EXHIBIT 10.1

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as of March 1, 2001, between J. LIVINGSTON KOSBERG ("Consultant") and U.S. PHYSICAL THERAPY, INC., a Nevada corporation (the "Company").

RECITALS

A. Consultant recently resigned from his position as Chairman of the Board of the Company after serving in this capacity for a number of years but remains a director of the Company and an advisor to management of the Company.

B. The Company wishes to retain the services of the Consultant in order to have access to Consultant's substantial experience with the Company.

C. Consultant has agreed to render consulting services to the Company on the terms and conditions stated herein.

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

1. Engagement and Scope. The Company engages Consultant to perform consulting services (the "Services"), and Consultant accepts such engagement, upon the terms and conditions set forth in this Agreement. The Company shall from time to time request Consultant to render services or accomplish certain tasks befitting of Consultant's qualifications and past duties. Should the Company not request services of Consultant, Consultant shall not be obligated to request or perform any duties. In no event shall Consultant be required to render services for an aggregate of more than two (2) work days per month during the five-year term of this Agreement. Consultant also shall perform such additional services in connection with this engagement as mutually agreed by the Company and Consultant.

2. Term of Agreement. The term of this Agreement shall be for the five-year period commencing on June 1, 2001 and ending May 31, 2006 or until earlier terminated as herein provided.

3. Service Fees; Expenses. For all services rendered under this Agreement, the Company shall pay Consultant at the rate of Ninety-Five Thousand and no/100 Dollars ($95,000.00) per year, payable monthly in arrears on the last business day of the month or as otherwise agreed between the Company and Consultant. The Company will also pay or reimburse Consultant for the health insurance provided in Section 4 and all reasonable out-of-pocket travel, entertainment and other expenses incurred with the prior written approval of the Company. Consultant acknowledges and agrees that except as provided in Section 4 of this Agreement, he is not entitled to or eligible to participate in any of the Company's employee or executive benefit programs, including without limitation, life, health and dental insurance programs, 401(k) plan, vacation benefits, pension program, or any other benefits available to employees of the Company except to the extent he is entitled to receive vested benefits pursuant to any such plans after retirement from the Company.

4. Health Insurance. In addition to the fees and expenses described in Section 3 of this Agreement, the Company (and its successors) will provide health insurance coverage for Consultant and his spouse on substantially the same terms and conditions as it provided health insurance benefits to Consultant and his spouse while he was an employee of the Company. The Company may make changes to such insurance coverage and the terms and conditions thereof as long as the health insurance coverage provided to Consultant hereunder is substantially identical to or better than the health insurance coverage provided to the most senior executives of the Company (and its successors) from time to time. Notwithstanding termination of this Agreement pursuant to Sections 6 or 7 hereof or anything else herein to the contrary in this Agreement, the Company shall provide the above-described health insurance coverage to Consultant and his spouse as required by this Section 4 until the earlier of (i) May 31, 2006 or (ii) the date on which there are no longer any persons surviving who are entitled to such coverage hereunder.

5. Taxes. Consultant acknowledges and agrees that, except as otherwise required by law, the Company will not withhold or deduct any federal, state, or local income taxes or unemployment insurance or social security taxes (collectively, "Taxes") from payments made to Consultant hereunder. Consultant shall report and pay directly all Taxes accruing as a result of payments made to Consultant under this Agreement. Consultant shall indemnify, defend and hold the Company and its directors, officers, affiliates, agents, employees, successors and assigns, (collectively, the "Indemnified Parties") harmless from and against any and all liabilities, obligations, claims, penalties, fines or losses, including reasonable attorneys' fees and costs (collectively, "Losses"), resulting from or in any way related to Consultant's failure to pay any Taxes.

6. Termination. In the event of a material default by either party of its obligations hereunder, the other party may provide notice to the defaulting party and the defaulting party shall have 30 days to correct such default (five days if the default is in payment of fees or expenses or in the provision of health coverage called for under this Agreement). If the defaulting party fails to correct the default within such 30-day period, the non-defaulting party may terminate this Agreement upon written notice to the defaulting party.

7. Death or Disability. This Agreement shall terminate in the event of the death of Consultant or the disability of Consultant which continues for a period of 90 days. In such event, the Company will pay Consultant or his estate all amounts payable hereunder through the date of death or 90 days after the date the disability begins, as the case may be, with fees prorated for any period representing a fraction of a month. In the event of any dispute under this Section 7 as to whether Consultant has suffered a disability, Consultant shall submit to a physical examination by a licensed physician selected by the Company and reasonably acceptable to Consultant. Notwithstanding termination of this Agreement pursuant to this Section 7, the Company shall continue to provide health insurance coverage to Consultant's spouse for the period specified and as required in Section 4 above.

8. Authority of Consultant. Consultant shall have no authority to perform any act in the name or on behalf of the Company except as expressly authorized by the Company in writing. Consultant shall indemnify, defend and hold the Indemnified Parties harmless from and against any and all Losses resulting from or in any way related to any unauthorized or unlawful acts of Consultant, whether willful or not.

9. Confidential Information. Because the work for which Consultant is retained will include knowledge and information of a confidential nature to, or which is a trade secret of, the Company, and its affiliates ("Confidential Information"), Consultant possesses and shall hereafter receive Confidential Information in confidence and shall not, except as required in the conduct of the Company's business or as authorized in writing by the Company, publish or disclose Confidential Information, or make any use of Confidential Information other than for and on behalf of the Company in rendering the Services, or authorize anyone else to do so, unless and until such information or knowledge shall become part of the public domain or shall have ceased to be secret or confidential, in either case through no fault of Consultant.

10. Return of the Company Proprietary or Confidential Information. All documents, written information, notebooks, records and any other information relating to the Company or its affiliates, and all tangible work product created by Consultant pursuant to this Agreement, shall be the property of the Company and shall be delivered by Consultant to the Company on termination of this Agreement.

11. Miscellaneous.

(a) Assignment; Binding Effect; Amendment - This Agreement and the rights of the parties under it may not be assigned (except by operation of law and except that they may be assigned by the Company to an affiliate of the Company or any successor of the Company as long as such assignment does not relieve the assignor from any liability hereunder). Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their successors and assigns, including specifically but without limitation, the obligation to provide health insurance coverage to Consultant and his spouse as provided in Section 4 above. This Agreement constitutes a valid and binding agreement of the parties enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by each party.

(b) Entire Agreement - This Agreement is the final, complete and exclusive statement of the agreement between the parties with relation to the subject matter of this Agreement, it being understood that there are no oral representations, understandings or agreements covering the same subject matter as this Agreement. This Agreement supersedes, and cannot be varied, contradicted or supplemented by evidence of, any prior or contemporaneous discussions, correspondence, or oral or written agreements of any kind.

(c) Counterparts - This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

(d) Notices - All notices or other communications required or permitted under this Agreement shall be in writing and may be given by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, by nationally recognized overnight courier, or by delivering the same in person to such party, addressed as follows:

If to Consultant, addressed to:

J. Livingston Kosberg 121 N. Post Oak Lane, #206 Houston, TX 77024

If to the Company, addressed to:

U.S. Physical Therapy, Inc. 3040 Post Oak Boulevard, Suite 222 Houston, TX 77056 Attn: Roy Spradlin, President and Chief Executive Officer

Notice shall be deemed given and effective the day personally delivered, the day after being sent by overnight courier, subject to signature verification, and three business days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, registered or certified, return receipt requested, or when actually received, if earlier. Any party may change the address for notice by notifying the other party of such change in accordance with this Agreement.

(e) Governing Law - This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas, without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

(f) Captions - The headings of this Agreement are inserted for convenience only, and shall not constitute a part of this Agreement or be used to construe or interpret any of its provisions.

(g) Remedies - In the event of breach of any of the terms of this Agreement by either party hereto, the non-breaching party will be entitled, where appropriate, to apply for and obtain injunctive relief in any court of competent jurisdiction without limitation as to any other or future remedies which may be available.

(h) Survival of Obligations - No termination of this Agreement or of Consultant's work hereunder, for whatever reason, shall relieve Consultant of or release Consultant from the obligations set forth in Sections 4, 8, 9 and 10 of this Agreement, which shall survive such termination.

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

CONSULTANT:

/s/ J. Livingston Kosberg
-------------------------
J. Livingston Kosberg

COMPANY:

U.S. Physical Therapy, Inc.

By:/s/ Roy Spradlin
   ----------------
     Roy Spradlin
     President and Chief Executive Officer

EXHIBIT 10.2

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between U. S. Physical Therapy, Inc. a Nevada corporation ("Employer") and Roy Spradlin ("Employee") as of February 21, 2001, and supersedes that certain Employment Agreement between the parties effective May 18, 1994. Employer and Employee may be referred to herein collectively as the "Parties" and individually as a "Party." For the purposes of this Agreement, "Employer" includes U.S.P.T. Management, Inc.; for the purposes of Sections 11, 12, and 13 "Employer" shall include all subsidiaries and affiliates (as defined under the Securities Exchange Act of 1934, as amended and regulations promulgated thereunder)

Section 1. Term. Employer hereby continues the employment of Employee and Employee hereby accepts continued employment with Employer for a term (the "Term") of three (3) years beginning on the date of execution hereof ("Commencement Date") and continuing until February 21, 2004; provided, however, that effective on the first and second anniversary of the date of this Agreement, the Term shall automatically be extended for an additional year (up to a maximum Term, with such extensions, of five (5) years) unless either party notifies the other on or before such anniversary dates that such party has elected not to extend the Term.

Section 2. Duties of Employee. Employee is engaged to serve as President and Chief Executive Officer of Employer and to perform such duties and responsibilities as are customarily performed by persons acting in such capacity or such other duties as may be assigned by Employer from time to time. Employee shall perform these duties in accordance with the policies and objectives established by Employer's Board of Directors.

Section 3. Full-Time Employment. Employee shall devote substantially all of his working time and talent to the business of Employer during the term hereof and shall diligently and to the best of his ability perform all duties incident to his employment hereunder, using his best efforts to promote the interests of Employer.

Section 4. Position on the Board of Directors. Employer agrees to use its best efforts to cause Employee to be elected to the Board of Directors of Employer.

Section 5. Base Compensation. Subject to the terms and conditions of this Agreement, as partial compensation for services rendered and Employee's covenants and agreements under this Agreement, Employer shall pay to Employee a base salary of TWO HUNDRED FIFTY THOUSAND AND NO/100THS DOLLARS ($250,000.00) per year ("Base Compensation"), payable in equal semi-monthly installments on the fifteenth (15th) and final days of each month during the term hereof. From time to time (but at least once a year) Employer and Employee shall review Employee's performance, and at that time Employer, in its

sole discretion, shall determine whether Employee's Base Compensation should be increased. At no time during the term hereof will Employee's Base Compensation be decreased.

Section 6. Additional Compensation. Subject to the terms and conditions of this Agreement, in addition to the Base Compensation, Employer may provide incentive compensation in the form of cash bonuses. The amount of such bonus is discretionary and will be determined by the Board of Directors of Employer or a compensation committee thereof, taking into consideration any factor as the Board of Directors or compensation committee deems relevant, but the total amount of the cash bonuses shall not generally exceed thirty percent (30%) of Employee's Base Compensation except in the case of extraordinary results or performance.

Section 7. Business Expenses. Employer shall reimburse Employee for business expenses directly and reasonably incurred in the performance of his duties.

Section 8. Benefits and Plans. Employee shall be entitled to such fringe benefits, including vacation, sick and personal leave, insurance (health, disability and life) and stock options generally available to the executive officers of Employer, and Employee shall be entitled to participate, subject to all conditions of eligibility, in any employee benefit plans which may be adopted by Employer, including without limitation, qualified retirement plan(s), deferred compensation plans, and salary continuation, disability insurance, hospitalization insurance, major medical insurance, medical reimbursement and life insurance benefit plans. Also, Employer shall continue Employee's monthly salary for a period of up to 90 continuous days during any period of Employee's sickness or disability.

Section 9. Termination. This Agreement shall terminate prior to the expiration of the term hereof upon the occurrence of any one of the following events:

(a) Disability. In the event that Employee is unable fully to perform his duties and responsibilities hereunder to the full extent required by Employer by reason of illness, injury or incapacity for ninety (90) consecutive days, this Agreement may be terminated by Employer, and Employer shall have no further liability or obligation to Employee for compensation or otherwise hereunder; provided, however, that Employee shall continue to be compensated as provided in this Agreement during such 90-day period and until termination under this section, and provided further, that Employee will be entitled to receive the benefits, rights and/or payments prescribed under any employee benefit, bonus or stock option plan in which Employee was participating at the time of such disability in accordance with the terms and conditions of such plans and programs. In the event of any dispute under this Section 9, Employee shall submit to a physical examination by a licensed physician selected by Employer and reasonably acceptable to Employee.

(b) Death. In the event that Employee dies during the term hereof, Employer shall pay to his executors, legal representatives or administrators an amount equal to one (1) year's base compensation set forth in Section 5 hereof, and thereafter Employer shall have no further liability or obligation hereunder to Employee's executors, legal

representatives, administrators, heirs or assigns or any other person claiming under or through Employee; provided, however, that Employee's heirs, legal representatives or administrators will be entitled to receive the benefits, rights and/or payments prescribed under any employee benefit, bonus and/or stock option plans and programs in which Employee was participating at the time of his death in accordance with the terms and conditions of such plans and programs.

(c) Cause. Nothing in this Agreement shall be construed to prevent its termination by Employer at any time for "cause". For purposes of this Agreement, "cause" shall mean (i) the willful and material failure of Employee to perform or observe (other than by reason of disability as contemplated in paragraph 9(a)) any of the terms or provisions of this Agreement, including the failure of Employee to follow the reasonable written directions of Employer's Board of Directors, (ii) dishonesty or misconduct on the part of Employee that is or is reasonably likely to be damaging or detrimental to the business of Employer, (iii) conviction of a crime involving moral turpitude, (iv) habitual insobriety or failure to perform duties due to abuse of alcohol or drugs, or (v) misappropriation of funds. Prior to terminating this Agreement on account of Employee's failure to perform or observe any of the terms and conditions of this Agreement (but not for any of the other enumerated "causes" stated in (ii) through (v) above, Employer shall give Employee thirty (30) days written notice and an opportunity to cure such failure to the satisfaction of Employer. Upon termination for cause, Employer shall pay to Employee all sums due to Employee through the date of such termination. Following such a termination, Employer shall have no further duty or obligation to Employee; provided, however, that Employee shall continue to be bound by Sections 11 through 17.

Section 10. Special Benefits.

A. Special Benefit in the Event of a Change in Control. Employee shall be entitled to a Change of Control benefit of $500,000 in the event of a "Change in Control", defined as:

(a) The transfer or sale by Employer of all or substantially all of the assets of Employer whether or not this Agreement is assigned or transferred as a part of such sale;

(b) The transfer or sale of more than fifty percent (50%) of the outstanding shares of Common Stock of Employer;

(c) A merger or consolidation involving Employer in a transaction in which the shareholders of Employer immediately prior to the merger or consolidation own less than fifty percent (50%) of the company surviving the merger or consolidation; or

(d) The voluntary or involuntary dissolution of Employer.

However, if a Change in Control occurs, the Term shall be modified to end one year from the date the Change in Control occurs, regardless of the remaining Term immediately prior to the Change of Control.

B. Special Benefit in the Event of Termination Without Cause or Resignation for Good Cause. Employee shall be also be entitled to the special benefit described below in the event of the occurrence of either of the following events (individually or collectively, a "Termination Event"):

(a) The termination of employment of Employee by Employer without "cause" as cause is defined in Section 9(c) hereof; or

(b) Employee resigns "for good reason" as defined in Section 10 F. hereof.

The special benefit payable upon the occurrence of a Termination Event shall be the sum of the following components:

(a) Employee's Base Compensation then in effect for the remainder of the Term; and

(b) The greater of (i) the bonus paid or payable to Employee with respect to last fiscal year of Employer completed prior to the occurrence of the Termination Event and (ii) the average of the bonuses paid to Employee over the three fiscal years of Employer ending with last fiscal year of Employer completed prior to the occurrence of the Termination Event; and

(c) Employee's accrued but unused vacation days.

If a Change in Control has occurred prior to a Termination Event, Employee shall also be entitled to a benefit under this Section 10 B., with the reduced Term described above.

C. The benefits described in Sections 10 A. and 10 B. shall each be paid in a lump sum on or before thirty (30) days after the occurrence of the Change in Control or the Termination Event, as the case may be. The benefits payable under Section 10 B. shall be paid without any reduction for the fact that the calculation of the benefit is determined with reference to amounts (such as salary) that would normally be paid out over time.

D. In the event Employee's employment is terminated (whether by Employer or Employee) as a result of a Termination Event, Employee shall be entitled to such medical insurance benefits as he enjoyed prior to his termination for the remainder of the Term and at the same cost to Employee of such benefits as in effect prior to such termination.

E. If Employee's employment is terminated (whether by Employer or Employee) as the result of a Termination Event within 12 months of a Change in Control, the period after termination during which the obligations imposed by Sections 11 and 12 remain in effect shall be reduced from two (2) years to one
(1) year. If Employee continues to be employed by Employer

for more than one year after a Change in Control occurs, the obligations imposed by Sections 11 and 12 shall remain in effect for the period after termination stated therein. Employee shall be entitled to the Change in Control benefit specified in Section 10 A. only if he remains an employee of Employer to the date of consummation of the Change in Control, unless Employee is terminated prior to such date pursuant to a Termination Event or as the result of disability or death as provided in Sections 9(a) and 9(b). Should any special benefits provided in this Section 10 become payable, the covenants contained in Sections 11 through 17 hereof shall continue to apply except as otherwise provided in this Section 10.

F. For purposes of this Agreement, "for good reason" means the occurrence of any one or more of the following: (i) removal or other termination of Employee as the President and/or Chief Executive of Employer, without Employee's express written consent; (ii) a reduction of Employee's duties, authority or responsibilities or the assignment to Employee of such reduced duties, authority or responsibilities, in either case without Employee's express written consent, (iii) a reduction by Employer in Employee's Base Compensation;
(iv) a material reduction by Employer in the kind or level of employee benefits, including bonuses, to which Employee was entitled immediately prior to such reduction with the result that Employee's overall benefits package is reduced;
(vi) Employer delivers a notice pursuant to Section 1 that it has elected not to extend the Term for an additional year at the time stated therein; or (vii) the relocation of Employee to a facility or a location more than 30 miles from Employee's then present location without Employee's express written consent.

Section 11. Non-Competition. During the term and for a two (2) year period following the termination of his employment under this Agreement for any reason, Employee shall not, directly or indirectly, for himself or on behalf of any other person or entity as an employee, employer, consultant, agent, lender, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, (i) invest, engage in, or permit his name to be used in connection with any business that is in competition with Employer,
(ii) accept employment with or render services to a competitor of Employer, as a director, officer, agent partner, employee or consultant, or (iii) solicit or accept from any of the customers of Employer or from any person or entity whose business Employer is soliciting, any business of the type which Employer is engaged in or actively is preparing to engage in. Employee shall be prohibited from engaging in the activities described above within fifty (50) miles of any of Employer's rehabilitation clinic locations. Notwithstanding the foregoing, Employee may own the voting common stock of any publicly held corporation so long as it does not exceed more than five per cent (5%) of the outstanding stock thereof.

Section 12. Non-Solicitation. During the term hereof and for a two
(2) year period following the termination of this Agreement for any reason, Employee agrees not to, directly or indirectly, for himself or on behalf of any other person or entity (a) solicit or induce, or attempt to solicit or induce, any person employed by, or any agent of, Employer, to terminate employee's or agent's relationship with Employer, nor (b) call on, solicit or divert, or attempt to call on, solicit or divert any person, firm, corporation or other entity who was or had been a customer or a patient referral source (including, without limitation, any physician) of Employer who referred

ten or more customers to Employer, who is a customer or a patient referral source of Employer who has referred ten or more customers to Employer, or who is a prospective customer or a patient referral source of Employer with whom Employee had contact as an employee of Employer and who, within six months of such solicitation, Employer was or is actively recruiting as a customer or patient referral source.

Section 13. Confidential Information. Employee will not, during or after the termination of this Agreement, disclose any trade secrets, customer lists, customer mailing lists, prospective customer lists, lists of referral sources or prospective referral sources, or pricing, marketing or advertising plans or methods used by Employer (the "Confidential Information") to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall Employee make use of the Confidential Information for his own purposes or for the benefit of any person, firm, corporation or other entity (except Employer) under any circumstances during or after the termination of this Agreement. On demand of Employer, at any time, Employee shall immediately deliver all printed or written Confidential Information to Employer. To the extent that Employee's property does not contain Confidential Information, Employee may remove all of Employee's property (such as computer software and tapes) upon termination of this Agreement. Confidential Information does not include information that (i) currently is generally available to or known by the public or hereafter becomes generally available to or known by the public through no fault of Employee, (ii) was already in the possession of Employee on the date of inception of Employee's employment by Employer, or (iii) is obtained by Employee from a third party who is under no obligation of confidence to Employer.

Section 14. Reasonableness of Restrictions. Employee agrees that
(a) the covenants contained in Sections 11, 12 and 13 hereof are necessary for the protection of Employer's business goodwill and trade secrets, (b) a portion of the compensation paid to Employee under this Agreement is paid in consideration of the covenants herein contained, the sufficiency of which consideration is hereby acknowledged, and if the scope of any restriction contained in Sections 11, 12 and 13 is too broad to permit enforcement of such restriction to its full extent, then such restriction shall be enforced to the maximum permitted by law, and the parties hereby consent that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

Section 15. Enforcement. Employee acknowledges Employee's employment with Employer is special and unique in character and that Employee will acquire special skill and training and gain special knowledge during Employee's employment with Employer, that the restrictions contained in Sections 11, 12 and 13 hereof are reasonable and necessary to protect the legitimate interests of Employer and its affiliates, that Employer would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those sections will result in irreparable injury to Employer. Employee also acknowledges that Employer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages as well as an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and in addition to any

other rights or remedies to which Employer may be entitled. The existence of any claim or cause of action of Employee against Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of these covenants.

Section 16. Copy of Covenants. Until the expiration of the applicable restrictions, Employee will provide, and Employer similarly may provide, a copy of the covenants contained in Sections 11, 12 and 13 of this Agreement to any business or enterprise which Employee may (i) directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management operation, financing, or control of, (ii) serve as an officer, director, employee, partner, principal, agent, representative, consultant, lender or otherwise, or (iii) with which he may use or permit his name to be used.

Section 17. Special Definition of Employer. For the purposes of Sections 11 through 16 above, the definition of Employer shall include any subsidiary or affiliate of Employer, including all affiliated physical therapy partnerships of Employer.

Section 18. Certain Additional Payments.

(a) Notwithstanding anything in this Agreement to the contrary, if it shall be determined that any payment or distribution by Employer to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 18 (a "Payment")) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") or any interest or penalties incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment (whether through withholding at the source or otherwise) by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), employment taxes and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) Subject to the provisions of this Agreement, all determinations required to be made under this Agreement, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the accounting firm providing audit services to the Employer (the "Accounting Firm") which shall provide detailed supporting calculations both to Employer and Employee within 15 business days of the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by Employer. If the Accounting Firm is serving as accountant or auditor for Employer, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm

shall be borne solely by Employer. Any Gross-Up Payment, as determined pursuant to this Agreement, shall be paid by Employer to Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee's applicable federal income tax return would not result in the imposition of negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon Employer and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by Employer should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Employer exhausts its remedies pursuant to the following provisions of this Agreement and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Employer to or for the benefit of Employee.

(c) Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Employee is informed in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall:

(i) give Employer any information reasonably requested by Employer relating to such claim;

(ii) take such action in connection with contesting such claim as Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Employer;

(iii) cooperate with Employer in good faith in order to effectively contest such claim; and

(iv) permit Employer to participate in any proceedings relating to such claim;

provided, however, that Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax,

employment tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Agreement, Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employer shall determine; provided, however, that if Employer directs Employee to pay such claim and sue for a refund, Employer shall advance the amount of such payment to Employee, on an interest-free basis and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax, employment tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Employer's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by Employee of an amount advanced by Employer pursuant to the foregoing provisions of this Agreement, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to Employer complying with the requirements of this Agreement) promptly pay to Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to the foregoing provisions of this Agreement, a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

(e) If Employer is obligated to provide Employee with a continuation of benefits hereunder, and the amount of such benefits or the value of such benefit coverage (including without limitation any insurance premiums paid by Employer to provided such benefits) is subject to any income, employment or similar tax imposed by federal, state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Income Tax") because such benefits cannot be provided under a nondiscriminatory health plan described in Section 105 of the Code or for any other reason, Employer will

pay to Employee an additional payment or payments (collectively, an "Income Tax Payment"). The Income Tax Payment will be in an amount such that, after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), Employee retains an amount of the Income Tax Payment equal to the Income Tax imposed with respect to such continued benefits.

If to Employer:             U.S. Physical Therapy, Inc.
                     3040 Post Oak Blvd., Suite 222
                     Houston, Texas 77056

with a copy to:      Eddy J. Rogers, Jr., Esq.
                     Mayor, Day, Caldwell & Keeton, L.L.P.
                     700 Louisiana, Suite 1900
                     Houston, Texas 77002

If to Employee:      Roy Spradlin
                     3040 Post Oak Blvd., Suite 222
                     Houston, Texas 77056

Mailed notices shall be addressed to the Parties at the addresses set forth above, but each Party may change the address by written notice in accordance with this Section 19. Notices delivered personally or by telefacsimile shall be deemed communicated as of actual receipt mailed notices shall be deemed communicated as of three days after mailing.

Section 20. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Employee by Employer, and contains all of the covenants and agreements between the parties with respect to such employment in any manner whatsoever.

Section 21. Headings. The headings or titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the heading or title of any section.

Section 22. Amendment or Modification; Waiver. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver is authorized by Employer and is agreed to in writing, signed by Employee and by an officer of Employer (other than Employee) thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by any Party hereto of any breach by any other Party hereto of any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar provision or condition at the same or at any prior or

subsequent time nor shall the receipt or acceptance of Employee's employment be deemed a waiver of any condition or provision hereof.

Section 23. Assignability. Employee shall not assign, pledge or encumber any interest in this Agreement or any part thereof without the express written consent of Employer, this Agreement being personal to Employee. This Agreement shall, however, inure to the benefit of Employee's estate, dependents, beneficiaries and legal representatives. This Agreement shall not be assignable by Employer without the written consent of Employee which will not be unreasonably withheld. Subject to the terms of this Agreement, Employer may merge or consolidate with or into, or transfer substantially all of its assets to, another corporation or other form of business organization without Employee's consent, and as a result of such merger, consolidation or transfer, this Agreement shall bind the successor of Employer resulting from such merger, consolidation or transfer. No such merger, consolidation or transfer, however, shall relieve the Parties from liability and responsibility for the performance of their respective duties and obligations hereunder.

Section 24. Governing Law. This Agreement shall be interpreted, construed and governed by and in accordance with the internal substantive law of the State of Texas.

Section 25. Severability. Each provision of this Agreement constitutes a separate and distinct undertaking, covenant and/or provision hereof. In the event that any provision of this Agreement shall finally be determined to be unlawful, such provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect, and in substitution for any such provision held unlawful, there shall be substituted a provision of similar import reflecting the original intent of the Parties hereto to the extent permissible under law.

EMPLOYER:

U.S. PHYSICAL THERAPY, INC.

By:/s/ Mark J. Brookner
   ------------------------------
Name: Mark J. Brookner
      ---------------------------
Position: Vice Chairman
          -----------------------

EMPLOYEE:

/s/ Roy Spradlin
---------------------------------
Roy Spradlin

EXHIBIT 10.3

U.S. PHYSICAL THERAPY, INC.

1992 STOCK OPTION PLAN, AS AMENDED

Scope and Purpose of Plan

This U.S. Physical Therapy, Inc. 1992 Stock Option Plan (the "Plan") provides for the granting of:

(a) Incentive Options (hereinafter defined) to certain key employees of U.S. Physical Therapy, Inc., a Nevada corporation (the "Corporation"), or of its Affiliates (hereinafter defined), and

(b) Nonstatutory Options (hereinafter defined) to certain key employees and nonemployee directors of the Corporation or of its Affiliates or of U.S. PT Management, Ltd., a Texas limited partnership ("USPTM").

The purpose of the Plan is to provide an incentive for key employees and directors of the Corporation or its Affiliates or USPTM to remain in the service of the Corporation or its Affiliates or USPTM, to extend to them the opportunity to acquire a proprietary interest in the Corporation so that they will apply their best efforts for the benefit of the Corporation, and to aid the Corporation in attracting able persons to enter the service of the Corporation and its Affiliates or USPTM.

SECTION 1. Definitions.

1.1 "Affiliates" shall mean (a) any corporation, other than the Corporation, in an unbroken chain of corporations ending with the Corporation if each of the corporations, other than the Corporation, owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain and (b)any corporation, other than the Corporation, in an unbroken chain of corporations beginning with the Corporation if each of the corporations, other than the last corporation in the unbroken chain, owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

1.2 "Agreement" shall mean the written agreement between the Corporation and a Holder evidencing the Option granted by the Corporation and the understanding of the parties with respect thereto.

1.3 "Board of Directors" shall mean the board of directors of the Corporation.

1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.

1.5 "Committee" shall mean the committee appointed pursuant to
Section 3 hereof by the Board of Directors to administer this Plan.

1.6 "Eligible Individuals" shall mean (a) key employees, including officers and directors who are also employees of the Corporation or of any of its Affiliates or of USPTM, (b) nonemployee directors (including advisory directors) and officers of the Corporation or of any of its Affiliates. Notwithstanding the foregoing provisions of this Paragraph 1.6, to ensure that the requirements of Subparagraph 3.1(a) are satisfied, the Board of Directors may from time to time specify individuals who shall not be eligible for the grant of Options or options or stock appreciation rights or allocations of stock under any plan of the Corporation or its Affiliates (as such terms are used in subsection (d)(3) of Rule 16b-3 promulgated under the Act); provided, however, that the Board of Directors may at any time determine that any individual who has been so excluded from eligibility shall become eligible for grants of Options and grants of such options or stock appreciation rights or allocations of stock under any plans of the Corporation and its Affiliates.

1.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

1.8 "Fair Market Value" shall mean:

(a) If shares of Stock of the same class are listed or admitted to unlisted trading privileges on any national or regional securities exchange at the date of determining the Fair Market Value, the last reported sale price on such exchange on the last business day prior to the date in question; or

(b) If shares of Stock of the same class shall not be listed or admitted to unlisted trading privileges as provided in Subparagraph 1.8(a) and sales prices therefor in the over-the-counter market shall be reported by the National Association of Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ") National Market System at the date of determining the Fair Market Value, the last reported sale price so reported on the last business day prior to the date in question; or

(c) If shares of Stock of the same class shall not be listed or admitted to unlisted trading privileges as provided in Subparagraph 1.8(a) and sales prices therefor shall not be reported by the NASDAQ National Market System as provided in Subparagraph 1.8(b), and bid and asked prices therefor in the over-the-counter market shall be reported by NASDAQ (or, if not so reported, by the National Quotation Bureau Incorporated) at the date of determining the Fair Market Value, the average of the closing bid and asked prices on the last business day prior to the date in question; and

(d) If shares of Stock of the same class shall not be listed or admitted to unlisted trading privileges as provided in Subparagraph 1.8(a) and sales prices or bid and asked prices therefor shall not be reported by NASDAQ (or the National Quotation Bureau Incorporated) as provided in Subparagraph 1.8(b) or Subparagraph 1.8(c) at the date of determining the Fair Market Value, the value determined in good faith by the Board of Directors.

For purposes of valuing Incentive Options, the Fair Market Value of Stock shall be determined without regard to any restriction other than one which, by its terms, will never lapse.

1.9 "Holder" shall mean an Eligible Individual to whom an Option has been granted.

1.10 "Incentive Options" shall mean stock options that are intended to satisfy the requirements of section 422 of the Code.

1.11 "Nonstatutory Options" shall mean stock options that are not intended to satisfy the requirements of section 422 of the Code.

1.12 "Options" shall mean either Incentive Options or Nonstatutory Options, or both.

1.13 "Securities Act" shall mean the Securities Act of 1933, as amended.

1.14 "Stock" shall mean the Corporation's authorized common stock, $0.01 par value per share, together with any other securities with respect to which Options granted hereunder may become exercisable.

SECTION 2. Stock and Maximum Number of Shares Subject to the Plan.

2.1 Description of Stock and Maximum Shares Allocated. The Stock which may be issued upon the exercise of an Option may either be unissued or reacquired shares of Stock, as the Board of Directors may, in its sole and absolute discretion, from time to time determine.

Subject to the adjustments provided for in Paragraph 6.6, (i) the aggregate number of shares of Stock to be issued pursuant to the exercise of all Options granted hereunder may equal but shall not exceed 2,330,000 shares of Stock and (ii) the maximum number of shares of Stock subject to Options that may be granted to any officer or other employee during any calendar year shall not exceed 100,000 shares of Stock.

2.2 Restoration of Unpurchased Shares. If an Option granted hereunder expires or terminates for any reason during the term of this Plan and prior to the exercise of the Option in full, the shares of Stock subject to but not issued under such Option shall again be available for Options granted hereunder subsequent thereto.

SECTION 3. Administration of the Plan.

3.1 Committee. The Plan shall be administered by the Committee. The Committee shall consist of not less than two individuals. In the event that Stock is registered under Section 12 of the Exchange Act, all members of the Committee shall be directors.

3.2 Duration, Removal, Etc. The members of the Committee shall serve at the pleasure of the Board of Directors, which shall have the power, at any time and from time to time, to remove members from the Committee or to add members thereto. Vacancies on the Committee, however caused, shall be filled by action of the Board of Directors.

3.3 Meetings and Actions of Committee. The Committee shall elect one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. All decisions and determinations of the Committee shall be made by the majority vote or decision of all of its members present at a meeting; provided, however, that any decision or determination reduced to writing and signed by all of the members of the Committee shall be as fully effective as if it had been made at a meeting duly called and held. The Committee may make any rules and regulations for the conduct of its business that are not inconsistent with the provisions hereof and with the bylaws of the Corporation as it may deem advisable.

3.4 Committee's Powers. Subject to the express provisions hereof, the Committee shall have the authority, in its sole and absolute discretion, (a) to adopt, amend, and rescind administrative and interpretive rules and regulations relating to the Plan; (b) to determine the terms and provisions of the respective Agreements (which need not be identical), including provisions defining or otherwise relating to (i) subject to Section 6 of the Plan, the term and the period or periods and extent of exercisability of the Options, (ii) the extent to which the transferability of shares of Stock issued upon exercise of Options is restricted, (iii) the effect of termination of employment upon the exercisability of the Options, and (iv) the effect of approved leaves of absence (consistent with any applicable regulations of the Internal Revenue Service);
(c) to accelerate the time of exercisability of any Option that has been granted; (d) to construe the terms of any Agreement and the Plan; and (e) to make all other determinations and perform all other acts necessary or advisable for administering the Plan, including the delegation of such ministerial acts and responsibilities as the Committee deems appropriate. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Agreement in the manner and to the extent it shall deem expedient

to carry it into effect, and it shall be the sole and final judge of such expediency. The Committee shall have full discretion to make all determinations on the matters referred to in this Paragraph 3.4; such determinations shall be final, binding and conclusive.

SECTION 4. Eligibility and Participation.

4.1 Eligible Individuals. Options may be granted hereunder only to persons who are Eligible Individuals at the time of the grant thereof. Notwithstanding any provision contained herein to the contrary, a person shall not be eligible to receive an Incentive Option hereunder unless he is an employee of the Corporation or an Affiliate, nor shall a person be eligible to receive an Incentive Option hereunder if he, at the time such Option is granted, would own (within the meaning of Sections 422 and 424 of the Code) stock possessing more than ten percent (10%) of the total combined voting power or value of all classes of stock of the Corporation or of an Affiliate unless at the time such Incentive Option is granted the exercise price per share of Stock is at least one hundred and ten percent (110%) of the Fair Market Value of each share of Stock to which the Incentive Option relates and the Incentive Option is not exercisable after the expiration of five (5) years from the date it is granted.

4.2 No Right to Option. The adoption of the Plan shall not be deemed to give any person a right to be granted an Option.

SECTION 5. Grant of Options and Certain Terms of the Agreements.

Subject to the express provisions hereof, the Committee shall determine which Eligible Individuals shall be granted Options hereunder from time to time. In making grants, the Committee shall take into consideration the contribution the potential Holder has made or may make to the success of the Corporation or its Affiliates or of USPTM and such other considerations as the Board of Directors may from time to time specify. The Committee shall also determine the number of shares subject to each of such Options, and shall authorize and cause the Corporation to grant Options in accordance with such determinations.

The date on which the Committee completes all action constituting an offer of an Option to an individual, including the specification of the number of shares of Stock to be subject to the Option, shall be the date on which the Option covered by an Agreement is granted, even though certain terms of the Agreement may not be at such time determined and even though the Agreement may not be executed until a later time. For purposes of the preceding sentence, an offer shall be deemed made if the Committee has completed all such action except communication of the grant of the Option to the potential Holder. In no event, however, shall a Holder gain any rights in addition to those specified by the Committee in its grant, regardless of the time that may pass between the grant of the Option and the actual execution of the Agreement by the Corporation and the Holder.

Each Option granted hereunder shall be evidenced by an Agreement, executed by the Corporation and the Eligible Individual to whom the Option is granted, incorporating such terms as the Committee shall deem necessary or desirable. More than one Option may be granted hereunder to the same Eligible Individual and be outstanding concurrently hereunder. In the event an Eligible Individual is granted one or more Incentive Options and one or more Nonstatutory Options, such grants shall be evidenced by separate Agreements, one for each of the Incentive Option grants and one for each of the Nonstatutory Option grants.

Each Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of the Stock acquired pursuant to an Option granted hereunder or otherwise and such restrictions on the transferability of shares of the Stock acquired pursuant to an Option granted hereunder or otherwise as the Committee in its sole and absolute discretion shall deem proper or advisable. Such conditions giving rise to forfeiture may include, but need not be limited to, the requirement that the Holder render substantial services to the Corporation or its Affiliates or of USPTM for a specified period of time.

SECTION 6. Terms and Conditions of Options.

All Options granted hereunder shall comply with, be deemed to include, and shall be subject to the following terms and conditions:

6.1 Number of Shares. Each Agreement shall state the number of shares of Stock to which it relates.

6.2 Exercise Price. Each Agreement shall state the exercise price per share of Stock. The exercise price per share of Stock subject to an Incentive Option shall not be less than the greater of (a) the par value per share of the Stock or (b) 100% of the Fair Market Value per share of the Stock on the date of the grant of the Option. The exercise price per share of Stock subject to a Nonstatutory Option shall not be less than the par value per share of the Stock. The exercise price per share of Stock subject to either an Incentive Option or a Nonstatutory Option shall be determined by the Committee upon the granting of the Option, subject to the restrictions set forth above.

6.3 Medium and Time of Payment, Method of Exercise, and Withholding Taxes. The exercise price of an Option shall be payable upon the exercise of the Option in a manner that is acceptable to the Committee in its sole discretion, which form may include cash, shares of Stock or a share or shares of Stock owned by the Holder and surrendered for actual or deemed multiple exchanges of shares of Stock, or any combination thereof. Exercise of an Option shall not be effective until the Corporation has received written notice of exercise, specifying the number of whole shares to be purchased and accompanied by payment in full of the aggregate exercise price of the number of shares purchased. The Corporation shall not in any case be required to sell, issue, or deliver a fractional share of Stock with respect to any Option.

The Committee may, in its discretion, require a Holder to pay to the Corporation at the time of exercise of an Option or portion thereof the amount that the Corporation deems necessary to satisfy its obligation to withhold Federal, state or local income or other taxes incurred by reason of the exercise. Where the exercise of an Option does not give rise to an obligation to withhold Federal income or other taxes on the date of exercise, the Corporation may, in its discretion, require a Holder to place shares of Stock purchased under the Option in escrow for the benefit of the Corporation until such time as Federal income or other tax withholding is no longer required with respect to such shares or until such withholding is required on amounts included in the gross income of the Holder as a result of the exercise of an Option or

the disposition of shares of Stock acquired pursuant thereto. At such later time, the Corporation, in its discretion, may require a Holder to pay to the Corporation the amount that the Corporation deems necessary to satisfy its obligation to withhold Federal, state or local income or other taxes incurred by reason of the exercise of the Option or the disposition of shares of Stock. Upon receipt of such payment by the Corporation, such shares of Stock shall be released from escrow to the Holder.

6.4 Term, Time of Exercise, and Transferability of Stock and Options. In addition to such other terms and conditions as may be included in a particular Agreement granting an Option, an Option shall be exercisable during a Holder's lifetime only by the Holder or by the Holder's guardian or legal representative in accordance with the next sentence. An Option shall not be transferable other than by will or the laws of descent and distribution. The provisions of the remainder of this Paragraph 6.4 shall apply to the extent a Holder's Agreement does not expressly provide otherwise.

If a Holder (a) voluntarily ceases to be an Eligible Individual or (b) ceases to be an Eligible Individual by reason that his status as such was terminated by the Corporation or one of its Affiliates or by USPTM (with or without cause), the Option shall terminate thirty days after such Holder ceases to be an Eligible Individual.

Notwithstanding the foregoing, if a Holder ceases to be an Eligible Individual by reason of (a) disability (as defined in Section 22(e)(3) of the Code) or (b) death, then the Holder shall have the right for twelve months after the date of disability or death to exercise an Option to the extent such Option is exercisable on the date of his disability.

That portion of the Option which is not exercisable on the date the Holder ceases to be an Eligible Individual shall terminate and be forfeited to the Corporation on the date of such cessation.

Notwithstanding any other provision of this Plan, no Incentive Option shall be exercisable after the expiration of ten (10) years from the date it is granted, or the period specified in Paragraph 4.1, if applicable. The Committee shall have authority to prescribe in any Agreement that the Option evidenced thereby may be exercised in full or in part as to any number of shares subject thereto at any time or from time to time during the term of the Option, or in such installments at such times during said term as the Committee may prescribe. Except as provided above and unless otherwise provided in any Agreement, an Option may be exercised at any time or from time to time during the term of the Option. Such exercise may be as to any or all whole (but no fractional) shares which have become purchasable under the Option.

Within a reasonable time or such time as may be permitted by law after the Corporation receives written notice that the Holder has elected to exercise all or a portion of an Option, accompanied by payment in full of the aggregate Option exercise price of the number of shares of Stock purchased, the Corporation shall issue and deliver a certificate representing the shares acquired in consequence of the exercise and any other amounts payable in consequence of such exercise. In the event that a Holder exercises both an Incentive Option, or portion thereof, and a Nonstatutory Stock Option, or a portion thereof, separate Stock certificates shall be issued, one for the Stock subject to the Incentive Option and one for the Stock subject to the Nonstatutory Stock Option. The number of the shares of Stock transferable due to an exercise of an Option under this Plan shall not be increased due to the passage of time, except as may be provided in an Agreement. However, this number of such shares of Stock which are transferable may increase due to the occurrence of certain events which are fully described in Paragraph 6.6.

Nothing herein or in any Option granted hereunder shall require the Corporation to issue any shares upon exercise of any Option if such issuance would, in the opinion of counsel for the Corporation, constitute a violation of the Securities Act or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. At the time of any exercise of an Option, the Corporation may, as a condition precedent to the exercise of such Option, require from the Holder of the Option (or in the event of his death, his legal representatives, heirs,

legatees, or distributees) such written representations, if any, concerning his intentions with regard to the retention or disposition of the shares being acquired by exercise of such Option and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Corporation, may be necessary to ensure that any disposition by such Holder (or in the event of his death, his legal representatives, heirs, legatees, or distributees), will not involve a violation of the Securities Act or any similar or superseding statute or statutes, or any other applicable state or federal statute or regulation, as then in effect. Shares of Stock issued upon exercise of any Option shall not be transferable until after six months from the date the Option is granted. Certificates for shares of Stock, when issued, may have the following or similar legend (in the event the shares of stock covered by Options granted under this Plan are not then registered under the Securities Act and under applicable state securities laws), or statements of other applicable restrictions, endorsed thereon, and, as described in the preceding sentence, may not be immediately transferable:

The shares of Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws, in reliance upon an exception from registration. Without such registration, these shares may not be sold, transferred, assigned or otherwise disposed of unless, in the opinion of the Corporation and its legal counsel, such sale, transfer, assignment or disposition will not be in violation of the Securities Act of 1933, as amended, applicable rules and regulations of the Securities and Exchange Commission, and any applicable state securities laws.

6.5 Limitation on Aggregate Value of Shares That May Become First Exercisable During Any Calendar Year Under an Incentive Option. Except as is otherwise provided in the second paragraph of Paragraph 6.6, with respect to any Incentive Option granted under this Plan, the sum of:

(a) the aggregate Fair Market Value of shares of Stock subject to such Incentive Option that first become purchasable in a calendar year under such Incentive Option, and

(b) the aggregate Fair Market Value of shares of Stock or stock of any Affiliate (or a predecessor of the Corporation or an Affiliate) subject to any other incentive stock option (within the meaning of Section 422 of the Code) of the Corporation or its Affiliates (or a predecessor corporation of any such corporation), that first become purchasable in a calendar year under such incentive stock option may not (with respect to any Holder) exceed $100,000, with such Fair Market Value to be determined as of the date the Incentive Option or such other incentive stock option is granted.

For purposes of this Paragraph 6.5, "predecessor corporation" means (i) a corporation that was a party to a transaction described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under such section had been effected) with the Corporation, (ii) a corporation which, at the time the new incentive stock option (within the meaning of section 422 of the Code) is granted, is an Affiliate of the Corporation or (iii) a predecessor corporation of any such corporations.

6.6 Adjustments Upon Changes in Capitalization, Merger, Etc. Notwithstanding any other provision hereof, in the event of any change in the number of outstanding shares of Stock

(a) effected without receipt of consideration therefor by the Corporation, by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Corporation is the surviving corporation, or

(b) by reason of a spin-off of a part of the Corporation into a separate entity, or assumptions and conversions of outstanding grants due to an acquisition by the Corporation of a separate entity,(1) the aggregate number and class of the reserved shares and the maximum number of shares subject to Options that may be granted to any officer or other employee during any calendar year,
(2) the number and class of shares subject to each outstanding Option and (3) the exercise price of each outstanding

Option shall be automatically adjusted to accurately and equitably reflect the effect thereon of such change (provided, however, that any fractional share resulting from such adjustment may be eliminated) so that the total number of outstanding shares subject to an Option shall be equivalent to the amount specified in Paragraph 2.1 of the Plan. In the event of a dispute concerning such adjustment, the Committee has full discretion to determine the resolution of the dispute. Such determination shall be final, binding and conclusive. The number of reserved shares or the number of shares subject to any outstanding Option shall be automatically reduced by any fraction included therein which results from any adjustment made pursuant to this Paragraph 6.6.

The following provisions of this Paragraph 6.6 shall apply unless a Holder's Agreement provides otherwise. In the event of:

(a) a dissolution or liquidation of the Corporation,

(b) a merger or consolidation (other than a merger effecting a reincorporation of the Corporation in another state or any other merger or a consolidation in which the stockholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately prior to the merger or consolidation) in which the Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately prior to the transaction; provided, however, that the Board of Directors may at any time prior to such a merger or consolidation provide by resolution that the foregoing provisions of this parenthetical shall not apply if a majority of the board of directors of such parent immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the transaction), or

(c) a transaction in which any person becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Corporation (provided, however, that the Board of

Directors may at any time prior to such transaction provide by resolution that this subparagraph (c) shall not apply if such acquiring person is a corporation and a majority of the board of directors of the acquiring corporation immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the acquisition of such 50% or more total combined voting power)the Plan and all Options outstanding hereunder shall terminate, except to the extent provision is made in writing in connection with such transaction for the continuation of the Plan and/or the assumption of the Options theretofore granted, or for the substitution for such Options of new options covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and exercise prices, in which event the Plan and Options theretofore granted shall continue in the manner and under the terms so provided. In the event of any such termination of the Plan, each individual holding an Option shall have the right (subject to the general limitations on exercise set forth in Section 6.4 above), immediately prior to the occurrence of such termination and during such period occurring prior to such termination as the Board of Directors in its sole discretion shall determine and designate, to exercise such Option in whole or in part, whether or not such Option was otherwise exercisable at the time such termination occurs. The Board shall send written notice of an event that will result in such a termination to all individuals who hold Options not later than the time at which the Corporation gives notice thereof to its stockholders.

6.7 Rights as a Stockholder. A Holder shall have no right as a stockholder with respect to any shares covered by his Option until a certificate representing such shares is issued to him. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or other property) or distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in paragraph 6.6 hereof.

6.8 Modification, Extension and Renewal of Options. Subject to the terms and conditions of and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of Options outstanding hereunder (to the extent not theretofore exercised) and

authorize the granting of new Options hereunder in substitution therefor (to the extent not theretofore exercised). The Committee may not, however, without the consent of the Holder, modify any outstanding Options so as to specify a higher or lower exercise price or base amount or accept the surrender of outstanding Incentive Options and authorize the granting of new Options in substitution therefor specifying a higher or lower exercise price. In addition, no modification of an Option granted hereunder shall, without the consent of the Holder, alter or impair any rights or obligations under any Option theretofore granted hereunder to such Holder under the Plan, except as may be necessary, with respect to Incentive Options, to satisfy the requirements of Section 422 of the Code.

6.9 Furnish Information. Each Holder shall furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation by or under any applicable statute or regulation.

6.10 Obligation to Exercise; Termination of Employment. The granting of an Option hereunder shall impose no obligation upon the Holder to exercise the same or any part thereof. In the event of a Holder's termination of employment with the Corporation or an Affiliate or USPTM, the unexercised portion of an Option granted hereunder shall terminate in accordance with paragraph 6.4 hereof.

6.11 Agreement Provisions. The Agreements authorized under the Plan shall contain such provisions in addition to those required by the Plan (including, without limitation, restrictions or the removal of restrictions upon the exercise of the Option and the retention or transfer of shares thereby acquired) as the Committee shall deem advisable. Each Agreement shall identify the Option evidenced thereby as an Incentive Option and a Nonstatutory Option, as the case may be, and no Agreement shall cover both an Incentive Option and a Nonstatutory Option. Each Agreement relating to an Incentive Option granted hereunder shall contain such limitations and restrictions upon the exercise of the Incentive Option to which it relates as shall be necessary for the Incentive Option to which such Agreement relates to constitute an incentive stock option, as defined in Section 422 of the Code.

SECTION 7. Duration of Plan.

No Incentive Options may be granted hereunder after the date that is ten
(10) years from the earlier of (a) the date the Plan is adopted by the Board of Directors or (b) the date the Plan is approved by stockholders of the Corporation. In addition, with respect to shares of Stock not currently covered by an outstanding Option, this Plan may be terminated at any time by the Board of Directors.

SECTION 8. Amendment of Plan.

The Board of Directors may at any time terminate or from time to time amend or suspend the Plan; provided, however, that no such amendment shall, without approval of the stockholders of the Corporation, except as provided in
Section 6, (a) increase the aggregate number of shares of Stock as to which Options may be granted under the Plan; (b) increase the maximum period during which Options may be exercised; or (c) extend the effective period of the Plan. No Option may be granted during any suspension of the Plan or after the Plan has been terminated and no amendment, suspension or termination shall, without a Holder's consent, alter or impair any of the rights or obligations under any Option theretofore granted to such Holder under the Plan.

SECTION 9. General.

9.1 Application of Funds. The proceeds received by the Corporation from the sale of shares pursuant to Options shall be used for general corporate purposes.

9.2 Right of the Corporation and Affiliates to Terminate. Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder the right to continue in the employ of the Corporation or any Affiliate, or interfere in any way with the rights of the Corporation or any Affiliate to terminate his employment any time.

9.3 Authority of Committee. In addition to its authority expressed herein, the Committee shall have full and absolute discretion to make determinations under the Plan and any Agreement and to interpret the provisions of the Plan and any Agreement.

9.4 No Liability for Good Faith Determinations. Neither the members of the Board of Directors nor any member of the Committee shall be liable for any act, omission, or determination taken or made in good faith with respect to the Plan or any Option granted under it, and members of the Board of Directors and the Committee shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage, or expense (including attorneys' fees, the costs of settling any suit, provided such settlement is approved by independent legal counsel selected by the Corporation, and amounts paid in satisfaction of a judgment, except a judgment based on a finding of bad faith) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may from time to time be in effect.

9.5 Information Confidential. As partial consideration for the granting of each Option hereunder, the Agreement may, in the Committee's sole and absolute discretion, provide that the Holder shall agree with the Corporation that he will keep confidential all information and knowledge that he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law and may be given in confidence to the Holder's spouse, tax and financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan. In the event any breach of this promise comes to the attention of the Committee, it shall take into consideration such breach, in determining whether to recommend the grant of any future Option to such Holder, as a factor militating against the advisability of granting any such future Option to such individual.

9.6 Other Benefits. Participation in the Plan shall not preclude the Holder from eligibility in any other stock option plan of the Corporation or any Affiliate or any old age benefit, insurance, pension, profit sharing, retirement, bonus, or other extra compensation plans which the Corporation or any Affiliate has adopted, or may, at any time, adopt for the benefit of its employees.

9.7 Execution of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock to the Holder, or to his legal representative, heir, legatee, or distributee, in

accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Committee may require any Holder, legal representative, heir, legatee, or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine.

9.8 No Guarantee of Interests. Neither the Committee nor the Corporation guarantees the Stock of the Corporation from loss or depreciation.

9.9 Payment of Expenses. All expenses incident to the administration, termination, or protection of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Corporation or its Affiliates; provided, however, the Corporation or an Affiliate may recover any and all damages, fees, expenses, and/or costs arising out of any actions taken by the Corporation to enforce its rights hereunder.

9.10 Corporation Records. Records of the Corporation or its Affiliates regarding the Holder's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect.

9.11 Information. The Corporation and its Affiliates shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished, all of the information or documentation which is necessary or required by the Committee to perform its duties and functions under the Plan.

9.12 No Liability of Corporation. The Corporation assumes no obligation or responsibility to the Holder or his legal representatives, heirs, legatees, or distributees for any act of, or failure to act on the part of, the Committee.

9.13 Corporation Act. Any action required of the Corporation shall be by resolution of its Board of Directors, by a person authorized to act by resolution of the Board of Directors, or by a person authorized to act by the bylaws of the Corporation.

9.14 Severability. If any provision of this Plan is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein.

9.15 Notices. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail or by a nationally recognized courier service. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered, or, if mailed, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has previously specified by written notice delivered in accordance herewith or, if by courier, 24 hours after it is sent, addressed as described in this Section, or, if by facsimile machine, the time mechanically recorded on the document by the facsimile process. The Corporation or a Holder may change, at any time and from time to time, by written notice to the other, the address which it or he had previously specified for receiving notices. Until changed in accordance herewith, the Corporation and each Holder shall specify as its and his address for receiving notices the address set forth in the Agreement pertaining to the shares to which such notice relates.

9.16 Waiver of Notice. Any person entitled to notice hereunder may waive such notice.

9.17 Successors. The Plan shall be binding upon the Holder, his legal representatives, heirs, legatees, and distributees, upon the Corporation, its successors, and assigns, and upon the Committee and its successors.

9.18 Headings. The titles and headings of Sections and Paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

9.19 Governing Law. All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. Questions arising with respect to the provisions of an Agreement that are matters of contract law shall be governed by the laws of the state specified in the Agreement, except to the extent preempted by federal law and except to the extent that Nevada corporate law conflicts with the contract law of such state, in which event Nevada corporate law shall govern. The obligation of the Corporation to sell and deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

9.20 Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Plan dictates, the plural shall be read as the singular and the singular as the plural.

SECTION 10. Approval of Stockholders.

The Plan shall take effect on the date it is adopted by the Board of Directors. However, if this Plan is not approved by the holders of a majority of the outstanding shares of equity securities of the Corporation having voting rights within twelve months of the date of adoption by the Board of Directors, none of the Options granted hereunder shall constitute Incentive Options.

* * * *

U.S. PHYSICAL THERAPY, INC. EXHIBIT 10.4

NONSTATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made and entered effective as of February 7, 2001 between U.S. Physical Therapy, Inc., a Nevada corporation (the "Corporation"), and BRENT DAVIS (the "Holder") in connection with the grant of a Nonstatutory Option (hereinafter defined).

W I T N E S S E T H:

WHEREAS, the Holder is employed by the Corporation, one of its Affiliates (hereinafter defined) or U.S. PT Management, Ltd., a Texas limited partnership ("USPTM") and the Corporation desires to encourage him to own Stock (hereinafter defined) and to give him added incentive to advance the interests of the Corporation and desires to grant the Holder a Nonstatutory Option (the "Option) to purchase shares of Stock of the Corporation under terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of these premises, the parties agree that the following shall constitute the Agreement between the Corporation and the Holder:

1. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified below:

1.1 "Affiliates" shall mean (a) any corporation, other than the Corporation, in an unbroken chain of corporations ending with the Corporation if each of the corporations, other than the Corporation, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain and (b) any corporation, other than the Corporation, in an unbroken chain of corporations beginning with the Corporation if each of the corporations, other than the last corporation in the unbroken chain, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

1.2 "Agreement" shall mean the written agreement between the Corporation and the Holder which is embodied herein.

1.3 "Board of Directors" shall mean the board of directors of the Corporation.

1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.

1.5 "Eligible Individual" shall mean an employee of the Corporation or of any of its Affiliates or of USPTM.

1.6 "Nonstatutory Option" shall mean a stock option that is not intended to satisfy the requirements of section 422 of the Code.

1.7 "Securities Act" shall mean the Securities Act of 1933, as amended.

1.8 "Stock" shall mean the Corporation's authorized common stock, $.01 par value, together with any other securities with respect to which this Option may become exercisable.

2. Grant of Option. Subject to the terms and conditions set forth herein, the Corporation grants to the Holder an Option to purchase from the Corporation during the period ending ten years from the date of said grant 20,000 shares of Stock at a price of $20.3750 per share, subject to adjustment or termination as provided in Paragraph 12 below. This Option is exercisable with respect to the shares of Stock indicated as follows:

On and After                          Number of Shares
------------                          ----------------

two years after the                 5,000 shares of Stock
grant date

three years after the               5,000 additional shares of Stock
grant date

four years after the                5,000 additional shares of Stock
grant date

five years after the                5,000 additional shares of Stock
grant date

Notwithstanding the foregoing, upon the occurrence of a "Change in Control" of the Corporation (as defined below), the Option shall become exercisable in full without regard to the foregoing schedule, except as provided in the next sentence.

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

If, after reduction for any applicable federal excise tax that would be imposed on the Holder under Section 4999 of the Code and any federal income tax that would be imposed on the Holder by the Code, the Holder's net proceeds from an exercise of the Option in full and immediate sale of the Stock would be less than the amount of the Holder's net proceeds, after reduction for federal income taxes, resulting from an exercise of the Option and immediate sale of the Stock after acceleration of exercisability of the Option only to the extent of the "Parachute Cap" as defined below, then the Option shall become exercisable in the event of a Change in Control only to the extent of the Parachute Cap. For this purpose, the "Parachute Cap" means the maximum extent to which the Option could be made exercisable upon a Change in Control of the Corporation, taking into account any other payments or other benefits to the Holder from the Corporation or any Affiliate, without the Holder being deemed to have received a "parachute payment" as defined in Code Section 280G(b)(2). In the event that the application of the Parachute Cap would otherwise prevent the Option from becoming exercisable in full, the Holder shall have the right, in the Holder's discretion, to designate payments or other benefits to the Holder from the Corporation or any Affiliate (if any) that shall be reduced or eliminated so as to permit the Option to become exercisable to a greater extent.

A "Change in Control" shall mean any of the following events:

(a) a merger or consolidation to which the Corporation is a party if the individuals and entities who were stockholders of the Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 ("Rule 13d-3")) of less than 50 percent of the total combined voting power for election of directors of the surviving corporation following the effective date of such merger or consolidation; or

(b) the sale of all or substantially all of the assets of the Corporation to any person or entity that is not a wholly-owned subsidiary of the Corporation; or

(c) the stockholders of the Corporation approve any plan or proposal for the liquidation of the Corporation; or

(d) a change in the composition of the Board of Directors at any time during any consecutive 24-month period such that the Incumbent Directors cease for any reason to constitute at least a majority of the Board of Directors. For this purpose, the "Incumbent Directors" means those members of the Board of Directors who either:

(1) were directors at the beginning of such consecutive 24-month period; or

(2) were elected by, or on the nomination or recommendation of, a majority of the then-members of the Board of Directors.

3. Notice of Exercise. This Option may be exercised in whole or in part, from time to time, in accordance with Paragraph 2, by written notice to the Corporation at the address provided in Paragraph 11, which notice shall:

(a) specify the number of shares of Stock to be purchased and the exercise price to be paid therefor;

(b) if the person exercising this Option is not the Holder, contain or be accompanied by evidence satisfactory to the Committee of such person's right to exercise this Option; and

(c) be accompanied by payment in full of the purchase price in any form acceptable to the Committee in its sole discretion, which form may include cash, shares of Stock or a share or shares of Stock owned by the Holder and surrendered for actual or deemed multiple exchanges of shares of Stock, or any combination thereof. The Corporation shall not in any case be required to sell, issue, or deliver a fractional share of Stock with respect to this Option.

4. General Restrictions. The Corporation shall not be required to sell or issue any shares of Stock under this Option if the sale or issuance of such shares would constitute a violation by the individual exercising this Option or by the Corporation of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Corporation shall determine, in its discretion, that the listing, registration or qualification of any shares subject to this Option upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Corporation, and any delay caused thereby shall in no way affect the date of termination of this Option. Specifically in connection with the Securities Act, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by this Option, the Corporation shall not be required to sell or issue such shares unless the Corporation has received evidence satisfactory to it that the holder of this Option may acquire such shares pursuant to an exemption from registration under such Act. Any determination in this connection by the

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

Corporation shall be final, binding, and conclusive. The Corporation may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Corporation shall not be obligated to take any affirmative action in order to cause the exercise of this Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that this Option shall not be exercisable unless and until the shares of Stock covered by this Option are registered or are subject to an available exemption from registration, the exercise of this Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. At the time of any exercise of this Option, the Corporation may, as a condition precedent to the exercise of this Option, require from the Holder of the Option (or in the event of his death, his legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning his intentions with regard to the retention or disposition of the shares being acquired by exercise of this Option and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Corporation, may be necessary to ensure that any disposition by such Holder (or in the event of his death, his legal representatives, heirs, legatees, or distributees), will not involve a violation of the Securities Act or any similar or superseding statute or statutes, or any other applicable state or federal statute or regulation, as then in effect. Certificates for shares of Stock, when issued, may have the following or similar legend (in the event the shares of Stock covered by this Option are not then registered under the Securities Act and under applicable state securities laws), or statements of other applicable restrictions, endorsed thereon, and, as described in the preceding sentence, may not be immediately transferable:

The shares of Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws, in reliance upon an exception from registration. Without such registration, these shares may not be sold, transferred, assigned or otherwise disposed of unless, in the opinion of the Corporation and its legal counsel, such sale, transfer, assignment or disposition will not be in violation of the Securities Act of 1933, as amended, applicable rules and regulations of the Securities and Exchange Commission, and any applicable state securities laws.

5. Transfer and Exercise of Option. This Option shall not be transferable except by will or by the laws of descent and distribution. During the Holder's lifetime this Option may be exercised only by him. No assignment or transfer of this Option, whether voluntary or involuntary, by operation of law or otherwise, except a transfer by will or by the laws of descent or distribution, shall vest in the assignee or transferee any interest or right whatsoever in this Option.

6. Status of Holder. The Holder shall not be deemed a stockholder of the Corporation with respect to any of the shares of Stock subject to this Option, except to the extent that such shares shall have been purchased and transferred to him. The Corporation shall not be required to issue or transfer any certificates for shares of Stock purchased upon exercise of this Option until all applicable requirements of law have been complied with and, in the event that the Stock is publicly traded, such shares shall have been duly listed on any securities exchange on which the Stock may then be listed.

7. No Effect on Capital Structure. This Option shall not affect the right of the Corporation or any Affiliate thereof to reclassify, recapitalize or otherwise change its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise reorganize.

8. Premature Expiration of Option. If a Holder (a) voluntarily ceases to be an Eligible Individual or (b) ceases to be an Eligible Individual by reason that his status as such was terminated by the Corporation or one of its Affiliates (with or without cause), this Option shall terminate thirty days after such Holder ceases to be an Eligible Individual.

Notwithstanding the foregoing, if a Holder ceases to be an Eligible Individual by reason of (a) disability (as defined in Section 22(e)(3) of the Code) or (b) death, then the Holder shall have the right for twelve months after the date of disability or death to exercise this Option to the extent that it is exercisable on the date of his disability.

That portion of this Option which is not exercisable on the date the Holder ceases to be an Eligible Individual shall terminate and be forfeited to the Corporation on the date of such cessation.

9. Board Authority. Any question concerning the interpretation of this Agreement, any adjustments required to be made under Paragraph12 and any controversy which may arise under this Agreement shall be determined by the Board of Directors in its sole discretion.

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

10. Tax Withholding. This Option is not intended to qualify as an "incentive stock option"within the meaning of section 422 of the Internal Revenue Code of 1986, as amended, and shall be so construed. The parties recognize that the Corporation or an Affiliate may be obligated to withhold federal, state and local income taxes and Social Security taxes to the extent that the Holder realizes ordinary income in connection with the exercise of the Option. The Holder agrees that the Corporation or Affiliate may withhold amounts needed to cover such taxes from payments otherwise due and owing to the Holder, and also agrees that upon demand the Holder will promptly pay to the Corporation or Affiliate having such obligation any additional amounts as may be necessary to satisfy such withholding tax obligation. Such payment shall be made in cash or cash equivalent.

11. Notice. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail, courier or facsimile machine. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Corporation or Holder may change, at any time and from time to time, by written notice to the other, the address previously specified for receiving notices. Until changed in accordance herewith, the Corporation and the Holder specify their respective addresses as set forth below:

Corporation:      U.S. Physical Therapy, Inc. Att'n:  Corporate Secretary
                  3040 Post Oak Boulevard, Suite 222
                  Houston, Texas  77056

Holder:           Brent Davis
                  5510 S. Rice, # 739
                  Houston, TX  77081

12. Adjustments Upon Changes in Capitalization, Merger, Etc. Notwithstanding any other provision hereof, in the event of any change in the number of outstanding shares of Stock

(a) effected without receipt of consideration therefor by the Corporation, by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Corporation is the surviving corporation, or

(b) by reason of a spin-off of a part of the Corporation into a separate entity, or assumptions and conversions of outstanding grants due to an acquisition by the Corporation of a separate entity,

(1) the number and class of shares subject to this Option and (2) the exercise price of this Option shall be automatically adjusted to accurately and equitably reflect the effect thereon of such change (provided, however, that any fractional share resulting from such adjustment may be eliminated). In the event of a dispute concerning such adjustment, the Board of Directors has full discretion to determine the resolution of the dispute. Such determination shall be final, binding and conclusive.

In addition to the foregoing, in the event of:

(a) a dissolution or liquidation of the Corporation,

(b) a merger or consolidation (other than a merger effecting a reincorporation of the Corporation in another state or any other merger or a consolidation in which the stockholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately prior to the merger or consolidation) in which the Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

prior to the transaction; provided, however, that the Board of Directors may at any time prior to such a merger or consolidation provide by resolution that the foregoing provisions of this parenthetical shall not apply if a majority of the board of directors of such parent immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the transaction), or

(c) a transaction in which any person becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Corporation (provided, however, that the Board of Directors may at any time prior to such transaction provide by resolution that this subparagraph (c) shall not apply if such acquiring person is a corporation and a majority of the board of directors of the acquiring corporation immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the acquisition of such 50% or more total combined voting power)

this Option shall terminate, except to the extent provision is made in writing in connection with such transaction for the assumption of this Option, or for the substitution for this Option of a new option covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and exercise price, in which event this Option shall continue in the manner and under the terms so provided. In the event of any such termination of this Option, the Holder shall have the right (subject to the general limitations on exercise set forth in Paragraph 8 above), immediately prior to the occurrence of such termination and during such period occurring prior to such termination as the Board of Directors in its sole discretion shall determine and designate, to exercise this Option in whole or in part, whether or not this Option was otherwise exercisable at the time such termination occurs. The Board shall send written notice of an event that will result in such a termination to the Holder not later than the time at which the Corporation gives notice thereof to its stockholders.

13. Rights as a Stockholder. The Holder shall have no right as a stockholder with respect to any shares covered by this Option until a certificate representing such shares is issued to him. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or other property) or distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Paragraph 12 hereof.

14. Furnish Information. The Holder shall furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation by or under any applicable statute or regulation.

15. Termination of Employment. In the event of the Holder's termination of employment with the Corporation or an Affiliate or USPTM, the unexercised portion of this Option granted hereunder shall terminate in accordance with Paragraph 8 hereof.

16. Right of the Corporation, Affiliates Thereof and USPTM to Terminate Holder's Employment. Nothing contained in this Agreement shall confer upon the Holder the right to continue in the employ of the Corporation, any of its Affiliates or USPTM, or interfere in any way with the rights of the Corporation, any of its Affiliates or USPTM to terminate his employment at any time.

17. No Liability for Good Faith Determinations. The members of the Board of Directors shall not be liable for any act, omission, or determination taken or made in good faith with respect to this Agreement, and members of the Board of Directors shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage, or expense (including attorneys' fees, the costs of settling any suit, provided such settlement is approved by independent legal counsel selected by the Corporation, and amounts paid in satisfaction of a judgment, except a judgment based on a finding of bad faith) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may from time to time be in effect.

18. Execution of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock to the Holder, or to his legal representative, heir, legatee, or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board of Directors may require any Holder, legal representative, heir, legatee, or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine.

19. No Guarantee of Interests. Neither the Board of Directors nor the Corporation guarantees the Stock of the Corporation from loss or depreciation.

20. Corporation Records. Records of the Corporation or its Affiliates (including USPTM) regarding the Holder's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Board of Directors to be incorrect.

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

21. No Liability of Corporation. The Corporation assumes no obligation or responsibility to the Holder or his legal representatives, heirs, legatees, or distributees for any act of, or failure to act on the part of, the Board of Directors.

22. Corporation Act. Any action required of the Corporation shall be by resolution of its Board of Directors, by a person authorized to act by resolution of the Board of Directors, or by a person authorized to act by the bylaws of the Corporation.

23. Severability. If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

24. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Corporation and the Holder; provided, however, that the Corporation unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Holder hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

25. Successors. This Agreement shall be binding upon the Holder, his legal representatives, heirs, legatees and distributees, and upon the Corporation and its successors and assigns.

26. Headings. The titles and headings of Paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

27. Governing Law. All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. Questions arising with respect to the provisions of this Agreement that are matters of contract law shall be governed by the contract law of the State of Texas, except to the extent preempted by federal law and except to the extent that Nevada corporate law conflicts with the contract law of such state, in which event Nevada corporate law shall govern. The obligation of the Corporation to sell and deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

28. Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed and the Holder has hereunto set his hand effective as of the day and year first above written.

U.S. PHYSICAL THERAPY, INC.

By:  /s/ Roy Spradlin
     -------------------------------------
Name:   Roy Spradlin
Title: President & Chief Executive Officer
Date of Execution: Feb. 8, 2001
                   -----------------------

HOLDER

       /s/ Brent Davis
------------------------------------------
Date of Execution:  March 15,2001
                  ------------------------

Nonstatutory Stock Option Agreement for Brent Davis dated February 7, 2001

U.S. PHYSICAL THERAPY, INC. EXHIBIT 10.5

NONSTATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made and entered effective as of February 17, 2000 between U.S. Physical Therapy, Inc., a Nevada corporation (the "Corporation"), and ROBERT L. BAKER (the "Holder") in connection with the grant of a Nonstatutory Option (hereinafter defined).

W I T N E S S E T H:

WHEREAS, the Holder is employed by the Corporation, one of its Affiliates (hereinafter defined) or U.S. PT Management, Ltd., a Texas limited partnership ("USPTM") and the Corporation desires to encourage him to own Stock (hereinafter defined) and to give him added incentive to advance the interests of the Corporation and desires to grant the Holder a Nonstatutory Option (the "Option) to purchase shares of Stock of the Corporation under terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of these premises, the parties agree that the following shall constitute the Agreement between the Corporation and the Holder:

1. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified below:

1.1 "Affiliates" shall mean (a) any corporation, other than the Corporation, in an unbroken chain of corporations ending with the Corporation if each of the corporations, other than the Corporation, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain and (b) any corporation, other than the Corporation, in an unbroken chain of corporations beginning with the Corporation if each of the corporations, other than the last corporation in the unbroken chain, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

1.2 "Agreement" shall mean the written agreement between the Corporation and the Holder which is embodied herein.

1.3 "Board of Directors" shall mean the board of directors of the Corporation.

1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.

1.5 "Eligible Individual" shall mean an employee of the Corporation or of any of its Affiliates or of USPTM.

1.6 "Nonstatutory Option" shall mean a stock option that is not intended to satisfy the requirements of section 422 of the Code.

1.7 "Securities Act" shall mean the Securities Act of 1933, as amended.

1.8 "Stock" shall mean the Corporation's authorized common stock, $.01 par value, together with any other securities with respect to which this Option may become exercisable.

2. Grant of Option. Subject to the terms and conditions set forth herein, the Corporation grants to the Holder an Option to purchase from the Corporation during the period ending ten years from the date of said grant 10,000 shares of Stock at a price of $8.5000 per share, subject to adjustment or termination as provided in Paragraph 12 below. This Option is exercisable with respect to the shares of Stock indicated as follows:

On and After                          Number of Shares
------------                          ----------------

two years after the                 2,500 shares of Stock
grant date

three years after the               2,500 additional shares of Stock
grant date

four years after the                2,500 additional shares of Stock
grant date

five years after the                2,500 additional shares of Stock
grant date

Notwithstanding the foregoing, upon the occurrence of a "Change in Control" of the Corporation (as defined below), the Option shall become exercisable in full without regard to the foregoing schedule, except as provided in the next sentence.

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000

If, after reduction for any applicable federal excise tax that would be imposed on the Holder under Section 4999 of the Code and any federal income tax that would be imposed on the Holder by the Code, the Holder's net proceeds from an exercise of the Option in full and immediate sale of the Stock would be less than the amount of the Holder's net proceeds, after reduction for federal income taxes, resulting from an exercise of the Option and immediate sale of the Stock after acceleration of exercisability of the Option only to the extent of the "Parachute Cap" as defined below, then the Option shall become exercisable in the event of a Change in Control only to the extent of the Parachute Cap. For this purpose, the "Parachute Cap" means the maximum extent to which the Option could be made exercisable upon a Change in Control of the Corporation, taking into account any other payments or other benefits to the Holder from the Corporation or any Affiliate, without the Holder being deemed to have received a "parachute payment" as defined in Code Section 280G(b)(2). In the event that the application of the Parachute Cap would otherwise prevent the Option from becoming exercisable in full, the Holder shall have the right, in the Holder's discretion, to designate payments or other benefits to the Holder from the Corporation or any Affiliate (if any) that shall be reduced or eliminated so as to permit the Option to become exercisable to a greater extent.

A "Change in Control" shall mean any of the following events:

(a) a merger or consolidation to which the Corporation is a party if the individuals and entities who were stockholders of the Corporation immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 ("Rule 13d-3")) of less than 50 percent of the total combined voting power for election of directors of the surviving corporation following the effective date of such merger or consolidation; or

(b) the sale of all or substantially all of the assets of the Corporation to any person or entity that is not a wholly-owned subsidiary of the Corporation; or

(c) the stockholders of the Corporation approve any plan or proposal for the liquidation of the Corporation; or

(d) a change in the composition of the Board of Directors at any time during any consecutive 24-month period such that the Incumbent Directors cease for any reason to constitute at least a majority of the Board of Directors. For this purpose, the "Incumbent Directors" means those members of the Board of Directors who either:

(1) were directors at the beginning of such consecutive 24-month period; or

(2) were elected by, or on the nomination or recommendation of, a majority of the then-members of the Board of Directors.

3. Notice of Exercise. This Option may be exercised in whole or in part, from time to time, in accordance with Paragraph 2, by written notice to the Corporation at the address provided in Paragraph 11, which notice shall:

(a) specify the number of shares of Stock to be purchased and the exercise price to be paid therefor;

(b) if the person exercising this Option is not the Holder, contain or be accompanied by evidence satisfactory to the Committee of such person's right to exercise this Option; and

(c) be accompanied by payment in full of the purchase price in any form acceptable to the Committee in its sole discretion, which form may include cash, shares of Stock or a share or shares of Stock owned by the Holder and surrendered for actual or deemed multiple exchanges of shares of Stock, or any combination thereof. The Corporation shall not in any case be required to sell, issue, or deliver a fractional share of Stock with respect to this Option.

4. General Restrictions. The Corporation shall not be required to sell or issue any shares of Stock under this Option if the sale or issuance of such shares would constitute a violation by the individual exercising this Option or by the Corporation of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Corporation shall determine, in its discretion, that the listing, registration or qualification of any shares subject to this Option upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Corporation, and any delay caused thereby shall in no way affect the date of termination of this Option. Specifically in connection with the Securities Act, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by this Option, the Corporation shall not be required to sell or issue such shares unless the Corporation has received evidence satisfactory to it that the holder of this Option may acquire such shares pursuant to an exemption from registration under such Act. Any determination in this connection by the

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000

Corporation shall be final, binding, and conclusive. The Corporation may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Corporation shall not be obligated to take any affirmative action in order to cause the exercise of this Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that this Option shall not be exercisable unless and until the shares of Stock covered by this Option are registered or are subject to an available exemption from registration, the exercise of this Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. At the time of any exercise of this Option, the Corporation may, as a condition precedent to the exercise of this Option, require from the Holder of the Option (or in the event of his death, his legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning his intentions with regard to the retention or disposition of the shares being acquired by exercise of this Option and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Corporation, may be necessary to ensure that any disposition by such Holder (or in the event of his death, his legal representatives, heirs, legatees, or distributees), will not involve a violation of the Securities Act or any similar or superseding statute or statutes, or any other applicable state or federal statute or regulation, as then in effect. Certificates for shares of Stock, when issued, may have the following or similar legend (in the event the shares of Stock covered by this Option are not then registered under the Securities Act and under applicable state securities laws), or statements of other applicable restrictions, endorsed thereon, and, as described in the preceding sentence, may not be immediately transferable:

The shares of Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares have not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws, in reliance upon an exception from registration. Without such registration, these shares may not be sold, transferred, assigned or otherwise disposed of unless, in the opinion of the Corporation and its legal counsel, such sale, transfer, assignment or disposition will not be in violation of the Securities Act of 1933, as amended, applicable rules and regulations of the Securities and Exchange Commission, and any applicable state securities laws.

5. Transfer and Exercise of Option. This Option shall not be transferable except by will or by the laws of descent and distribution. During the Holder's lifetime this Option may be exercised only by him. No assignment or transfer of this Option, whether voluntary or involuntary, by operation of law or otherwise, except a transfer by will or by the laws of descent or distribution, shall vest in the assignee or transferee any interest or right whatsoever in this Option.

6. Status of Holder. The Holder shall not be deemed a stockholder of the Corporation with respect to any of the shares of Stock subject to this Option, except to the extent that such shares shall have been purchased and transferred to him. The Corporation shall not be required to issue or transfer any certificates for shares of Stock purchased upon exercise of this Option until all applicable requirements of law have been complied with and, in the event that the Stock is publicly traded, such shares shall have been duly listed on any securities exchange on which the Stock may then be listed.

7. No Effect on Capital Structure. This Option shall not affect the right of the Corporation or any Affiliate thereof to reclassify, recapitalize or otherwise change its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise reorganize.

8. Premature Expiration of Option. If a Holder (a) voluntarily ceases to be an Eligible Individual or (b) ceases to be an Eligible Individual by reason that his status as such was terminated by the Corporation or one of its Affiliates (with or without cause), this Option shall terminate thirty days after such Holder ceases to be an Eligible Individual.

Notwithstanding the foregoing, if a Holder ceases to be an Eligible Individual by reason of (a) disability (as defined in Section 22(e)(3) of the Code) or (b) death, then the Holder shall have the right for twelve months after the date of disability or death to exercise this Option to the extent that it is exercisable on the date of his disability.

That portion of this Option which is not exercisable on the date the Holder ceases to be an Eligible Individual shall terminate and be forfeited to the Corporation on the date of such cessation.

9. Board Authority. Any question concerning the interpretation of this Agreement, any adjustments required to be made under Paragraph12 and any controversy which may arise under this Agreement shall be determined by the Board of Directors in its sole discretion.

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000

10. Tax Withholding. This Option is not intended to qualify as an "incentive stock option"within the meaning of section 422 of the Internal Revenue Code of 1986, as amended, and shall be so construed. The parties recognize that the Corporation or an Affiliate may be obligated to withhold federal, state and local income taxes and Social Security taxes to the extent that the Holder realizes ordinary income in connection with the exercise of the Option. The Holder agrees that the Corporation or Affiliate may withhold amounts needed to cover such taxes from payments otherwise due and owing to the Holder, and also agrees that upon demand the Holder will promptly pay to the Corporation or Affiliate having such obligation any additional amounts as may be necessary to satisfy such withholding tax obligation. Such payment shall be made in cash or cash equivalent.

11. Notice. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail, courier or facsimile machine. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Corporation or Holder may change, at any time and from time to time, by written notice to the other, the address previously specified for receiving notices. Until changed in accordance herewith, the Corporation and the Holder specify their respective addresses as set forth below:

Corporation:      U.S. Physical Therapy, Inc. Att'n:  Corporate Secretary
                  3040 Post Oak Boulevard, Suite 222
                  Houston, Texas  77056

Holder:           Robert L. Baker
                  777 Dunlavy # 8305
                  Houston, TX  77019

12. Adjustments Upon Changes in Capitalization, Merger, Etc. Notwithstanding any other provision hereof, in the event of any change in the number of outstanding shares of Stock

(a) effected without receipt of consideration therefor by the Corporation, by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Corporation is the surviving corporation, or

(b) by reason of a spin-off of a part of the Corporation into a separate entity, or assumptions and conversions of outstanding grants due to an acquisition by the Corporation of a separate entity,

(1) the number and class of shares subject to this Option and (2) the exercise price of this Option shall be automatically adjusted to accurately and equitably reflect the effect thereon of such change (provided, however, that any fractional share resulting from such adjustment may be eliminated). In the event of a dispute concerning such adjustment, the Board of Directors has full discretion to determine the resolution of the dispute. Such determination shall be final, binding and conclusive.

In addition to the foregoing, in the event of:

(a) a dissolution or liquidation of the Corporation,

(b) a merger or consolidation (other than a merger effecting a reincorporation of the Corporation in another state or any other merger or a consolidation in which the stockholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately prior to the merger or consolidation) in which the Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Corporation and their proportionate interests therein immediately prior to the transaction; provided, however, that the Board of Directors may at any time prior to such a merger or consolidation provide by resolution that the foregoing provisions of this parenthetical

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000

shall not apply if a majority of the board of directors of such parent immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the transaction), or

(c) a transaction in which any person becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Corporation (provided, however, that the Board of Directors may at any time prior to such transaction provide by resolution that this subparagraph (c) shall not apply if such acquiring person is a corporation and a majority of the board of directors of the acquiring corporation immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the acquisition of such 50% or more total combined voting power)

this Option shall terminate, except to the extent provision is made in writing in connection with such transaction for the assumption of this Option, or for the substitution for this Option of a new option covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and exercise price, in which event this Option shall continue in the manner and under the terms so provided. In the event of any such termination of this Option, the Holder shall have the right (subject to the general limitations on exercise set forth in Paragraph 8 above), immediately prior to the occurrence of such termination and during such period occurring prior to such termination as the Board of Directors in its sole discretion shall determine and designate, to exercise this Option in whole or in part, whether or not this Option was otherwise exercisable at the time such termination occurs. The Board shall send written notice of an event that will result in such a termination to the Holder not later than the time at which the Corporation gives notice thereof to its stockholders.

13. Rights as a Stockholder. The Holder shall have no right as a stockholder with respect to any shares covered by this Option until a certificate representing such shares is issued to him. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or other property) or distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Paragraph 12 hereof.

14. Furnish Information. The Holder shall furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation by or under any applicable statute or regulation.

15. Termination of Employment. In the event of the Holder's termination of employment with the Corporation or an Affiliate or USPTM, the unexercised portion of this Option granted hereunder shall terminate in accordance with Paragraph 8 hereof.

16. Right of the Corporation, Affiliates Thereof and USPTM to Terminate Holder's Employment. Nothing contained in this Agreement shall confer upon the Holder the right to continue in the employ of the Corporation, any of its Affiliates or USPTM, or interfere in any way with the rights of the Corporation, any of its Affiliates or USPTM to terminate his employment at any time.

17. No Liability for Good Faith Determinations. The members of the Board of Directors shall not be liable for any act, omission, or determination taken or made in good faith with respect to this Agreement, and members of the Board of Directors shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage, or expense (including attorneys' fees, the costs of settling any suit, provided such settlement is approved by independent legal counsel selected by the Corporation, and amounts paid in satisfaction of a judgment, except a judgment based on a finding of bad faith) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may from time to time be in effect.

18. Execution of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock to the Holder, or to his legal representative, heir, legatee, or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board of Directors may require any Holder, legal representative, heir, legatee, or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine.

19. No Guarantee of Interests. Neither the Board of Directors nor the Corporation guarantees the Stock of the Corporation from loss or depreciation.

20. Corporation Records. Records of the Corporation or its Affiliates (including USPTM) regarding the Holder's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Board of Directors to be incorrect.

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000

21. No Liability of Corporation. The Corporation assumes no obligation or responsibility to the Holder or his legal representatives, heirs, legatees, or distributees for any act of, or failure to act on the part of, the Board of Directors.

22. Corporation Act. Any action required of the Corporation shall be by resolution of its Board of Directors, by a person authorized to act by resolution of the Board of Directors, or by a person authorized to act by the bylaws of the Corporation.

23. Severability. If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

24. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Corporation and the Holder; provided, however, that the Corporation unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Holder hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

25. Successors. This Agreement shall be binding upon the Holder, his legal representatives, heirs, legatees and distributees, and upon the Corporation and its successors and assigns.

26. Headings. The titles and headings of Paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

27. Governing Law. All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. Questions arising with respect to the provisions of this Agreement that are matters of contract law shall be governed by the contract law of the State of Texas, except to the extent preempted by federal law and except to the extent that Nevada corporate law conflicts with the contract law of such state, in which event Nevada corporate law shall govern. The obligation of the Corporation to sell and deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

28. Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed and the Holder has hereunto set his hand effective as of the day and year first above written.

U.S. PHYSICAL THERAPY, INC.

By:  /s/ Roy Spradlin
    --------------------------------------
Name:   Roy Spradlin
Title: President & Chief Executive Officer
Date of Execution:  Feb. 18,2000
                  ------------------------

HOLDER

      /s/ Robert L. Baker
------------------------------------------
Date of Execution:   June 22, 2000
                  ------------------------

Nonstatutory Stock Option Agreement for Robert L. Baker dated February 17, 2000