term Loans; (iii) third,
         within five Business Days after such Net Proceeds are received, the
         lesser of the amount outstanding of the Revolving Borrowings on such
         date and the amount of any remaining Net Proceeds shall be applied to
         prepay Revolving Borrowings (which prepayment shall not reduce the
         Revolving Commitments hereunder unless the Company shall elect to
         reduce such Commitments pursuant to Section 2.08(b)); and (iv)
         thereafter, any remaining Net Proceeds may be retained by the Company
         for general corporate purposes.

                  (d) Section 2.20 is amended and restated in its entirety to
read as follows:

                           SECTION 2.20. Increase in Revolving Commitments. The
                                         ---------------------------------
         Company may, by written notice to the
<PAGE>

                                                                               3

     US Agent, executed by the Company and one or more financial institutions
     (any such financial institution referred to in this Section being called a
     "Prospective Revolving Lender"), which may include any Lender, cause the
      ----------------------------
     Revolving Commitments of the Prospective Revolving Lenders to be increased
     (or cause Revolving Commitments to be extended by the Prospective Revolving
     Lenders, as the case may be) in an amount for each Prospective Revolving
     Lender set forth in such notice, provided, however, that (a) the aggregate
                                      --------  -------
     amount of the Lenders' Revolving Commitments after giving effect to such
     increase shall in no event exceed US$185,000,000, (b) each Prospective
     Revolving Lender, if not already a Lender hereunder, shall be subject to
     the approval of the US Agent (which approval shall not be unreasonably
     withheld) and (c) each Prospective Revolving Lender, if not already a
     Lender hereunder, shall become a party to this Agreement by completing and
     delivering to the US Agent a duly executed Accession Agreement. Increases
     and new Revolving Commitments created pursuant to this Section shall become
     effective (A) in the case of Prospective Revolving Lenders already parties
     hereunder, on the date specified in the notice delivered pursuant to this
     Section and (B) in the case of Prospective Revolving Lenders not already
     parties hereunder, on the effective date of the Accession Agreement. Upon
     the effectiveness of any Accession Agreement to which any Prospective
     Revolving Lender is a party, (i) such Prospective Revolving Lender shall
     thereafter be deemed to be a party to this Agreement and shall be entitled
     to all rights, benefits and privileges accorded a Lender hereunder and
     subject to all obligations of a Lender hereunder and (ii) Schedule 2.01
     shall be deemed to have been amended to reflect the Revolving Commitment of
     the additional Lender as provided in such Accession Agreement. Upon the
     effectiveness of any increase pursuant to this Section in the Revolving
     Commitment of a Lender already a party hereunder, Schedule 2.01 shall be
     deemed to have been amended to reflect the increased Revolving Commitment
     of such Lender. Notwithstanding the foregoing, no increase in the aggregate
     Revolving Commitments (or in the Revolving Commitment of any Lender) shall
     become effective under this Section unless, on the date of such increase,
     the conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be
     satisfied (with all references in such paragraphs to a Borrowing being
     deemed to be references to such increase) and the US Agent shall have
     received a certificate to that effect dated such date and executed by a
     Financial Officer of the Company.
<PAGE>

                                                                               4

         Following any increase of a Lender's Revolving Commitment or any
         extension of a new Revolving Commitment pursuant to this paragraph, any
         Revolving Loans outstanding prior to the effectiveness of such increase
         or extension shall continue outstanding until the ends of the
         respective Interests Periods applicable thereto, and shall then be
         repaid or refinanced with new Revolving Loans made pursuant to Sections
         2.01 and 2.03.

                  (e) Section 5.15 is amended by deleting in its entirety
 paragraph (a) thereof and deleting "(b)" appearing immediately prior to the
 words "The Company and CBIL shall pay and perform".

                  (f) Section 6.05(d) is amended and restated in its entirety to
 read as follows:

                           (d) (i) the Senior Subordinated Notes; (ii) any other
         Subordinated Indebtedness of the Company the proceeds of which are
         solely applied to repay the Senior Subordinated Notes; provided that
                                                                --------
         the terms of any such other Subordinated Indebtedness (including
         maturity, amortization, redemption, repurchase or prepayment
         requirements, covenants and events of default and subordination
         provisions) shall (x) be in the aggregate not less favorable to the
         Company than those of the Senior Subordinated Notes, (y) contain
         subordination provisions at least as favorable to the Lenders as those
         contained in the Senior Subordinated Notes and (z) mature no earlier
         than, and require no amortization, redemption, repurchase or prepayment
         earlier than, the Senior Subordinated Notes; and (iii) Qualified
         Subordinated Indebtedness in an aggregate principal amount not to
         exceed US$225,000,000;

                  (g) Section 6.15 is amended and restated in its entirety to
read as follows:

                           SECTION 6.15. Subordinated Indebtedness. The Company
                                         -------------------------
         will not, and will not permit any Subsidiary to, make or agree to make,
         directly or indirectly, any payment or other distribution (whether in
         cash, securities or other property) of or in respect of the principal
         of or interest on the Senior Subordinated Notes or any other
         Subordinated Indebtedness, or any payment or other distribution
         (whether in cash, securities or other property), including any sinking
         fund or similar deposit, on account of the purchase, redemption,
         retirement,
<PAGE>

                                                                               5

         defeasance, cancellation or termination of the Senior Subordinated
         Notes or any other Subordinated Indebtedness, except (i) scheduled and
         other mandatory payments of interest and principal in respect thereof
         (other than any prepayments of the Senior Subordinated Notes Due 2009
         with the proceeds of any offering or issuance of Equity Interests or
         Indebtedness), (ii) the prepayment of the Senior Subordinated Notes
         with the proceeds of other Subordinated Indebtedness, including
         Qualified Subordinated Indebtedness, permitted under Section 6.05(d)
         and (iii) after an Initial Public Offering, the prepayment of Senior
         Subordinated Notes with up to US$25,000,000 (or US$45,000,000 if such
         Initial Public Offering is the Planned IPO) of the Net Proceeds from
         such Initial Public Offering, provided that, in the case of clauses
                                       --------
         (ii) and (iii) above, (A) the Net Proceeds from such Initial Public
         Offering are applied first to prepay US Term Loans and, unless such
         Initial Public offering is the Planned IPO, amounts owed in respect of
         Canadian Term Loans and outstanding B/As in accordance with Section
         2.11(c), (B) the Net Proceeds from the issuance of Qualified
         Subordinated Indebtedness are applied to prepay Senior Subordinated
         Notes, US Term Loans and Revolving Borrowings in accordance with
         Section 2.11(c) and (C) the Leverage Ratio does not exceed 3.5 to 1.0
         (calculated on a pro forma basis to give effect to the application of
         such Net Proceeds in accordance with Section 2.11 and to any prepayment
         of Senior Subordinated Notes); provided that, in any case, no payment
                                        --------
         shall be made in respect of the Senior Subordinated Notes or any other
         Subordinated Indebtedness that is prohibited by the subordination
         provisions applicable thereto. Notwithstanding the forgoing proviso, it
         is agreed that any prepayment of the Senior Subordinated Notes with
         proceeds from an issuance of Qualified Subordinated Indebtedness
         permitted by clause (ii) of the preceding sentence or with proceeds
         from an Initial Public Offering permitted by clause (iii) of the
         preceding sentence shall not be received in trust for, held for the
         benefit of, or paid over, delivered or transferred to, the Lenders.

                  SECTION 2. Increase in Revolving Commitments of Certain
                             --------------------------------------------
Existing Lenders. In the event that the Amendment Effective Date (as defined in
----------------
Section 4 below) shall have occurred, effective as of the date on which US Term
Loans are prepaid with Net Proceeds of the issuance of Qualified Subordinated
Indebtedness pursuant to Section 2.11(c) of the Credit Agreement, each of the US
Term Lenders that executes a separate signature block appearing on its signature
page
<PAGE>

                                                                               6

 hereto set forth therein for such purpose agrees that its Revolving Commitment
 shall be automatically increased without any further action on the part of any
 Person on such date in an amount equal to (i) the aggregate principal amount of
 such US Term Lender's outstanding US Term Loans prepaid on such date with the
 Net Proceeds of the issuance of Qualified Subordinated Indebtedness plus (ii)
 in the case of CIBC, Inc. and First Union National Bank, the additional amount
 appearing on such US Term Lender's signature page hereto. On the date of such
 prepayment, Schedule 2.01 shall be deemed to be modified to reflect the
 increase in the Revolving Commitment of each such US Term Lender, subject to
 such US Term Lender's indicating its agreement to the terms of this Section 2
 on its signature page hereto (and the last sentence of the definition of
 "Revolving Commitment" shall be deemed to be modified to reflect the resulting
 increase in the aggregate Revolving Commitments pursuant to this Section 2).
 Following any increase of any of the Lenders' Revolving Commitments pursuant to
 this Section 2, any Revolving Loans outstanding prior to the effectiveness of
 such increase shall continue outstanding until the ends of the respective
 Interest Periods applicable thereto, and shall then be repaid or refinanced
 with new Revolving Loans made pursuant to Sections 2.01 and 2.03.

                  SECTION 3. Representations and Warranties. Each of the
                             ------------------------------
 Borrowers represents and warrants to each of the Lenders that, after giving
 effect to the amendments contemplated hereby, (a) the representations and
 warranties of such Borrower set forth in the Credit Agreement are true and
 correct in all material respects on and as of the date of this Amendment,
 except to the extent such representations and warranties expressly relate to an
 earlier date (in which case such representations and warranties shall be true
 and correct in all material respects as of the earlier date) and (b) no Default
 has occurred and is continuing.

                  SECTION 4. Effectiveness. This Amendment shall become
                             --------------
effective as of the date (the "Amendment Effective Date") when the following
                               ------------------------
conditions shall have been satisfied:

                  (a) The Administrative Agent (or its counsel) shall have
         received copies hereof that, when taken together, bear (i) the
         signatures of the Borrowers and the Required Lenders, (ii) the
         signatures of US Term Lenders having outstanding US Term Loans
         representing more than 50% of the total outstanding US Term Loans on
         the Amendment Effective Date, (iii) the signatures of Canadian Term
         Lenders having outstanding Canadian Term Loans and outstanding accepted
         B/As representing more
<PAGE>

                                                                               7

         than 50% of the sum of the total outstanding Canadian Term Loans and
         accepted B/As on the Amendment Effective Date and (iv) the signatures
         of each Lender increasing its Revolving Commitment pursuant to Section
         2 of this Amendment.

                  (b) The Company shall have received gross cash proceeds from
         the issuance of the Qualified Subordinated Indebtedness of at least
         $125,000,000.

                  (c) The Administrative Agent shall have received a certificate
         of the President, a Vice President or a Financial Officer of the
         Company, confirming compliance as of the Amendment Effective Date with
         the conditions set forth in paragraphs (a) and (b) of Section 4.02 of
         the Credit Agreement.

                  (d) The Administrative Agent and the Lenders shall have
         received all fees, expenses and other consideration presented for
         payment on or before the date hereof.

 The Administrative Agent shall notify the Borrower and the Lenders of the
 occurrence of the Amendment Effective Date and shall distribute to the Borrower
 and the Lenders an updated Schedule 2.01 on the date when such Schedule may be
 modified pursuant to Section 2 hereof.

                  SECTION 5.  Applicable  Law. THIS AMENDMENT SHALL BE CONSTRUED
                              ---------------
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                  SECTION 6. No Other Amendments. Except as expressly set forth
                             -------------------
 herein, this Amendment shall not by implication or otherwise limit, impair,
 constitute a waiver of, or otherwise affect the rights and remedies of any
 party under, the Credit Agreement, nor alter, modify, amend or in any way
 affect any of the terms, conditions, obligations, covenants or agreements
 contained in the Credit Agreement, all of which are ratified and affirmed in
 all respects and shall continue in full force and effect. This Amendment shall
 apply and be effective only with respect to the provisions of the Credit
 Agreement specifically referred to herein.

                  SECTION 7. Counterparts. This Amendment may be executed in two
                             ------------
or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one contract. Delivery of an
executed counterpart of a signature page of this Amendment by
<PAGE>

                                                                               8

facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Amendment.

                  SECTION 8. Headings. Section headings used herein are for
                             --------
convenience of reference only, are not part of this Amendment and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Amendment.
<PAGE>

                                                                               9

                  IN WITNESS WHEREOF, the Borrower and the undersigned Lenders
have caused this Amendment to be duly executed by their duly authorized
officers, all as of the date first above written.

                                               SELECT MEDICAL CORPORATION,

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

                                               CANADIAN BACK INSTITUTE LIMITED,

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

<PAGE>

                                                                              10

                                             To approve the Amendment:
                                             -------------------------

                                             THE CHASE MANHATTAN BANK,
                                             individually and as US Agent
                                             and US Collateral Agent,

                                              by: Dawn Lee Lum
                                                 -------------------------------
                                                Name:  Dawn Lee Lum
                                                Title: Vice President

                                             To increase the Revolving
                                             Commitment of The Chase
                                             Manhattan Bank pursuant to
                                             Section 2 of the Amendment:
                                             ---------------------------

                                             THE CHASE MANHATTAN BANK,
                                             individually,

                                              by: Dawn Lee Lum
                                                 -------------------------------
                                                Name:  Dawn Lee Lum
                                                Title: Vice President

                                             To approve the Amendment:
                                             -------------------------

                                             THE CHASE MANHATTAN BANK OF
                                             CANADA, individually and as
                                             Canadian Agent and Canadian
                                             Collateral Agent,

                                              by: Chris (illegible) Collins
                                                 -------------------------------
                                                Name:
                                                Title:

<PAGE>

                                             To approve the Third Amendment
                                             dated as of May 31, 2001 (the
                                             "Amendment") to the Credit
                                             Agreement dated as of September 22,
                                             2000 (the "Credit Agreement"), as
                                                        ----------------
                                             amended, among Select Medical
                                             Corporation, a Delaware corporation
                                             (the "Company"), Canadian Back
                                                   -------
                                             Institute Limited, an Ontario
                                             corporation and a wholly owned
                                             subsidiary of the Company ("CBIL"
                                                                         ----
                                             and, together with the Company, the
                                             "Borrowers"), the Lenders party
                                              ---------
                                             thereto, The Chase Manhattan Bank,
                                             as US Agent and US Collateral
                                             Agent, The Chase Manhattan Bank of
                                             Canada, as Canadian Agent and
                                             Canadian Collateral Agent, Banc of
                                             America Securities, LLC, as
                                             Syndication Agent, and CIBC, Inc.,
                                             as Documentation Agent:

                                             Name of Institution:

                                             Bank of America, N.A.
                                             -----------------------------------

                                             by Kevin Wagley
                                               ---------------------------------
                                                Name: Kevin Wagley
                                                Title: Principal

                                             by ________________________________
                                                Name:
                                                Title:

                                             To approve the increase in the
                                             above named institution's Revolving
                                             Commitment pursuant to Section 2 of
                                             the Amendment:

                                             by ________________________________
                                                Name:
                                                Title:

                                             by ________________________________
                                                Name:
                                                Title:
<PAGE>

                                             To approve the Third Amendment
                                             dated as of May 31, 2001 (the
                                             "Amendment") to the Credit
                                             Agreement dated as of September 22,
                                             2000 (the "Credit Agreement"), as
                                                        ----------------
                                             amended, among Select Medical
                                             Corporation, a Delaware corporation
                                             (the "Company"), Canadian Back
                                                   -------
                                             Institute Limited, an Ontario
                                             corporation and a wholly owned
                                             subsidiary of the Company ("CBIL"
                                                                         ----
                                             and, together with the Company, the
                                             "Borrowers"), the Lenders party
                                              ---------
                                             thereto, The Chase Manhattan Bank,
                                             as US Agent and US Collateral
                                             Agent, The Chase Manhattan Bank of
                                             Canada, as Canadian Agent and
                                             Canadian Collateral Agent, Banc of
                                             America Securities, LLC, as
                                             Syndication Agent, and CIBC, Inc.,
                                             as Documentation Agent:

                                             Name of Institution:

                                             Merrill Lynch Capital Corporation
                                             -----------------------------------

                                             by Chris Berosak
                                               ---------------------------------
                                                Name: Chris Berosak
                                                Title: Vice President

                                             by ________________________________
                                                Name:
                                                Title:

                                             To approve the increase in the
                                             above named institution's Revolving
                                             Commitment pursuant to Section 2 of
                                             the Amendment:

                                             by Chris Berosak
                                               ---------------------------------
                                                Name: Chris Berosak
                                                Title: Vice President

                                             by ________________________________
                                                Name:
                                                Title:

<PAGE>

                                             To approve the Third Amendment
                                             dated as of May 31, 2001 (the
                                             "Amendment") to the Credit
                                             Agreement dated as of September 22,
                                             2000 (the "Credit Agreement"), as
                                                        ----------------
                                             amended, among Select Medical
                                             Corporation, a Delaware corporation
                                             (the "Company"), Canadian Back
                                                   -------
                                             Institute Limited, an Ontario
                                             corporation and a wholly owned
                                             subsidiary of the Company ("CBIL"
                                                                         ----
                                             and, together with the Company, the
                                             "Borrowers"), the Lenders party
                                              ---------
                                             thereto, The Chase Manhattan Bank,
                                             as US Agent and US Collateral
                                             Agent, The Chase Manhattan Bank of
                                             Canada, as Canadian Agent and
                                             Canadian Collateral Agent, Banc of
                                             America Securities, LLC, as
                                             Syndication Agent, and CIBC, Inc.,
                                             as Documentation Agent:

                                             Name of Institution:

                                             PNC Bank National Association
                                             -----------------------------------

                                             by Marie T. Boyer
                                               ---------------------------------
                                                Name: Marie T. Boyer
                                                Title: Vice President

                                             by ________________________________
                                                Name:
                                                Title:

                                             To approve the increase in the
                                             above named institution's Revolving
                                             Commitment pursuant to Section 2 of
                                             the Amendment:

                                             by Marie T. Boyer
                                               ---------------------------------
                                                Name: Marie T. Boyer
                                                Title: Vice President

                                             by ________________________________
                                                Name:
                                                Title:

<PAGE>

                                            To approve the Third Amendment
                                            dated as of May 31, 2001 (the
                                            "Amendment") to the Credit
                                            Agreement dated as of September 22,
                                            2000 (the "Credit Agreement"), as
                                                       ----------------
                                            amended, among Select Medical
                                            Corporation, a Delaware corporation
                                            (the "Company"), Canadian Back
                                                  -------
                                            Institute Limited, an Ontario
                                            corporation and a wholly owned
                                            subsidiary of the Company ("CBIL"
                                                                        ----
                                            and, together with the Company, the
                                            "Borrowers"), the Lenders party
                                             ---------
                                            thereto, The Chase Manhattan Bank,
                                            as US Agent and US Collateral
                                            Agent, The Chase Manhattan Bank of
                                            Canada, as Canadian Agent and
                                            Canadian Collateral Agent, Banc of
                                            America Securities, LLC, as
                                            Syndication Agent, and CIBC, Inc.,
                                            as Documentation Agent:

                                            Name of Institution:

                                            Societe Generale
                                            ------------------------------------

                                            by Richard Bernal
                                              ----------------------------------
                                              Name: Richard Bernal
                                              Title: Director, Corporate Banking

                                            by________________________________
                                              Name:
                                              Title:

                                            To approve the increase in the
                                            above named institution's Revolving
                                            Commitment pursuant to Section 2 of
                                            the Amendment:

                                            by Richard Bernal
                                              ----------------------------------
                                              Name: Richard Bernal
                                              Title: Director, Corporate Banking

                                            by________________________________
                                              Name:
                                              Title:

<PAGE>

                                             To approve the Third Amendment
                                             dated as of May 31, 2001 (the
                                             "Amendment") to the Credit
                                             Agreement dated as of September 22,
                                             2000 (the "Credit Agreement"), as
                                                        ----------------
                                             amended, among Select Medical
                                             Corporation, a Delaware corporation
                                             (the "Company"), Canadian Back
                                                   -------
                                             Institute Limited, an Ontario
                                             corporation and a wholly owned
                                             subsidiary of the Company ("CBIL"
                                                                         ----
                                             and, together with the Company, the
                                             "Borrowers"), the Lenders party
                                              ---------
                                             thereto, The Chase Manhattan Bank,
                                             as US Agent and US Collateral
                                             Agent, The Chase Manhattan Bank of
                                             Canada, as Canadian Agent and
                                             Canadian Collateral Agent, Banc of
                                             America Securities, LLC, as
                                             Syndication Agent, and CIBC, Inc.,
                                             as Documentation Agent:

                                             CIBC, INC.

                                             by Douglas J. (illegible)
                                               ---------------------------------
                                                Name: Douglas J. (illegible)
                                                Title: Executive Director

                                             To approve the increase in the
                                             above named institution's Revolving
                                             Commitment pursuant to Section 2 of
                                             the Amendment, and an additional
                                             US$5,000,000 increase in such
                                             Revolving Commitment:

                                             by Douglas J. (illegible)
                                               ---------------------------------
                                                Name: Douglas J. (illegible)
                                                Title: Executive Director

<PAGE>

                                             To approve the Third Amendment
                                             dated as of May 31, 2001 (the
                                             "Amendment") to the Credit
                                             Agreement dated as of September 22,
                                             2000 (the "Credit Agreement"), as
                                                        ----------------
                                             amended, among Select Medical
                                             Corporation, a Delaware corporation
                                             (the "Company"), Canadian Back
                                                   -------
                                             Institute Limited, an Ontario
                                             corporation and a wholly owned
                                             subsidiary of the Company ("CBIL"
                                                                         ----
                                             and, together with the Company, the
                                             "Borrowers"), the Lenders party
                                              ---------
                                             thereto, The Chase Manhattan Bank,
                                             as US Agent and US Collateral
                                             Agent, The Chase Manhattan Bank of
                                             Canada, as Canadian Agent and
                                             Canadian Collateral Agent, Banc of
                                             America Securities, LLC, as
                                             Syndication Agent, and CIBC, Inc.,
                                             as Documentation Agent:

                                             FIRST UNION NATIONAL BANK

                                             by Jeanette A. Griffin
                                               ---------------------------------
                                                Name: Jeanette A. Griffin
                                                Title: Vice President

                                             To approve the increase in the
                                             above named institution's Revolving
                                             Commitment pursuant to Section 2 of
                                             the Amendment, and an additional
                                             US$15,000,000 increase in such
                                             Revolving Commitment:

                                             by Jeanette A. Griffin
                                               ---------------------------------
                                                Name: Jeanette Griffin
                                                Title: Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]