Document:

Third
      Amendment to Amended and Restated Revolving Credit
      Agreement

     

    This
      Third Amendment to Amended and Restated Revolving Credit Agreement (herein,
      the
“Amendment”)
      is
      entered into as of August 31, 2007, by and among World Acceptance Corporation,
      a
      South Carolina corporation (the “Borrower”),
      the
      Banks party hereto, Bank of Montreal, as successor Agent for the Banks (the
      “Agent”),
      and
      Harris N.A. as resigning Agent for the Banks (the “Prior
      Agent”).

     

    Preliminary
      Statements

     

    A.The
      Borrower, the Banks, JPMorgan Chase Bank as Co-Agent, and the Prior Agent are
      parties to a certain Amended and Restated Revolving Credit Agreement, dated
      as
      of July 20, 2005, as amended (the “Credit
      Agreement”).
      All
      capitalized terms used herein without definition shall have the same meanings
      herein as such terms have in the Credit Agreement.

     

    B.The
      Borrower has requested that the Banks agree to extend the Termination Date,
      increase the Base Revolving Credit Commitment, increase the Seasonal Revolving
      Credit Commitment, and make certain other amendments to the Credit Agreement,
      and the Banks are willing to do so under the terms and conditions set forth
      in
      this Amendment. In addition, Harris N.A. is resigning as “Agent” under, and as
      defined in, the Credit Agreement, and the parties have agreed to substitute
      Bank
      of Montreal as successor Agent and, in connection therewith, to replace Harris
      N.A. (herein, the
      “Departing Bank”)
      as a
      Bank with BMO Capital Markets Financing, Inc. (herein, the “New
      Bank”)
      as a
      replacement Bank.

     

    Now,
      Therefore, for
      good
      and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto agree as follows:

     

    
      	
              Section 1.

            	
              Assignment.

            

    

     

    The
      Departing Bank hereby agrees to sell and assign without representation,
      recourse, or warranty all of its Obligations and Commitment (except the
      Departing Bank represents to New Bank that it has authority to execute and
      deliver this Amendment and sell its Obligations and assign its Commitment
      contemplated hereby, which Obligations are owned by the Departing Bank free
      and
      clear of all Liens), and upon the satisfaction of the conditions precedent
      set
      forth in Section 4 hereof New Bank hereby agrees to purchase and assume,
      100% of the Departing Bank’s outstanding Obligations and Commitment under the
      Credit Agreement and the Loan Documents (including, without limitation, all
      of
      the Loans held by the Departing Bank) for a purchase price equal to the
      outstanding principal balance of Loans owed to the Departing Lender under the
      Credit Agreement as of the effective date of this Amendment, which purchase
      price shall be paid in immediately available funds on such date. Such purchase
      and sale shall be arranged through Bank of Montreal, as successor Agent as
      provided for below, and the Departing Bank hereby agrees to execute such further
      instruments and documents, if any, as Bank of Montreal, as successor Agent,
      may
      reasonably request in connection therewith. The
      New
Bank
      hereby
      confirms that it has received a copy of the Loan Documents and the exhibits
      related thereto, together with copies of the documents which were required
      to be
      delivered under the Credit Agreement as a condition to the making of the Loans
      and other extensions of credit thereunder. The New Bank
      acknowledges
      and agrees that it has made and will continue to make, independently and without
      reliance upon the Agent or any other Bank
      and
      based
      on such documents and information as it has deemed appropriate, its own credit
      analysis and decisions relating to the Credit Agreement. The New Bank
      further
      acknowledges and agrees that the Agent has not made any representations or
      warranties about the credit worthiness of the Borrower or any other party to
      the
      Credit Agreement or any other Loan Document or with respect to the legality,
      validity, sufficiency or enforceability of the Credit Agreement or any other
      Loan Document or the value of any security therefor.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Upon
      satisfaction of the conditions precedent set forth in Section 4 hereof and
      the payment of the purchase price owing to the Departing Bank pursuant hereto,
      the Departing Bank shall cease to be a Bank under the Credit Agreement and
      the
      other Loan Documents and (i) the New Bank shall have the rights of the
      Departing Bank thereunder subject to the terms and conditions hereof, and
      (ii) the Departing Bank shall have relinquished its rights (other than
      rights to indemnification and reimbursements referred to in the Credit Agreement
      which survive the repayment of the Obligations owed to the Departing Bank in
      accordance with its terms, including Sections 2.10, 12.6 and 12.13 thereof)
      and be released from its obligations under the Credit Agreement; provided
      Harris
      N.A. shall continue to serve as Security Trustee pursuant to the Loan Documents
      and nothing herein contained shall affect its rights or obligations in its
      capacity as such Security Trustee. It is understood that all unpaid interest
      and
      fees accrued to the effective date of this Amendment that are owed to the
      Departing Bank with respect to the interest assigned hereby are for the account
      of the Departing Bank and such interest and fees accruing from and including
      the
      effective date of this Amendment are for the account of the New Bank. Each
      of
      the Departing Bank and the New Bank hereby agrees that if it receives any amount
      under the Credit Agreement which is for the account of the other, it shall
      receive the same for the account of such other party to the extent of such
      other
      party’s interest therein and shall promptly pay the same to such other
      party.

     

    
      	
              Section 2.

            	
              
                Resignation
                  of Harris N.A. as Agent and appointment of Bank of Montreal as
                  successor
                  Agent.

              

            

    

     

    Harris
      N.A. is currently Agent for the Banks under the Credit Agreement and the related
      Loan Documents. Harris N.A. is resigning as Agent under the Credit Agreement
      and
      the related Loan Documents, effective upon the satisfaction of the conditions
      precedent set forth in Section 4 below. Each Bank hereby appoints Bank of
      Montreal as the successor Agent for all purposes of the Credit Agreement and
      the
      other Loan Documents, effective immediately (any prior written notice thereof
      required by Section 11.8 of the Credit Agreement being expressly waived by
      the parties hereto), and hereby authorizes Bank of Montreal, the successor
      Agent, to take such action as the Agent on behalf of the Banks and to exercise
      such powers under the Credit Agreement and the other Loan Documents as are
      delegated to the Agent by the terms thereof, together with such powers as are
      reasonably incidental thereto. All references in the Loan Documents, including
      any exhibits or schedules thereto, to Harris N.A. as Agent shall from and after
      the effective date of this Amendment be deemed to be a reference to Bank of
      Montreal, as Agent; provided
      Harris
      N.A. shall continue to serve as Security Trustee pursuant to the Loan Documents
      and nothing herein contained shall affect its rights or obligations in its
      capacity as such Security Trustee. The Borrower hereby consents to the
      appointment of Bank of Montreal as the successor Agent for all purposes of
      the
      Credit Agreement and the other Loan Documents.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

     

    
      	
              Section 3.

            	
              Amendments.

            

    

     

    Subject
      to the satisfaction of the conditions precedent set forth in Section 3
      below, the Credit Agreement shall be and hereby is amended as
      follows:

     

    3.1.The
      defined terms “Base
      Rate”,
      “Eurodollar
      Margin”,
      and
“LIBOR”
      (including the definitions of “LIBOR Index Rate” and “Telerate Page 3750” found
      therein) set forth in Section 2.1 of the Credit Agreement (Applicable
      Interest Rates) shall each be amended and restated in their entirety to read
      as
      follows (which shall each be effective as of August 31, 2007):

     

    
      	
              “Base
                Rate”
                means for any day the greater of: (i) the rate of interest announced
                or otherwise established by the Agent from time to time as its prime
                commercial rate, or its equivalent, for U.S. Dollar loans to borrowers
                located in the United States as
                in effect on such day, with any change in the Base Rate resulting
                from a
                change in said prime commercial rate to be effective as of the date
                of the
                relevant change in said prime commercial rate (it being acknowledged
                and
                agreed that such rate may not be the Agent’s best or lowest rate) and
                (ii) the sum of (x) the rate determined by the Agent to be the
                average (rounded upward, if necessary, to the next higher 1/100 of
                1%) of
                the rates per annum quoted to the Agent at approximately 10:00 a.m.
                (Chicago time) (or as soon thereafter as is practicable) on such
                day (or,
                if such day is not a Business Day, on the immediately preceding Business
                Day) by two or more Federal funds brokers selected by the Agent for
                sale
                to the Agent at face value of Federal funds in the secondary market
                in an
                amount equal or comparable to the principal amount for which such
                rate is
                being determined, plus
                (y) 1/2 of 1%.

               

            
	
              “Eurodollar
                Margin”
                means 1.80% per annum.

               

            
	
              “LIBOR”
                means, for an Interest Period for a Borrowing of Eurodollar Loans,
                (a) the LIBOR Index Rate for such Interest Period, if such rate is
                available, and (b) if the LIBOR Index Rate cannot be determined, the
                arithmetic average of the rates of interest per annum (rounded upwards,
                if
                necessary, to the nearest 1/100 of 1%) at which deposits in U.S.
                Dollars
                in immediately available funds are offered to the Agent at 11:00 a.m.
                (London, England time) two (2) Business Days before the beginning of
                such Interest Period by three (3) or more major banks in the interbank
                eurodollar market selected by the Agent for delivery on the first
                day of
                and for a period equal to such Interest Period and in an amount equal
                or
                comparable to the principal amount of the Eurodollar Loan scheduled
                to be
                made as part of such Borrowing.“LIBOR
                Index Rate”
                means, for any Interest Period, the rate per annum (rounded upwards,
                if
                necessary, to the next higher one hundred-thousandth of a percentage
                point) for deposits in U.S. Dollars for a period equal to such Interest
                Period, which appears on the LIBOR01 Page as of 11:00 a.m. (London,
                England time) on the day 2 Business Days before the commencement of
                such Interest Period. “LIBOR01
                Page”
                means the display designated as “Reuters
                Screen LIBOR01 Page”
                (or such other page as may replace the LIBOR01 Page on that service
                or
                such other service as may be nominated by the British Bankers’ Association
                as the information vendor for the purpose of displaying British Bankers’
                Association Interest Settlement Rates for U.S. Dollar
                deposits).

            

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

     

    3.2.Section 5.1
      of the Credit Agreement (Definitions) shall be amended by adding thereto in
      appropriate alphabetical order the definition of “Designated
      Disbursement Account”,
      and the
      definitions of “Base
      Revolving Credit Commitment”,
      “Seasonal
      Revolving Credit Commitment”
      and
“Termination
      Date”
      appearing therein shall be amended and restated to read as follows (which shall
      each be effective as of August 31, 2007):

     

    
      	
              “Base
                Revolving Credit Commitment"
                means, as to any Bank, the obligation of such Bank to make Loans
                under the
                Revolving Credit in an aggregate principal amount at any one time
                outstanding not to exceed the amount set forth opposite such Bank’s name
                on Schedule 1.1 attached hereto and made a part hereof, as the same
                may be reduced or modified at any time or from time to time pursuant
                to
                the terms hereof. The Borrower and the Banks acknowledge and agree
                that
                the Base Revolving Credit Commitments of the Banks aggregate $187,000,000
                on August 31, 2007.

               

            
	
              “Designated
                Disbursement Account”
                means the account of the Borrower maintained with the Agent or its
                Affiliate and designated in writing to the Agent as the Borrower’s
                Designated Disbursement Account (or such other account as the Borrower
                and
                the Agent may otherwise agree).

               

            
	
              “Seasonal
                Revolving Credit Commitment”
                means, as to any Bank and available only during the Availability
                Period,
                the obligation of such Bank to make Loans under the Revolving Credit
                in an
                aggregate principal amount at any one time outstanding not to exceed
                the
                amount set forth opposite such Bank’s name on Schedule 1.1 attached hereto
                and made a part hereof, as the same may be reduced or modified at
                any time
                or from time to time pursuant to the terms hereof. The Borrower and
                the
                Banks acknowledge and agree that the Seasonal Revolving Credit Commitments
                of the Banks aggregate $30,000,000 on August 31,
                2007.

            

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    

    
      	
              “Termination
                Date”
                means September 30, 2009, or such later date to which the Commitments
                are extended pursuant to Section 3.4 hereof, or such earlier date on
                which the Commitments are terminated in whole pursuant to
                Sections 2.9, 9.3 or 9.4
                hereof.

            

    

     

    3.3.The
      last
      sentence of Section 2.3(d) of the Credit Agreement (Disbursement of Loans)
      shall
      be amended and restated in its entirety to read as follows:

     

    
      	
              Subject
                to Section 7 hereof, the Agent shall make the proceeds of each new
                Borrowing available to the Borrower at the Agent’s principal office in
                Chicago, Illinois (or at such other location as the Agent shall
                designate), by depositing or wire transferring such proceeds to the
                credit
                of the Borrower’s Designated Disbursement Account or as the Borrower and
                the Agent may otherwise agree.

            

    

     

    3.4.Section 8.9(e)
      of the Credit Agreement (Permitted Indebtedness) shall be amended and restated
      in its entirety to read as follows:

     

    
      	(e) other
              unsecured Indebtedness for Borrowed Money to any Person (other than
              to the
              Borrower or another Restricted Subsidiary) in an aggregate amount for
              the
              Borrower and all Restricted Subsidiaries not exceeding $15,000,000
              at any
              time outstanding.

    

     

    3.5.Section 11.8
      of the Credit Agreement (Resignation of Agent) shall be amended by striking
      the
      phrase “a commercial bank organized under the laws of the United States of
      America or of any State thereof” appearing in the third sentence thereof and
      inserting in its place the phrase “a commercial bank, or an Affiliate of a
      commercial bank, having an office in the United States of America”.

     

    3.6.Section 11
      of the Credit Agreement (The Agent) shall be further amended by adding at the
      end thereof a new Section 11.12 which shall read as follows:

     

    
      	
              Section 11.12.
                Security Trustee.
                The Banks and the Borrower acknowledge and agree that Harris N.A.
                has been
                appointed to act as Security Trustee pursuant to the Loan Documents.
                The
                Security Trustee shall have all of the benefits and immunities
                (i) provided to the Agent in this Section 11 with respect to any
                acts taken or omissions suffered by the Security Trustee in connection
                with any Loan Documents as fully as if the term “Agent”, as used in this
                Section 11, included the Security Trustee with respect to such acts
                or omissions and (ii) as additionally provided in this Agreement and
                any of the other Loan Documents with respect to the Security
                Trustee.

            

    

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    3.7.Section 12.11
      of the Credit Agreement (Amendments) shall be amended by (a) striking the
      word “and” appearing after subsection (b) appearing in the third line of
      this Section, and (b) inserting after subsection (c) and before the
      proviso appearing in the fourth line of this Section the following:

     

    
      	, and (d) if the rights or duties of
              the Security Trustee are affected thereby, the Security
              Trustee

    

     

    3.8.Schedule
      1.l to the Credit Agreement (Commitments) shall be amended and restated in
      its
      entirety to read as the Schedule 1.1 attached hereto.

     

    
      	
              Section 4.

            	
              Conditions
                Precedent.

            

    

     

    The
      effectiveness of this Amendment is subject to the satisfaction of all of the
      following conditions precedent:

     

    4.1.The
      Borrower, the Banks, the Prior Agent, and Bank of Montreal, as successor Agent,
      shall have executed and delivered this Amendment, and the Borrower shall have
      executed and delivered to the Agent (for the account of the Banks) replacement
      Notes in the amount of each Bank’s aggregate Commitment.

     

    4.2.The
      Restricted Subsidiaries parties to the Subsidiary Guaranty Agreement shall
      have
      executed and delivered to the Agent their consent to this Amendment in the
      form
      set forth below.

     

    4.3.The
      Borrower shall have executed and delivered to Bank of Montreal, as successor
      Agent, a replacement administrative agent’s letter and Designated Disbursement
      Account letter, each in form and substance acceptable to the successor
      Agent.

     

    4.4.Legal
      matters incident to the execution and delivery of this Amendment shall be
      satisfactory to the Agent and its counsel.

     

    
      	
              Section 5.

            	
              Representations.

            

    

     

    In
      order
      to induce the Banks to execute and deliver this Amendment, the Borrower hereby
      represents to the Agent, the Security Trustee, and the Banks that as of the
      date
      hereof, after giving effect to the amendments set forth in Section 3 above,
      (a) the representations and warranties set forth in Section 6 of the Credit
      Agreement and in the other Loan Documents are and shall be and remain true
      and
      correct (except that the representations contained in Section 6.6 shall be
      deemed to refer to the most recent financial statements of the Borrower
      delivered to the Agent) and (b) the Borrower and the Guarantors are in
      compliance with the terms and conditions of the Credit Agreement and the other
      Loan Documents and no Default or Event of Default exists or shall result after
      giving effect to this Amendment.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

     

    
      	
              Section 6.

            	
              Miscellaneous.

            

    

     

    6.1.Except
      as
      specifically amended herein, the Credit Agreement shall continue in full force
      and effect in accordance with its original terms. Reference to this specific
      Amendment need not be made in the Credit Agreement, the Notes, or any other
      instrument or document executed in connection therewith, or in any certificate,
      letter or communication issued or made pursuant to or with respect to the Credit
      Agreement, any reference in any of such items to the Credit Agreement being
      sufficient to refer to the Credit Agreement as amended hereby.

     

    6.2.The
      Borrower heretofore executed and delivered, among other things, the Company
      Security Agreement and hereby acknowledges and agrees that the security
      interests and liens created and provided for therein continue to secure the
      payment and performance of the Obligations of the Borrower under the Credit
      Agreement as amended hereby entitled to all of the benefits and privileges
      set
      forth therein.

     

    6.3.The
      Borrower agrees to pay on demand all costs and expenses of or incurred by the
      Agent in connection with the negotiation, preparation, execution and delivery
      of
      this Amendment and the other instruments and documents to be executed and
      delivered in connection herewith, including the fees and expenses of counsel
      for
      the Agent.

     

    6.4.This
      Amendment may be executed in any number of counterparts, and by the different
      parties on different counterpart signature pages, all of which taken together
      shall constitute one and the same agreement. Any of the parties hereto may
      execute this Amendment by signing any such counterpart and each of such
      counterparts shall for all purposes be deemed to be an original. Delivery of
      a
      counterpart hereof by facsimile transmission or by e-mail transmission of an
      Adobe Portable Document Format File (also known as an “PDF” file)
      shall be effective as delivery of a manually executed counterpart hereof. This
      Amendment shall be governed by, and construed in accordance with, the internal
      laws of the State of Illinois (without regard to principles of conflicts of
      laws).

     

    [Signature
      Page to Follow]

     

    

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    This
      Third Amendment to Amended and Restated Revolving Credit Agreement is entered
      into as of the date and year first above written.

    
      	 	
              World
                Acceptance Corporation

            
	 	  
	 	    
	 	  
	 	
              By

            	
              /s/A.
                Alexander McLean, III

            
	 	
               

            	
              Name:
                A. Alexander McLean, III

            
	 	
               

            	
              
                Title:
                  Chief Executive Officer

              

            
	
               

            	 	   
	
              Accepted
                and agreed to.

            	 	  
	 	 	    
	 	
              
                Bank
                  of Montreal,
                  in its capacity as successor Agent

              

            
	 	    
	 	   
	 	        
	 	
              By

            	
              /s/Michael
                Cameli

            
	 	
            	
              
                Name
                  Michael Cameli

              

            
	 	
               

            	
              
                Title
                  Director

              

            
	 	 	    
	 	 	          
	 	
              BMO
                Capital Markets Financing, Inc.

            
	 	   
	 	   
	 	         
	 	
              By

            	
              /s/Michael
                Cameli

            
	 	
               

            	
              
                Name
                  Michael Cameli

              

            
	 	
               

            	
              
                Title
                  Director

              

            
	 	 	     

	 	
              JPMorgan
                Chase Bank, N.A.

            
	 	    
	 	    
	 	       
	 	
              By

            	
              /s/Michael
                M. Tolentino

            
	 	
               

            	
              
                Name
                  Michael M. Tolentino

              

            
	 	
               

            	
              
                Title
                  Vice President

              

            
	 	 	   
	 	 	    
	 	
              LaSalle
                Bank National Association

            
	 	   
	 	  
	 	   
	 	
              By

            	
              /s/David
                H. Shearer

            
	 	
               

            	
              
                Name
                  David H. Shearer

              

            
	 	
               

            	
              
                Title
                  Senior Vice
                  President

              

            

    

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

    
      	 	
              Capital
                One, National Association 

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By

            	
              /s/Lori
                Mitchell

            
	 	
               

            	
              
                Name
                  Lori Mitchell

              

            
	 	
               

            	
              
                Title
                  Vice President

              

            
	 	 	    
	 	 	   
	 	
              Wells
                Fargo Financial Preferred Capital, Inc.  

            
	 	 	  
	 	 	  
	 	 	   
	 	
              By

            	
              /s/William
                M. Laird

            
	 	
               

            	
              
                Name
                  William M. Laird

              

            
	 	
               

            	
              
                Title
                  Senior Vice President

              

            
	 	 	   
	 	 	          
              
	 	
              Carolina
                First Bank

            
	 	   
	 	   
	 	  
	 	
              By

            	
              /s/Kevin
                M. Short

            
	 	
               

            	
              
                Name
                  Kevin M. Short

              

            
	 	
               

            	
              
                Title
                  Executive Vice President

              

            
	 	 	   
	
              Accepted
                and agreed to.

            	 	   
	
               

            	 	  
	 	
              Harris
                N.A., in
                its capacity as Security Trustee and as resigning Agent and as Departing
                Bank

            
	 	    
	 	  
	 	  
	 	
              By

            	
              /s/Michael
                Cameli

            
	 	
               

            	
              
                Name
                  Michael Cameli

              

            
	 	
               

            	
              
                Title
                  Director

              

            

    

     

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    

    Acknowledgement
      and Consent

     

    Each
      of
      the undersigned is a Restricted Subsidiary of World Acceptance Corporation
      who
      has executed and delivered to the Security Trustee, the Agent, and the Banks
      the
      Subsidiary Guaranty and the Subsidiary Security Agreement. Each of the
      undersigned hereby acknowledges and consents to the Third Amendment to Amended
      and Restated Revolving Credit Agreement set forth above and confirms that the
      Loan Documents executed by it, and all of its obligations thereunder, remain
      in
      full force and effect, and that the security interests and liens created and
      provided for therein continue to secure the payment and performance of the
      Obligations of the Borrower under the Credit Agreement after giving effect
      to
      the Amendment. Each of the undersigned acknowledges that the Security Trustee,
      the Agent, and the Banks are relying on the foregoing in entering into the
      Amendment.

     

    Dated
      as
      of August 31, 2007.

    
      	 	
              World
                Acceptance Corporation of Alabama

            
	 	
              World
                Acceptance Corporation of Missouri

            
	 	
              World
                Finance Corporation of Georgia

            
	 	
              World
                Finance Corporation of Louisiana

            
	 	
              World
                Acceptance Corporation of Oklahoma, Inc.

            
	 	
              World
                Finance Corporation of South Carolina

            
	 	
              World
                Finance Corporation of Tennessee

            
	 	
              WFC
                of South Carolina, Inc.

            
	 	
              World
                Finance Corporation of Illinois

            
	 	
              World
                Finance Corporation of New Mexico

            
	 	
              World
                Finance Corporation of Kentucky

            
	 	
              WFC
                Services, Inc.,
                a
                South Carolina corporation

            
	 	
              World
                Finance Corporation of Colorado

            
	 	            
              
	 	       
	 	   
	 	
              By

            	
              /s/A.
                Alexander McLean, III

            
	 	 	
              A.
                Alexander McLean, III

            
	 	 	
              Its
                Chief Executive Officer

            

    

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    

    
      	 	
              WFC
                Limited Partnership

            
	 	 
	 	
              By

            	
              WFC
                of South Carolina, Inc., as sole

              general
                partner

            

    

     

    

    
      	 	
              By

            	
              /s/A.
                Alexander McLean, III

            
	 	 	
              A.
                Alexander McLean, III

            
	 	 	
              Its
                Chief Executive Officer

            

    

     

    

    
      	
               

            	
              World
                Finance Corporation of Texas

            
	 	    
	 	  
	 	  
	
               

            	
              By

            	
              /s/Jeff
                L. Tinney

            
	 	 	
              Jeff
                L. Tinney

            
	 	 	
              Its
                President

            

    

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    

    Schedule
      1.1

     

    Commitments

     

    
      	
              Name
                of Bank

            	 	
              Base
                Revolving Credit Commitments

            	 	
              Seasonal
                Revolving Credit Commitments

            	 	
              Total
                Commitments

            	 
	
              BMO
                Capital Markets Financing, Inc.

            	 	
              $

            	
              41,098,901.10

            	 	
              $

            	
              6,593,406.58

            	 	
              $

            	
              47,692,307.68

            	 
	
              JPMorgan
                Chase Bank, NA

            	 	
              $

            	
              35,704,670.33

            	 	
              $

            	
              5,728,021.98

            	 	
              $

            	
              41,432,692.31

            	 
	
              LaSalle
                Bank National Association

            	 	
              $

            	
              28,769,230.77

            	 	
              $

            	
              4,615,384.62

            	 	
              $

            	
              33,384,615.39

            	 
	
              Capital
                One, National Association 

            	 	
              $

            	
              23,375,000.00

            	 	
              $

            	
              3,750,000.00

            	 	
              $

            	
              27,125,000.00

            	 
	
              Wells
                Fargo Financial Preferred Capital, Inc.

            	 	
              $

            	
              35,704,670.33

            	 	
              $

            	
              5,728,021.98

            	 	
              $

            	
              41,432,692.31

            	 
	
              Carolina
                First Bank

            	 	
              $

            	
              22,347,527.47

            	 	
              $

            	
              3,585,164.84

            	 	
              $

            	
              25,932,692.31

            	 
	
              Total

            	 	
              $

            	
              187,000,000.00

            	 	
              $

            	
              30,000,000.00

            	 	
              $

            	
              217,000,000.00EXHIBIT 10.1

--------------------------------------------------------------------------------

                      -------------------------------------
                      REORGANIZATION AND PURCHASE AGREEMENT
                      -------------------------------------

                                  By and Among

                           U.S. PHYSICAL THERAPY, LTD.
                                 (THE PURCHASER)

                            STAR PHYSICAL THERAPY, LP
                                  (THE COMPANY)

                                       and

                             ITS RESPECTIVE PARTNERS
                                 (THE SELLERS),

                                       and

                                  REGG SWANSON,
                         (AS THE SELLER REPRESENTATIVE),

                          Dated as of September 6, 2007

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

                                                                           Page

                                    ARTICLE I
                                   DEFINITIONS
   Section 1.1         Definitions............................................2
   Section 1.2         Certain Interpretive Matters..........................10

                                   ARTICLE II
                  PRE-CLOSING REORGANIZATION, SALE AND PURCHASE
   Section 2.1         Pre-Closing Reorganization............................11
   Section 2.2         Purchase and Sale of Purchased Interests..............12

                                   ARTICLE III
          PURCHASE PRICE, CLOSING PAYMENTS, WORKING CAPITAL ADJUSTMENT

   Section 3.1         Closing Purchase Price................................12
   Section 3.2         Estimated Closing Working Capital.....................13
   Section 3.3         Working Capital True-Up...............................13

                                   ARTICLE IV
                         CLOSING AND CLOSING DELIVERIES
   Section 4.1         The Closing...........................................16
   Section 4.2         Deliveries of STAR LP and the Sellers.................16
   Section 4.3         Deliveries by Purchaser...............................17

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
                           OF STAR LP AND THE SELLERS
   Section 5.1         Existence and Power...................................18
   Section 5.2         Authorization; Enforceability.........................18
   Section 5.3         Governmental Authorization............................18
   Section 5.4         Non-Contravention; Consents...........................19
   Section 5.5         Capitalization........................................19
   Section 5.6         Subsidiaries..........................................20
   Section 5.7         Financial Statements..................................20
   Section 5.8         No Undisclosed Liabilities............................20
   Section 5.9         Tax Matters...........................................21
   Section 5.10        Absence of Certain Changes............................22
   Section 5.11        Contracts.............................................24
   Section 5.12        Insurance Coverage....................................25
   Section 5.13        Litigation............................................26
   Section 5.14        Compliance with Laws; Permits.........................26
   Section 5.15        Assets; Properties; Sufficiency of Assets.............27
   Section 5.16        Intellectual Property.................................27
   Section 5.17        Environmental Matters.................................28
   Section 5.18        Benefit Plans and Material Documents..................29

                                      -i-

<PAGE>

   Section 5.19        Affiliate Transactions................................32
   Section 5.20        Referrals, Supplier and Employee Relations............32
   Section 5.21        Other Employment Matters..............................32
   Section 5.22        Medicare Participation/Accreditation..................33
   Section 5.23        Medicare and Medicaid Filings.........................34
   Section 5.24        Exclusion.............................................34
   Section 5.25        Federal Health Care Programs..........................35
   Section 5.26        Billing; Gratuitous Payments..........................35
   Section 5.27        Reimbursement Matters.................................35
   Section 5.28        Bank Accounts.........................................36
   Section 5.29        General Partner and STAR LP Matters...................36
   Section 5.30        Accounts Receivable...................................36
   Section 5.31        Finders' Fees.........................................37
   Section 5.32        Books and Records.....................................37
   Section 5.33        Disclosure............................................37

                                   ARTICLE VI
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER
   Section 6.1         Existence and Power...................................37
   Section 6.2         Authorization; Enforceability.........................37
   Section 6.3         Governmental Authorization............................38
   Section 6.4         Non-Contravention.....................................38
   Section 6.5         Parent Stock..........................................38
   Section 6.6         Section 6.7 Disclosure................................38

                                   ARTICLE VII
                              ADDITIONAL AGREEMENTS
   Section 7.1         Employees and Benefits................................38
   Section 7.2         Physical Therapy Alliance.............................39
   Section 7.3         Further Assurances....................................39
   Section 7.4         No Change of Ownership................................39
   Section 7.5         Cooperation with Post-Closing Consents................39
   Section 7.6         Clinic Director Expense...............................40

                                  ARTICLE VIII
                               CERTAIN TAX MATTERS
   Section 8.1         Transfer Taxes........................................40
   Section 8.2         Partnership Status....................................40
   Section 8.3         Section 754 Election..................................40
   Section 8.4         Other Tax Matters.....................................40

                                   ARTICLE IX
                              CONDITIONS TO CLOSING
   Section 9.1         Conditions to Obligations of Purchaser................42
   Section 9.2         Conditions to Obligations of STAR LP and the Sellers..44

                                      -ii-

<PAGE>

                                    ARTICLE X
                            SURVIVAL; INDEMNIFICATION
   Section 10.1        Survival..............................................44
   Section 10.2        Indemnification.......................................45
   Section 10.3        Procedures............................................45
   Section 10.4        Offset................................................47
   Section 10.5        Payment of Indemnification Payments...................47

                                   ARTICLE XI
                                  MISCELLANEOUS
   Section 11.1        Notices...............................................48
   Section 11.2        Amendments and Waivers................................48
   Section 11.3        Expenses..............................................49
   Section 11.4        Successors and Assigns................................49
   Section 11.5        No Third-Party Beneficiaries..........................49
   Section 11.6        Governing Law.........................................49
   Section 11.7        Jurisdiction..........................................49
   Section 11.8        Counterparts..........................................50
   Section 11.9        Table of Contents; Headings...........................50
   Section 11.10       Entire Agreement......................................50
   Section 11.11       Severability; Injunctive Relief.......................50
   Section 11.12       Arbitration...........................................50
   Section 11.13       Swanson Guarantee.....................................51

EXHIBITS

Exhibit A     -   Certificate of Formation of General Partner
Exhibit B     -   Limited Liability Agreement of General Partner
Exhibit C     -   Plan of Conversion
Exhibit D     -   Certificate of Formation of STAR LP
Exhibit E     -   Agreement of Limited Partnership of STAR LP
Exhibit F     -   Clinic Locations
Exhibit G     -   Employment Agreement
Exhibit H     -   Non-Competition Agreement
Exhibit I     -   Note
Exhibit J     -   Guarantee Agreement
Exhibit K     -   Assignment of Purchase Interests
Exhibit L     -   Form of Seller Counsel Legal Opinion
Exhibit M     -   Form of Purchaser Counsel Legal Opinion
Exhibit N     -   General Release
Exhibit O     -   Management Agreement
Exhibit P     -   Sharing Percentages
Exhibit Q         Illustrative Computation of Net Working Capital

                                      -iii-

<PAGE>

                      REORGANIZATION AND PURCHASE AGREEMENT

         REORGANIZATION AND PURCHASE  AGREEMENT,  dated as of September 6, 2007,
by and among U.S.  Physical  Therapy,  Ltd., a Texas  limited  partnership  (the
"Purchaser"),  STAR Physical  Therapy,  LP, a Texas limited  partnership  ("STAR
LP"),  the  members  of the  Company  set forth on the  signature  pages to this
Agreement and who  collectively  are the legal and beneficial  owners of 100% of
the limited  partnership  interests of STAR LP (each a "Seller" and collectively
the  "Sellers"),  and Regg  Swanson as Seller  Representative  for the  purposes
described herein (the "Seller  Representative")  and in his individual  capacity
for purposes of Section 11.13 of this  Agreement  relating to the  unconditional
guarantee  all  of the  obligations  and  liabilities  of the  Regg  E.  Swanson
Revocable Trust, one of the Sellers, under this Agreement.

                                    RECITALS

     A. The STAR PT Management  GP, LLC, a Texas limited  liability  company and
sole  general  partner of STAR LP (the  "General  Partner")  and Sellers are the
owners of all of the issued and  outstanding  partnership  interests in STAR LP,
which has been,  and will  continue  after the  Closing,  to be  engaged  in the
Business (as defined below), and the Regg E. Swanson Revocable Trust, one of the
Sellers,  is the sole  owner of all of the  issued  and  outstanding  membership
interests of the General Partner.

     B. STAR LP is the successor entity to STAR Physical Therapy,  LLC, a former
Tennessee  limited  liability  company  (the  "Company"),  as a  result  of  the
Pre-Closing Reorganization described below.

     C. The Company with the Sellers on or about August 30, 2007,  (i) formed or
caused to form General Partner,  including in connection with such formation the
transfer  by the Regg E.  Swanson  Revocable  Trust to  General  Partner of a 1%
member  interest in the Company and (ii) as of the  Effective  Time,  caused the
Company to be converted  into STAR LP, a Texas  limited  partnership,  under the
name "STAR Physical  Therapy,  LP" to succeed to the Business of the Company and
whereby, among other things, the Sellers converted their membership interests in
the  Company  into  99%  limited  partnership  interests  of STAR  LP  (the  "LP
Interests")  and the General  Partner  converted  its 1% member  interest in the
Company into a 1% general partner interest of STAR LP (the "GP Interest") as the
sole general  partner,  all in accordance with the Texas Business  Organizations
Code  ("TBOC")  and the  Tennessee  Revised  Limited  Liability  Company Act, as
amended  ("TRLLCA") (the  transactions  described in clauses (i) and (ii) above,
collectively  the  "Pre-Closing  Reorganization"),   all  as  provided  in  this
Agreement.

     D. On the terms and subject to the  conditions  of this  Agreement,  at the
Closing, the Purchaser shall, in consideration of the Purchase Price (as defined
below), purchase (or cause one or more of its Affiliates to purchase),  (i) from
the Regg E. Swanson Revocable Trust one hundred percent (100%) of the membership
interests in the General Partner; and (ii) from the Sellers, sixty-nine (69%) of
the LP Interests in STAR LP.

     E. As a result of the  consummation of the Pre-Closing  Reorganization  and
the Closing,  at the  Effective  Time:  (i) the Sellers shall  collectively  own
thirty  percent  (30%)  of the  STAR LP  Interests,  all of  which  shall  be LP
Interests;  (ii) the  Purchaser  shall own or, as the sole owner of the  General

<PAGE>

Partner, control, (A) seventy percent (70%) of the STAR LP Interests,  including
all of the GP Interest;  and (B) 100% of the membership interests of the General
Partner; and (iii) STAR LP shall continue to engage in the Business.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
agreements and covenants  hereinafter set forth, the Purchaser,  STAR LP and the
Sellers hereby agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

          Section 1.1 Definitions. In  addition  to  the terms defined elsewhere
herein, the terms below are defined as follows:

         "Accountants" has the meaning set forth in Section 3.3(b).

         "Accounts  Receivable" means all accounts and notes receivable relating
to the Business.

         "Accredited  Sellers"  means  the  Sellers  who  constitute,  and  have
represented to Purchaser,  their status as "accredited  investors" at Closing as
such term is defined in Rule 501 promulgated under the Securities Act.

         "Affected Employees" has the meaning set forth in Section 7.1(a).

         "Affiliate"  means,  with  respect  to any  Person,  any  other  Person
directly or indirectly  controlling,  controlled by or under common control with
the first Person and, if such first Person is an  individual,  any member of the
immediate family (including parents, spouse and children) of such individual and
any trust whose principal  beneficiary is such individual or one or more members
of such individual's  immediate family,  and any Person who is controlled by any
such member or trust.  For the purposes of this Agreement,  "control," when used
with respect to any Person, means the possession, directly or indirectly, of the
power to (a) vote 10% or more of the securities having ordinary voting power for
the election of directors (or comparable positions) of such Person or (b) direct
or cause the direction of the  management  and policies of such Person,  whether
through the ownership of voting  securities,  by contract or otherwise,  and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

         "Agreement" means this  Reorganization and Purchase  Agreement,  as the
same may be amended from time to time in accordance with the terms hereof.

         "Ancillary  Agreements"  means the Employment  Agreements,  the General
Release, the Investment Agreement, the Management Agreement, the Non-Competition
Agreements,  the Pre-Closing Reorganization Documents and all other instruments,
certificates  and  other  agreements  entered  into by STAR LP or any  Seller in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement.

         "Balance Sheet Date" means July 31, 2007.

         "Benefit  Plan" means any  employee  benefit plan within the meaning of
Section  3(3) of ERISA,  and any other plan,  program,  agreement,  arrangement,

                                       2
<PAGE>

policy,   contract,   commitment  or  scheme,  written  or  oral,  statutory  or
contractual,  that provides for compensation or benefits, including any deferred
compensation,  executive  compensation,  bonus or incentive  plan, any cafeteria
plan or any holiday or vacation plan or practice.

         "Business"  means the  business  of STAR LP as now  conducted  (and the
business of the Company as conducted  before the consummation of the Pre-Closing
Reorganization),  including  the business of providing  outpatient  physical and
occupational   therapy  services,   including  but  not  limited  to,  pre-  and
post-operative  care  and  treatment  for  orthopedic-related  disorders,  sport
related  injuries,  preventative  care,  rehabilitation  of injured  workers and
neurological related injuries for patients and ancillary services and activities
in connection  therewith  from the locations and in the areas  identified on the
attached Exhibit F.

         "Business  Day" means a day that is not a Saturday,  Sunday or a day on
which  commercial  banking  institutions  located  in the  State  of  Texas  are
authorized or required to close.

         "Capital  Stock"  means  (a)  with  respect  to any  Person  that  is a
corporation,  any and all shares, interests,  participation or other equivalents
(however designated and whether or not voting) of corporate stock, including the
common  stock of such  Person,  and (b) with respect to any Person that is not a
corporation, any and all partnership,  limited liability or membership interests
or other equity interests of such Person.

         "Capitalized  Lease  Obligations"  means the obligations of such Person
that  are  required  to  be  classified  and  accounted  for  as  capital  lease
obligations  under  GAAP,  together  with all  obligations  to make  termination
payments under such capitalized lease obligations.

         "CERCLA" means the Comprehensive Environmental Response,  Compensation,
and Liability Act of 1980, 42 U.S.C. ss.ss. 9601, et seq., as amended.

         "Chapman" has the meaning set forth in Section 7.2.

         "Charter  Documents"  means  (a) in the case of any  Person  which is a
corporation,  its  articles,  certificate  or  memorandum  of  incorporation  or
association  and bylaws or regulations,  and each  certificate or other document
setting  forth the  designation,  amount and relative  rights,  limitations  and
preferences of any class or series of the  corporation's  capital stock,  (b) in
the case of a Person  that is a  limited  liability  company,  its  articles  or
certificate of formation or organization,  limited liability company  agreement,
operating agreement or other similar governing documents and, (c) in the case of
Person that is a general or limited partnership, its certificate of formation or
limited partnership,  partnership  agreement or limited partnership agreement or
similar governing documents..

         "Closing" has the meaning set forth in Section 4.1.

         "Closing  Cash  Consideration"  has the  meaning  set forth in  Section
3.1(b).

         "Closing Date" has the meaning set forth in Section 4.1.

         "Closing  Date  Balance  Sheet"  has the  meaning  set forth in Section
3.3(a).

                                       3
<PAGE>

         "Closing Date Funded Indebtedness" means the aggregate amount necessary
to full pay and retire the Funded Debt of STAR LP as of the Closing Date.

         "Closing Statement" has the meaning set forth in Section 3.3(a).

         "Closing  Working Capital Balance" has the meaning set forth in Section
3.3(a).

         "Code" means the Internal  Revenue  Code of 1986,  as amended,  and the
rules and regulations promulgated thereunder.

         "Company" has the meaning set forth in Recital B to this Agreement.

         "Constituent  of Concern"  means any  substance  defined as a hazardous
substance,  hazardous waste, hazardous material, pollutant or contaminant by any
Environmental  Law, any petroleum  hydrocarbon and any degradation  product of a
petroleum  hydrocarbon,  asbestos,  PCB or similar  substance,  the  generation,
recycling,  use,  treatment,  storage,  transportation,   Release,  disposal  or
exposure of or to which is subject to regulation under any Environmental Law.

         "Contracts" has the meaning set forth in Section 5.11.

         "Conversion" has the meaning specified in Section 2.1(ii).

         "Damages" has the meaning set forth in Section 10.2(a).

         "Direct Claim" has the meaning set forth in Section 10.3(c).

         "Effective Time" has the meaning set forth in Section 4.1.

         "Employment Agreements" means the employment agreements between STAR LP
and each of the Key Employees in the form of Exhibit G hereto.

         "Environmental  Claims"  means  administrative,  regulatory or judicial
actions,  suits, demands, demand letters,  claims, liens, citations,  summonses,
notices of non-compliance or violation, requests for information, investigations
or proceedings  relating in any way to the Release of Constituents of Concern or
any  Environmental  Law,  including  (a)  Environmental  Claims by  Governmental
Authorities  for  enforcement,  cleanup,  removal,  response,  remedial or other
actions  or  damages  pursuant  to any  applicable  Environmental  Law  and  (b)
Environmental   Claims  by  any  third  party  seeking  damages,   contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from an alleged injury or threat of injury to
human health and safety or the environment.

         "Environmental  Condition"  means  a  condition  with  respect  to  the
environment,  which has resulted or could  reasonably be expected to result in a
material loss, liability, cost or expense to the Business or STAR LP.

         "Environmental  Law"  means  any  Law,  administrative  interpretation,
administrative  order, consent decree or judgment, or common law relating to the
environment,  human health and safety, including CERCLA, and any state and local
counterparts or equivalents.

                                       4
<PAGE>

         "Environmental  Permits"  mean all Permits,  licenses,  authorizations,
certificates and approvals of Governmental  Authorities  relating to or required
by Environmental Laws.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and any successor thereto.

         "ERISA  Affiliate" means any Person that,  together with STAR LP, would
be considered a single  employer  within the meaning of Section 4001 of ERISA or
Section 414 of the Code.

         "Estimated  Closing Working Capital  Balance" has the meaning set forth
in Section 3.2(a).

         "Estimated Dispute Amount" has the meaning set forth in Section 10.4.

         "Estimated  Working  Capital  Adjustment"  has the meaning set forth in
Section 3.2(b).

         "Exchange Act" means the  Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

         "Filings" has the meaning set forth in Section 5.23.

         "Final  Parent Stock Price" means the average of the per share  closing
sales prices of Parent Common Stock on NASDAQ Global Select Market,  as reported
in The Wall Street Journal,  for the ten consecutive  trading days ending on the
second calendar day immediately prior to the Effective Time (or if such calendar
day is not a trading  day,  then  ending on the first  trading  day  immediately
preceding such calendar day).

         "Foreign Qualifications" has the meaning set forth in Section 2.1(iii).

         "Funded Debt" means any (a)  Indebtedness for borrowed money (including
current  maturities of such Indebtedness,  accrued interest and penalties),  (b)
any deferred compensation or similar obligations to current or former employees,
shareholders,  members  or  their  representatives,  (c) any  Capitalized  Lease
Obligations,  and (d) any  guarantees of obligations of others similar to any of
those set forth above.

         "GAAP"   means   U.S.  generally   accepted   accounting   principles,
consistently applied.

         "General  Partner"  has the  meaning  set  forth in  Recital  A to this
Agreement.

         "General  Partner  Formation"  has the  meaning  set  forth in  Section
2.1(i).

         "General  Release" means the general release among STAR LP, the Sellers
and Swanson, in the form of Exhibit N hereto.

         "Governmental  Authority" means any domestic or foreign governmental or
regulatory  agency,  authority,  bureau,  commission,  department,  official  or
similar body or instrumentality  thereof,  or any governmental  court,  arbitral
tribunal or other body administering alternative dispute resolution.

                                       5
<PAGE>

         "GP Formation Documents" has the meaning set forth in Section 4.2(i).

         "GP Interest" has the meaning set forth in Recital C to this Agreement.

         "Guarantee Agreement" has the meaning set forth in Section 3.1(d).

         "Indebtedness"  means with respect to any Person, at any date,  without
duplication,  (a) all obligations of such Person for borrowed  money,  including
all principal, interest, premiums, fees, expenses, overdrafts and penalties with
respect  thereto,  (b)  all  obligations  of such  Person  evidenced  by  bonds,
debentures,  notes or other similar  instruments,  (c) all  obligations  of such
Person to pay the deferred  purchase  price of the property or services,  except
trade payables incurred in the Ordinary Course of Business,  (d) all obligations
of such Person to reimburse  any bank or other Person in respect of amounts paid
under a letter  of credit  or  similar  instrument,  (e) all  Capitalized  Lease
Obligations, (f) all other obligations of a Person which would be required to be
shown as  indebtedness  on a balance sheet of such Person prepared in accordance
with GAAP, and (g) all  indebtedness of any other Person of the type referred to
in clauses (a) to (f) above directly or indirectly  guaranteed by such Person or
secured by any assets of such Person,  whether or not such Indebtedness has been
assumed by such Person.

         "Indemnified Party" has the meaning set forth in Section 10.3(a).

         "Indemnifying Party" has the meaning set forth in Section 10.3(a).

         "Intellectual Property Right" means any trademark,  service mark, trade
name,  product  designation,  logo,  slogan,  invention,  patent,  trade secret,
copyright,  know-how,  proprietary  design or  process,  computer  software  and
database,  Internet  address or domain  name  (including  any  registrations  or
applications for  registration or renewal of any of the foregoing),  research in
progress, or any other similar type of proprietary  intellectual property right,
in each case which is used or held for use or otherwise  necessary in connection
with the conduct of the Business.

         "Inventory"  means raw  materials,  work in progress and finished goods
inventory.

         "IRS" means the Internal Revenue Service.

         "Key  Employees"  means  each  of  Regg  Swanson,  David  Landers,  Hal
Henninger, Kelly Ziegler, Leslie Burton, Marty Blair and Kent Chapman.

         "Law"  means  any  federal,  foreign,  state  or  local  statute,  law,
including common law, rule, regulation, ordinance, code, permit or license.

         "Lien"  means,  with  respect to any property or asset,  any  mortgage,
lien, pledge, charge,  security interest,  encumbrance or other adverse claim of
any  kind in  respect  of such  property  or  asset.  For the  purposes  of this
Agreement,  a Person will be deemed to own,  subject to a Lien,  any property or
asset  which it has  acquired  or holds  subject to the  interest of a vendor or
lessor  under any  conditional  sale  agreement,  capital  lease or other  title
retention agreement relating to such property or asset.

         "LP  Interests"  has  the  meaning  set  forth  in  Recital  C to  this
Agreement.

                                       6
<PAGE>

         "Management  Agreement" means that certain  Management  Agreement dated
the date hereof  between U.S. PT  Management,  Ltd., an Affiliate of the General
Partner, and STAR LP, in the form of Exhibit O hereto.

         "Material Adverse Effect" means (i) with respect to STAR LP, a material
adverse effect on the business,  assets,  liabilities,  condition  (financial or
otherwise),  or results of operations and (ii) with respect to the Purchaser,  a
material  adverse  effect  on  the  business,  assets,  liabilities,   condition
(financial  or  otherwise)  or results of  operations  of the  Purchaser and its
Subsidiaries, taken as a whole.

         "Net  Working  Capital"  means at any given time an amount equal to the
current  assets of STAR LP less the sum of (i) current  liabilities  of STAR LP,
including any STAR LP  Transaction  Expenses (to the extent not paid at or prior
to Closing)  and (ii) Funded Debt of STAR LP. For  illustration  purposes  only,
Exhibit Q set forth an example of the  calculation of Net Working  Capital based
upon the  Reference  Balance  Sheet,  as  adjusted  to  remove  certain  current
liabilities not anticipated to continue after the Closing.

         "Non-Competition  Agreement" means the non-competition  agreement among
the Sellers,  Swanson and the Purchaser in  substantially  the form of Exhibit H
hereto.

         "Notes" has the meaning set forth in Section 3.1(d).

         "Order"  means any  judgment,  injunction,  judicial or  administrative
order or decree.

         "Ordinary  Course of Business" means,  with respect to any Person,  the
ordinary  course of business of such Person,  consistent with such Person's past
practice and custom, including, with respect to any category, quantity or dollar
amount, term and frequency of payment,  delivery,  accrual, expense or any other
accounting entry.

         "Parent" has the meaning set forth in Section 3.1(d).

         "Parent  Stock" means the common stock,  par value $0.01 per share,  of
Parent.

         "Permit" has the meaning set forth in Section 5.14(b).

         "Permitted Lien" means (a) mechanics' Liens, workmen's Liens, carriers'
Liens,  repairmen's  Liens,  landlord's  Liens or (b) statutory Liens for Taxes,
assessments and other similar governmental charges that are not overdue.

         "Person"  means  an  individual,   corporation,   partnership,  limited
liability  company,  joint  venture,  association,  trust  or  other  entity  or
organization or Governmental Authority.

         "Pre-Closing  Reorganization" has the meaning set forth in Recital C to
this Agreement and in Section 2.1(ii) of this Agreement.

         "Pre-Closing  Reorganization  Documents"  has the  meaning set forth in
Section 4.2(i).

                                       7
<PAGE>

         "Pre-Closing Tax Period" means any Tax period (or portion thereof) that
ends on or before August 31, 2007.

         "Prime Rate" means the U.S.  prime rate of interest as published by The
Wall Street  Journal on the last  Business  Day prior to the Closing Date as the
base rate on  corporate  loans  posted by at least  75% of the 30  largest  U.S.
banks.

         "Property"  means any real property and improvements at any time owned,
leased, used, operated or occupied (whether for storage,  disposal or otherwise)
by STAR LP.

         "PTA" has the meaning set forth in Section 7.2.

         "PTA Clinics" has the meaning set forth in Section 7.2.

         "PTA Indebtedness" has the meaning set forth in Section 7.2.

         "Purchase Price" has the meaning set forth in Section 3.1.

         "Purchased  Interests"  means  (i)  100%  of  all  of  the  issued  and
outstanding  Capital  Stock  of  the  General  Partner  and  (ii)  69% of the LP
Interests  of STAR LP to be  purchased  by the  Purchaser  on the  Closing  Date
immediately after consummation of the Pre-Closing Reorganization, subject to the
terms and conditions of this Agreement.

         "Purchaser" has the meaning set forth in the introductory  paragraph of
this Agreement.

         "Real Property" has the meaning set forth in Section 5.15(b).

         "Reference Balance Sheet" means the balance sheet of STAR LP as of July
31, 2007, attached hereto as Schedule 5.7.

         "Reference Financial Statements" means the balance sheets of STAR LP as
of December 31, 2005 and 2006,  together  with the related  statements of income
for the years then ended,  and the Reference  Balance  Sheet,  together with the
related  statement of income for the six-month  period then ended,  all of which
are attached hereto as Schedule 5.7.

         "Release"  means any  release,  spill,  emission,  discharge,  leaking,
pumping,  injection,  deposit,  disposal,  discharge,   dispersal,  leaching  or
migration  into  the  environment   (including   ambient  air,   surface  water,
groundwater  and surface or  subsurface  strata) or into or out of any Property,
including the movement of  Constituents  of Concern through or in the air, soil,
surface water, groundwater or property.

         "Returns"  means  returns,  declarations,  reports,  claims for refund,
information  returns or other  documents  (including  any related or  supporting
schedules,  statements or information) and including any amendment thereof filed
or required to be filed in  connection  with the  determination,  assessment  or
collection of Taxes of any party or the  administration  of any Laws relating to
any Taxes.

         "Securities Act" means the Securities Act of 1933, as amended.

                                       8
<PAGE>

         "Selected Representations and Warranties" means the representations and
warranties  contained  in Sections  5.1  (Corporate  Existence  and Power),  5.2
(Authorization;   Enforceability),   5.3   (Governmental   Authorization),   5.4
(Non-Contravention;  Consents), 5.5 (Capitalization), 5.9 (Tax Matters), 5.15(a)
(Assets; Properties;  Sufficiency of Assets), 5.17 (Environmental Matters), 5.22
(Medicare  Participation/Accreditation),  5.23 (Cost Reports and Other Filings),
5.24 (Exclusion), 5.25 (Federal Health Care Programs), 5.26 (Billing; Gratuitous
Payments),  5.27  (Reimbursement  Matters),  5.29  (General  Partner and STAR LP
Matters) and 5.30 (Finders' Fees).

         "Seller" and  "Sellers"  has the meaning set forth in the  introductory
paragraph of this Agreement.

         "Seller Representative" has the meaning set forth in Section 3.3(e).

         "Sharing Percentages" means the percentage applicable to each Seller as
set forth on Exhibit P.

         "STAR LP" has the meaning set forth in the  introductory  paragraph  of
this Agreement,  and includes,  for purposes of this Agreement,  the Company for
all periods prior to the effective time of the Conversion  consummated  pursuant
to the Pre-Closing Reorganization.

         "STAR LP Benefit Plans" has the meaning set forth in Section 5.18(a).

         "STAR LP Formation" has the meaning set forth in Section 2.1(ii).

         "STAR LP  Formation  Documents"  has the  meaning  set forth in Section
4.2(i).

         "STAR LP Interests" has the meaning set forth in Section 2.1(ii).

         "STAR LP  Transaction  Expenses"  means  the  aggregate  amount  of all
out-of-pocket fees and expenses,  incurred by or on behalf of, or to be paid by,
STAR LP relating to the negotiation,  preparation or execution of this Agreement
or any  documents  or  agreements  contemplated  hereby  or the  performance  or
consummation of the transactions  contemplated  hereby, which shall include, but
not be limited to (A) any fees and expenses  associated with obtaining necessary
or appropriate waivers,  consents or approvals of any Governmental  Authority or
third  parties  on behalf  of STAR LP or any  Seller,  (B) any fees or  expenses
associated   with  obtaining  the  release  and  termination  of  any  liens  or
Encumbrances,  (C) all  brokers'  or  finders'  fees;  (D) fees and  expenses of
counsel, advisors,  consultants,  investment bankers, accountants,  auditors and
experts,  (F) all awarded  discretionary  pro rated 2007  bonuses for the period
from January 1, 2007 through the Closing Date (or portion of such period) to the
extent not accrued on the Closing Balance Sheet  (including all payroll taxes of
STAR LP), and (G) all sale, change of control, "stay-around," retention, success
or similar bonuses, severance or other payments to any Person in connection with
or upon the consummation of the transactions  contemplated hereby, in all cases,
which have not been paid on or prior to the Closing Date  (including all payroll
taxes of STAR LP with respect thereto).

         "Straddle  Period" means any taxable period beginning before but ending
after the Closing Date.

                                       9
<PAGE>

         "Subsidiary" means, with respect to any Person, (a) any corporation 50%
or more of whose  stock of any class or  classes  having  by the  terms  thereof
ordinary  voting power to elect a majority of the directors of such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  have or might have voting power by reason of the happening of
any  contingency)  is at the time owned by such Person,  directly or  indirectly
through  Subsidiaries,  and  (b) any  partnership,  limited  liability  company,
association, joint venture, trust or other entity in which such Person, directly
or indirectly through  Subsidiaries,  is either a general partner,  has a 50% or
greater equity interest at the time or otherwise owns a controlling interest.

         "Swanson"  means Regg E.  Swanson,  the founder of STAR LP and indirect
owner,  through the Regg E. Swanson  Revocable  Trust,  of (i) a majority of the
outstanding  partnership  interests  of STAR LP and (ii) all of the  outstanding
membership interest of the General Partner.

         "Target Working Capital Balance" means $1,250,000.

         "Tax"  means (a) any net income,  alternative  or add-on  minimum  tax,
gross income,  gross receipts,  sales, use, ad valorem,  value added,  transfer,
franchise,  profits,  license,  withholding  on  amounts  paid to or by STAR LP,
payroll,  employment,  excise, severance, stamp, occupation,  premium, property,
environmental  or windfall profit tax, custom,  duty or other tax,  governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest,  penalty,  addition to tax or additional  amount imposed by any Taxing
Authority, (b) any liability of STAR LP for the payment of any amounts of any of
the  foregoing   types  as  a  result  of  being  a  member  of  an  affiliated,
consolidated,  combined or unitary  group,  or being a party to any agreement or
arrangement  whereby  liability  of STAR LP for  payment  of  such  amounts  was
determined  or taken into account with  reference to the  liability of any other
Person,  and (c) any  liability  of STAR LP for the  payment of any amounts as a
result of being a party to any  Tax-Sharing  Agreement  or with  respect  to the
payment of any amounts of any of the foregoing  types as a result of any express
or implied obligation to indemnify any other Person.

         "Tax-Sharing  Agreements" means all existing Tax-sharing  agreements or
arrangements (whether or not written) that are binding on STAR LP.

         "Taxing Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or other imposition of any Tax.

         "Third-Party Claim" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this  Agreement  or
who or which is not an Affiliate of any party to this Agreement.

         Section 1.2   Certain Interpretive Matters.

               (a) When a  reference  is made in this  Agreement  to an Article,
          Section,  Exhibit or Schedule, such reference will be to an Article or
          Section  of, or an Exhibit  or  Schedule  to,  this  Agreement  unless
          otherwise  indicated.  Whenever the words,  "include,"  "includes"  or
          "including"  are used in this  Agreement,  they  will be  deemed to be
          followed  by the  words  "without  limitation."  The  words  "hereof,"
          "herein" and "hereunder" and words of similar import when used in this
          Agreement refer to this Agreement as a whole and not to any particular

                                       10
<PAGE>

          provision of this Agreement.  All terms defined in this Agreement have
          the defined  meanings when used in any  certificate  or other document
          made or delivered  pursuant hereto unless  otherwise  defined therein.
          The  definitions  contained in this  Agreement  are  applicable to the
          singular  as  well  as the  plural  forms  of  such  terms  and to the
          masculine as well as to the feminine and neuter  genders of such term.
          All references to "$" or dollar amounts will be to lawful  currency of
          the United  States of America.  Any  agreement,  instrument or statute
          defined or referred to herein or in any agreement or  instrument  that
          is referred to herein means such  agreement,  instrument or statute as
          from time to time amended, modified or supplemented, including (in the
          case of  agreements or  instruments)  by waiver or consent and (in the
          case of statutes) by succession of comparable  successor  statutes and
          references to all  attachments  thereto and  instruments  incorporated
          therein.  References to a Person are also to its permitted  successors
          and  assigns.   Each  of  the   Schedules   will  apply  only  to  its
          corresponding Section or subsection of this Agreement. Each accounting
          term not otherwise  defined in this Agreement has the meaning assigned
          to it in accordance  with GAAP. To the extent the term "day" or "days"
          is used, it will mean calendar days unless  referred to as a "Business
          Day."

               (b) No provision of this  Agreement  will be interpreted in favor
          of, or against,  any of the parties  hereto by reason of the extent to
          which  any such  party or its  counsel  participated  in the  drafting
          thereof  or by reason of the  extent  to which any such  provision  is
          inconsistent with any prior draft hereof or thereof.

               (c) All  references to the  "knowledge of STAR LP" or to words of
          similar import will be deemed to be references to the actual knowledge
          of any Seller or  Swanson,  and will  include  such  knowledge  as the
          Sellers or Swanson would have had after due inquiry of the responsible
          employees  of  STAR  LP and  its  counsel  and  accountants,  and  all
          references to the  "knowledge of the Purchaser" or to words of similar
          import will be deemed to be references to the actual  knowledge of one
          or  more  of the  individuals  whose  names  are  listed  on  Schedule
          1.2(c)(i)  and  will  include  such  knowledge  as  such  officers  or
          directors  would  have  had  after  due  inquiry  of  the  responsible
          employees of the Purchaser and its counsel and accountants.

                                   ARTICLE II
                  PRE-CLOSING REORGANIZATION, SALE AND PURCHASE

          Section 2.1 Pre-Closing  Reorganization.  Prior to  the  Closing,  the
Company and the Sellers  consummated,  or caused to  consummate,  the  following
transactions  to  effect  a  reorganization  of the  Business  conducted  by the
Company:

               (i)  Swanson  has  formed  or caused  to be  formed  the  General
          Partner,  and caused the Regg E. Swanson  Revocable  Trust to transfer
          and  convey to the  General  Partner  a one  percent  (1%)  membership
          interest in the Company in exchange for one hundred  percent (100%) of
          the membership  interests in the General Partner (the "General Partner
          Formation"),   such  membership   transfer  evidenced  by  a  form  of
          assignment of membership interest reasonably acceptable to Purchaser;

                                       11
<PAGE>

               (ii)  Immediately  following  the General  Partner  Formation and
          before the Closing and in accordance with the Charter Documents of the
          Company and the applicable  provisions of the TBOC and the TRLLCA, the
          Company,  the Sellers and the General  Partner  entered into a plan of
          conversion  in the form  attached  hereto as  Exhibit C (the  "Plan of
          Conversion"),  whereby the Company was converted  into a Texas limited
          partnership  under  the  name of  "STAR  Physical  Therapy,  LP"  (the
          "Conversion")  and pursuant to which,  among other things,  (A) all of
          the  outstanding  membership  interests  of the  Company  owned by the
          Sellers  immediately  before  the  effective  time  of the  Conversion
          automatically converted into 99% limited partnership interests in STAR
          LP,  (B) the 1%  membership  interests  owned by the  General  Partner
          immediately  prior  to  the  effective  time  of the  Conversion  were
          automatically converted into a 1% general partnership interest in STAR
          LP, and (C) a certificate  of conversion was filed by the Company with
          Secretary of State of each of the States of Texas and Tennessee; and

               (iii)  each  of  STAR LP and  the  General  Partner  will be duly
          qualified to do business in Tennessee and Indiana in  accordance  with
          the  applicable  Laws of  Tennessee  and  Indiana  (collectively,  the
          "Foreign  Qualifications") (the transactions described in clauses (i),
          (ii) and (iii) of this  Section  2.1,  collectively  the  "Pre-Closing
          Reorganization").

          Section 2.2 Purchase and Sale of Purchased Interests. As of the date
hereof (but  effective as of the Effective  Time) and upon the terms and subject
to the conditions of this Agreement,  at the Closing,  the Sellers agree to sell
to the  Purchaser,  and the  Purchaser  shall  purchase  from  the  Sellers  the
Purchased  Interests,  free and clear of all Liens.  The  Sellers  shall pay any
Taxes payable with respect to the transfer of Purchased Interests by the Sellers
to the Purchaser.

                                  ARTICLE III
          PURCHASE PRICE, CLOSING PAYMENTS, WORKING CAPITAL ADJUSTMENT

          Section 3.1  Closing  Purchase  Price. In  consideration  for  the
conveyance by the Sellers to the Purchaser of the  Purchased  Interests,  at the
Closing (but  effective as of the Effective  Time),  the Purchaser  will pay, or
cause to be paid,  $23,100,000  aggregate purchase price (the "Purchase Price"),
as adjusted pursuant to Sections 3.2 and 3.3, payable as follows:

               (a) An amount  sufficient  to  satisfy in full the  Closing  Date
          Funded Indebtedness, to the applicable lenders;

               (b)  $19,099,995  in cash, as adjusted for the Estimated  Working
          Capital  Adjustment   pursuant  to  Section  3.2  (the  "Closing  Cash
          Consideration")  and any reduction in the Purchase  Price  pursuant to
          Section  7.6,  to Sellers by wire  transfer of  immediately  available
          funds to a bank account  designated  in writing by the  Sellers,  such
          designation  to occur no later than the second  Business  Day prior to
          the  scheduled  payment date to be allocated  among the Sellers as set
          forth on Schedule 3.1(b);

                                       12
<PAGE>

               (c) $3,000,005  payable in Parent Stock to the Accredited Sellers
          based on the Final Parent Stock Price; and

               (d)  $1,000,000  by the issuance by the  Purchaser to  Accredited
          Sellers of  three-year  promissory  notes  payable  to the  Accredited
          Sellers in the aggregate original  principal amount of $1,000,000,  in
          the form  attached  hereto as  Exhibit I (the  "Notes"),  as  adjusted
          pursuant  to  Section  3.3.  The  original  principal  amount  to each
          Accredited Seller shall be as set forth on Schedule 3.1(d).  The Notes
          shall (i) bear  interest  at the  annual  rate equal to the Prime Rate
          with interest and principal  payable  annually  beginning on the first
          anniversary  date of the Closing Date,  (ii) provide for  prepayments,
          without  penalty,  at any time by the  Purchaser  and  (iii)  shall be
          unsecured  but  guaranteed  by  the  ultimate  parent  corporation  of
          Purchaser,  U.S. Physical Therapy,  Inc., a Delaware  corporation (the
          "Parent")  in the form  attached  hereto as Exhibit J (the  "Guarantee
          Agreement").

          Section 3.2  Estimated Closing Working Capital.

               (a) Prior to the Closing Date, STAR LP and Purchaser will prepare
and agree on an estimate of the Closing  Working Capital Balance (the "Estimated
Closing Working Capital Balance")  determined in accordance with Section 3.3(a),
as if it were the actual Closing  Working Capital  Balance,  but based upon STAR
LP's and  Purchaser's  review of monthly and other  financial  information  then
available  and inquiries of personnel  responsible  for the  preparation  of the
financial  information  relating to STAR LP in the ordinary course, and prepared
in accordance with GAAP applying the same accounting  principles,  policies, and
practices that were used in preparing the Reference Financial Statements.

               (b)  The   Closing   Cash   Consideration   will   be   decreased
dollar-for-dollar  by the an amount  equal to the excess,  if any, of the Target
Working  Capital Balance over the Estimated  Closing  Working  Capital  Balance,
determined in accordance  with Section 3.3(a) (the  "Estimated  Working  Capital
Adjustment").

          Section 3.3  Working Capital True-Up.

               (a) Within 60 days after the Closing Date, Purchaser will prepare
and deliver or cause to be prepared and delivered to the Seller Representative a
balance  sheet of STAR LP as of the close of  business  on August 31,  2007 (the
"Closing  Date  Balance  Sheet")  and a proposed  statement  of the Net  Working
Capital of STAR LP prepared therefrom (the "Closing  Statement"),  in each case,
without  giving  effect to the  transactions  described in this  Agreement to be
consummated  at the  Closing,  other than the  payment at Closing of the Closing
Date  Funded  Indebtedness,  if any,  which  shall be  treated as paid as of the
Effective  Time.  The Closing Date Balance  Sheet and the Closing  Statement (i)
will reflect, respectively, the financial position of STAR LP and the components
and  calculation of the Net Working Capital of STAR LP and (ii) will be prepared
and  determined  as of the close of business on August 31, 2007,  in  accordance
with GAAP applying the same accounting principles,  policies, and practices that
were used in  preparing  the  Reference  Financial  Statements.  The Net Working
Capital of STAR LP as of the close of business on August 31, 2007, determined in
accordance  with this Section 3.3 is referred to herein as the "Closing  Working
Capital Balance."

                                       13
<PAGE>

               (b) If, within 30 days after the date of Purchaser's  delivery of
the Closing Date Balance Sheet and the Closing Statement,  Seller Representative
determines  in good faith that the Closing  Date  Balance  Sheet and the Closing
Statement  have  not  been  prepared  or  determined  in  accordance  with  this
Agreement,  Seller  Representative  will give written notice to Purchaser within
such 30 day period (i) setting forth Seller Representative's proposed changes to
the Closing Date Balance Sheet as prepared by Purchaser and the determination by
Seller Representative of the Closing Working Capital Balance and (ii) specifying
in  reasonable  detail  Seller  Representative's  basis  for  disagreement  with
Purchaser's  preparation and determination of the Closing Date Balance Sheet and
the Closing Working Capital Balance. The failure by Seller  Representative to so
express  disagreement  and provide  such  notice  within such 30 day period will
constitute the acceptance of Purchaser's preparation of the Closing Date Balance
Sheet and the computation of the Closing Working Capital  Balance.  If Purchaser
and Seller  Representative  are unable to resolve any disagreement  between them
with  respect to the  preparation  of the  Closing  Date  Balance  Sheet and the
determination  of the Closing  Working  Capital Balance within 15 days after the
giving of notice by Seller Representative to Purchaser of such disagreement, the
items in dispute will be referred for  determination  to the Nashville office of
Crowe  Chizek and  Company LLC (or,  if they are unable or  unwilling  to serve,
another nationally or regionally  recognized accounting firm not affiliated with
STAR  LP,  the  Sellers  or  Purchaser)  (the   "Accountants")  as  promptly  as
practicable,  but not later than five days after the  expiration  of such 15 day
period.  Each of the  Purchaser  and Seller  Representative  shall  provide  the
Accountants  with a statement of its position  within fifteen (15) days from the
date of the referral.  Each party shall submit,  in writing,  detailed briefs to
the  Accountants  setting  forth  their  position  as to the amount of each item
remaining in dispute with respect to the  calculation of Closing Working Capital
Balance,  and the Accountants shall make a written  determination as promptly as
practicable but in any event within thirty (30) days after the date on which the
dispute is referred to the  Accountants by selecting from the position of either
Purchaser  or  Seller   Representative.   Neither   Purchaser   nor  the  Seller
Representative  shall be entitled to respond to the brief  provided by the other
party to the Accountants. The Accountants shall be authorized to select only the
calculation of Closing Working Capital Balance as presented by Purchaser and the
Seller  Representative  and shall not select any other amount as the calculation
of Closing  Working Capital  Balance.  The costs and expenses of the Accountants
shall be borne by the party against whom the  arbitration  is decided.  No party
will disclose to the Accountants,  and the Accountants will not consider for any
purpose,  any settlement  discussions or settlement offer made by any Party. The
calculation  of  Closing  Working  Capital  Balance  as  finally  determined  in
accordance  with the terms of this  Section  3.3 shall be the  "Closing  Working
Capital Balance" and such decision of the Accountants shall be final and binding
on the Purchaser and the Seller Representative (on behalf of all Sellers).

               (c) Upon the final  determination  of the Closing Working Capital
Balance, the Parties shall make the following adjustments:

                    (i) If the  Closing  Working  Capital  Balance  exceeds  the
               Estimated  Closing  Working  Capital  Balance  and the  Estimated
               Working  Capital Balance was less than the Target Working Capital
               Balance, then Purchaser will pay to the Seller Representative (on
               behalf of all Sellers) the amount of such  difference,  but in no
               event in an amount  greater than the  Estimated  Working  Capital
               Adjustment computed pursuant to Section 3.2(b).

                                       14
<PAGE>

                    (ii) If the Closing Working Capital Balance is less than the
               Estimated Closing Working Capital Balance,  then the Sellers will
               pay to Purchaser the amount of such difference.

               (d) Any payment in respect of an  adjustment  required to be made
under  this  Section  3.3(c)  will be  made  by the  Sellers  or  Purchaser,  as
applicable,  in cash by wire  transfer  of  immediately  available  funds to one
account  specified by  Purchaser or Seller  Representative,  as  applicable,  in
writing,  prior to the date such payment is required to be made hereunder.  Such
payment  will  be made  within  five  (5)  Business  Days  following  the  final
determination  of the Closing  Working  Capital  Balance.  The Sellers  shall be
jointly and severally liable for any payment due Purchaser under Section 3.3(c),
and to the extent  not  otherwise  promptly  satisfied  by the  Sellers in cash,
Purchaser  may  (but is not  required)  to  set-off  amounts  due and  owing  by
Purchaser  under the Notes to satisfy  any  amounts  due  Purchaser  pursuant to
Section  3.3(c).  Any payment  due to the Seller  Representative  under  Section
3.3(c) shall be paid to the Sellers based on their relative Sharing  Percentages
(less any fees and expenses incurred by the Seller Representative in performance
on behalf of the Sellers).

               (e) By execution of this  Agreement,  each of the Sellers  hereby
appoints,   without   further  act  of  any   Seller,   Swanson  as  the  Seller
representative ("Seller Representative"),  as agent and attorney-in-fact of each
of the Sellers, with full power and authority,  including power of substitution,
acting  in the name of and for and on behalf  of such  Seller  and to, in Seller
Representative's  sole  discretion:  (i) resolve any dispute with Buyer over any
aspect of this Section  3.3;  (ii) give and receive  notices and  communications
with  respect to this Section 3.3 and Section  8.4;  (iii) agree to,  negotiate,
enter into  settlements  and  compromises  of, and  arbitration  and comply with
orders and awards of  arbitrators  in respect of any claim or dispute under this
Section 3.3; (iv) enter into any  agreement to  effectuate  any of the foregoing
items  (i)-(iii)  which shall have the effect of binding  each Seller as if such
Seller had  personally  entered  into such  agreement(s),  taken such actions or
refrained from taking such actions described in items (i)-(iv) above; (v) do all
other  things and take all other  action under or related to this Section 3.3 or
the  other   agreements   contemplated   under  this  Section  3.3  that  Seller
Representative  may  consider  necessary  or  proper  to  effectuate  any of the
foregoing. Notwithstanding the foregoing, all actions taken or decisions made by
the Seller  Representative  on behalf of the  Sellers  shall be  evidenced  by a
writing  signed  by the  Seller  Representative  and shall be taken or made in a
manner that is ratable and equitable  among such Sellers.  This  appointment and
power of attorney  shall be deemed as coupled with an interest and all authority
conferred hereby shall be irrevocable and shall not be subject to termination by
operation  of  law,  whether  by the  death  or  incapacity  or  liquidation  or
dissolution of any Seller or the occurrence of any other event or events and the
Seller  Representative  may not terminate this power of attorney with respect to
any  Seller or such  Seller's  successors  or  assigns  without  the  consent of
Purchaser.  Each Seller  agrees to hold the Seller  Representative  harmless and
indemnify the Seller Representative, with respect to any and all loss, damage or
liability and expenses  (including  reasonable legal fees) which such Seller may
sustain  as  a  result  of  any  action  taken  in  good  faith  by  the  Seller
Representative.

                                       15
<PAGE>

                                   ARTICLE IV
                         CLOSING AND CLOSING DELIVERIES

          Section  4.1 The  Closing.  The   closing  of  the  sale and  purchase
of the Purchased Interests (the "Closing") will take place on or about September
6, 2007, at the offices of Porter & Hedges, L.L.P., located at 1000 Main Street,
36th Floor,  Houston,  Texas,  unless the parties agree in writing to change the
Closing to another time,  date or place.  The date upon which the Closing occurs
is herein called the "Closing Date," but each of the parties hereto hereby agree
that the purchase and sale of the Purchased Interests shall be effective for all
purposes,  including  financial  accounting  and Tax  purposes,  at 8:01 a.m. on
September 1, 2007 ("Effective Time").

          Section 4.2  Deliveries of STAR LP and the Sellers.  At  the  Closing,
STAR LP and Sellers will deliver, or cause to be delivered, to the Purchaser:

               (i) all  documents  necessary  to  evidence  consummation  of the
          Pre-Closing  Reorganization  duly  executed by STAR LP,  Sellers,  the
          General  Partner  or  STAR  LP,  as  applicable,  including:  (A)  the
          Certificate of Formation of the General Partner in the form of Exhibit
          A hereto,  the  Limited  Liability  Company  Agreement  of the General
          Partner  in  the  form  of  Exhibit  B  hereto,  an  assignment  of 1%
          membership  interest  from  Swanson to the  General  Partner in a form
          reasonably  acceptable  to  Purchaser,  and to effect the GP Formation
          (such  Exhibit  A and  Exhibit  B,  collectively,  the  "GP  Formation
          Documents");  (B) Plan of  Conversion  in the form of  Exhibit  C, the
          Certificate  of  Formation of STAR LP in the form of Exhibit D hereto,
          and the  Certificate  of  Conversions  to effect the STAR LP Formation
          (such  Exhibit C and Exhibit D,  collectively,  the "STAR LP Formation
          Documents");  (C) the foreign  qualification  applications  to qualify
          each of the General  Partner  and STAR LP to do business in  Tennessee
          and Indiana,  to effect the Foreign  Qualifications;  and (D) and such
          other documents necessary to consummate the Pre-Closing Reorganization
          (the items in clauses (A) through (D)  collectively,  the "Pre-Closing
          Reorganization Documents");

               (ii) an Assignment of Purchased  Interests in the form of Exhibit
          K hereto;

               (iii) the Agreement of Limited Partnership of STAR LP in the form
          of Exhibit E hereto, executed by the Sellers;

               (iv) a certificate  of a duly  authorized  officer of the General
          Partner and of the Sellers  confirming  compliance  with the condition
          set forth in Section 9.1(a);

               (v) a certificate  of the secretary of STAR LP and of the Sellers
          certifying as to each of the Pre-Closing Reorganization Documents;

               (vi)  evidence  or copies  of the  consents,  approvals,  orders,
          qualifications  or waivers required by any third party or Governmental
          Authority  to  consummate  the   transactions   contemplated  by  this
          Agreement that are listed in Schedule 4.2(vi);

               (vii) an Investment  Agreement executed by each of the Accredited
          Sellers with respect to the Parent Stock, Notes and Guarantee received
          as a part of the Purchase  Price, in  substantially  the form attached
          hereto;

                                       16
<PAGE>

               (viii) each Ancillary  Agreement (other than those provided under
          clause (i) above)  required to be executed  and  delivered  by parties
          other than the Purchaser or its Affiliates;

               (ix) an opinion of Stites & Harbison,  P.L.L.C.,  counsel for the
          Seller, in the form of Exhibit L hereto;

               (x)  resignations  of the  managers  and  officers of the General
          Partner (other than with respect to the persons  executing  Employment
          Agreements  relating  to the  positions  set forth in such  Employment
          Agreements);

               (xi) payoff  letters  executed and delivered  from all holders of
          Closing Date Funded Debt, which payoff letters set forth the terms and
          conditions  of payment and  satisfaction  in full of all such  Closing
          Date Funded Debt and release of all Liens  granted by STAR LP relating
          thereto on and as of the Closing Date; and

               (xii) such other  documents and  instruments as may be reasonably
          required to consummate the transactions contemplated by this Agreement
          and the Ancillary  Agreements  and to comply with the terms hereof and
          thereof.

          Section 4.3  Deliveries  by Purchaser.  At the Closing,  the Purchaser
will deliver, or cause to be delivered, to the applicable Sellers:

                    (i)  the  Closing  Cash  Consideration  to  Sellers  by wire
               transfer of immediately available funds to the accounts specified
               pursuant to Section 3.1(b);

                    (ii) the  Notes  executed  by the  Purchaser  issued  to the
               Accredited Sellers pursuant to Section 3.1(d);

                    (iii) the  Parent  Stock  issued to the  Accredited  Sellers
               pursuant to Section 3.1(c);

                    (iv) the Guarantee Agreement executed by Parent;

                    (v) the  Agreement  of  Limited  Partnership  in the form of
               Exhibit E  hereto,  executed  by the  Purchaser  and the  General
               Partner;

                    (vi) a certificate of an authorized officer of the Purchaser
               confirming  the  Purchaser's  compliance  with the  condition set
               forth in Section 9.2(a);

                    (vii)  each   Ancillary   Agreement   required  to  be  duly
               authorized and delivered by the Purchaser or its Affiliates;

                    (viii) an opinion of Porter & Hedges,  L.L.P.,  counsel  for
               the Purchaser, in the form of Exhibit M hereto; and

                                       17
<PAGE>

                    (ix)  such  other   documents  and  instruments  as  may  be
               reasonably  required to consummate the transactions  contemplated
               by this Agreement and the Ancillary Agreements and to comply with
               the terms hereof and thereof.

                                   ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
                           OF STAR LP AND THE SELLERS

         STAR LP and Sellers  represent  and warrant to the  Purchaser as of the
time immediately  prior to the  consummation of the Pre-Closing  Reorganization,
except if expressly provided as of another time, as follows:

          Section 5.1  Existence and Power.  STAR LP (i) is a limited  liability
partnership duly organized, validly existing and in good standing under the laws
of the State of Texas, (ii) has all limited  partnership power required to carry
on the Business as now conducted and (iii) is duly qualified to conduct business
as a foreign  limited  liability  company and is in good  standing in each other
jurisdiction  where such  qualification is necessary.  Schedule 5.1 sets forth a
list of each foreign  jurisdiction in which STAR LP is qualified to do business.
STAR LP has  previously  delivered to the Purchaser  true,  correct and complete
copies of the articles of organization (and all amendments  thereto) and limited
liability company agreement of STAR LP (and all amendments thereto) as in effect
immediately prior to consummation of Pre-Closing Reorganization pursuant to this
Agreement.

          Section  5.2  Authorization;   Enforceability.   As  of  Closing,  the
execution, delivery and performance of this Agreement by STAR LP and each of the
Sellers,  and of each of the Ancillary Agreements by STAR LP, the Sellers or the
General Partner to the extent it will be a party thereto are within each party's
powers and have been duly  authorized  by all  necessary  actions,  and no other
action on the part of any such party is necessary to authorize this Agreement or
any of the  Ancillary  Agreements  to  which  any  such  party is a party at the
Closing.  As of Closing,  this  Agreement  has been,  and each of the  Ancillary
Agreements to which STAR LP, any Sellers or the General  Partner is a party have
been duly executed and delivered by such party, as applicable.  Assuming the due
execution  and  delivery  by the  Purchaser  of this  Agreement  and each of the
Ancillary Agreements to which STAR LP, any of the Sellers or the General Partner
is a party at the  Closing,  this  Agreement  constitutes,  and  each  Ancillary
Agreement  to which STAR LP or any of the Sellers or the  General  Partner are a
party at the  Closing  constitutes  at the  Effective  Time,  valid and  binding
agreements of such party, as applicable,  enforceable against each in accordance
with their  terms,  except as such  enforcement  may be  limited by  bankruptcy,
insolvency,   reorganization,   moratorium  or  other  similar  laws   affecting
enforcement of creditors'  rights generally and by general  principles of equity
(whether applied in a proceeding at law or in equity).

          Section  5.3  Governmental  Authorization.   Except  as  disclosed  in
Schedule 5.3, as of Closing, the execution, delivery and performance by STAR LP,
the  Sellers  and the  General  Partner  of this  Agreement  and each  Ancillary
Agreement  to which  STAR LP,  the  Sellers  or the  General  Partner is a party
require no consent,  approval,  order,  authorization or action by or in respect
of, or filing with, any Governmental Authority.

                                       18
<PAGE>

          Section  5.4  Non-Contravention;  Consents.  Except  as  disclosed  in
Schedule 5.4, as of Closing, the execution,  delivery and performance by STAR LP
and each of the Sellers of this Agreement and each Ancillary  Agreement to which
STAR  LP,  any of the  Sellers  or the  General  Partner  is a  party,  and  the
consummation  of the  transactions  contemplated  hereby and  thereby do not (a)
violate the Charter  Documents of STAR LP, the General Partner or any applicable
Seller as in effect either before or after the Pre-Closing  Reorganization,  (b)
violate  any  applicable  Law or Order,  (c)  require any filing with or Permit,
consent or  approval  of, or the giving of any notice to, any Person  (including
filings, consents or approvals required under any Permits of STAR LP, any Seller
or any  licenses  to which  STAR LP or any  Seller is a party),  (d) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse  of  time  or  both) a  default  under,  or  give  rise  to any  right  of
termination,  cancellation or acceleration of any right or obligation of STAR LP
or any  Seller,  or to a loss of any  benefit  to which STAR LP or any Seller is
entitled under, any Contract, agreement or other instrument binding upon STAR LP
or any Seller, or any license,  franchise, Permit or other similar authorization
held by STAR LP or any Seller,  or (e) result in the creation or  imposition  of
any Lien (other than Permitted  Liens) on any asset of STAR LP.  Notwithstanding
the foregoing, no representation or warranty is made with respect to whether the
transactions contemplated hereby violate any general non-assignment clause under
any  Contract,  agreement or other  instrument  binding upon STAR LP solely as a
result of the Conversion contemplated by the Pre-Closing Reorganization.

          Section 5.5 Capitalization.

               (a)  Immediately  prior to the  consummation  of the  Pre-Closing
          Reorganization, (i) all units of the outstanding Capital Stock of STAR
          LP are owned of record and  beneficially by the Sellers in the amounts
          as set forth on Schedule 5.5, and (ii) all such units of Capital Stock
          of STAR LP were duly authorized, validly issued and outstanding, fully
          paid and nonassessable,  and free of preemptive rights and other Liens
          and were  issued  in  compliance  with  applicable  limited  liability
          company and securities laws.

               (b)  Immediately   after  the  consummation  of  the  Pre-Closing
          Reorganization  and  immediately  prior to the closing of the purchase
          and sale of the Purchased Interests, (i) the total outstanding Capital
          Stock of STAR LP are owned of record  and  beneficially  (A) 1% by the
          General  Partner  and (B)  99% by the  Sellers,  and  (ii)  the  total
          outstanding  Capital  Stock of the General  Partner is owned of record
          and  beneficially  by Regg E. Swanson  Revocable  Trust, in each case,
          free  of  preemptive  rights  and  other  Liens  and  were  issued  in
          compliance with applicable  limited  partnership or limited  liability
          company laws, as applicable,  and securities laws.  Immediately  after
          the  consummation of the Pre-Closing  Reorganization  and prior to the
          closing of the purchase and sale of the Purchased  Interests  pursuant
          to this Agreement,  the General Partner is the sole general partner of
          STAR LP and the General Partner and Sellers together own of record and
          beneficially  100% of the Capital  Stock of STAR LP, free and clear of
          all Liens. Upon consummation of the transactions  contemplated by this
          Agreement,  at the Effective Time (i) the Purchaser will acquire good,
          valid and indefeasible title to all of the Purchased  Interests,  free
          and clear of all Liens,  and which  interests will represent as of the
          Effective Time (A) 100% of the issued and outstanding Capital Stock of
          the  General  Partner,  which  General  Partner in turn owns 1% of the
          issued  and  outstanding  Capital  Stock of STAR LP and (B) 69% of the

                                       19
<PAGE>

          issued and  outstanding  Capital  Stock of STAR LP, (ii)  Sellers will
          retain an aggregate 30% of the issued and outstanding Capital Stock of
          STAR LP.

               (c)  Immediately   before  and  after  the  consummation  of  the
          Pre-Closing  Reorganization  and as of the Effective  Time,  (i) there
          were no  options,  warrants,  purchase  rights,  subscription  rights,
          conversion rights,  exchange rights,  convertible  securities or other
          rights,  agreement,  arrangements  or  commitments  of  any  character
          relating to the shares of Capital Stock of STAR LP or obligating  STAR
          LP to issue, sell or otherwise cause to become  outstanding any shares
          of its Capital  Stock and (ii) there were no  outstanding  contractual
          obligations of STAR LP to repurchase,  redeem or otherwise acquire any
          Capital  Stock of STAR LP or interests in STAR LP, or to provide funds
          to,  or  make  any  investment  (in  the  form  of  a  loan,   capital
          contribution or otherwise) in, any other Person.  Immediately prior to
          the closing of the Pre-Closing  Reorganization,  all of the issued and
          outstanding  Capital  Stock  of STAR  LP  were  owned  of  record  and
          beneficially  by the Sellers in amounts and the  percentages set forth
          on  Schedule  5.5  hereof,  free and clear of all  Liens.  Immediately
          before  and  after  the  Pre-Closing  Reorganization  and  as  of  the
          Effective Time, (i) there are no voting trusts, agreements, proxies or
          other  understandings in effect with respect to the voting or transfer
          of any of the shares of Capital Stock of STAR LP and (ii) there are no
          outstanding or authorized stock or other equity appreciation,  phantom
          stock participation or similar rights with respect to STAR LP.

          Section 5.6  Subsidiaries. STAR LP does not  own any  Capital Stock or
other equity or ownership or proprietary interest in any Person.

          Section 5.7  Financial Statements.

               (a) STAR LP heretofore  furnished  the Purchaser  with a true and
          complete copy of the Reference Financial Statements which are attached
          hereto as Schedule 5.7. The Reference  Financial  Statements have been
          derived  from the books and records of STAR LP, have been  prepared in
          accordance  with GAAP  (except  for,  with  respect  to the  Reference
          Balance  Sheet and the related  statement of income,  normal  year-end
          adjustments  and the absence of footnotes),  and fairly present in all
          material respects the financial condition of STAR LP at the respective
          dates  thereof  and the  results  of  operations  and for the  periods
          indicated.

               (b) The books of account,  minute  books,  stock record books and
          other records of STAR LP, all of which have been made available to the
          Purchaser, are complete and correct in all material respects.

          Section  5.8 No  Undisclosed  Liabilities.  There are no  liabilities,
whether accrued, contingent, absolute, determined, determinable or otherwise, of
STAR LP other than (a) liabilities fully provided for in the Reference Financial
Statements,  (b) liabilities  specifically  disclosed in Schedule 5.8, (c) other
undisclosed  current  liabilities  incurred  since the Balance Sheet Date in the
Ordinary  Course of Business which could not,  individually or in the aggregate,
reasonably  be  expected  to have a Material  Adverse  Effect and (d)  executory
obligations  relating to the  Contracts  and for which STAR LP is not  otherwise
delinquent  or in breach or default of such  Contracts.  Except as  disclosed on

                                       20
<PAGE>

Schedule  5.8.  None of STAR LP, the General  Partner or any Seller has any such
liability  to any  partner  (or former  member)  of STAR LP with  respect to the
purchase  of their  shares  of  Capital  Stock of STAR LP or  otherwise  and the
consummation  of the transaction  contemplated by this Agreement  (including the
Pre-Closing Reorganization) will not otherwise give rise to any such liability.

          Section 5.9  Tax Matters.

               (a) Except as disclosed in Schedule 5.9(a):

                    (i) from  the time  since  its  formation,  STAR LP has been
               taxed as a partnership  for federal and  applicable  state income
               tax purposes;

                    (ii) STAR LP does not currently  have any liability for U.S.
               federal income Taxes;

                    (iii)  all  Tax  Returns  required  to  be  filed  with  any
               Governmental  Authority  on or before the Closing by or on behalf
               of STAR LP have been duly filed on a timely  basis in  accordance
               with all applicable Laws;

                    (iv) at the time of their  filings all such Tax Returns were
               complete and correct in all material respects;

                    (v) all  Taxes  required  to be paid by STAR LP on or before
               the date of this Agreement have been paid, the reserves for Taxes
               of STAR LP reflected in the Reference  Balance Sheet are adequate
               to cover all Taxes that have not been paid,  but which under GAAP
               were accruable,  through the date of the Reference  Balance Sheet
               and the accrued  and unpaid  Taxes of STAR LP do not and will not
               from the Reference  Balance Sheet Date through the Effective Time
               result from transactions  outside the Ordinary Course of Business
               (other  than as a result  of  transactions  contemplated  by this
               Agreement);

                    (vi)  there are no Liens for Taxes  upon any  assets of STAR
               LP,  except  Liens for Taxes not yet due for  current Tax periods
               ending after the date of this Agreement;

                    (vii) there are no outstanding deficiencies,  assessments or
               written proposals for the assessment of Taxes proposed,  asserted
               or assessed against STAR LP, and, to the knowledge of STAR LP, no
               grounds exist for any such assessment of Taxes;

                    (viii)  STAR LP is not an obligor on, and none of its assets
               have been  financed  directly  or  indirectly  by, any tax exempt
               bonds;

                    (ix) no extension or waiver of the statute of limitations on
               the assessment of any Taxes has been granted to or applied for by
               STAR LP;

                                       21
<PAGE>

                    (x)  STAR LP (x) is not a party  to any  Tax  allocation  or
               Tax-Sharing   Agreement,   (y)  has  not  been  a  member   of  a
               consolidated,  combined or unitary  group for  purposes of filing
               Tax Returns, and (z) does not have any liability for the Taxes of
               any other Person as a  transferee  or  successor,  by contract or
               otherwise;

                    (xi) none of the Tax  Returns of STAR LP are the  subject of
               an  action,   suit,   proceeding,   audit  or  examination  by  a
               Governmental Authority;

                    (xii) STAR LP has  withheld  and paid all Taxes  required to
               have been withheld and paid in  connection  with any amounts paid
               or owing to any employee,  independent  contractor,  creditor, or
               other party;

                    (xiii)  none of STAR LP,  any  Seller  or  their  respective
               representatives  have  filed an  election  to treat  the  General
               Partner as an  association  taxable as a corporation  for federal
               income tax purposes; and

                    (xiv) STAR LP is not a United States real  property  holding
               corporation  within the meaning of Code Section  897(c)(2) during
               the applicable period specified in Code Section 897(c)(1)(A)(ii).

               (b) Schedule  5.9(b) lists all Returns filed with respect to STAR
          LP for all taxable  periods  since the fiscal year ended  December 31,
          2003 and  specifies  the  jurisdictions  in which each such Return has
          been filed,  and indicates any Returns that  currently are the subject
          of audit,  and STAR LP has  delivered  to the  Purchaser  correct  and
          complete  copies of all such  Returns  since  the  fiscal  year  ended
          December 31, 2003, and of any  examination  reports and any statements
          of deficiencies  proposed to be assessed against, or agreed to by STAR
          LP.

               (c)  In  connection  with  the  Pre-Closing  Reorganization,   no
          election  was  filed to cause  the  General  Partner  or STAR LP to be
          treated as an association  taxable as a corporation  for U.S.  federal
          income tax purposes for any period commencing with the consummation of
          the Pre-Closing  Reorganization,  and since such consummation  through
          the  closing  of the  purchase  and  sale of the  Purchased  Interests
          pursuant to this  Agreement,  the General Partner will be treated as a
          "disregarded  entity" within the meaning of Section  301.7701-3(b)  of
          Treasury Regulation  promulgated under the Code for federal income tax
          purposes.

          Section  5.10  Absence  of Certain  Changes.  Except as  disclosed  in
Schedule  5.10 or as expressly  permitted by this  Agreement,  since the Balance
Sheet  Date,  STAR LP has  conducted  the  Business  in the  Ordinary  Course of
Business  and  there  has  not  been  any  event,  occurrence,   development  or
circumstances  which has had or which  could  reasonably  be  expected to have a
Material Adverse Effect. Except as disclosed in Schedule 5.10, since the Balance
Sheet Date, STAR LP has not:

                    (i) Changed any salaries or other  compensation  of, or paid
               any  distributions or bonuses to, any current or former director,
               manager,  officer,  employee,  partner  or  member of STAR LP, or

                                       22
<PAGE>

               entered into any employment,  severance or similar agreement with
               any  current  or former  director,  manager,  officer,  employee,
               partner or member of STAR LP;

                    (ii)  Adopted or  increased  any  benefits  under any profit
               sharing,  bonus,  deferred  compensation,   savings,   insurance,
               pension,  retirement or other Benefit Plan for or with any of the
               employees of STAR LP;

                    (iii)  Entered  into any  material  contract or  commitment,
               except for contracts and  commitments  entered into by STAR LP in
               the Ordinary Course of Business;

                    (iv)  Modified  or  amended  in  any  material   respect  or
               terminated  any  Contract  listed  or  required  to be  listed in
               Schedule 5.11(a);

                    (v) Incurred any  Indebtedness  for borrowed money or issued
               any debt  securities  or  assumed,  guaranteed  or  enclosed,  or
               otherwise  as  an  accommodation   become  responsible  for,  the
               obligations   of  any   Person,   other  than  with   respect  to
               availability  under its existing  credit  facilities that will be
               repaid in full at Closing pursuant to Section 3.1(a);

                    (vi) Sold,  leased or  otherwise  disposed  of any  material
               asset or property;

                    (vii)  Created or assumed  any Lien,  other than a Permitted
               Lien;

                    (viii)  Terminated  or  closed  any  facility,  business  or
               operation;

                    (ix) Authorized or made any capital expenditure in excess of
               $10,000, individually or $25,000 in the aggregate;

                    (x)  Declared,  paid or set aside for payment  any  non-cash
               dividend  or other  distribution  in respect  of any  outstanding
               Capital Stock of STAR LP;

                    (xi)  Issued  any  shares  of  Capital  Stock or  securities
               convertible  into or  exchangeable  or exercisable  for shares of
               Capital Stock of STAR LP;

                    (xii)  Settled,  released or forgiven  any  indebtedness  or
               guarantee in favor of STAR LP,  material  claim or  litigation or
               waived any material right thereto; or

                    (xiii) Agreed to do any of the foregoing.

                                       23
<PAGE>

          Section 5.11 Contracts.

               (a) Except as specifically disclosed in Schedule 5.11(a), STAR LP
          is  not a  party  to or  bound  by  any  lease,  agreement,  contract,
          commitment or other legally  binding  contractual  right or obligation
          (whether  written or oral)  (collectively,  "Contracts")  that is of a
          type described below:

                    (i)  any  lease  (whether  of real  or  personal  property),
               including  the leases  disclosed  or required to be  disclosed on
               Schedule 5.15(b);

                    (ii) any agreement for the purchase of materials,  supplies,
               goods,  services,  equipment  or other  assets that  provides for
               aggregate payments by STAR LP of $10,000 or more;

                    (iii) any sales,  distribution  or other  similar  agreement
               providing for the sale by STAR LP of materials,  supplies, goods,
               services,  equipment or other assets that  provides for aggregate
               payments to STAR LP of $10,000 or more;

                    (iv)  any  partnership,   joint  venture  or  other  similar
               agreement or arrangement;

                    (v) any  Contract  pursuant  to which  any  third  party has
               rights to own or use any material asset of STAR LP, including any
               Intellectual Property Right of STAR LP;

                    (vi)  any   agreement   relating  to  the   acquisition   or
               disposition  of any business  (whether by merger,  sale of stock,
               sale of assets or otherwise) or granting to any Person a right of
               first refusal,  first offer or other right to purchase any of the
               assets of STAR LP;

                    (vii) any agreement  relating to Indebtedness  (in any case,
               whether incurred,  assumed, guaranteed or secured by any asset of
               STAR LP) other than accruals  recorded in the Ordinary  Course of
               Business;

                    (viii) any license, franchise or similar agreement;

                    (ix) any agency, dealer, sales representative,  marketing or
               other similar agreement;

                    (x) any third party payor,  managed  care and other  similar
               payment  arrangements or Contracts pursuant to which the terms of
               which STAR LP derives or is  reasonably  expected  to derive more
               than $100,000 of revenue during any twelve month period;

                    (xi) any  agreement  with (A) any  member  of STAR LP or any
               other  Affiliate  of  STAR  LP or (B) any  director,  manager  or
               officer of STAR LP or with any  "associate"  or any member of the
               "immediate  family"  (as such terms are  respectively  defined in

                                       24
<PAGE>

               Rules 12b-2 and 16a-1 of the Exchange  Act) of any such  director
               or officer, other than as set forth in clause (xiv) below;

                    (xii)  any  management  service,  consulting  or  any  other
               similar type of agreement;

                    (xiii) any warranty,  guaranty or other similar  undertaking
               with  respect to any  contractual  performance  (or the  standard
               forms  of  any of the  foregoing  of  STAR  LP) or  agreement  to
               indemnify any Person;

                    (xiv)  any  employment,  deferred  compensation,  severance,
               bonus, retirement or other similar agreement or plan in effect as
               of the date hereof (including in respect of any advances or loans
               to any employees) and entered into or adopted by STAR LP;

                    (xv) any Contract  that  purports to limit STAR LP's freedom
               to compete in any line of business or in any geographic area, and
               Contracts  that  contain  any   standstill  or   non-solicitation
               agreements; or

                    (xvi) any other agreement,  commitment,  arrangement or plan
               of STAR LP that is material to STAR LP or the Business.

               (b) Each  Contract  disclosed  in or required to be  disclosed in
          Schedule  5.11(a) is a valid and binding  agreement of STAR LP and, to
          the  knowledge of STAR LP, each other party  thereto,  enforceable  in
          accordance with its respective  terms,  except as such enforcement may
          be limited by bankruptcy,  insolvency,  reorganization,  moratorium or
          other  similar  laws  affecting   enforcement  of  creditors'   rights
          generally and by general  principles of equity  (whether  applied in a
          proceeding at law or in equity). Neither STAR LP nor, to the knowledge
          of STAR LP,  any other  party to any such  Contract  is in  default or
          breach  (with or  without  due notice or lapse of time or both) in any
          material  respect  under the terms of any such  Contract.  STAR LP has
          delivered  or  made  available  to the  Purchaser  true  and  complete
          originals  or copies of all  Contracts  disclosed in or required to be
          disclosed in Schedule 5.11(a).

          Section 5.12 Insurance Coverage.  Schedule 5.12 contains a list of all
of the  insurance  policies and fidelity  bonds  covering the assets,  Business,
operations,  employees,  officers and directors (or comparable positions such as
managers)  of STAR LP and a list of all claims  pending as of the Balance  Sheet
Date and the  Closing  Date  under  any such  policies  or  bonds,  including  a
description of the  background  and status of such claims.  There is no claim by
STAR LP pending  under any of such  policies or bonds as to which  coverage  has
been  questioned,  denied or disputed by the  underwriters  of such  policies or
bonds.  All premiums due and payable under all such policies and bonds have been
paid and STAR LP has complied with the terms and conditions of all such policies
and bonds.  Such  policies of insurance  and bonds (or other  policies and bonds
providing  substantially  similar  insurance  coverage)  are in full  force  and
effect.  STAR LP has no knowledge of any threatened  termination of, or material
premium increase with respect to, any of such policies or bonds.  Since the last

                                       25
<PAGE>

renewal date of any  insurance  policy,  there has not, to the knowledge of STAR
LP, been any adverse change in the  relationship  of STAR LP with its respective
insurers or the premiums payable pursuant to such policies.

          Section 5.13  Litigation.  Except as  disclosed  in Schedule  5.13(a),
there is no action, suit, investigation,  arbitration or administrative or other
proceeding  pending  or, to the  knowledge  of STAR LP,  threatened,  against or
affecting STAR LP before any court or arbitrator or any  Governmental  Authority
or  which  in any  manner  challenges  or seeks  to  prevent,  enjoin,  alter or
materially  delay  the  transactions  contemplated  by  this  Agreement  and any
Ancillary Agreements to which STAR LP or any Seller is a party at Closing.  STAR
LP does not know of any valid basis for any such  action,  suit,  investigation,
arbitration or proceeding  against or affecting STAR LP or the Business.  Except
as disclosed in Schedule 5.13(a),  there are no outstanding  judgments,  orders,
injunctions,  decrees,  stipulations  or awards  (whether  rendered  by a court,
administrative agency,  arbitral body or Governmental Authority) against STAR LP
or any Seller.

          Section 5.14 Compliance with Laws; Permits.

               (a) Except as described in Schedule 5.14(a), STAR LP has complied
          in all  material  respects  with all  Laws.  STAR LP knows of no fact,
          circumstance,  condition or situation  existing which, after notice or
          lapse of time or both, would constitute  noncompliance in any material
          respect  by STAR LP or give rise to any  future  liability  of STAR LP
          with respect to any Law  heretofore  or  currently  in effect.  To the
          knowledge  of STAR LP, STAR LP is not  required  to make any  material
          expenditure to achieve or maintain  compliance  with any Law.  Neither
          the use,  condition  nor  other  aspect  of any of the  assets  of the
          Business or other right,  property or asset used in or associated with
          the Business is or has been in violation of any applicable Law. Except
          as set forth in Schedule  5.14(a),  neither STAR LP nor any Seller has
          received  any notice of any  violation  of any Law,  or any  potential
          liability under any Law,  relating to the operation of the Business or
          to any of its assets, operations,  processes, results or products, nor
          is STAR LP aware of any such violation or potential liability.

               (b)  Schedule  5.14(b)  sets forth a list of each  government  or
          regulatory license, authorization, permit, franchise, provider number,
          consent and approval (the  "Permits")  issued and held by or on behalf
          of STAR LP or  required  to be so  issued  and  held to  carry  on the
          Business as  currently  conducted  by STAR LP.  Except as disclosed in
          Schedule  5.14(b),  STAR  LP is the  authorized  legal  holder  of the
          Permits,  and each Permit is valid and in full force and effect.  STAR
          LP is not in default under,  and no condition  exists that with notice
          or lapse of time or both could constitute a default or could give rise
          to a right of termination,  cancellation or  acceleration  under,  any
          Permit held by STAR LP.

                                       26
<PAGE>

          Section 5.15 Assets; Properties; Sufficiency of Assets.

               (a) Except for  Inventory,  if any,  disposed of, or cash or cash
          equivalents expended, in the Ordinary Course of Business,  STAR LP has
          good title to, or in the case of leased  property has valid  leasehold
          interests  in, the  property  and assets  (whether  real or  personal,
          tangible or  intangible)  reflected in the Reference  Balance Sheet or
          acquired after the date thereof,  free and clear of all Liens,  except
          for Permitted Liens.

               (b) STAR LP owns no Real Property  assets.  Schedule 5.15(b) sets
          forth a list of all real property  assets leased by STAR LP (the "Real
          Property").  STAR  LP  is a  tenant  or  possessor  in  good  standing
          thereunder (with a right of quiet enjoyment therein) and all rents due
          under  such  leases  have  been  paid.  Neither  STAR LP  nor,  to the
          knowledge  of STAR LP, any other party to any such lease is in default
          or breach  (with or without due notice or lapse of time or both) under
          the terms of any such lease.  STAR LP is in peaceful  and  undisturbed
          possession  of the space and/or estate under each lease of which it is
          a tenant.  STAR LP has not received  any notice of any  appropriation,
          condemnation or like proceeding, or of any violation of any applicable
          zoning Law or Order relating to or affecting the Real Property, and to
          STAR  LP's  knowledge,  no such  proceeding  has  been  threatened  or
          commenced.  Each item of Real  Property  has  adequate  Utilities  (as
          hereinafter  defined) of a capacity and condition to serve  adequately
          such Real  Property  (with due  regard  for the use to which such Real
          Property  is  presently  being put by STAR LP).  For  purposes of this
          Agreement,  the term  "Utilities"  means all of the  following:  water
          distribution  and service  facilities;  sanitary sewers and associated
          installations;  storm sewers; storm retention ponds and other drainage
          facilities; electrical distribution and service facilities; telephone,
          and similar communication facilities;  heating,  ventilating,  cooling
          and air conditioning systems and facilities;  natural gas distribution
          and service facilities; fire protection facilities; garbage compaction
          and  collection  facilities;  and all other  utility  lines,  conduit,
          pipes, ducts, shafts, equipment, apparatus and facilities.

               (c) Schedule  5.15(c) sets forth a list of all tangible  personal
          property  of STAR LP, and such  tangible  personal  property is in all
          material respects in good repair and operating  condition  (subject to
          normal maintenance requirements and normal wear and tear excepted).

               (d) The  property  and  assets of STAR LP  constitute  all of the
          properties  and assets used in the  Business,  and such  property  and
          assets are adequate to conduct the Business as currently  conducted by
          STAR LP.

          Section 5.16 Intellectual Property.

               (a)  Schedule  5.16(a)  sets  forth  a list  of all  Intellectual
          Property  Rights  which  are  owned by STAR LP or  which  STAR LP is a
          licensor or licensee, and all material licenses, sublicenses and other
          written  agreements as to which STAR LP or any of its  Affiliates is a
          party and  pursuant  to which any  Person  is  authorized  to use such
          Intellectual  Property  Right,  including  the identity of all parties
          thereto.

                                       27
<PAGE>

               (b) Except as disclosed in Schedule 5.16(b):

                    (i) All of the Intellectual Property Rights necessary for or
               used in the  conduct of the  Business  are set forth in  Schedule
               5.16(a).

                    (ii)  To the  knowledge  of  STAR  LP,  the  conduct  of the
               Business by STAR LP as currently conducted does not infringe upon
               any Intellectual  Property Right of any third party.  There is no
               claim,  suit,  action or proceeding that is either pending or, to
               the  knowledge  of STAR LP,  threatened,  that,  in either  case,
               involves a claim of infringement  by STAR LP of any  Intellectual
               Property  Right of any  third  party,  or  challenging  STAR LP's
               ownership,  right to use,  or the  validity  of any  Intellectual
               Property  Right  listed or  required  to be  listed  in  Schedule
               5.16(a). STAR LP has no knowledge of any basis for any such claim
               of infringement  and no knowledge of any continuing  infringement
               by any other Person of any of the  Intellectual  Property  Rights
               listed or required to be listed in Schedule 5.16(a);

                    (iii) No  Intellectual  Property Right listed or required to
               be listed in  Schedule  5.16(a)  is  subject  to any  outstanding
               order, judgment, decree, stipulation or agreement restricting the
               use thereof by STAR LP or  restricting  the licensing  thereof by
               STAR LP to any Person,  other than with  respect to standard  and
               customary  restrictions  associated with  commercially  available
               third party software to which STAR LP has a valid right to use in
               connection with the Business;

                    (iv) STAR LP has not entered into any agreement to indemnify
               any  other  Person  against  any  charge of  infringement  of any
               Intellectual Property Right; and

                    (v) STAR LP has duly  maintained all  registrations  for any
               Intellectual  Property  Rights listed or required to be listed in
               Schedule 5.16(a).

          Section 5.17 Environmental Matters.

               (a) Except as disclosed in Schedule 5.17(a):

                    (i) STAR LP has not,  and to STAR  LP's  knowledge  no other
               party  has,  generated,  recycled,  used,  treated  or stored on,
               transported  to or from, or Released or disposed on, the Property
               any  Constituents  of Concern or, to the knowledge of STAR LP, on
               any  property  adjoining or adjacent to any  Property,  except in
               compliance with Environmental Laws;

                    (ii) STAR LP has not  disposed  of  Constituents  of Concern
               from Property at any off-site  facility except in compliance with
               Environmental Laws;

                    (iii) STAR LP has been and is in compliance, in all material
               respects, with (a) Environmental Laws and (b) the requirements of
               Permits issued under such  Environmental Laws with respect to the
               Property;

                                       28
<PAGE>

                    (iv) There are no pending  Environmental Claims against STAR
               LP or,  to the  knowledge  of STAR LP,  threatened  Environmental
               Claims  against  STAR LP or pending or, to the  knowledge of STAR
               LP, threatened Environmental Claims against any Property;

                    (v) To the  knowledge of STAR LP,  there are no  underground
               storage tanks or sumps located on any Property;

                    (vi) STAR LP is not listed, nor to the knowledge of STAR LP,
               proposed  for  listing,  nor to the  knowledge of STAR LP without
               having performed any inquiry,  is any Property listed or proposed
               for listing,  on the National  Priorities List under CERCLA or on
               any similar  federal,  state or foreign  list of sites  requiring
               investigation  or  clean-up,  and  STAR LP has not  received  any
               requests  for  information  pursuant  to  104(e) of CERCLA or any
               state counterpart or equivalent;

                    (vii)  STAR  LP  has  obtained  all  Environmental   Permits
               required in connection  with the operation of the Business or the
               use of the Property and is in  compliance  with the terms of each
               Environmental   Permit.   Except   as  set   forth  in   Schedule
               5.17(a)(viii), there are no Environmental Permits of STAR LP that
               are  nontransferable  or require  consent,  notification or other
               action  to  remain  in  full  force  and  effect   following  the
               consummation of the transactions contemplated hereby; and

                    (viii) STAR LP has no liability under any  Environmental Law
               (including an obligation to remediate any Environmental Condition
               whether caused by STAR LP or any other Person).

               (b) STAR LP has delivered or made available to the Purchaser true
          and  complete  copies of all  environmental  investigations,  studies,
          audits,  tests, reviews or other analyses commenced or conducted by or
          on behalf of STAR LP or any Seller (or by a third  party of which STAR
          LP has knowledge) in relation to the current or prior business of STAR
          LP.

               (c) For  purposes  of this  Section  5.17,  the  term  "STAR  LP"
          (including the use of such term in the term  "Property")  will include
          any entity which is, in whole or in part, a predecessor of STAR LP.

          Section 5.18 Benefit Plans and Material Documents.

               (a) Schedule  5.18(a) sets forth a list of all Benefit Plans with
          respect to which STAR LP or any ERISA  Affiliate  has or has had prior
          to the date hereof any  obligation  or  liability or which are or were
          prior to the date hereof  maintained,  contributed  to or sponsored by
          STAR LP or any ERISA  Affiliate  for the  benefit  of any  current  or
          former employee,  officer, director or manager of STAR LP or any ERISA
          Affiliate (collectively "STAR LP Benefit Plans"). With respect to each
          STAR LP Benefit Plan,  STAR LP has delivered or made  available to the
          Purchaser a true and  complete  copy of each such STAR LP Benefit Plan
          (including  all  amendments  thereto) and a true and complete  copy of
          each material document  (including all amendments thereto) prepared in

                                       29
<PAGE>

          connection with each such STAR LP Benefit Plan including (i) a copy of
          each  trust or other  funding  arrangement,  (ii)  each  summary  plan
          description  and  summary of  material  modifications,  (iii) the most
          recently  filed IRS Form 5500 for each such STAR LP Benefit  Plan,  if
          any,  and (iv) the most  recent  determination  letter  referred to in
          Section  5.18(d).  STAR LP has no  express or  implied  commitment  to
          create,  incur liability with respect to or cause to exist any Benefit
          Plan or to modify any Benefit Plan, other than as required by Law.

               (b) Except as  disclosed  in  Schedule  5.18(b),  none of STAR LP
          Benefit  Plans is a plan that is or has ever been  subject to Title IV
          of ERISA,  Section  302 of ERISA or Section  412 of the Code.  None of
          STAR LP Benefit Plans is a "multiemployer  plan" as defined in Section
          3(37) of ERISA.  Neither the Company nor any ERISA  Affiliate has had,
          has or could have any  liability  with  respect to any Plan subject to
          Title IV of ERISA.  Except as disclosed in Schedule  5.18(b),  none of
          STAR  LP  Benefit  Plans  provides  for  the  payment  of  separation,
          severance,  termination  or  similar-type  benefits  to any  person or
          provides  for or,  except  to the  extent  required  by Law,  promises
          retiree  medical or life  insurance  benefits to any current or former
          employee,  officer,  director  or  manager  of  STAR  LP or any  ERISA
          Affiliate.

               (c) Except as disclosed in Schedule 5.18(c), each STAR LP Benefit
          Plan is in compliance  with, and has been operated in accordance with,
          its  terms  and the  ERISA  Affiliates  have  satisfied  all of  their
          statutory, regulatory and contractual obligations with respect to each
          such STAR LP Benefit Plan.  No legal action,  suit or claim is pending
          or, to the knowledge of STAR LP,  threatened  with respect to any STAR
          LP Benefit  Plan  (other  than  claims for  benefits  in the  ordinary
          course).

               (d) Except as disclosed in Schedule 5.18(d), each STAR LP Benefit
          Plan or  trust  which is  intended  to be  qualified  or  exempt  from
          taxation  under  Section  401(a),  401(k)  or  501(a)  of the Code has
          received a favorable  determination  letter from the IRS that it is so
          qualified or exempt under the currently applicable requirements of the
          Code, and, to the knowledge of STAR LP, nothing has occurred since the
          date of such  determination  letter  that would  adversely  affect the
          qualified  or exempt  status of any STAR LP  Benefit  Plan or  related
          trust.

               (e) There has been no non-exempt  prohibited  transaction (within
          the meaning of Section 406 of ERISA or Section  4975 of the Code) with
          respect to any STAR LP  Benefit  Plan.  Neither  STAR LP nor any ERISA
          Affiliate  has incurred any liability for any excise tax arising under
          the Code with respect to a STAR LP Benefit Plan.

               (f) All  contributions,  premiums or payments required to be made
          with  respect to any STAR LP Benefit  Plan have been made on or before
          their due  dates.  For  completed  plan  years of such STAR LP Benefit
          Plans, all such  contributions have been fully deducted for income tax
          purposes and no such  deduction  has been  challenged or disallowed by
          any Governmental Authority.

               (g) There has been no amendment to, written  interpretation of or
          announcement  (whether  or not  written)  by STAR LP  relating  to, or

                                       30
<PAGE>

          change  in  employee  participation  or  coverage  under,  any STAR LP
          Benefit Plan that would increase materially the expense of maintaining
          such STAR LP Benefit  Plan above the level of the expense  incurred in
          respect  thereto  for the most  recent  fiscal year ended prior to the
          date hereof.

               (h) Except as  disclosed  in  Schedule  5.18(h),  no  employee or
          former  employee  of  STAR  LP  will  become  entitled  to any  bonus,
          retirement,  accelerated vesting or timing of payments, severance, job
          security  or  similar  benefit or  enhanced  such  benefit  (including
          acceleration of vesting or exercise of an incentive award) as a result
          of the transactions contemplated by this Agreement.

               (i)  Schedule  5.18(i)  lists each  Company  Benefit Plan that is
          treated as a "nonqualified  deferred  compensation plan" under Section
          409A of the Code and each such plan has been  maintained in good faith
          compliance  with  the  requirements  of  Section  409A of the Code and
          applicable notices and regulations, both proposed and final, issued by
          the Internal Revenue Service.  Except as set forth in Schedule 5.18(i)
          hereto, each Company Benefit Plan that is required to be amended as of
          December  31, 2007 to either be exempt from or to comply with  Section
          409A of the Code  (and the  final  regulations  thereunder  that  were
          issued on April 10, 2007) has been so amended.

               (j) No Person  who is  entitled  to a benefit  under any  Company
          Benefit Plan that is a deferred compensation plan has incurred or will
          incur any  additional  tax  described in Section 409A of the Code as a
          result of any event  occurring,  or the  manner in which such plan has
          been established or operated, prior to the Closing Date.

               (k) Except as specified  in 5.18(k)  hereto,  no Company  Benefit
          Plan  provides for a "gross up" or similar  payments in respect to any
          Taxes that may become payable under Section 409A or Section 4999(a) of
          the Code.

               (l) There  have been no  terminations,  partial  terminations  or
          discontinuances  of  contributions  to any tax qualified  pension plan
          during the preceding  five years without notice to and approval by the
          Internal   Revenue   Service  and  payment  of  all   obligations  and
          liabilities attributable to such tax qualified pension plan.

               (m)  Except  as set  forth  in  Schedule  5.18(m),  there  are no
          investigations   or  audits  of  any  Company   Benefit  Plan  by  any
          Governmental  Authority  currently pending and there have been no such
          investigations or audits that have been concluded that resulted in any
          liability  to the Company or any ERISA  Affiliate  of the Company that
          has not been discharged.

               (n) Neither the  Company nor any ERISA  Affiliate  of the Company
          maintains,  has  established  or has ever  participated  in a multiple
          employer welfare benefit  arrangement as described in Section 3(40)(A)
          of ERISA.

               (o) Neither the  Company nor any ERISA  Affiliate  of the Company
          has any current or future  obligation  or liability  with respect to a
          Company  Benefit  Plan  pursuant  to the  provisions  of a  collective
          bargaining agreement.

                                       31
<PAGE>

               (p) Except as set forth in Schedule  5.18(p) hereto,  none of the
          Company  Benefit  Plans  provide  for  post-employment  life or health
          insurance,  benefits  or  coverage  for any  employees,  directors  or
          consultants or former employees,  directors, or consultants (or any of
          their  beneficiaries) of the Company,  except as may be required under
          the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
          or other similar law.

          Section 5.19 Affiliate Transactions.

               (a)  Except  as  disclosed  in  Schedule  5.19(a),  there  are no
          outstanding payables,  receivables,  loans, advances and other similar
          accounts  between STAR LP, on the one hand, and any of its Affiliates,
          on the other hand, relating to the Business.

               (b)  Except  as  disclosed  in  Schedule  5.19(b),  no  director,
          manager,  officer or, to the knowledge of STAR LP, any other  employee
          of STAR LP, possesses,  directly or indirectly, any ownership interest
          in, or is a director,  officer or employee  of, any Person  which is a
          supplier,  customer,  lessor, lessee,  licensor, or competitor of STAR
          LP.  Ownership  of 1% or less of any class of  securities  of a Person
          whose  securities  are  registered  under the Exchange Act will not be
          deemed  to be an  ownership  interest  for  purposes  of this  Section
          5.19(b).

          Section 5.20 Referrals, Supplier and Employee Relations. Schedule 5.20
includes a complete and correct list of (a) all physicians, clinics, hospital or
other sources who have made  referrals for the Business that aggregate in excess
of 5% of the total combined revenues of STAR LP in calendar year 2006 and during
the six month period ending July 31, 2007,  and (b) all suppliers from whom STAR
LP has  purchased  in excess of  $25,000 in  equipment  or  supplies  to date in
calendar  year 2006 or during the six month period  ending July 31,  2007,.  The
relationships  of STAR LP with  such  referral  sources  and  suppliers  and the
employees of STAR LP are good commercial  working  relationships  and, except as
disclosed  in  Schedule  5.20,  none  of such  referral  sources,  suppliers  or
employees has canceled,  terminated or otherwise  materially altered or notified
any authorized  representative of STAR LP of any intention to cancel,  terminate
or materially alter its relationship with STAR LP since the Balance Sheet Date.

          Section 5.21 Other Employment Matters.

               (a) STAR LP is not a party to any labor or collective  bargaining
          agreement.

               (b) No labor  organization or group of STAR LP employees has made
          a  pending  demand  for  recognition,   there  are  no  representation
          proceedings or petitions seeking a representation proceeding presently
          pending or, to the  knowledge of STAR LP,  threatened to be brought or
          filed with the National Labor Relations Board or other labor relations
          tribunal,  and  there  is no  organizing  activity  involving  STAR LP
          pending  or,  to the  knowledge  of STAR LP,  threatened  by any labor
          organization or group of employees.

               (c)  There  are  no  (i)  strikes,  work  stoppages,  slow-downs,
          lockouts or  arbitrations  or (ii)  grievances or other labor disputes
          pending  or,  to the  knowledge  of STAR  LP,  threatened  against  or
          involving STAR LP.

                                       32
<PAGE>

               (d) There are no  complaints,  charges or claims  against STAR LP
          pending or, to the  knowledge of STAR LP,  threatened to be brought or
          filed with any  Governmental  Authority  based on,  arising out of, in
          connection  with, or otherwise  relating to the employment by STAR LP,
          of any Person, including any claim for workers' compensation.

               (e) STAR LP is in  compliance  in all material  respects with all
          Laws and Orders in  respect of  employment  and  employment  practices
          (including  relating  to the  employment  or  engagement  of aliens or
          similar   immigration   matters)  and  the  terms  and  conditions  of
          employment  and wages and hours,  and has not, and is not,  engaged in
          any  unfair  labor  practice.   All  current  and  former  independent
          contractors  engaged  by STAR LP are  property  characterized  as such
          under the Code and other applicable Law.

               (f) Schedule 5.21(f) contains a complete and accurate list of the
          following information for each employee,  officer, director or manager
          of STAR LP,  including  each  employee  on leave of  absence or layoff
          status:  employer;  name;  job  title;  current  compensation  paid or
          payable and any change in  compensation  since the Balance Sheet Date;
          vacation  accrued as of a recent  date;  and service  credited as of a
          recent date for  purposes of vesting and  eligibility  to  participate
          under  any  pension,   retirement,   profit-sharing,   thrift-savings,
          deferred compensation, stock bonus, stock option, cash bonus, employee
          stock  ownership   (including   investment  credit  or  payroll  stock
          ownership),  severance pay, insurance,  medical,  welfare, or vacation
          plan or other  Benefit  Plan of STAR LP; and all bonuses and any other
          amounts to be paid by STAR LP at or in connection with the Closing.

               (g)  Except  as  set  forth  in  Schedule  5.21(g),  no  officer,
          director,  manager or partner of STAR LP and, to the knowledge of STAR
          LP, no other employee of STAR LP, is a party to, or is otherwise bound
          by, any confidentiality, non-competition, proprietary rights agreement
          or similar  agreement that would affect (i) the  performance of his or
          her duties as an employee,  officer or director or (ii) the ability of
          the Purchaser to conduct the Business after the Effective Time.

          Section 5.22 Medicare Participation/Accreditation.

               (a) STAR LP is qualified  for  participation  in the Medicare and
          Medicaid programs, have current and valid provider contracts with such
          programs  and are,  and  have  been,  in  compliance  in all  material
          respects with the  conditions of  participation  in such programs with
          respect to each participating  location.  STAR LP has no known pending
          Medicare or Medicaid payment offsets, and have not received any notice
          of such payment offsets. Schedule 5.22 sets forth for STAR LP (and the
          Sellers,  if any) all of their respective  provider numbers (including
          both individual and group numbers), Durable Medical Equipment numbers,
          National  Provider  Identifier  numbers,  a  list  of  the  outpatient
          clinics,   hospitals  or  contracts  that  are  billing  for  services
          utilizing  such provider  numbers and the type of  designation of such
          facility or service billed. All such provider numbers, Durable Medical
          Equipment  numbers and National  Provider  numbers are in valid and in
          good standing.  Except as set forth on Schedule 5.22,  neither STAR LP
          nor any  Seller  has  received  any  written  notice  from  either the

                                       33
<PAGE>

          Medicare   or   Medicaid   program  of  any   pending  or   threatened
          investigation  or survey,  and,  to STAR LP's  knowledge,  there is no
          reason to believe that any such  investigation or survey is pending or
          threatened.

               (b)  Neither  STAR LP nor any Seller has  received  notice of any
          pending or  threatened  investigation  or inquiry  (other than routine
          surveys  and audits  that have not  resulted  in an  investigation  or
          inquiry) from any Governmental Authority, fiscal intermediary, carrier
          or similar  entity  that  enforces or  administers  the  statutory  or
          regulatory  provisions  in respect  of any  governmental  health  care
          program. There are no outstanding judgments orders, writs, injunctions
          or  decrees  of  any   Governmental   Authority   in  respect  of  any
          governmental  health care program  against STAR LP or any Seller which
          would result in liability to STAR LP in excess of $10,000  (whether or
          not covered by  insurance)  or that would  materially  affect or delay
          STAR LP's or any Seller's performance of this Agreement.  There are no
          material,  non-monetary orders,  writs,  injunctions or decrees of any
          Governmental  Authority  outstanding  in respect  of any  governmental
          health care program against STAR LP or any Seller.

          Section 5.23  Medicare and  Medicaid  Filings.  Except as set forth on
Schedule 5.23, each report (including but not limited to Non-Application of Cost
Report)  and  other  required  claims,  filings  or  submissions   (collectively
"Filings")  with  respect to Medicare and each state  Medicaid  program in which
they participate,  required to be filed by or on behalf of STAR LP or any Seller
on or prior to the Closing Date, has been timely filed and amounts shown on such
Filings (if any) as owed by STAR LP or such Seller(s) have been paid timely. All
of such Filings were, when filed or as they have been subsequently amended, true
and complete in all material respects. STAR LP has made available for inspection
by the Purchaser prior to the date of this Agreement each such Filing.  Schedule
5.23 lists the Medicare and Medicaid  Filings filed by STAR LP or any Seller for
any period  after  December  31,  2001 for which STAR LP or any Seller  could be
liable.  Schedule  5.23 sets forth which of such  Filings  have been audited and
finally  settled,  audited  but not  finally  settled  and  neither  audited nor
settled,   and  a  brief   description   of  any  and  all  notices  of  program
reimbursement, proposed or pending audit adjustments,  disallowances, appeals of
disallowances, and any and all other unresolved claims or disputes in respect of
such  Filings.  To the  knowledge of STAR LP, there is no basis for any material
claims  against  STAR LP or any  Seller by any  third-party  payors  other  than
routine Medicare and Medicaid audit adjustments which adjustments have not been,
and would not  reasonably be expected to be,  material.  Neither STAR LP nor any
Seller has received any written  notice that  Medicare  (inclusive of applicable
fiscal  intermediary or carrier) and or Medicaid  (inclusive of applicable state
agency) has any claims  against it which could result in offsets  against future
reimbursement in excess of that provided for in the Reference Balance Sheet.

          Section 5.24 Exclusion. Neither STAR LP nor any Seller has, and to the
knowledge  of STAR LP, no other  Person  with whom STAR LP employs or  otherwise
contracts in any capacity  whatsoever has, been excluded from participation in a
federal health care program (as defined in 42 U.S.C.  Section 1320a-7b(f)) where
such action could  reasonably  serve as a basis for STAR LP's or such  Seller(s)
suspension or exclusion from the Medicare or any state Medicaid program.

                                       34
<PAGE>

          Section 5.25 Federal Health Care Programs.

               (a) None of STAR LP, its  Affiliates  (including  the Sellers) or
          any person who has a direct or indirect  ownership  interest (as those
          terms are defined in 42 C.F.R. Section  1001.1001(a)(2)) in STAR LP of
          5% or more, or who has an ownership or control interest (as defined in
          Section  1124(a)(3)  of the  Social  Security  Act or any  regulations
          promulgated  thereunder)  in STAR LP, or who is an officer,  director,
          manager,  agent or managing employee (as defined in 42 C.F.R.  Section
          1001.1001(a)(i)):  (i) except as set forth in Schedule 5.25, has had a
          civil monetary  penalty assessed against it under Section 1128A of the
          Social Security Act or any regulations  promulgated  thereunder;  (ii)
          has been excluded  from  participation  under any federal  health care
          program;  or (iii) has been  convicted  (as that term is defined in 42
          C.F.R.  Section  1001.2)  of any  of the  categories  of  offenses  as
          described in the Social Security Act Section 1128(a) and (b)(1),  (2),
          (3) or any regulations promulgated thereunder.

               (b) All Filings  filed or  submitted by STAR LP or any Seller are
          true and complete  and the  contents  contained in such Filings are in
          full accordance with Medicare and Medicaid rules and regulations.

               (c) No  action  is  pending  or,  to the  knowledge  of STAR  LP,
          threatened,  to suspend,  limit or terminate  the status of STAR LP or
          any Seller as a provider in any federal health care program. Except as
          set  forth  on  Schedule  5.25,  neither  STAR LP nor any  Seller  has
          received  notice that a third party private payor intends to terminate
          or fail to renew  any  contractual  arrangement  with  STAR LP or such
          Seller(s)  (or  adversely  amend or modify any right of  reimbursement
          thereunder) from which STAR LP or any Seller derived more than $25,000
          in revenue from the Business during 2006.

          Section  5.26  Billing;  Gratuitous  Payments.  Except as set forth in
Schedule 5.26,  all billing by, or on behalf of, STAR LP or any Seller  relating
to the Business to  third-party  payors,  including  to  Medicare,  Medicaid and
private insurance companies has been true and complete in all material respects.
Neither  STAR LP nor any Seller has  received  any notice  from any  third-party
payor,  including  from Medicare or Medicaid,  that indicates that the Purchaser
could not  continue to bill in  substantially  the same manner and  structure as
STAR LP or the Sellers  are is billing on the date  hereof  with  respect to the
Business.

          Section 5.27  Reimbursement  Matters.  Except as disclosed on Schedule
5.27, for the previous three years,  neither STAR LP nor any Seller has received
any written notice of denial of payment or overpayment of a material nature from
a federal  health care  program or any other third  party  reimbursement  source
(inclusive  of managed  care  organizations)  with  respect to items or services
provided  by STAR LP or any  Seller,  other than those  which have been  finally
resolved in any settlement for an amount less than $10,000.  Neither STAR LP nor
any Seller is subject to (i) a "focused  review" of claims by Medicare or (ii) a
"Corporate  Integrity  Agreement"  or similar  government - mandated  compliance
program.

                                       35
<PAGE>

          Section  5.28 Bank  Accounts.  Schedule  5.28 lists  each bank,  trust
company or similar  institution  with which STAR LP maintains an account or safe
deposit box, and accurately  identifies each such account or safe deposit box by
its number or other  identification and the names of all individuals  authorized
to draw thereon or have access thereto.

          Section 5.29 General Partner and STAR LP Matters.

               (a) The  General  Partner  is a  newly  formed  entity  organized
          specifically for the purpose of the Pre-Closing Reorganization and has
          not  otherwise  conducted  any business or  operations,  and as of the
          Effective Time, has no liabilities, except for its interest in STAR LP
          and the Pre-Closing  Reorganization  Documents executed by the General
          Partner  or  STAR  LP in  connection  with  the GP  Formation  and the
          conversion  and each  Ancillary  Agreement  to which it is a party and
          which is to be entered into at Closing.

               (b) Except for the  General  Partner's  interest  in STAR LP, the
          General  Partner  does not own any  Capital  Stock or other  equity or
          ownership or proprietary interest in any Person.

               (c) As of the  Effective  Time,  except  as set  forth  in the GP
          Formation  Documents  and the  STAR  LP  Formation  Documents  and the
          purchase  and sale of the  Purchased  Interests  contemplated  by this
          Agreement,  (i)  there  are no  options,  warrants,  purchase  rights,
          subscription rights,  conversion rights, exchange rights,  convertible
          securities or other rights, agreements or commitments of any character
          relating  the  Capital  Stock  of the  General  Partner  or STAR LP or
          obligating the General Partner or STAR LP to issue,  sell or otherwise
          cause to become  outstanding  any of their  respective  Capital Stock,
          (ii) there were no outstanding  contractual obligations of the General
          Partner or STAR LP to  repurchase,  redeem or  otherwise  acquire  any
          Capital  Stock of the  General  Partner or STAR LP or  interest in the
          General  Partner  or  STAR  LP or to  provide  funds  to or  make  any
          investment (in the form of a loan, capital  contribution or otherwise)
          in,  any  other  Person;   and  (iii)  there  are  no  voting  trusts,
          agreements,  proxies or other understandings in effect with respect to
          the voting or transfer of any Capital Stock of the General  Partner or
          STAR LP.

               (d) As of the Effective  Time, the General Partner is not a party
          to  any   agreement   or   contract,   other   than  the   Pre-Closing
          Reorganization  Documents and the Ancillary Agreements  (including the
          Contracts,  if any) to which it is a party and which is to be  entered
          into at Closing.

          Section  5.30  Accounts  Receivable.  All of the  Accounts  Receivable
reflected  on Schedule  5.30 (net of any  discount  to adjust  such  balances to
allowable  reimbursement  amounts and net of  applicable  reserves  for doubtful
accounts and patient  refunds as set forth on such Schedule  5.30) are valid and
enforceable  claims,  and the goods and services sold and  delivered  which gave
rise to such Accounts  Receivable were sold and delivered in the Ordinary Course
of Business.  Except as set forth in Schedule 5.30, such Accounts Receivable are
subject to no  defenses,  offsets or recovery in whole or in part by the Persons
whose purchase gave rise to such Accounts Receivable or by third parties and are
fully  collectible  within 120 days after the Effective  Time without  resort to

                                       36
<PAGE>

legal  proceedings,  except to the  extent  of the  amount  of the  reserve  for
doubtful accounts  reflected on the Reference Balance Sheet (plus any additional
applicable  reserves  established  since  such  date in the  Ordinary  Course of
Business).

          Section  5.31  Finders'  Fees.  Except as set forth on Schedule  5.31,
there is no investment  banker,  broker,  finder or other intermediary which has
been  retained by or is authorized to act on behalf of STAR LP or any Seller who
is, or who to STAR LP's knowledge may claim to be,  entitled to any fee or other
commission in connection with the transactions contemplated by this Agreement or
any of the Ancillary Agreements.

          Section 5.32 Books and Records.  The books of account,  minute  books,
stock record books and other  records of STAR LP are complete and correct in all
material  respects.  Except  as  set  forth  in  Schedule  5.32,  there  are  no
outstanding powers of attorney executed on behalf of STAR LP.

          Section  5.33  Disclosure.  None of the  information  contained in the
Schedules or in this Agreement  contain any untrue  statement of a material fact
or omit to state a material fact  required to be stated  therein or necessary in
order to make the statements  contained  therein,  in light of the circumstances
under which they were or are made, not false or misleading.

                                   ARTICLE VI
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

          The Purchaser  represents  and  warrants to STAR LP and the Sellers as
follows:

          Section  6.1  Existence   and  Power.   The  Purchaser  is  a  limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Texas. The Purchaser has all limited  partnership power required to
carry on its  business as now  conducted.  The  Purchaser  is duly  qualified to
conduct  business as a foreign  limited  partnership  and is in good standing in
each  jurisdiction  where such  qualification  is  necessary.  The Purchaser has
previously  delivered to STAR LP and the Sellers true and complete copies of the
Charter Documents of the Purchaser, all as currently in effect.

          Section 6.2 Authorization; Enforceability. The execution, delivery and
performance  by the  Purchaser  of this  Agreement  and  each  of the  Ancillary
Agreements  to which it is a party at the  Closing  are within  the  Purchaser's
limited  partnership  power and have been duly authorized by the partners of the
Purchaser and no other limited  partnership  action on the part of the Purchaser
is necessary to authorize this  Agreement or any of the Ancillary  Agreements to
which the Purchaser is a party at the Closing. This Agreement has been, and each
of the Ancillary Agreements to which the Purchaser is a party at the Closing has
been,  duly executed and delivered by the Purchaser.  Assuming the due execution
and  delivery  by STAR LP and the  Sellers  of this  Agreement  and  each of the
Ancillary  Agreements  to which the  Purchaser is a party at the  Closing,  this
Agreement constitutes,  and each Ancillary Agreement to which the Purchaser is a
party at the  Closing  constitutes  at the  Effective  Time,  valid and  binding
agreements  of the  Purchaser,  enforceable  against the Purchaser in accordance
with their  terms,  except as such  enforcement  may be  limited by  bankruptcy,

                                       37
<PAGE>

insolvency,   reorganization,   moratorium  or  other  similar  laws   affecting
enforcement of creditors'  rights generally and by general  principles of equity
(whether applied in a proceeding at law or in equity).

          Section  6.3  Governmental  Authorization.   Except  as  disclosed  in
Schedule 6.3, the execution,  delivery and  performance by the Purchaser of this
Agreement and each Ancillary  Agreement to which the Purchaser is a party at the
Closing require no consent,  approval,  order,  authorization or action by or in
respect of, or filing with, any Governmental Authority.

          Section 6.4  Non-Contravention.  Except as set forth on Schedule  6.4,
the execution,  delivery and  performance by the Purchaser of this Agreement and
each Ancillary  Agreement to which the Purchaser is a party at the Closing,  and
the consummation of the transactions contemplated hereby and thereby, do not (a)
violate  the  certificate  of  limited   partnership  or  agreement  of  limited
partnership or other similar constituent documents of the Purchaser, (b) violate
any applicable Law or Order,  (c) require any filing with or Permit,  consent or
approval  of, or the giving of any notice  to,  any Person  (including  filings,
consents  or  approvals  required  under any  Permits  of the  Purchaser  or any
licenses to which the Purchaser is a party),  or (d) result in a violation of or
breach of,  conflict  with,  constitute  (with or without due notice or lapse of
time or  both) a  default  under,  or give  rise to any  right  of  termination,
cancellation or acceleration of any right or obligation of the Purchaser or to a
loss of any benefit to which the  Purchaser  is entitled  under,  any  Contract,
agreement  or other  instrument  binding  upon  the  Purchaser  or any  license,
franchise, Permit or other similar authorization held by the Purchaser.

          Section  6.5  Parent  Stock.  The  Parent  Stock to be  issued  to the
Accredited  Sellers as part of the  Purchase  Price  pursuant to Section  3.1(c)
shall  represent  when issued duly  authorized,  validly  issued,  full paid and
non-assessable shares of the Parent's common stock.

          Section  6.6  Section 6.7  Disclosure.  None of (i) any other  written
information  required  to be  furnished  to STAR LP or Sellers by the  Purchaser
under  this  Agreement,  or  (ii)  the  representations  and  warranties  of the
Purchaser contained in this Agreement contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements contained therein, in light of the circumstances
under which they were or are made, not false or misleading.

                                  ARTICLE VII
                              ADDITIONAL AGREEMENTS

          Section 7.1 Employees and Benefits.

               (a) The  Purchaser  agrees that  individuals  who are employed by
          STAR LP  immediately  prior  to the  Closing  Date  and set  forth  on
          Schedule  5.21(f) shall  continue to be employees of STAR LP as of the
          Effective  Time (each such  employee,  an "Affected  Employee") at the
          wage level set forth therein,  provided, that, the terms of employment
          of the Key Employees  shall be governed by the terms and conditions of
          the Employment Agreements,  provided,  further, that nothing contained
          herein shall confer upon any Affected  Employee the right to continued
          employment by STAR LP for any period of time after the Effective  Time
          which is not  otherwise  required by law,  contract or the  Employment
          Agreements.

                                       38
<PAGE>

               (b) Unless  and until the date the  Purchaser  determines  in its
          sole  and  absolute  discretion  to move  Affected  Employees  to U.S.
          Physical  Therapy,  Inc.'s group employee  health and welfare  benefit
          plans or other Benefit  Plans,  the  Purchaser  shall cause STAR LP to
          maintain for the benefit of the  Affected  Employees  the  Transferred
          Employee  Benefit  Plans or such other  plans  that are  substantially
          comparable  as a whole  to the  Benefit  Plans  maintained  by STAR LP
          immediately prior to the Closing.

          Section  7.2  Physical  Therapy  Alliance.  STAR LP  provides  certain
management  and other  services to Physical  Therapy  Alliance,  LLC, a Kentucky
limited  liability  company  ("PTA"),  pursuant  to the  terms  of that  certain
Management  Services  Agreement dated August 15, 2002. PTA owns and operates two
physical  therapy  clinics  located  at  6420  Dutchman's  Parkway,  Suite  195,
Louisville,  Kentucky 40205 and 6610 Bardstown Road, Louisville,  Kentucky 40291
(the "PTA  Clinics").  As of July 31,  2007,  PTA was indebted to STAR LP in the
amount of $702,023.64 for accrued but unpaid management fees and working capital
advances (the "PTA  Indebtedness").  All of the membership  interests in PTA are
owned by Kent A. Chapman ("Chapman"), one of the Sellers. Following the Closing,
STAR LP and Chapman  hereby agree to  cooperate  and work in good faith with one
another to explore and, if commercially  practicable,  arrange for a transfer of
the PTA Clinics and related business to STAR LP. The terms and conditions of any
such  transfer will assure that Chapman will not have any Tax liability (or will
be  indemnified  or reimbursed  for such Tax  liability) in connection  with the
transfer and that based on the existence of the  Management  Services  Agreement
between PTA and STAR LP, Chapman will receive nominal consideration, if any, for
any  transfer  of his  membership  interests  or the  assets  of PTA to STAR LP.
Purchaser,  for itself  and on behalf of STAR LP,  recognizes  and  agrees  that
Chapman does not have and will not have any personal  liability or obligation to
Purchaser or STAR LP with respect to the PTA Indebtedness.

          Section  7.3  Further  Assurances.  From  time to  time,  as and  when
requested by any party hereto,  the other  parties will execute and deliver,  or
cause to be executed and delivered,  all such documents and instruments and will
take, or cause to be taken,  all such further  actions,  as the requesting party
may  reasonably  deem  necessary  or desirable to  consummate  the  transactions
contemplated  by this  Agreement  or to vest  STAR LP  with  full  title  to all
properties,  assets, rights, approvals,  immunities and franchises of STAR LP as
of the time immediately prior to the Closing Date Time.

          Section  7.4 No Change of  Ownership.  STAR LP and each of the Sellers
agree that neither the Pre-Closing  Reorganization nor the purchase by Purchaser
(or its  Affiliates)  of the  Purchased  Interests  pursuant  to this  Agreement
results  in a change of  ownership  ("CHOW")  as  defined  by 42 CFR  489.18 and
Section 3210 of the CMS State Operations Manual.

          Section 7.5 Cooperation with Post-Closing  Consents. To the extent any
third  party  consents  required  by  STAR  LP to  consummate  the  transactions
contemplated by this Agreement  (including the Pre-Closing  Reorganization)  are
not obtained on or prior to Closing, each of the Sellers hereby agrees to assist
and  cooperate  with STAR LP and  Purchaser in such manner as may be  reasonably
requested by them in obtaining  such  consents  after the Closing,  including by
participating in discussions and negotiations  with all persons or entities with
the authority to grant or withhold such consent.

                                       39
<PAGE>

          Section 7.6 Clinic Director Expense.  STAR LP, each of the Sellers and
Purchaser  hereby  acknowledge  and  agree  that STAR LP shall be  permitted  to
negotiate with Dallas Roberts  regarding his continuing  employment  arrangement
with STAR LP post-closing on terms reasonable acceptable to Purchaser, including
payments to secure the waiver of any right to the sale of clinic bonus or deemed
sale  of  clinic  bonus  under  Sections  9 and  11 of his  existing  employment
agreement  with STAR LP. The  Sellers and  Purchaser  shall each bear 50% of any
out-of-pocket  payments to Dallas  Roberts,  whether  occurring  before or after
Closing,  to secure the foregoing waiver up to a maximum payment by Purchaser of
$200,000,  with  the  Sellers  bearing  the  responsibility  for any  additional
payments over such amount. For avoidance of doubt,  Sellers shall be responsible
for all amounts paid to Dallas Roberts in connection  with the foregoing  waiver
above over $400,000.  The Sellers shall be jointly and severally  liable for the
obligation  under  this  Section  7.6;  provided,  however,  to the  extent  the
foregoing payment (i) is made on or before Closing,  the Sellers' portion of the
payment  shall be a  dollar-for-dollar  reduction of the Purchase  Price payable
under  Section  3.1(b)  and (ii) to the  extent  such  payment is made after the
Closing, the Purchaser shall offset the Sellers' portion of such payment against
the Note or Notes.

                                  ARTICLE VIII
                               CERTAIN TAX MATTERS

          Section  8.1  Transfer  Taxes.  Any  sales,  use,  transfer,   vehicle
transfer,  stamp,  conveyance,  value added or other  similar  Taxes that may be
imposed by any Governmental Authority, in connection with this transaction, will
be borne by Sellers.

          Section 8.2 Partnership Status. The parties hereto intend that STAR LP
will  constitute a  partnership  for U.S.  federal  income tax purposes both (i)
following the  consummation  of the  Pre-Closing  Reorganization  and before the
closing of the purchase  and sale of the  Purchased  Interests  pursuant to this
Agreement and (ii) immediately following the closing of the purchase and sale of
the Purchased  Interests pursuant to this Agreement.  No party hereto shall take
any action to cause STAR LP not to be treated as  partnership  for U.S.  federal
income tax purposes as of such times.

          Section 8.3 Section 754 Election.  The parties  hereto agree that STAR
LP will file with the IRS, and the parties  hereto hereby request and consent to
the filing of, an election under Section 754 of the Code.  Purchaser and Sellers
shall agree to the allocation of the Closing Purchase Price among the assets and
properties  of STAR LP  within  60 days  after  the  Closing  for all  purposes,
including financial  accounting and Tax purposes,  and which allocation shall be
in  accordance  with  Section  755 of the  Code.  None of STAR  LP,  Sellers  or
Purchaser  shall  take any  position  on any Tax  return  or before  any  Taxing
Authority  inconsistent  with such  allocation  (except to the extent  otherwise
required by a "final determination" within the meaning of the Code).

          Section 8.4 Other Tax Matters.

               (a) STAR LP, the Sellers and Purchaser, as applicable,  shall, to
          the  extent  permitted  by  applicable  Law and  except  as  otherwise

                                       40
<PAGE>

          provided  herein,  elect with each relevant Taxing  Authority to close
          the  taxable  period  of STAR LP at the end of the day on  August  31,
          2007.

               (b) In the case of any Tax for any Straddle  Period  imposed upon
          or measured by income or receipts,  Taxes shall be  allocated  between
          the  Pre-Closing  Tax Period and the  portion of the  Straddle  Period
          following  August 31,  2007 on the basis of an interim  closing of the
          books  as of the  close  of  business  on the  August  31,  2007.  The
          liability and  deduction for franchise  Taxes based on income or gross
          receipts  shall be  determined on the basis of the period during which
          such income or gross  receipts  were earned and without  regard to the
          period for which any privilege to exercise such franchise is granted.

               (c) In the case of any Tax for any  Straddle  Period  that is not
          imposed  upon or measured by income or gross  receipts,  the amount of
          such Tax to be apportioned to the  Pre-Closing Tax Period shall be the
          amount of such Tax  multiplied by a fraction the numerator of which is
          the number of days in the portion of such Tax period  ending on August
          31, 2007, and the  denominator of which is the total number of days in
          the  entire  Tax  period.  The  remaining  amount of such Tax shall be
          apportioned to the portion of the Straddle Period following August 31,
          2007.

               (d) STAR LP shall  prepare and file,  or cause to be prepared and
          filed,  all Tax Returns relating to STAR LP required to be filed on or
          prior to August 31, 2007. The Purchaser shall be provided a reasonable
          opportunity  to review  and  comment  on all such Tax  Returns  in the
          nature of income or franchise Tax Returns  before such Tax Returns are
          filed with the applicable Taxing Authorities.

               (e) The Purchaser shall prepare and file (or cause to be prepared
          and filed) all Tax Returns of STAR LP not  described  in  subparagraph
          (d), including all Straddle Period Tax Returns.

               (f)  The  amount  of  any  Straddle  Period  Taxes  allocated  or
          apportioned  to the  Pre-Closing  Tax Period  pursuant to this Section
          5.10 (to the extent not already paid on or before  August 31, 2007 or,
          without  duplication,  accrued as a current liability on the Reference
          Balance  Sheet or included as a current  liability on the Closing Date
          Balance Sheet) shall be paid by the Sellers to Purchaser promptly upon
          demand by the  Purchaser  to the Seller  Representative.  The  Sellers
          shall be jointly and  severally  liable for any payment due  Purchaser
          under this Section  8.4(f),  and to the extent not otherwise  promptly
          satisfied by the Sellers in cash,  Purchaser may (but is not required)
          to  set-off  amounts  due and  owing by  Purchaser  under the Notes to
          satisfy any amounts due Purchaser pursuant to this Section 8.4(f).

               (g) Any Tax Return for any taxable  period  ending on or prior to
          August 31, 2007 or for any Straddle Period, and any Tax Return for any
          taxable  period  beginning  after August 31, 2007 if items reported on
          such Tax Return  might  reasonably  affect  items  reported on any Tax
          Return for any taxable period ending on or prior to August 31, 2007 or
          for any Straddle Period,  shall be prepared on a basis consistent with
          past Tax accounting  practices and Tax reporting  positions of STAR LP
          (unless such past  practices or reporting  positions are not, or cease
          to be, permissible under the Code or other applicable Tax Law) and, to

                                       41
<PAGE>

          the extent any items are not covered by past  practices  or  reporting
          positions (or in the event such past practices or reporting  positions
          are  not,  or  cease  to be,  permissible  under  the  Code  or  other
          applicable  Tax Law), in accordance  with sound legal  principles  and
          reasonable Tax accounting  practices selected by the party responsible
          for  preparing the Tax Return,  and in all other  respects in a manner
          consistent  with the  allocation of  responsibility  for Taxes in this
          Section 8.4.

               (h) As to any Pre-Closing Tax Period, neither the Sellers nor the
          Seller Representative shall make or change, or cause or permit STAR LP
          to make or change,  any Tax election,  change an annual Tax accounting
          period,  adopt or change any Tax accounting  method,  file any amended
          Tax Return, enter into any closing agreement,  settle any Tax claim or
          assessment  relating to STAR LP, surrender any right to claim a refund
          of Taxes,  consent to any extension or waiver of the limitation period
          applicable to any Tax claim or assessment relating to STAR LP, or take
          any  similar  action  relating  to the filing of any Tax Return or the
          payment of any Tax.

               (i)  At the  Closing,  STAR  LP  shall  deliver  to  Purchaser  a
          certificate(s),  duly executed and acknowledged, in form and substance
          reasonably satisfactory to Purchaser,  certifying that the acquisition
          of the  Purchased  Interest is exempt from  withholding  under Section
          1445 of the Code.

               (j)  After  the  Closing,  until  expiration  of  the  statue  of
          limitations  applicable  for taxable  periods  ending on,  before,  or
          including August 31, 2007, the Sellers and the Seller  Representative,
          on the one hand,  and Purchaser,  on the other hand,  shall (and shall
          cause their  respective  Affiliates to) (i) provide such assistance to
          STAR LP as is reasonably  requested by STAR LP in connection  with its
          preparation  of any  Tax  Returns  which  STAR LP is  responsible  for
          preparing and filing,  (ii) cooperate  fully in the manner  reasonably
          requested  by the other party in  connection  with  responding  to any
          inquiries from or preparing for any audits of, or disputes with taxing
          authorities regarding, any Taxes or Tax Returns of STAR LP for taxable
          periods  ending on,  before,  or including  August 31, 2007, and (iii)
          make available to the other party or parties, as the case may be, with
          respect to taxable periods ending on, before,  or including August 31,
          2007, all information in its possession  relating to STAR LP which may
          be relevant to any Tax Return,  audit or  examination,  proceeding  or
          determination  and to any taxing authority as reasonably  requested by
          the other party.

                                   ARTICLE IX
                              CONDITIONS TO CLOSING

          Section 9.1 Conditions to Obligations of Purchaser. The obligations of
the  Purchaser to  consummate  the Closing are subject to the  satisfaction  (or
waiver by the Purchaser) at or prior to the Closing of the following conditions:

               (a) Representations,  Warranties and Covenants of STAR LP and the
          Sellers.

                    (i) The  representations  and  warranties of STAR LP and the
               Sellers made in this  Agreement  shall be true and correct in all

                                       42
<PAGE>

               material respects (except in the case of (i) the  representations
               contained  in Section  5.1  (Existence  and  Power),  Section 5.2
               (Authorization;  Enforceability),  Section 5.4 (Non-Continuation;
               Consents),   Section  5.5   (Capitalization)   and  Section  5.31
               (Finders' Fees) and (ii) any  representation and warranty that is
               expressly  qualified by "materiality,"  "Material Adverse Effect"
               or words of similar import,  then in all respects) as of the date
               hereof (except to the extent such  representations and warranties
               relate  to an  earlier  date or time,  in  which  case as of such
               earlier date or time); and

                    (ii)  STAR LP and  the  Sellers  shall  have  performed  and
               complied in all material respects with all terms,  agreements and
               covenants contained in this Agreement required to be performed or
               complied with by STAR LP and the Sellers on or before the Closing
               Date.

               (b) No Injunction, etc. No provision of any applicable Law and no
          judgment,  injunction,  order or decree of any Governmental  Authority
          shall be in  effect  which  shall  prohibit  the  consummation  of the
          Closing.

               (c) No  Proceedings.  No action,  suit or  proceeding  materially
          affecting the Business or challenging  this  Agreement,  the Ancillary
          Agreements  or the  transactions  contemplated  hereby or  thereby  or
          seeking to prohibit, alter, prevent or materially delay the Closing or
          seeking  material  damages shall have been instituted or threatened by
          any Person.

               (d) Delivery of  Documents.  Each of the  deliveries  required by
          Section 4.2 shall have been made.

               (e) Third-Party Consents;  Governmental Approvals.  All consents,
          approvals,  waivers and Permits,  if any,  disclosed or required to be
          disclosed  on  Schedule   4.2(vi)  attached  hereto  shall  have  been
          received.

               (f) Pre-Closing  Reorganization.  The Pre-Closing  Reorganization
          shall have been consummated,  including the transactions  described in
          Section 2.1.

               (g) Discharge of Liens.  STAR LP shall have  discharged all Liens
          on the assets and properties of STAR LP, other than Permitted Liens.

               (h) No Material  Adverse  Change.  No event  shall have  occurred
          which,  individually or in the aggregate, has had, or could reasonably
          be  expected  to have,  a  Material  Adverse  Effect on STAR LP or the
          Business.

               (i)  Clinic  Director  Waivers.   STAR  LP  shall  have  provided
          Purchaser  executed  written  letter  agreements  from each of Brandon
          Hollis, Ross Maldonado,  Patty Hendrix, Brent Barker and Lisa Schwartz
          in a form  reasonably  satisfactory  to Purchaser  whereby each of the
          foregoing  persons  agrees  to  waive  and  render  null  and void any
          provision contained in their existing  employment  agreement with STAR
          LP or other agreement  existing on or prior to the Closing relating to
          any bonus on the sale any clinic  locations  operated  by STAR LP as a
          result of this  Agreement or any  subsequent  transaction  by STAR LP,

          Purchaser or Parent or their respective Affiliates after the Closing.

                                       43
<PAGE>

          Section 9.2 Conditions to Obligations of STAR LP and the Sellers.  The
obligations  of STAR LP and the Sellers to consummate the Closing are subject to
the  satisfaction  (or  waiver  by STAR LP and the  Sellers)  at or prior to the
Closing of the following conditions:

               (a) Representations, Warranties and Covenants of Purchaser.

                    (i) The representations and warranties of the Purchaser made
               in this  Agreement  shall be true  and  correct  in all  material
               respects  (except,  in the case of (i) Section 6.1 (Existence and
               Power), Section 6.2 (Authorization;  Enforceability), Section 6.4
               (Non-Continuation)  and Section  6.5  (Parent  Stock) or (ii) any
               representation  and  warranty  that  is  expressly  qualified  by
               "materiality,"  "Material  Adverse  Effect"  or words of  similar
               import, then in all respects) as of the date hereof; and

                    (ii) The Purchaser  shall have performed and complied in all
               material  respects  with  all  terms,  agreements  and  covenants
               contained in this Agreement  required to be performed or complied
               with by the Purchaser on or before the Closing Date.

               (b) No Injunction, etc. No provision of any applicable Law and no
          judgment,  injunction,  order or decree of any Governmental  Authority
          shall be in  effect  which  shall  prohibit  the  consummation  of the
          Closing.

               (c) Delivery of  Documents.  Each of the  deliveries  required by
          Section 4.3 shall have been made.

                                   ARTICLE X
                            SURVIVAL; INDEMNIFICATION

          Section 10.1  Survival.  The  representations  and  warranties  of the
parties  contained in this  Agreement  or in any  certificate  or other  writing
delivered  pursuant  hereto or in connection  herewith shall survive the Closing
for three (3) years;  provided,  however, that (i) the Selected  Representations
and  Warranties  (other than those  contained in clause (ii) below,  which shall
survive as set forth  below)  shall  survive the Closing for seven (7) years and
(ii)  the   representations   and   warranties   contained  in  Section   5.5(b)
(Capitalization) and Section 5.15(a) (Assets; Properties; Sufficiency of Assets)
shall  survive  the  Closing   indefinitely.   Notwithstanding  the  immediately
preceding sentence, any representation or warranty in respect of which indemnity
may be sought  under  this  Agreement  will  survive  the time at which it would
otherwise  terminate  pursuant to the immediately  preceding sentence if written
notice  of the  inaccuracy  or  breach  thereof  giving  rise to such  right  of
indemnity  shall have been given to the party against whom such indemnity may be
sought prior to such time; provided, however, that the applicable representation
or warranty  will  survive  only with respect to the  particular  inaccuracy  or
breach  specified in such written  notice.  All covenants and  agreements of the
parties contained in this Agreement will survive the Closing  indefinitely.  The

                                       44
<PAGE>

representations  and  warranties  will not be affected or reduced as a result of
any investigation or knowledge of the Purchaser.

          Section 10.2 Indemnification.

               (a) From and after the  Closing,  the Sellers  will,  jointly and
          severally,  indemnify,  defend and hold harmless the Purchaser and its
          partners, officers, directors,  employees,  affiliates (including STAR
          LP after the Closing),  stockholders and agents, and the successors to
          the foregoing (and their respective  officers,  directors,  employees,
          affiliates,  stockholders and agents) against any and all liabilities,
          damages  and  losses,  and,  but  only  to the  extent  asserted  in a
          Third-Party  Claim,  punitive  damages,  and all  costs  or  expenses,
          including  reasonable  attorneys' and  consultants'  fees and expenses
          incurred  in  respect  of  Third-Party  Claims or claims  between  the
          parties  hereto  ("Damages"),  incurred  or suffered as a result of or
          arising out of (i) the failure of any  representation or warranty made
          by STAR LP or any Seller in Article V to be true and correct as of the
          Closing Date (except to the extent such representations and warranties
          relate to an earlier  date or time,  in which case as of such  earlier
          date or time) (and which,  for  purposes of clause (i) of this Section
          10.2(a), shall be determined without reference to any qualifier of any
          representation  or warranty with respect to  "materiality,"  "Material
          Adverse  Effect" or other  similar  concepts),  (ii) the breach of any
          covenant or agreement made or to be performed by STAR LP or any Seller
          pursuant  to  this  Agreement,   (iii)  any  Environmental  Claims  or
          Environmental Conditions which relate to the business of STAR LP prior
          to the Closing  Date and (iv) any claim by Dallas K.  Roberts or Patty
          Hendrix  relating to the right to the  payment of the bonus  regarding
          the sale or deemed sale of clinics  under  Section 9 and Section 11 of
          their  respective   employment  agreements  with  STAR  LP;  provided,
          however,  that the Sellers will not be liable under clause (i) of this
          Section  10.2(a)(i) (other than with respect to a breach of any of the
          Selected  Representations and Warranties) unless, and then only to the
          extent,  the aggregate amount of Damages exceeds  $150,000,  provided,
          further,  that the aggregate liability of the Sellers under clause (i)
          of this Section 10.2(a) will not exceed,  in the aggregate,  an amount
          equal to twenty-five percent (25%) of the sum of the Purchase Price.

               (b) The Purchaser  will  indemnify,  defend and hold harmless the
          Sellers against Damages incurred or suffered as a result of or arising
          out of (i) the failure of any  representation  or warranty made by the
          Purchaser in Article VI to be true and correct as of the Closing Date,
          and  (ii)  the  breach  of any  covenant  or  agreement  made or to be
          performed by the Purchaser pursuant to this Agreement.

          Section 10.3 Procedures.

               (a)  If  any   Person   who  or   which  is   entitled   to  seek
          indemnification  under Section 10.2 (an "Indemnified  Party") receives
          notice of the  assertion  or  commencement  of any  Third-Party  Claim
          against  such  Indemnified  Party  with  respect  to which the  Person
          against  whom or  which  such  indemnification  is  being  sought  (an
          "Indemnifying  Party") is obligated to provide  indemnification  under
          this  Agreement,  the  Indemnified  Party will give such  Indemnifying
          Party reasonably  prompt written notice thereof,  but in any event not
          later  than 20 days  after  receipt  of such  written  notice  of such

                                       45
<PAGE>

          Third-Party  Claim. Such notice by the Indemnified Party will describe
          the Third-Party Claim in reasonable detail, will include copies of all
          available  material  written  evidence  thereof and will  indicate the
          estimated  amount, if reasonably  estimable,  of the Damages that have
          been or may be sustained by the Indemnified  Party.  The  Indemnifying
          Party will have the right to  participate  in,  or, by giving  written
          notice  to the  Indemnified  Party,  to  assume,  the  defense  of any
          Third-Party Claim at such Indemnifying Party's own expense and by such
          Indemnifying   Party's   own  counsel   (which   will  be   reasonably
          satisfactory to the Indemnified Party), and the Indemnified Party will
          cooperate in good faith in such defense.

               (b) If, within 20 days after giving notice of a Third-Party Claim
          to an Indemnifying  Party pursuant to Section 10.3(a),  an Indemnified
          Party  receives  written notice from the  Indemnifying  Party that the
          Indemnifying   Party  has  elected  to  assume  the  defense  of  such
          Third-Party Claim as provided in the last sentence of Section 10.3(a),
          the  Indemnifying  Party  will not be liable  for any  legal  expenses
          subsequently  incurred by the Indemnified Party in connection with the
          defense thereof;  provided,  however,  that if the Indemnifying  Party
          fails to take  reasonable  steps  necessary to defend  diligently such
          Third-Party  Claim  within  twenty (20) days after  receiving  written
          notice  from  the  Indemnified  Party  or  if  the  Indemnified  Party
          reasonably  believes  the  Indemnifying  Party has failed to take such
          steps  or if the  Indemnifying  Party  has  not  undertaken  fully  to
          indemnify the Indemnified  Party in respect of all Damages relating to
          the matter, the Indemnified Party may assume its own defense,  and the
          Indemnifying  Party  will be  liable  for  all  reasonable  costs  and
          expenses paid or incurred in connection therewith;  provided, however,
          that the  Indemnifying  Party  shall not be  liable  for the costs and
          expenses of more than one counsel for all  Indemnified  Parties in any
          one jurisdiction. Without the prior written consent of the Indemnified
          Party,  the  Indemnifying  Party will not enter into any settlement of
          any  Third-Party  Claim  which would lead to  liability  or create any
          financial or other obligation on the part of the Indemnified Party for
          which  the  Indemnified  Party  is  not  entitled  to  indemnification
          hereunder,  or which  provides for  injunctive  or other  non-monetary
          relief  applicable to the  Indemnified  Party,  or does not include an
          unconditional  release of all Indemnified  Parties. If a firm offer is
          made to settle a Third-Party Claim without leading to liability or the
          creation  of a  financial  or  other  obligation  on the  part  of the
          Indemnified  Party for which the Indemnified  Party is not entitled to
          indemnification hereunder and the Indemnifying Party desires to accept
          and agree to such  offer,  the  Indemnifying  Party will give  written
          notice to the  Indemnified  Party to that effect.  If the  Indemnified
          Party  fails to consent  to such firm offer  within ten days after its
          receipt of such notice,  the Indemnified Party may continue to contest
          or defend  such  Third-Party  Claim and,  in such  event,  the maximum
          liability of the Indemnifying  Party as to such Third-Party Claim will
          not exceed the amount of such settlement  offer. The Indemnified Party
          will provide the  Indemnifying  Party with  reasonable  access  during
          normal  business  hours  to  books,   records  and  employees  of  the
          Indemnified  Party  necessary  in  connection  with  the  Indemnifying
          Party's  defense of any  Third-Party  Claim  which is the subject of a
          claim for indemnification by an Indemnified Party hereunder.

               (c) Any claim by an Indemnified Party on account of Damages which
          does not result from a  Third-Party  Claim (a "Direct  Claim") will be

                                       46
<PAGE>

          asserted by giving the Indemnifying  Party  reasonably  prompt written
          notice thereof. Such notice by the Indemnified Party will describe the
          Direct  Claim  in  reasonable  detail,  will  include  copies  of  all
          available  material  written  evidence  thereof and will  indicate the
          estimated amount, if reasonably practicable,  of Damages that has been
          or may be sustained by the Indemnified  Party. The Indemnifying  Party
          will  have a period of  thirty  (30)  calendar  days  within  which to
          respond in writing to such Direct  Claim.  If the  Indemnifying  Party
          does  not  so  respond  within  such  thirty  (30)  day  period,   the
          Indemnifying  Party will be deemed to have  rejected  such  claim,  in
          which event the Indemnified Party will be free to pursue such remedies
          as may be available to the Indemnified  Party on the terms and subject
          to the provisions of this Agreement.

               (d) A failure to give timely  notice or to include any  specified
          information in any notice as provided in Sections 10.3(a),  10.3(b) or
          10.3(c)  will not  affect  the  rights  or  obligations  of any  party
          hereunder,  except  and only to the extent  that,  as a result of such
          failure,  any party  which was  entitled  to receive  such  notice was
          deprived  of its right to recover  any  payment  under its  applicable
          insurance coverage or was otherwise materially  prejudiced as a result
          of such failure.

          Section 10.4 Offset.  If the Purchaser incurs any Damages for which it
is entitled to  indemnification  by the Sellers under this Article X pursuant to
(i) a written agreement for offset among the Purchaser and the applicable Seller
or (ii) either (x) a decision by an arbitrator in accordance  with Section 11.12
or (y) a judgment  entered by a court of competent  jurisdiction,  the Purchaser
shall have the right (but not the  obligation)  to offset any payments due or to
be due under the Notes,  and principal amount of the Notes, by the amount of the
Damages.  Such right of offset shall not be considered an exclusive  remedy,  it
being  agreed that the  Purchaser  shall also be entitled to exercise  any other
remedies available to it at law or equity,  including the indemnification rights
set forth in this Article X.

          In  addition, if a dispute  arises or exists  concerning a claim as to
whether any Seller is  obligated  to indemnify  the  Purchaser  pursuant to this
Article X, the Purchaser  shall make a good faith estimate of the amount of such
indemnification  liability (the "Estimated  Dispute  Amount") and shall have the
right (but not the  obligation),  if any  payment(s)  under the Notes become due
prior to the final  resolution of such dispute  consistent  with the immediately
preceding  paragraph,  to reduce  or offset  such  payment(s)  by the  Estimated
Dispute  Amount  until such time as the dispute is finally  resolved in a manner
consistent with the immediately preceding paragraph.

          Section 10.5 Payment of  Indemnification  Payments.  All indemnifiable
Damages  payable by the  Sellers  under this  Article X shall be paid in cash in
immediately  available funds,  subject to Section 10.4 or otherwise satisfied by
exercise  of the  offset  right by  Purchaser  pursuant  to  Section  10.4.  All
indemnifiable  Damages  payable by the Sellers under this Article X shall be net
of amounts actually  recovered by the Purchaser under any insurance policy.  All
indemnifiable  Damages  payable by the  Purchaser  under this Article X shall be
paid in cash in immediately available funds.

                                       47
<PAGE>

                                   ARTICLE XI
                                  MISCELLANEOUS

          Section 11.1 Notices. All notices and other communications required or
permitted  hereunder will be in writing and, unless  otherwise  provided in this
Agreement,  will be deemed to have been duly given when  delivered  in person or
when  dispatched by electronic  facsimile  transfer  (receipt  confirmed) or one
Business Day after having been dispatched by a nationally  recognized  overnight
courier service to the appropriate party at the address specified below:

               (a) If to the Purchaser to:

                           U.S.  Physical  Therapy,  Ltd.
                           1300 West Sam Houston Parkway South
                           Suite 300
                           Houston, Texas 77042
                           Facsimile No.:  (713) 266-0558
                           Attention:  Lawrance W. McAfee

                           With a copy to:

                           Porter & Hedges, L.L.P.
                           1000 Main Street, 36th Floor
                           Houston, Texas 77002
                           Facsimile No.:  (713) 228-1331
                           Attention:  Chris A. Ferazzi

               (b) If to STAR LP, any Seller or Seller Representative, to:

                           STAR Physical Therapy, LP
                           263 Seaboard Lane
                           Suite 200
                           Franklin, TN  37067
                           Facsimile No.:  (615) 591-6601
                           Attention:  Regg Swanson

                           with a copy to:

                           Stites & Harbison, P.L.L.C.
                           424 Church Street, Suite 1800
                           Nashville, TN  37219-2376
                           Facsimile No.:  (615) 742-4137
                           Email: michael.hinchion@stites.com
                           Attention:  Michael J. Hinchion

or to such other  address or  addresses  as any such party may from time to time
designate as to itself by like notice.

          Section 11.2 Amendments and Waivers.

                                       48
<PAGE>

               (a) Any provision of this  Agreement may be amended or waived if,
          but only if, such amendment or waiver is in writing and is signed,  in
          the case of an amendment,  by each party to this Agreement,  or in the
          case of a  waiver,  by the  party  against  whom the  waiver  is to be
          effective.

               (b) No  failure  or delay by any party in  exercising  any right,
          power or privilege hereunder will operate as a waiver thereof nor will
          any single or partial  exercise  thereof preclude any other or further
          exercise  thereof  or  the  exercise  of any  other  right,  power  or
          privilege.  The rights and remedies herein provided will be cumulative
          and not exclusive of any rights or remedies provided by Law.

          Section 11.3 Expenses. Whether or not the transactions contemplated by
this  Agreement  are  consummated,  except as otherwise  expressly  provided for
herein,  the  parties  will pay or  cause  to be paid all of their  own fees and
expenses  incident to this  Agreement  and in  preparing  to  consummate  and in
consummating  the  transactions  contemplated  hereby,  including  the  fees and
expenses of any broker,  finder,  financial advisor,  investment  banker,  legal
advisor or similar person engaged by such party.

          Section 11.4 Successors and Assigns.  The provisions of this Agreement
will be binding  upon and inure to the benefit of the  parties  hereto and their
respective  successors and assigns.  No party may assign,  delegate or otherwise
transfer any of its rights or obligations  under this  Agreement  (including any
transfer by way of merger or operation of law) without the consent of each other
party hereto; provided, however, that Purchaser may assign all or any portion of
its rights and/or obligations  hereunder to an Affiliate of Purchaser or Parent;
provided,  further,  that no such  assignment  shall relieve  Purchaser from its
obligations  hereunder.  Any  assignment in violation of the preceding  sentence
will be void ab initio.

          Section  11.5 No  Third-Party  Beneficiaries.  Except as  provided  in
Article X, this  Agreement  is for the sole  benefit of the  parties  hereto and
their permitted  successors and assigns, and nothing herein expressed or implied
will give or be construed to give to any Person,  other than the parties  hereto
and such  permitted  successors  and  assigns,  any  legal or  equitable  rights
hereunder.

          Section 11.6  Governing  Law. This  Agreement will be governed by, and
construed in accordance with, the laws of the State of Texas,  regardless of the
Laws that might otherwise govern under principles of conflict of laws thereof.

          Section 11.7  Jurisdiction.  Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions  contemplated  hereby may be brought in
the courts of the State of Texas,  in Harris  County,  and the federal courts in
the  Southern  District  of  Texas.  Each of the  parties  (i)  consents  to the
exclusive  jurisdiction of such courts (and of the appropriate  appellate courts
therefrom) in any such suit, action or proceeding,  (ii) irrevocably  waives, to
the fullest extent permitted by Law, any objection which it may now or hereafter
have to the laying of the venue of any such suit,  action or  proceeding  in any
such court or that any such suit,  action or proceeding  which is brought in any
such court has been brought in an inconvenient  forum, (iii) will not attempt to
deny or defeat such personal  jurisdiction  by motion or other request for leave

                                       49
<PAGE>

from any such  court,  and (iv)  will not  bring  any  action  relating  to this
Agreement or any of the transactions contemplated by this Agreement in any other
court. Process in any such suit, action or proceeding may be served on any party
anywhere in the world,  whether within or without the  jurisdiction  of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section  11.1 will be deemed  effective  service of
process on such party.

          Section 11.8  Counterparts.  This  Agreement may be executed in one or
more  counterparts,  all of which will be considered  one and the same agreement
and will become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.

          Section  11.9 Table of Contents;  Headings.  The table of contents and
headings in this  Agreement are for  convenience  of reference only and will not
control or affect the meaning or construction of any provisions hereof.

          Section  11.10  Entire  Agreement.   This  Agreement   (including  the
Schedules  and Exhibits  hereto) and the  Ancillary  Agreements  constitute  the
entire  agreement  among the parties with respect to the subject  matter of this
Agreement.  This Agreement (including the Schedules and Exhibits hereto) and the
Ancillary  Agreements  supersede all prior agreements and  understandings,  both
oral and written,  between the parties with respect to the subject matter hereof
of this Agreement.

          Section 11.11  Severability;  Injunctive  Relief.  If any provision of
this  Agreement  or the  application  of any such  provision  to any  Person  or
circumstance is held invalid, illegal or unenforceable in any respect by a court
of competent jurisdiction, the remainder of the provisions of this Agreement (or
the  application  of such  provision  in other  jurisdictions  or to  Persons or
circumstances  other  than  those  to  which it was  held  invalid,  illegal  or
unenforceable) will in no way be affected,  impaired or invalidated,  and to the
extent  permitted by applicable  Law, any such  provision  will be restricted in
applicability  or reformed to the minimum extent  required for such provision to
be  enforceable.  This provision will be interpreted and enforced to give effect
to the original written intent of the parties prior to the determination of such
invalidity or unenforceability.

          Section 11.12 Arbitration. Any dispute between the parties hereto with
respect  to any  claim for  indemnification  or  otherwise  arising  under  this
Agreement  shall be  resolved  by binding  arbitration  in  accordance  with the
following  provisions,  provided,  however,  that any party may seek  injunctive
relief or other equitable relief to preserve the status quo pending arbitration.

               (a) Any party to this  Agreement  may submit any dispute  that is
          subject to  arbitration  by giving written notice to the other parties
          hereto.  Within 30 days  after  receipt  of such  notice by such other
          party, the parties hereto shall mutually select an arbitrator.  If the
          parties are unable to agree upon such  selection  within such 30 days,
          then either party may, upon at least five days prior written notice to
          the other  party,  request the  American  Arbitration  Association  to
          appoint the  arbitrator.  The  American  Arbitration  Association  may
          thereupon  appoint the arbitrator.  The arbitrator  shall be impartial
          and unrelated, directly or indirectly, so far as rendering of services

                                       50
<PAGE>

          is  concerned  to either  of the  parties  or any of their  respective
          Affiliates.  The arbitration  shall be conducted in Houston,  Texas in
          accordance  with the  Commercial  Arbitration  Rules  of the  American
          Arbitration  Association,  as  then in  effect,  except  as  otherwise
          provided in this Section 11.12, and the arbitrator shall be paid on an
          hourly basis, except as otherwise mutually agreed.

               (b) The arbitrator shall investigate the facts and may, in his or
          her discretion, hold hearings, at which the parties hereto may present
          evidence  and  arguments,   be  represented  by  counsel  and  conduct
          cross-examination.  The  arbitrator  shall  permit  discovery  by  the
          parties  thereto  in  accordance  with  the  Federal  Rules  of  Civil
          Procedure.  The  arbitrator  shall  render a written  decision  on the
          matter  presented as soon as practicable  after his or her appointment
          and in any event not more than 90 days  after  such  appointment.  The
          decision of the arbitrator,  which may include equitable relief, shall
          be final and  binding on the parties  hereto,  and  judgment  upon the
          decision may be entered in any court having  jurisdiction  thereof. If
          the  arbitrator  shall  fail to render a decision  within  such 90 day
          period,  either party may institute  such action or proceeding in such
          court  as  shall  be  appropriate  in the  circumstances  and upon the
          institution  of such  action,  the  arbitration  proceeding  shall  be
          terminated and shall be of no further force and effect. The prevailing
          party  shall  be  awarded  reasonable   attorneys'  fees,  expert  and
          non-expert  witness costs and expenses incurred in connection with the
          arbitration,  and the fees and costs of the arbitrator  shall be borne
          by the nonprevailing  party unless, in either case, the arbitrator for
          good  cause  determines  otherwise.  In  resolving  any  dispute,  the
          arbitrator shall apply the provisions of this Agreement and applicable
          law,  without varying  therefrom in any respect.  The arbitrator shall
          not have the power to add to,  modify or change any of the  provisions
          of this Agreement.

          Section  11.13  Swanson  Guarantee.  By execution  of this  Agreement,
Swanson  hereby  unconditionally   guarantees  each  and  every  obligation  and
liability of the Regg E. Swanson Revocable Trust, one of the Sellers,  under the
terms of this Agreement.  Swanson hereby further acknowledges and agrees that as
the settlor,  trustee and beneficiary of the Regg E. Swanson  Revocable Trust he
is indirectly  receiving  substantial  benefits and consideration as a result of
the consummation of the transactions contemplated by this Agreement.

                                       51
<PAGE>

         The parties  hereto have caused this  Agreement to be duly  executed by
their respective authorized officers as of the day and year first above written.

                                 PURCHASER:

                                 U.S. PHYSICAL THERAPY, LTD.

                                 By:      National Rehab Management GP, Inc.,
                                          its general partner

                                 By:      /s/ Lawrance W. McAfee
                                     -------------------------------------------
                                 Name:
                                       -----------------------------------------
                                 Title:
                                       -----------------------------------------

                                 COMPANY:

                                 STAR PHYSICAL THERAPY, LP

                                 By:      STAR PT Management GP, LLC,
                                          its general partner

                                 By:      /s/ Regg E. Swanson
                                     -------------------------------------------
                                 Name:
                                       -----------------------------------------
                                 Title:
                                       -----------------------------------------

                                 SELLERS:

                                 REGG E. SWANSON REVOCABLE TRUST

                                 By:      /s/ Regg E. Swanson
                                     -------------------------------------------
                                          Regg E. Swanson, Trustee

                                 /s/ Leslie M. Burton
                                 -----------------------------------------------
                                 Leslie M. Burton

                                 /s/ Harold E. Henninger, Jr.
                                 -----------------------------------------------
                                 Harold E. Henninger, Jr.

                                       52
<PAGE>

                                 /s/ Marty Blair
                                 -----------------------------------------------
                                 Marty Blair

                                 /s/ Kelly G. Ziegler
                                 -----------------------------------------------
                                 Kelly G. Ziegler

                                 /s/ Kent A. Chapman
                                 -----------------------------------------------
                                 Kent A. Chapman

                                 /s/ David M. Landers
                                 -----------------------------------------------
                                 David M. Landers

                                 SELLER REPRESENTATIVE:

                                 /s/ Regg E. Swanson
                                 -----------------------------------------------
                                 Regg E. Swanson

ACKNOWLEDGED AND AGREED TO THIS
6TH DAY OF SEPTEMBER, 2007 FOR THE
SOLE PURPOSE OF SECTION 11.13
OF THIS AGREEMENT

/s/ Regg E. Swanson
----------------------------------------
Regg E. Swanson

                                       53

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]