PROXY STATEMENT

     This Proxy Statement and the accompanying proxy card are being mailed on or about April 18, 2003,19, 2004, to owners of shares of Select Medical Corporation (the “Company”) Common Stockcommon stock in connection with the solicitation of proxies by the Board of Directors for the 20032004 Annual Meeting of Stockholders. This proxy procedure is necessary to permit all stockholders of Select Medical Corporation, many of whom are unable to attend the Annual Meeting, to vote. The Board of Directors encourages you to read this document thoroughly and to take this opportunity to vote on the matters to be decided at the Annual Meeting.

CONTENTS

Select Medical Corporation

VOTING PROCEDURES

     Your vote is very important.Your shares can only be voted at the Annual Meeting if you are present or represented by proxy. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote by proxy to assure that your shares will be represented. You have a choice of voting by means of the Internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you. Please be aware that if you vote over the Internet, you may incur costs such as telephone and internet access charges for which you will be responsible. Also note that proxies submitted by telephone or the Internet must be received by 11:59 p.m., EDT, on May 9, 2004.

     You may revoke thisyour proxy at any time before it is voted by written notice to the Secretary of the Company, by submission of a proxy bearing a later date or by casting a ballot at the Annual Meeting. Properly executed proxies that are received before the Annual Meeting’s adjournment will be voted in accordance with the directions provided. If no directions are given, your shares will be voted by one of the individuals named on your proxy card as recommended by the Board of Directors. If you wish to give a proxy to someone other than those named on the proxy card, you should cross out those names and insert the name(s) of the person(s), not more than four, to whom you wish to give your proxy.

     Who can vote?Stockholders as of the close of business on March 28, 200326, 2004 are entitled to vote. On that day, 47,463,629102,610,675 shares of Common Stockcommon stock were outstanding and eligible to vote, and there were 128117 record holders. Each share is entitled to one vote on each matter presented at the Annual Meeting. A list of stockholders eligible to vote will be available at the offices of Select Medical Corporation, 4716 Old Gettysburg Road, Mechanicsburg, Pennsylvania beginning May 2, 2003.on April 30, 2004. Stockholders may examine this list during normal business hours for any purpose relating to the Annual Meeting.

     How does the board recommend I vote?The board recommends a vote FOR each board nominee and FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors.

     What shares are included in the proxy card?Each proxy card you receive represents all the shares of Common Stockcommon stock registered to you in that particular account. You may receive more than one proxy card if you hold shares which are either registered differently or in more than one account. Each share of Common Stockcommon stock that you own entitles you to one vote.

     How do I vote by proxy? Most stockholders have three ways to vote by proxy: by telephone, via the Internet or by returning the proxy card. To vote by telephone or via the Internet, follow the instructions set forth on each proxy card you receive. To vote by mail, sign and date each proxy card you receive, mark the boxes indicating how you wish to vote, and return the proxy card in the postage-paid envelope provided. Do not return the proxy card if you vote via the Internet or by telephone.

How are votes counted?The Annual Meeting will be held if a quorum, consisting of a majority of the outstanding shares of Common Stockcommon stock entitled to vote, is represented at the meeting in person or by proxy. If a broker holds your shares in “street name,” your broker will provide you with instructions on how to vote. Broker non-votes, votes withheld and abstentions will be counted for purposes of determining whether a quorum has been reached. Except for the election of directors, the affirmative vote of the holders of a majority of the shares of Common Stockcommon stock present in person or by proxy at the meeting and entitled to vote on a proposal is required to ratify and approve the proposal. Abstentions are counted in tabulations of the votes cast by stockholders on the proposals and will have the effect of a negative vote. Broker non-votes will have no effect on the approval or rejection of any proposal. Directors are elected by a plurality of the votes present or represented by proxy at the meeting and entitled to vote on the election of directors. Because directors are elected by a plurality of the votes cast, abstentions and broker non-votes will not affect their election.

     Who will count the vote?The Company’s Transfer Agent and Registrar, Mellon Investor Services LLC, will tally the vote.

     Who is soliciting this proxy?Solicitation of proxies is made on behalf of the Board of Directors of the Company. The Company will pay the cost of preparing, assembling and mailing the notice of Annual Meeting,

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     We have hired Mellon Investor Services LLC to assist with the distribution of proxy materials and the solicitation of votes at a cost of $7,500, plus out-of-pocket expenses. In addition to solicitation by mail, solicitations may also be made by personal interview, telegram, telefax and telephone, including by members of the Company’s management.

     What if I can’t attend the meeting?If you do not attend the meeting in person and you intend to vote, you must vote your shares by proxy, via the Internet or by telephone by the applicable deadline.

What is householding? If you and other residents at your mailing address own shares of common stock in “street name,” your broker or bank may have notified you that your household will receive only one annual report and proxy statement for each company in which you hold stock through that broker or bank. This practice is known as “householding.” Unless you responded that you did not want to participate in “householding,” you were deemed to have consented to the process. Each stockholder will continue to receive a separate proxy card or voting instruction card.

     If you did not receive an individual copy of this year’s proxy statement or our annual report, we will send a copy to you if you intendaddress a written request to vote.Select Medical Corporation, c/o Investor Relations, 4716 Old Gettysburg Road, P.O. Box 2034, Mechanicsburg, Pennsylvania 17055 or call (717) 972-1100.

1     If you would like to receive your own set of the Company’s future annual report and proxy statement, or if you share an address with another Company stockholder and together both of you would like to receive only a single set of the Company’s annual disclosure documents, you should contact your broker or bank or you may contact the Company at the above address and phone number.

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CORPORATE GOVERNANCE

Role of the Board of Directors

     In accordance with the Delaware General Corporation Law and the Company’s Restated Certificate of Incorporation and Amended and Restated Bylaws, (the “Bylaws”), the Company’s business, property and affairs are managed under the direction of the Board of Directors. Although directors are not involved in the Company’s day-to-day operating details, they are kept informed of the Company’s business through written reports and documents provided to them regularly, as well as by operating, financial and other reports presented by the officers of the Company at meetings of the Board of Directors and committees of the Board of Directors.

Principles of Corporate Governance

     The Board of Directors has undertaken a comprehensive review of the Company’s corporate governance practices, committee charters and overall governance structure in light of the Sarbanes-Oxley Act of 2002 and the new rules adopted by the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). In February 2004, the Board approved Corporate Governance Guidelines for the Company, which address issues responsive to the Sarbanes-Oxley Act and the new SEC and NYSE rules. These Guidelines, which are posted on the Company’s Internet website, www.selectmedicalcorp.com, under the caption “Corporate Governance,” address the following matters, among others: director qualifications, director responsibilities, director orientation and continuing education, director compensation, Board performance evaluation, Board Committees, the conduct of Board and Committee meetings, access to officers and employees, management evaluation and succession planning.

Independence Standards

     Pursuant to NYSE rules, at least a majority of the members of the Board are required to be independent directors. In addition, all members of the Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee are required to be independent directors.

     Under the independence standards adopted by the Board as required by NYSE rules, a director does not qualify as independent unless the Board affirmatively determines that the director has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company. The Board considers such facts and circumstances as it deems relevant to the determination of director independence. To assist it in making its determination regarding independence, the Board considers, at a minimum, the following categorical standards:

	•	No director who is an employee or whose immediate family member is an executive officer of the Company will be considered independent until three years after the end of such employment relationship.
	•	No director who receives or whose immediate family member (as an executive officer of the Company) receives more than $100,000 per year in direct compensation from the Company (other than director and committee fees and pension or other forms of deferred compensation for prior service, which compensation is not contingent upon continued service) will be considered independent until three years after he or she ceases to receive more than $100,000 per year in such compensation.
	•	No director who is affiliated with or employed by or whose immediate family member is affiliated with or employed in a professional capacity by a present or former internal or external auditor of the Company will be considered independent until three years after the end of the affiliation or the employment or auditing relationship.
	•	No director who is employed or whose immediate family member is employed as an executive officer of another company where any of the Company’s executives serve on that company’s compensation committee will be considered independent until three years after the end of such service or employment relationship.

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	•	No director who is an executive officer or an employee or whose immediate family member is an executive officer of a company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues will be considered independent until three years after falling below such threshold.
	•	No director who serves as an executive officer of a charitable organization to which the Company has made charitable contributions in any single fiscal year exceeding the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues will be considered independent until three years after falling below such threshold.

     In addition, in accordance with SEC rules, no member of the Audit Committee is considered independent for purposes of Audit Committee service if he or she receives any consulting, advisory or other compensatory fee from the Company (other than director and committee fees and pension or other forms of deferred compensation for prior service, which compensation is not contingent upon continued service) or is otherwise an affiliated person of the Company. Furthermore, (i) each member of the Company’s Audit Committee must be financially literate and (ii) at least one member of the Audit Committee must have accounting or related financial management expertise. For purposes of (ii) above, the Board considers any Audit Committee member who in the Board’s business judgment satisfies the SEC’s definition of audit committee financial expert to have the requisite accounting or related financial management expertise. Each of the independence standards is interpreted and applied by the Board in its business judgment and in a manner consistent with applicable NYSE and SEC guidance.

     Applying these standards, which are intended to comply with the NYSE corporate governance rules and all other applicable rules and laws, the Board of Directors has determined that each of the following directors is independent: Russell L. Carson, David S. Chernow, Bryan C. Cressey, James E. Dalton, Jr., Meyer Feldberg, Thomas A. Scully and Leopold Swergold.

     The Board of Directors has also determined that while LeRoy S. Zimmerman is not independent under the standards outlined above because he served as an employee of the Company from September 2000 until December 2001, Mr. Zimmerman would be considered independent under the NYSE’s transition rule concerning director independence, which expires in November 2004 when the NYSE’s three-year “look-back” provision becomes effective. Mr. Zimmerman’s independence may be re-examined by the Board of Directors in January 2005, by which time three years will have passed since the date Mr. Zimmerman was last employed by the Company.

Stockholder Communications

     Stockholders who wish to communicate with a member or members of the Board of Directors, including the chairman of the Nominating & Governance Committee or the non-management directors as a group, may do so by addressing their correspondence to the Board member or members, c/o the Secretary, Select Medical Corporation, P.O. Box 2034, Mechanicsburg, PA 17055. The Board of Directors has unanimously approved a process pursuant to which the Secretary will review and forward correspondence to the appropriate person or persons for response.

     Recognizing that director attendance at the Company’s Annual Meeting can provide the Company’s stockholders with a valuable opportunity to communicate with Board members about issues affecting the Company, the Company encourages its directors to attend the Annual Meeting of Stockholders. In 2003, three of the Company’s directors attended the Annual Meeting.

Meetings of the Board of Directors.Directors

The Board of Directors held seveneight meetings in 2002.2003. Each of the incumbent directors attended an aggregate of at least 75% of the Board of Directors and committee meetings on which the director served, except LeRoy S. Zimmerman.served. In addition, the non-management directors regularly meet in executive session without members of management present. In February 2004, the non-management members of the Board determined that each non-

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Committees of the Board of Directors.Directors

The Board of Directors has established three standing committees.committees: the Compensation Committee, the Audit Committee and the Nominating & Governance Committee.

     Compensation Committee.The compensation committeeCompensation Committee reviews and makes recommendations to the Board of Directors regarding the compensation to be provided to our Executive Chairman, Chief Executive Officer and our directors. The compensation committee held four meetings during 2002. The compensation committee consists of Russell L. Carson, Bryan C. Cresseydirectors and David S. Chernow.

     In addition to the responsibilities described above, the compensation committee reviews compensation arrangements for our other executive officers. The compensation committeeCompensation Committee also acts as the stock option committee and administers the Second Amended and Restated 1997 Stock Option Plan and the Amended and Restated 2002 Non-Employee Directors’ Stock Option Plan. A copy of the charter of the Compensation Committee is available on the Company’s Internet website, www.selectmedicalcorp.com, under the caption “Corporate Governance.” The Compensation Committee held four meetings during 2003. The compensation committee currently consists of three directors, Messrs. Carson, Cressey and Chernow, with Mr. Carson serving as chairman. The Board has determined that each member of the Compensation Committee is independent.

     Audit Committee.The audit committeeAudit Committee reviews and monitors our corporate financial reporting, external audits, internal control functions and compliance with laws and regulations that could have a significant effect on our financial condition or results of operations. In addition, the audit committeeAudit Committee has the responsibility to consider and appoint, and to review fee arrangements with, our independent auditors. The Audit Committee also approves all audit and non-audit services to be performed by our independent auditors. In the exercise of these oversight responsibilities, it is not the duty of the audit committeeAudit Committee to plan or conduct audits or to determine that our financial statements fairly present our financial position and results of operations or are in accordance with generally accepted accounting principles. Instead, such duties remain the responsibility of management and our independent auditors. The amendedAdditional information about the Audit Committee and restated audit committeeits responsibilities is included in the charter of the Audit Committee which is attached to this proxy statement as Appendix A.A, and is available on the Company’s Internet website, www.selectmedicalcorp.com, under the caption “Corporate Governance.”

     The audit committee held 11 meetings during 2002.Audit Committee currently consists of Messrs. Cressey, Dalton and Swergold, with Mr. Cressey Leopold Swergold and James E. Dalton, Jr. are currently the three members of our audit committee. The Board of Directors has appointed Mr. Cresseyserving as chairman of the audit committee. While Mr. Dalton also currently serves on the audit committees of three other public companies, theThe Board of Directors has determined that Mr. Dalton’s service on these other audit committees does not impair his ability to effectively serve as aeach member of our audit committee.the Audit Committee is financially literate. The Board of Directors has also determined that each of Messrs. Cressey, Dalton and Swergold Cressey and Dalton are “independent”qualifies as an audit committee financial expert as defined by the applicable New York Stock Exchange rules currently in effect.Item 401(h) of Regulation S-K and, as described above, that each is independent. The Audit Committee held 17 meetings during 2003.

     Nominating & Governance Committee. In February 2004, the Board of Directors revised the mandate of the Nominating Committee by changing its name to the Nominating & Governance Committee and expanding its responsibilities to include oversight of the Company’s corporate governance policies. Until February 2004, Messrs. Rocco Ortenzio, Robert Ortenzio, Carson and Cressey served as the members of the Nominating Committee. At that time, Messrs. Rocco Ortenzio and Robert Ortenzio resigned from the Committee in order to comply with NYSE and SEC independence rules. The nominating committeeNominating Committee held one meeting during 2003.

     The Nominating & Governance Committee evaluates and recommends candidates to the Board of Directors for membership on the Board, considers candidates for the Board that have been recommended by the Company’s stockholders, reviews the structure of the Board and recommends candidates to fill vacancies on the Board that occur between annual meetings. The nominating committee held one meeting during 2002.Nominating & Governance Committee is also responsible for oversight of the corporate governance of the Company and for leading the Board of Directors in its annual review of the Board’s and management’s performance. The Nominating & Governance Committee currently consists of Messrs. Rocco Ortenzio, Robert Ortenzio, Carson and Cressey, are currentlyboth of whom have been determined to be independent by the fourBoard of Directors in accordance with the corporate governance rules of the NYSE. A copy of the charter of the Nominating & Governance

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Director Candidates Recommended by Stockholders

     It is the policy of the Board of Directors and the Nominating & Governance Committee to consider director candidates recommended by the Company’s stockholders. To be considered by the Nominating & Governance Committee, a stockholder recommendation of a director candidate must be made in writing and should be sent to the Nominating & Governance Committee in care of the Secretary, who will be responsible for submitting any recommendations received from stockholders to the Nominating & Governance Committee. In addition to including the name, address and phone number of the individual being recommended, the recommendation should include (i) the name and address of the stockholder making the recommendation, (ii) a representation that the stockholder is a holder of record, which should include the number of shares presently held and how long the shares have been held, and (iii) a description of any and all arrangements or understandings between the stockholder making the recommendation and the director candidate. Only recommendations received at least 90 days but no more than 120 days prior to the first anniversary of the Company’s preceding year’s annual meeting of stockholders will be considered.

     In addition to any other qualifications the Nominating & Governance Committee may in its discretion deem appropriate, all director candidates, at a minimum, (i) should possess the highest personal and professional ethics, integrity and values, (ii) should have substantial experience which is of particular relevance to the Company, and (iii) should have sufficient time available to devote to the affairs of the Company. Each director candidate will be evaluated by the Nominating & Governance Committee based on the same criteria and in the same manner, regardless of whether the candidate was recommended by a Company stockholder or by others.

     The Nominating & Governance Committee will conduct the appropriate and necessary inquiries with respect to the backgrounds and qualifications of all director candidates. The members of our nominating committee.the Nominating & Governance Committee will also review the independence of each candidate and other qualifications of all director candidates, as well as consider questions of possible conflicts of interest between director candidates and the Company. Once the Nominating & Governance Committee has completed its review of a candidate’s qualifications and conducted the appropriate inquiries, the Nominating & Governance Committee will make a determination whether to recommend the candidate for approval by the Board of Directors. If the Nominating & Governance Committee decides to recommend the director candidate for nomination by the Board of Directors and such recommendation is accepted by the Board, the form of proxy solicited by the Company will include the name of the director candidate.

Director Compensation.Compensation

We do not pay cash compensation to our employee directors; however they are reimbursed for the expenses they incur in attending meetings of the board or board committees. Non-employee directors other than non-employee directors affiliated with Welsh, Carson, Anderson & Stowe and Thoma Cressey Equity Partners, receive cash compensation in the amount of $5,000$6,000 per quarter, and the following if in attendance for all meetings exceptattended other than audit committee meetings: $1,250$1,500 per board meeting, $300 per telephonic board meeting, $500 per committee meeting held in conjunction with a board meeting and $1,000 per committee meeting held independent of a board meeting. For each audit committee meetingsmeeting attended,

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Director Independence.The Board of Directors is aware of and has been monitoring developments in the corporate governance area, including the applicable requirements of the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange’s rules on director independence. As a result of these developments, the independence of each member of our Board of Directors and each of the committees of our Board of Directors will be reevaluated in light of the new independence standards, and the membership of our Board of Directors and its committees may need to be altered in light of these new rules, once they become effective.

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ELECTION OF DIRECTORS

ITEM 1 ON PROXY CARD

     The Company’s Bylaws provide that the Company’s business shall be managed by a Board of Directors of not less than five and not more than ten directors, with the number of directors to be fixed by the Board of Directors from time to time. The number of directors is currently fixed at nine (9)ten (10) members. The Bylaws also divide the Company’s Board of Directors into three classes: Class I, Class II and Class III. The directors in each class serve terms of three years and until their respective successors have been elected and have qualified. There are currently threefour Class I directors, three Class II directors and three Class III directors.

     The term of office of one class of directors expires each year in rotation so that one class is elected at each annual meeting of stockholders for a three year term. The term of the three Class IIIII directors, Bryan C. Cressey, James E. Dalton, Jr.Russell L. Carson, Rocco A. Ortenzio and Robert A. Ortenzio,Leopold Swergold, will expire at the Annual Meeting.

     Director candidates are nominated by the Board of Directors upon the recommendation of the nominating committee.Nominating & Governance Committee. The nominating committeeNominating & Governance Committee has recommended the election of Bryan C. Cressey, James E. Dalton, Jr.Russell L. Carson, Rocco A. Ortenzio and Robert A. OrtenzioLeopold Swergold to the Board of Directors. Stockholders are also entitled to nominate director candidates for the Board of Directors in accordance with the procedures set forth in the Bylaws.

     At the Annual Meeting, three Class IIIII directors are to be elected. Each of the director nominees is currently a director of the Company. Each nominee has consented to being named as a nominee for director of the Company and has agreed to serve if elected. The directors will be elected to serve for three year terms and until their successors hashave been elected and have qualified. If any of the nominees should become unavailable to serve at the time of the Annual Meeting, the shares represented by proxy will be voted for any remaining nominees and any substitute nominee(s) designated by the Board of Directors. Director elections are determined by a plurality of the votes cast at the Annual Meeting (in person or by proxy).

     Set forth below is information regarding each nominee for Class IIIII director and each Class I and Class IIIII director, each of whose term will continue after the Annual Meeting.

Nominees For Class IIIII Directors

Bryan C. Cresseyhas been a director since February 1997. He has been a partner at Thoma Cressey Equity Partners since its founding in June 1998 and prior to that time was a principal, partner and founder of Golder, Thoma, Cressey and Rauner, the predecessor of GTCR Golder Rauner, LLC, since 1980. He also serves as a director and chairman of Cable Design Technologies Corp. and several private companies. Age: 53.

James E. Dalton, Jr.has been a director since December, 2000. Mr. Dalton served as President, Chief Executive Officer and as a director of Quorom Health Group, Inc. from May 1, 1990 until it was acquired by Triad Hospitals, Inc. in April 2001. Mr. Dalton currently serves as a director of Triad Hospitals. Prior to joining Quorom, he served as Regional Vice President, Southwest Region for HealthTrust, Inc., as division Vice President of HCA, and as Regional Vice President of HCA Management Company. He was elected to the American Hospital Association’s Board of Trustees on January 1, 2000. He also serves on the board of directors of AmSouth Bancorporation, Genesis Health Ventures, Inc., and U.S. Oncology, Inc. He serves as a Trustee for the Universal Health Services Realty Income Trust. Mr. Dalton is a Fellow of the American College of Healthcare Executives. Age: 60.

Robert A. Ortenzioco-founded our company and has served as a director since February 1997. Mr. Ortenzio has served as our President and Chief Executive Officer since September 2001, and prior to that served as our President and Chief Operating Officer since February 1997. He was an Executive Vice President and a director of Horizon/ CMS Healthcare Corporation from July 1995 until July 1996. Mr. Ortenzio co-founded Continental Medical Systems, Inc. a provider of comprehensive medical rehabilitation services, and served as its President from May 1989 and its Chief Executive Officer from July 1995 (when it merged with Horizon Healthcare Corporation), respectively, until August 1996. Also, he served as Chief Operating Officer of Continental Medical Systems, Inc. from April 1988 to July 1995. Mr. Ortenzio joined Continental Medical

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The Board of Directors recommends a vote FOR each of the listed nominees.

     Russell L. Carsonhas been a director since February 1997. He co-founded Welsh, Carson, Anderson & Stowe in 1978 and has focused on healthcare investments. Welsh, Carson, Anderson & Stowe has created 12 institutionally funded limited partnerships with total capital of $12 billion and has invested in more than 200 companies. Before co-founding Welsh, Carson, Anderson & Stowe, Mr. Carson was employed by Citicorp Venture Capital Ltd., a subsidiary of Citigroup, Inc., and served as its Chairman and Chief Executive Officer from 1974 to 1978. Mr. Carson serves as a director of U.S. Oncology, Inc. Age: 59.60.

     Rocco A. Ortenzioco-founded our company and has served as Executive Chairman since September 2001. He served as Chairman and Chief Executive Officer from February 1997 until September 2001. In 1986, he co-founded Continental Medical Systems, Inc., and served as its Chairman and Chief Executive Officer until July 1995. In 1979, Mr. Ortenzio founded Rehab Hospital Services Corporation, and served as its Chairman and Chief Executive Officer until June 1986. In 1969, Mr. Ortenzio founded Rehab Corporation and served as its Chairman and Chief Executive Officer until 1974, when it merged with American Sterilizer Company. From 1996 to 1999, he served on the Board of Governors of the Pennsylvania State System of Higher Education.1974. Mr. Ortenzio is the father of Robert A. Ortenzio, our President and Chief Executive Officer. Age: 70.71.

     Leopold Swergoldhas been a director since May 2001. In 1983, Mr. Swergold formed Swergold, Chefitz & Company, a healthcare investment banking firm. In 1989, Swergold, Chefitz & Company merged into Furman Selz, an investment banking firm, where Mr. Swergold served as Head of Healthcare Investment Banking and as a member of the Board of Directors. In 1997, Furman Selz was acquired by ING Groep N.V. of the Netherlands. Since 1997, Mr. Swergold has been a Managing Director of ING Furman Selz Asset Management LLC, where he manages several healthcare investment funds. Mr. Swergold also serves on the Board of Trustees of Continuum Health Partners Inc., the holding company for the Beth Israel Medical Center, the Board of Trustees of St. Luke’s — Roosevelt HospitalMedical Center and Long Island College Hospital. Age: 64.

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The Board of Directors recommends a vote FOR each of the Rockefeller University Council. Age: 63.listed nominees.

David S. Chernowhas served as a director since January 2002. Since July 2001, Mr. Chernow has served as the President and Chief Executive Officer of Junior Achievement, Inc., a nonprofit organization dedicated to the education of young people. From 1999 to 2001, he was the President of the Physician Services Group at US Oncology, Inc. Mr. Chernow co-founded America Oncology Resources (AOR) in 1992 and served as its Chief Development Officer until the time of the merger which created US Oncology in 1999. Age: 47.

     Meyer Feldberghas been a director since September 2000. He has served as professor of management and the dean of Columbia University Business School since 1989. Mr. Feldberg also serves as a director and member of the compensation committee of Federated Department Stores, as a director and a member of the audit committees of Revlon, Inc., PRIMEDIA Inc. and UBS Funds and as a director of SAPPI Limited.Limited and PRIMEDIA Inc. Age: 61.62.

Thomas A. Scullyhas been a director since February 2004. Since January 1, 2004, he has served as Senior Counsel to the law firm of Alston & Bird and as a Senior Advisor to Welsh, Carson Anderson & Stowe. From May 2001 to December 2003, Mr. Scully served as Administrator of the Centers for Medicare & Medicaid Services (“CMS”). CMS is responsible for the management of Medicare, Medicaid, SCHIP and other national healthcare initiatives. Before joining CMS, Mr. Scully served as President and Chief Executive Officer of the Federation of American Hospitals from January 1995 to May 2001. Age. 46.

     LeRoy S. Zimmermanhas been a director since October 1998. He served as our Executive Vice President of Public Policy from September 2000 until January 2002,December 2001, and as a consultant from January 2002 until October 2002. He was an equity member of the law firm Eckert Seamans Cherin & Mellott, LLC, from April 1989 to September 2000, and since January 2002 has been ofsenior counsel to that firm. At Eckert Seamans, he served as Chairman of the Board of Directors from January 1994 to September 2000, and Chairman of its Executive Committee from June 1997 to September 2000. Before joining Eckert Seamans, Mr. Zimmerman served as Pennsylvania’s first elected Attorney General from January 1981 to January 1989, and District Attorney of Dauphin County, Pennsylvania from to 1965 to 1980. Mr. Zimmerman is also a member of the Board of Directors of the Hershey Trust Company and the Board of Managers of the Milton Hershey School. Age: 68.69.

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     David S. ChernowBryan C. Cresseyhas been a director since February 1997. He has been a partner at Thoma Cressey Equity Partners since its founding in June 1998 and prior to that time was a principal, partner and co-founder of Golder, Thoma, Cressey and Rauner, the predecessor of GTCR Golder Rauner, LLC, since 1980. He also serves as a director and chairman of Cable Design Technologies Corp. and several private companies. Age: 54.

James E. Dalton, Jr. has been a director since December 2000. Since 2001, Mr. Dalton has served as President of Edinburgh Associates, Inc. Mr. Dalton served as President, Chief Executive Officer and as a director of Quorom Health Group, Inc. from May 1, 1990 until it was acquired by Triad Hospitals, Inc. in April 2001. Prior to joining Quorom, he served as Regional Vice President, Southwest Region for HealthTrust, Inc., as division Vice President of HCA, and as Regional Vice President of HCA Management Company. He also serves on the board of directors of Neighborcare, Inc. and U.S. Oncology, Inc. He serves as a Trustee for the Universal Health Services Realty Income Trust. Mr. Dalton is a Fellow of the American College of Healthcare Executives. Age: 61.

Robert A. Ortenzioco-founded our Company and has served as a director since January 2002. Since July 2001,February 1997. Mr. ChernowOrtenzio has served as theour President and CEOChief Executive Officer since September 2001, and prior to that served as our President and Chief Operating Officer since February 1997. He was an Executive Vice President and a director of Junior Achievement,Horizon/ CMS Healthcare Corporation from July 1995 until July 1996. In 1986, Mr. Ortenzio co-founded Continental Medical Systems, Inc., and served in a nonprofit organization dedicated to the educationnumber of young people. From 1999 to 2001,different capacities, including as a Senior Vice President from February 1986 until April 1988, as Chief Operating Officer from April 1988 until July 1995, as President from May 1989 until August 1996 and as Chief Executive Officer

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69

RATIFICATION OF APPOINTMENT OF

ITEM 2 ON PROXY CARD

     Subject to stockholder ratification, theThe Audit Committee has reappointed the firm of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”), certified public accountants, as independent auditors to examine the financial statements of the Company for 2003.the fiscal year ending December 31, 2004. Ratification requires the affirmative vote of a majority of shares present at the Annual Meeting, in person or by proxy, and voting thereon. Unless otherwise specified by the stockholders, the shares of stock represented by the proxy will be voted for ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors to audit and report upon the financial statements of the Company for the fiscal year 2003.ending December 31, 2004. If this appointment is not ratified by the stockholders, the Audit Committee may reconsider its recommendation.appointment.

     One or more representatives of PricewaterhouseCoopers LLP are expected to be at the Annual Meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions.

Audit Fees

     Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) in connection with its audit of the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 20012002 and December 31, 2002 and2003, its limited reviews of the Company’s unaudited condensed consolidated interim financial statements, were $471,900issuance of comfort letters and $495,000, respectively.

Financial Information Systems Designconsents and Implementation Fees

     During the year ended December 31, 2002, PricewaterhouseCoopers rendered no professional services to the Company in connectionreview of documents filed with the designSEC were $495,000 and implementation of financial information systems.$944,000, respectively.

Audit Related Fees

     Aggregate fees for assurance and related services reasonably related to PricewaterhouseCoopers’ audit of the Company’s consolidated financial statements as of and for the years ended December 31, 20012002 and December 31, 20022003 were $421,012$8,300 and $8,300,$98,000, respectively. For the fiscal year ended December 31, 2001, the audit-related fees included fees paid in connection with the issuance of consents and comfort letters for the Company’s initial public offering, subordinated debt offering and secondary offering, and fees for audits of the Company’s employee benefit plans. For the fiscal year ended December 31, 2002, the audit-related fees included fees for audits of the Company’s employee benefit plans. For the fiscal year ended December 31, 2003, the audit-related fees included fees for audits of the Company’s employee benefit plans and audits of the Company’s subsidiaries.

Tax Fees

     Aggregate fees for professional services rendered by PricewaterhouseCoopers for tax compliance, tax advice and tax planning were $79,896$54,200 and $54,200$155,000 for the fiscal years ended December 31, 20012002 and December 31, 2002.2003, respectively.

All Other Fees

     During the yearyears ended December 31, 2001, in addition to2002 and December 31, 2003, other than the fees described above, aggregate fees of $83,152 were billed by PricewaterhouseCoopers for assistance they provided the Company’s billing and collection operations. Nono other fees were billed by PricewaterhouseCoopers during the year ended December 31, 2002.PricewaterhouseCoopers.

     The audit committee reviews and considers all PriceWaterhouseCoopers LLPPricewaterhouseCoopers professional services when assessing auditor independence.

Audit Committee Policy on Pre-Approval of Services

     All audit and permissible non-audit services provided by our independent auditors, PricewaterhouseCoopers, require pre-approval by our Audit Committee in accordance with a pre-approval policy approved by the Audit Committee in August 2003. The policy (i) includes a list of the audit, audit-related, tax and other services that have been granted general pre-approval and may be provided without specific pre-approval from the Audit Committee, (ii) includes a list of non-audit services that may not be performed by PricewaterhouseCoopers and (iii) sets forth the pre-approval requirements for all permitted services. The policy also requires the Company’s independent auditors to provide the Audit Committee with a summary of

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     The Audit Committee approved services that accounted for 49% of the fees paid other than audit fees during the fiscal year ended December 31, 2003. The fees paid for services that were not approved were provided prior to the effective date of the Company’s pre-approval policy.

The Board of Directors recommends a vote FOR ratification of PricewaterhouseCoopers LLP as independent auditors of the Company for the year ending December 31, 2003.2004.

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AUDIT COMMITTEE

REPORT OF THE AUDIT COMMITTEE

Report of the Audit Committee to the Full Board of Directors of Select Medical Corporation.

     The Audit Committee consists of three directors each of whom, in the judgment of the Board of Directors, was found to be an “independent director”“independent” as defined inby the existing listing standards of The New York Stock Exchange.the NYSE and the standards adopted by the Board. The Audit Committee operates pursuant to a written charter first adopted by the Board of Directors on May 1, 2001, and last amended and restated on August 13, 2002.February 10, 2004. A copy of the amended and restated charter is attached as Appendix A to this proxy statement.

     The Audit Committee oversees the Company’s financial reporting process on behalf of the Company’s Board of Directors and has sole authority for the appointment, compensation, oversight, termination and replacement of the Company’s independent auditors. Management is responsible for the Company’s financial reporting process, including its system of internal control, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Company’s independent auditors are responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. It is not our duty or our responsibility to conduct auditing or accounting reviews or procedures.

     We are not employees of the Company and we are not accountants or auditors by profession or experts in the fields of accounting or auditing. Therefore, we have relied, without independent verification, on management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and on the representations of the independent auditors included in their report on the Company’s financial statements. Our oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our considerations and discussions with management and the independent auditors do not assure that the Company’s financial statements are presented in accordance with generally accepted accounting principles, that the audit of our Company’s financial statements has been carried out in accordance with generally accepted auditing standards or that our Company’s independent accountants are in fact “independent.”

     In fulfilling its oversight responsibilities, the Audit Committee reviewed the Company’s earnings releases, quarterly reports on Form 10-Q and the audited financial statements in the Company’s 20022003 Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

     The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, their judgment as to the quality, not just the acceptability, of the Company’s accounting principles. The Audit Committee discussed with the Company’s independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61. The Audit Committee received the written disclosures and the letter from the Company’s independent auditors required by Independence Standards Board Standard No. 1. In addition, the Audit Committee reviewed and discussed with the independent auditors all significant relationships with the Company that might affect the auditor’s independence, including the provision of non-audit services.

     The Audit Committee discussed with the Company’s independent auditors the overall scope and plans for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

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     In reliance on the reviews and discussions referred to above, the Audit Committee recommended that the audited financial statements be included in the Annual Report on Form 10-K for fiscal year ended December 31, 20022003 for filing with the Securities and Exchange Commission. The Audit Committee has also selected, subject to stockholder approval,appointed PricewaterhouseCoopers LLP as the Company’s independent auditors for 2003.2004.

	AUDIT COMMITTEE
	Bryan C. Cressey, Chairman
	Leopold Swergold
	James E. Dalton, Jr.

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EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE

Report of the Compensation Committee of the Board of Directors on Executive Compensation

     Role of Committee. The Compensation Committee consists of three directors each of whom, in the judgment of the Board of Directors, was found to be “independent” as defined by the listing standards of the NYSE and the standards adopted by the Board. The Compensation Committee establishes, oversees and directs the Company’s executive compensation programs and policies and administers the Company’s stock option plans. The Compensation Committee seeksCommittee’s objectives include (i) attracting and retaining exceptional individuals as executive officers and (ii) providing key executives with motivation to align executive compensation withperform to the full extent of their abilities, to maximize Company objectives and strategies, business financial performance and deliver enhanced stockholder value. The Compensation Committee consists of three non-employee directors.value to the Company’s stockholders.

     The Compensation Committee reviews and approves generally all compensation and fringe benefit programs of the Company and also reviews and determines the actual compensation of the Company’s executive officers, as well as all stock option grants and cash incentive awards to all key employees. The Compensation Committee also reviews and makes recommendations to the Board of Directors on policies and programs for the development of management personnel and management structure and organization.

     The Compensation Committee’s objectives include (i) attracting and retaining exceptional individuals as executive officers and (ii) providing key executives with motivation to perform to the full extentComponents of their abilities, to maximize Company performance and deliver enhanced value to the Company’s stockholders. The Compensation Committee believes it is important to place a significant portion of executive officers’ total compensation, principally in the form of equity, at risk by tying executive officers’ compensation directly to the performance of the business.Executive Compensation. Executive compensation consists primarily of an annual salary, annual incentive bonuses conditioned upon the performance of the Company and long-term equity-based compensation in the form of stock options. The Compensation Committee believes that it is important to place a significant portion of an executive officer’s total compensation at risk by tying executive officers’ compensation directly to the performance of the Company.

	Annual Salary. An executive officer’s annual salary is established initially on the basis of subjective factors, including experience, individual achievements and the level of responsibility assumed at the Company. The Compensation Committee reviews an executive officer’s annual salary periodically and makes adjustments based on each executive officer’s past performance, expected future contributions, and the scope and nature of the responsibilities of the executive officer, including changes in responsibilities and market compensation practices. For certain of our executive officers, including our Executive Chairman and our Chief Executive Officer, annual salary is determined based on their respective employment agreements, subject to adjustments made from time to time at the discretion of the Compensation Committee.
	Annual Incentive Bonus. The Compensation Committee believes that a portion of an executive officer’s compensation should be tied to the achievement of the Company’s performance goals in the form of an annual incentive bonus, in order to reward individual performance and overall Company success. In 2003, the Compensation Committee approved the Company’s 2003 annual incentive compensation plan, which set forth an annual target bonus award for seven of the Company’s executive officers, including the Company’s five most highly compensated executive officers, as a percentage of each officer’s base salary. The amount of the bonus paid to each executive officer was based on two financial performance-based targets for the Company, Return on Equity (“ROE”) and Earnings per Share (“EPS”), and the amount by which the Company’s performance in 2003 exceeded those targets. Each executive officer participating in the plan was eligible to receive a multiple of their respective target bonus award. The multiple was determined by a matrix under which the multiple increased as the Company exceeded the performance targets by greater amounts, up to a maximum of 250% of each executive officer’s target bonus award. An executive officer’s target bonus award, together with those payable to other participating executive officers, could also be decreased proportionately based upon performance levels below the targeted levels of ROE and EPS for 2003 established by the Compensation Committee. For 2003, the Company’s ROE and EPS exceeded target levels in an amount that resulted in a bonus payout equal to 250% of the target bonus award for each of the seven executive officers eligible to participate in the plan.

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Equity-Based Compensation. In addition to annual salaries and annual incentive bonuses, the Compensation Committee also grants stock options to executive officers and other key employees of the Company and its subsidiaries in order to focus the efforts of these employees on the long-term enhancement of profitability and stockholder value. Stock option grants allow executive officers to acquire shares of the Company’s common stock at the fair market value in effect on the date of grant and in some cases vest over a specified period as determined by the Compensation Committee. In the case of options subject to vesting, the stock option will provide a return to the executive only if he or she remains an employee of the Company until the stock option has vested, and then only if the market value of the stock appreciates over the term of the stock option. The table entitled “Option Grants During the Year Ended December 31, 2003” summarizes the stock options granted during 2003 to the Company’s five most highly compensated executive officers.

     Executive Chairman.Chairman Compensation. Rocco A. Ortenzio has served as Executive Chairman since September 2001. Mr. Ortenzio’s compensation during 20022003 was based in part on the employment agreement entered into in March 2000, which has subsequently been amended on August 8, 2000, February 23, 2001, April 24, 2001 and September 17, 2001. Under that agreement,In 2003, Mr. Ortenzio iswas paid an annual salary of $800,000,$824,000, and iswas eligible to receive bonus compensation and stock options at the discretion of the Board of Directors. In 2002 the Board of Directors, upon the recommendation of the Compensation Committee, awarded Mr. Ortenzio a bonus of $640,000, based upon the accomplishment of Company and personal performance goals that areas determined by the Compensation Committee, including our achievement of certain financial objectives, such as increasing our earnings per share, revenue and profitability, and non-financial objectives, such as the achievement ofCommittee. In accordance with the Company’s hospital development goals2003 annual incentive compensation plan described above, Mr. Ortenzio had a target bonus opportunity equal to 80% of his annual salary, with the opportunity for a greater bonus to the extent the Company’s performance exceeded the ROE and the successful supervision of the adjustments requiredEPS targets established by the significant changesCompensation Committee. Under the plan, based upon the Company’s 2003 performance, Mr. Ortenzio was paid a bonus equal to 250% of his target bonus opportunity, and therefore received a cash incentive bonus in the regulatory environment in which the Company operates.amount of $1,648,000. During 2002,2003, Mr. Ortenzio also was granted stock options to purchase 1,560,0003,550,000 shares of our common stock. The use of stock options as a portion of Mr. Ortenzio’s compensation accomplishes the Compensation Committee’s objective that a significant portion of our executive’s compensation be at risk and dependent upon our long-term stock performance.

     Chief Executive Officer.Officer Compensation. Robert A. Ortenzio has served as our President and Chief Executive Officer since September 2001. Mr. Ortenzio’s compensation during 20022003 was based in part on the employment agreement entered into in March 2000, which has subsequently been amended on August 8, 2000, February 23, 2001, and September 17, 2001. Under that agreement,In 2003, Mr. Ortenzio iswas paid an annual salary of $800,000,$824,000, and iswas eligible to receive bonus compensation and stock options at the discretion of the Board of Directors. In 2002 the Board of Directors, upon the recommendation of the Compensation Committee, awarded Mr. Ortenzio a bonus of $640,000, based upon the accomplishment of Company and personal performance goals that areas determined by the Compensation Committee, including our achievement of certain financial objectives, such as increasing our earnings per share, revenue and profitability, and non-financial objectives, such as the achievement ofCommittee. In accordance with the Company’s hospital development goals2003 annual incentive compensation plan described above, Mr. Ortenzio had a target bonus opportunity equal to 80% of his annual salary, with the opportunity for a greater bonus to the extent the Company’s performance exceeded the ROE and the successful supervision of the adjustments requiredEPS targets established by the significant changesCompensation Committee. Under the plan, based upon the Company’s 2003 performance, Mr. Ortenzio was paid a bonus equal to 250% of his targeted bonus opportunity, and therefore received a cash incentive bonus in the regulatory environment in which the Company operates.amount of $1,648,000. During 2002,2003, Mr. Ortenzio

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2002 Compensation for Other Executive Officers.Annual compensation for executive officers consists of base salaries and incentive bonuses. Base salaries are established initially on the basis of subjective factors, including experience, individual achievements and the level of responsibility assumed at the Company. The Compensation Committee reviews executive officers’ annual compensation to adjust annual compensation based on each executive officer’s past performance, expected future contributions, the scope and nature of responsibilities of the executive officer, including changes in responsibilities, and market compensation practices.

     The Compensation Committee believes that a portion of the executives’ annual compensation in the form of incentive bonuses should be tied to the achievement of the Company’s annual goals in order to reward individual performance and overall Company success. Additionally, a portion of each officer’s bonus is based on subjective criteria particular to each officer’s individual performance. Assuming such goals have been met during the year, each executive officer is then eligible to receive a certain predetermined percentage of such officer’s base salary in the form of an annual bonus.

     In addition to base salaries and incentive bonuses, the Compensation Committee also grants stock options to executive officers and other key employees of the Company and its subsidiaries in order to focus the efforts of these employees on the long-term enhancement of profitability and stockholder value. Options, which have a fixed exercise price equal to the market value of the Common Stock on the date of grant, were granted to directors, executive officers and other key employees in 2002.

     Deductibility of Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits our ability to deduct compensation in excess of $1,000,000 paid during a tax year individually to our executive officers at year end. Certain performance-based compensation is not subject to such deduction limit. Awards of stock options under our Second Amended and Restated 1997 Stock Option Plan are designed to meet the criteria of “performance-based” compensation that is fully deductible under Code Section 162(m). It is the Compensation Committee’s intent to maximize the deductibility of executive compensation while retaining the discretion necessary to compensate executive officers in a manner commensurate with performance and the competitive market for executive talent.

	COMPENSATION COMMITTEE
	Russell L. Carson, Chairman
	Bryan C. Cressey
	David S. Chernow

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Executive Compensation

     The following table provides summary information concerning the compensation earned by our Chief Executive Officer and our four most highly paid executive officers, other than our Chief Executive Officer, employed by us during the fiscal year ended December 31, 2002.2003.

Summary Compensation Table

(a)	The value of certain perquisites and other personal benefits is not included in the amounts disclosed because it did not exceed for any officer in the table above the lesser of either $50,000 or 10% of the total annual salary and bonus reported for such officer.
(b)	OtherThe option information has been restated to reflect the effect of a 2-for-1 stock split of the Company’s common stock paid on December 22, 2003.
(c)	All other compensation representsfor fiscal 2001 included the benefit to Rocco A. Ortenzio of premiums we paid in connection with life insurance policies owned by the Rocco A. Ortenzio Irrevocable Trust. These premiums have subsequently been refunded to the Company. See “— Employment Agreements.” Under this arrangement we paid no premiums in respect of term life insurance, and the value of the premiums paid by us reflects the present value of an interest free loan to Mr. Ortenzio through the end of the fiscal year.
(c)(d)	Other annualAll other compensation represents employer matching contributions to the 401(k) plan.
(d)(e)	OtherAll other compensation representsfor Martin F. Jackson includes employer matching contributions to the 401(k) plan in the amounts of $4,531, $5,500 and $5,100 in fiscal 2003, fiscal 2002 and fiscal 2001, respectively. All other compensation also includes the forgiveness of principal in the amounts of $20,000 and $40,000 in fiscal 2002 and fiscal 2001, respectively, in connection with a loan we made to Martin F.Mr. Jackson in 1999 for the purpose of purchasing shares of our common stock.

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Option Grants During the Year Ended December 31, 20022003

     The following tables set forth certain information concerning grants to purchase shares of our common stock of each of the officers named in the summary compensation table above during the year ended

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(a)	The options granted to employees are either incentive stock options or nonqualified stock options and (other than those granted to Rocco A. Ortenzio and Robert A. Ortenzio) except as noted below, generally vest over five years at the rate of 20% of the shares subject to the option per year. Except as noted below, theThe options granted in 20022003 to Robert A. Ortenzio vest over three years at the rate of 33.33% of the shares subject to the option per year, and all options granted in 20022003 to Rocco A. Ortenzio are currently exercisable. Unvested options lapse upon termination of employment. Options expire ten years from the date of grant.
(b)	We granted options at an exercise price equal to or greater than the fair market value of our common stock on the date of grant, as determined by our Board of Directors.
(c)	Based on the Black-Scholes option pricing model adapted for use in valuing executive stock options. The actual value, if any, an executive may realize will depend upon the excess of the stock price over the exercise price on the day the option is exercised, so there is no assurance that the value realized by an executive will be at or near the value estimated by the Black-Scholes model. The estimated values under that model are based on assumptions as to certain variables, including the following: (i) stock price volatility is assumed to be 39%45%; (ii) the assumed weighted average risk-free rate of return varies based upon the term and vesting period of the option. The rates range from 2.52%2.44% to 5.03%3.72%; (iii) dividend yield is assumed to be 0%; and (iv) an expected life of 4 years from each vesting date.
(*)	These performance accelerated vesting options are scheduled to vest on May 13, 2009; however, the vesting of some or all of the options may be accelerated in accordance with Section 4(b) of our Second Amended and Restated 1997 Stock Option Plan.

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Year End December 31, 20022003 Option Values

     The following table sets forth certain information concerning option exercises by each of the officers named in the above summary compensation table. The information provided in this table has been restated to reflect the effect of a 2-for-1 stock split of the Company’s common stock on December 22, 2003.

(a)	Based on the stock’s closing price on the New York Stock Exchange on December 31, 2002,2003, less the exercise price, multiplied by the number of shares underlying the option. Such amounts may not be

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	realized. Actual values which may be realized, if any, upon any exercise of such options will be based on the market price of the common stock at the time of any such exercise and thus are dependent upon future performance of the common stock.

Employment Agreements

     In March 2000, we entered into three-year employment agreements with three of our executive officers, Rocco A. Ortenzio, Robert A. Ortenzio and Patricia A. Rice. These agreements were amended on August 8, 2000, February 23, 2001, and, with respect to Rocco Ortenzio, April 24, 2001, and, with respect to Messrs. Rocco and Robert Ortenzio, September 17, 2001. Under these agreements, Messrs. Rocco and Robert Ortenzio are to be paid an annual salary of $800,000 and Ms. Rice is to be paid a salary of $500,000, subject to adjustment by our Board of Directors. In addition, these executives are eligible for bonus compensation. The employment agreements also provide that the executive officers will receive long term disability insurance. In the event Rocco A. Ortenzio’s employment is terminated due to his disability, we must make salary continuation payments to him equal to 100% of his annual base salary for ten years after his date of termination or until he is physically able to become gainfully employed in an occupation consistent with his education, training and experience. We are also obligated to make disability payments to Robert A. Ortenzio and Patricia A. Rice for the same period; however, payments to them must equal 50% of their annual base salary. In addition, Rocco A. Ortenzio and Robert A. Ortenzio are each entitled to six weeks paid vacation. Patricia A. Rice is entitled to four weeks paid vacation.

     Under the terms of each of these executive officers’ employment agreements, their employment term began on March 1, 2000 and expired on March 1, 2003. At the end of each 12-month period beginning March 1, 2000, however, the term of each employment agreement automatically extends for an additional year unless one of the executives or we give written notice to the other not less than three months prior to the end of that 12-month period that we or they do not want the term of the employment agreement to continue. Each of these agreements was extended for an additional year on March 1, 2001, March 1, 2002, March 1, 2003 and March 1, 2003.2004. Thus, in the absence of written notice given by one of the executives or us, the remaining term of each employment agreement will be three years from each anniversary of March 1, 2000. In each employment agreement, for the term of the agreement and for two years after the termination of employment, the executive may not participate in any business that competes with us within a twenty-five mile radius of any of our hospitals or outpatient rehabilitation clinics. The executive also may not solicit any of our employees for one year after the termination of the executive’s employment.

     These three employment agreements also contain a change of control provision. If, within the one-year period immediately following a change of control of Select, we terminate Rocco A. Ortenzio or Robert A. Ortenzio without cause or Rocco A. Ortenzio or Robert A. Ortenzio terminates his employment agreement for any reason, we are obligated to pay them a lump sum cash payment equal to their base salary plus bonus for the previous three completed calendar years. If, within the one-year period immediately following a change of control of Select, Patricia A. Rice terminates her employment for certain specified reasons or, within the five-year period immediately following a change of control, is terminated without cause, has her compensation reduced from that in effect prior to the change of control or is relocated to a location more than 25 miles from Mechanicsburg, Pennsylvania, we are obligated to pay her a lump sum cash payment equal to her base salary plus bonus for the previous three completed calendar years. In addition, if any of these executives are terminated within one year of a change of control, all of their unvested and unexercised stock options will vest as of the date of termination. A change in control is generally defined to include the following: the acquisition by a person or group, other than our current stockholders who own 12% or more of the common stock, of more than 50% of our total voting shares; a business combination following which there is an increase in share ownership by any person or group, other than the executive or any group of which the executive is a part, by an amount equal to or greater than 33% of our total voting shares; our current directors, or any director elected after the date of the respective employment agreement whose election was approved by a majority of the then current directors, cease to constitute at least a majority of our board; a business combination following which our stockholders cease to own shares representing more than 50% of the voting power of the surviving corporation; or a sale of substantially all of our assets other than to an entity controlled by our stockholders

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     Under previous amendments to Rocco A. Ortenzio’s senior management and employment agreements, we were obligated to pay premiums on life insurance policies held in the Rocco A. Ortenzio Irrevocable Trust, provided that Mr. Ortenzio remained an employee, director, consultant, advisor or independent contractor of ours. We were obligated under these arrangements to pay $1.25 million in premiums for each of the years 2001 through 2010. Beginning in October 2002, after the enactment of the Sarbanes-Oxley Act of 2002, we suspended the premium payments that we were obligated to make pending clarification regarding the legality of making these payments. Under a related collateral assignment agreement, upon Mr. Ortenzio’s death, or if the trust surrendered these policies, we were entitled to be repaid, at our election, by the trust for the amount of the premiums we have paid over the life of the policies. On December 10, 2003, we entered into a Termination of Collateral Assignment Split-Dollar Agreement by which the split dollar agreement and the collateral assignment agreement were terminated and the premiums paid by us on Mr. Ortenzio’s behalf were refunded to us.

     We previously entered into a deferred compensation agreement with Rocco A. Ortenzio, pursuant to which Mr. Ortenzio deferred all of his compensation, including his salary and bonus, earned between March 1, 1997 and December 31, 2000. This amount accrued interest at a rate of 6% from March 1, 1997 to December 31, 1999, and no interest thereafter. On December 22, 2003, we entered into a mutual termination agreement by which the deferred compensation agreement was terminated and all amounts credited to his account under the agreement were paid to Mr. Ortenzio on or before December 26, 2003.

     In June 1997, we entered into a senior management agreement with S. Frank Fritsch, which remains in effect until terminated by either us or Mr. Fritsch. Under this agreement, Mr. Fritsch is entitled to an annual salary of $130,000, subject to adjustment from time to time by the Compensation Committee. The Compensation Committee has increased Mr. Fritsch’s salary on several occasions subsequent to entering that agreement. The Compensation Committee may also in its discretion award incentive compensation to Mr. Fritsch. Further, Mr. Fritsch is entitled to any employment and fringe benefits under our policies as they exist from time to time and which are made available to our senior executive employees. During the employment term and for two years after the termination of his employment, Mr. Fritsch may not solicit any of our customers or employees or participate in any business that competes with us within a twenty mile radius of any of our facilities or businesses.