Exhibit 10.1
USPH Executive Long-Term Incentive Plan - 2007-09
o Objective of this Long-Term Incentive Plan (LTIP)
>> The objective of the LTIP is to provide incentives for USPH Executives
to build and strengthen the company on a long-term basis for the
future and maximize stockholder return based upon increasing the value
of USPH shares and earnings growth through 2009.
o Incentive and Reward for Stockholder Return Based upon Stock Price
Appreciation
>> The average trading price of USPH stock for the second half of 2006
was $13.12. For every percentage increment over $13.12 if the average
trading price for the second half of calendar year 2009 exceeds a
minimum threshold $15.63, then a cash award will be earned. The $15.63
referred to in the previous sentence represents 6% annual compounded
appreciation for 3 years over the average trading price of USPH for
the second half of 2006 of $13.12, which forms the baseline for the
3-year LTIP measurement period and is established as the minimum
threshold for payment of any LTIP cash award under this share price
appreciation criteria. Such cash awards will be equal to $18,000 for
Chris Reading (CEO), $17,300 for Larry McAfee (CFO) and $9,600 for
Glenn McDowell (COO), for every such 1% increase in trading price as
measured from the $13.12 base if USPH's stock price in excess of the
6% annual compounded threshold. [For examples, see table below.]
H2-2009
Avg. Appreciation
Stock Over
Price H2-2006 CEO CFO COO
--------- ------------ ---------- ---------- --------
$15.63 19% $0 $0 $0
$16.40 25% $108,000 $103,800 $57,600
$19.68 50% $558,000 $536,300 $297,600
$22.96 75% $1,008,000 $968,800 $537,600
$26.24 100% $1,458,000 $1,401,300 $777,600
>> Any cash dividends paid to common shareholders during the 3-year LTIP
period will be added (on a per-share basis) to the average trading
price for the second half of 2009, for purposes of these calculations
as such dividends would represent additional return to the
shareholders. Any stock dividends, stock splits or recapitalizations
will result in resetting of the per-share figures stated above and
below on a pro-rata basis for purposes of these calculations.
>> If the average trading price for the second half of 2009 is greater
than $26.24, then the LTIP "stretch target" of increasing the share
price by 100% over three years is achieved and the cash award is
calculated based on this maximum value. The maximum that can be earned
under this calculation is therefore $1,458,000 for CEO, $1,401,300 for
CFO, and $777,600 for COO.
>> Further guidelines are as follows:
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o Calculations of average "trading price" for the second half of
2009 shall be based on the weighted average actual trading price
of USPH common stock as reported on a public exchange during such
period.
o No cash payment due to share price appreciation will be
considered as vested, and the applicable Executive participant
shall not be entitled to any such payment, until January 1, 2010,
and then cash payments will be paid after January 1, 2010 within
30 days after the Compensation Committee certifies in a written
resolution approved by a majority of its members the amount of
the cash compensation to be paid to each participant based on the
weighted average trading price performance criteria of this LTIP,
which the Compensation Committee will make on a timely basis and
in accordance with the terms of this LTIP.
o In the event of a Change in Control of USPH (as defined in the
USPH 2003 Stock Incentive Plan) during the term of this LTIP, (i)
a calculation will be made on the next-to-last day of trading of
USPH stock prior to the Change in Control event as though the
closing price for such day was the average for the second half of
2009, and (ii) the share-price floor assuming 6% p.a.
appreciation will be re-calculated through the date of the Change
in Control. The Compensation Committee shall review such a
calculation prior to the time of the Change in Control and
certify in a written resolution approved by a majority of its
members the amount of the cash compensation based on the trading
price performance criteria of this LTIP, and any such cash
payments will be due and payable at the time of the Change in
Control. This LTIP will then cease to be in effect.
o If an Executive's employment with USPH is terminated for any
reason (other than in connection with a Change in Control - see
above) prior to January 1, 2010, he will not be eligible for any
LTIP award based on the weighted average trading price
performance criteria above.
o Incentive and Reward for EPS Growth
>> Objective is to grow Diluted EPS by more than 12.5% per annum over the
three years 2007-09, inclusive.
>> Executives have the opportunity to earn cash awards for achieving the
objective during each year of the LTIP. The maximum amount of cash
incentive that can be earned over the three year measurement period of
the LTIP is as stated below:
o Chris Reading - $750,000
o Larry McAfee - $720,000
o Glenn McDowell - $375,000
>> Using Diluted EPS from Continuing Operations of $0.70 for 2006 as a
baseline, if the comparable Diluted EPS for 2007 is greater than $0.70
by 12.5% (i.e. $.7875) or more, then each Executive will be entitled
to a Performance Award cash payment equal to one-sixth (16.67%) of the
Executive's total maximum incentive. In addition, one-sixth (16.67%)
of the Executive's total maximum incentive will be placed in the
"Deferred Performance Awards" category.
>> The Diluted EPS for 2007 then becomes the "base" for the 2008
calculation, and so on. Any Performance Awards earned in 2008 or in
2009 also entitle the Executives to a cash payment equal to one-sixth
(16.67%) of the Executive's total maximum incentive. Any time that
Performance Awards are earned, an equal amount of the Executive's
total maximum incentive is placed in the "Deferred Performance Awards"
category.
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>> Performance Awards will vest on January 1 following the fiscal year
for which they are awarded and will be paid in cash within 30 days
after the Diluted EPS is determined for each applicable fiscal year
2007-09, inclusive. All Deferred Performance Awards will be vested on
January 1, 2010 and will be paid within 30 days in cash after the
Diluted EPS is determined for fiscal year 2009.
>> In any year that Diluted EPS growth is less than 12.5% from the prior
year base, no Performance Awards will be earned. However, to the
extent that EPS growth during the 3-year period (2007-2009) is 42% or
greater, all the Performance Awards and Deferred Performance Awards
available during such 3-year period (i.e., the total maximum incentive
under this LTIP criteria) shall be considered to have been earned.
[For example, if Diluted EPS grows by 6% in 2007 (to $0.74) and by
another 6% in 2008 (to $0.79), no Performance Awards will have been
earned in 2007 or 2008; but if Diluted EPS in 2009 is $1.00,
representing 26% growth from the prior year and 42% growth from the
2006 baseline, then all of the total maximum incentive for each
Executive as set forth above will be earned and paid in cash after the
Diluted EPS has been determined for fiscal year 2009.]
>> In any year that Diluted EPS growth is negative, then no Performance
Award will be earned for such financial year and the "base" for the
following year will not be adjusted. [For example, assume Diluted EPS
in 2007 is $0.80 (14% growth) and, as a result: (i) one-sixth (16.67%)
of the total maximum incentive amount for each Executive is earned and
cash payments are made on a current basis for such Performance Awards,
(ii) one-sixth (16.67%) becomes a Deferred Performance Award for each
Executive, and (iii) the "base" for measuring 2008 growth becomes
$0.80. Further assume that Diluted EPS in 2008 is $0.72 (-10% growth);
as a result, no Performance Awards are earned in 2008 and the "base"
for 2009 will remain at $0.80, because of negative growth in 2008. In
this example, Diluted EPS in 2009 greater than $0.90 will represent a
greater than 12.5% growth from the base of $0.80 and will result in
Performance Award cash payments of $125,000, $120,000 and $62,500 for
the CEO, CFO and COO, respectively, based on one-sixth (16.67%) of the
total maximum incentive, and one-sixth (16.67%) of the total maximum
incentive will be a Deferred Performance Award for the final financial
year, which, when added to the Deferred Performance Award earned in
2007, results in total Deferred Performance Award cash payments of
$250,000, $240,000 and $125,000 for the CEO, CFO and COO,
respectively. In this example, Diluted EPS of $1.00 or more in 2009
will represent greater than 42% growth over 3 years (2007-09) and will
result in the total maximum incentive being earned and paid to each
Executive, less the one-sixth (16.67%) amount already received in cash
as a Performance Award for 2007. In this example, the Deferred
Performance Award from the 2007 financial year results in a cash
payment after completing the 2009 fiscal year, irrespective of the
Diluted EPS in 2008 and 2009, subject to the Executive's continued
employment with USPH as described below.]
>> Further guidelines are as follows:
o Diluted EPS for purposes of these calculations should be as
reported in the audited annual financial statements of USPH.
However, consistent accounting principles should be applied from
year-to-year in the determination of Diluted EPS. The
Compensation Committee may adjust reported Diluted EPS for
purposes of these calculations if USPH changes accounting
policies, such as occurred with the adoption of FAS 123R in 2006.
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o No cash payment due to Diluted EPS growth will be considered as
vested, and the applicable Executive participant shall not be
entitled to any such payment, until the Compensation Committee
certifies in a written resolution approved by a majority of its
members the amount of the cash compensation to be paid to each
participant based on the performance criteria of this Diluted EPS
growth LTIP, which the Compensation Committee will make on a
timely basis and in accordance with the terms of this LTIP.
o The Compensation Committee may elect, in its sole discretion, to
exclude extraordinary, unusual or non-recurring items of gain or
loss in a particular year from reported Diluted EPS for purposes
of these calculations.
o Calculations of average "trading price" shall be based on the
weighted average actual trading price of USPH common stock as
reported on a public exchange during such period.
o In the event of a Change in Control of USPH (as defined in the
USPH 2003 Stock Incentive Plan) prior to January 1, 2010, a cash
payment will automatically be made to each Executive immediately
prior to such Change in Control equal to (i) the amounts set
forth in the table below:
If CIC
Occurs In CEO CFO COO
--------- -------- -------- --------
Q1 $62,500 $60,000 $31,250
Q2 $125,000 $120,000 $62,500
Q3 $187,500 $180,000 $93,750
Q4 $250,000 $240,000 $125,000
plus (ii) any Deferred Performance Awards applicable to each
Executive. Such cash payments will be due and payable at the time
of and as an integral part of the Change in Control transaction.
This LTIP will then cease to be in effect.
o If an Executive ceases to be employed on a full-time basis by
USPH for any reason (other than in connection with a Change in
Control - see above) prior to January 1, 2010, then the Executive
will not be entitled to any LTIP cash compensation under this EPS
growth criteria for the fiscal year in which such termination
occurs nor for any future years. In addition, any Deferred
Performance Award will be forfeited unless the termination is due
to (i) Executive's death or "disability" (as defined in the USPH
2003 Stock Incentive Plan), or (ii) precipitated by USPH without
"cause" (as defined in the USPH 2003 Stock Incentive Plan), in
which case the Deferred Performance Award will be paid in cash at
the effective date of termination.
o Administration of the LTIP
>> Except for Change in Control payments stipulated above as "automatic,"
no cash awards can be paid until the Compensation Committee certifies
in a written resolution approved by a majority of its members the
amount of cash compensation to be paid pursuant to the specific terms
of this LTIP. The Compensation Committee will meet on a timely basis
for the purpose of such determinations.
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>> The Compensation Committee retains the right to decide all matters of
interpretation with respect to this LTIP as well as the right to
clarify or redefine (for purposes of clarity), prospectively or
retroactively, any and all terms of this LTIP by a majority vote of
its members. Decisions of the Compensation Committee shall be final
and binding.
>> Notwithstanding anything herein to the contrary, the LTIP and all
amounts payable hereunder are intended to be exempt from the
definition of deferred compensation under Code section 409A of the
IRC.
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