Agency Agreement for Subscription and Best Efforts Offering of Common Stock by American Physicians Capital, Inc. and ABN AMRO Incorporated

Summary

American Physicians Capital, Inc. and Mutual Insurance Corporation of America (MICOA) have entered into an agreement with ABN AMRO Incorporated to act as agent for the offer and sale of up to 10,000,000 shares of common stock. The shares will be offered first to eligible policyholders and certain officers and directors, with any remaining shares offered to the public on a best efforts basis. ABN AMRO is not required to purchase any shares. The agreement outlines the parties' responsibilities and the process for the stock offering related to MICOA's conversion to a stock company.

EX-1.1 2 k56045a2ex1-1.txt FORM OF AGENCY AGREEMENT 1 EXHIBIT 1.1 Up to 10,000,000 Shares AMERICAN PHYSICIANS CAPITAL, INC. (a Michigan corporation) Common Stock (no par value) AGENCY AGREEMENT __________________, 2000 ABN AMRO INCORPORATED 1290 Avenue of the Americas New York, New York 10104-0101 Ladies and Gentlemen: Pursuant to the terms of this Agency Agreement (this "Agreement"), American Physicians Capital, Inc., a Michigan corporation (the "Company"), and Mutual Insurance Corporation of America, a Michigan mutual insurance company ("MICOA"), hereby confirm their agreement with ABN AMRO Incorporated ("the Agent") with respect to the matters set forth herein including the offer and sale by the Company of up to 10,000,000 shares (the "Shares") of the Company's common stock, no par value (the "Common Stock"). The Company was formed in connection with a Plan of Conversion dated June 28, 2000 (together with any amendments thereto, the "Plan of Conversion"), pursuant to which MICOA is converting from a mutual insurance company to stock company form (the "Conversion"). Upon consummation of the Conversion, the Company will become the holding company for MICOA and its subsidiaries. The Shares to be issued will be offered by the Company at a price of $____ per share, subject to downward adjustment in certain circumstances as provided in the Plan of Conversion (the "Purchase Price") in a subscription offering (the "Subscription Offering") pursuant to nontransferable subscription rights being granted to eligible policyholders of MICOA and to certain officers and directors of the Company and MICOA, all on the terms and subject to the conditions set forth in Article V of the Plan of Conversion. Subject to the prior rights of holders of subscription rights, any Shares not subscribed for in the Subscription Offering may be sold to certain members of the general public at the Purchase Price in a "best efforts" underwritten offering (the "Best Efforts Offering," and together with the Subscription Offering, the "Subscription and Best Efforts Offerings") to be commenced concurrently with the Subscription Offering. The Best Efforts Offering shall be made only to 2 those persons described in Section 6.1 of the Plan of Conversion, and only on the terms and subject to the conditions set forth in the Plan of Conversion. The Agent is being retained by the Company and MICOA to act as the Company's subscription agent in connection with the Shares being offered in the Subscription Offering, and to act as exclusive agent on a "best efforts" basis in connection with the Shares being offered in the Best Efforts Offering. Neither the Subscription Offering nor the Best Efforts Offering constitutes a firm commitment underwritten offering, and the Agent shall have no obligation to purchase any of the Shares offered in connection therewith. It is currently anticipated by the Company and MICOA that any Shares not subscribed for in the Subscription and Best Efforts Offerings will be offered in a firm commitment underwritten offering (the "Underwritten Offering"). The Subscription and Best Efforts Offerings and the Underwritten Offering are sometimes hereinafter referred to collectively as the "Offerings." SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company and MICOA jointly and severally represent and warrant to the Agent as set forth in this Section 1. Unless the context otherwise requires, references in this Agreement to "Subsidiaries" refers to MICOA and each of its direct and indirect majority owned corporations and limited liability companies which will be direct or indirect subsidiaries of the Company immediately after the Effective Date. (i) The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-1 (File No. 333-41136), including a prospectus, relating to the Shares to be offered in the Subscription and Best Efforts Offerings, and such registration statement has been declared effective by the Commission, and no stop order has issued with respect thereto and no proceedings therefor have been initiated or, to the knowledge of the Company or MICOA, threatened by the Commission. There have been or will promptly be delivered to the Agent three signed copies of such registration statement and amendments, three copies of each exhibit filed therewith, and conformed copies of such registration statement and amendments (but without exhibits) and of the related final prospectus. The term "Registration Statement" as used in this Agreement shall mean such registration statement at the time such registration statement became effective and, in the event any amendment thereto becomes effective prior to the Closing Date (as hereinafter defined), shall also mean such registration statement as so amended. The term "Prospectus" as used in this Agreement shall mean the form of prospectus included in the Registration Statement at the time it became effective or as subsequently amended. The Securities Exchange Act of 1934, as am5ended, and the rules and regulations of the Commission thereunder are hereinafter collectively referred to as the "Exchange Act." (ii) Neither the Commission nor any other court or other governmental agency or body has issued any order preventing or suspending the use of the Prospectus, and the Prospectus complied in all material respects when so filed with the requirements of the Act. 2 3 (iii) The Registration Statement in the form in which it became effective, and the Prospectus when and in the form last filed with the Commission as part of the Registration Statement prior to effectiveness, and when any supplement or amendment thereto is filed with the Commission, each will comply in all material respects with the requirements of the Act, will not at any such time contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This representation and warranty does not apply to statements in or omissions from the Registration Statement or the Prospectus (or any supplement or amendment thereto) made in reliance upon and in conformity with information relating to the Agent furnished to the Company in writing by or on behalf of the Agent specifically for use in the Registration Statement. (iv) There is no contract or other document of a character required to be described in the Registration Statement or Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. (v) The accountants who have expressed their opinions with respect to certain of the financial statements of the Company included in the Registration Statement and the Prospectus, are independent public accountants as required by the Act. (vi) The consolidated financial statements, together with the notes thereto, of the Company included in the Registration Statement and the Prospectus comply in all material respects with the Act and present fairly the consolidated financial position of the Company as of the dates indicated, and the consolidated results of operations, cash flows and changes in financial position of the Company for the periods specified; and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved except to the extent disclosed therein. The pro forma financial statements and other pro forma information included in the Prospectus present fairly the information shown therein, have been prepared in accordance with generally accepted accounting principles and the Commission's rules and guidelines with respect to pro forma financial statements and other pro forma information, have been properly compiled on the pro forma basis described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate under the circumstances. (vii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan, with full corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and Prospectus. The Company is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification, except in any such case in which the failure to so qualify or be in good standing would not have a material adverse effect upon the business of the Company and its Subsidiaries, taken as a whole; and no proceeding of which the Company or MICOA 3 4 has knowledge has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. (viii) MICOA has been duly organized and is validly existing as a mutual insurance company in good standing under the laws of the State of Michigan, with full corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and Prospectus. MICOA is duly qualified to do business as a foreign insurer and in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification, except in any such case in which the failure to so qualify or be in good standing would not have a material adverse effect upon the business of the Company and its Subsidiaries, taken as a whole; and no proceeding of which the Company or MICOA has knowledge has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. Immediately following the Effective Date (as hereinafter defined), MICOA will be duly organized and validly existing as a stock insurance company in good standing under the laws of the State of Michigan. (ix) Except for SURF (Barbados) Ltd., which would require governmental approval to commence operations, and except as disclosed in the Registration Statement and Prospectus, each of the Subsidiaries has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with full power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and Prospectus. Each of the Subsidiaries is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification, except in any such case in which the failure to so qualify or be in good standing would not have a material adverse effect on the business of the Company and its Subsidiaries, taken as a whole. Except for the capital stock of the Subsidiaries and except as otherwise described in the Prospectus, the Company does not own any capital stock of, or other securities evidencing an equity interest in, any corporation, partnership or other entity (other than interests in real property partnerships or limited liability companies). All of the issued and outstanding shares of capital stock of the Subsidiaries have been duly and validly authorized and issued, are fully paid and non-assessable, and except as described in the Prospectus, are directly or indirectly owned by MICOA (other than preferred stock issued by MICOA Indemnity (Bermuda) Ltd. in the ordinary course of its business), free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature Except as described in the Prospectus, there are no outstanding subscriptions, rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock of any of the Subsidiaries. (x) The Company has an authorized and outstanding capitalization as set forth in the Prospectus and the Shares conform to the description thereof contained in the Prospectus. All of the issued and outstanding shares of Common Stock have been duly authorized, validly issued and are fully paid and non-assessable and free of preemptive or other similar rights and there are no options, agreements, contracts or other rights in 4 5 existence to acquire from the Company any shares of Common Stock, except as set forth in the Prospectus. (xi) The Shares to be sold by the Company as contemplated by this Agreement have been duly authorized and, when issued and paid for by the purchasers thereof, will be validly issued, fully paid and non-assessable; the holders of the Shares will not be subject to personal liability by reason of being such holders; there are no holders of Shares of the Company having rights, contractual or otherwise, to registration thereof or preemptive rights to purchase Common Stock; except as disclosed in the Registration Statement and Prospectus, all corporate actions required to be taken for the authorization, issue and sale of the Shares have been validly and sufficiently taken; and upon delivery of and payment for such Shares hereunder, the purchasers thereof will acquire valid and marketable title thereto, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature. (xii) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated or contemplated therein, there has not been (A) any material adverse change in the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as a whole, whether or not arising in the ordinary course of business, (B) any material transaction entered into, or any material liability or obligation incurred, by the Company or its Subsidiaries other than in the ordinary course of business, (C) any change in the capital stock, or material increase in the short-term debt or long-term debt of the Company or its Subsidiaries, or (D) any dividend or distribution of any kind declared, paid or made by the Company or its Subsidiaries on its capital stock other than dividends by any Subsidiary to the Company or any Subsidiary. (xiii) The Company and each of its Subsidiaries have good and marketable title to all properties and assets reflected as owned in the financial statements hereinabove described or described in the Prospectus as owned by it them, free and clear of all liens, charges, encumbrances or restrictions of any kind, except such as are referred to in such financial statements or the Prospectus or which are not material to the business of the Company and its Subsidiaries, taken as a whole; all of the leases and subleases material to the business of the Company and its Subsidiaries, taken as a whole, or under which the Company or its Subsidiaries holds properties are in full force and effect; and neither the Company nor any of its Subsidiaries has received any notice of any material claim of any sort which has been asserted by anyone adverse to the rights of the Company or any Subsidiary as owner or as lessee or sublessee under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease. (xiv) Neither the Company nor any of its Subsidiaries is in default in the observance of any provision of its Articles of Incorporation or by-laws, or in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or any of its properties may be bound, the effect of 5 6 which could be materially adverse to the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as a whole. (xv) The execution and delivery of this Agreement, the issuance and delivery of the Shares, the consummation of the transactions contemplated herein and in the Registration Statement and compliance with the terms of this Agreement have been duly authorized by all necessary corporate action and will not result in any violation of the Articles of Incorporation or by-laws of the Company or any of its Subsidiaries, and will not result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge, encumbrance or restriction of any kind upon any property or assets of the Company or any of its Subsidiaries under any material contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries, or any of their respective properties, is bound, or any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their respective properties which breach or default would have a material adverse effect upon the business of the Company and its Subsidiaries, taken as a whole. Except for approval of an exemption application filed with the Illinois Department of Insurance, no approval, authorization or consent of any court, regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its Subsidiaries is required in connection with the sale of the Shares, except such as may be required under the Act, state Blue Sky laws or from the clearance of the offering with the National Association of Securities Dealers, Inc. (the "NASD"). (xvi) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, or any arbitrator or arbitration panel, now pending or, to the knowledge of the Company or MICOA, threatened against or affecting the Company or any of its Subsidiaries which could result in any material adverse change to the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as whole; and there is no decree, judgment or order of any kind in existence against or restraining the Company or any of its Subsidiaries, or any of its their respective officers, employees or directors, from taking any actions of any kind in connection with the business of the Company or any such Subsidiary. (xvii) The Company and each of its Subsidiaries own or possess or have obtained all material governmental licenses, permits, consents, orders, approvals and other authorizations necessary to lease or own, as the case may be, and to operate their properties and to carry on their businesses as presently conducted, except in any such case in which the failure to have or obtain such governmental licenses, permits, consents, orders, approvals and other authorizations would not have a material adverse effect upon the business of the Company and its Subsidiaries, taken as a whole, and neither the Company nor any such Subsidiary has received any notice of proceedings related to revocation or modification of any such licenses, permits, consents, orders, approvals or authorizations which singly or in the aggregate, if the subject of an unfavorable ruling or 6 7 finding, would be materially adverse to the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as a whole. Without limiting the generality of the foregoing, each of MICOA and the other Subsidiaries that are insurance companies (the "Insurance Company Subsidiaries") has all requisite power and authority to carry on an insurance business pursuant to and to the extent of the certificates of authority issued them under the laws of the jurisdictions in which they conduct their insurance business and each has all requisite power, authority and licenses to carry on their respective businesses. Except as disclosed in the Prospectus, the authority of each of the Insurance Company Subsidiaries to write the classes and lines of insurance authorized by such licenses, certificates, permits and other authorizations and described in the Prospectus is unrestricted and none of the Insurance Company Subsidiaries is a party to any agreement, formal or informal, with any regulatory official or other person limiting the ability of any of them from making full use of the licenses, certificates, permits and other authorizations issued to them or requiring them to comply with regulatory standards or procedures or requirements different from those applicable to companies with comparable or similar licenses, certificates, permits and other authorizations, except when such restriction, limitation or requirement would not have a material adverse effect on the financial condition, results of operations or business affairs of the Company and its Subsidiaries, taken as a whole. (xviii) Except with respect to matters described in (xx), (xxvi) and (xxviii) of this Section 1 (which matters shall be governed by such provisions), the conduct of the business of the Company and each of its Subsidiaries is in compliance with all applicable federal, state and local laws and regulations that regulate the business of the Company or such Subsidiaries, where the effect of the failure to comply would be materially adverse to the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as a whole. (xix) The Company together with its Subsidiaries, owns or possesses, or can acquire on reasonable terms, all right, title and interest in or to, or has duly licensed from third parties, all patents, trademarks, service marks, copyrights, trade names, trade secrets and other proprietary rights ("Trade Rights") necessary to conduct the business now or proposed to be conducted by it, and neither the Company nor any of its Subsidiaries has received any notice of, and has no knowledge of, infringement of or conflict with asserted rights of others with respect to any such Trade Rights which, singly or in the aggregate, if the subject of any unfavorable decision, ruling or finding, would be materially adverse to the condition (financial or otherwise), earnings, affairs, business or prospects of the Company and its Subsidiaries, taken as a whole. (xx) The Company and its Subsidiaries have filed all tax returns required to be filed and have paid all taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any tax returns which the Company or any such Subsidiary is contesting in good faith or which are not material to the Company and its Subsidiaries, taken as a whole, and there is no tax deficiency that has been, or to the knowledge of the Company or MICOA might be, asserted against the Company or any of its properties or assets that would or could be expected to have a material adverse affect 7 8 upon the condition (financial or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole. (xxi) This Agreement has been duly executed and delivered by each of the Company and MICOA. (xxii) The Company has filed an application to list the Shares on the Nasdaq National Market System and has no reason to believe that the listing will not be approved at the conclusion of the Offerings. (xxiii) None of the Company nor any of the Subsidiaries is, and none intends to conduct its business in a manner in which it would become, an "investment company" as defined in Section 3(a) of the Investment Company Act of 1940, as amended (the "Investment Company Act"). (xxiv) All offers and sales of the Company's capital stock prior to the date hereof were at all relevant times exempt from the registration requirements of the Act and were duly registered with, or the subject of an available exemption from, the registration requirements of the applicable state securities or Blue Sky laws. (xxv) Except as disclosed in the Registration Statement and the Prospectus, no transaction has occurred between or among the Company or any of its Subsidiaries, on the one hand, and any of their officers or directors or any affiliate or affiliates of any such officer or director, on the other hand, that is required to be so disclosed, including, but not limited to, any outstanding loans, advances or guaranties of indebtedness by the Company or any such Subsidiary to or for the benefit of any of their affiliates, or any of the officers or directors of the Company or any such Subsidiary, or any family member of any of them. (xxvi) Neither the Company nor any Subsidiary has, directly or indirectly, at any time (A) made any contributions to any candidate for foreign political office, or if made, failed to disclose fully any such contribution made in violation of law, or (B) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments or contributions required or allowed by applicable law. The Company's internal accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended. (xxvii) RP Financial, LC, who is referred to and whose Valuation Analysis Letter appears in the Prospectus, was, as of the date of such Letter, and is, as of the date hereof, an independent appraiser with respect to the Company and MICOA. (xxviii) The Company and each of its Subsidiaries (A) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance 8 9 with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole. (xxix) The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management's general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxx) In connection with the Conversion, the Company and MICOA have made all required filings under applicable insurance holding company statutes required to have been made at or prior to the Effective Date, and have received approvals of, or are exempt in respect of, acquisition of control and/or affiliate transactions in each jurisdiction in which such filings, approvals or exemptions are required to have been received at or prior to the Effective Date, except where the failure to have made such filings or receive such approvals or exemptions in any such jurisdiction would not, singly or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole; the Insurance Company Subsidiaries are each in compliance with, and each conducts its businesses in conformity with, all applicable insurance laws and regulations, except where the failure to so comply or conform would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. (xxxi) The Plan of Conversion has been duly adopted by the required vote of the Board of Directors of MICOA in compliance with the applicable requirements of Chapter 59 of the Michigan Insurance Code (the "Conversion Statute") and was submitted to the Commissioner of the Office of Financial and Insurance Services of the State of Michigan (the "Commissioner") in the manner, and accompanied by all information, required by the Conversion Statute and conforms in all material respects to the requirements of the laws of the State of Michigan applicable to the reorganization of a mutual insurance company into a stock insurance company and any applicable published rules, regulations or guidelines of the Commissioner in respect thereof; on September 8, 2000 the Commissioner issued an order approving the Plan of Conversion and on ________, 2000 the Commissioner issued an order approving an amendment thereto; MICOA will hold a special meeting of policyholders on _______________, 2000 in order to seek approval of the Plan of Conversion from Eligible Policyholders (as defined in the Plan of Conversion) in accordance with applicable provisions of the Michigan Insurance Code and the Articles of Incorporation and Bylaws of MICOA; the approval of the Commissioner has not been rescinded or otherwise withdrawn; no other approvals are required to be obtained under applicable law for the effectiveness of the Plan of Conversion (the date of such effectiveness, the "Effective Date"); on the Effective Date, 9 10 the Plan of Conversion will become effective in accordance with its terms and all aspects of the Conversion to have been completed on or prior to the Effective Date will be completed in accordance with the Plan of Conversion and Michigan law; and prior to or contemporaneously with the Closing Date each of the actions required to occur and conditions required to be satisfied on or prior to the Effective Date pursuant to the Commissioner's order or the Plan of Conversion will have occurred or have been satisfied. (xxxii) The proxy statement mailed to policyholders (the "Proxy Statement"), as of its date and as of the date of the vote of the Eligible Policyholders, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (h) Any certificate signed by any officer of the Company or MICOA and delivered to the Agent or to counsel for the Agent shall be deemed a representation and warranty by the Company or MICOA, as applicable, to the Agent as to the matters covered thereby. SECTION 2. APPOINTMENT OF THE AGENT; FEES. (a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby appoints ABN AMRO Incorporated to act as its Agent, to consult with and advise the Company, and to assist the Company with the solicitation of subscriptions and purchase orders for Shares in connection with the Company's sale of Shares in the Subscription and Best Efforts Offerings. On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, the Agent accepts such appointment and agrees to assist the Company in the Subscription and Best Efforts Offerings through selling Shares on a "best efforts" basis through the Agent's distribution system; provided, however, that the Agent shall not be obligated to (i) obtain subscriptions or orders for any particular number of Shares, or (ii) take any action which is inconsistent with any applicable laws, regulations, decisions or orders. Agent's duties hereunder shall be limited to responding to investment-related inquiries by potential participants in the Subscription and Best Efforts Offerings as requested on behalf of the Company by ChaseMellon Shareholder Services, LLC, and Agent shall not be obligated to actively solicit (via telephone or otherwise) any person in connection with such offerings. Agent and the Company each acknowledge that Agent shall not be responsible for administrative functions associated with the Subscription and Best Efforts Offerings and that the Company has retained ChaseMellon Shareholder Services, LLC to perform such functions (which functions shall include, without limitation, mailing offering materials, staffing a toll-free dial-in center, accepting subscriptions, maintaining records relating to the Subscription and Best Efforts Offerings and coordinating the delivery of share certificates and, if necessary, cash refunds of escrowed funds to participants in such offerings). Neither the Subscription Offering nor the Best Efforts Offering constitutes a firm commitment underwritten offering, and the Agent shall have no obligation to purchase any of the Shares offered in connection therewith. 10 11 Funds received from subscriptions for Shares or other offers to purchase Shares shall be placed in a separate escrow account at a financial institution to be designated by the Company (the "Escrow Account"). The Agent shall remit to the Escrow Account within two business days any funds received by it in connection with the Subscription and Best Efforts Offerings. The appointment of the Agent hereunder shall terminate upon the earliest to occur of (i) ninety (90) days after the last day of the Subscription and Best Efforts Offerings, unless the Company and the Agent agree in writing to extend such period, (ii) the receipt and acceptance of subscriptions and purchase orders for all of the Shares, (iii) the closing of the Underwritten Offering, (iv) the termination of the Subscription and Best Efforts Offerings (written notice of which shall be delivered promptly to the Agent) or (v) the termination of this Agreement pursuant to Section 9. In the event the Company terminates the Subscription and Best Efforts Offerings, the Company shall refund to any persons who have subscribed for any of the Shares the full amount which it may have received from them, without interest, and no party to this Agreement shall have any obligation to the others hereunder, except for the obligations of the Company and MICOA as set forth in Sections 5, 7 and 10 hereof and the obligations of the Agent as provided in Section 7 hereof. In addition to reimbursement of the expenses specified in Section 5 and 10 hereof, the Agent will receive the following compensation for its services hereunder (the "Agent Fees") equal to the greater of: (i)$25,000; or (ii) 1.0% of the first $10,000,000 of aggregate gross proceeds received by the Company in the Subscription and Best Efforts Offerings (excluding sales to officers, directors and employees of the Company) ("Gross Proceeds"), plus 0.5% of aggregate Gross Proceeds in excess of $10,000,000. All fees payable to the Agent hereunder shall be payable in immediately available funds on the Closing Date, or upon the termination of this Agreement, as the case may be. SECTION 3. CLOSING. A closing shall be held at such place as shall be agreed upon between the Company and the Agent as of the close of business on a business day to be selected by the Company and contemporaneous with the closing of the Underwritten Offering or at such other time as shall be agreed upon between the Company and the Agent. At the closing, the Company shall deliver to the Agent in next day funds the fees and expenses due and owing to the Agent as set forth in Sections 2 and 4 hereof, any certificates required hereby and other documents deemed reasonably necessary by the Agent shall be executed and delivered. The hour and date upon which the Company shall release for delivery all of the Shares, in accordance with the terms hereof, are referred to herein as the "Closing Date." 11 12 SECTION 4. AGREEMENTS OF THE COMPANY AND MICOA. The Company and MICOA each covenants and agrees with the Agent that: (a) The Company will endeavor to cause the Registration Statement to remain effective and will advise the Agent promptly and, if requested by the Agent, will confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment to the Registration Statement becomes effective, and of the filing of any final prospectus or supplement or amendment to the Prospectus, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation or contemplation of any proceeding for such purposes, (iv) within the period of time referred to in paragraph (e) below, of the happening of any event which makes any statement made in the Registration Statement or Prospectus (as then amended or supplemented) untrue in any material respect or which requires the making of any additions to or changes in the Registration Statement or Prospectus (as then amended or supplemented) in order to make the statements therein not misleading or the necessity to amend or supplement the Prospectus to comply with the Act or any other law, and (v) of the receipt of any communication (whether written or oral) from the Commissioner that affects the validity of the order approving the Plan of Conversion or that is otherwise reasonably likely to affect the Offerings in any manner (including any of the disclosures made in any Prospectus). If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or the Commissioner shall issue any order affecting the validity of the order approving the Plan of Conversion, the Company and MICOA will notify the Agent and make every reasonable effort to obtain the withdrawal of such order at the earliest possible moment. (b) Neither the Company nor any of its Subsidiaries will, prior to the earlier of the Closing Date or termination or expiration of this Agreement, incur any liability or obligation, direct or contingent, or enter into any material transaction, other than in the ordinary course of business, except as contemplated in the Prospectus, it being understood that changes in the investment portfolio of MICOA or the Insurance Subsidiaries shall not be prohibited hereby. (c) The Company will give the Agent notice of its intention to file or prepare any amendment to the Registration Statement or Plan of Conversion or any amendment or supplement to the Prospectus, will furnish the Agent with copies of any such amendment or supplement a reasonable time prior to such proposed filing or use, and will not file or use any such amendment or supplement to the Prospectus of which the Agent shall promptly after being so advised reasonably object in writing. (d) The Company has delivered or will deliver to the Agent, without charge, copies of the Prospectus in such quantities as they have reasonably requested or may hereafter reasonably request. The Company consents to the use, in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions in which the Shares are offered by the Agent and by dealers, prior to the effective date of the Registration Statement, of each Prospectus so furnished by the Company. 12 13 (e) From time to time after the date hereof and during such period as in the opinion of counsel for the Agent a prospectus relating to the Shares is required by law to be delivered in connection with offers or sales of the Shares by the Agent, the Company will deliver to the Agent, without charge, as many copies of the Registration Statement and the Prospectus (and of any amendment or supplement to such documents) as they may reasonably request. During such period, if any event occurs which in the judgment of the Company, or in the written opinion of counsel for the Agent, should be set forth in the Prospectus in order to ensure that no part of the Prospectus includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances at the time the Prospectus is delivered to a purchaser, not misleading, the Company will forthwith prepare, submit to the Agent, file with the Commission and deliver, without charge to the Agent any amendments or supplements to the Prospectus so that the statements in the Prospectus, as so amended or supplemented, will comply with the standards set forth in this sentence. The Company consents to the use of such Prospectus (and of any amendments or supplements thereto) in accordance with the provisions of the Act and with the securities or Blue Sky laws of the jurisdictions described in the preliminary Blue Sky memorandum in which the Shares are lawfully offered by the Agent, both in connection with the placement of the Shares and for such period of time thereafter as the Prospectus is required by law to be delivered in connection therewith. In case the Agent is required to deliver a Prospectus (and any amendment or supplement thereto) more than nine months after the first date upon which the Shares are offered to the public, the Company will, upon request, but at the expense of the Agent, promptly prepare and furnish the Agent with reasonable quantities of a Prospectus complying with Section 10(a)(3) of the Act. (f) The Company will cooperate with the Agent and counsel for the Agent in connection with the registration or qualification of the Shares for placement by the Agent under the securities or Blue Sky laws of such jurisdictions as the Agent may designate, will continue such registrations or qualifications in effect so long as reasonably required for the distribution of the Shares and will file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided that in no event shall the Company be obligated (i) to qualify to do business in any jurisdiction where it is not now so qualified, (ii) to file any general consent to service of process, or (iii) take any action that would subject it to income taxation in any jurisdiction where it is not so qualified. (g) For a period of two years after the date hereof, the Company will furnish to the Agent (A) as soon as available, a copy of each report of the Company of general interest mailed to any class of its security holders (B) copies of all reports filed with the Commission on Forms 10-K, 10-Q and 8-K and any amendment thereto or such other similar forms as may be designated by the Commission and (C) as soon as practicable following the release thereof, a copy of each press release in respect of the Company. (h) The Company will make generally available to its security holders an earning statement of the Company, which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement as soon as practicable after the end of such period, which earning statement shall satisfy the provisions of Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including Rule 158). 13 14 (i) The Company will apply the net proceeds from the sale of the shares to be sold by it under this Agreement for the purposes set forth in the Prospectus under the caption "Use of Proceeds." (j) The Company will use its best efforts, subject to notice of issuance, to cause the Shares to be approved for quotation on the NASDAQ Stock Market. (k) The Company and MICOA will conduct the Offerings in all material respects in accordance with the Plan of Conversion, the Conversion Statute and all other applicable regulations, decisions and orders, including all applicable terms, requirements and conditions precedent to the offerings imposed upon the Company or MICOA by the Commissioner. (l) The Company and MICOA will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with the "Interpretation Relating to Free-Riding and Withholding" of the National Association of Securities Dealers, Inc. ("NASD") SECION 5. PAYMENT OF EXPENSES. The Company and MICOA jointly and severally agree to pay, or reimburse if paid by the Agent, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated, all costs and expenses incident to the performance by it of its obligations under this Agreement, including, without limiting the generality of the foregoing, (a) preparation, printing, filing and distribution (including postage, air freight charges and charges for counting and packaging) of the original registration statement, the Registration Statement and the Prospectus (including any exhibits and financial statements), each amendment and/or supplement to any of the foregoing, and this Agreement, Powers of Attorney and Agent's Powers of Attorney and Questionnaires, (b) furnishing to the Agent copies of the foregoing materials (provided, however, that any such copies furnished by the Company more than nine months after the first date upon which the Shares are offered to the public shall be at the expense of the Agent as provided in Section 4(e) above), (c) the registrations or qualifications referred to in Section 4(f) above (including filing fees and fees and disbursements of counsel in connection therewith) and expenses of printing and delivering to the Agent copies of the preliminary and final Blue Sky memoranda, (d) the review of the terms of the public offering of the Shares by the NASD (including the filing fees paid to the NASD in connection therewith) and the reasonable fees and disbursements of counsel for the Agent in connection therewith, (e) the performance by the Company of its other obligations under this Agreement, including the fees of the Company's counsel and accountants, (f) the issuance of the Shares and the preparation and printing of the stock certificates representing the Shares, including any stock issue, stamp or transfer taxes payable in connection with the original issuance of the Shares, (g) furnishing to the Agent copies of all reports and information required by Section 4(g) above, including reasonable costs of shipping and mailing, and (h) the designation of the Common Stock as a Nasdaq National Market security. 14 15 SECTION 6. OTHER AGREEMENTS. The Agent and the Company agree that the Closing shall be conditioned on the following (unless waived in writing by the Agent): (a) That the Registration Statement shall have been declared effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for the purpose shall have been instituted or shall be pending or, to the knowledge of the Company or MICOA, shall be contemplated by the Commission and there shall not have come to the attention of the Agent any facts that would cause it to believe that the Prospectus, at the time it was required to be delivered to purchasers of the Shares, contained any untrue statement of material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which there were made, not misleading. (b) That subsequent to the effective date of the Registration Statement, (i) there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or any of its Subsidiaries not contemplated by the Prospectus, which, in the Agent's opinion would materially adversely affect the market for the Shares or make it impracticable or inadvisable to proceed with the offering or the delivery of the Shares, as contemplated herein and in the Prospectus, or to attempt to enforce contracts for the purchase of Shares, and (ii) the business and operations of the Company and its Subsidiaries and shall not have been adversely affected by strike, fire, flood, accident or other calamity (whether or not insured). (c) The Agent shall have received from Dykema Gossett PLLC, counsel for the Company and MICOA, a favorable opinion as to the law of Michigan and the federal law of the United States, dated the Closing Date, governed by and interpreted in accordance with the Legal Opinion Accord of the American Bar Association Section of Business Law (1991) and reasonably satisfactory to the Agent and its counsel to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan, with full corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement. Based solely upon certificates of governmental authorities, the Company is duly qualified to do business as a foreign corporation in the following states: __________, ___________ and ______________. (ii) An opinion to the same general effect as clause (i) of this subparagraph (c) in respect of each of MICOA and each of the other Subsidiaries (except with respect to jurisdictions outside the United States). (iii) All of the issued and outstanding capital stock of the Subsidiaries has been duly authorized and validly issued and, to counsel's knowledge, is fully paid and non-assessable, and except as disclosed in the Registration Statement or in the representations and warranties in Section 1 hereof, MICOA owns directly or indirectly 100 percent of the outstanding capital stock of each Subsidiary and, to the best 15 16 knowledge of such counsel, such stock is owned free and clear of any security interests, claims, liens, encumbrances or adverse interests of any nature. (iv) The issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable and free of preemptive rights. (v) The authorized capitalization of the Company consists entirely of ________ shares of Common Stock, of which, to such counsel's knowledge, __________were issued and outstanding on the date of the Prospectus and ________ shares of Preferred Stock, of which none were issued and outstanding on the date of the Prospectus and all of which conforms to the description thereof in the Registration Statement and the Prospectus. (vi) The certificates for the Shares to be delivered in the Subscription and Best Efforts Offerings are in due and proper form, and when duly countersigned by the Company's transfer agent and delivered to the purchasers thereof against payment of the agreed consideration therefor in accordance with the procedures specified in the Plan of Conversion. The Shares, when issued and sold in the manner described in the Registration Statement and Prospectus, will be legally and validly issued, fully paid and nonassessable and free of preemptive rights and to the knowledge of such counsel, will be free of any security interest, claim, lien, encumbrance or adverse interest of any nature, or rights of first refusal in favor of, stockholders with respect to any of the Shares or the issuance or sale thereof, pursuant to the Articles of Incorporation or by laws of the Company and, to such counsel's knowledge, there are no contractual preemptive rights, rights of first refusal, rights of co-sale or other similar rights which exist with respect to any of the Shares or the issuance and sale thereof; and the Shares to be sold in the Subscription and Best Efforts Offerings have been duly and validly authorized and, to such counsel's knowledge, qualified for inclusion on The Nasdaq National Market, subject to notice of issuance. (vii) This Agreement has been duly and validly authorized, executed and delivered by the Company and MICOA and is a legal, valid and binding obligation of each of the Company and MICOA, enforceable against them in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity, and except as rights to indemnity and contribution hereunder may be limited under applicable law. (viii) No further authorization, approval, order or consent of any governmental authority or agency is required for the valid issuance and sale of the Shares, except such as may be otherwise stated in this Agreement or as required under the Act or state securities laws as to which such counsel need express no opinion. (ix) The execution, delivery and performance of this Agreement by the Company and MICOA, the issue and sale of the Shares, and the consummation of the transactions contemplated hereby will not result in a breach of any of the provisions of, or 16 17 constitute a default under (A) their respective Articles of Incorporation or by-laws or any material agreement, franchise, license, indenture, mortgage, deed of trust or other instrument or agreement known to such counsel and required to be filed as an exhibit to the Registration Statement to which the Company, MICOA or any of the Subsidiaries is a party or by which any of them is bound or to which any of their respective properties is subject and which breach or default would be material to the Company and the Subsidiaries taken as a whole or (B) so far as known to such counsel, any statute, order, rule or regulation applicable to the Company, MICOA or any of the Subsidiaries of any court or other governmental authority or body having jurisdiction over the Company, MICOA or any of the Subsidiaries or any of their properties. (x) The Registration Statement has become effective under the Act, and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act. (xi) The Registration Statement as amended or supplemented (except for the financial statements and notes thereto, the financial statement schedules and other statistical or financial data included therein as to which such counsel need express no opinion) and the Prospectus and any supplements or amendments thereto (except for the financial statements and notes thereto, the financial statement schedules and other statistical or financial data included therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Act and the rules of the Commission thereunder on the Closing Date. Counsel shall also make a statement to the following effect: (a) in passing on the form of the Registration Statement and the Prospectus, it has assumed the correctness and completeness of the statements made or included therein by the Company since it did not verify independently the accuracy or completeness of such statements, (b) however, in the course of preparation of the Registration Statement and the Prospectus, counsel had conferences with officials of the Company and its independent auditors, and with representatives of the Agent and its counsel, and also had discussions with such officials of the Company with a view toward a clear understanding on their part of the requirements of the Act and the rules and regulations with reference to the preparation of registration statements and prospectuses, (c) counsel's examination of the Registration Statement and the Prospectus and its discussions in the above-mentioned conferences did not disclose to counsel any information which gives counsel reason to believe that the Registration Statement as amended or supplemented (except for the financial statements and notes thereto, the financial statement schedules and other statistical or financial data included therein as to which such counsel need express no opinion) at the time it became effective and at the Closing Date, contained any untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that, as of its date, the Prospectus or any amendment or supplement thereto (except for the financial statements and notes thereto, the financial statement schedules and other statistical or financial data included therein as to which such counsel need express no opinion) included or includes any untrue statement of a material fact or omitted or omits to state any material fact necessary to 17 18 make the statements therein, in light of the circumstances in which they were made, not misleading. (xii) The statements in the Prospectus in the sections captioned "The Conversion," "Description of Capital Stock," "Business--Insurance Regulatory Matters," and "Shares Eligible for Future Sale," in each case to the extent that they constitute matters of law or summaries of legal matters, documents or proceedings and reflect a summary of the material legal matters referred to therein, fairly and accurately present the information called for by the Act and the applicable rules and regulations promulgated thereunder in all material respects. (xiii) To the knowledge of such counsel, there are no statutes or regulations, provisions of the Michigan Business Corporation Act or Michigan Insurance Code or any pending or threatened litigation or governmental proceedings against the Company or its Subsidiaries required to be described in the Prospectus which are not so described, nor of any contracts or documents of a character required to be described in or filed as a part of the Registration Statement which are not described or filed as required. (xiv) To such counsel's knowledge, except as disclosed in the Prospectus, no person has the right, contractual or otherwise, to cause the Company to register pursuant to the Act any shares of capital stock of the Company, upon the issuance and sale of the Shares to be sold by the Company as contemplated by this Agreement. (xv) Neither the Company nor any of the Subsidiaries is an "investment company" or a person "controlled by" an "investment company" within the meaning of the Investment Company Act. (xvi) To such counsel's knowledge, all offers and sales of the Company's capital stock prior to the date hereof were at all relevant times exempt from the registration requirements of the Act and were duly registered or the subject of an available exemption from the registration requirements of the applicable state securities or blue sky laws. (xvii) Each Insurance Company Subsidiary has all requisite power and authority to carry on an insurance business pursuant to and to the extent of its certificates of authority in the manner contemplated by the Prospectus. (xviii) The Plan of Conversion has been approved by MICOA's Board of Directors and by the Commissioner, and no order suspending the effectiveness of the Plan of Conversion has been issued by the Commissioner nor, to the best of such counsel's knowledge, has any proceeding therefor been initiated or threatened by the Commissioner. (xix) The Plan of Conversion complies with the applicable requirements of the Conversion Statute, including all documents required to be filed as exhibits thereto. The Plan of Conversion and the Proxy Statement is, to the best of such counsel's knowledge, truthful, accurate and complete. To the best of such counsel's knowledge, the Company and MICOA have complied in all material respects with the Conversion 18 19 Statute and all regulations, decisions and orders, including all terms, conditions, requirements and provisions precedent to the Offerings imposed by the Commissioner or any other regulatory authority upon the Company or MICOA, other than those which the Commissioner or any such regulatory authority permits to be completed after the Closing Time. In rendering such opinion, such counsel may state that they are relying upon the certificate of the officers of the Company and MICOA and the transfer agent for the Common Stock, as to the number of shares of Common Stock at any time or times outstanding, and that insofar as their opinion under clause (xi) above relates to the accuracy and completeness of the Prospectus and Registration Statement, it is based upon a general review with the Company's representatives and independent accountants of the information contained therein, without independent verification by such counsel of the accuracy or completeness of such information. Such counsel may also rely upon the opinions of other competent counsel and, as to factual matters, on the representations in this Agreement and certificates of officers of the Company and MICOA and of state officials, in which case their opinion is to state that they are so doing and copies of such opinions or certificates are to be attached to the opinion unless such opinions or certificates (or, in the case of certificates, the information therein) have been furnished to the Agent otherwise. (d) That the Agent shall have received on the Closing Date a favorable opinion dated the Closing Date from Sidley & Austin, counsel for the Agent, as to such matters as the Agent may reasonably require. (e) That the Agent shall have received letters addressed to the Agent and dated the date hereof and the Closing Date from PricewaterhouseCoopers LLP, independent public accountants for the Company, to the effect set forth in Schedule I. There shall not have been any change or decrease specified in the letters referred to in this subparagraph which makes it impractical or inadvisable in the judgment of the Agent to proceed with the offering or sale of the Shares as contemplated hereby. (f) That (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company or MICOA, shall be contemplated by the Commission at or prior to the Closing Date; (ii) there shall not have been any change in the capital stock of the Company nor any material increase in the short or long-term debt of the Company or MICOA from that set forth or contemplated in the Registration Statement; (iii) there shall not have been, since the respective dates as to which information is given in the Registration Statement and the Prospectus, except as may otherwise be set forth or contemplated in the Registration Statement and the Prospectus, any material adverse change in the financial condition or results of operations of the Company or MICOA; (iv) the Company and MICOA shall not have incurred any material liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), other than those reflected in the Registration Statement, (v) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Insurance Company Subsidiaries' financial strength or claims paying ability by A.M. Best Company, Inc., and (vi) all of the representations 19 20 and warranties of the Company and MICOA contained in this Agreement shall be true and correct in all material respects on and as of the date hereof and the Closing Date as if made on and as of each such date, and the Agent shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the principal financial officer (or such other officers as are acceptable to the Agent) to the effect set forth in this Section 6(f) and in Section 6(g) hereof. (g) That the Company and MICOA shall not have failed at or prior to the Closing Date to have performed or complied in all material respects with any of their respective agreements herein contained and required to be performed or complied with by them at or prior to the Closing Date. (h) The Shares shall have been qualified for sale or exempted from such qualification under the securities laws of such jurisdictions as the Agent shall have designated and such qualification or exemption shall continue in effect to and including the Closing Date. (i) In accordance with Michigan law, the Plan of Conversion shall have been duly adopted by the required vote of the Board of Directors and Eligible Policyholders of MICOA and all necessary approvals for the Plan of Conversion to become effective will have been duly obtained from the Commissioner and any other regulatory body, all such approvals shall be in full force and effect and no other approvals shall be required to be obtained under any applicable law for the effectiveness of the Plan of Conversion that are required to be completed on or prior to the Effective Date. (j) The Company and MICOA shall have completed in all material respects the conditions precedent to the effectiveness of the Plan of Conversion and the Offerings in accordance with the Plan of Conversion, the Conversion Statute and any other applicable law. SECTION 7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and MICOA, jointly and severally, agree to indemnify and hold harmless the Agent and each person, if any, who controls the Agent within the meaning of the Act or the Exchange Act from and against any and all losses, claims, damages or liabilities, joint or several, whatsoever (including any investigation, legal or other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) to which the Agent, or such controlling person may become subject, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Agent for any legal or other expenses reasonably incurred by the Agent in connection with investigating or defending any such action or claim as such expenses are incurred, except insofar as such losses, claims, damages or liabilities arise out of or are based upon any such untrue statement or omission or allegation thereof which has been made therein or omitted therefrom in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Agent expressly for use therein. 20 21 (b) If any action or claim shall be brought against the Agent or any person controlling the Agent, in respect of which indemnity may be sought against the Company or MICOA, the Agent or person shall promptly notify the Company and MICOA in writing, and the Company shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. The Agent or any such person controlling the Agent shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Agent or such controlling person and shall be reimbursed as they are incurred unless (i) the Company or MICOA has agreed in writing to pay such fees and expenses, (ii) the Company has failed to assume the defense and employ counsel, or (iii) the named parties to any such action (including any impleaded party) included the Agent or controlling person and the Company or MICOA and the Agent or controlling person shall have been advised in writing by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Company or MICOA and which may also result in a conflict of interest (in which case if the Agent or controlling person notifies the Company shall not have the right to assume the defense of such action on behalf of the Agent or controlling person, it being understood, however, that the Company and MICOA shall be permitted to participate in such defense and shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Agent and all such controlling persons, which firm shall be designated in writing by the Agent). The Company and MICOA shall not be liable for any settlement or any such action effected without the written consent of the Company and MICOA, but if settled with the written consent of the Company and MICOA, or if there shall be a final judgment for the plaintiff in any such action and the time for filing all appeals has expired, each of the Company and MICOA agrees to indemnify and hold harmless the Agent and any such controlling person from and against any loss or liability by reason of such settlement or judgment. (c) The Agent will indemnify and hold harmless the Company and MICOA, and each of their respective directors, officers who sign the Registration Statement and any person controlling the Company within the meaning of the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company and MICOA to the Agent, but only with respect to information relating to the Agent furnished in writing to the Company or MICOA by or on behalf of the Agent expressly for use in the Registration Statement or the Prospectus. If any action or claim shall be brought or asserted against the Company or MICOA, or any of their respective directors, such officers or any such controlling person based on the Registration Statement or the Prospectus and in respect of which indemnity may be sought against the Agent, the Agent shall have the rights and duties given to the Company pursuant to Section 7(b) hereof (except that if the Company or MICOA shall have assumed the defense thereof, the Agent shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the Agent), and the Company and MICOA, and their respective directors, such officers, and any such controlling person shall have the rights and duties given to the Agent by Section 7(b) hereof. (d) If the indemnification provided for in this Section 7 is unavailable as a matter of law to any indemnified party under this Section 7 in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party in lieu of indemnifying 21 22 such indemnified party thereunder, shall contribute to the amount paid or payable by damages, liabilities or expenses (A) in such proportion as is appropriate to reflect the relative benefits received by the Company, MICOA and the Agent from the offering of the Shares or (B) if the allocation provided by clause (A) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (A) above but also the relative fault of the Company, MICOA and the Agent in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company, MICOA and the Agent shall be deemed to be in the same proportion in the case of the Company and MICOA, as the total proceeds of the Subscription and Best Effort Offerings paid or contributed to the Company and MICOA for the Shares (net of Agent Fees but before deducting expenses), and in the case of the Agent as the Agent Fees received by them bears to the total of such amounts received by the Company and MICOA and received by the Agent as Agent Fees. The relative fault of the Company, MICOA and the Agent shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, MICOA or by the Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in this Section shall be deemed to include, subject to the limitations set forth in this Section, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. (e) The Company, MICOA and the Agent agree that the determination of contribution pursuant to this Section based on pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph would not be just and equitable. Notwithstanding the provisions of this Section, the Agent shall not be required to contribute any amount in excess of the aggregate Agent Fees to which the Agent is entitled and actually paid pursuant to this Agreement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Agent's obligations to contribute pursuant to this Section are several in proportion to their respective sales and not joint. (f) The indemnity and contribution agreements contained in this Section and the representations and warranties of the Company and MICOA set forth in this Agreement shall survive and shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Agent or any person controlling the Agent, the Company, MICOA or any of their respective directors or officers, (or any person controlling the Company), (ii) the sale and purchase of the Shares or (iii) any termination of this Agreement. A successor or assign of the Agent, the Company, MICOA or any of their respective directors or officers, and their legal and personal agent (or of any person controlling the Agent, the Company or MICOA) shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section. 22 23 SECTION 8. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective immediately. SECTION 9. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the expiration or termination of the appointment of ABN AMRO Incorporated as Agent hereunder pursuant to Section 2 of this Agreement. In addition, this Agreement shall be subject to termination by notice given by the Agent to the Company and MICOA, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Agent, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event, singly or together with any other such event, makes it, in the Agent's judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. Notice of such cancellation shall be given to the Company by telecopy or telephone but shall be subsequently confirmed by letter. SECTION 10. REIMBURSEMENT OF AGENT'S EXPENSES. Whether or not the sale of Shares in the Subscription and Best Efforts Offerings on the Closing Date is consummated (unless the sale of Shares is not consummated as a result of Agent's termination of this Agreement pursuant to Section 9 or as a result of failure by the Agent to satisfy the conditions or to comply with any provision hereof) the Company and MICOA jointly and severally agree to reimburse the Agent upon demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel), that shall have been reasonably incurred by the Agent and them in connection with the proposed purchase and the sale of the Shares. Any such termination shall be without liability of any party to any other party except that the provisions of this Section 10, Section 5 and Section 7 shall at all times be effective and shall apply. SECTION 11. NOTICES. Except as otherwise provided in Section 7 hereof, notice given pursuant to any of the provisions of this Agreement shall be in writing and shall be delivered (a) if to the Company or MICOA, at the office of MICOA at 1301 North Hagadorn Road, East Lansing, Michigan 48823, Attention: President with a copy to Dykema Gossett PLLC, Attention: Mark Metz or (b) if to the Agent, at the offices of ABN AMRO Incorporated, 1290 Avenue of the Americas, New York, New York 10104-0101, Attention: Corporate Finance Department, with a copy to Sidley & Austin, Bank One Plaza, 10 South Dearborn Street, Chicago, Illinois 60603, Attention: 23 24 Richard Clemens, or in any case to such other address as the person to be notified may have requested in writing. SECTION 12. SUCCESSORS. The Agreement is made solely for the benefit of the Agent, the Company, MICOA, their respective directors and officers and other controlling persons referred to in Section 7 hereof, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. SECTION 13. PARTIAL UNENFORCEABILITY. If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other section, paragraph or provision hereof. SECTION 14. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 15. COUNTERPARTS. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. SECTION 16. ENTIRE AGREEMENT. This Agreement represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made with respect to the subject matter hereof, except for that certain letter agreement between the Agent and the Company dated ___________, 2000 (the "Letter Agreement") which shall not be superseded by this Agreement; provided, however, that the indemnification provisions of this Agreement shall control as to any matter resulting in a claim for which indemnification may be sought under both this Agreement and the Letter Agreement. No waiver, amendment, modification or assignment of this Agreement shall be effective unless in writing and signed by the parties hereto. * * * * * 24 25 Please confirm that the foregoing correctly sets forth the agreement among the Company and the Agent. Very truly yours, AMERICAN PHYSICIANS CAPITAL, INC. By: _____________________________ Name: Title: MUTUAL INSURANCE CORPORATION OF AMERICA By: ______________________________ Name: Title: ACCEPTED AND DELIVERED AS OF THE DATE FIRST WRITTEN ABOVE. ABN AMRO INCORPORATED By: ________________________________ Name: Title: 25 26 SCHEDULE I Comfort Letter of PricewaterhouseCoopers LLP (1) They are independent public accountants with respect to the Company and its Subsidiaries within the meaning of the Act. (2) In their opinion the consolidated financial statements and schedules of the Company and its Subsidiaries included in the Registration Statement and the consolidated financial statements of the Company from which the information presented under the caption "Selected Historical Financial and Operating Data" has been derived which are stated therein to have been examined by them comply as to form in all material respects with the applicable accounting requirements of the Act. (3) On the basis of specified procedures (but not an examination in accordance with generally accepted auditing standards), including inquiries of certain officers of the Company, MICOA and each of the other Subsidiaries responsible for financial and accounting matters as to transactions and events subsequent to [December 31, 1999], a reading of minutes of meetings of the stockholders and directors of the Company, the policyholders and directors of MICOA, and the stockholders and directors of the Subsidiaries since [December 31, 1999], a reading of the latest available interim unaudited consolidated financial statements of the Company and its Subsidiaries (with an indication of the date thereof) and other procedures as specified in such letter, nothing came to their attention which caused them to believe that (i) the unaudited consolidated financial statements and the pro forma information included under the caption "Pro Forma Data" of the Company and its Subsidiaries included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the Act or that such unaudited financial statements and pro forma information are not fairly presented in accordance with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement, and (ii) at a specified date not more than five days prior to the date thereof in the case of the first letter and not more than two business days prior to the date thereof in the case of the second letter, there was any change in the capital stock or long-term debt or short-term debt (other than normal payments) of the Company and its Subsidiaries on a consolidated basis or any decrease in consolidated net current assets or consolidated stockholders' equity as compared with amounts shown on the latest unaudited balance sheet of the Company included in the Registration Statement or for the period from the date of such balance sheet to a date not more than five days prior to the day thereof in the case of the first letter and not more than two business days prior to the date thereof in the case of the second letter, there were any decreases, as compared with the corresponding period of the prior year, in consolidated total revenues, consolidated income before income taxes or in the total or per share amounts of consolidated net income except, in all instances, for changes or decreases which the Prospectus discloses have occurred or may occur or which are set forth in such letter. (4) They have carried out specified procedures, which have been agreed to by the Agent, with respect to certain information in the Prospectus specified by the Agent, and on the basis of such procedures, they have found such information to be in agreement with the general accounting records of the Company and each of its Subsidiaries.