Form of Escrow Agreement

ESCROW AGREEMENT


This ESCROW AGREEMENT, dated as of this day of , 2000, by and among American Physicians Capital, Inc., a Michigan corporation ("APC"), Mutual Insurance Corporation of America, a Michigan mutual insurance company (the "Company"), ChaseMellon Shareholder Services, L.L.C. ("CMSS"), and the Chase Manhattan Bank, a New York state chartered bank (the "Escrow Agent").


WITNESSETH


WHEREAS, pursuant to the Conversion Agent Agreement dated as of , 2000 by and among APC, the Company and CMSS, there is required to be deposited into escrow certain funds to be received by CMSS in connection with APC's Subscription Offering and Best Efforts Offering pursuant to the Company's Plan of Conversion dated June 28, 2000 (the "Plan"), which funds are to be held by the Escrow Agent subject to the terms and conditions set forth herein.


NOW THEREFORE, for good and valuable consideration of the foregoing and of the mutual covenants hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, for themselves, their successors and permitted assigns, hereby agree as follows:


1. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. APC hereby appoints and designates the Escrow Agent to establish an escrow account and serve as escrow agent hereunder, and the Escrow Agent hereby accepts such appointment and establishes such account in accordance with the terms of this Escrow Agreement.


2. ESTABLISHMENT OF ESCROW FUND. CMSS shall deposit all funds received by CMSS in connection with APC's Subscription Offering and Best Efforts Offering (each as defined in the Plan) with the Escrow Agent no later than the next Business Day after receipt. For purposes of this Escrow Agreement, a "Business Day" shall be any day (except a Saturday or Sunday) on which banks are permitted by federal law to be open for business in the State of New York. The Escrow Agent shall hold, subject to the terms and conditions hereof, such funds and such investments and reinvestments as may be permitted pursuant to Section 3 hereof (which, together with the income from such investments are hereinafter referred to as the "Escrow Fund"). Any interest from such Escrow Fund shall accrue to the benefit of APC.


3. INVESTMENT OF ESCROW FUND.


(a) During the term of this Escrow Agreement, the Escrow Fund shall be invested and reinvested by the Escrow Agent, in The Chase Manhattan Bank's 100% U.S. Treasury Securities Money Market Mutual Fund known as the "Chase Vista Fund" or a fund with similar risk characteristics selected by the Agent with the approval of APC.


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(b) The Escrow Agent shall have the right to liquidate any investments held at any time and from time to time without the consent of or notice of any party, in order to provide funds necessary to make required payments under Section 4 of this Escrow Agreement. The Escrow Agent in its capacity as escrow agent hereunder shall not have any liability for any loss sustained as a result of any investment or sale made pursuant to this Escrow Agreement.


4. DISBURSEMENT OF ESCROW. The Escrow Agent shall hold the Escrow Fund in its possession until authorized hereunder to deliver such Fund or a portion thereof upon the happening of one of the following events:


(a) If the Company determines to terminate the Plan and the conversion prior to the effective date of the conversion, it shall give prior written notice of such determination to the Escrow Agent and the Escrow Fund shall be distributed to CMSS (and refunded by CMSS to the subscribers in accordance with the Conversion Agent Agreement).


(b) With respect to any subscription which APC has determined to reject or permit the revocation of, the Escrow Agent shall, upon receipt of written notice from APC, distribute the portion of the Escrow Fund attributable to such subscription to CMSS, (which portion shall then be refunded by CMSS to the subscriber who submitted the rejected or revoked subscription).


(c) Except as provided in paragraph (e) below, if the effective date of the conversion has occurred and (i) directors and officers of APC and the Company have not subscribed for more than 300,000 shares in total, (ii) no subscriber in the Subscription or Best Efforts Offerings (as defined in the Plan) has subscribed for more than shares, and (iii) the total number of shares subscribed for the in Subscription and Best Efforts Offerings does not exceed 10,000,000, then the Escrow Fund shall be distributed to APC upon written notice from APC directing the Escrow Agent to make such distribution.


(d) If conditions (i) and (ii) described in paragraph (c) above have been satisfied but APC is required to reduce the number of shares subscribed for in accordance with the provisions of the Plan relating to oversubscriptions, then, upon written instruction and notice from APC, (i) that portion of the Escrow Fund relating to the subscriptions which have been rejected pursuant to such reduction shall be distributed to CMSS (and refunded by CMSS to the subscriber(s) whose subscriptions were reduced to the extent of such reduction), and (ii) the remainder of the Escrow Fund shall be distributed to APC.


(e) If all of the conditions described in paragraph (c) above have been satisfied but the offering price per share in the Underwritten Offering (as defined in the Plan) is less than the offering price per share in the Subscription and Best Efforts Offerings (as


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defined in the Plan), then, upon written instruction and notice from APC, (i) an amount equal to (i) the excess of (A) the offering price per share in the Subscription and Best Efforts Offerings (as defined in the Plan) over (B) the offering price per share in the Underwritten Offering (as defined in the Plan), multiplied by (ii) the number of shares subscribed for in the Subscription and Best Efforts Offerings (as defined in the Plan) as to which proceeds are held in the Escrow Fund shall be distributed to CMSS (and refunded by CMSS to the subscribers), and (ii) the remainder of the Escrow Fund shall be distributed to APC.


The date on which a distribution described in paragraph (a), (c), (d) or (e) occurs shall be deemed the "Escrow Termination Date." All disbursements to APC or CMSS by the Escrow Agent, upon APC's written request, shall be made by wire transfer of immediately available funds no later than the second Business Day after receipt by the Escrow Agent of such notice.


5. SUSPENSION OF PERFORMANCE OR DISBURSEMENT INTO COURT. If, at any time, there shall exist any dispute between APC, the Company, CMSS, the Escrow Agent, or any other person with respect to the holding or disposition of any portion of the Escrow Fund or any other obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is unable to determine, to the Escrow Agent's sole satisfaction, the proper disposition of the Escrow Fund, or any portion thereof, or the Escrow Agent's proper actions with respect to its obligations hereunder, or if APC has not, within twenty (20) Business Days of the furnishing by the Escrow Agent of a notice of resignation pursuant to Section 6 hereof, appointed a successor escrow agent to act hereunder, then the Escrow Agent may in its sole discretion, take either or both of the following actions:


(a) suspend the performance of any of its obligations under this Escrow Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of the Escrow Agent or until a successor escrow agent shall have been appointed (as the case may be); and/or


(b) petition (by means of an interpleader action or any other appropriate method) the court set forth in Section 10 below, for instructions with respect to such dispute or uncertainty, and for disposition of the Escrow Fund in accordance with the instructions of such court.


The Escrow Agent shall have no liability to APC, the Company, CMSS or any other person with respect to any such suspension of performance or disbursement into court, specifically including any liability or claimed liability that may arise, to be alleged to have arisen, out of or as a result of any delay in the disbursement of the funds held in escrow or any delay in or with respect to any other action required or requested of the Escrow Agent.


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6. RESIGNATION AND REMOVAL OF ESCROW AGENT. The Escrow Agent may resign from the performance of its duties hereunder at any time by giving twenty (20) Business Days prior written notice to APC and CMSS or may be removed, with or without cause, by APC in writing at any time by the giving of ten (10) days prior written notice to the Escr ...