EXHIBIT 10.4


                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT  ("Agreement")  is entered
into and  effective  as of the  24th  day of May,  2007,  by and  between  U. S.
Physical Therapy, Inc. a Nevada corporation  ("Employer") and Lawrance W. McAfee
("Employee"),  and  supersedes  that certain  Employment  Agreement  between the
parties  effective  November 1, 2004.  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")  beginning  on the  effective  date  hereof  ("Commencement  Date")  and
continuing until December 31, 2009.

     Section 2. Duties of  Employee.  Employee is engaged to serve as  Executive
Vice  President  and Chief  Financial  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 report to the  Employer's  President and Chief  Executive
Officer and Board of Directors and shall  perform his duties in accordance  with
the policies and objectives established by Employer.

     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.  Employee  agrees  that he shall  not serve as an  officer,  director,
consultant,  or  employee  of any other  person or  entity,  whether  or not for
compensation, without the prior consent of the Employer's Board of Directors.

     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 compensation for services  rendered and Employee's  covenants and
agreements under this Agreement, Employer shall pay to Employee a base salary of
THREE HUNDRED FORTY-FIVE  THOUSAND AND NO/100THS DOLLARS  ($345,000.00) per year
("Base Compensation"), payable in accordance with Employer's then-prevailing pay
practices.  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


<PAGE>


incentive  compensation in the form of cash bonuses and other incentive  awards,
including stock option and restricted  shares.  The amount of any cash bonus and
the award of any  additional  stock options or  restricted  shares is completely
discretionary  and  will be  determined  solely  by the  Board of  Directors  of
Employer or a compensation  committee  thereof,  taking into  consideration  any
factor the Board of Directors or compensation committee deems relevant.

     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 20 vacation, 7 sick and personal days, and company holidays
per calendar year, as well as insurance (health,  disability and life) 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 ninety
(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
     ninety-  (90) day period and until  termination  under this  Section 9, and
     provided  further,  that Employee will be entitled to receive the benefits,
     rights and/or  payments  prescribed  under any employee  welfare or benefit
     plan in which Employee was  participating at the time of such disability in
     accordance with the terms and conditions of such plans. 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 welfare
     or benefit  plans in which  Employee was  participating  at the time of his
     death in accordance with the terms and conditions of such plans.

          (c) Cause. Nothing in this Agreement shall be construed to prevent its
     termination  by  Employer  at any time for  "cause".  For  purposes of this

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<PAGE>


     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  President and Chief Executive Officer or
     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) A merger or consolidation  involving  Employer in a transaction in
     which the board  members  of  Employer  after the  merger or  consolidation
     constitute  less  than  fifty  percent  (50%) of the  board of the  company
     surviving the merger or consolidation; or

          (e) The voluntary or involuntary dissolution of Employer.

However,  if a Change in Control  occurs,  the Term shall be modified to end one
(1) 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 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"):

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<PAGE>


          (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  or (ii)  the  average  of the  bonuses  paid to
     Employee  over the three (3)  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.  Employee's  accrued but unused  vacation days shall be paid to Employee
within  thirty (30) days of the actual  date of the  termination  of  Employee's
employment.  The other  benefits  described in Sections 10 A. and 10 B. shall be
paid in equal amounts over the remaining Term as if the Employee  remained as an
Employee after the occurrence of the Change in Control or the Termination Event,
as the case may be.

     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,
subject to a one-year  extension  option in accordance  with the terms of clause
(c) of the second paragraph of Section 11. If Employee  continues to be employed
by  Employer  for more than one (1) 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  within  twelve  (12)  months  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, and should

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<PAGE>


Employee  violate the terms of such covenants  Employer may cease payment of the
benefits and terminate any and all future  payments  otherwise  called for under
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;  or (iv) 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. At all times that Employee remains employed by
the Employer and after the termination of employment,  for a period which is the
lesser of (1) a two- (2) year period following the termination of his employment
under this  Agreement for any reason or (2) the remaining Term as of the date of
his termination of employment  (unless extended pursuant to the second paragraph
of this Section 11), 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 in which Employer is actively preparing
to so engage,  in each case described in clauses (i), (ii) or (iii),  within the
Territory.  Employee  shall  be  prohibited  from  engaging  in  the  activities
described above within,  or with respect to any business in competition with the
Employer  located within,  fifty (50) miles of any of Employer's  rehabilitation
clinic locations (the "Territory").

     Notwithstanding the foregoing: (a) Employee may own the voting common stock
of any publicly  held  corporation  so long as it does not exceed more than five
percent (5%) of the outstanding stock thereof; (b) in the event that Employee is
terminated for "cause" or if Employee  terminates  other than "for good reason",
as defined in this  Agreement,  Employee  agrees not compete  with the  Employer
under  the  terms  of the  preceding  paragraph  for two  (2)  years  after  his
employment  terminates;  (c) Employer and Employee agree that  regardless of the
terms of the first paragraph of this Section 11, if Employee is terminated other
than for "cause" or if Employee  terminates  "for good reason",  Employer  shall
have the right and option to require that Employee not compete with the Employer
under the terms of the  preceding  paragraph  for up to two (2) years  after his
employment  terminates  notwithstanding  the  period  stated  in  the  preceding
paragraph so long as Employer  continues  to pay Employee his Base  Compensation
after the termination of his employment in accordance  with Employer's  standard
pay  practices  whether such  payments are made  pursuant to the  provisions  of
section 10 or this section 11.  Employer,  however,  may terminate such extended
payments of Base  Compensation  at any time pursuant to this Section 11, and the
restrictions of Employee under this Section 11 shall thereupon cease.


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<PAGE>


     Section  12.  Non-Solicitation.  For a two- (2) year period  following  the
termination  of the  employment  of the Employee  under 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 or patients to Employer,  who is a customer or a patient referral
source of  Employer  who has  referred  ten or more  customers  or  patients  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,  financial and
accounting  information,  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


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<PAGE>


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,  except for  nonpayment of amounts
payable after the termination of Employee's  employment  under the terms of this
Agreement 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.  Notices.  Any notices to be given hereunder by either Party to
the other may be effected in writing either by personal delivery,  via facsimile
or by mail,  registered  or  certified,  postage  prepaid  with  return  receipt
requested:

        If to Employer:            U.S. Physical Therapy, Inc.
                                   1300 West Sam Houston Parkway South
                                   Suite 300
                                   Houston, Texas 77042
                                   Attention: Chairman of the Board

        with a copy to:            Porter & Hedges, L.L.P.
                                   1000 Main Street, 36th Floor
                                   Houston, Texas 77002
                                   Attention: Chris A. Ferazzi

        If to Employee:            Lawrance W. McAfee
                                   11414 Dunbeath
                                   Houston, Texas 77024

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 18.  Notices  delivered  personally  or by facsimile  shall be
deemed  communicated  upon  actual  receipt.  Mailed  notices  shall  be  deemed
communicated three (3) days after mailing.


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<PAGE>


     Section 19. 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 20. 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  21.  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 22.  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 23.  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 24.  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.


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<PAGE>


         IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
first written above.



                                         EMPLOYER:

                                         U.S. PHYSICAL THERAPY, INC.



                                         By:
                                            ------------------------------------
                                         Name:
                                               ---------------------------------
                                         Position:
                                                   -----------------------------

                                         EMPLOYEE:


                                         ---------------------------------------
                                         LAWRANCE W. MCAFEE





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