Form of Stock Option Agreement With Directors

NONQUALIFIED STOCK OPTION AGREEMENT
(DIRECTOR VERSION)


THIS AGREEMENT is entered into as of December 5, 2000 by and between American Physicians Capital, Inc. ("Company") and the undersigned ("Optionee"), pursuant to the American Physicians Capital, Inc. Stock Compensation Plan ("Plan"). The Company hereby grants to the Optionee a Nonqualified Stock Option to purchase __________ shares of Common Stock, subject to the terms and conditions contained in the Plan and as hereinafter provided (the "Option"). Capitalized terms not defined in this Agreement shall have the meanings respectively ascribed to them in the Plan.


1. EXERCISE PRICE. The Option shall be exercisable at $13.50 per
share.


2. OPTION EXERCISE.


(a) Vesting. The Option shall become exercisable in installments
as follows:


10% of the Option shall become exercisable at the close of business on the first anniversary of the date hereof, 15% on the second anniversary of the date hereof, 20% on the third anniversary of the date hereof, 25% on the fourth anniversary of the date hereof and 30% on the fifth anniversary of the date hereof.


To the extent not exercised, installments shall accumulate and the Optionee may exercise them thereafter in whole or in part, subject to termination pursuant to Section 3 below. In the event of a Change of Control, the Option immediately shall become exercisable in full, except as provided in Section 6.02 of the Plan. If the Company is a party to any merger, consolidation, reorganization, or sale of substantially all of its assets, Optionee shall, in connection with such transaction, to the extent that the Option is not cancelled, cashed-out or exercised, be entitled to receive, in lieu of Common Stock, the securities or property which a shareholder owning the number of shares of Common Stock for which the Option is then exercisable would be entitled to receive pursuant to such transaction upon the eventual exercise of the Option. Any provision of this Agreement to the contrary notwithstanding, the Option shall expire and no longer be exercisable after close of business on the date which is the tenth anniversary of the date of this Agreement (the "Expiration Date").


(b) Notice. The Option may be exercised only by delivery to the President of the Company of a written and duly executed notice in the form attached hereto accompanied by payment in the form or forms permitted by Section 2(c) below.


(c) Payment Terms. The purchase price for shares of Common Stock to be acquired upon exercise of the Option shall be paid in full at the time of exercise in (i) cash, (ii) by personal check, bank draft or money order, (iii) by tendering shares of Common Stock that


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have been held at least six months, which are freely owned and held by the Optionee independent of any restrictions, hypothecations or other encumbrances, duly endorsed for transfer (or with duly executed stock powers attached), (iv) by delivery to the Company of a properly executed exercise notice, acceptable to the Company, together with irrevocable instructions to the Optionee's broker to deliver to the Company sufficient cash to pay the exercise price and any applicable income and employment withholding taxes, in accordance with a written agreement between the Company and the brokerage firm ("cashless exercise procedure"), or (v) any combination of the above.


3. TERMINATION OF SERVICES.


(a) If, prior to the date that the Option first becomes exercisable, Optionee's services as a director are terminated for any reason, Optionee's right to exercise the Option shall terminate and all rights thereunder shall cease as of the Optionee's termination of services as a director.


(b) If, on or after the date that the Option first becomes exercisable, Optionee's services as a director are terminated for any reason, including death, Disability or Retirement, except Cause, the Option, to the extent that it is then exercisable, shall expire no later than three months af ...