-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A0X/tBfh2yTb/ednlDW2u41kGkbsKNh4Lod5YXvu+j4Jm/6CpqZbMwDk8kzLA0An mEJGSXLZNY+NOqiLnE+z6w== 0000724024-05-000011.txt : 20050617 0000724024-05-000011.hdr.sgml : 20050617 20050617160617 ACCESSION NUMBER: 0000724024-05-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050615 ITEM INFORMATION: Entry into a Material Definitive Agreement FILED AS OF DATE: 20050617 DATE AS OF CHANGE: 20050617 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PHYSICIANS SERVICE GROUP INC CENTRAL INDEX KEY: 0000724024 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 751458323 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31434 FILM NUMBER: 05903330 BUSINESS ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HWY STREET 2: C-300 CITY: AUSTIN STATE: TX ZIP: 78746 BUSINESS PHONE: 5123280888 MAIL ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HIGHWAY CITY: AUTIN STATE: TX ZIP: 78746 8-K 1 june15.txt MATERIAL AGREEMENTS ENTERED INTO SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: Date of Report (Date of earliest event reported:) June 17, 2005 (June 14, 2005) American Physicians Service Group, Inc. (Exact name of registrant as specified in its charter) Texas 0-11453 75-1458323 (State of (Commission File Number) (IRS Employer Incorporation) Identification No.) 1301 Capitol of Texas Highway Suite C-300 Austin, Texas 78746 (Address of principal executive offices) (Zip Code) (512) 328-0888 (Registrant's telephone number, including area code) Section 1 Registrant's Business and Operations Item 1.01 Entry into Material Definitive Agreements On June 14, 2005 the shareholders of American Physicians Service Group, Inc. approved the 2005 Incentive and Non-Qualified Stock Option Plan (Exhibit 10.1) and the American Physicians Service Group, Inc. Affiliated Group Deferred Compensation Master Plan (Exhibit 10.2) Both plans are attached as Exhibits to the Form 8-K 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. American Physicians Service Group, Inc. Date: June 17, 2005 By: /s/ W.H. Hayes ---------------------------------------------- Name: W.H. Hayes ---------------------------------------------- Title: Sr VP - Finance ---------------------------------------------- 3 EX-10 2 non-qual.txt INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN Exhibit 10.1 2005 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN OF AMERICAN PHYSICIANS SERVICE GROUP, INC. A Texas Corporation I. Purpose of Plan The purpose of this 2005 Incentive and Non-Qualified Stock Option Plan (this "Plan") is to strengthen American Physicians Service Group, Inc. a Texas corporation (the "Corporation"), and its subsidiaries, by providing stock options as a means to attract, retain and motivate corporate personnel. II. Administration This Plan shall be administered by an administrative body (the "Committee") designated by the Board of Directors of the Corporation (the "Board"). The Board may designate itself as the Committee or appoint two or more "Non-Employee Directors" to a committee which shall serve as the Committee. For purposes of this Plan, "Non-Employee Director" will mean a director who meets the definition of "non-employee director" under Rule 16b-3 under the Securities Exchange Act of 1934 (as amended, the "1934 Act"), and who qualifies as an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and to the extent applicable, meets the requirements for an independent director, pursuant to the rules of any securities exchange on which the stock is listed, or if the stock is not listed, the rules of the National Association of Securities Dealers, Inc. ("NASD"), if applicable. The Committee shall have the sole authority to select the persons entitled to receive Options (as defined below) from among those eligible hereunder (the "Optionees") and to establish the number of shares that may be issued under each Option to such persons; provided, however, that, notwithstanding any provision in this Plan to the contrary, the maximum number of shares of common stock, $.10 par value per share of the Corporation (the "Common Stock"), that may be subject to Options granted under the Plan to an individual Optionee during any calendar year may not exceed 150,000 (subject to adjustment in the same manner as provided in Article VIII hereof to prevent dilution.) The limitation set forth in the preceding sentence shall be applied in a manner which will permit compensation generated under the Plan to constitute "performance-based" compensation for purposes of Section 162(m) of the Code, including, without limitation, counting against such maximum number of shares, to the extent required under Section 162(m) of the Code and applicable interpretive authority thereunder, any shares subject to Options that are canceled or repriced. All determinations, interpretations and constructions made by the Committee in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons. Members of the Committee and any officer or employee of the Corporation acting at the direction of, or on behalf of, the Committee will not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and will, to the extent permitted by law, be fully indemnified by the Corporation with respect to any such action or determination. 1 III. Grant of Options The Corporation is authorized to grant incentive stock options ("Incentive Stock Options") as defined in section 422 of the Code and options that are not intended to be Incentive Stock Options (hereafter "Non-Qualified Stock Options" and, together with Incentive Stock Options, the "Options"). Any Option granted under this Plan shall be granted within 10 years from the date this Plan is adopted, or the date this Plan is approved by the shareholders pursuant to Article X, whichever is earlier. No Option granted under this Plan shall be exercisable by its terms after the expiration of 10 years from the grant of the Option. Options may be granted only to individuals (a) who are employees (including officers and directors who are also employees) of the Corporation or any parent or subsidiary corporation (as defined in section 424 of the Code) of the Corporation, (b) who are non-employee directors of the Corporation at the time the Option is granted and who may be granted Options hereunder in compliance with Rule 16b-3, or (c) consultants and advisors of the Corporation or any parent or subsidiary corporation of the Corporation who render bona fide services to the Corporation or any parent or subsidiary corporation of the Corporation; provided that such services must not be in connection with the offer or sale of securities in a capital-raising transaction. Options may be granted to the same individual on more than one occasion. Incentive Stock Options may not be granted to persons who own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation, or of its parent or subsidiary, if any, within the meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is granted the option exercise price is at least 110% of the fair market value of the Common Stock subject to such Option and (ii) such Option by its terms is not exercisable after the expiration of five years from the date of the grant. To the extent that the aggregate fair market value of Common Stock (as determined in good faith by the Committee at the time the Incentive Stock Option is granted), with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year (under all incentive stock option plans of the Corporation and any parent or subsidiary corporation) exceeds $100,000, such excess Incentive Stock Options shall be treated as Non-Qualified Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of an Optionee's Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the Optionee of such determination as soon as practicable after such determination. IV. Stock Subject to Plan The aggregate number of shares of Common Stock that may be issued pursuant to Options granted under this Plan shall not exceed 350,000 shares of Common Stock (subject to adjustment as provided in Article VIII). Such shares may consist of authorized but unissued shares of Common Stock or previously issued shares of Common stock reacquired by the Corporation. Any of such shares which remain unissued and which are not subject to outstanding Options at the termination of this Plan shall cease to be subject to this Plan, but, until termination of this Plan, the Corporation shall at all times make available a sufficient number of shares to meet the requirements of this Plan. Should any Option hereunder expire or terminate prior to its exercise in full, the shares 2 of Common Stock theretofore subject to such Option may again be subject to an Option granted under this Plan to the extent permitted under Rule 16b-3. The aggregate number of shares which may be issued under this Plan shall be subject to adjustment as provided in Article VIII hereof. Exercise of an Option in any manner pursuant to the terms of this Plan and the related Option Agreement shall result in a decrease in the number of shares of Common Stock which may thereafter be available, for purposes of the Plan, by the number of shares as to which the Option is exercised. Separate stock certificates shall be issued by the Corporation for those shares acquired pursuant to the exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of any Non-Qualified Stock Options. V. Option Agreements Each Option shall be evidenced by a written agreement between the Corporation and the Optionee ("Option Agreement") which shall contain such terms and conditions as the Committee deems necessary, including, without limitation, terms and conditions relating to the termination of Options. The terms and conditions of the respective Option Agreements need not be identical. VI. Option Price; Payment of Option Price The purchase price for a share of Common Stock subject to an Incentive Stock Option granted pursuant to this Plan shall not be less than the fair market value of the Common Stock subject to such Incentive Stock Option on the date such Option is granted. The purchase price for a share of the Common Stock subject to a Non-Qualifying Stock Option granted pursuant to this Plan shall be not less than 100% of the fair market value of the Common Stock subject to such Non-Qualifying Stock Option on the date such Option is granted. For all purposes under the Plan, the fair market value of a share of Common Stock on a particular date shall be equal to the closing price per share of the Common Stock (i) reported by the National Market System of NASDAQ on that date or (ii) if the Common Stock is listed on a national stock exchange, reported on the stock exchange composite tape on that date. If the Common Stock is traded over the counter at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the reported high and low or closing bid and ask prices of the Common Stock on the most recent date on which the Common Stock was publicly traded. In the event the Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made in good faith by the Committee in such manner as it deems appropriate. Notwithstanding the foregoing, an Incentive Stock Option or a Non-Qualifying Stock Option may be granted with an exercise price less than 100% of fair market value if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. The exercise price of an Option shall be paid in one of the following forms (or any combination thereof): (a) cash or (b) the transfer to the Company of already-owned shares of Common Stock; provided, however that the Committee may determine that the exercise price be paid only in cash. In addition, Options 3 may be exercised through such "cashless exercise" procedures that are, from time to time, deemed acceptable by the Committee and not in violation of applicable law. Any shares of Common Stock transferred to the Company as payment of the exercise price (including shares of Common Stock underlying the Option to be exercised and being used to pay the exercise price therefor pursuant to a cashless exercise) shall be valued at their fair market value on the trading day preceding the date of exercise of such Option. VII. Options Nontransferable Incentive Stock Options and all rights granted thereunder shall not be transferable other than by will or the laws of descent and distribution. Non-Qualified Stock Options and all rights granted thereunder shall not be transferable other than by will or the laws of descent and distribution, or upon the express prior written consent of the Committee in each instance so long as such transfer is to a "family member" as defined under General Instruction A(1)(a)(5) to the Registration Statement on Form S-8. All Incentive Stock Options shall be exercisable during the Optionee's lifetime, only by the Optionee or the Optionee's guardian or legal representative. VIII. Recapitalization or Reorganization In the event of a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, an appropriate and proportionate adjustment shall be made to the maximum number of shares of Common Stock available for issuance pursuant to Options granted pursuant to this Plan, as set forth in Article IV hereof, and the maximum number of shares of Common Stock subject to Options granted to a person during any calendar year, as set forth in Article II hereof. A corresponding change shall be made to the number and kind of shares, and the exercise price per share, of unexercised Options. IX. Change in Control and Other Corporate Transactions In the event of a Change in Control, dissolution or liquidation of the Corporation, or any corporate separation or division, including, but not limited to, a split-up, a split-off or a spin-off, or a sale of substantially all of the assets of the Corporation (collectively, a "Corporate Transaction"), then the Corporation, to the extent permitted by applicable law, but otherwise in the sole discretion of the Committee, may provide for: (i) the continuation of outstanding Options by the Corporation (if the Corporation is the surviving entity); (ii) the assumption of the Plan and such outstanding Options by the surviving entity or its parent; (iii) the substitution by the surviving entity or its parent of Options with substantially the same terms (including Options to acquire the same consideration paid to the shareholders in the transaction described in this Article IX) for such outstanding Options and, if appropriate, subject to the equitable adjustment provisions of Article VIII hereof; (iv) the cancellation of such outstanding Options in consideration for a payment equal in value to the difference between the fair market value and the exercise price for all shares of Common Stock subject to exercise (i.e., to the extent vested) under any outstanding Option; or (v) the cancellation of such outstanding Options without payment of any consideration. Any such payment may be paid in cash or such other consideration payable to the holders of outstanding shares of Common Stock of the Corporation in connection with such Corporate Transaction. If vested Options would be canceled without consideration, the Option holder 4 shall have the right, exercisable during the later of the ten-day period ending on the fifth day prior to such Corporate Transaction or ten days after the Committee provides the grant holder a notice of cancellation, to exercise such Options in whole or in part without regard to any installment exercise provisions in the Option Agreement. In addition, the Committee, in its discretion, may provide for acceleration of unvested Options in connection with any of the alternatives described above. A "Change in Control" shall mean the occurrence of any of the following: (a) The "acquisition" by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the 1934 Act) of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of any securities of the Corporation which generally entitles the holder thereof to vote for the election of directors of the Corporation (the "Voting Securities") which, when added to the Voting Securities then "Beneficially Owned" by such Person, would result in such Person either "Beneficially Owning" fifty percent (50%) or more of the combined voting power of the Corporation's then outstanding Voting Securities or having the ability to elect fifty percent (50%) or more of the Corporation's directors; or (b) The consummation of a merger, consolidation or reorganization involving the Corporation (a "Business Combination"), unless the stockholders of the Corporation, immediately before the Business Combination, own, directly or indirectly immediately following the Business Combination, at least fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from the Business Combination in substantially the same proportion as their ownership of the Voting Securities immediately before the Business Combination; or (c) The consummation of a merger or consolidation involving the Corporation where the Corporation is not the surviving entity; or (d) Any change in the identity of directors constituting a majority of the Board within a twenty-four month period unless the change was approved by a majority of the Incumbent Directors, where "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors. X. Effective Date of Plan This Plan shall be effective on approval by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation present or represented and entitled to vote thereon at a duly held shareholder meeting or by unanimous written consent of the shareholders of the Corporation in the manner required by Rule 16b-3. XI. Amendment or Termination of Plan The Board in its discretion may terminate this Plan at any time with respect to any shares of Common Stock for which Options have not theretofore been granted. The Board shall have the right to alter or amend this Plan or any part hereof from time to time; provided, that no change in any Option heretofore 5 granted may be made which would impair the rights of the Optionee without the consent of such Optionee; and provided, further, that (i) the Board may not make any alteration or amendment which would decrease any authority granted to the Committee hereunder in contravention of Rule 16b-3 and (ii) the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan, change the class of individuals eligible to receive Options under the Plan or extend the term of the Plan, without the approval of the shareholders of the Corporation. XII. Compliance with Section 16 With respect to persons subject to Section 16 of the 1934 Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. XIII. Exchange Provisions; Governing Law The Committee may at any time offer to exchange or buy out any previously granted Option for a payment in cash, Common Stock or another Option, based on the terms and conditions the Committee determines and communicates to the Option holder at the time the offer is made. This Plan shall be governed by the laws of the State of Texas. [Signature Page Follows] 6 AMERICAN PHYSICIANS SERVICE GROUP, INC. By: /s/ W. H. Hayes ------------------------------------ W.H. Hayes Senior Vice President and Secretary S-1 EX-10 3 def-comp.txt DEFERRED COMPENSATION MASTER PALN Exhibit 10.2 AMERICAN PHYSICIANS SERVICE GROUP, INC. AFFILIATED GROUP DEFERRED COMPENSATION MASTER PLAN This American Physicians Service Group, Inc. Affiliated Group Deferred Compensation Master Plan (this "Plan") is entered into to be effective as of the 7th day of December, 2004 by and between the American Physicians Service Group, Inc., Affiliated Group company set forth on Schedule A hereto (the "Employer") and the employee or director identified on Schedule A hereto (the "Participant"). RECITALS A. Participant is an employee or director of Employer. Participant and Employer, as part of Participant's compensation, have agreed that Participant may receive certain additional compensation under the terms and conditions of this Plan. B. Participant and Employer intend for this Plan to be an unfunded, unsecured promise to pay to Participant the Shares (as defined in this Agreement) subject to the terms and conditions of this Plan. C. Participant and Employer intend for this to be a mandatory deferral of compensation; the payment of benefits under this Plan will be deferred in accordance with this Plan. No Participant will have any election to change the deferral of benefits under this Plan. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Plan hereby agree as follows: ARTICLE I DEFINITIONS Capitalized words and phrases not otherwise defined in this Plan and used in this Plan have the following meanings: 1.1 "American Physicians Service Group, Inc. Affiliated Group" shall mean the following companies or entities: American Physicians Group, Inc., a Texas corporation, APS Financial Corporation, a Texas corporation, and FMI Partners, Ltd., a Texas limited partnership. The definition of American Physicians Service Group, Inc. Affiliated Group may be amended from time to time to include other companies. 1.2 "Disability" shall mean "disability" as defined in the Internal Revenue Code of 1986, as amended, (the "Code") section 409A(a)(1)(C) or, if use of the definition in the then current disability policy of Employer does not violate Code section 409A, the definition of "disability" in the then current long term disability policy then in effect for employees of Employer as such policy may change from time to time. 1.3 "Participant's Account" shall mean the book entry account established on behalf of Participant in accordance with Section 2.1 hereof. 1.4 "Participant's Account Balance" shall mean the cumulative sum of the book entries made on behalf of Participant in accordance with Section 2.1 hereof. 1.5 "Termination for Cause" shall mean any one of the following: (a) If the Participant has an employment contract with the Employer, any Termination for Cause under that employment contract shall be a termination for cause under this Plan; (b) Participant is convicted of an offense constituting a felony or involving moral turpitude; or (c) Participant in a material and substantial way (i) violates any written policy of Employer or (ii) fails to follow reasonable instructions from Participant's supervisor or to use good faith efforts to carry out Participant's employment duties and fails to cure the foregoing within fifteen days of notice by such Participant's supervisor of such failure. 1.6 "Committee" shall mean an administrative body designated by the Board of Directors of American Physicians Service Group, Inc. (the "Board"). The Board may designate itself as the Committee or appoint two or more "Non-Employee Directors" to a committee which shall serve as the Committee. ARTICLE II GRANT OF DEFERRED COMPENSATION 2.1 New Participants; Credit to Participant's Account Employer shall admit new Participants into the Plan no later than the last day of the calendar year in the year preceding the first year in which the Participant is to be a Participant in the Plan or as permitted by Code section 409A. For each year in which this Plan is in effect, the Employer may credit to the Participant's Account a number of shares of American Physicians Service Group, Inc. stock as determined by the Committee (the "Annual Credit") (the cumulative sum of all Annual Credits for Participant collectively referred to as the "Shares"), as a book entry only and Participant shall become entitled to receive the Shares in accordance with Article IV hereto. Each year's Annual Credit shall include any shares of American Physicians Service Group, Inc. which were allocated to Participant as a result of a forfeiture by another participant under this Plan. 2.2 Shares Unfunded, Unsecured Participant understands and acknowledges that the credit of Shares in paragraph 2.1 is an unfunded and unsecured promise to distribute the Shares in accordance with Article IV hereto. Upon the grant of deferred compensation to a Participant's Account, the Participant shall have no right to the Shares, shall not be considered a stockholder with respect 2 to the Shares, shall not be entitled to any dividends or entitled to vote the Shares unless and until the Shares are distributed in accordance with the pay-out described in Article IV hereof. No Participant shall have any right to change the deferral of his receipt of benefits under the terms and conditions of this Plan. 2.3 Maximum Number of Shares The maximum number of Shares that may be credited to all Participants under the terms of this Plan is one hundred thousand (150,000). Any credit of any Share which would cause the total number of Shares credited under this Plan to exceed one hundred thousand (150,000) shall be void and have no legal effect. ARTICLE III SCHEDULE OF DEFERRED COMPENSATION 3.1 Schedule The Shares are earned in the year of award and will be subject to the following schedule: Each year's annual credit shall be subject to a separate schedule as follows: On the first day of year following the year in which each Annual Credit is credited to the Participant's Account and on the first day of each of the next four years, twenty percent (20%) of that year's Annual Credit shall be eligible for the application of Article IV hereof (the "Eligible Shares"); the Participant shall only become entitled to receive the Shares as set forth in Article IV hereof. 3.2 Acceleration Upon the occurrence of any of the following 100% of the Shares shall become eligible for the application of Article IV hereof: (i) upon the death of the Participant, (ii) upon the Disability of the Participant, or (iii) upon the termination or resignation of the Participant from the Employer's employment provided that the following conditions are satisfied: (a) if terminated, such termination was not a Termination for Cause and (b) Participant executed a non-competition agreement reasonably satisfactory to Employer. 3.3 Age 60 Upon the Participant's attaining the age of sixty (60) and provided that the Participant has been a Participant in this Plan for at least five (5) years, the Participant shall become entitled to receive the Eligible Shares as defined in Section 3.1, and each year thereafter, Participant shall be entitled to receive that year's Eligible Shares. 3.4 Forfeiture of Shares Upon the occurrence of the following, Participant shall forfeit shares not yet eligible for the application of Article IV hereof pursuant to Sections 3.1, 3.2, or 3.3: (i) if Participant is terminated and such termination is Termination for Cause, or (ii) if Participant resigns for any reason or is terminated, but such termination is not a 3 Termination for Cause, and Participant does not execute a non-competition agreement reasonably satisfactory to Employer. Allocations of forfeitures will be reviewed and approved by the Committee. 3.5 Re-allocation of Forfeited Shares Any forfeited Shares shall be allocated pro-rata to other participants in this Plan based upon the percentage that each participant's account balance bears to the sum of all participants' account balances at the time of the forfeiture. ARTICLE IV PAY-OUT OF DEFERRED COMPENSATION 4.1 Pay-Out of Participant's Entire Account Balance in Lump Sum Each Participant's Account Balance, represented by the Shares, shall be paid to such Participant in full upon the occurrence of the following: (i) the death of the Participant, or (ii) the Disability of the Participant. In order to meet the requirements of pay-out under this Article IV, on the date Participant becomes entitled to the pay-out of Participant's deferred compensation, Employer shall cause the Shares to be issued into the name of the Participant, it being expressly understood that the form of payment for the deferred compensation under this Plan are shares of stock of American Physicians Service Group, Inc. 4.2 Pay-Out at Age 60 Participant shall be paid the Eligible Shares under the terms and conditions as described in Section 3.3 hereof upon Participant attaining age sixty (60) provided Participant meets the requirements set forth in Section 3.3 herein. 4.3 Pay-Out of Participant's Entire Account Balance in Installments In the event that the Participant executed a non-competition agreement reasonably satisfactory to Employer each Participant's Account Balance shall be paid to such Participant in four equal installments beginning with the date of the non-competition agreement and continuing annually thereafter on the anniversary of the non-competition agreement. 4.4 Pay-Out of the Eligible Portion of Participant's Account Balance in Lump Sum The eligible portion of each Participant's Account Balance shall be paid to such Participant in the event that Participant is terminated and such termination is Termination for Cause, or (ii) if Participant resigns for any reason or is terminated but such termination is not a Termination for Cause and Participant does not execute a non-competition agreement reasonably satisfactory to Employer. 4.5 Limitation on Pay-Out for Specified Employees 4 Notwithstanding any other provision of this Plan, in the case of any Participant who is a "Specified Employee" as defined in Code section 409A(a)(2)(B), such Participant shall not be entitled to receive any pay-outs under this Article IV until six (6) months following such Participant's termination of employment, whether or not for cause. 4.6 No Joint Liability No member of the American Physicians Service Group Inc. Affiliated Group shall be liable for the payment of the Shares to any Participant who is not an employee of that company or entity. ARTICLE V DESIGNATION OF BENEFICIARY In the event of the death of the Participant, the Participant's Account Balance shall be payable to the Participant's spouse, if any. Otherwise, the Participant's Account Balance shall be payable to the Participant's estate. ARTICLE VI WITHHOLDING OF TAXES Employer shall take, and Participant shall cooperate with, appropriate measures to assure compliance with state and federal withholding requirements to cover all taxes required to be paid by applicable law. ARTICLE VII MISCELLANEOUS 7.1 Entire Agreement This Plan and Schedule A constitute the entire agreement between the parties and no party shall be liable or bound to any party in any manner by any warranties, representations, or covenants except as specifically set forth in this Plan and Schedule A. The terms and conditions of this Plan and Schedule A shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 7.2 Governing Law This Plan and Schedule A shall be governed by and construed under the laws of the State of Texas applicable to agreements made and fully performable therein. 7.3 Modification; Waiver No modification or amendment of any provision of this Plan or Schedule A shall be effective unless in writing and approved by each of the parties hereto, and no consent or waiver of any provision of this Plan or Schedule A or departure therefrom shall be effective unless in writing and executed by the party against which such consent or waiver is effective. 5 7.4 Headings Section and other headings contained in this Plan and Schedule A are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Plan or any provision hereof. IN WITNESS WHEREOF, this Plan is adopted to be effective as of the date set forth above. EMPLOYER: American Physicians Service Group, Inc. A Texas corporation By: /s/ W.H. Hayes ------------------ Name: W.H. Hayes ------------------ Title: Sr. Vice-President ------------------- APS Financial Corporation, A Texas corporation By: /s/ George S. Conwill --------------------- Name: George S. Conwill --------------------- Title: President --------------------- FMI Partners, Ltd., A Texas limited partnership By: ________________________ Its: General Partner By: /s/ Maury Magids -------------------- Name: Maury Magids -------------------- Title: President -------------------- SCHEDULE A to the American Physicians Service Group, Inc. Affiliated Group Deferred Compensation Master Plan 1. Employer Name: _____________________ 2. Participant Name: ____________________ 3. Annual Credit, First Year: ______________ 4. Annual Credit: Subsequent Years: Year: Credit: ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== ====== ======== Employer: Participant: Name: ____________________ __________________ __________________________ Name: ____________ By: ________________________ Name: _____________________ Title: ______________________ Executed to be effective as of the ____day of __________, 200__. -----END PRIVACY-ENHANCED MESSAGE-----