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Delaware		8060		20-1764048
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number of each Registrant)		(I.R.S. Employer Identification No.)

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

	•	The exchange offer expires at 5:00 p.m., New York City time, on,                     , 2006, unless extended. We do not currently intend to extend the expiration date of the exchange offer.
	•	The exchange offer is not subject to any condition other than that the exchange offer not violate applicable law or any applicable interpretation of the Staff of the Securities and Exchange Commission.
	•	We will exchange the exchange notes for all outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer.
	•	You may withdraw tendered outstanding notes at any time prior to the expiration of the exchange offer.
	•	We do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system.
	•	We will not receive any proceeds from the exchange offer. We will pay all expenses incurred by us in connection with the exchange offer and the issuance of the exchange notes.

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		Page
Prospectus Summary			1
Risk Factors			13
Industry and Market Data			25
Forward Looking Statements			25
The Exchange Offer			27
The Transactions			34
Use of Proceeds			36
Capitalization			36
Selected Historical Consolidated Financial Data			37
Unaudited Pro Forma Condensed Consolidated Financial Information			39
Management’s Discussion and Analysis of Financial Condition and Results of Operations			43
Our Business			70
Management			88
Security Ownership of Certain Beneficial Owners and Management			97
Certain Relationships and Related Transactions			100
Description of Certain Other Indebtedness			103
Description of the Exchange Notes			107
Material U.S. Federal Income Tax Considerations			153
Plan of Distribution			157
Legal Matters			157
Experts			157
Available Information			157
Index to Consolidated Financial Statements			F-1
Form of Opinion of Dechert LLP as to the validity of the Senior Floating Rate Notes
Statement of Ratio of Earnings to Fixed Charges
Consent of PricewaterhouseCoopers LLP
Form of Letter of Transmittal

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	Compliance with recent changes in federal regulations applicable to long-term acute care hospitals operated as “hospitals within hospitals” or as “satellites” will result in increased capital expenditures and may have an adverse effect on our future net operating revenues and profitability.

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	Government implementation of recent changes to Medicare’s method of reimbursing our long-term acute care hospitals will reduce our future net operating revenues and profitability.

	If our long-term acute care hospitals fail to maintain their certifications as long-term acute care hospitals or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our net operating revenues and profitability may decline.

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	Implementation of modifications to the admissions policies for our inpatient rehabilitation facilities as required in order to achieve compliance with Medicare regulations may result in a loss of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability.

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	Implementation of annual caps that limit the amounts that can be paid for outpatient therapy services rendered to any Medicare beneficiary may reduce our future net operating revenues and profitability.

	If there are changes in the rates or methods of government reimbursements for our services, our net operating revenues and profitability could decline.

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	We conduct business in a heavily regulated industry, and changes in regulations or violations of regulations may result in increased costs or sanctions that reduce our net operating revenues and profitability.

	•	facility and professional licensure, including certificates of need;
	•	conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral;
	•	addition of facilities and services and enrollment of newly developed facilities in the Medicare program; and
	•	payment for services.

	Future acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.

	•	the difficulty and expense of integrating acquired personnel into our business;
	•	diversion of management’s time from existing operations;
	•	potential loss of key employees or customers of acquired companies; and
	•	assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations.

	Future cost containment initiatives undertaken by private third-party payors may limit our future net operating revenues and profitability.

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	If we fail to maintain established relationships with the physicians in our markets, our net operating revenues may decrease.

	Shortages in qualified nurses or therapists could increase our operating costs significantly.

	Competition may limit our ability to acquire hospitals and clinics and adversely affect our growth.

	If we fail to compete effectively with other hospitals, clinics and healthcare providers, our net operating revenues and profitability may decline.

	Our business operations could be significantly disrupted if we lose key members of our management team.

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	Significant legal actions as well as the cost and possible lack of available insurance could subject us to substantial uninsured liabilities.

	The interests of our principal stockholder may conflict with your interests as a holder of the notes.

Holdings is the sole obligor under the notes. Our subsidiaries, including Select, will not guarantee our obligations under the notes and do not have any obligation with respect to the notes; the notes will be structurally subordinated to all indebtedness and other obligations of Holdings’ subsidiaries, including Select. Holdings is a holding company and therefore depends on its subsidiaries to service its obligations under the notes and its other indebtedness. Holdings’ ability to repay the notes depends upon the performance of its subsidiaries and their ability to make distributions.

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				Balance at				Payments Due by Year
				December 31,
				2005				2006				2007				2008				2009				2010				Thereafter
Select:
		Senior Secured Credit Facility		$	660,650			$	5,800			$	5,800			$	5,800			$	5,800			$	5,800			$	631,650
		75/8 % Senior Subordinated Notes			660,000				—				—				—				—				—				660,000
		Seller Notes			899				355				389				155				—				—				—
		Capital Lease Obligations			359				197				162				—				—				—				—
		Other Debt Obligations			372				164				208				—				—				—				—
	Total Debt				1,322,280				6,516				6,559				5,955				5,800				5,800				1,291,650
	Interest(2)								90,972				90,572				90,169				89,802				89,445				228,758
	Total			$	1,322,280			$	97,488			$	97,131			$	96,124			$	95,602			$	95,245			$	1,520,408
Holdings:
		10% Senior Subordinated Notes(1)			131,609				—				—				—				—				—				131,609
		Senior Floating Rate Notes		$	175,000			$	—			$	—			$	—			$	—			$	—			$	175,000
	Total Debt				306,609				—				—				—				—				—				306,609
	Interest(2)								32,850				32,850				32,850				32,850				32,850				159,193
	Total			$	306,609			$	32,850			$	32,850			$	32,850			$	32,850			$	32,850			$	465,802

(1)	Reflects the balance sheet liability of Holdings’ senior subordinated notes calculated in accordance with GAAP. The balance sheet liability so reflected is less than the $150.0 million aggregate principal amount of such notes because such notes were issued with original issue discount totaling $18.4 million. Interest on the senior subordinated notes accrues on the full principal amount thereof and Holdings will be obligated to repay the full principal amount thereof at maturity or upon any mandatory or voluntary prepayment thereof.
(2)	The interest obligation was calculated using the average interest rate for the quarter ended December 31, 2005 of 6.158% for the senior credit facility, the stated interest rate for the 75/8 % senior subordinated notes and the 10% senior subordinated notes, 10.2% for the senior floating rate notes and 6.0% for seller notes, capital lease obligations and other debt obligations.

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		Period from
		February 25, 2005
		through
		December 31,
		2005(1)
Funds remitted by Select to Holdings		$	24,441

(1)	Funds are comprised of $14.5 million paid to certain members of senior management of Select under the terms of our long-term incentive compensation plan, $6.5 million to fund the interest payment on our $150.0 million 10% senior subordinated notes and $3.4 million in other general and administrative expenses primarily related to the issuance of our $175.0 million senior floating rate notes.

	Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business, which could prevent us from generating the future cash flow needed to fulfill our obligations under the notes.

	•	requires us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity, acquisitions and other general corporate purposes;
	•	increases our vulnerability to adverse general economic or industry conditions;
	•	limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate;
	•	makes us more vulnerable to increases in interest rates, as borrowings under Select’s existing senior secured credit facility and the notes are at variable rates;
	•	limits our ability to obtain additional financing in the future for working capital or other purposes, such as raising the funds necessary to repurchase all notes tendered to us upon the occurrence of specified changes of control in our ownership; or
	•	places us at a competitive disadvantage compared to our competitors that have less indebtedness.

	Despite our substantial level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above.

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	To service our indebtedness and meet our other ongoing liquidity needs, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, including possible changes in government reimbursement rates or methods. If we cannot generate the required cash, we may not be able to make the required payments under the notes.

	The notes are not secured by our assets and the lenders under Select’s existing senior secured credit facility will be entitled to remedies available to a secured lender, which gives them priority over you to collect amounts due to them.

	Restrictions imposed by Select’s existing senior secured credit facility and the indenture governing the notes limit our ability to engage in or enter into business, operating and financing arrangements, which could prevent us from taking advantage of potentially profitable business opportunities.

	•	incur, assume, permit to exist or guarantee additional debt and issue or sell or permit any subsidiary to issue or sell preferred stock;
	•	pay dividends or other distributions on, redeem, repurchase, retire or cancel capital stock;

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	•	purchase or acquire any debt or equity securities of, make any loans or advances to, guarantee any obligation of, or make any other investment in, any other company;
	•	incur or permit to exist certain liens on property or assets owned or accrued or assign or sell any income or revenues with respect to such property or assets;
	•	sell or otherwise transfer property or assets to, purchase or otherwise receive property or assets from, or otherwise enter into transactions with affiliates;
	•	merge, consolidate or amalgamate with another company or permit any subsidiary to merge, consolidate or amalgamate with another company;
	•	sell, transfer or otherwise dispose of assets, including any equity interests;
	•	repay, redeem, repurchase, retire or cancel any subordinated debt;
	•	incur capital expenditures;
	•	engage to any material extent in any business other than business of the type currently conducted by Select or reasonably related businesses; and
	•	incur obligations that restrict the ability of its subsidiaries to incur or permit to exist any liens on its property or assets or to make dividends or other payments to us.

	We may not have the funds to purchase the notes upon a change of control as required by the indenture governing the notes. This could result in the occurrence of an event of default under our existing debt agreements and the acceleration of some or all of our outstanding debt, which may result in our having insufficient funds to repay the notes.

	•	a sale of all or substantially all of our assets;
	•	the adoption of a plan relating to our liquidation or dissolution;
	•	the consummation of a transaction the result of which is that any person (other than Welsh Carson, Thoma Cressey, Rocco Ortenzio or Robert Ortenzio and their respective affiliates and family members) become the beneficial owner of more than 40% of the voting stock of Holdings; and
	•	the first day that a majority of the members of our Board of Directors are not Continuing Directors as described under “Description of the Notes.”

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	There may be no active trading market for the exchange notes.

	The market price for the notes may be volatile.

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	•	compliance with the Medicare “hospital within a hospital” regulation changes will require increased capital expenditures and may have an adverse effect on our future net operating revenues and profitability;
	•	additional changes in government reimbursement for our services may have an adverse effect on our future net operating revenues and profitability, such as the final regulations released by the Centers for Medicare & Medicaid Services on May 2, 2006;
	•	the failure of our long-term acute care hospitals to maintain their status as such may cause our net operating revenues and profitability to decline;
	•	the failure of our facilities operated as “hospitals within hospitals” to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline;
	•	implementation of modifications to the admissions policies for our inpatient rehabilitation facilities, as required to achieve compliance with Medicare guidelines, may result in a loss of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability;
	•	implementation of annual caps that limit the amounts that can be paid for outpatient therapy services rendered to any Medicare beneficiary may reduce our future net operating revenues and profitability;
	•	changes in applicable regulations or a government investigation or assertion that we have violated applicable regulations may result in increased costs or sanctions that reduce our net operating revenues and profitability;
	•	integration of recently acquired operations and future acquisitions may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities;
	•	private third-party payors for our services may undertake future cost containment initiatives that limit our future net operating revenues and profitability;

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	•	the failure to maintain established relationships with the physicians in our markets could reduce our net operating revenues and profitability;
	•	shortages in qualified nurses or therapists could increase our operating costs significantly;
	•	competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability;
	•	the loss of key members of our management team could significantly disrupt our operations; and
	•	the effect of claims asserted against us or lack of adequate available insurance could subject us to substantial uninsured liabilities.

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	•	the exchange notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the holder;
	•	the holder does not have an arrangement or understanding with any person to participate in the distribution of the exchange notes;
	•	the holder is not an “affiliate,” as defined under Rule 405 under the Securities Act, of Holdings; and
	•	if the holder is a broker-dealer that will receive exchange notes for its own account in exchange for outstanding notes that were acquired as a result of market-making or other trading activities, then the holder will deliver a prospectus in connection with any resale of such exchange notes.

	•	is an “affiliate,” within the meaning of Rule 405 under the Securities Act, of Holdings;
	•	is a broker-dealer who acquired outstanding notes directly from us and not as a result of market making activities or other trading activities;
	•	acquired the exchange notes other than in the ordinary course of the holder’s business;
	•	has an arrangement with any person to engage in the distribution of the exchange notes; or
	•	is prohibited by any law or policy of the SEC from participating in the exchange offer.

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	•	to delay accepting any outstanding notes, to extend the exchange offer or, if any of the conditions set forth under “— Conditions to the Exchange Offer” shall not have been satisfied, to terminate the exchange offer, by giving oral or written notice of that delay, extension or termination to the exchange agent, or
	•	to amend the terms of the exchange offer in any manner.

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	•	certificates for the outstanding notes must be received by the exchange agent along with the letter of transmittal prior to the expiration date, or
	•	a timely confirmation of a book-entry transfer, or a book-entry confirmation, of the outstanding notes, if that procedure is available, into the exchange agent’s account at The Depository Trust Company, which we refer to as the book-entry transfer facility, following the procedure for book-entry transfer described below, must be received by the exchange agent prior to the expiration date, or you must comply with the guaranteed delivery procedures described below.

	•	by a registered holder who has not completed the box entitled “Special Issuance Instruction” or “Special Delivery Instructions” on the letter of transmittal, or
	•	for the account of an eligible guarantor institution.

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	•	the tender is made through an eligible guarantor institution;
	•	prior to 5:00 p.m., New York City time, on the expiration date, the exchange agent receives from that eligible guarantor institution a properly completed and duly executed letter of transmittal or a facsimile of a duly executed letter of transmittal and notice of guaranteed delivery, substantially in the form provided by us, by telegram, fax transmission, mail or hand delivery, setting forth the name and address of the holder of outstanding notes and the amount of the outstanding notes tendered and stating that the tender is being made by guaranteed delivery, the certificates for all physically tendered outstanding notes, in proper form for transfer, or a book-entry confirmation, as the case may be, will be deposited by the eligible guarantor institution with the exchange agent; and
	•	the certificates for all physically tendered outstanding notes, in proper form for transfer, or a book-entry confirmation, as the case may be, are received by the exchange agent within five business days after the date of execution of the notice of guaranteed delivery.

	•	specify the name of the person having deposited the outstanding notes to be withdrawn, whom we refer to as the depositor;
	•	identify the outstanding notes to be withdrawn, including the certificate number or numbers and principal amount of such outstanding notes;
	•	be signed by the holder in the same manner as the original signature on the letter of transmittal by which such outstanding notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee register the transfer of such outstanding notes into the name of the person withdrawing the tender; and
	•	specify the name in which any such outstanding notes are to be registered, if different from that of the depositor.

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	•	as set forth in the legend printed on the outstanding notes as a consequence of the issuance of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and
	•	otherwise set forth in the prospectus distributed in connection with the private offering of the outstanding notes.

By Mail, Hand Delivery or Facsimile:		U.S. Bank Trust National Association
		Specialized Finance Group
		60 Livingston Avenue
		St. Paul, MN 55107
		Facsimile: (651) 495-8158

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	•	$1,827.7 million to pay Select’s then existing stockholders (other than rollover stockholders) and option holders all amounts due under the merger agreement;
	•	$152.0 million of rollover equity from the continuing investors;
	•	$344.2 million to repay existing indebtedness of Select; and
	•	$119.2 million to pay related fees and expenses, including premiums, consent fees and interest payable in connection with the tender offers and consent solicitations for our then existing senior subordinated notes.

	•	a cash equity investment in Holdings of $570.0 million by an investor group led by Welsh Carson and Thoma Cressey and a rollover equity investment in Holdings of $152.0 million by the continuing investors;
	•	Holdings’ issuance and sale of senior subordinated notes, preferred stock and common stock to WCAS Capital Partners IV, L.P., an investment fund affiliated with Welsh Carson, Rocco A. Ortenzio, Robert A. Ortenzio and certain other investors who are members of or affiliated with the Ortenzio family, for an aggregate purchase price of $150.0 million;
	•	borrowing of $580.0 million in term loans and $200.0 million in revolving loans under Select’s senior secured credit facility;
	•	existing cash on hand at Select of $131.1 million; and
	•	the issuance by Select of $660.0 million in aggregate principal amount of 75/8 % senior subordinated notes.

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			As of March 31,
			2006
			(In millions)
Cash and cash equivalents			$	13.9
Debt:
	Select:
	Revolving credit facility(1)		$	28.0
	Term loan facility(2)			574.2
	75/8 % senior subordinated notes due 2015			660.0
	Other debt			1.2
	Total Select debt			1,263.4
	Holdings:
	Senior floating rate notes			175.0
	10% senior subordinated notes due 2015(3)			131.9
	Total Holdings debt			306.9
Total debt				1,570.3
Participating preferred stock				450.2
Total stockholder’s equity				(219.9	)
Total capitalization			$	1,800.6

(1)	The revolving credit facility is a part of Select’s existing senior secured credit facility and provides for borrowings of up to $300.0 million of which $249.5 million was available as of March 31, 2006 for working capital and general corporate purposes (after giving effect to $22.5 million of outstanding letters of credit at March 31, 2006).
(2)	In connection with the Transactions, Select borrowed $580 million in term loans under its existing senior secured credit facility. Between February 24, 2005 and March 31, 2006 Select repaid approximately $5.8 million of its outstanding term loans.
(3)	Reflects the balance sheet liability of Holdings’ senior subordinated notes calculated in accordance with GAAP. The balance sheet liability so reflected is less than the $150.0 million aggregate principal amount of such notes because such notes were issued with original issue discount totaling $18.1 million. Interest on the senior subordinated notes accrues on the full principal amount thereof and Holdings will be obligated to repay the full principal amount thereof at maturity or upon any mandatory or voluntary prepayment thereof.

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			Predecessor																					Successor
																			Period from					Period from				Period from				Three
																			January 1					February 25				February 25,				Months
			Year Ended December 31,																through					through				through				Ended
																			February 24,					December 31,				March 31,				March 31,
			2001				2002				2003				2004				2005					2005				2005				2006
			(In thousands)
Statement of Operations Data:
Net operating revenues			$	921,692			$	1,086,894			$	1,341,657			$	1,601,524			$	277,736				$	1,580,706			$	188,386			$	479,743
Operating expenses(1)				816,358				966,596				1,165,814				1,340,068				231,205					1,297,303				149,423				401,451
Stock compensation expense(2)				—				—				—				—				142,213					10,312				4,326				946
Long-term incentive compensation				—				—				—				—				—					14,453				—				—
Depreciation and amortization				31,297				25,071				33,663				38,951				5,933					37,922				4,126				10,895
Income (loss) from operations				74,037				95,227				142,180				222,505				(101,615	)				220,716				30,511				66,451
Loss on early retirement of debt(3)				(14,223	)			—				—				—				(42,736	)				—				—				—
Merger related charges(4)				—				—				—				—				(12,025	)				—				—				—
Equity in income from joint ventures				—				—				824				—				—					—				—				—
Other income				—				—				—				1,096				267					1,092				103				—
Interest expense, net(5)				(27,604	)			(25,293	)			(24,499	)			(30,716	)			(4,128	)				(101,441	)			(10,967	)			(32,659	)
Income (loss) from continuing operations before minority interests and income taxes				32,210				69,934				118,505				192,885				(160,237	)				120,367				19,647				33,792
Minority interests(6)				2,135				1,404				1,661				2,608				330					1,776				302				391
Income (loss) from continuing operations before income taxes				30,075				68,530				116,844				190,277				(160,567	)				118,591				19,345				33,401
Income tax provision (benefit)				2,185				26,822				46,238				76,551				(59,794	)				49,336				7,853				15,230
Income (loss) from continuing operations				27,890				41,708				70,606				113,726				(100,773	)				69,255				11,492				18,171
Income from discontinued operations, net of tax				1,791				2,523				3,865				4,458				522					3,072				672				10,018
Net income (loss)				29,681				44,231				74,471				118,184				(100,251	)				72,327				12,164				28,189
	Less: Preferred dividends			2,513				—				—				—				—					23,519				2,924				5,488
Net income (loss) available to common stockholders			$	27,168			$	44,231			$	74,471			$	118,184			$	(100,251	)			$	48,808			$	9,240			$	22,701
Other Financial Data:
Capital expenditures			$	24,011			$	43,183			$	35,852			$	32,626			$	2,586				$	107,360			$	1,112			$	38,386
Ratio of earnings to fixed charges(7)				1.5	x			2.3	x			3.1	x			3.9	x			n/a					1.7	x			2.0	x			1.6	x
Cash Flow Data
Net cash provided by operating activities			$	95,770			$	120,812			$	246,248			$	174,276			$	19,056				$	38,155			$	(191,971	)		$	(5,578	)
Net cash used in investing activities				(61,947	)			(54,048	)			(261,452	)			(28,959	)			(110,757	)				(110,054	)			(3,339	)			36,734
Net cash provided by (used in) financing activities				(26,164	)			(21,423	)			124,318				(63,959	)			94					(48,604	)			58,828				(53,201	)

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		Predecessor																				Successor
																		Period from				Period from				Period from				Three
																		January 1				February 25				February 25,				Months
		Year Ended December 31,																through				through				through				Ended
																		February 24,				December 31,				March 31,				March 31,
		2001				2002				2003				2004				2005				2005				2005				2006
		(In thousands)
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	10,703			$	56,062			$	165,507			$	247,476							$	35,861			$	19,343			$	13,851
Working capital			126,749				130,621				188,380				313,715								77,556				157,071				65,809
Total assets			650,845				739,059				1,078,998				1,113,721								2,168,385				2,160,723				2,135,287
Total debt			288,423				260,217				367,503				354,590								1,628,889				1,580,824				1,570,327
Total stockholders’ equity			234,284				286,418				419,175				515,943								(244,658	)			(288,076	)			(219,921	)

(1)	Operating expenses include cost of services, general and administrative expenses, and bad debt expenses.
(2)	Consists of stock compensation expense related to the repurchase of outstanding stock options in the Predecessor period from January 1, 2005 through February 24, 2005 and compensation expense related to restricted stock and stock options that were issued in the Successor period from February 25, 2005 through December 31, 2005 and the period from February 25, 2005 through March 31, 2005 and for the three months ended March 31, 2006.
(3)	In connection with the Merger, Select tendered for all of its 91/2% senior subordinated notes due 2009 and all of its 71/2 % senior subordinated notes due 2013. The loss in the Predecessor period of January 1, 2005 through February 24, 2005 consists of the tender premium cost of $34.8 million and the remaining write-off of unamortized deferred financing costs of $7.9 million.
(4)	As a result of the Merger, we incurred costs in the Predecessor period of January 1, 2005 through February 24, 2005 directly related to the Merger. This included the cost of the investment advisor hired by the Special Committee of the Board of Directors to evaluate the Merger, legal and accounting fees, costs associated with the Hart-Scott-Rodino filing relating to the Merger, cost associated with purchasing a six year extended reporting period under our directors and officers liability insurance policy and other associated expenses.
(5)	Interest expense, net, equals interest expense minus interest income.
(6)	Reflects interests held by other parties in subsidiaries, limited liability companies and limited partnerships owned and controlled by us.
(7)	For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) from continuing operations before income taxes, fixed charges, minority interest in income of subsidiaries, and income (loss) from unconsolidated joint ventures. Fixed charges include preferred dividend requirements of subsidiaries, deemed dividends on preferred stock conversion, interest expense, capitalized interest, interest related to discontinued operations, and the portion of operating rents that is deemed representative of an interest factor. For the period January 1, 2005 through February 24, 2005 (Predecessor period), the ratio coverage was less than 1:1, and we would have had to generate additional earnings of approximately $160.3 million to achieve a coverage ratio of 1:1.

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			Predecessor				Successor
			For the				For the
			Period				Period
			January 1				February 25
			Through				Through				Year Ended
			February 24,				December 31,				December 31,
			2005				2005				2005				Adjustments				Pro Forma
			(In thousands)
Net operating revenues			$	277,736			$	1,580,706			$	1,858,442			$	—			$	1,858,442
Costs and expenses:
	Cost of services			217,133				1,244,183				1,461,316				—				1,461,316
	Stock compensation expense			142,213				10,312				152,525				—				152,525
	Long-term incentive compensation			—				14,453				14,453				—				14,453
	General and administrative			7,484				34,907				42,391				—				42,391
	Bad debt expense			6,588				18,213				24,801				—				24,801
	Depreciation and amortization			5,933				37,922				43,855				682	(1)			44,537
Total costs and expenses				379,351				1,359,990				1,739,341				682				1,740,023
Income (loss) from operations				(101,615	)			220,716				119,101				(682	)			118,419
Other income and expense:
	Loss on early retirement of debt			(42,736	)			—				(42,736	)			—				(42,736	)
	Merger related charges			(12,025	)			—				(12,025	)			—				(12,025	)
	Other income			267				1,092				1,359				—				1,359
	Interest expense, net			(4,128	)			(101,441	)			(105,569	)			(28,350	)(2)			(133,919	)
Income (loss) before minority interests and income taxes				(160,237	)			120,367				(39,870	)			(29,032	)			(68,902	)
Minority interest in consolidated subsidiary companies				330				1,776				2,106				—				2,106
Income (loss) before income taxes				(160,567	)			118,591				(41,976	)			(29,032	)			(71,008	)
Income tax expense (benefit)				(59,794	)			49,336				(10,458	)			(12,078	)(3)			(22,536	)
Income (loss) from continuing operations			$	(100,773	)		$	69,255			$	(31,518	)		$	(16,954	)		$	(48,472	)

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(1)	Represents amortization on an incremental increase in identifiable intangible assets of which $20.5 million would be amortized over a five year life.
(2)	The adjustment to interest expense represents the elimination of historical interest expense related to Select’s 91/2% and 71/2% senior subordinated notes that were tendered in the Transactions. In addition, the adjustment includes the recording of interest expense for the Transactions and the sale of the outstanding notes, as if such events had occurred as of January 1, 2005. The following presents the interest expense for the 75/8 % senior subordinated notes issued by Select and the senior subordinated notes issued by Holdings in the Transactions, the interest expense related to the senior floating rate notes issued by Holdings in September 2005 and the interest expense for Select’s existing term loans and revolving credit facility calculated based on the initial principal amount outstanding using the following assumed interest rates:

		Outstanding Principal				Interest Rate
		(In thousands)
Existing revolving credit facility		$	200,000				6.620	%
Existing term loans			580,000				6.090	%
Senior subordinated notes			660,000				7.625	%
Holdings’ senior subordinated notes			150,000				10.000	%
Holdings’ senior floating rate notes			175,000				10.167	%

		Year Ended
		December 31,
		2005(a)
		(In thousands)
Eliminate interest expense on 91/2 % senior subordinated notes		$	(2,457	)
Eliminate interest expense on 71/2 % senior subordinated notes			(2,005	)
Eliminate amortization of deferred financing fees from the tendered 91/2% and 71/2 % senior subordinated notes and former credit facility			(361	)
Eliminate commitment fees related to former credit facility			(147	)
Interest on existing revolving credit facility			2,023
Commitment fee on unused portion of credit facility			65
Interest on existing term loan facility			5,396
Interest on Select’s senior subordinated notes			7,689
Interest on Holdings’ senior subordinated notes			2,292
Amortization of discount on Holding’s senior subordinated notes			321
Interest on Holdings’ senior floating rate notes			13,344
Amortization of deferred financing fees from senior subordinated notes, senior floating rate notes and existing credit facility			1,510
Reduction of interest income related to use of existing cash to fund the Transactions(b)			680
Pro forma interest adjustment		$	28,350

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	(a)	The pro forma interest adjustment represents elimination of historical amounts from January 1, 2005 to February 24, 2005 and inclusion of pro forma amounts for that same period, except for the interest on the senior floating rate notes and the related amortization of deferred financing fees which is pro forma for the period January 1, 2005 through September 29, 2005 (the issuance date).

(b)	The reduction in interest income is related to the use of $131.1 million of Select’s existing cash to fund the Transactions. The interest rate used was 3.113% and represents the average interest rate earned by us during the period presented.

	An increase or decrease in 12.5 basis points would result in an increase or decrease of annual interest expense associated with the Select’s revolving credit facility, Select’s term loan facility and Holdings’ senior floating rate notes of approximately $1.2 million.

(3)	Represents the incremental tax effect of the adjustments based upon Select’s effective statutory tax rate of 41.6%.

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	CBIL Sale

	Note Offering

	First Quarter Ended March 31, 2006

	Combined Year Ended December 31, 2005

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	SemperCare Acquisition

	Year Ended December 31, 2004

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	Sources of Revenue

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	Contractual Adjustments

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	Allowance for Doubtful Accounts

		Balance as of December 31,
		2004									2005
		Predecessor									Successor
						Over 90									Over 90
		0-90 Days				Days					0-90 Days				Days
Medicare and Medicaid		$	88,174			$	20,182				$	111,707			$	24,141
Commercial insurance, and other			127,692				75,426					131,087				64,754
Total net accounts receivable		$	215,866			$	95,608				$	242,794			$	88,895

		As of December 31,
		2004					2005
		Predecessor					Successor
0 to 90 days			69.3	%				73.2	%
91 to 180 days			11.2	%				9.7	%
181 to 365 days			9.9	%				7.6	%
Over 365 days			9.6	%				9.5	%
Total			100.0	%				100.0	%

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		As of December 31,
		2004					2005
		Predecessor					Successor
Insured receivables			98.3	%				99.1	%
Self-pay receivables (including deductible and copayments)			1.7	%				0.9	%
Total			100.0	%				100.0	%

	Insurance

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															Combined
			Fiscal Year Ended								Combined				Three Months				Three Months
			December 31,								Year Ended				Ended				Ended
											December 31,				March 31,				March 31,
			2003				2004				2005				2005				2006
Specialty hospital data(1):
Number of hospitals — start of period				72				83				86				86				101
	Number of hospital start-ups			8				4				—				—				—
	Number of hospitals acquired			4				—				17				17				—
	Number of hospitals closed			(1	)			(1	)			(2	)			—				—
Number of hospitals — end of period				83				86				101				103				101
Available licensed beds				3,204				3,403				3,829				3,907				3,852
Admissions				27,620				33,523				39,963				10,336				10,483
Patient days				722,231				816,898				985,025				250,839				251,701
Average length of stay (days)				26				24				25				25				25
Net revenue per patient day(2)			$	1,173			$	1,306			$	1,357			$	1,330			$	1,405
Occupancy rate				70	%			67	%			70	%			71	%			73	%
Percent patient days — Medicare				76	%			74	%			75	%			77	%			73	%
Outpatient rehabilitation data(3):
Number of clinics owned — start of period				568				645				589				589				553
	Number of clinics acquired			124				1				—				—				—
	Number of clinic start-ups			27				19				22				9				1
	Number of clinics closed/sold			(74	)			(76	)			(58	)			(6	)			(1	)
Number of clinics owned — end of period				645				589				553				592				553
Number of clinics managed — end of period				43				51				55				53				60
Total number of clinics (all) — end of period				688				640				608				645				613
Number of visits				3,865,637				3,621,129				3,308,620				863,173				784,839
Net revenue per visit(4)			$	87			$	90			$	89			$	90			$	91

(1)	Specialty hospitals consist of long-term acute care hospitals and inpatient rehabilitation facilities.
(2)	Net revenue per patient day is calculated by dividing specialty hospital patient service revenues by the total number of patient days.
(3)	Clinic data has been restated to remove the clinics operated by CBIL, which is being reported as a discontinued operation. CBIL operated 102, 101 and 109 clinics at December 31, 2003, 2004 and 2005, respectively, and 108 clinics at March 31, 2005. Occupational health clinics have been reclassified from owned to managed clinics.

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(4)	Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include contract services revenue.

			Period from				Period from
			January 1,				February 25,
			2005				2005
			through				through				Year Ended
			February 24,				December 31,				December 31,
			2005				2005				2005
			Predecessor				Successor				Combined
			(In thousands)
Net operating revenues			$	277,736			$	1,580,706			$	1,858,442
Costs and expenses:
	Cost of services			217,133				1,244,183				1,461,316
	Stock compensation expense			142,213				10,312				152,525
	Long-term incentive compensation			—				14,453				14,453
	General and administrative			7,484				34,907				42,391
	Bad debt expense			6,588				18,213				24,801
	Depreciation and amortization			5,933				37,922				43,855
	Total costs and expenses			379,351				1,359,990				1,739,341
	Income (loss) from operations			(101,615	)			220,716				119,101
Other income and expense:
	Loss on early retirement of debt			(42,736	)			—				(42,736	)
	Merger related charges			(12,025	)			—				(12,025	)
	Other income			267				1,092				1,359
	Interest income			523				767				1,290
	Interest expense			(4,651	)			(102,208	)			(106,859	)
Income (loss) before minority interests and income taxes				(160,237	)			120,367				(39,870	)
Minority interest in consolidated subsidiary companies				330				1,776				2,106
Income (loss) before income taxes				(160,567	)			118,591				(41,976	)
Income tax expense (benefit)				(59,794	)			49,336				(10,458	)
Income (loss) from continuing operations				(100,773	)			69,255				(31,518	)
Income from discontinued operations, net of tax				522				3,072				3,594
Net income (loss)			$	(100,251	)		$	72,327			$	(27,924	)

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							Period
			Period from				from
			January 1,				February 25,				Three
			2005				2005				Months
			through				through				Ended
			February 24,				March 31,				March 31,
			2005				2005				2005
			Predecessor				Successor				Combined
			(In thousands)
Net operating revenues			$	277,736			$	188,386			$	466,122
Costs and expenses:
	Cost of services			217,133				140,509				357,642
	Stock compensation expense			142,213				4,326				146,539
	General and administrative			7,484				4,356				11,840
	Bad debt expense			6,588				4,558				11,146
	Depreciation and amortization			5,933				4,126				10,059
	Total costs and expenses			379,351				157,875				537,226
	Income (loss) from operations			(101,615	)			30,511				(71,104	)
Other income and expense:
	Loss on early retirement of debt			(42,736	)			—				(42,736	)
	Merger related charges			(12,025	)			—				(12,025	)
	Other income			267				103				370
	Interest income			523				77				600
	Interest expense			(4,651	)			(11,044	)			(15,695	)
Income (loss) from continuing operations before minority interests and income taxes				(160,237	)			19,647				(140,590	)
Minority interest in consolidated subsidiary companies				330				302				632
Income (loss) from continuing operations before income taxes				(160,567	)			19,345				(141,222	)
Income tax expense (benefit)				(59,794	)			7,853				(51,941	)
Income (loss) from continuing operations				(100,773	)			11,492				(89,281	)
Income from discontinued operations, net of tax				522				672				1,194
Net income (loss)			$	(100,251	)		$	12,164			$	(88,087	)

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		Fiscal Year												Combined
		Ended								Combined Year				Three Months				Three Months
		December 31,								Ended				Ended				Ended
										December 31,				March 31,				March 31,
		2003				2004				2005(1)				2005(1)				2006
Net operating revenues			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
Cost of services(2)			79.8				77.8				78.6				76.7				80.3
Stock compensation expense			—				—				8.2				31.5				0.2
Long-term incentive compensation			—				—				0.8				—				—
General and administrative			3.3				2.9				2.3				2.5				2.4
Bad debt expense			3.8				3.0				1.3				2.4				1.0
Depreciation and amortization			2.5				2.4				2.4				2.2				2.3
Income (loss) from operations			10.6				13.9				6.4				(15.3	)			13.8
Loss on early retirement of debt			—				—				(2.3	)			(9.2	)			—
Merger related charges			—				—				(0.7	)			(2.6	)			—
Equity in earnings from joint ventures			0.1				—				—				—				—
Other income			—				0.1				0.1				0.1				—
Interest expense, net			(1.9	)			(1.9	)			(5.7	)			(3.2	)			(6.8	)
Income (loss) from continuing operations before minority interests and income taxes			8.8				12.1				(2.2	)			(30.2	)			7.0
Minority interests			0.1				0.2				0.1				0.1				0.1
Income (loss) from continuing operations before income taxes			8.7				11.9				(2.3	)			(30.3	)			6.9
Income tax (benefit)			3.4				4.8				(0.6	)			(11.1	)			3.2
Income (loss) from continuing operations			5.3				7.1				(1.7	)			(19.2	)			3.7
Income from discontinued operations, net of tax			0.3				0.3				0.2				0.3				2.1
Net income (loss)			5.6	%			7.4	%			(1.5	)%			(18.9	)%			5.8	%

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			Fiscal Year Ended								Combined				%				%				Three Months Ended
			December 31,								Year Ended				Change				Change				March 31,
											December 31,				2003-				2004-
			2003				2004				2005(1)				2004				2005				2005(1)				2006				% Change
			(In thousands)
Net operating revenues:
	Specialty hospitals		$	849,260			$	1,089,538			$	1,370,320				28.3	%			25.8	%		$	342,044			$	359,672				5.2	%
	Outpatient rehabilitation			478,553				498,830				480,711				4.2				(3.6	)			121,455				119,290				(1.8	)
	Other(4)			13,844				13,156				7,411				(5.0	)			(43.7	)			2,623				781				(70.2	)
	Total company		$	1,341,657			$	1,601,524			$	1,858,442				19.4	%			16.0	%		$	466,122			$	479,743				2.9	%
Income (loss) from operations:
	Specialty hospitals		$	129,861			$	216,803			$	280,206				67.0	%			29.2	%		$	72,750			$	67,889				(6.7	)%
	Outpatient rehabilitation			53,159				57,777				56,052				8.7				(3.0	)			15,730				11,468				(27.1	)
	Other(4)			(40,840	)			(52,075	)			(217,157	)			(27.5	)			(317.0	)			(159,584	)			(12,906	)			N/M
	Total company		$	142,180			$	222,505			$	119,101				56.5	%			(46.5	)%		$	(71,104	)		$	66,451				N/M
Adjusted EBITDA:(3)
	Specialty hospitals		$	145,650			$	236,181			$	307,339				62.2	%			30.1	%		$	79,127			$	74,718				(5.6	)%
	Outpatient rehabilitation			66,378				71,562				65,957				7.8				(7.8	)			18,564				14,760				(20.5	)
	Other(4)			(36,185	)			(46,287	)			(43,362	)			(27.9	)			6.3				(12,197	)			(11,186	)			8.3
Adjusted EBITDA margins:(3)
	Specialty hospitals			17.2	%			21.7	%			22.4	%			26.2	%			3.2	%			23.1	%			20.8	%			(10.0	)%
	Outpatient rehabilitation			13.9				14.3				13.7				2.9				(4.2	)			15.3				12.4				(19.0	)
	Other(4):			N/M				N/M				N/M				N/M				N/M				N/ M				N/M				N/M
Total assets:
	Specialty hospitals		$	512,956			$	520,572			$	1,652,532											$	1,553,606			$	1,746,744
	Outpatient rehabilitation			365,534				318,180				293,720												530,855				269,295
	Other			200,508				274,969				222,133												76,262				119,248
	Total company		$	1,078,998			$	1,113,721			$	2,168,385											$	2,160,723			$	2,135,287
Purchases of property and equipment, net:
	Specialty hospitals		$	22,559			$	23,320			$	102,321											$	1,945			$	36,505
	Outpatient rehabilitation			8,514				5,885				3,750												682				1,641
	Other			4,779				3,421				3,875												1,071				240
	Total company		$	35,852			$	32,626			$	109,946											$	3,698			$	38,386

			Twelve Months Ended
			December 31,
			2003				2004
			(In thousands)
Net operating revenue
	Specialty hospitals net operating revenue		$	849,260			$	1,089,538
	Less: Specialty hospitals opened, acquired or closed after 1/1/03			66,014				222,049
	Specialty hospitals same store net operating revenue		$	783,246			$	867,489
Adjusted EBITDA(3)
	Specialty hospitals Adjusted EBITDA(3)		$	145,650			$	236,181
	Less: Specialty hospitals opened, acquired or closed after 1/1/03			2,897				46,813
	Specialty hospitals same store Adjusted EBITDA(3)		$	142,753			$	189,368
	All specialty hospitals Adjusted EBITDA margin(3)			17.2	%			21.7	%
	Specialty hospitals same store Adjusted EBITDA margin(3)			18.2	%			21.8	%

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			Twelve Months Ended
			December 31,
			2004				2005(1)
			(In thousands)
Net operating revenue
	Specialty hospitals net operating revenue		$	1,089,538			$	1,370,320
	Less: Specialty hospitals opened, acquired or closed after 1/1/04			30,754				218,837
	Specialty hospitals same store net operating revenue		$	1,058,784			$	1,151,483
Adjusted EBITDA(3)
	Specialty hospitals Adjusted EBITDA(3)		$	236,181			$	307,339
	Less: Specialty hospitals opened, acquired or closed after 1/1/04			(4,591	)			34,095
	Specialty hospitals same store Adjusted EBITDA(3)		$	240,772			$	273,244
	All specialty hospitals Adjusted EBITDA margin(3)			21.7	%			22.4	%
	Specialty hospitals same store Adjusted EBITDA margin(3)			22.7	%			23.7	%

			Three Months Ended
			March 31,
			2005(1)				2006
			(In thousands)
Net operating revenue
	Specialty hospitals net operating revenue		$	342,044			$	359,672
	Less: Specialty hospitals in development or closed after 1/1/05			6,028				204
	Specialty hospitals same store net operating revenue		$	336,016			$	359,468
Adjusted EBITDA(3)
	Specialty hospitals Adjusted EBITDA(3)		$	79,127			$	74,718
	Less: Specialty hospitals in development or closed after 1/1/05			1,334				(377	)
	Specialty hospitals same store Adjusted EBITDA(3)		$	77,793			$	75,095
	All specialty hospitals Adjusted EBITDA margin(3)			23.1	%			20.8	%
	Specialty hospitals same store Adjusted EBITDA margin(3)			23.2	%			20.9	%

(1)	To arrive at the combined year ended December 31, 2005, the financial data for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period).

	To arrive at the combined three months ended March 31, 2005, the financial data for the period after the Merger, February 25, 2005 through March 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period).

(2)	Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense and other operating costs.
(3)	We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, income from discontinued operations, loss on early retirement of debt, equity in income from joint ventures, merger related charges, stock compensation expense, long-term incentive compensation, other income and minority interest. We believe that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our operating units. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement

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	data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. See footnote 13 to our audited consolidated financial statements for a reconciliation of net income to Adjusted EBITDA as utilized by us in reporting our segment performance in accordance with SFAS No. 131.
(4)	Other includes the company’s general and administrative services, as well as businesses associated with the sale of home medical equipment, orthotics, prosthetics, and infusion/intravenous services.

	Net Operating Revenues

	Operating Expenses

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	Adjusted EBITDA

	Stock Compensation Expense

	Income (Loss) from Operations

	Loss on Early Retirement of Debt

	Merger Related Charges

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	Interest Expense

	Minority Interests

	Income Taxes

	Income from Discontinued Operation, Net of Tax

	Net Operating Revenues

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	Operating Expenses

	Adjusted EBITDA

	Stock Compensation Expense

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	Long-term Incentive Compensation

	Income (Loss) from Operations

	Loss on Early Retirement of Debt

	Merger Related Charges

	Interest Expense

	Minority Interests

	Income Taxes

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	Income from Discontinued Operations, Net of Tax

	Net Operating Revenues

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	Operating Expenses

	Adjusted EBITDA

	Income from Operations

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	Interest Expense

	Minority Interests

	Income Taxes

	Three Months Ended March 31, 2006 and Combined Three Months Ended March 31, 2005

	Combined Year Ended December 31, 2005 and Years Ended December 31, 2004 and 2003

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	Capital Resources

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	•	a $300.0 million revolving loan facility that will terminate on February 24, 2011, including both a letter of credit sub-facility and a swingline loan sub-facility, and
	•	a $580.0 million term loan facility that matures on February 24, 2012.

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	Commitments and Contingencies

			Payments Due by Year
Contractual Obligations			Total				2006				2007-2009				2010-2011				After 2011
			(In thousands)
75/8 % Senior Subordinated Notes			$	660,000			$	—			$	—			$	—			$	660,000
Senior Secured Credit Facility				660,650				5,800				17,400				637,450				—
10% Senior Subordinated Notes(1)				131,609				—				—				—				131,609
Senior Floating Rate Notes				175,000				—				—				—				175,000
Seller Notes				899				355				544				—				—
Capital Lease Obligations				359				197				162				—				—
Other Debt Obligations				372				164				208				—				—
	Total Debt			1,628,889				6,516				18,314				637,450				966,609
Interest(2)				1,003,161				123,822				369,093				227,309				282,937
Letters of Credit Outstanding				21,981				50				—				21,931				—
Purchase Obligations				5,469				2,400				3,069				—				—
Construction Contracts				43,958				43,958				—				—				—
Naming, Promotional and Sponsorship Agreement				61,327				2,445				7,679				5,421				45,782
Operating Leases				199,556				73,020				106,476				17,814				2,246
Related Party Operating Leases				17,118				1,963				5,836				3,587				5,732
Total Contractual Cash Obligations			$	2,981,459			$	254,174			$	510,467			$	913,512			$	1,303,306

(1)	Reflects the balance sheet liability of Holdings’ senior subordinated notes calculated in accordance with GAAP. The balance sheet liability so reflected is less than the $150.0 million aggregate principal amount of such notes because such notes were issued with original issue discount totaling $18.4 million. Interest on the senior subordinated notes accrues on the full principal amount thereof and Holdings will be obligated to repay the full principal amount thereof at maturity or upon any mandatory or voluntary prepayment thereof.
(2)	The interest obligation was calculated using the average interest rate for the quarter ended December 31, 2005 of 6.158% for the senior credit facility, the stated interest rate for the 75/8 % senior subordinated notes and the 10% senior subordinated notes, 10.2% for the senior floating rate notes and 6.0% for seller notes, capital lease obligations and other debt obligations.

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			Distribution
Medical Condition			of Patients
Respiratory disorder				33.0	%
Neuromuscular disorder				31.9
Cardiac disorder				11.1
Wound care				8.1
Other				15.9
	Total			100.0	%

	Recent Long-Term Acute Care Hospital Regulatory Developments

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	•	optimizing staffing based on our occupancy and the clinical needs of our patients;
	•	centralizing administrative functions such as accounting, finance, payroll, legal, reimbursement, compliance, human resources and billing and collection;
	•	standardizing management information systems to aid in financial reporting as well as billing and collecting; and
	•	participating in group purchasing arrangements to receive discounted prices for pharmaceuticals and medical supplies.

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			Fiscal Year Ended												Three Months
			December 31,												Ended March 31,
Net Operating Revenues by Payor Source(1)			2003				2004				2005(2)				2005(2)				2006
Medicare				47.8	%			49.8	%			56.4	%			56.7	%			55.8	%
Commercial insurance(3)				44.9				42.3				37.2				36.5	%			37.9
Private and other(4)				5.7				5.7				4.3				4.8				4.6
Medicaid				1.6				2.2				2.1				2.0				1.7
	Total			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

(1)	This table excludes the net operating revenues of our Canadian operations which have been reclassified and reported as a discontinued operation.
(2)	To arrive at the combined fiscal year ended December 31, 2005, the net operating revenues for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), have been added to the net operating revenues for the period from January 1, 2005 through February 24, 2005 (Predecessor period). To arrive at the combined three months ended March 31, 2005, the net operating revenues for the period after the Merger, February 25, 2005 through March 31, 2005 (Successor period), have been added to the net operating revenues for the period from January 1, 2005 through February 24, 2005 (Predecessor period).
(3)	Includes commercial healthcare insurance carriers, health maintenance organizations, preferred provider organizations, workers’ compensation and managed care programs.
(4)	Includes self payors, contract management services and non-patient related payments. Self pay revenues represent less than 1% of total net operating revenues.

	Government Sources

	Non-Government Sources

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	General

	Licensure

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	Overview of U.S. and State Government Reimbursements

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	Other Healthcare Regulations

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	Our Compliance Program

	Operating Our Compliance Program

	Compliance Committee

	Compliance Issue Reporting

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	Compliance Monitoring and Auditing/ Comprehensive Training and Education

	Policies and Procedures Reflecting Compliance Focus Areas

	Internal Audit

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Name		Age				Position(s)
Rocco A. Ortenzio			73			Director and Executive Chairman
Robert A. Ortenzio			48			Director and Chief Executive Officer
Russell L. Carson			62			Director
David S. Chernow			49			Director
Bryan C. Cressey			56			Director
James E. Dalton, Jr.			63			Director
Thomas A. Scully			48			Director
Leopold Swergold			66			Director
Sean M. Traynor			37			Director
Patricia A. Rice			59			President and Chief Operating Officer
David W. Cross			59			Senior Vice President and Chief Development Officer
S. Frank Fritsch			54			Senior Vice President, Human Resources
Martin F. Jackson			52			Senior Vice President and Chief Financial Officer
James J. Talalai			44			Senior Vice President and Information Officer
Michael E. Tarvin			45			Senior Vice President, General Counsel and Secretary
Scott A. Romberger			46			Vice President, Controller and Chief Accounting Officer

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																			Long-Term Compensation Awards
			Annual Compensation																Awards								Payouts
															Other				Restricted				Securities
Name and															Annual				Stock				Underlying				LTIP				All Other
Principal Position			Year				Salary				Bonus				Compensation(1)				Awards				Options				Payouts				Compensation(2)
Rocco A. Ortenzio(3)				2005			$	824,000			$	1,648,000			$	115,763				19,006,179				—				3,561,721			$	—
	Executive Chairman			2004				824,000				1,711,385				—								1,550,000								—
				2003				824,000				1,648,000				—								3,550,000								—
Robert A. Ortenzio(3)				2005				824,000				1,648,000				56,792				20,506,176				—				4,986,409				6,300
	Chief Executive Officer			2004				824,000				1,711,385				—								1,250,000								5,948
				2003				824,000				1,648,000				—								2,060,000								4,531
Patricia A. Rice(3)				2005				592,250				740,000				94,452				6,538,361				—				2,137,032				6,800
	President and Chief			2004				592,250				768,786				—								215,000								5,948
	Operating Officer			2003				592,250				740,000				—								440,000								4,531
Martin F. Jackson				2005				371,315				464,000				—				3,269,181				—				997,282				6,300
	Senior Vice President			2004				371,315				481,476				—								30,000								5,948
	and Chief Financial Officer			2003				360,500				451,300				—								340,000								4,531
S. Frank Fritsch				2005				275,834				276,000				—				1,133,316				—				712,344				5,250
	Senior Vice President,			2004				275,834				286,134				—								59,000								5,948
	Human Resources			2003				267,800				268,000				—								123,500								4,531

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(1)	The value of certain perquisites and other personal benefits is not included 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.
(2)	All other compensation represents employer matching contributions to the 401(k) plan.
(3)	Other annual compensation represents the value of the personal flights on the Company’s corporate aircraft based on the aggregate incremental costs of such flights to the Company.

		Number of				Percent of Total
		Securities				Options
		Underlying				Granted to				Exercise								Grant Date
		Options				Employees in				Price per				Expiration				Present
Name		Granted				2005				Share				Date				Value
Rocco A. Ortenzio			—				—				—				—				—
Robert A. Ortenzio			—				—				—				—				—
Patricia A. Rice			—				—				—				—				—
Martin F. Jackson			—				—				—				—				—
S. Frank Fritsch			—				—				—				—				—

										Number of Securities								Value of Unexercised
										Underlying Unexercised								In-the-Money
										Options Held at 2005								Options at 2005
		Number of								Year End								Year End
		Options				Amount
Name		Exercised				Realized				Exercisable				Unexercisable				Exercisable				Unexercisable
Rocco A. Ortenzio			—				—				—				—				—				—
Robert A. Ortenzio			17,020			$	204,580				—				—				—				—
Patricia A. Rice			30,720				449,740				—				—				—				—
Martin F. Jackson			62,976				927,037				—				—				—				—
S. Frank Fritsch			—				—				—				—				—				—

(1)	All stock options outstanding under our Second Annual and Related 1997 Stock Option Plan were cancelled in connection with the Merger. Stock option holders received as consideration for such cancellation a cash payment equal to (i) $18.00 minus the exercise price of the option multiplied by (ii) the number of unexercised vested and unvested shares subject to the option.

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		% Allocation of
		Cash Plan
Name of Executive		Units
Robert A. Ortenzio			35	%
Rocco A. Ortenzio			25	%
Patricia A. Rice			15	%
Martin F. Jackson			7	%
James J. Talalai			5	%
Michael E. Tarvin			5	%
S. Frank Fritsch			5	%
David W. Cross			3	%

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										Participating				Percent of
						Percent of				Preferred Shares				Outstanding
		Common Shares				Outstanding				Beneficially				Participating
Name of Beneficial Owner(1)		Beneficially Owned				Common Shares				Owned				Preferred Shares
Welsh, Carson, Anderson & Stowe(2)			114,938,082				55.9	%			16,877,179.59				76.1	%
Thoma Cressey Equity Partners(3)			17,554,946				8.5	%			2,610,400.84				11.8	%
Rocco A. Ortenzio(4)			22,453,271				10.9	%			921,500.59				4.2	%
Robert A. Ortenzio(5)			21,651,873				10.5	%			913,858.31				4.1	%
Russell L. Carson(6)			2,910,387				1.4	%			432,771.36				2.0	%
Bryan C. Cressey(7)			17,962,732				8.7	%			2,671,038.22				12.1	%
David S. Chernow(8)			20,000				*				2,973.98				*
James E. Dalton, Jr.			50,000				*				7,434.94				*
Thomas A. Scully(9)			130,255				*				4,460.97				*
Leopold Swergold			200,000				*				29,739.78				*
Sean M. Traynor(10)			5,000				*				743.49				*
Patricia A. Rice(11)			6,898,361				3.4	%			53,531.60				*
S. Frank Fritsch(12)			1,448,482				*				46,864.77				*
Martin F. Jackson(13)			3,632,781				1.8	%			54,066.93				*
All directors and named executive officers as a group(16)			80,816,657				39.3	%			5,167,691.68				23.3	%

	*	Less than one percent

	(1)	Unless otherwise indicated, the address of each of the beneficial owners identified is 4716 Old Gettysburg Road, P.O. Box 2034, Mechanicsburg, Pennsylvania 17055.
	(2)	Represents (A) 80,857,183 common shares and 12,023,373.01 participating preferred shares held by WCAS IX over which WCAS IX has sole voting and investment power, (B) 15,000 common shares and 2,230.48 participating preferred shares held by WCAS Management Corporation, over which WCAS Management Corporation has sole voting and investment power, (C) 3,623,302 common shares and 538,780.97 participating preferred shares held by WCAS Capital Partners IV, L.P., over which WCAS Capital Partners IV, L.P. has sole voting and investment power, (D) an aggregate 8,246,203 common shares and 1,226,213.10 participating preferred shares held by individuals who are general partners of WCAS IX Associates LLC, the sole general partner of WCAS IX and/or otherwise employed by an affiliate of Welsh, Carson, Anderson & Stowe, and (E) an aggregate 22,196,394 common shares and 3,086,582.03 participating preferred shares held by other co-investors, over which WCAS IX has sole voting power. The principal executive offices of Welsh, Carson, Anderson & Stowe are located at 320 Park Avenue, Suite 2500, New York, New York 10022.
	(3)	Represents (A) 7,480,145 common shares and 1,112,289.19 participating preferred shares held by Thoma Cressey Fund VI, L.P. over which Thoma Cressey Fund VI, L.P. has shared voting and

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		investment power, (B) 74,801 common shares and 11,122.80 participating preferred shares held by Thoma Cressey Friends Fund VI, L.P., over which Thoma Cressey Friends Fund VI, L.P. has shared voting and investment power, (C) 9,846,200 common shares and 1,464,118.96 participating preferred shares held by Thoma Cressey Fund VII, L.P., over which Thoma Cressey Fund VII, L.P. has shared voting and investment power, and (D) 153,800 common shares and 22,869.89 participating preferred shares held by Thoma Cressey Friends Fund VII, L.P., over which Thoma Cressey Friends Fund VII, L.P. has shared voting and investment power. Mr. Cressey is a principal of Thoma Cressey Equity Partners Inc. The principal address of Thoma Cressey Equity Partners Inc. is 9200 Sears Tower, 233 South Wacker Drive, Chicago, IL 60606.
	(4)	Includes 5,000,000 common shares held by the Robert A. Ortenzio Descendants Trust, of which Mr. Rocco Ortenzio is a trustee. Mr. Rocco Ortenzio disclaims beneficial ownership of shares held by the Robert A. Ortenzio Descendants Trust except in his capacity as a fiduciary of such trust. Does not include 7,750,000 common shares held by the Rocco A. Ortenzio Descendents Trust, of which Mr. Rocco A. Ortenzio serves as the Investment Advisor. Does not include 385,697 common shares and 57,532.74 participating preferred shares held by the Ortenzio Family Foundation of which Mr. Rocco A. Ortenzio and his wife Nancy A. Ortenzio are two of five trustees.
	(5)	Includes 10,256,176 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. Does not include 5,000,000 common shares held by The Robert A. Ortenzio Descendants Trust of which Mr. Robert A. Ortenzio is one of three trustees. Does not include 7,750,000 common shares held by The Rocco A. Ortenzio Descendants Trust of which Mr. Ortenzio is one of four trustees. Does not include 385,697 common shares and 57,532.74 participating preferred shares held by the Ortenzio Family Foundation of which Mr. Robert Ortenzio is one of five trustees.
	(6)	Does not include 80,857,183 common shares and 12,023,373.01 participating preferred shares owned by WCAS IX, 15,000 common shares and 2,230.48 participating preferred shares owned by WCAS Management Corporation or 3,623,302 common shares and 538,780.97 participating preferred shares owned by WCAS Capital Partners IV, L.P. Mr. Carson is a general partner of WCAS IX and WCAS Capital Partners IV, L.P. and is an officer of WCAS Management Corporation.
	(7)	Includes (A) 7,480,145 common shares and 1,112,289.19 participating preferred shares held by Thoma Cressey Fund VI, L.P., (B) 74,801 common shares and 11,122.80 participating preferred shares held by Thoma Cressey Friends Fund VI, L.P., (C) 9,846,200 common shares and 1,464,118.96 participating preferred shares held by Thoma Cressey Fund VII, L.P., and (D) 153,800 common shares and 22,869.89 participating preferred shares held by Thoma Cressey Friends Fund VII, L.P. Mr. Cressey is a principal of Thoma Cressey Equity Partners Inc. Mr. Cressey may be deemed to beneficially own the shares beneficially owned by Thoma Cressey Fund VI, L.P., Thoma Cressey Friends Fund VI, L.P., Thoma Cressey Fund VII, L.P. and Thoma Cressey Friends Fund VII, L.P. Mr. Cressey disclaims beneficial ownership of such shares. The principal address of Mr. Cressey is 9200 Sears Tower, 233 South Wacker Drive, Chicago, IL 60606.
	(8)	Represents 20,000 common shares held by David S. Chernow and Elizabeth A. Chernow as tenants in common.
	(9)	Includes 100,255 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions.

(10)	Does not include 80,857,183 common shares and 12,023,373.01 participating preferred shares owned by WCAS IX, 15,000 common shares and 2,230.48 participating preferred shares owned by WCAS Management Corporation or 3,623,302 common shares and 538,780.97 participating preferred shares owned by WCAS Capital Partners IV, L.P. Mr. Traynor is a general partner of WCAS IX and WCAS Capital Partners IV, L.P. and is an officer of WCAS Management Corporation.
(11)	Includes 3,923,361 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions and 360,000 common shares and 53,531.60 participating preferred shares owned by The Patricia Ann Rice Living Trust for which Ms. Rice acts as a trustee. Includes 2,615,000 common shares owned by the 2005 Rice Family Trust for which Ms. Rice acts as investment trustee.

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(12)	Includes 1,133,316 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions.
(13)	Includes 3,269,181 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. Includes an aggregate 14,400 common shares and 2,141.28 participating preferred shares owned by Mr. Jackson’s children who live in his household and over which Mr. Jackson acts as custodian.
(14)	Does not include 80,857,183 common shares and 12,023,373.01 participating preferred shares owned by WCAS IX, 15,000 common shares and 2,230.48 participating preferred shares owned by WCAS Management Corporation or 3,623,302 common shares and 538,780.97 participating preferred shares owned by WCAS Capital Partners IV, L.P. Includes an aggregate 18,722,290 common shares which are subject to restrictions on transfer set forth in restricted stock award agreements entered into at the time of the consummation of the Transactions.

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	Stock Subscription and Exchange Agreement

	Stockholders Agreement and Equity Registration Rights Agreement

	Securities Purchase Agreement and Debt Registration Rights Agreement

	Transaction Fee

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	Restricted Stock Award Agreement

	Lease of Office Space

	Equity Incentive Plan

	Non-Employee Director Plan

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	Long-Term Cash Incentive Plan

	Employee Stock Purchase Plan

	Consulting Agreement with Director

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	General

	•	a $300.0 million revolving credit facility with a maturity of six years, including both a letter of credit sub-facility and a swingline loan sub-facility, and
	•	a $580.0 million term loan facility with a maturity of seven years.

	Interest and Fees

	Prepayments

	•	50% (as may be reduced based on Select’s ratio of total indebtedness to its consolidated EBITDA) of Select’s annual excess cash flow (as defined in the credit agreement);

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	•	100% of the net cash proceeds from asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions;
	•	50% (as may be reduced based on Select’s ratio of total indebtedness to its consolidated EBITDA) of the net cash proceeds from specified issuances of equity securities; and
	•	100% of the net cash proceeds from certain incurrences of debt.

	Amortization of Principal

	Collateral and Guarantors

	Restrictive Covenants and Other Matters

	•	incur, assume, permit to exist or guarantee additional debt and issue or sell or permit any subsidiary to issue or sell preferred stock;
	•	pay dividends or other distributions on, redeem, repurchase, retire or cancel capital stock;
	•	purchase or acquire any debt or equity securities of, make any loans or advances to, guarantee any obligation of, or make any other investment in, any other company;
	•	incur or permit to exist certain liens on property or assets owned or accrued or assign or sell any income or revenues with respect to such property or assets;
	•	sell or otherwise transfer property or assets to, purchase or otherwise receive property or assets from, or otherwise enter into transactions with affiliates;
	•	merge, consolidate or amalgamate with another company or permit any subsidiary to merge, consolidate or amalgamate with another company;

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	•	sell, transfer or otherwise dispose of assets, including any equity interests;
	•	repay, redeem, repurchase, retire or cancel any subordinated debt;
	•	incur capital expenditures;
	•	engage to any material extent in any business other than business of the type currently conducted by Select or reasonably related businesses; and
	•	incur obligations that restrict the ability of its subsidiaries to incur or permit to exist any liens on its property or assets or to make dividends or other payments to us.

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	•	are our general unsecured obligations;
	•	are pari passu in right of payment to any of our senior Indebtedness; and
	•	are senior in right of payment to all of our existing and future subordinated Indebtedness, including the Existing Subordinated Issuer Notes.

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	(1) either no notes remain outstanding immediately following such redemption or at least 65% of the aggregate principal amount of notes originally issued under the indenture (excluding notes held by us and our subsidiaries) remains outstanding immediately after the occurrence of such redemption; and
	(2) the redemption occurs within 90 days of the date of the closing of such Equity Offering or equity contribution.

Year		Percentage
2009			102.00%
2010			101.00%
2011 and thereafter			100.00%

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	Change of Control

	(1) accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer;
	(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and
	(3) deliver or cause to be delivered to the trustee the notes properly accepted together with an officers’ certificate stating the aggregate principal amount of notes or portions of notes being purchased by us.

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	Asset Sales

	(1) we (or the Restricted Subsidiary, as the case may be) receive consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and
	(2) at least 75% of the consideration we or such Restricted Subsidiary receive in the Asset Sale is in the form of cash. For purposes of this paragraph (2), each of the following will be deemed to be cash:

	(a) Cash Equivalents;
	(b) any liabilities, as shown on our most recent consolidated balance sheet, of us or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases us or such Restricted Subsidiary from further liability;
	(c) any securities, notes or other obligations received by us or any such Restricted Subsidiary from such transferee that are converted by us or such Restricted Subsidiary into cash within 180 days of receipt, to the extent of the cash received in that conversion;
	(d) any Designated Noncash Consideration the Fair Market Value of which, when taken together with all other Designated Noncash Consideration received pursuant to this clause (d) (and not subsequently converted into Cash Equivalents that are treated as Net Proceeds of an Asset Sale), does not exceed $30.0 million since the Issue Date, with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value; and
	(e) any stock or assets of the kind referred to in clauses (2) or (4) of the second succeeding paragraph.

(1) to repay Indebtedness (other than (x) Indebtedness that is contractually subordinated to the notes and (y) any intercompany Indebtedness between or among us and any of our Restricted Subsidiaries) and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; provided that, if an offer to purchase any such Indebtedness of Select or any Restricted Subsidiary is made in accordance with the terms of such Indebtedness, the obligation to repay such Indebtedness will be deemed satisfied to the extent of the amount of the offer, whether or not

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	accepted by the holders thereof, and the amount of Net Proceeds will be reduced to the extent of the amount of the offer;
	(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of ours;
	(3) to make a capital expenditure with respect to a Permitted Business; or
	(4) to acquire Additional Assets;

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	Restricted Payments

	(A) declare or pay any dividend or make any other payment or distribution on account of our or any of our Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving our or any of our Restricted Subsidiaries or any payment under our Deferred Compensation Plan to the extent such payment is funded with a dividend or distribution that would have constituted a “Restricted Payment” under the terms of the indenture governing the Existing Select Notes) or to the direct or indirect holders of our or any of our Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of ours); provided that the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of a Restricted Subsidiary of ours shall not constitute a Restricted Payment;
	(B) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving us) any Equity Interests of ours or any other direct or indirect parent of ours;
	(C) make any payment on or with respect to, or purchase, repurchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is contractually subordinated to the notes (excluding any intercompany Indebtedness between or among us and any of our Restricted Subsidiaries), except (i) a payment of interest or principal at the Stated Maturity thereof or (ii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of any such subordinated Indebtedness (other than the Existing Issuer Subordinated Notes or any Permitted Refinancing Indebtedness in respect thereof) purchased in anticipation of satisfying a sinking fund obligation, principal installment or payment at final maturity, in each case within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement; or
	(D) make any Restricted Investment;

	(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
	(2) we or such Restricted Subsidiary, as the case may be, would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the applicable Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of indebtedness and issuance of disqualified stock and preferred stock”; provided that for purposes of this clause (2) only, any of our non-cash interest expense and amortization of original issue discount and deferred financing fees shall be excluded from the determination of the Fixed Charge Coverage Ratio to the extent not already excluded therefrom; and

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	(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by us and our Restricted Subsidiaries since February 24, 2005 (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9), (11), (12), (13), (14), (15), (16), (17), (18) and (19) of the next succeeding paragraph), is less than the sum, without duplication, of:

	(a) 50% of our Consolidated Net Income (excluding, for purposes of calculating our Consolidated Net Income for purposes of this clause (3)(a) only, any of our non-cash interest expense and amortization of original issue discount and deferred financing fees to the extent not already excluded from the definition of Consolidated Net Income) for the period (taken as one accounting period) from the beginning of the first full fiscal quarter commencing after February 24, 2005 to the end of our most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income (as determined as set forth above) for such period is a deficit, less 100% of such deficit); plus
	(b) 100% of the aggregate Qualified Proceeds we received since February 24, 2005 as a contribution to our equity capital (other than Disqualified Stock) or from the issue or sale of our Equity Interests (other than Disqualified Stock and Excluded Contributions) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of ours that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of ours); plus
	(c) an amount equal to the net reduction in Investments by us and our Restricted Subsidiaries resulting from (A) the sale or other disposition (other than to us or a Restricted Subsidiary) of any Restricted Investment that was made after February 24, 2005 and (B) repurchases, redemptions and repayments of such Restricted Investments and the receipt of any dividends or distributions from such Restricted Investments; plus
	(d) to the extent that any Unrestricted Subsidiary of ours designated as such after the Issue Date is redesignated as a Restricted Subsidiary after the Issue Date, an amount equal to the lesser of (A) the Fair Market Value of our interest in such Subsidiary immediately prior to such redesignation and (B) the aggregate amount of our Investments in such Subsidiary that was previously treated as a Restricted Payment; plus
	(e) in the event we and/or any Restricted Subsidiary of ours makes any Investment in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary of ours, an amount equal to our existing Investment of and/or the investment of any of our Restricted Subsidiaries in such Person that was previously treated as a Restricted Payment.

	(1) the payment of any dividend or other distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the indenture;
	(2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of ours) of, Equity Interests of ours (other than Disqualified Stock) or from the substantially concurrent contribution of equity capital to us (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph;
	(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of ours that is contractually subordinated to the notes with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness, or from the substantially concurrent sale (other than to a Restricted Subsidiary of ours) of, Equity Interests of ours (other than Disqualified Stock) or from the substantially concurrent contribution of equity capital to us (other than

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	Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph;
	(4) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of ours or any Restricted Subsidiary of ours which Disqualified Stock was issued after the Issue Date in accordance with the provisions of the covenant described below under the caption “— Incurrence of indebtedness and issuance of disqualified stock and preferred stock”;
	(5) the repurchase, redemption or other acquisition or retirement for value of Disqualified Stock of ours or of any Restricted Subsidiary of ours made by exchange for, or out of the proceeds of the substantially concurrent sale of Replacement Preferred Stock that is permitted to be incurred pursuant to the covenant described below under “— Incurrence of indebtedness and issuance of disqualified stock and preferred stock”;
	(6) the payment of any dividend (or any similar distribution) by a Restricted Subsidiary of ours to the holders of its Equity Interests on a pro rata basis;
	(7) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of ours or of any Restricted Subsidiary of ours held by any current or former officer, director, employee or consultant of ours or any of our Restricted Subsidiaries, and any dividend payment or other distribution by us or a Restricted Subsidiary to any direct or indirect parent holding company of ours utilized for the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of such direct or indirect parent holding company held by any current or former officer, director, employee or consultant of ours or any of our Restricted Subsidiaries or such parent holding company, in each case, pursuant to any equity subscription agreement, stock option agreement, shareholders’ agreement or similar agreement or benefit plan of any kind; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $5.0 million in any fiscal year (it being understood, however, that unused amounts permitted to be paid pursuant to this proviso are available to be carried over to subsequent fiscal years); provided further that such amount in any fiscal year may be increased by an amount not to exceed:

	(a) the cash proceeds from the sale of Equity Interests of ours and, to the extent contributed to us as equity capital (other than Disqualified Stock), Equity Interests of any direct or indirect parent company of ours, in each case to members of management, directors or consultants of ours, any of our Subsidiaries or any direct or indirect parent company of ours that occurs after February 24, 2005, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3)(b) of the preceding paragraph, and excluding Excluded Contributions, plus
	(b) the cash proceeds of key man life insurance policies received by us and our Restricted Subsidiaries after February 24, 2005, less
	(c) the amount of any Restricted Payments previously made pursuant to clauses (a) and (b) of this clause (7);

	(8) the repurchase of Equity Interests deemed to occur upon the exercise of options, rights or warrants to the extent such Equity Interests represent a portion of the exercise price of those options, rights or warrants;
	(9) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness that is contractually subordinated to the notes with any Excess Proceeds that remain after consummation of an Asset Sale Offer;
	(10) so long as no Default has occurred and is continuing or would be caused thereby, after the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the notes pursuant to the covenant described above under “— Repurchase at the option of holders — Change of control” (including the purchase of the notes tendered), any purchase or redemption of Indebtedness that is contractually subordinated to the notes required pursuant to the terms thereof as a result of such

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	Change of Control at a purchase or redemption price not to exceed 101% of the outstanding principal amount thereof, plus any accrued and unpaid interest; provided, however, we are permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of indebtedness and issuance of disqualified stock and preferred stock”;
	(11) cash payments in lieu of fractional shares issuable as dividends on preferred stock or upon the conversion of any convertible debt securities of ours or any of our Restricted Subsidiaries;
	(12) Permitted Payments to Parent;
	(13) so long as no default has occurred and is continuing or would be caused thereby, the payment:

	(a) by us or any Restricted Subsidiary to any direct or indirect parent of ours, which payment is used by the Person receiving such payment, following the first initial public offering of common Equity Interests by such Person, to pay dividends of up to 6% per annum of the net proceeds received by such Person in such public offering (or any subsequent public offering of common Equity Interests of such Person) that are contributed to us as equity capital (other than Disqualified Stock), or
	(b) by us, following the first initial public offering of our common Equity Interests, to pay dividends of up to 6% per annum of the net proceeds received by or contributed to us in such public offering (or any subsequent public offering of common Equity Interests by us); (excluding, in the case of both clause (a) and clause (b), public offerings of common Equity Interests registered on Form S-8 and any other public sale to the extent the proceeds thereof are Excluded Contributions);

	(14) Investments that are made with Excluded Contributions;
	(15) distributions or payments of Receivables Fees;
	(16) Restricted Payments described in the offering memorandum for the notes under “Use of Proceeds”;
	(17) all other payments made or to be made in connection with the Transactions and all payments made to former stockholders of Select who have validly exercised appraisal rights in connection with the Transactions;
	(18) so long as no Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $50.0 million since February 24, 2005; provided that after giving effect to any such Restricted Payment, our Leverage Ratio is less than or equal to 6.5 to 1.0 and
	(19) so long as no Default has occurred and is continuing or would be caused thereby, payments to any direct or indirect parent company of ours in amounts and at times as would be sufficient to permit such direct or indirect parent company of ours to pay regularly scheduled or accrued interest (including interest previously paid “in kind” or added to the principal amount thereof) on any Indebtedness of, or regularly scheduled or accrued dividends (including dividends previously paid “in kind” or added to the liquidation preference thereof) on any preferred stock of, any direct or indirect parent company of ours, in each case, which is issued in exchange for, or the net proceeds of which are used to repay, repurchase, redeem, defease or otherwise refinance the Existing Subordinated Issuer Notes as amended, modified, restated, renewed or extended (or any such Indebtedness or preferred stock previously issued), but only to the extent that (x) the principal amount (or accreted value, if applicable) of such Indebtedness or the initial liquidation preference of such preferred stock, does not exceed the principal amount (or accreted value, if applicable) or liquidation preference of, the Existing Subordinated Issuer Notes, as amended, modified, restated, renewed or extended, or such Indebtedness or preferred stock being amended or refinanced and (y) the interest rate or dividend rate on such Indebtedness or preferred stock does not exceed the interest rate or dividend rate, as applicable, on the Existing Subordinated Issuer Notes, as amended, modified, restated, renewed or extended, or such Indebtedness or preferred stock being

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	amended or refinanced, and subject to the preceding clauses (x) and (y), any amendment, modification, restatement, renewal or extension of such Indebtedness or preferred stock.

	Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock

	(1) the incurrence by us and/or any Restricted Subsidiary of Indebtedness under the Credit Agreement and other Credit Facilities entered into after the date of the Credit Agreement in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to our maximum potential liability and our Restricted Subsidiaries thereunder) not to exceed $1,000.0 million, less the aggregate amount of all Net Proceeds of Asset Sales applied by us or any of our Restricted Subsidiaries since the Issue Date to repay any term Indebtedness under a Credit Facility or to repay any revolving credit Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder pursuant to the covenant described above under the caption “— Repurchase at the option of holders — Asset sales”;
	(2) the incurrence by us and our Restricted Subsidiaries of the Existing Indebtedness;

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	(3) the incurrence by us of Indebtedness represented by the notes to be issued on the Issue Date, replacement notes in respect thereof, if any, and the Exchange Notes to be issued pursuant to the registration rights agreement;
	(4) the incurrence or issuance by us or any of our Restricted Subsidiaries of Indebtedness (including Capital Lease Obligations), Disqualified Stock or preferred stock, in each case, incurred or issued for the purpose of financing all or any part of the purchase price or cost of design, construction, lease, installation or improvement of property, plant or equipment used or useful in a Permitted Business, in an aggregate principal amount, including all Permitted Refinancing Indebtedness and Replacement Preferred Stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed $40.0 million at any time outstanding;
	(5) the incurrence by us or any of our Restricted Subsidiaries of Permitted Refinancing Indebtedness or Replacement Preferred Stock in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) or any Disqualified Stock or preferred stock that was permitted by the indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5), (13), (15), (17) or (18) of this paragraph;
	(6) the incurrence by us or any of our Restricted Subsidiaries of intercompany Indebtedness between or among us and any of our Restricted Subsidiaries; provided, however, that:

	(a) if we are the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the notes, except to the extent such subordination would violate any applicable law, rule or regulation; and
	(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than us or a Restricted Subsidiary of ours and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either us or a Restricted Subsidiary of ours, will be deemed, in each case, to constitute a new incurrence of such Indebtedness by us or such Restricted Subsidiary, as the case may be, which new incurrence is not permitted by this clause (6);

	(7) the issuance by any of the our Restricted Subsidiaries to us or to any of our Restricted Subsidiaries of shares of preferred stock; provided, however, that:

	(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than us or a Restricted Subsidiary of our, and
	(b) any sale or other transfer of any such preferred stock to a Person that is not either us or a Restricted Subsidiary of ours,

	will be deemed, in each case, to constitute a new issuance of such preferred stock by such Restricted Subsidiary which new issuance is not permitted by this clause (7);

	(8) the incurrence by us or any of our Restricted Subsidiaries of Hedging Obligations in the ordinary course of business;
	(9) the guarantee by us or any Restricted Subsidiary of Indebtedness of ours or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the notes, then the guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;
	(10) the incurrence by us or any of our Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, letters of credit, performance bonds, surety bonds, appeal bonds or other similar bonds in the ordinary course of business; provided, however, that upon the drawing of letters of credit for reimbursement obligations, including with respect to workers’ compensation claims, or the incurrence of other Indebtedness with respect to

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	reimbursement type obligations regarding workers’ compensation claims, such obligations are reimbursed within 30 days following such drawing or incurrence;
	(11) the incurrence by us or any of our Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness is extinguished within five business days;
	(12) the incurrence of Indebtedness arising from agreements of ours or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, holdback, contingency payment obligations or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or Capital Stock of ours or any Restricted Subsidiary;
	(13) the incurrence of Indebtedness or the issuance of any Disqualified Stock or preferred stock by any Restricted Subsidiary, in an amount not to exceed $10.0 million at any time outstanding;
	(14) the incurrence of Indebtedness resulting from endorsements of negotiable instruments for collection in the ordinary course of business;
	(15) Indebtedness, Disqualified Stock or preferred stock of Persons that are acquired by us or any Restricted Subsidiary (including by way of merger or consolidation) in accordance with the terms of the indenture; provided that such Indebtedness, Disqualified Stock or preferred stock is not incurred in contemplation of such acquisition or merger; and provided further that after giving effect to such acquisition or merger, either

	(a) we or such Restricted Subsidiary would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the applicable Fixed Charge Coverage Ratio test set forth in the first paragraph of this covenant; or
	(b) our Fixed Charge Coverage Ratio after giving pro forma effect to such acquisition or merger would be greater than our actual Fixed Charge Coverage Ratio immediately prior to such acquisition or merger;

	(16) Indebtedness of ours or a Restricted Subsidiary in respect of netting services, overdraft protection and otherwise in connection with deposit accounts; provided that such Indebtedness remains outstanding for ten business days or less;
	(17) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction;
	(18) the incurrence or issuance by us or any of our Restricted Subsidiaries of additional Indebtedness, Disqualified Stock or preferred stock in an aggregate principal amount (or accreted value or liquidation preference, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness and all Replacement Preferred Stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock incurred or issued pursuant to this clause (18), not to exceed $100.0 million; provided that after giving effect to any incurrence of Indebtedness by us or our Restricted Subsidiaries (other than Select and its Restricted Subsidiaries) under this clause (18), our Leverage Ratio is less than or equal to 6.5 to 1.0; and
	(19) the incurrence by us or any of its Restricted Subsidiaries of Indebtedness in the form of loans from a Captive Insurance Subsidiary.

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	(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
	(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and
	(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

	(a) the Fair Market Value of such assets at the date of determination; and
	(b) the amount of the Indebtedness of the other Person.

	Limitation on Certain Subordination Terms in Subordinated Indebtedness

	Liens

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	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

	(1) pay dividends or make any other distributions on its Capital Stock to us or any of our Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to us or any of our Restricted Subsidiaries;
	(2) make loans or advances to us or any of our Restricted Subsidiaries; or
	(3) sell, lease or transfer any of its properties or assets to us or any of our Restricted Subsidiaries.

	(1) agreements governing Existing Indebtedness and the Credit Agreement as in effect on the Issue Date;
	(2) the indenture and the notes;
	(3) applicable law, rule, regulation or order;
	(4) any instrument or agreement governing Indebtedness or Capital Stock of a Restricted Subsidiary acquired by us or any of our Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or any of its Subsidiaries, or the property or assets of the Person or any of its Subsidiaries, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;
	(5) customary non-assignment provisions in contracts, leases, subleases, licenses and sublicenses entered into in the ordinary course of business;
	(6) customary restrictions in leases (including capital leases), security agreements or mortgages or other purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property purchased or leased of the nature described in clause (3) of the preceding paragraph;
	(7) any agreement for the sale or other disposition of all or substantially all the Capital Stock or the assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;
	(8) any instrument or agreement governing Permitted Refinancing Indebtedness; provided that the restrictions contained therein are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
	(9) Liens permitted to be incurred under the provisions of the covenant described above under the caption “— Liens” that limit the right of the debtor to dispose of the assets subject to such Liens;
	(10) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements, which limitation is applicable only to the assets that are the subject of such agreements;
	(11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
	(12) customary provisions imposed on the transfer of copyrighted or patented materials;
	(13) customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Issuer or any Restricted Subsidiary;

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	(14) Indebtedness or other contractual requirements of a Receivables Subsidiary in connection with a Qualified Receivables Transaction; provided that such restrictions apply only to such Receivables Subsidiary;
	(15) contracts entered into in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of ours or any Restricted Subsidiary of ours in any manner material to us or any Restricted Subsidiary of ours;
	(16) restrictions on the transfer of property or assets required by any regulatory authority having jurisdiction over us or any Restricted Subsidiary of ours or any of their businesses;
	(17) any instrument or agreement governing Indebtedness or preferred stock of Select or any of its Restricted Subsidiaries that is incurred or issued subsequent to the Issue Date and not in violation of the covenant described under “— Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”; provided that such restrictions, taken as a whole, either (i) are no more restrictive in the aggregate than those contained in the Credit Agreement on the Issue Date or (ii) will not materially impair Select’s ability to make dividends to us in an amount sufficient to make scheduled payments of cash interest on the notes, in each case, as determined in good faith by the Board of Directors whose determination shall be conclusive;
	(18) any encumbrance or restriction imposed on any Subsidiary of ours that is of the type referred to in clause (3) of the definition of “Subsidiary” by (and for the benefit of) us or a Restricted Subsidiary; and
	(19) any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the Indebtedness, preferred stock, Liens, agreements, contracts, licenses, leases, subleases, instruments or obligations referred to in clauses (1), (2), (4) through (15), (17) and (18) above; provided, however, that such amendments, modifications, restatements, renewals, in creases, supplements, refundings, replacements or refinancings are in the good faith judgment of our Board of Directors, whose determination shall be conclusive, not materially more restrictive, taken as a whole, than those restrictions contained in the Indebtedness, preferred stock, Liens, agreements, contracts, licenses, leases, subleases, instruments or obligations referred to in clauses (1), (2), (4) through (15), (17) and (18) above, as applicable prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

	Merger, Consolidation or Sale of Assets

	(1) either: (a) we are the surviving entity; or (b) the Person formed by or surviving any such consolidation or merger (if other than us) or to which such sale, assignment, transfer, conveyance or other disposition has been made is an entity organized or existing under the laws of the United States, any state of the United States or the District of Columbia;
	(2) the Person formed by or surviving any such consolidation or merger (if other than us) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of our under the notes, the indenture and the registration rights agreement pursuant to agreements reasonably satisfactory to the trustee; provided, however, that at all times, a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia must be a co-issuer or the issuer of the notes if such surviving Person is not a corporation;
	(3) immediately after such transaction, no Default or Event of Default exists; and
	(4) we or the Person formed by or surviving any such consolidation or merger (if other than us), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the

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	date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period:

	(a) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of indebtedness and issuance of disqualified stock and preferred stock”; or
	(b) have a Fixed Charge Coverage Ratio that is greater than our actual Fixed Charge Coverage Ratio immediately prior to such transaction.

	(1) a merger of us with an Affiliate solely for the purpose of our reincorporating in another jurisdiction;
	(2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among us and our Restricted Subsidiaries; and
	(3) transfers of accounts receivable and related assets of the type specified in the definition of Qualified Receivables Transaction (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction.

	Transactions with Affiliates

	(1) the Affiliate Transaction is on terms that, taken as a whole, are not materially less favorable to us or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by us or such Restricted Subsidiary with an unrelated Person; and
	(2) we deliver to the trustee:

	(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20.0 million, an officers’ certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the members of our Board of Directors, together with a certified copy of the resolutions of our Board of Directors approving such Affiliate Transaction or Affiliate Transactions; and
	(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30.0 million, an opinion as to the fairness to us or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

	(1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by us or any of our Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;
	(2) transactions between or among us and our Restricted Subsidiaries;

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	(3) transactions with a Person (other than an Unrestricted Subsidiary of ours) that is an Affiliate of ours solely because we own, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;
	(4) payment of reasonable directors’ fees;
	(5) any issuance of our Equity Interests (other than Disqualified Stock) to Affiliates of ours;
	(6) Permitted Investments or Restricted Payments that do not violate the provisions of the indenture described above under the caption “— Restricted payments”;
	(7) payments by us or any of our Restricted Subsidiaries to Welsh, Carson, Anderson & Stowe IX, L.P., Thoma Cressey Equity Partners and/or any of their Affiliates for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by the majority of the disinterested members of our Board of Directors in good faith in an aggregate amount for all such fees not to exceed 2.00% of the aggregate transaction value in respect of which such services are rendered;
	(8) loans (or cancellation of loans) or advances to employees in the ordinary course of business;
	(9) transactions with customers, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services, in each case which are in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the indenture, and which are fair to us or our Restricted Subsidiaries, as applicable, in the reasonable determination of our Board of Directors, chief executive officer or chief financial officer or our Restricted Subsidiaries, as applicable, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;
	(10) the existence of, or the performance by us or any Restricted Subsidiary of their obligations, if any, under the terms of, any subscription, registration rights or stockholders agreement, partnership agreement or limited liability company agreement to which we or any Restricted Subsidiary is a party as of the Issue Date and which is disclosed under the caption “Certain Relationships and Related Transactions” in the offering memorandum for the notes and any similar agreements which we, any Restricted Subsidiary, or any direct or indirect parent company of ours may enter into thereafter; provided, however, that the entering into by us or any Restricted Subsidiary or the performance by us or any Restricted Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date will only be permitted by this clause to the extent that the terms of any such amendment or new agreement, taken as a whole, are not materially disadvantageous to the holders of the notes, as determined in good faith by our Board of Directors, chief executive officer or chief financial officer;
	(11) the Transactions, including all payments made or to be made in connection with the Transactions as described in the offering memorandum for the notes;
	(12) any Qualified Receivables Transaction;
	(13) Permitted Payments to Parent;
	(14) any management, consulting, monitoring, financial advisory, financing, underwriting or placement services or any other investment banking, banking or similar services involving us and any of our Restricted Subsidiaries (including without limitation any payments in cash, Equity Interests or other consideration made by us or any of our Restricted Subsidiaries in connection therewith) on the one hand and the Permitted Holders on the other hand, which services (and payments and other transactions in connection therewith) are approved as fair to us or such Restricted Subsidiary by a majority of the members of our Board of Directors in good faith;
	(15) the issuance of our Equity Interests (other than Disqualified Stock) or any Restricted Subsidiary for compensation purposes;

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	(16) any lease entered into between us or any Restricted Subsidiary, as lessee and any Affiliate of ours, as lessor, which is approved by a majority of the disinterested members of our Board of Directors in good faith;
	(17) intellectual property licenses in the ordinary course of business;
	(18) Existing Indebtedness and any other obligations pursuant to an agreement existing on the Issue Date and described in the offering memorandum for the notes, including any amendment thereto (so long as such amendment is not disadvantageous to the holders of the notes in any material respect);
	(19) payments by us or any of our Restricted Subsidiaries of reasonable insurance premiums to, and any borrowings or dividends received from, any Captive Insurance Subsidiary; and
	(20) transactions in which we or any Restricted Subsidiary delivers to the trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to us or such Restricted Subsidiary from a financial point of view and which are approved by a majority of the disinterested members of our Board of Directors in good faith.

	Business Activities

	Future Guarantors

	(1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of ours, if the sale or other disposition of all or substantially all of the assets of that Guarantor complies with the “Asset Sales” covenant described above;
	(2) if we designate any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the provisions of the indenture described below under “— Designation of restricted and unrestricted subsidiaries”;
	(3) in connection with any sale of Capital Stock of a Guarantor to a Person that results in the Guarantor no longer being a Subsidiary of ours, if the sale of such Capital Stock of that Guarantor complies with the “Asset Sales” provisions of the Indenture;
	(4) if we exercise our Legal Defeasance option or our Covenant Defeasance option as described under “— Legal defeasance and covenant defeasance” or if our obligations under the Indenture are discharged in accordance with the terms of the Indenture; or
	(5) upon the release or discharge of the Guarantee by such Restricted Subsidiary of Indebtedness of ours or the repayment of the Indebtedness, in each case, which resulted in the obligation to Guarantee the Notes.

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	Designation of Restricted and Unrestricted Subsidiaries

	Payments for Consent

	Reports; Quarterly Earnings Calls

	(1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K, if we were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes our consolidated financial condition and results of operation and, with respect to the annual information only, a report thereon by our independent registered public accountants, and
	(2) all current reports that would be required to be filed with the SEC on Form 8-K if we were required to file such reports.

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	(1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the notes, whether or not prohibited by the subordination provisions of the indenture;
	(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes, whether or not prohibited by the subordination provisions of the indenture;
	(3) failure by us or any of our Restricted Subsidiaries to comply with the provisions described above under the caption “— Certain covenants — Merger, consolidation or sale of assets”;
	(4) failure by us or any of our Restricted Subsidiaries for 60 days after notice to us by the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the other agreements in the indenture;
	(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by us or any of our Significant Subsidiaries (or the payment of which is guaranteed by us or any of our Significant Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default;

	(a) is caused by a failure to pay principal at the final Stated Maturity of such Indebtedness (a “Payment Default”); or
	(b) results in the acceleration of such Indebtedness prior to its express maturity;

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	and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25.0 million or more;

	(6) with respect to any judgment or decree for the payment of money (net of any amount covered by insurance issued by a reputable and creditworthy insurer that has not contested coverage or reserved rights with respect to an underlying claim) in excess of $25.0 million or its foreign currency equivalent against us or any Significant Subsidiary, the failure by us or such Significant Subsidiary, as applicable, to pay such judgment or decree, which judgment or decree has remained outstanding for a period of 60 days after such judgment or decree became final and nonappealable without being paid, discharged, waived or stayed; and
	(7) certain events of bankruptcy or insolvency described in the indenture with respect to us or any Subsidiary that is a Significant Subsidiary.

	(1) such holder has previously given the trustee notice that an Event of Default is continuing;
	(2) holders of at least 25% in aggregate principal amount of the then outstanding notes have requested the trustee to pursue the remedy;
	(3) such holders have offered the trustee reasonable security or indemnity against any loss, liability or expense;
	(4) the trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and
	(5) holders of a majority in aggregate principal amount of the then outstanding notes have not given the trustee a direction inconsistent with such request within such 60-day period.

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	(1) the rights of holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such notes when such payments are due from the trust referred to below;
	(2) our obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;
	(3) the rights, powers, trusts, duties and immunities of the trustee, and our obligations in connection therewith; and
	(4) the Legal Defeasance provisions of the indenture.

	(1) we must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and we must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date;
	(2) in the case of Legal Defeasance, we must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) we have received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
	(3) in the case of Covenant Defeasance, we must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding notes will not

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	recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
	(4) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement (including, without limitation, the Credit Agreement) or instrument (other than the indenture) to which we or any of our Subsidiaries is a party or by which we or any of our Subsidiaries is bound;
	(5) we must deliver to the trustee an officers’ certificate stating that the deposit was not made by us with the intent of preferring the holders of notes over the other creditors of ours with the intent of defeating, hindering, delaying or defrauding any creditors of us or others; and
	(6) we must deliver to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

	(1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver;
	(2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the optional redemption of the notes as described under the caption “— Optional redemption” (other than provisions relating to the notice period for consummating an optional redemption of the notes);
	(3) reduce the rate of or change the time for payment of interest, including default interest, on any note;
	(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration);
	(5) make any note payable in money other than that stated in the notes;
	(6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the notes; or
	(7) make any change in the preceding amendment and waiver provisions.

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	(1) to cure any ambiguity, defect or inconsistency;
	(2) to provide for uncertificated notes in addition to or in place of certificated notes;
	(3) to provide for the assumption of our obligations to holders of notes in the case of a merger or consolidation or sale of all or substantially all of our assets, as applicable;
	(4) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder;
	(5) to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;
	(6) to conform the text of the indenture, or the notes to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the indenture or the notes;
	(7) to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the Issue Date;
	(8) to add Guarantees with respect to the notes; or
	(9) to issue the notes.

	(1) either:

	(a) all notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust and thereafter repaid to us, have been delivered to the trustee for cancellation; or
	(b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and we have irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the notes not delivered to the trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption;

	(2) no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which we are a party or by which we are bound;
	(3) we have paid or caused to be paid all sums payable by it under the indenture; and
	(4) we have delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or on the redemption date, as the case may be.

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	(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and
	(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

	(1) the sale, lease (other than operating leases), conveyance or other disposition of any assets or rights outside of the ordinary course of business; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of us and our Restricted Subsidiaries taken as a whole

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	will be governed by the provisions of the indenture described above under the caption “— Repurchase at the option of holders — Change of control” and/or the provisions described above under the caption “— Certain covenants — Merger, consolidation or sale of assets” and not by the provisions of the Asset Sale covenant; and
	(2) the issuance of Equity Interests in any of our Restricted Subsidiaries or the sale of Equity Interests in any of our Restricted Subsidiaries (other than directors’ qualifying Equity Interests or Equity Interests required by applicable law to be held by a Person other than us or a Restricted Subsidiary).

	(1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $5.0 million;
	(2) a transfer of assets between or among us and our Restricted Subsidiaries;
	(3) an issuance of Equity Interests by a Restricted Subsidiary of ours to us or to a Restricted Subsidiary of ours;
	(4) the sale or lease of products, services or accounts receivable (including at a discount) in the ordinary course of business and any sale or other disposition of damaged, worn-out, negligible, surplus or obsolete assets in the ordinary course of business;
	(5) the sale or other disposition of Cash Equivalents;
	(6) a Restricted Payment that does not violate the covenant described above under the caption “— Certain covenants — Restricted payments” or a Permitted Investment;
	(7) a sale and leaseback transaction with respect to any assets within 180 days of the acquisition of such assets;
	(8) any exchange of like-kind property of the type described in Section 1031 of the Code for use in a Permitted Business;
	(9) the sale or disposition of any assets or property received as a result of a foreclosure by us or any of our Restricted Subsidiaries on any secured Investment or any other transfer of title with respect to any secured Investment in default;
	(10) the licensing of intellectual property in the ordinary course of business or in accordance with industry practice;
	(11) the sale, lease, conveyance, disposition or other transfer of (a) the Capital Stock of, or any Investment in, any Unrestricted Subsidiary or (b) Permitted Investments made pursuant to clause (15) of the definition thereof;
	(12) surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind;
	(13) leases or subleases to third persons in the ordinary course of business that do not interfere in any material respect with the business of us or any of our Restricted Subsidiaries;
	(14) sales of accounts receivable and related assets of the type specified in the definition of Qualified Receivables Transaction to a Receivables Subsidiary for the Fair Market Value thereof, less amounts required to be established as reserves and customary discounts pursuant to contractual agreements with entities that are not Affiliates of ours entered into as part of a Qualified Receivables Transaction; and
	(15) transfers of accounts receivable and related assets of the type specified in the definition of Qualified Receivables Transaction (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction.

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	(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;
	(2) with respect to a partnership, the Board of Directors of the general partner of the partnership;
	(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and
	(4) with respect to any other Person, the board or committee of such Person serving a similar function.

	(1) in the case of a corporation, corporate stock;
	(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
	(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
	(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

	(1) United States dollars or, in the case of any Restricted Subsidiary which is not a Domestic Subsidiary, any other currencies held from time to time in the ordinary course of business;
	(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than 12 months from the date of acquisition;
	(3) direct obligations issued by any state of the United States of America or any political subdivision of any such state, or any public instrumentality thereof, in each case having maturities of not more than 12 months from the date of acquisition;
	(4) certificates of deposit and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank that has capital and surplus of not less than $500.0 million;

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	(5) repurchase obligations with a term of not more than one year for underlying securities of the types described in clauses (2) and (4) above entered into with any financial institution meeting the qualifications specified in clause (4) above;
	(6) commercial paper having one of the two highest ratings obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and, in each case, maturing within 12 months after the date of acquisition;
	(7) Indebtedness or preferred stock issued by Persons with a rating of “A” or higher from Standard & Poor’s Rating Services or “A2” or higher from Moody’s Investors Service, Inc. with maturities of 12 months or less from the date of acquisition; and
	(8) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition.

	(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of us and our Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act) other than Permitted Holders;
	(2) the adoption of a plan relating to the liquidation or dissolution of us;
	(3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any “person” (as defined above), other than Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 40% of our Voting Stock, measured by voting power rather than number of shares, unless the Permitted Holders are the Beneficial Owners of a greater percentage of our Voting Stock; provided, however, for purposes of this clause (3), each Person will be deemed to beneficially own any Voting Stock of another Person held by one or more of its Subsidiaries; or
	(4) the first day on which a majority of the members of our Board of Directors are not Continuing Directors.

	(1) the Fixed Charges of such Person and its Restricted Subsidiaries for the Measurement Period; plus
	(2) the consolidated income tax expense of such Person and its Restricted Subsidiaries for the Measurement Period; plus
	(3) the consolidated depreciation expense of such Person and its Restricted Subsidiaries for the Measurement Period; plus
	(4) the consolidated amortization expense of such Person and its Restricted Subsidiaries for the Measurement Period; plus
	(5) fees, costs and expenses paid or payable in cash by us or any of our Subsidiaries during the Measurement Period in connection with the Transactions (including, without limitation, retention payments paid as an incentive to retained employees in connection with the Transactions); plus
	(6) other non-cash expenses and charges for the Measurement Period reducing Consolidated Net Income (excluding any such non-cash item to the extent representing an accrual or reserve for potential

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	cash items in any future period or amortization of a prepaid cash item that was paid in a prior period); plus
	(7) any non-recurring out-of-pocket expenses or charges for the Measurement Period relating to any offering of Equity Interests by us or any direct or indirect parent of ours or merger, recapitalization or acquisition transactions made by us or any of our Restricted Subsidiaries, or any Indebtedness incurred by us or any of our Restricted Subsidiaries (in each case, whether or not successful); plus
	(8) all fees paid by us pursuant to clauses (8) and (15) of the covenant described under “Certain covenants — Transactions with affiliates”; plus
	(9) Consolidated Net Income attributable to minority interests of a Restricted Subsidiary (less the amount of any mandatory cash distribution with respect to any minority interest other than in connection with a proportionate discretionary cash distribution with respect to the interest held by us or any Restricted Subsidiary); plus
	(10) the amount of any restructuring charges or reserves (which, for the avoidance of doubt, shall include retention, severance, systems establishment cost, contract termination costs, including future lease commitments, and costs to consolidate facilities and relocate employees); minus
	(11) without duplication, other non-cash items (other than the accrual of revenue in accordance with GAAP consistently applied in the ordinary course of business) increasing Consolidated Net Income for the Measurement Period (excluding any such non-cash item to the extent it represents the reversal of an accrual or reserve for potential cash item in any prior period).

	(1) the Net Income (but not loss) of any other Person that is not a Restricted Subsidiary of such specified Person or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of the specified Person;
	(2) the Net Income of any Restricted Subsidiary of such specified Person will be excluded to the extent that the declaration or payment of dividends or other distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, other than any restrictions permitted under the covenant described under “Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”; provided that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash to (or to the extent converted into cash by) such Person or a Restricted Subsidiary thereof (subject to provisions of this clause (2)) during such period, to the extent not previously included therein;
	(3) the cumulative effect of a change in accounting principles will be excluded;
	(4) any fees or expenses (including amortization of deferred financing fees and expenses) incurred in connection with the Transactions and the amortization of any amounts required or permitted by Accounting Principles Board Opinions Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with the Transactions) and 17 (including non-cash charges relating to intangibles and goodwill), in each case in connection with the Transactions, will be excluded;
	(5) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its

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	Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries will be excluded;
	(6) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss will be excluded;
	(7) income or losses attributable to discontinued operations (including, without limitation, operations disposed during such period whether or not such operations were classified as discontinued) will be excluded;
	(8) all extraordinary gains and losses will be excluded;
	(9) any non-cash charges (i) attributable to applying the purchase method of accounting in accordance with GAAP, (ii) resulting from the application of FAS 142 or FAS 144, and (iii) relating to the amortization of intangibles resulting from the application of FAS 141, will be excluded;
	(10) all non-cash charges relating to employee benefit or other management or stock compensation plans of ours or a Restricted Subsidiary (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense incurred in a prior period) will be excluded to the extent that such non-cash charges are deducted in computing such Consolidated Net Income; provided, further that if we or any Restricted Subsidiary of ours makes a cash payment in respect of such non-cash charge in any period, such cash payment will (without duplication) be deducted from our Consolidated Net Income for such period; and
	(11) all unrealized gains and losses relating to hedging transactions and mark-to-market of Indebtedness denominated in foreign currencies resulting from the application of FAS 52 shall be excluded.

	(1) was a member of such Board of Directors on the Issue Date; or
	(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election; or
	(3) was designated or appointed with the approval of Permitted Holders holding a majority of the Voting Stock of all of the Permitted Holders.

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	(1) Investments, acquisitions, mergers, consolidations and dispositions that have been made by the specified Person or any of its Restricted Subsidiaries, or any Person or any of its Restricted Subsidiaries acquired by, merged or consolidated with the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect, including giving effect to Pro Forma Cost Savings, as if they had occurred on the first day of the four-quarter reference period;
	(2) the Consolidated Adjusted EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;
	(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date;
	(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;
	(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and
	(6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness).

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	(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, net of interest income, whether paid or accrued, including, without limitation, original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all cash payments made or received pursuant to Hedging Obligations in respect of interest rates, and excluding amortization of deferred financing costs; plus
	(2) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, but only to the extent that such Guarantee or Lien is called upon; plus
	(3) the product of (A) all cash dividends paid on any series of preferred stock of such Person or any of its Restricted Subsidiaries (other than to us or a Restricted Subsidiary of ours), in each case, determined on a consolidated basis in accordance with GAAP multiplied by (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of us and our Restricted Subsidiaries expressed as a decimal; plus
	(4) the amount of dividends paid by us and our Restricted Subsidiaries pursuant to clause (19) of the covenant described under “— Certain covenants — Restricted payments.”

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	(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;
	(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and
	(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

	(1) in respect of borrowed money;
	(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) (other than letters of credit issued in respect of trade payables);
	(3) in respect of banker’s acceptances;
	(4) representing Capital Lease Obligations;
	(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than twelve months after such property is acquired or such services are completed (except any such balance that constitutes a trade payable or similar obligation to a trade creditor); or
	(6) representing the net obligations under any Hedging Obligations,

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	(1) Investments, acquisitions, mergers, consolidations and dispositions that have been made by the specified Person or any of its Restricted Subsidiaries, or any Person or any of its Restricted Subsidiaries acquired by, merged or consolidated with the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Leverage Ratio Calculation Date will be given pro forma effect, including giving effect to Pro Forma Cost Savings, as if they had occurred on the first day of the four-quarter reference period;
	(2) the Consolidated Adjusted EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Leverage Ratio Calculation Date, will be excluded;
	(3) any Person that is a Restricted Subsidiary on the Leverage Ratio Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period; and
	(4) any Person that is not a Restricted Subsidiary on the Leverage Ratio Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period.

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	(1) any available tax credits or deductions and any tax sharing arrangements;
	(2) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale;
	(3) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP;
	(4) any reserve for adjustment in respect of any liabilities associated with the asset disposed of in such transaction and retained by us or any Restricted Subsidiary after such sale or other disposition thereof;
	(5) any distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale; and
	(6) in the event that a Restricted Subsidiary consummates an Asset Sale and makes a pro rata payment of dividends to all of its stockholders from any cash proceeds of such Asset Sale, the amount of dividends paid to any stockholder other than us or any other Restricted Subsidiary, provided that any net proceeds of an Asset Sale by a Subsidiary that are subject to restrictions on repatriation to us will not be considered Net Proceeds for so long as such proceeds are subject to such restrictions.

	(1) as to which neither we nor any of our Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or (b) is directly or indirectly liable as a guarantor or otherwise; and
	(2) as to which the lenders have been notified in writing or have agreed in writing (in the agreement relating thereto or otherwise) that they will not have any recourse to the stock or assets of us or any of our Restricted Subsidiaries except as permitted by the definition of “Unrestricted Subsidiary.”

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	(1) any Investment in us or in a Restricted Subsidiary of ours;
	(2) any Investment in Cash Equivalents;
	(3) any Investment by us or any Restricted Subsidiary of ours in a Person, if as a result of such Investment:

	(a) such Person becomes a Restricted Subsidiary of ours; or
	(b) such Person, in one transaction or a series of transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, us or a Restricted Subsidiary of ours;

	(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales”;
	(5) any Investment solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of ours;
	(6) any Investments received in compromise, settlement or resolution of (A) obligations of trade debtors or customers that were incurred in the ordinary course of our business or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade debtor or customer, (B) litigation, arbitration or other disputes with Persons who are not Affiliates or (C) as a result of a foreclosure by us or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
	(7) Investments represented by Hedging Obligations entered into to protect against fluctuations in interest rates, exchange rates and commodity prices;
	(8) any Investment in payroll, travel and similar advances to cover business-related travel expenses, moving expenses or other similar expenses, in each case incurred in the ordinary course of business;
	(9) Investments in receivables owing to us or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as we or any such Restricted Subsidiary deem reasonable under the circumstances;
	(10) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course of business;
	(11) obligations of one or more officers or other employees of ours or any of its Restricted Subsidiaries in connection with such officer’s or employee’s acquisition of shares of our Capital Stock or Capital Stock of any direct or indirect parent company of ours so long as no cash or other assets are paid by us or any of our Restricted Subsidiaries to such officers or employees in connection with the acquisition of any such obligations;
	(12) loans or advances to and guarantees provided for the benefit of employees made in the ordinary course of business of us or the Restricted Subsidiary of ours in an aggregate principal amount not to exceed $5.0 million at any one time outstanding;
	(13) Investments existing as on the Issue Date or an Investment consisting of any extension, modification or renewal of any Investment existing as of the Issue Date (excluding any such extension, modification or renewal involving additional advances, contributions or other investments of cash or property or other increases thereof unless it is a result of the accrual or accretion of interest or original issue discount or payment-in-kind pursuant to the terms, as of the Issue Date, of the original Investment so extended, modified or renewed);
	(14) repurchases of the notes;

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	(15) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (15) that are at the time outstanding not to exceed $50.0 million; provided, however, that if any Investment pursuant to this clause (15) is made in any Person that is not a Restricted Subsidiary of ours at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of ours after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (15) for so long as such Person continues to be a Restricted Subsidiary (it being understood that if such Person thereafter ceases to be a Restricted Subsidiary of ours, such Investment will again be deemed to have been made pursuant to this clause (15));
	(16) the acquisition by a Receivables Subsidiary in connection with a Qualified Receivables Transaction of Equity Interests of a trust or other Person established by such Receivables Subsidiary to effect such Qualified Receivables Transaction; and any other Investment by us or a Subsidiary of ours in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Transaction customary for such transactions;
	(17) payments to any Captive Insurance Subsidiary in an amount equal to (i) the capital required under the applicable laws or regulations of the jurisdiction in which such Captive Insurance Subsidiary is formed or determined by independent actuaries as prudent and necessary capital to operate such Captive Insurance Subsidiary plus (ii) any reasonable general corporate and overhead expenses of such Captive Insurance Subsidiary;
	(18) Investments in joint ventures in an amount not to exceed $80.0 million outstanding at any time; provided that (i) substantially all of the business activities of any such joint venture consists of owning or operating facilities of us or a Restricted Subsidiary of ours and (ii) a majority of the Voting Stock of such Person is owned by us, our Restricted Subsidiaries and/or other Persons that are not our Affiliates; and
	(19) Guarantees of our Indebtedness of us or the Indebtedness of a Restricted Subsidiary permitted under the covenant entitled “— Certain covenants — Incurrence of indebtedness and issuance of disqualified stock and preferred stock” and performance guarantees in the ordinary course of business.

	(1) Liens on our assets or any of the assets of our Restricted Subsidiaries securing any Indebtedness (x) of a Restricted Subsidiary (including any Guarantee by us in respect thereof) that was permitted by the terms of the indenture to be incurred or (y) of ours permitted under clauses (1), (10) and (18) of the covenant described above under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock”;
	(2) Liens in favor of us or any Restricted Subsidiary;
	(3) Liens on property or assets of a Person, plus renewals and extensions of such Liens, existing at the time such Person is merged with or into, consolidated with or acquired by us or any Restricted Subsidiary of ours; provided that such Liens were in existence prior to the contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person merged into, consolidated with or acquired by us or such Subsidiary;
	(4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by us or any Restricted Subsidiary of ours; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition;
	(5) Liens (including deposits and pledges) to secure the performance of public or statutory obligations, progress payments, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business;
	(6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled “— Certain covenants — Incurrence of indebtedness and

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	issuance of disqualified stock and preferred stock” covering only the assets acquired, constructed or improved with or financed by such Indebtedness;
	(7) Liens existing on the Issue Date, plus renewals and extensions of such Liens;
	(8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;
	(9) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s, materialmen’s, laborers’, employees’, suppliers’ and mechanics’ Liens, in each case, incurred in the ordinary course of business;
	(10) survey exceptions, title defects, encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that do not materially interfere with the ordinary conduct of our business and the business of our Subsidiaries, taken as a whole;
	(11) Liens created for the benefit of (or to secure) the notes;
	(12) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture; provided, however, that:

	(a) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Indebtedness (plus improvements and accessions to, such property or proceeds or distributions thereof); and
	(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;

	(13) Liens incurred in the ordinary course of our business or the business of any Subsidiary of ours with respect to obligations that do not exceed $10.0 million at any one time outstanding;
	(14) Liens incurred in connection with a Qualified Receivables Transaction (which, in the case of the Issuer and its Restricted Subsidiaries (other than Receivables Subsidiaries) shall be limited to receivables and related assets referred to in the definition of Qualified Receivables Transaction);
	(15) security for the payment of workers’ compensation, unemployment insurance, other social security benefits or other insurance-related obligations (including, but not limited to, in respect of deductibles, self-insured retention amounts and premiums and adjustments thereto) entered into in the ordinary course of business;
	(16) deposits or pledges in connection with bids, tenders, leases and contracts (other than contracts for the payment of money) entered into in the ordinary course of business;
	(17) zoning restrictions, easements, licenses, reservations, provisions, encroachments, encumbrances, protrusion permits, servitudes, covenants, conditions, waivers, restrictions on the use of property or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee), in each case, not materially interfering with the ordinary conduct of our business and the business of our Subsidiaries, taken as a whole;
	(18) leases, subleases, licenses or sublicenses to third parties entered into in the ordinary course of business;
	(19) Liens securing Hedging Obligations entered into to protect against fluctuations in interest rates, exchange rates and commodity prices;

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	(20) Liens arising out of judgments, decrees, orders or awards in respect of which we shall in good faith be prosecuting an appeal or proceedings for review which appeal or proceedings shall not have been finally terminated, or if the period within which such appeal or proceedings may be initiated shall not have expired;
	(21) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligation of such Unrestricted Subsidiary;
	(22) Liens on the assets of Restricted Subsidiaries securing our Indebtedness or the Indebtedness of our Restricted Subsidiaries that were permitted by the terms of the indenture to be incurred;
	(23) Liens arising from filing Uniform Commercial Code financing statements regarding leases;
	(24) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection and (ii) in favor of banking institution encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry; and
	(25) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to brokerage accounts incurred in the ordinary course of business and not for speculative purposes.

(1) payments, directly or indirectly, to any direct or indirect parent company of ours to be used by such direct or indirect parent company of ours to pay (x) consolidated, combined or similar federal, state and local taxes payable by such parent company and directly attributable to (or arising as a result of) the operations of us and our Subsidiaries and (y) franchise or similar taxes and fees of such parent company required to maintain such parent company’s corporate or other existence and other taxes; provided that:

	(a) the amount of such dividends, distributions or advances paid shall not exceed the amount (x) that would be due with respect to a consolidated, combined or similar federal, state or local tax return that included us and our Subsidiaries if we were a corporation for federal, state and local tax purposes plus (y) the actual amount of such franchise or similar taxes and fees of such parent company required to maintain such parent company’s corporate or other existence and other taxes, each as applicable; and
	(b) such payments are used by such parent company for such purposes within 90 days of the receipt of such payments; and

(2) payments, directly or indirectly, to any direct or indirect parent company of ours if the proceeds thereof are used to pay general corporate and overhead expenses (including salaries and other compensation of employees) incurred in the ordinary course of its business or of the business of such parent company of ours as a direct or indirect holding company for us or used to pay fees and expenses (other than to Affiliates) relating to any unsuccessful debt or equity financing.

	(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees, commissions, discounts and expenses, including premiums, incurred in connection therewith);
	(2) either (a) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged or (b) all scheduled payments on or in respect of such Permitted

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	Refinancing Indebtedness (other than interest payments) shall be at least 91 days following the final scheduled maturity of the notes;
	(3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged; and
	(4) such Indebtedness is incurred

	(a) by us or the applicable Restricted Subsidiary who is the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; or
	(b) by any Restricted Subsidiary if the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is a Restricted Subsidiary.

	(1) Cash Equivalents;
	(2) the Fair Market Value of assets that are used or useful in the Permitted Business; and
	(3) the Fair Market Value of the Capital Stock of any Person engaged primarily in a Permitted Business if, in connection with the receipt by us or any of our Restricted Subsidiaries of such Capital Stock, such Person becomes a Restricted Subsidiary or such Person is merged or consolidated into us or any Restricted Subsidiary;

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	(1) a Receivables Subsidiary (in the case of a transfer by us or any of our Subsidiaries, which transfer may be effected through us or one or more of our Subsidiaries); and
	(2) if applicable, any other Person (in the case of a transfer by a Receivables Subsidiary),

	(1) is guaranteed by us or any Subsidiary of ours (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction);
	(2) is recourse to or obligates us or any Subsidiary of ours in any way other than pursuant to representations, warranties, covenants and indemnities customarily entered into in connection with a Qualified Receivables Transaction; or
	(3) subjects any property or asset of ours or any Subsidiary of ours (other than accounts receivable and related assets as provided in the definition of Qualified Receivables Transaction), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities customarily entered into in connection with a Qualified Receivables Transaction; and

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	(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof);
	(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof); and
	(3) any third party professional corporation or similar business entity with which we or any Subsidiary of ours has an exclusive management arrangement under which it manages the business of such entity and whose financial statements are consolidated with our financial statements for financial reporting purposes (it being understood that the limitations set forth in clause (2) of the definition of Consolidated Net Income shall not apply to any such entity).

	(1) has no Indebtedness other than Non-Recourse Debt; provided that this clause (1) shall be deemed to be satisfied for so long as the total amount of Indebtedness of all Unrestricted Subsidiaries

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	that is not Non-Recourse Debt does not exceed, measured as of the date of incurrence thereof, 1% of Total Assets;
	(2) except with respect to any Indebtedness permitted by clause (1), is not party to any agreement, contract, arrangement or understanding with us or any Restricted Subsidiary of ours unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to us or such Restricted Subsidiary than those permitted under the covenant described above under the caption “— Certain Covenants — Transactions with Affiliates”;
	(3) is a Person with respect to which neither we nor any of our Restricted Subsidiaries has any direct or indirect obligation to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and
	(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of ours or any of our Restricted Subsidiaries.

	(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
	(2) the then outstanding principal amount of such Indebtedness.

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	In General

	•	an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the “substantial presence” test under Section 7701(b) of the Code;
	•	a corporation (including an entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
	•	a trust if (1) a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996, was treated as a U.S. person prior to such date and has elected to continue to be treated as a U.S. person

	Payments of Interest

153

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	Sale, Exchange or Retirement of the Notes

	Exchange Offer

	Backup Withholding

	•	fails to furnish its taxpayer identification number (“TIN”) which, for an individual, is ordinarily his or her social security number;
	•	furnishes an incorrect TIN;
	•	is notified by the IRS that it has failed to properly report payments of interest or dividends; or
	•	fails to certify under penalties of perjury that it has furnished a correct TIN and that the IRS has not notified the U.S. Holder that it is subject to backup withholding.

154

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	Definition of Non-U.S. Holders

	Interest Payments

	•	such holder does not directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all of our classes of stock;
	•	such holder is not a controlled foreign corporation that is related to us through stock ownership;
	•	such holder is not a bank that received such notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and
	•	either (1) the non-U.S. Holder certifies in a statement provided to us or our paying agent, under penalties of perjury, that it is not a “United States person” within the meaning of the Code and provides its name and address (generally on IRS Form W-8BEN or applicable successor form), or (2) a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business and holds the notes on behalf of the non-U.S. Holder certifies to us or our paying agent under penalties of perjury that it has received from the non-U.S. Holder a statement, under penalties of perjury, that such holder is not a “United States person” and provides us or our paying agent with a copy of such statement or (3) the non-U.S. Holder holds its notes through a “qualified intermediary” and certain conditions are satisfied.

	Sale or Other Taxable Disposition of Notes

155

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	Backup Withholding and Information Reporting

	•	a United States person;
	•	a controlled foreign corporation for U.S. federal income tax purposes;
	•	a foreign person 50% or more whose gross income is effectively connected with a U.S trade or business for a specified three-year period; or
	•	a foreign partnership, if at any time during its tax year, one or more of its partners are United States persons, as defined in Treasury Regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, the foreign partnership is engaged in a U.S. trade or business.

156

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157

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158

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Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-4
Consolidated Statements of Operations		F-5
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss)		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

Consolidated Balance Sheets		F-40
Consolidated Statements of Operations		F-41
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income		F-42
Consolidated Statements of Cash Flows		F-43
Notes to Consolidated Financial Statements		F-44

F-1

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F-2

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F-3

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				Select
				Medical
				Corporation
				Predecessor					Successor
				December 31,					December 31,
				2004					2005
				(In thousands, except share and
				per share amounts)
ASSETS
Current Assets:
		Cash and cash equivalents		$	247,476				$	35,861
		Restricted cash			7,031					6,345
		Accounts receivable, net of allowance for doubtful accounts of $94,622 and $74,891 in 2004 and 2005, respectively			216,852					256,798
		Current deferred tax asset			59,239					59,135
		Other current assets			18,737					19,725
		Prepaid taxes			—					4,110
		Current assets held for sale			—					13,876
Total Current Assets					549,335					395,850
Property and equipment, net					165,336					248,541
Goodwill					302,069					1,305,210
Other identifiable intangibles					78,304					86,789
Other assets					18,677					70,607
Non-current assets held for sale					—					61,388
Total Assets				$	1,113,721				$	2,168,385
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
		Bank overdrafts		$	—				$	19,355
		Current portion of long-term debt and notes payable			3,557					6,516
		Accounts payable			48,632					60,528
		Accrued payroll			56,554					61,531
		Accrued vacation			23,102					26,983
		Accrued interest			6,472					36,028
		Accrued professional liability			14,627					21,527
		Accrued restructuring			4,924					390
		Accrued other			60,012					69,046
		Income taxes payable			4,474					—
		Due to third party payors			13,266					12,175
		Current liabilities held for sale			—					4,215
Total Current Liabilities					235,620					318,294
Long-term debt, net of current portion					351,033					1,622,373
Non-current deferred tax liability					4,458					19,438
Non-current liabilities held for sale					—					3,817
Total Liabilities					591,111					1,963,922
Commitments and Contingencies
Minority interest in consolidated subsidiary companies					6,667					4,356
Preferred stock — Authorized shares — 25,000,000; Issued Shares — 22,165,256.17					—					444,765
Stockholders’ Equity:
	Common stock, $0.01 par value, 200,000,000 shares authorized, 101,954,000 issued and outstanding (Predecessor) and $0.001 par value, 250,000,000 shares authorized, 205,408,000 shares issued and outstanding (Successor)				1,020					205
	Capital in excess of par				275,281					(299,028	)
	Retained earnings				230,535					48,808
	Accumulated other comprehensive income				9,107					5,357
Total Stockholders’ Equity					515,943					(244,658	)
Total Liabilities and Stockholders’ Equity				$	1,113,721				$	2,168,385

F-4

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			Select Medical Corporation Predecessor													Successor
			Year Ended December 31,
											Period from					Period from
											January 1					February 25
											through					through
											February 24,					December 31,
			2003				2004				2005					2005
			(In thousands)
Net operating revenues			$	1,341,657			$	1,601,524			$	277,736				$	1,580,706
Costs and expenses:
	Cost of services			1,070,700				1,246,249				217,133					1,244,183
	Stock compensation expense			—				—				142,213					10,312
	Long-term incentive compensation			—				—				—					14,453
	General and administrative			44,417				45,856				7,484					34,907
	Bad debt expense			50,697				47,963				6,588					18,213
	Depreciation and amortization			33,663				38,951				5,933					37,922
Total costs and expenses				1,199,477				1,379,019				379,351					1,359,990
Income (loss) from operations				142,180				222,505				(101,615	)				220,716
Other income and expense:
Loss on early retirement of debt				—				—				42,736					—
Merger related charges				—				—				12,025					—
Equity in earnings from joint ventures				(824	)			—				—					—
Other income				—				(1,096	)			(267	)				(1,092	)
Interest income				(936	)			(2,583	)			(523	)				(767	)
Interest expense				25,435				33,299				4,651					102,208
Income (loss) from continuing operations before minority interests and income taxes				118,505				192,885				(160,237	)				120,367
Minority interest in consolidated subsidiary companies				1,661				2,608				330					1,776
Income (loss) from continuing operations before income taxes				116,844				190,277				(160,567	)				118,591
Income tax expense (benefit)				46,238				76,551				(59,794	)				49,336
Income (loss) from continuing operations				70,606				113,726				(100,773	)				69,255
Income from discontinued operations, net of tax				3,865				4,458				522					3,072
Net income (loss)				74,471				118,184				(100,251	)				72,327
Less: Accretion of dividends on preferred stock				—				—				—					23,519
Net income (loss) available to common stockholders			$	74,471			$	118,184			$	(100,251	)			$	48,808

F-5

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																				Accumulated
				Common				Common				Capital in								Other
				Stock				Stock Par				Excess of				Retained				Comprehensive				Comprehensive
				Issued				Value				Par				Earnings				Income (Loss)				Income (Loss)
				(In thousands)
Predecessor, Select Medical Corporation:
Balance at December 31, 2002					93,352			$	934			$	235,716			$	50,155			$	(387	)
	Net income																74,471							$	74,471
	Unrealized loss on available for sale securities																				(49	)			(49	)
	Realized loss on interest rate swap																				313				313
	Changes in foreign currency translation																				5,197				5,197
	Total comprehensive income																							$	79,932
	Issuance of common stock				8,867				88				28,525
	Cash dividends																(3,066	)
	Valuation of non-employee options												2,219
	Tax benefit of stock option exercises												25,059
Balance at December 31, 2003					102,219				1,022				291,519				121,560				5,074
	Net income																118,184							$	118,184
	Unrealized loss on available for sale securities																				(4	)			(4	)
	Realized loss on available for sale securities																				53				53
	Changes in foreign currency translation																				3,984				3,984
	Total comprehensive income																							$	122,217
	Issuance of common stock				3,134				32				18,591
	Cash dividends																(9,209	)
	Repurchase of common stock				(3,399	)			(34	)			(48,024	)
	Valuation of non-employee options												151
	Tax benefit of stock option exercises												13,044
Balance at December 31, 2004					101,954				1,020				275,281				230,535				9,107
	Net loss																(100,251	)						$	(100,251	)
	Changes in foreign currency translation																				(1,019	)			(1,019	)
	Total comprehensive loss																							$	(101,270	)
	Issuance of common stock				267				3				1,020
	Repurchase of non-employee options												(1,617	)
	Tax benefit of stock option exercises												1,507
Balance at February 24, 2005					102,221			$	1,023			$	276,191			$	130,284			$	8,088
Successor:
	Capitalization of Successor Company at February 25, 2005				148,253			$	148			$	(310,092	)
		Issuance of common stock			808				1				808
		Issuance and vesting of restricted stock			56,347				56				10,247
		Stock option expense											9
		Accretion of dividends on preferred stock														$	(23,519	)
		Net income															72,327							$	72,327
		Unrealized gain on interest rate swap																		$	3,539				3,539
		Changes in foreign currency translation																			1,818				1,818
		Total comprehensive income																						$	77,684
Balance at December 31, 2005					205,408			$	205			$	(299,028	)		$	48,808			$	5,357

F-6

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				Select Medical Corporation
				Predecess								or					Successor
				For the Year Ended
				December 31,								Period from					Period from
												January 1 through					February 25 through
				2003				2004				February 24, 2005					December 31, 2005
				(In thousands)
Operating activities
Net income (loss)				$	74,471			$	118,184			$	(100,251	)			$	72,327
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation and amortization				34,957				39,912				6,177					39,060
	Provision for bad debts				51,428				48,986				6,661					18,600
	Loss on early retirement of debt (non-cash)				—				—				7,977					—
	Non cash compensation expense				—				—				—					10,312
	Amortization of debt discount				—				—				—					881
	Other non cash expenses				—				—				—					810
	Deferred income taxes				6,837				10,803				(63,863	)				19,822
	Minority interests				2,402				3,448				469					3,018
	Changes in operating assets and liabilities, net of effects from acquisition of businesses:
		Accounts receivable			8,838				(22,864	)			(48,976	)				(2,908	)
		Other current assets			(5,047	)			8,594				1,816					312
		Other assets			4,898				2,778				(622	)				4,887
		Accounts payable			17,499				(13,980	)			5,250					1,879
		Due to third-party payors			21,228				(52,296	)			667					(1,757	)
		Accrued expenses			19,337				3,069				199,909					(152,336	)
		Income taxes			9,400				27,642				3,842					23,248
Net cash provided by operating activities					246,248				174,276				19,056					38,155
Investing activities
Purchases of property and equipment					(35,852	)			(32,626	)			(2,586	)				(107,360	)
Earnout payments					(464	)			(2,983	)			—					—
Restricted cash					—				(7,031	)			108					578
Proceeds from sale of discontinued operations					—				11,554				—					—
Proceeds from sale of membership interests					—				4,064				—					—
Proceeds from disposal of assets					2,595				—				—
Acquisition of businesses, net of cash acquired					(227,731	)			(1,937	)			(108,279	)				(3,272	)
Net cash used in investing activities					(261,452	)			(28,959	)			(110,757	)				(110,054	)
Financing activities
Proceeds from senior floating rate notes					—				—				—					175,000
Equity investment					—				—				—					574,042
Proceeds from senior credit facility					—				—				—					780,000
Proceeds from 75/8 % senior subordinated notes					—				—				—					660,000
Proceeds from 10% senior subordinated notes					—				—				—					150,000
Repayment of senior subordinated notes					—				—				—					(350,000	)
Payment of deferred financing costs					(5,922	)			—				—					(60,269	)
Costs associated with equity investment					—				—				—					(8,686	)
Issuance of 71/2 % senior subordinated notes					175,000				—				—					—
Net repayments on senior credit facility debt					(65,627	)			(8,483	)			—					(119,350	)
Principal payments on seller and other debt					(3,721	)			(3,904	)			(528	)				(4,161	)
Repurchases of common stock and options					—				(48,058	)			—					(1,687,994	)
Payment of preferred stock dividends					—				—				—					(175,000	)
Proceeds from issuance of common stock					28,613				18,623				1,023					—
Payment of common stock dividends					(3,066	)			(9,209	)			—					—
Proceeds from (repayment of) bank overdrafts					307				(11,427	)			—					19,355
Distributions to minority interests					(1,266	)			(1,501	)			(401	)				(1,541	)
Net cash provided by (used in) financing activities					124,318				(63,959	)			94					(48,604	)
Effect of exchange rate changes on cash and cash equivalents					331				611				(149	)				644
Net increase (decrease) in cash and cash equivalents					109,445				81,969				(91,756	)				(119,859	)
Cash and cash equivalents at beginning of period					56,062				165,507				247,476					155,720
Cash and cash equivalents at end of period				$	165,507			$	247,476			$	155,720				$	35,861
Supplemental Cash Flow Information
	Cash paid for interest			$	20,229			$	30,677			$	10,630				$	59,725
	Cash paid for taxes			$	33,344			$	42,134			$	1,502				$	10,712

F-7

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1.	Organization and Significant Accounting Policies

	Business Description

	Merger and Related Transactions

F-8

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	•	a cash common and preferred equity investment in Holdings by Welsh Carson and other equity investors of $570.0 million;
	•	a senior subordinated notes offering by Holdings of $150.0 million;
	•	borrowing by Select of $580.0 million in term loans and $200.0 million on the revolving loan facility under its senior secured credit facility;
	•	the issuance by Select of $660.0 million in aggregate principle amount of 75/8 % senior subordinated notes; and
	•	$131.1 million of cash on hand at Select at the closing date.

F-9

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Equity contributions		$	570,000
Exchange of shares of Select for equity of Holdings at $18.00 per share			151,992
Aggregate equity contribution			721,992
Continuing shareholders’ basis adjustment			(449,510	)
Equity contribution, net			272,482
Merger expenses paid			(8,686	)
Proceeds from borrowings			1,590,000
Purchase price allocated		$	1,853,796
Fair value of net tangible assets acquired:
Cash		$	34,484
Accounts receivable			280,891
Current deferred tax asset			69,858
Other current assets			20,955
Property and equipment			177,634
Non-current deferred tax asset			31,879
Other assets			12,970
Current liabilities			(267,831	)
Long-term debt			(7,052	)
Minority interest in consolidated subsidiary companies			(6,661	)
Net tangible assets acquired			347,127
Capitalized debt issuance costs			55,392
Intangible assets acquired			92,988
Goodwill			1,358,289
		$	1,853,796

		For the Year Ended December 31,
		2003				2004				2005
		(In thousands)
Net revenue		$	1,341,657			$	1,601,524			$	1,858,442
Net income (loss)			22,419				66,749				(39,044	)

F-10

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	Principles of Consolidation

	Use of Estimates

	Cash and Cash Equivalents

	Restricted Cash

	Accounts Receivable and Allowance for Doubtful Accounts

F-11

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	Property and Equipment

Leasehold improvements		5 years
Furniture and equipment		3 — 20 years
Buildings		40 years

	Concentration of Credit Risk

	Income Taxes

	Intangible Assets

F-12

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Goodwill		Indefinite
Trademarks		Indefinite
Certificates of need		Indefinite
Accreditation		Indefinite
Non-compete agreements		6 — 7 years
Contract therapy relationships		5 years

	Due to Third-Party Payors

	Insurance Risk Programs

	Minority Interests

F-13

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	Stock Options

		Pred								ecessor
		For the Year Ended
		December 31,								Period from January 1,
										through February 24,
		2003				2004				2005
		(In thousands, except per share amounts)
Net income available to common stockholders — as reported		$	74,471			$	118,184			$	(100,251	)
Add: Stock-based employee compensation cost, net of related tax effects, included in the determination of net income as reported			—				—				87,927
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(19,376	)			(21,069	)			(14,931	)
Net income available to common stockholders — pro forma		$	55,095			$	97,115			$	(27,255	)
Weighted average grant-date fair value(1)			6.64				6.42				—

(1)	No stock options were granted in the period from January 1, 2005 through February 24, 2005.

	Revenue Recognition

F-14

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	Other Comprehensive Income (Loss)

	Financial Instruments and Hedging

	Recent Accounting Pronouncements

F-15

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F-16

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2.	Acquisitions

	For the Year Ended December 31, 2003

	For the Year Ended December 31, 2004

	For the Year Ended December 31, 2005

F-17

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Cash paid, net of cash acquired		$	105,085
Fair value of net tangible assets acquired:
Accounts receivable			22,143
Other current assets			4,718
Property and equipment			9,265
Other assets			242
Current liabilities			(14,150	)
Long-term debt			(1,203	)
Net tangible assets acquired			21,015
Intangible assets acquired			2,000
Goodwill			82,070
		$	105,085

		Predecessor													Successor
										Period from					Period from
		For the Year Ended								January 1					February 25,
		December 31,								through					through
										February 24,					December 31,
		2003				2004				2005					2005
		(In thousands)
Cash paid (net of cash acquired)		$	227,731			$	1,937			$	108,279				$	3,276
Notes issued			316				214				—					60
			228,047				2,151				108,279					3,336
Liabilities assumed			36,513				573				19,924					148
Restructuring reserve (note 6)			16,213				—				—					—
			280,773				2,724				128,203					3,484
Fair value of assets acquired, principally accounts receivable and property and equipment			126,406				227				41,295					165
Trademark			21,000				—				—					—
Non-compete agreement			24,000				—				2,000					—
Minority interest liabilities relieved			1,405				1,069				—					666
Cost in excess of fair value of net assets acquired (goodwill)		$	107,962			$	1,428			$	84,908				$	2,653

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		Pro Forma Unaudited
		Results of Operations
		For the Year Ended
		December 31,
		2003				2004
		(In thousands)
Net revenue		$	1,571,865			$	1,756,083
Net income			58,615				126,036

3.	Discontinued Operations and Assets and Liabilities Held For Sale

F-19

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			December 31,
			2005
			(In thousands)
Current assets held for sale:
	Accounts receivable, net		$	9,334
	Other current assets			4,542
	Total current assets held for sale		$	13,876
Non-current assets held for sale:
	Property, plant and equipment, net		$	3,461
	Goodwill allocated to business			57,252
	Other assets			675
	Total non-current assets held for sale		$	61,388
Current liabilities held for sale:
	Current portion of long-term debt		$	477
	Accrued other			3,738
	Total current liabilities held for sale		$	4,215
Long-term liabilities:
	Long-term debt, net of current portion		$	731
	Other long-term liabilities			3,086
	Total non current liabilities held for sale		$	3,817

		Predecessor													Successor
										Period from					Period from
		For the Year Ended								January 1					February 25,
		December 31,								through					through
										February 24,					December 31,
		2003				2004				2005					2005
		(In thousands)
Net revenue		$	55,116			$	69,699			$	10,051				$	60,161
Income from discontinued operations before income tax expense			6,388				8,019				950					8,130
Income tax expense(1)			2,523				3,561				428					5,058
Income from discontinued operations, net of tax		$	3,865			$	4,458			$	522				$	3,072

(1)	The period from February 25 through December 31, 2005 includes income tax of $1.4 million related to undistributed earnings of the Company’s foreign subsidiary that were previously permanently reinvested.

F-20

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4.	Property and Equipment

		Predecessor					Successor
		December 31,
		2004					2005
		(In thousands)
Land		$	11,996				$	17,599
Leasehold improvements			90,919					46,242
Buildings			46,044					55,281
Furniture and equipment			159,240					85,946
Construction-in-progress			973					67,778
			309,172					272,846
Less: accumulated depreciation and amortization			143,836					24,305
Total property and equipment		$	165,336				$	248,541

5.	Intangible Assets

F-21

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		Predecessor
		As of December 31, 2004
		Gross Carrying				Accumulated
		Amount				Amortization
		(In thousands)
Amortized intangible assets
Non-compete agreement		$	24,000			$	(4,571	)
Indefinite-lived intangible assets
Goodwill		$	302,069
Trademarks			58,875
Total		$	360,944

		Successor
		As of December 31, 2005
		Gross Carrying				Accumulated
		Amount				Amortization
		(In thousands)
Amortized intangible assets
Contract therapy relationships		$	20,456			$	(3,409	)
Non-compete agreements			20,809				(3,100	)
Total		$	41,265			$	(6,509	)
Indefinite-lived intangible assets
Goodwill		$	1,305,210
Trademarks			47,058
Certificates of need			3,083
Accreditations			1,892
Total		$	1,357,243

		Predecessor												Successor
		For the Year								Period from				Period from
		Ended								January 1				February 25
		December 31,								through				through
										February 24,				December 31,
		2003				2004				2005				2005
		(In thousands)
Amortization expense		$	948			$	3,429			$	576			$	6,509

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		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Predecessor:
Balance as of January 1, 2004		$	180,011			$	125,656			$	584			$	306,251
Sale of discontinued operations			(2,693	)			—				—				(2,693	)
Sale of membership interests			(1,351	)			—				—				(1,351	)
Income tax benefits recognized			—				(5,492	)			—				(5,492	)
Earn-out payments			—				2,983				—				2,983
Translation adjustment			—				1,999				—				1,999
Other			—				372				—				372
Balance as of December 31, 2004			175,967				125,518				584				302,069
Goodwill acquired during the year			82,070				2,838				—				84,908
Income tax benefits recognized			—				(936	)			—				(936	)
Translation adjustment			—				(880	)			—				(880	)
Other			260				—				—				260
Balance as of February 24, 2005		$	258,297			$	126,540			$	584			$	385,421
Successor:
February 25, 2005, beginning balance resulting from Merger			1,225,780				132,509				—				1,358,289
Deferred tax adjustments related to merger			(6,441	)			6,269				—				(172	)
Goodwill acquired during year			2,270				383				—				2,653
Translation adjustment			—				1,951				—				1,951
Goodwill allocated to assets held for sale			—				(57,252	)			—				(57,252	)
Other			167				(426	)			—				(259	)
Balance as of December 31, 2005		$	1,221,776			$	83,434				—			$	1,305,210

6.	Restructuring Reserves

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		Lease
		Termination Costs				Severance				Total
		(In thousands)
January 1, 2003 — Predecessor		$	788			$	12			$	800
2003 acquisition restructuring costs			5,886				10,327				16,213
Amounts paid in 2003			(869	)			(5,769	)			(6,638	)
December 31, 2003 — Predecessor			5,805				4,570				10,375
Amounts paid in 2004			(2,580	)			(2,871	)			(5,451	)
December 31, 2004 — Predecessor			3,225				1,699				4,924
Amounts paid during the period from January 1 through February 24, 2005			(197	)			(392	)			(589	)
February 24, 2005 — Predecessor			3,028				1,307				4,335
Amounts paid during the period from February 25 through December 31, 2005			(2,638	)			(1,307	)			(3,945	)
December 31, 2005 — Successor		$	390			$	—			$	390

7.	Long-Term Debt and Notes Payable

		December 31,
		2004					2005
		(Predecessor)					(Successor)
		(In thousands)
91/2 % Senior Subordinated Notes		$	175,000				$	—
71/2 % Senior Subordinated Notes			175,000					—
75/8 % Senior Subordinated Notes			—					660,000
Senior secured credit facility			—					660,650
10% senior subordinated notes			—					131,609
Senior floating rate notes			—					175,000
Seller notes			3,406					899
Other			1,184					731
Total debt			354,590					1,628,889
Less: current maturities			3,557					6,516
Total long-term debt		$	351,033				$	1,622,373

	Senior Secured Credit Facility

	•	A $300.0 million revolving credit facility that will terminate on February 24, 2011 including both a letter of credit sub facility and a swingline loan sub facility and;

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	•	A $580.0 million term loan facility that matures on February 24, 2012 that was drawn at the closing of the Merger.

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	Senior Subordinated Notes

Year		Redemption Price
2010			103.813	%
2011			102.542	%
2012			101.271	%
2013 and thereafter			100.000	%

	71/2%  Senior Subordinated Notes

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	91/2%  Senior Subordinated Notes

	Senior Floating Rate Notes

Year		Redemption Price
2009			102.00	%
2010			101.00	%
2011			100.00	%

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	10% Senior Subordinated Notes

2006		$	6,516
2007			6,559
2008			5,955
2009			5,800
2010			5,800
2011 and beyond			1,598,259

8.	Stockholders’ Equity

	Stock Repurchase Program

	Preferred Stock

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	Common Stock

9.	Long-Term Incentive Compensation

10.	Stock Option and Restricted Stock Plans

	Predecessor Stock Option Plans

	Successor Stock Option and Restricted Stock Plans

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		2006				2007				2008				2009				2010
Compensation expense		$	3,759			$	3,759			$	2,173			$	1,155			$	204

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11.	Income Taxes

			Predecessor													Successor
											Period from					Period from
			For the Year Ended								January 1					February 25
			December 31,								through					through
											February 24,					December 31,
			2003				2004				2005					2005
			(In thousands)
Current:
	Federal		$	33,172			$	53,742			$	3,632				$	26,585
	State and local			6,229				12,006				437					2,929
Total current				39,401				65,748				4,069					29,514
Deferred				6,837				10,803				(63,863	)				19,822
Total income tax provision			$	46,238			$	76,551			$	(59,794	)			$	49,336

		Predecessor													Successor
		For the Year								Period from					Period from
		Ended								January 1					February 25
		December 31,								through					through
										February 24,					December 31,
		2003				2004				2005					2005
Expected federal tax rate			35.0	%			35.0	%			35.0	%				35.0	%
State and local taxes, net of federal benefit			3.3				3.1				4.6					5.7
Other permanent differences			1.3				0.8				—					3.4
Valuation allowance			—				1.3				(1.5	)				(1.4	)
Other			—				—				(0.9	)				(1.1	)
Total			39.6	%			40.2	%			37.2	%				41.6	%

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		December 31,
		Predecessor				Successor
		2004				2005
		(In thousands)
Deferred tax assets — current
Allowance for doubtful accounts		$	37,846			$	29,845
Compensation and benefit related accruals			15,813				19,020
Malpractice insurance			1,082				9,717
Restructuring reserve			1,959				201
Patient care reserve			1,595				—
Net operating loss carryforwards			—				4,822
Other accruals, net			944				1,890
Net deferred tax asset — current			59,239				65,495
Deferred tax assets — non current
Expenses not currently deductible for tax			199				212
Net operating loss carry forwards			14,289				16,050
Restricted Stock Options			—				(4,413	)
Interest rate swap			—				(2,520	)
Depreciation and amortization			(8,440	)			(23,166	)
Net deferred tax asset (liability) — non current			6,048				(13,837	)
Net deferred tax asset before valuation allowance			65,287				51,658
Valuation allowance			(10,506	)			(11,961	)
		$	54,781			$	39,697

2006		$	—
2007			—
2008			—
2009			—
Thereafter through 2019			4,530

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12.	Retirement Savings Plan

13.	Segment Information

		Predecessor
		Year Ended December 31, 2003
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	849,260			$	478,553			$	13,844			$	1,341,657
Adjusted EBITDA			145,650				66,378				(36,185	)			175,843
Total assets			512,956				365,534				200,508				1,078,998
Capital expenditures			22,559				8,514				4,779				35,852

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		Predecessor
		Year Ended December 31, 2004
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	1,089,538			$	498,830			$	13,156			$	1,601,524
Adjusted EBITDA			236,181				71,562				(46,287	)			261,456
Total assets			520,572				318,180				274,969				1,113,721
Capital expenditures			23,320				5,885				3,421				32,626

		Predecessor
		Period from January 1 through February 24, 2005
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	202,465			$	73,344			$	1,927			$	277,736
Adjusted EBITDA			44,343				9,848				(7,660	)			46,531
Total assets			903,208				239,019				89,186				1,231,413
Capital expenditures			1,163				408				1,015				2,586

		Successor
		Period from February 25 through December 31, 2005
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	1,167,855			$	407,367			$	5,484			$	1,580,706
Adjusted EBITDA			262,996				56,109				(35,702	)			283,403
Total assets(1)			1,652,532				293,720				222,133				2,168,385
Capital expenditures			101,158				3,342				2,860				107,360

(1)	The outpatient rehabilitation segment includes $75.3 million in assets held for sale relating to the sale of the Company’s Canadian subsidiary (Footnote 3).

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		Predecessor
															Successor
										Period from
		For the Year Ended								January 1					Period from
		December 31,								through					February 25
										February 24,					through
		2003				2004				2005					December 31,
		(In thousands)
Net income (loss)		$	74,471			$	118,184			$	(100,251	)			$	72,327
Income from discontinued operations			(3,865	)			(4,458	)			(522	)				(3,072	)
Income tax expense (benefit)			46,238				76,551				(59,794	)				49,336
Minority interest			1,661				2,608				330					1,776
Interest expense, net			24,499				30,716				4,128					101,441
Other income			—				(1,096	)			(267	)				(1,092	)
Equity in earnings from joint ventures			(824	)			—				—					—
Merger related charges			—				—				12,025					—
Loss on early retirement of debt			—				—				42,736					—
Depreciation and amortization			33,663				38,951				5,933					37,922
Long-term incentive compensation			—				—				—					14,453
Stock compensation expense			—				—				142,213					10,312
Adjusted EBITDA		$	175,843			$	261,456			$	46,531				$	283,403

14.	Fair Value of Financial Instruments

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15.	Related Party Transactions

2006		$	1,963
2007			1,992
2008			2,001
2009			1,843
2010			1,816
Thereafter			7,503
		$	17,118

16.	Commitments and Contingencies

	Leases

2006		$	73,020
2007			53,473
2008			34,108
2009			18,895
2010			9,047
Thereafter			11,013
		$	199,556

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	Patient Care Obligation

	Other

	Litigation

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17.	Supplemental Disclosures of Cash Flow Information

		Predecessor													Successor
										Period from					Period from
		For the Year Ended								January 1					February 25
		December 31,								through					through
										February 24,					December 31,
		2003				2004				2005					2005
		(In thousands)
Notes issued with acquisitions (Note 2)		$	316			$	214			$	—				$	60
Liabilities assumed with acquisitions (Note 2)			36,513				573				19,924					148
Tax benefit of stock option exercises			25,059				13,044				1,507					—

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18.	Subsequent Events

19.	Selected Quarterly Financial Data (Unaudited)

			Predecessor
			First Quarter				Second Quarter				Third Quarter				Fourth Quarter
			(In thousands)
Year ended December 31, 2004
	Net revenues		$	403,830			$	400,503			$	393,467			$	403,724
	Income from operations			56,922				56,466				53,215				55,902
	Income from continuing operations			28,591				29,092				27,186				28,857
	Income from discontinued operations, net of tax			979				1,879				631				969
	Net income		$	29,570			$	30,971			$	27,817			$	29,826

			Predecessor					Successor
			Period from					Period from
			January 1					February 25
			through					through
			February 24,					March 31,
			2005					2005				Second Quarter				Third Quarter				Fourth Quarter
			(In thousands)
Year ended December 31, 2005
	Net revenues		$	277,736				$	188,386			$	473,704			$	460,658			$	457,958
	Income (loss) from operations			(101,615	)				30,511				71,606				53,751				64,848
	Income (loss) from continuing operations			(100,773	)				11,492				25,311				14,306				18,146
	Income from discontinued operations, net of tax			522					672				1,634				1,061				(295	)
	Net income (loss)		$	(100,251	)			$	12,164			$	26,945			$	15,367			$	17,851

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			December 31,				March 31,
			2005				2006
			(Unaudited)
			(In thousands, except share
			and per share amounts)
ASSETS
Current Assets:
	Cash and cash equivalents		$	35,861			$	13,851
	Restricted cash			6,345				5,908
	Accounts receivable, net of allowance for doubtful accounts of $74,891 and $70,202 in 2005 and 2006, respectively			256,798				285,138
	Prepaid income taxes			4,110				—
	Current deferred tax asset			59,135				56,550
	Current assets held for sale			13,876				—
	Other current assets			19,725				19,447
Total Current Assets				395,850				380,894
Property and equipment, net				248,541				277,888
Goodwill				1,305,210				1,318,111
Other identifiable intangibles				86,789				85,259
Other assets held for sale				61,388				—
Other assets				70,607				73,135
Total Assets			$	2,168,385			$	2,135,287
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Bank overdrafts		$	19,355			$	25,906
	Current portion of long-term debt and notes payable			6,516				6,425
	Accounts payable			60,528				64,243
	Accrued payroll			61,531				49,312
	Accrued vacation			26,983				28,717
	Accrued interest			36,028				15,509
	Accrued professional liability			21,527				22,332
	Accrued restructuring			390				340
	Accrued other			69,046				70,897
	Income taxes payable			—				18,570
	Due to third party payors			12,175				12,834
	Current liabilities held for sale			4,215				—
Total Current Liabilities				318,294				315,085
Long-term debt, net of current portion				1,622,373				1,563,902
Non-current deferred tax liability				19,438				23,192
Non-current liabilities held for sale				3,817				—
Total Liabilities				1,963,922				1,902,179
Commitments and Contingencies
Minority interest in consolidated subsidiary companies				4,356				2,781
Preferred stock				444,765				450,248
Stockholders’ Equity:
	Common stock, $0.001 par value, 250,000,000 shares authorized, 205,508,000 shares issued & outstanding in 2005 and 2006			205				206
	Capital in excess of par			(299,028	)			(298,082	)
	Retained earnings			48,808				71,509
	Accumulated other comprehensive income			5,357				6,446
Total Stockholders’ Equity				(244,658	)			(219,921	)
Total Liabilities and Stockholders’ Equity			$	2,168,385			$	2,135,287

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			Predecessor				Successor
			Period from				Period from
			January 1				February 25
			through				through				Three Months
			February 24,				March 31,				Ended
			2005				2005				March 31, 2006
			(Unaudited)
			(In thousands)
Net operating revenues			$	277,736			$	188,386			$	479,743
Costs and expenses:
	Cost of services			217,133				140,509				385,139
	Stock compensation expense			142,213				4,326				946
	General and administrative			7,484				4,356				11,312
	Bad debt expense			6,588				4,558				5,000
	Depreciation and amortization			5,933				4,126				10,895
Total costs and expenses				379,351				157,875				413,292
Income (loss) from operations				(101,615	)			30,511				66,451
Other income and expense:
Loss on early retirement of debt				(42,736	)			—				—
Merger related charges				(12,025	)			—				—
Other income				267				103				—
Interest income				523				77				222
Interest expense				(4,651	)			(11,044	)			(32,881	)
Income (loss) from continuing operations before minority interests and income taxes				(160,237	)			19,647				33,792
Minority interest in consolidated subsidiary companies				330				302				391
Income (loss) from continuing operations before income taxes				(160,567	)			19,345				33,401
Income tax expense (benefit)				(59,794	)			7,853				15,230
Income (loss) from continuing operations				(100,773	)			11,492				18,171
Income from discontinued operations, net of tax (includes pre-tax gain of $13,950 in 2006)				522				672				10,018
Net income (loss)			$	(100,251	)		$	12,164			$	28,189

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																			Accumulated
			Common				Common				Capital in								Other
			Stock				Stock Par				Excess of				Retained				Comprehensive				Comprehensive
			Issued				Value				Par				Earnings				Income				Income
			(Unaudited)
			(In thousands)
Balance at December 31, 2005				205,408			$	205			$	(299,028	)		$	48,808			$	5,357
	Net income															28,189							$	28,189
	Unrealized gain on interest rate swap, net of tax																			2,907				2,907
	Changes in foreign currency translation																			1,013				1,013
	Sale of foreign subsidiary																			(2,831	)			(2,831	)
	Total comprehensive income																						$	29,278
	Restricted stock issuance			100				1
	Vesting of restricted stock											943
	Stock option expense											3
	Accretion of dividends on preferred stock															(5,488	)
Balance at March 31, 2006				205,508			$	206			$	(298,082	)		$	71,509			$	6,446

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				Predecessor				Successor
				Period from				Period from
				January 1				February 25				Three Months
				through				through				Ended
				February 24,				March 31,				March 31,
				2005				2005				2006
				(Unaudited)
				(In thousands)
Operating activities
Net income (loss)				$	(100,251	)		$	12,164			$	28,189
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation and amortization				6,177				4,248				11,071
	Provision for bad debts				6,661				4,609				5,087
	Gain from sale of business				—				—				(13,950	)
	Loss on early retirement of debt				7,977				—				—
	Non-cash compensation expense				—				4,326				946
	Amortization of debt discount				—				—				281
	Minority interests				469				462				731
	Changes in operating assets and liabilities, net of effects from acquisition of businesses:
		Accounts receivable			(48,976	)			(35,716	)			(34,211	)
		Other current assets			1,816				(590	)			(105	)
		Other assets			(622	)			(1,056	)			1,798
		Accounts payable			5,250				3,769				3,569
		Due to third-party payors			667				(209	)			659
		Accrued interest			(4,839	)			8,456				(20,519	)
		Accrued expenses			204,748				(198,253	)			(8,466	)
		Income and deferred taxes			(60,021	)			5,819				19,342
Net cash provided by (used in) operating activities					19,056				(191,971	)			(5,578	)
Investing activities
Purchases of property and equipment					(2,586	)			(1,112	)			(38,386	)
Proceeds from sale of business, net					—				—				76,806
Earnout payments					—				—				(100	)
Restricted cash					108				(12	)			437
Acquisition of businesses, net of cash acquired					(108,279	)			(2,215	)			(2,023	)
Net cash provided by (used in) investing activities					(110,757	)			(3,339	)			36,734
Financing activities
Equity investment by Holdings					—				720,000				—
Proceeds from credit facility					—				780,000				—
Proceeds from senior subordinated notes					—				660,000				—
Repayment of senior subordinated notes					—				(344,250	)			—
Deferred financing costs					—				(57,198	)			—
Net repayment on credit facility					—				—				(58,450	)
Costs associated with equity investment of Holdings					—				(8,686	)			—
Principal payments on seller and other debt					(528	)			(2,578	)			(425	)
Repurchases of common stock and options					—				(1,687,994	)			—
Proceeds from issuance of common stock					1,023				—				—
Proceeds from bank overdrafts					—				—				6,551
Distributions to minority interests					(401	)			(466	)			(877	)
Net cash provided by (used in) financing activities					94				58,828				(53,201	)
Effect of exchange rate changes on cash and cash equivalents					(149	)			105				35
Net decrease in cash and cash equivalents					(91,756	)			(136,377	)			(22,010	)
Cash and cash equivalents at beginning of period					247,476				155,720				35,861
Cash and cash equivalents at end of period				$	155,720			$	19,343			$	13,851
Supplemental Cash Flow Information:
Cash paid for interest				$	10,630			$	380			$	51,830
Cash paid for income taxes				$	1,502			$	2,305			$	489

F-43

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Table of Contents

1.	Basis of Presentation

2.	Accounting Policies

	Use of Estimates

	Reclassifications

	Recent Accounting Pronouncements

F-44

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Table of Contents

F-45

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Table of Contents

3.	Intangible Assets

		Successor
		As of March 31, 2006
		Gross Carrying				Accumulated
		Amount				Amortization
		(In thousands)
Amortized intangible assets
Contract therapy relationships		$	20,456			$	(4,432	)
Non-compete agreements			20,809				(4,030	)
Total		$	41,265			$	(8,462	)
Indefinite-lived intangible assets
Goodwill		$	1,318,111
Trademarks			47,058
Certificates of need			3,506
Accreditations			1,892
Total		$	1,370,567

Predecessor

Successor

Period from

Period from

January 1

February 25

through

through

For the Three

February 24,

March 31,

Months Ended

2005

2005

March 31, 2006

(In thousands)

Amortization expense

$

576

$

904

$

1,953

		Specialty				Outpatient
		Hospitals				Rehabilitation				Total
		(In thousands)
Balance as of December 31, 2005		$	1,221,776			$	83,434			$	1,305,210
Tax adjustments related to Merger			112				10,800				10,912
Goodwill acquired during year			—				593				593
Earnouts			—				100				100
Other			—				1,296				1,296
Balance as of March 31, 2006		$	1,221,888			$	96,223			$	1,318,111

F-46

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Table of Contents

4.	Accumulated Other Comprehensive Income

5.	Segment Information

		Predecessor
		Period from January 1 through February 24, 2005
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	202,781			$	73,344			$	1,611			$	277,736
Adjusted EBITDA			44,384				9,848				(7,701	)			46,531
Total assets			904,754				239,019				87,640				1,231,413
Capital expenditures			1,165				408				1,013				2,586

		Successor
		Period from February 25 through March 31, 2005
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	139,263			$	48,111			$	1,012			$	188,386
Adjusted EBITDA			34,743				8,716				(4,496	)			38,963
Total assets			1,553,606				530,855				76,262				2,160,723
Capital expenditures			780				274				58				1,112

F-47

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Table of Contents

		Successor
		For the Three Months Ended March 31, 2006
		Specialty				Outpatient
		Hospitals				Rehabilitation				All Other				Total
		(In thousands)
Net revenue		$	359,672			$	119,290			$	781			$	479,743
Adjusted EBITDA			74,718				14,760				(11,186	)			78,292
Total assets			1,746,744				269,295				119,248				2,135,287
Capital expenditures			36,505				1,641				240				38,386

		Predecessor
						Successor
		Period from
		January 1				Period from
		through				February 25				For the Three
		February 24,				through March 31,				Months Ended
		2005				2005				March 31, 2006
		(In thousands)
Net income (loss)		$	(100,251	)		$	12,164			$	28,189
Income from discontinued operations			(522	)			(672	)			(10,018	)
Income tax expense (benefit)			(59,794	)			7,853				15,230
Minority interest			330				302				391
Interest expense, net			4,128				10,967				32,659
Other income			(267	)			(103	)			—
Merger-related charges			12,025				—				—
Loss on early retirement of debt			42,736				—				—
Depreciation and amortization			5,933				4,126				10,895
Stock compensation expense			142,213				4,326				946
Adjusted EBITDA		$	46,531			$	38,963			$	78,292

6.	Discontinued Operations

F-48

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Table of Contents

		Predecessor
		Period from				Successor
		January 1
		through				Period from				For the Two Months
		February 24,				February 25 through				Ended February 28,
		2005				March 31, 2005				2006
		(In thousands)
Net revenue		$	10,051			$	6,726			$	12,902
Income from discontinued operations before income tax expense, including gain of $13,950			950				1,155				15,547
Income tax expense			428				483				5,529
Income from discontinued operations, net of tax		$	522			$	672			$	10,018

7.	Commitments and Contingencies

	Litigation

F-49

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Table of Contents

	Other

F-50

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Table of Contents

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Table of Contents

Item 20.	Indemnification of Directors, Officers, Managers and Members

II-1

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Table of Contents

Item 21.	Exhibits and Financial Statement Schedules

		Balance at				Charged to												Balance at
		Beginning				Cost and												End
Description		of Year				Expenses				Acquisitions(A)				Deductions(B)				of Year
		(In thousands)
Combined year ended December 31, 2005 allowance for doubtful accounts		$	94,622			$	24,801			$	7,847			$	(52,379	)		$	74,891
Year ended December 31, 2004 allowance for doubtful accounts		$	111,517			$	48,522			$	—			$	(65,417	)		$	94,622
Year ended December 31, 2003 allowance for doubtful accounts		$	79,815			$	51,320			$	30,574			$	(50,192	)		$	111,517
Combined year ended December 31, 2005 income tax valuation allowance		$	10,506			$	2,322			$	823			$	(1,690	)		$	11,961
Year ended December 31, 2004 income tax valuation allowance		$	4,520			$	3,386			$	2,600			$	—			$	10,506
Year ended December 31, 2003 income tax valuation allowance		$	2,862			$	—			$	1,658			$	—			$	4,520

(A)	Represents opening balance sheet reserves resulting from purchase accounting entries.

(B)

Allowance for doubtful accounts deductions represent write-offs against the reserve for 2003 and 2004. In 2005, allowance for doubtful accounts deductions represent write-offs against the reserve of $52.1 million and $0.3 million reclassed to assets held for sale due to the sale of the Company’s Canadian subsidiary. Income tax valuation allowance deductions primarily represent the reversal of valuation allowances because the Company believes certain deferred tax items will be realized.

Exhibit
Number				Document
	2	.1		Agreement and Plan of Merger and Reorganization, dated as of November 19, 2004, by and among Select Medical Corporation, Camp Hill Acquisition Corp., SemperCare, Inc. and Jeffrey J. Collinson, as stockholders’ agent, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s current report on Form 8-K filed November 23, 2004.
	3	.1		Amended and Restated Certificate of Incorporation of Select Medical Corporation, incorporated by reference to Exhibit 3.1 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	3	.2		Amended and Restated Bylaws of Select Medical Corporation, incorporated by reference to Exhibit 3.2 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	3	.3		Amended and Restated Certificate of Incorporation of Select Medical Holdings Corporation.†
	3	.4		Amended and Restated Bylaws of Select Medical Holdings Corporation.†
	4	.1		Indenture governing 91/2 % Senior Subordinated Notes due 2009 among Select Medical Corporation, the Subsidiary Guarantors named therein and State Street Bank and Trust Company, N.A., dated June 11, 2001, incorporated by reference to Exhibit 4.1 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828).

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Table of Contents

Exhibit
Number				Document
	4	.2		Form of 91/2 % Senior Subordinated Notes due 2009 (included in Exhibit 4.1), incorporated by reference to Exhibit 4.2 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	4	.3		Eighth Supplemental Indenture governing 91/2 % Senior Subordinated Notes due 2009 among Select Medical Corporation, the Subsidiary Guarantors named therein and .S. Bank Trust National Association, dated February 4, 2005, incorporated by reference to Exhibit 4.3 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	4	.4		Indenture governing 75/8 % Senior Subordinated Notes due 2015 among Select Medical Corporation, the Guarantors named therein and U.S. Band Trust national Association, dated February 24, 2005, incorporated by reference to Exhibit 4.4 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	4	.5		Form of 75/8 % Senior Subordinated Notes due 2015 (included in Exhibit 4.4), incorporated by reference to Exhibit 4.5 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	4	.6		Exchange and Registration Rights Agreement, dated as of February 24, 2005, by and among Select Medical Corporation, the Guarantors named therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities, Inc., Wachovia Capital Markets, LLC, CIBC World Markets Corp. and PNC Capital Markets, Inc., incorporated by reference to Exhibit 4.6 of Select Medical Corporation’s Firm S-4 filed June 15, 2005.†
	4	.7		Indenture governing Senior Floating Rate Notes due 2015 among Select Medical Holdings Corporation and U.S. Bank Trust National Association, dated September 29, 2005.†
	4	.8		Form of Senior Floating Rate Notes due 2015 (included in Exhibit 4.7).†
	4	.9		Exchange and Registration Rights Agreement, dated as of September 29, 2005, by and among Select Medical Holdings Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC, CIBC World Markets Corp. and PNC Capital Markets, Inc.†
	5	.1		Form of Opinion of Dechert LLP as to the validity of the Senior Floating Rate Notes.
	10	.1		Credit Agreement, dated as of February 24, 2005, among Select Medical Holding Corporation, select Medical Corporation, as Borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated and CIBC Inc., as Co-Documentation Agents, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.2		Guarantee and Collateral Agreement, dated as of February 24, 2005 , among Select Medical Holdings Corporation, Select Medical Corporation, the Subsidiaries of Select identified therein and JPMorgan Chase Bank, N.A., as Collateral Agent, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.3		Amended and Restated Senior Management Agreement dated as of May 7, 1997 between Select Medical Corporation, John Ortenzio, Martin Ortenzio, Select Investments II, Select Partners, L.P. and Rocco Ortenzio, incorporated by reference to Exhibit 10.34 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No, 333-48856).
	10	.4		Amendment No. 1 dated as of January 1, 2000 to Amended and Restated Senior Management Agreement dated May 7, 1997 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.35 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.5		Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-488566).
	10	.6		Amendment dated as of August 8, 2000 to Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.17 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).

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Exhibit
Number				Document
	10	.7		Amendment No. 2 dated as of February 23, 2001 to Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.47 of Select Medical Corporation’s Form S-1 filed March 30, 2001 (Reg. No. 333-48856).
	10	.8		Amendment No. 3 dated as of April 24, 2001 to Employment Agreement dated as of March 1, 2000 between Select Medial Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.50 of Select Medical Corporation’s Form S-4 filed June 26, 2001 (Reg. No. 333-63828).
	10	.9		Amendment No. 4 to Employment Agreement dated as of September 17, 2001 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.10		Amendment No. 5 to Employment Agreement dated as of February 24, 2005 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.10 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.11		Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.14 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.12		Amendment to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.15 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.13		Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.48 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.14		Amendment No. 3 to Employment Agreement, dated as of September 17, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.15		Amendment No. 4 to Employment Agreement, dated as of December 10, 2004, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 99.3 of Select Medical Corporation’s Form 8-K (Reg. No. 001-31441).
	10	.16		Amendment No. 5 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.17		Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.19 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.18		Amendment to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.20 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.19		Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.49 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.20		Amendment No. 3 to Employment Agreement, dated as of December 10, 2004, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 99.2 of Select Medical Corporation’s Form 8-K (Reg. No. 001-31441).
	10	.21		Amendment No. 4 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.21 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.22		Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.11 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.23		Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).

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Exhibit
Number				Document
	10	.24		Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.25		Employment Agreement dated as of December 16, 1998 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.8 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.26		First Amendment dated as of October 15, 2000 to Employment Agreement dated as of December 16, 1998 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.33 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.27		Change of Control Agreement dated as of November 21, 2001 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.61 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.28		Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.28 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.29		Other Senior Management Agreement, dated as of June 2, 1997, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.9 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.30		Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.10 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.31		Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.32		Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.32 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.33		Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.58 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.34		Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.59 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.35		Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.35 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.36		Other Senior Management Agreement, dated as of March 28, 1997, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.21 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.37		Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.22 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.38		Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.54 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.39		Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.39 of Select Medical Corporation’s Form S-4 filed June 15, 2005.

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Exhibit
Number				Document
	10	.40		Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.56 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.41		Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.57 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.42		Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.42 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.43		Fifth Amendment to Employment Agreement, dated as of April 18, 2005, between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.43 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.44		Consulting Agreement, dated as of January 1, 2004, between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004.
	10	.45		First Amendment to Consulting Agreement, dated as of April 18, 2005, between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.45 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.46		Amendment No. 5 to Employment Agreement, dated as of April 27, 2005, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.46 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.47		Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.48		First Addendum dated June 1999 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.25 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.49		Second Addendum dated as of February 1, 2000 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.26 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.50		Office Lease Agreement dated as of June 17, 1999 between Select Medical Corporation and Old Gettysburg Associates III, incorporated by reference to Exhibit 10.27 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.51		Third Addendum dated as of May 17, 2001 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828).
	10	.52		Office Lease Agreement dated as of May 15, 2001 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828).
	10	.53		Fourth Addendum to Lease Agreement dated as of September 1, 2001 by and between Old Gettysburg Associates and Select Medical Corporation, incorporated by reference to Exhibit 10.54 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
	10	.54		First Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

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Exhibit
Number				Document
	10	.55		Second Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.3 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
	10	.56		Third Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.4 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
	10	.57		Office Lease Agreement dated as of October 29, 2003 by and between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.74 of Select Medical Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2003.
	10	.58		Office Lease Agreement dated as of October 29, 2003 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.74 of Select Medical Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2003.
	10	.59		Fifth Addendum to Lease Agreement, dated as of February 19, 2004, by and between Old Gettysburg Associates and Select Medical Corporation, incorporated by reference to Exhibit 10.59 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.60		Office Lease Agreement dated as of March 19, 2004 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.3 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004.
	10	.61		Office Lease Agreement dated as of March 19, 2004 by and between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.4 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004.
	10	.62		Naming, Promotional and Sponsorship Agreement dated as of October 1, 1997 between NovaCare, Inc. and the Philadelphia Eagles Limited Partnership, assumed by Select Medical Corporation in a Consent and Assumption Agreement dated November 19, 1999 by and among NovaCare, Inc., Select Medical Corporation and the Philadelphia Eagles Limited Partnership, incorporated by reference to Exhibit 10.36 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856).
	10	.63		First Amendment to Naming, Promotional and Sponsorship Agreement, dated as of January 1, 2004, between Select Medical Corporation and Philadelphia Eagles, LLC, incorporated by reference to Exhibit 10.63 of Select Medical Corporation’s Form S-4 filed June 15, 2005.
	10	.64		Office Lease Agreement dated August 10, 2005 among Old Gettysburg Associates II and Select Medical Corporation, dated August 10, 2005, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s current report on Form 8-K filed August 10, 2005.
	10	.65		Amended and Restated Select Medical Holdings Corporation 2005 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s current report on Form 8-K filed November 8, 2005.
	10	.66		Select Medical Holdings Corporation 2005 Equity Incentive Plan for Non-Employee Directors, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s current report on Form 8-K filed November 8, 2005.
	10	.67		Acquisition Agreement between Select Medical Corporation, SLMC Finance Corporation and Callisto Capital L.P., dated December 23, 2005, incorporated by reference to Exhibit 2.2 of Select Medical Corporation’s current report on Form 8-K filed December 23, 2005.
	10	.68		Amendment to the Acquisition Agreement, dated as of February 9, 2006, among Select Medical Corporation, SLMC Finance Corporation, Callisto Capital L.P. and Canadian Back Institute Limited, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s current report on Form 8-K filed February 9, 2006.
	10	.69		10% Senior Subordinated Note due December 31, 2015 in favor of WCAS Capital Partners IV, L.P., amended and restated as of September 29, 2005.†
	10	.70		10% Senior Subordinated Note due December 31, 2015 in favor of Rocco A. Ortenzio, amended and restated as of September 29, 2005.†

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Exhibit
Number				Document
	10	.71		10% Senior Subordinated Note due December 31, 2015 in favor of Robert A. Ortenzio, amended and restated as of September 29, 2005.†
	10	.72		10% Senior Subordinated Note due December 31, 2015 in favor of John M. Ortenzio, amended and restated as of September 29, 2005.†
	10	.73		10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio, amended and restated as of September 29, 2005.†
	10	.74		10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio Descendants Trust, amended and restated as of September 29, 2005.†
	10	.75		10% Senior Subordinated Note due December 31, 2015 in favor of Ortenzio Family Foundation, amended and restated as of September 29, 2005.†
	10	.76		Stockholders Agreement, dated as of February 24, 2005, by and among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners IV, L.P., and each of the other individuals and entities from time to time named therein.†
	10	.77		Registration Rights Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners IV, L.P., each of the entities and individuals listed on Schedule I thereto and each of the other entities and individuals from time to time listed on Schedule II thereto.†
	10	.78		Registration Rights Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation, WCAS Capital Partners IV, L.P., Rocco A. Ortenzio, Robert A. Ortenzio, John M. Ortenzio, Martin J. Ortenzio, Martin J. Ortenzio Descendants Trust and Ortenzio Family Foundation.†
	12	.1		Statement of Ratio of Earnings to Fixed Charges.
	21	.1		Subsidiaries of Select Medical Holdings Corporation.†
	23	.1		Consent of Dechert LLP (see Exhibit 5.1).
	23	.2		Consent of PricewaterhouseCoopers LLP.
	24	.1		Powers of Attorney (see signature pages to the Registration Statement).†
	25	.1		Statement on Form T-1 as to the eligibility of the Trustee.†
	99	.1		Form of Letter of Transmittal.
	99	.2		Form of Notice of Guaranteed Delivery.†

†	Previously filed.

Item 22.	Undertakings

	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

	(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
	(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

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	(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

	(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and
	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

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	SELECT MEDICAL HOLDINGS CORPORATION

	By:	/s/ Michael E. Tarvin

	Michael E. Tarvin
	Senior Vice President, General Counsel and Secretary

Name				Title
/s/ Rocco A. Ortenzio   Rocco A. Ortenzio				Director and Executive Chairman
*   Robert A. Ortenzio				Director and Chief Executive Officer (principal executive officer)
/s/ Martin F. Jackson   Martin F. Jackson				Senior Vice President and Chief Financial Officer (principal financial officer)
/s/ Scott A. Romberger   Scott A. Romberger				Vice President, Chief Accounting Officer and Controller (principal accounting officer)
*   Russell L. Carson				Director
*   David S. Chernow				Director
Bryan C. Cressey				Director
*   James E. Dalton, Jr.				Director
*   Thomas A. Scully				Director
*   Leopold Swergold				Director
*   Sean M. Traynor				Director
*By:		/s/ Michael E. Tarvin   Attorney-in-fact

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