Exhibit 10.40
                            SHARE EXCHANGE AGREEMENT


         This Share Exchange  Agreement  (this  "Agreement") is made and entered
into  as of the 1st day of  April,  1998,  by and  between  American  Physicians
Service Group, Inc., a Texas corporation ("APS") and Antonio Cavazos,  III, M.D.
(the "Shareholder").

                                R E C I T A L S:

         WHEREAS,  pursuant  to  that  certain  Asset  Purchase  Agreement  (the
"Purchase  Agreement") entered into by Shareholder of even date herewith and the
other contracts and agreements to which  Shareholder  was, or was to be, a party
as contemplated in the Purchase  Agreement (the Purchase  Agreement and all such
other contracts and agreements are  hereinafter  referred to collectively as the
"Acquisition Documents"), Shareholder has acquired or will acquire 70,000 shares
(the "PM Shares") of the $0.001 par value per share common stock of APS Practice
Management, Inc., a Texas corporation ("Practice Management"); and

         WHEREAS,  APS has agreed,  on the terms and  subject to the  conditions
hereof, to exchange certain shares of its $0.10 par value per share common stock
("APS Common") for the PM Shares.


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         NOW,  THEREFORE,  in  consideration of the foregoing and other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

         1.  CONDITIONS  TO EXCHANGE  RIGHT.  In addition to the other terms and
conditions  contained in this Agreement,  Shareholder  shall only be entitled to
exchange  the PM  Shares  for  shares  of APS  Common  if each of the  following
conditions has been satisfied:

                  (a) There  shall not have been,  on or before  March 31,  2000
(the  "Determination  Date"), any registered public offering of the common stock
of Practice  Management,  or any other  transaction  or event  pursuant to which
shares of  Practice  Management  of the same  class as the PM Shares  shall have
become publicly traded.; and

                  (b) Shareholder  shall not be, or have been, at any time on or
prior to the date of the  closing  of any  exchange  of stock  pursuant  to this
Agreement (the "Closing Date"),  in breach of, or default under, this Agreement,
any of the  Acquisition  Documents  or any other  contract or agreement to which
Shareholder  and Practice  Management  and/or APS are parties,  and  Shareholder
shall not have threatened to breach or default under this Agreement,  any of the
Acquisition Documents or any such other contract or agreement; and

                  (c) At the Closing Date,  Shareholder  has all requisite legal
capacity  and  authority  to engage  in the  transactions  contemplated  by this
Agreement,  is the owner of all the 

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PM Shares, and the PM Shares are free of any
and all liens, claims or encumbrances of any kind whatsoever; and

                  (d) At or before the Closing Date,  Practice  Management shall
not  be,  or  have  been,  a  party  to any  merger,  consolidation  or  similar
transaction,  or agreement  with  respect  thereto,  pursuant to which  Practice
Management  was not or would  not be,  the named  surviving  entity  after  such
merger, consolidation or other transaction.

         2. EXCHANGE  NOTICE.  In the event all of the  conditions  described in
Section 1 are satisfied as of the Determination  Date and Shareholder  elects to
exercise  its  right  to  exchange  its PM  Shares  for  shares  of APS  Common,
Shareholder shall provide written notice thereof (the "Exchange Notice") to APS,
which  Exchange  Notice  must be  received  by APS not later  than the date (the
"Expiration  Date") which is ninety (90) calendar  days after the  Determination
Date.  In the event (i) any of the  conditions  required  for an  exchange to be
permissible,  as described in Section 1 above,  fail to be satisfied on or prior
to  the  Determination  Date,  or  (ii)  any  of  the  conditions  specified  in
subsections  (b),  (c) and (d) of Section 1 fail to be  satisfied on or prior to
the  Closing  Date,  or (iii) APS  fails to  receive  an  Exchange  Notice  from
Shareholder on or prior to the Expiration  Date;  then, in any such case, all of
Shareholder's  rights under this Agreement shall automatically  terminate and be
of no further force or effect whatsoever.

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         3.       SHARE CONVERSION.

                  (a)  Shareholder's  right to exchange its PM Shares  hereunder
shall  apply as to all,  but not less  than  all,  of the PM  Shares  which  are
eligible for exchange as described in this  paragraph (a) of Section 3. Assuming
Shareholder  has complied  with all of the  conditions  allowing for an exchange
pursuant  to this  Agreement,  30,000 of the PM  Shares  shall be  eligible  for
conversion as provided in this Agreement; and the remaining 40,000 PM Shares, or
a portion thereof,  will only be eligible for an exchange hereunder in the event
there is consummation of a transaction  between  Practice  Management and one or
more physicians (or their  professional  associations)  in Bexar County,  Texas,
save and except for those  physicians set forth on Exhibit A attached hereto and
incorporated  herein for all purposes,  whereby each such physician  enters into
binding and  enforceable  agreements  with  Practice  Management of the type and
nature  ordinarily  relied  upon by Practice  Management  in its  dealings  with
physicians  on or before the  Determination  Date.  In the event that there is a
consummation of any such transaction on or before the  Determination  Date, then
the portion of the 40,000 PM Shares which will be eligible for exchange pursuant
to this Agreement (assuming compliance with all other conditions provided for in
this  Agreement)  will be  determined  by  multiplying  5,000 by the  number  of
physicians  in Bexar County,  Texas,  save and except for those  physicians  set
forth on Exhibit A attached  hereto and  incorporated  herein for all  purposes,
consummating such transactions.

                  Notwithstanding  the  above  or any  other  provision  in this
Agreement,  (i) the Shareholder shall not benefit from, and the above provisions
shall not apply to, any such 

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transaction  between Practice Management and any of
the  physicians  set forth on Exhibit A attached  hereto and (ii) any portion of
the  40,000 PM Shares  which  have not,  as of the  Determination  Date,  become
eligible for exchange  hereunder  (pursuant  to the above  provisions)  shall no
longer be eligible for exchange under any circumstances.

                  (b) In the  event  Shareholder  has  complied  with all of the
conditions  allowing for an exchange pursuant to this Agreement,  the closing of
any such exchange (the  "Closing")  shall occur at the offices of APS in Austin,
Texas,  on such day and at such time as the parties  hereto may  mutually  agree
upon,  or in the failure to so agree,  at 10:00 a.m.  Austin,  Texas time on the
first  business day that falls thirty (30) days after the  Expiration  Date. The
maximum number of PM Shares which Shareholder has the right to exchange pursuant
to  paragraph  (a)  of  this  Section  are   hereinafter   referred  to  as  the
"Exchangeable  PM Shares";  and the "Gross  Exchange Value" for purposes of this
Agreement is the gross dollar amount  determined by multiplying the Exchangeable
PM Shares by $5.00 per share (the "Exchange Value"). For purposes of determining
the number of shares of APS Common which may be received upon any  exchange,  no
consideration  will be given to stock  dividends,  stock  splits,  reverse stock
splits or  recapitalizations  to which Practice  Management or the PM Shares are
subject after the date this Agreement was originally entered into as first above
written. At the Closing, Shareholder shall be entitled to receive such shares of
APS Common as is determined by dividing the Gross  Exchange Value by the average
of the  "bid"  and  "ask"  prices  for APS  Common  as  quoted  by the  National
Association of Securities  Dealers  Automated  Quotation  System at the close of
trading on each of the last five (5) business  days  immediately  preceding  the
Closing Date.

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         (c) At the Closing,  Shareholder shall tender its share  certificate(s)
for all of the Exchangeable PM Shares, duly endorsed in blank, to APS, and shall
also  provide APS with an  executed  blank stock  power,  in form and  substance
reasonably acceptable to APS, wherein Shareholder represents and warrants to APS
(i) that  Shareholder has all necessary  legal capacity,  power and authority to
engage in the transactions  contemplated  hereby, and (ii) that Shareholder owns
all interests in and to the  Exchangeable PM Shares and that the Exchangeable PM
Shares  are  being  transferred  to APS free and clear of all  liens,  claims or
encumbrances of any kind  whatsoever.  The shares of APS Common that Shareholder
receives in the  exchange are  hereinafter  referred to as the "New APS Shares."
The parties  acknowledge and agree that Shareholder shall receive a whole number
of shares of APS Common only,  and that any fractional  share amounts  resulting
from the foregoing  conversion  calculation  shall be rounded up or down, as the
case  may be,  to the  next  whole  number  of  shares.  APS  shall  be under no
obligation to pay any cash or other amounts with respect to any fractional share
amounts,  or to issue  any  fractional  share  amounts  to  Shareholder.  At the
Closing,  Shareholder  shall either receive a share  certificate for all its New
APS Shares or, if APS' transfer  agent is unable to produce such  certificate by
the Closing  Date,  will receive a copy of a registered  letter sent from APS to
the transfer agent instructing the transfer agent to deliver such certificate in
the name of Shareholder directly to Shareholder or Shareholder's designee.

         4. NEW APS  SHARES  TRANSFERABILITY.  APS will have  registered  at its
expense the New APS Shares with the Securities and Exchange Commission, and made
such other filings and taken such other steps as necessary,  so that Shareholder
may  immediately  sell,  or  otherwise  convey,   the  New  APS  Shares  without
restriction  (except  as  otherwise  provided  below).  

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Shareholder  agrees  to
cooperate  fully  and in all  respects  with  APS in  connection  with  any such
registration,  whether  such  cooperation  is  requested  before  or  after  the
Determination Date. Failure of Shareholder to cooperate fully, including without
limitation,  promptly  providing  complete and accurate  information  to APS, in
connection  with  the  registration  of any  APS  Common  shares,  whether  such
cooperation  and/or  information is requested before or after the  Determination
Date or  before  or  after  Shareholder  delivers  any  Exchange  Notice,  shall
automatically    terminate    Shareholder's   rights   under   this   Agreement.
Notwithstanding anything contained herein to the contrary, in the event that APS
is in the process,  either at the Closing Date or at the Determination  Date, of
registering  and/or  selling  any of its  capital  stock in or  pursuant  to any
underwritten  public offering,  upon the written request of the lead underwriter
involved therein,  Shareholder  agrees,  and shall then agree in writing in form
and substance  reasonably  acceptable  to APS, to not sell,  attempt to sell, or
solicit  or accept any offers to sell or  otherwise  convey,  any of the New APS
Shares for such period of time (not to exceed one hundred  eighty (180) days) as
may be requested by such lead underwriter.

         5.       MISCELLANEOUS.

                  (a) Fees and Expenses.  Except as otherwise  herein  provided,
each  party  hereto  agrees  to bear all fees and  expenses  (including  without
limitation  all fees and expenses for its legal counsel and any  accountants  or
other  professional  advisors)  incurred  in  connection  with the  transactions
contemplated hereby.

                  (b) GOVERNING LAW AND VENUE.  This Agreement shall be governed
by, and  

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construed  and enforced in  accordance  with,  the laws of the State of
Texas  (except  the  laws  of  Texas  that  would  render  such  choice  of  law
ineffective).  Venue for any action  relating to this Agreement  shall be proper
only in Texas.

                  (c)    COUNTERPARTS.    This   Agreement   may   be   executed
simultaneously  in one or more  counterparts,  each of which  shall be deemed an
original,  and  all  of  which  together  shall  constitute  one  and  the  same
instrument.

                  (d)  INUREMENT.  This  Agreement  shall  be  binding  upon the
parties hereto and their respective heirs, legal representatives, successors and
permitted  assigns.  No party hereto may assign this Agreement,  or any of their
rights or obligations  hereunder,  without the express prior written  consent of
all parties hereto in each instance.

                  (e)  NOTICES.  Any notices  required or  permitted to be given
under this Agreement  shall be given in writing and shall be deemed received (a)
when  personally  delivered  to the  relevant  party at its address as set forth
below or (b) if sent by mail, on the third day following the date when deposited
in the United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:

                  APS:               American Physicians Service Group, Inc.
                                     1301 Capital of Texas Highway, Suite C-300
                                     Austin, Texas 78746-6550
                                     Attn: President

                  Shareholder:       Antonio Cavazos, III, M.D.
                                     4499 Medical Drive, Suite 102
                                     San Antonio, Texas 78229

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Any party may change its address for purposes of this Agreement by proper notice
to the other party.

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         IN WITNESS  WHEREOF,  the parties hereto have executed this  Agreement,
intending to be legally bound hereby, as of the date first above written.

APS:                                  AMERICAN PHYSICIANS SERVICE GROUP, INC.

                                      By:           /s/  William H. Hayes       
                                                    ----------------------
                                      Printed Name:      William H. Hayes       
                                                    ----------------------
                                      Title:             Sr. VP Finance         
                                                    ----------------------
SHAREHOLDER:

                                      /s/  Antonio Cavazos, III, M.D.
                                      -------------------------------



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