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                                  EXHIBIT 10.1
                              EMPLOYMENT AGREEMENT

                           U.S. Physical Therapy, Inc.
                 1300 West Sam Houston Parkway South, Suite 300
                              Houston, Texas 77042

Dear Larry:

          I have enjoyed our discussions to date, and it is my pleasure to offer
you the position of Chief Financial Officer of U.S. Physical Therapy, Inc. (the
"Company"). The terms of your retention by the Company are outlined below:

     1.   Your position will be as stated above, and you shall be the principal
          financial and accounting officer of the Company, reporting to me as
          the President and CEO. This is a full-time position, and you shall not
          accept other responsibilities for compensation unless approved by me.
          Your service to non-profit institutions shall be limited in a manner
          that does not interfere with your duties at the Company. In making
          this offer to you, you have assured me that you are aware of the new
          requirements of the Sarbanes-Oxley Act, particularly the certification
          requirements thereunder, and you have agreed to make such
          certifications if correct. You have also agreed to serve as an officer
          and director of the Company and any of its subsidiaries without
          further compensation.

     2.   Your base salary shall be $300,000 per annum, payable in accordance
          with normal Company payment schedules. You will receive an initial
          signing bonus of $12,500 when you start with the Company. You will be
          eligible for additional cash bonuses with the Company, but these
          bonuses are not fixed, and bonuses, if any, that you receive while
          serving the Company shall be set by the Compensation Committee of the
          Board.

     3.   As an inducement for you to accept our offer of employment, you shall
          be awarded 50,000 non-qualified stock options to purchase Company
          common stock. The options will be issued by the Compensation Committee
          of the Board upon your reporting for duty, and exercisable at the fair
          market value of the common stock (i.e., the closing market price) on
          the date of issuance. These options will vest ratably each year on the
          anniversary date of your employment at 20% per annum, such that all
          shares will be vested after 5 years. However, the terms of the options
          shall provide that all options will become vested upon an event that
          constitutes a change of control (as defined in Attachment A hereto) in
          the Company.

     4.   We expect that you will report for duty beginning September 2, 2003,
          and that your compensation will begin that date.

     5.   The initial term of your employment will be for a period of three (3)
          years. If you are terminated during that period without "Cause" (as
          defined in Attachment A hereto), the Company will continue to pay you
          for one (1) year following your termination in accordance with the
          normal payroll practices. After the initial term of your employment,
          you shall be an "at will" employee, but if you are terminated after
          the initial term, without Cause, you shall be paid 6 months salary as
          a severance payment. During the payout of these severance payments,
          the Company shall continue to provide you health insurance, but all
          other benefits shall cease and you shall not be eligible to receive
          any bonuses.

     6.   In the event that there is a Change of Control in the Company, as
          defined in Attachment A, and (a) you do not continue as the Chief
          Financial Officer of the Company after the Change of Control and for 6
          months thereafter or (b) you are required to change your work location
          by more than 30 miles, then you shall be entitled to terminate your
          employment for "good reason" for a period of up to 90 days following
          the event giving rise to your right to terminate. Your termination for
          good reason shall be considered a termination by the Company without
          Cause and you shall be entitled to the same benefits if that had
          occurred during your first three years of employment (that is, you
          shall be entitled to a one year severance payment).

     7.   You will be entitled to the same fringe benefits as are accorded to
          all senior management of the Company, which benefits I have described
          generally to you. You shall be eligible to take up to four (4) weeks
          of vacation each year. Your vacations should be coordinated with me to
          insure that the executive offices of the Company are staffed during
          normal vacation times.

          We hope that you will join us. This offer will remain open for
acceptance until September 2, 2003. Should you choose to accept and the terms of
employment stated above are acceptable to you, please sign in the space provided
below.

                                       Cordially,

                                       /s/ Roy Spradlin
                                       ------------------------------
                                       Roy Spradlin, President and CEO

AGREED TO AND ACCEPTED
This 2nd day of September, 2003

/s/ Lawrance W. McAfee
-------------------------
Lawrance W. McAfee

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                                  ATTACHMENT A

For purposes of this Agreement:

"Cause" shall mean (i) the willful and material failure of McAfee 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
McAfee to follow the reasonable written directions of the Company's Board of
Directors, (ii) dishonesty or misconduct on the part of McAfee that is or is
reasonably likely to be damaging or detrimental to the business of the Company,
(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.

"Change in Control" shall mean:

               (a)  The transfer or sale by the Company of all or substantially
     all of the assets of the Company 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 the Company;

               (c)  A merger or consolidation involving the Company in a
     transaction in which the shareholders of the Company 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 the Company.

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