Exhibit No. 4.2
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.
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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
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respect 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
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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.
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.
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4.5 Limitation on Pay-Out for Specified Employees
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.
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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/ X.X. Xxxxx
Name: X.X. Xxxxx
Title: Senior Vice-President
APS Financial Corporation,
A Texas corporation
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: President
FMI Partners, Ltd.,
A Texas limited partnership
By: APS Facilities Management, Inc.
Its: General Partner
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
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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:
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Employer: Participant:
Name: ____________________ ____________________
__________________________ Name: ______________
By: ________________________
Name: _____________________
Title: ______________________
Executed to be effective as of the ____day of __________, 200__.
