exv10w1







	 	 	 	 	 



Exhibit 10.1




USPH Executive Long-Term Incentive Plan — 2007-09, As Amended





	o	 	Objective of this Long-Term Incentive Plan (LTIP)






	 	>>	 	 The objective of the LTIP is to provide incentives for USPH Executives to build
and strengthen the company on a long-term basis for the future and maximize
stockholder return based upon increasing the value of USPH shares and earnings growth
through 2009.






	o	 	Incentive and Reward for Stockholder Return Based upon Stock Price Appreciation






	 	>>	 	 The average trading price of USPH stock for the second half of 2006 was $13.12.
For every percentage increment over $13.12 if the average trading price for the
second half of calendar year 2009 exceeds a minimum threshold $15.63, then a cash
award will be earned. The $15.63 referred to in the previous sentence represents 6%
annual compounded appreciation for 3 years over the average trading price of USPH for
the second half of 2006 of $13.12, which forms the baseline for the 3-year LTIP
measurement period and is established as the minimum threshold for payment of any
LTIP cash award under this share price appreciation criteria. Such cash awards will
be equal to $18,000 for Chris Reading (CEO), $17,300 for Larry McAfee (CFO) and
$9,600 for Glenn McDowell (COO), for every such 1% increase in trading price as
measured from the $13.12 base if USPH’s stock price in excess of the 6% annual
compounded threshold. [For examples, see table below.]





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	H2-2009	 	 	 	 	 	 	 	 	 	 
	Avg. 	 	 	 	Appreciation	 	 	 	 	 	 
	Stock	 	 	 	Over	 	 	 	 	 	 
	Price	 	 	 	H2-2006	 	CEO	 	CFO	 	COO
	$	15.63	 	 	 
	 	 	19	%	 	$	0	 	 	$	0	 	 	$	0	 
	$	16.40	 	 	 
	 	 	25	%	 	$	108,000	 	 	$	103,800	 	 	$	57,600	 
	$	19.68	 	 	 
	 	 	50	%	 	$	558,000	 	 	$	536,300	 	 	$	297,600	 
	$	22.96	 	 	 
	 	 	75	%	 	$	1,008,000	 	 	$	968,800	 	 	$	537,600	 
	$	26.24	 	 	 
	 	 	100	%	 	$	1,458,000	 	 	$	1,401,300	 	 	$	777,600	 







	 	>>	 	 Any cash dividends paid to common shareholders during the 3-year LTIP period will
be added (on a per-share basis) to the average trading price for the second half of
2009, for purposes of these calculations as such dividends would represent additional
return to the shareholders. Any stock dividends, stock splits or recapitalizations
will result in resetting of the per-share figures stated above and below on a
pro-rata basis for purposes of these calculations.
	 
	 	>>	 	 If the average trading price for the second half of 2009 is greater than $26.24,
then the LTIP “stretch target” of increasing the share price by 100% over three years
is achieved and the cash award is calculated based on this maximum value. The




 









 






	 	 	 	maximum that can be earned under this calculation is therefore $1,458,000 for CEO,
$1,401,300 for CFO, and $777,600 for COO.
	 
	 	>>	 	 Further guidelines are as follows:






	 	o	 	Calculations of average “trading price” for the second half of
2009 shall be based on the weighted average actual trading price of USPH common
stock as reported on a public exchange during such period.
	 
	 	o	 	No cash payment due to share price appreciation will be
considered as vested, and the applicable Executive participant shall not be
entitled to any such payment, until January 1, 2010, and then cash payments will
be paid after January 1, 2010 within 30 days after the Compensation Committee
certifies in a written resolution approved by a majority of its members the
amount of the cash compensation to be paid to each participant based on the
weighted average trading price performance criteria of this LTIP, which the
Compensation Committee will make on a timely basis and in accordance with the
terms of this LTIP.
	 
	 	o	 	In the event of a Change in Control of USPH (as defined in the
USPH 2003 Stock Incentive Plan) during the term of this LTIP, (i) a calculation
will be made on the next-to-last day of trading of USPH stock prior to the
Change in Control event as though the closing price for such day was the average
for the second half of 2009, and (ii) the share-price floor assuming 6% p.a.
appreciation will be re-calculated through the date of the Change in Control.
The Compensation Committee shall review such a calculation prior to the time of
the Change in Control and certify in a written resolution approved by a majority
of its members the amount of the cash compensation based on the trading price
performance criteria of this LTIP, and any such cash payments will be due and
payable at the time of the Change in Control. This LTIP will then cease to be
in effect.
	 
	 	o	 	If an Executive’s employment with USPH is terminated for any
reason (other than in connection with a Change in Control — see above) prior to
January 1, 2010, he will not be eligible for any LTIP award based on the
weighted average trading price performance criteria above.






	o	 	Incentive and Reward for EPS Growth






	 	>>	 	 Objective is to grow Diluted EPS by more than 12.5% per annum over the three
years 2007-09, inclusive.
	 
	 	>>	 	 Executives have the opportunity to earn cash awards for achieving the objective
during each year of the LTIP. The maximum amount of cash incentive that can be
earned over the three year measurement period of the LTIP is as stated below:






	 	o	 	Chris Reading — $750,000
	 
	 	o	 	Larry McAfee — $720,000
	 
	 	o	 	Glenn McDowell — $375,000




 









 












	 	>>	 	 Using Diluted EPS from Continuing Operations of $0.70 for 2006 as a baseline, if
the comparable Diluted EPS for 2007 is greater than $0.70 by 12.5% (i.e. $.7875) or
more, then each Executive will be entitled to a Performance Award cash payment equal
to one-sixth (16.67%) of the Executive’s total maximum incentive. In addition,
one-sixth (16.67%) of the Executive’s total maximum incentive will be placed in the
“Deferred Performance Awards” category.
	 
	 	>>	 	 The Diluted EPS for 2007 then becomes the “base” for the 2008 calculation, and so
on. Any Performance Awards earned in 2008 or in 2009 also entitle the Executives to
a cash payment equal to one-sixth (16.67%) of the Executive’s total maximum
incentive. Any time that Performance Awards are earned, an equal amount of the
Executive’s total maximum incentive is placed in the “Deferred Performance Awards”
category.
	 
	 	>>	 	 Performance Awards will vest on January 1 following the fiscal year for which
they are awarded and will be paid in cash within 30 days after the Diluted EPS is
determined for each applicable fiscal year 2007-09, inclusive. All Deferred
Performance Awards will be vested on January 1, 2010 and will be paid within 30 days
in cash after the Diluted EPS is determined for fiscal year 2009.
	 
	 	>>	 	 In any year that Diluted EPS growth is less than 12.5% from the prior year base,
no Performance Awards will be earned. However, to the extent that EPS growth during
the 3-year period (2007-2009) is 42% or greater, all the Performance Awards and
Deferred Performance Awards available during such 3-year period (i.e., the total
maximum incentive under this LTIP criteria) shall be considered to have been earned.
[For example, if Diluted EPS grows by 6% in 2007 (to $0.74) and by another 6% in 2008
(to $0.79), no Performance Awards will have been earned in 2007 or 2008; but if
Diluted EPS in 2009 is $1.00, representing 26% growth from the prior year and 42%
growth from the 2006 baseline, then all of the total maximum incentive for each
Executive as set forth above will be earned and paid in cash after the Diluted EPS
has been determined for fiscal year 2009.]
	 
	 	>>	 	 In any year that Diluted EPS growth is negative, then no Performance Award will
be earned for such financial year and the “base” for the following year will not be
adjusted. [For example, assume Diluted EPS in 2007 is $0.80 (14% growth) and, as a
result: (i) one-sixth (16.67%) of the total maximum incentive amount for each
Executive is earned and cash payments are made on a current basis for such
Performance Awards, (ii) one-sixth (16.670) becomes a Deferred Performance Award for
each Executive, and (iii) the “base” for measuring 2008 growth becomes $0.80.
Further assume that Diluted EPS in 2008 is $0.72 (-10% growth); as a result, no
Performance Awards are earned in 2008 and the “base” for 2009 will remain at $0.80,
because of negative growth in 2008. In this example, Diluted EPS in 2009 greater
than $0.90 will represent a greater than 12.5% growth from the base of $0.80 and will
result in Performance Award cash payments of $125,000, $120,000 and $62,500 for the
CEO, CFO and COO, respectively, based on one-sixth (16.670) of the total maximum
incentive, and one-sixth (16.67%) of the total maximum incentive will be a Deferred
Performance Award for the final financial year, which, when added to the Deferred
Performance Award earned in 2007, results in total Deferred Performance Award cash
payments of $250,000, $240,000 and $125,000 for the CEO, CFO and COO, respectively.
In this example, Diluted





 









 





	 	 	 	EPS of $1.00 or more in 2009 will represent greater than 42% growth over 3 years
(2007-09) and will result in the total maximum incentive being earned and paid to
each Executive, less the one-sixth (16.67%) amount already received in cash as a
Performance Award for 2007. In this example, the Deferred Performance Award from
the 2007 financial year results in a cash payment after completing the 2009 fiscal
year, irrespective of the Diluted EPS in 2008 and 2009, subject to the Executive’s
continued employment with USPH as described below.]
	 
	 	>>	 	 Further guidelines are as follows:






	 	o	 	Diluted EPS for purposes of these calculations should be as
reported in the audited annual financial statements of USPH. However,
consistent accounting principles should be applied from year—to-year in the
determination of Diluted EPS. The Compensation Committee may adjust reported
Diluted EPS for purposes of these calculations if USPH changes accounting
policies, such as occurred with the adoption of FAS 123R in 2006.
	 
	 	o	 	No cash payment due to Diluted EPS growth will be considered as
vested, and the applicable Executive participant shall not be entitled to any
such payment, until the Compensation Committee certifies in a written resolution
approved by a majority of its members the amount of the cash compensation to be
paid to each participant based on the performance criteria of this Diluted EPS
growth LTIP, which the Compensation Committee will make on a timely basis and in
accordance with the terms of this LTIP.
	 
	 	o	 	The Compensation Committee may elect, in its sole discretion, to
exclude extraordinary, unusual or non-recurring items of gain or loss in a
particular year from reported Diluted EPS for purposes of these calculations.
	 
	 	o	 	Calculations of average “trading price” shall be based on the
weighted average actual trading price of USPH common stock as reported on a
public exchange during such period.
	 
	 	o	 	In the event of a Change in Control of USPH (as defined in the
USPH 2003 Stock Incentive Plan) prior to January 1, 2010, a cash payment will
automatically be made to each Executive immediately prior to such Change in
Control equal to (i) the amounts set forth in the table below:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	If CIC	 	 	 	 	 	 
	Occurs In	 	CEO	 	CFO	 	COO
	Q1
	 	$	62,500	 	 	$	60,000	 	 	$	31,250	 
	Q2
	 	$	125,000	 	 	$	120,000	 	 	$	62,500	 
	Q3
	 	$	187,500	 	 	$	180,000	 	 	$	93,750	 
	Q4
	 	$	250,000	 	 	$	240,000	 	 	$	125,000	 







	 	 	 	plus (ii) any Deferred Performance Awards applicable to each Executive. Such
cash payments will be due and payable at the time of and as an integral




 









 






	 	 	 	part of the Change in Control transaction. This LTIP will then cease to be
in effect.
	 
	 	o	 	If an Executive ceases to be employed on a full-time basis by
USPH for any reason (other than in connection with a Change in Control — see
above) prior to January 1, 2010, then the Executive will not be entitled to any
LTIP cash compensation under this EPS growth criteria for the fiscal year in
which such termination occurs nor for any future years. In addition, any
Deferred Performance Award will be forfeited unless the termination is due to
(i) Executive’s death or “disability” (as defined in the USPH 2003 Stock
Incentive Plan), or (ii) precipitated by USPH without “cause” (as defined in the
USPH 2003 Stock Incentive Plan), in which case the Deferred Performance Award
will be paid in cash at the effective date of termination.
	 
	 	o	 	All amounts earned and vested under the LTIP will be paid in a
lump-sum cash payment (with applicable taxes withheld) and on the dates as
provided herein but in no event later than 21/2 months following the end of the
calendar year in which the awards are vested. The Executive must be a full-time
employee of USPH on the applicable vesting date in order to be vested; for
example, without intending to provide an all-encompassing list of all
possibilities, (1) the Executive must be employed on the date of a Change in
Control; (2) the Executive must be employed on January 1, 2010, in order to
receive any payment that is based on exceeding a 42% growth in EPS over a
three-year period; and (3) with respect to Deferred Performance Awards that are
vested due to termination without cause, disability or death, the amount payable
will be based upon the amount of any Deferred Performance Awards previously
earned by the Executive up to the date of termination.






	o	 	Administration of the LTIP






	 	>>	 	 Except for Change in Control payments stipulated above as “automatic,” no cash
awards can be paid until the Compensation Committee certifies in a written resolution
approved by a majority of its members the amount of cash compensation to be paid
pursuant to the specific terms of this LTIP. The Compensation Committee will meet on
a timely basis for the purpose of such determinations.
	 
	 	>>	 	 The Compensation Committee retains the right to decide all matters of
interpretation with respect to this LTIP as well as the right to clarify or redefine
(for purposes of clarity), prospectively or retroactively, any and all terms of this
LTIP by a majority vote of its members. Decisions of the Compensation Committee
shall be final and binding.
	 
	 	>>	 	 The terms of the LTIP shall be interpreted and construed to be exempt from, and
to the extent any amount is deferred compensation subject to Code Section 409A,
comply with Code Section 409A including, without limitation, the requirement that any
termination of Executive’s employment shall mean a “separation of service” within the
meaning of Code Section 409A. Furthermore, to the extent that all or any portion of
the payments provided under this LTIP are determined to be non-qualified deferred
compensation subject to Code Section 409A with respect to any amounts payable on
account of a separation from service to an Executive who is a




 









 






	 	 	 	“specified employee” (as defined in Code Section 409A) on the date of his
separation of service, then any such amounts payable under this LTIP shall be paid
on the first business day of the seventh month following Executive’s separation of
service.