Exhibit
10.2
EXECUTIVE EMPLOYMENT
AGREEMENT
This Employment
Agreement (this “ Agreement ”) is by and
between American Physicians Service Group, Inc., a Texas
corporation (“ Employer ”) and Timothy L.
LaFrey, an individual (“ Executive ”),
and shall be effective as of April 1, 2009 (the “
Effective Date ”).
Preliminary
Statements
Executive desires to be
employed by Employer upon the terms and conditions stated herein,
and Employer desires to employ Executive provided that, in so
doing, it can protect its confidential information, business,
accounts, patronage and goodwill.
Employer and Executive
have specifically determined that the terms of this Agreement are
fair and reasonable.
Statement of
Agreement
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained
herein, and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I.
Term; Termination;
Prior Agreements .
Section 1.1
Term
. Employer hereby
hires Executive and Executive accepts such employment for a term of
four years commencing on the Effective Date.
Section 1.2
Termination Upon
Expiration .
Unless earlier terminated by Employer or Executive in
accordance with the terms of this Agreement, this Agreement shall
terminate automatically upon the expiration of the four-year term
described in Section 1.1.
Section 1.3
Termination Upon
Death or Permanent Disability . This Agreement shall be
automatically terminated on the death of Executive or on the
permanent disability of Executive if Executive is no longer able to
perform in all material respects the usual and customary duties of
Executive’s employment hereunder. For purposes hereof,
any condition which in reasonable likelihood is expected to impair
Executive’s ability to materially perform Executive’s
duties hereunder for a period of three months or more shall be
considered to be permanent.
Section 1.4
Termination for
Cause .
If this Agreement has not been previously terminated, and no
party has previously given notice of termination pursuant to
Section 1.5, Section 1.6 or Section 1.7, then
Employer may terminate this Agreement “ for
cause ” if:
(a)
In connection with the
business of Employer, Executive is convicted of an offense
constituting a felony or involving moral turpitude; or
(b)
In a material and
substantial way, (i) Executive (A) violates any written
policy of Employer, (B) violates any provision of this
Agreement, (C) fails to follow reasonable written instructions
or directions from the Board of Directors of Employer (the “
Board ”), or (D) fails to use good-faith
efforts to perform the services required pursuant to this
Agreement; and (ii) Executive fails to materially cure such
violation or failure within fifteen days after receiving written
notice from the Board clearly specifying the act or circumstances
that gave rise to such violation or failure.
A notice of termination
pursuant to this Section shall be in writing and shall state the
alleged reason for termination. Executive, within not less
than fifteen nor more than thirty days after such notice, shall be
given the opportunity to appear before the Board, or a committee
thereof, to rebut or dispute the alleged reason for termination.
If the Board or committee determines, by a majority of the
disinterested directors, after having given Executive the
opportunity to rebut or dispute the allegations, that such reason
is indeed valid, Employer may immediately terminate
Executive’s employment under this Agreement for cause.
Immediately upon giving the notice contemplated by this
paragraph, Employer may elect, during the pendency of such inquiry,
to relieve Executive of Executive’s regular duties.
Section 1.5
Termination for Good
Reason .
Any termination by Executive of this Agreement pursuant to
this Section shall be deemed a termination by Executive for
“ good reason. ” Executive may terminate
this Agreement for good reason any time after a Change of Control
in accordance with any of the following (with the further agreement
that any election by Executive to not terminate this Agreement
pursuant to this Section following a particular Change of
Control shall not prevent the application of this Section to a
subsequent Change of Control):
(a)
Executive may terminate
this Agreement for any or no reason upon six months prior written
notice, which notice cannot be given before the consummation of
such Change of Control or after the expiration of the term of this
Agreement pursuant to Section 1.1;
(b)
Executive may terminate
this Agreement upon thirty days’ prior written notice if
Executive’s base salary, as provided hereunder, is
diminished;
(c)
Executive may terminate
this Agreement upon thirty days’ prior written notice if
Employer requires that Executive move to a city other than
Austin;
(d)
Executive may terminate
this Agreement upon thirty days’ prior written notice if the
Board or any person authorized to act by the Board (for purposes of
this Agreement, any such authorized person is referred to as an
“ Authorized Board Designee ”) materially
and unreasonably interferes with Executive’s ability to
fulfill Executive’s job duties; or
(e)
Executive may terminate
this Agreement upon thirty days’ prior written notice if
Executive is reassigned to a position with diminished
responsibilities, or Executive’s job responsibilities are
materially narrowed or diminished.
Without limiting the
provisions of Section 1.8 hereof, Executive agrees that
Employer can relieve Executive of Executive’s duties
hereunder prior to the end of the applicable notice period provided
for in this Section, and in such event, Executive shall not
thereafter be entitled to any of the benefits or salary described
in Article III hereof. Furthermore, if the term of this
Agreement expires pursuant to Section 1.1 prior to the end of
any notice period otherwise required under this Section, then the
applicable notice period does not apply and notice may be given at
any time prior to expiration pursuant to
Section 1.1.
Section 1.6
Termination of
Agreement by Employer Without Cause . Employer has the right to
terminate this Agreement, other than “for cause,” on
thirty days’ prior written notice. Any termination of
this Agreement by Employer other than pursuant to the express terms
of Section 1.2, Section 1.3 or Section 1.4 shall be
deemed a termination pursuant to this Section, irrespective of
whether the notice required under this Section is properly
given.
Section 1.7
Termination of
Agreement by Executive Without Good Reason . Executive may terminate
Executive’s employment, other than for “good
reason,” upon thirty days’ prior written notice stating
that this Agreement is terminated other than for “good
reason.” Executive agrees that Employer can relieve Executive
of Executive’s duties hereunder prior to the end of such
thirty-day notice period, and in such event, Executive shall not
thereafter be entitled to any of the benefits or salary described
in Article III hereof.
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Section 1.8
Executive’s
Rights Upon Termination . Upon termination of this
Agreement, Executive shall be entitled to the following:
(a)
If this Agreement is
terminated pursuant to Section 1.2, Section 1.3,
Section 1.4, or Section 1.7 then Employer shall pay
Executive or Executive’s representative, as the case may be,
Executive’s then current base salary (excluding any bonuses
and non-cash benefits) through the effective date of termination
(which, in the case of Section 1.7, shall follow any portion
of the applicable notice period during which Executive has not been
relieved of Executive’s duties hereunder), and Employer shall
have no further obligations hereunder.
(b)
If Employer terminates
this Agreement without cause pursuant to Section 1.6, or
Executive terminates this Agreement pursuant to
Section 1.5(b), (c), (d), or (e) then, in addition to
receiving Executive’s then current base salary through the
effective date of termination Executive shall receive within
fifteen days of the effective date of termination a lump sum
payment equal to four times the average annual total cash
compensation earned by Executive for the prior four years (or the
period since Executive’s initial employment with Employer, if
less than four years), including, without limitation, salary and
bonus, and excluding all equity-based compensation, including, but
not limited to, deferred stock and stock options.
(c)
If Executive terminates
this Agreement for good reason pursuant to Section 1.5(a),
then, in addition to receiving Executive’s then current base
salary through the effective date of termination Executive shall
receive within fifteen days of the effective date of termination a
lump sum payment equal to two times the average annual total cash
compensation earned by Executive for the prior four years (or the
period since Executive’s initial employment with Employer, if
less than four years), including, without limitation, salary and
bonus, and excluding all equity-based compensation, including, but
not limited to, deferred stock and stock options.
(d)
Executive and Employer
agree that the effective date of any termination pursuant to
Section 1.5 shall be the earlier of the end of the applicable
notice period, if any, or the date on which Employer relieves
Executive of Executive’s duties hereunder. Executive
and Employer agree that the effective date of any termination
pursuant to Section 1.6 hereof shall be only upon the
expiration of the thirty-day notice period described in
Section 1.6, regardless of whether Employer earlier relieves
Executive of Executive’s duties hereunder. Furthermore,
if this Agreement is terminated after a Change of Control, and
Executive holds any rights or options exercisable or exchangeable
for, or convertible into, a class of capital stock of Employer that
is not or will not be publicly traded on the NASDAQ or another
national exchange after such termination or Change of Control, then
Employer agrees to buy from Executive all such rights and options
that have an exercise price below the per share price assigned to
the capital stock in the Change of Control, or if no price was
assigned, the per share market price on the date of the Change of
Control (whichever price is applicable, the “ Market
Price ”). The purchase price for each such
right or option shall be determined by multiplying the number of
shares of capital stock that may be acquired using such right or
option by the difference between the exercise price stated in such
right or option and the Market Price.
Section 1.9
Survival
. Any termination
of this Agreement and Executive’s employment as a result
thereof shall not release either Employer or Executive from their
respective obligations to the date of termination nor from the
provisions of this Agreement which, by necessary or reasonable
implication, are intended to apply after termination of this
Agreement, including, without limitation, the provisions of
Article IV. Furthermore, neither the termination of this
Agreement nor the termination of Executive’s employment under
this Agreement shall affect, limit, or modify in any manner the
existence or enforceability of any other written agreement between
Executive and Employer, even if such other agreements provide
employment-related benefits to Executive.
Section 1.10
“ Change of
Control .” As used in this Agreement, “
Change of Control ” shall mean the occurrence
of any of the following:
(a)
Any person, entity or
“group” within the meaning of Section 13(d)
or 14(d) of the of the Securities and Exchange Act
of 1934 (the “ Exchange Act ”)
becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board;
(b)
A merger,
reorganization or consolidation whereby Employer’s equity
holders existing immediately prior to such merger, reorganization
or consolidation do not, immediately after consummation of such
reorganization, merger or consolidation, own more than 50% of
the combined voting power of the surviving entity’s then
outstanding voting securities entitled to vote generally in the
election of directors;
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(c)
The sale of all or
substantially all of Employer’s assets to an entity in which
Employer, any subsidiary of Employer, or Employer’s equity
holders existing immediately prior to such sale beneficially own
less than 50% of the combined voting power of such acquiring
entity’s then outstanding voting securities entitled to vote
generally in the election of directors; or
(d)
Any change in the
identity of directors constituting a majority o
