S-1/A

As filed with the Securities and Exchange Commission on June 18, 2007

Registration No. 333-143241

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

American Physicians Service Group, Inc.

(Exact name of Registrant as Specified in Its Charter)

Texas	8741	75-1458323
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification Number)

1301 S. Capital of Texas Highway, Suite C-300

Austin, Texas 78746-6550

(512) 328-0888

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Timothy L. LaFrey

American Physicians Service Group, Inc.

1301 S. Capital of Texas Highway, Suite C-300

Austin, Texas 78746-6550

(512) 328-0888

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

J. Kenneth Menges, Jr., P.C.	Ward S. Bondurant
Akin Gump Strauss Hauer & Feld LLP	Heath D. Linsky
1700 Pacific Avenue, Suite 4100	Morris, Manning & Martin, LLP
Dallas, Texas 75201	1600 Atlanta Financial Center
(214) 969-2800	3343 Peachtree Road, NE
	Atlanta, Georgia 30326
	(404) 233-7000

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities To Be Registered	Amount To Be Registered	Proposed Maximum Offering Price Per Share	Proposed Maximum Aggregate Offering Price(2)	Amount of Registration Fee
Common Stock, par value $0.10	2,645,000(1)	$17.49	$46,261,050	$1,421

(1) Includes 345,000 shares subject to the underwriters’ over-allotment option.

(2) Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c) under the Securities Act, the registration fee is calculated on the basis of the average of the high and low sale prices on the Nasdaq Capital Market on May 22, 2007.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

EXPLANATORY NOTE

American Physicians Service Group, Inc. has prepared this Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-143241) for the sole purposes of filing Exhibit Numbers 1.1, 5.1 and 10.21 with the Securities and Exchange Commission, and amending Part II of the Registration Statement. Amendment No. 1 does not modify any provision of the Prospectus that forms a part of the Registration Statement and accordingly such Prospectus has not been included herein.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions payable by us, in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee.

SEC Registration Fee		1,400
NASD filing fee		4,500
Blue sky fees and expenses		10,000
Transfer agent and registrar fees		3,500
Accounting fees and expenses		150,000
Legal fees and expenses		250,000
Printing and engraving costs		125,000
Miscellaneous expenses		2,500
Total	$	546,900

Item 14. Indemnification of Directors and Officers

Article 2.02-1 of the Texas Business Corporation Act (the “TBCA”) provides that a Texas corporation shall have the power to indemnify anyone who was, is, or may become a defendant or respondent to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, or any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding, because such person is or was a director of the corporation, provided that (i) such person conducted himself in good faith, (ii) such person reasonably believed (A) that in the case of conduct in his official capacity as a director of the corporation that his conduct was in the corporation’s best interests and (B) in all other cases, that his conduct was at least not opposed to the corporation’s best interests, and (iii) in the case of a criminal proceeding, such person has no reasonable cause to believe his conduct was unlawful. The termination of a proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that a director is not eligible for indemnification by a corporation. Instead, a person shall be deemed to be liable in respect of any claim, issue or matter only after a court of competent jurisdiction adjudges the person liable and the person has exhausted all available appeals. We may not indemnify a director as described above for obligations resulting from a proceeding (i) in which such person is liable on the basis that he improperly received personal benefit, whether or not the benefit resulted from an action taken in his official capacity, or (ii) in which such person is found liable to the corporation (except that in such cases we may indemnify such director against reasonable expenses the director actually incurs in connection with the proceeding unless the director’s misconduct was willful, in which case we may not pay such indemnification).

A corporation may provide indemnification as described above only if a determination of indemnification is made: (i) by a majority vote of a quorum of directors who the proceeding does not name as defendants or respondents at the time of voting, regardless of whether the directors not named defendants or respondents constitute a quorum; (ii) by a majority vote of a committee of the board of directors, if (A) the committee is designated by a majority vote of the directors who at the time of the vote are not named defendants or respondents in the proceeding, regardless of whether the directors not named defendants or respondents constitute a quorum, and (B) the committee consists solely of one or more of the directors not named as defendants or respondents in the proceeding; (iii) by special legal counsel selected by the board of directors or a committee of the board by vote as set forth in (i) and (ii); or (iv) by the shareholders in a vote that excludes the shares held by the directors who are named defendants or respondents in the proceeding. A court may order indemnification even though we do not meet certain of these conditions, if the court deems indemnification

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proper and equitable; provided, however, that if the court determines that the indemnified person is liable to the corporation or that he improperly received a personal benefit, the court-ordered indemnification cannot exceed the reasonable expenses that the indemnified party actually incurred in connection with the proceeding.

A person may be indemnified by a corporation as previously described against judgments, penalties (including excise and similar taxes), fines, settlements and reasonable expenses actually incurred by the person in connection with the proceeding, provided, that if such a person is found liable to the corporation or is liable on the basis that he or she improperly received a personal benefit, the indemnification shall be limited to reasonable expenses actually incurred by the person in connection with the proceeding and shall not be available in respect of any proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of his duty to the corporation.

A corporation shall indemnify a director against reasonable expenses incurred by him in connection with the proceeding in which he is a named defendant or respondent because he is or was a director if he has been wholly successful, on the merits or otherwise, in the defense of the proceeding. In addition, if a director sues a corporation to recover indemnification in such a case, the court, upon ordering the corporation to pay indemnification, shall also award the director his expenses incurred in securing the indemnification. A corporation may pay, or reimburse a director for, the director’s reasonable expenses incurred because he or she was, is, or may become a defendant correspondent in a proceeding, in advance of any final disposition of the proceeding and without any determination that the director is entitled to such payment or reimbursement under the above-described standards after the corporation receives a written affirmation by the director of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under Article 2.02-1 of the TBCA and a written undertaking by or on behalf of the director (which must be an unlimited general obligation but that need not be secured, and that may be accepted without reference to the director’s financial ability to pay) to repay the amount paid or reimbursed if it is ultimately determined that the director has not met that standard or if it is ultimately determined that indemnification of the director against expenses incurred by such director in connection with that proceeding is prohibited under the standards enumerated above. Notwithstanding the above, a corporation may pay or reimburse a director for expenses incurred in connection with the director’s appearance as a witness or other participation in a proceeding at a time when the director is not a named defendant or respondent in the proceeding.

Article 2.02-1 of the TBCA permits the purchase and maintenance of insurance or another arrangement on behalf of directors, officers, employees and agents of the corporation against any liability asserted against or incurred by them in any such capacity or arising out of the person’s status as such, whether or not the corporation itself would have the power to indemnify any such officer or director against such liability; provided, that if the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of providing insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the corporation would not have the power to indemnify the person only if the shareholders of the corporation have approved including coverage for the additional liability.

Any indemnification of, or advance of expenses to, a director must be reported in writing to shareholders with or before the notice or waiver of notice of the next shareholders’ meeting or before the next submission to shareholders of a consent to action without a meeting, and, in any case, within the twelve-month period immediately following such indemnification or advance.

A corporation shall indemnify officers and others who are not officers, employees or agents of the corporation, but who are serving at the corporation’s request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary for another entity, to the same extent that the corporation indemnifies directors. A corporation may indemnify and advance expenses to such officers and other persons to the same extent that it may indemnify, or advance expenses to, directors.

Article IX of our restated articles of incorporation provides that, to the extent permitted by applicable law and by resolution or other proper action of our board of directors, we will indemnify its present and former

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directors and officers, its employees and agents and any other person serving at the request of the Company as a director, trustee, officer, employee or agent of another corporation, partnership, joint venture, association, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding to which any such person is, or is threatened to be made, a party and which may arise by reason of the fact he is or was a person occupying any such office or position. In addition, we currently maintain directors and officers’ liability insurance.

Article XVI of our restated articles of incorporation provides that our directors shall not be liable to the Company or its shareholders for monetary damages for an act or omission in the director’s capacity as a director except for liability based upon (i) a breach of duty of loyalty to the Company or its shareholders, (ii) an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, (iii) a transaction from which a director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director’s office, (iv) an act or omission for which the director’s liability is expressly provided by statute, or (v) an act related to an unlawful stock repurchase or payment of a dividend.

In addition to the indemnifications provided by our restated articles of incorporation, we have entered into indemnity agreements with our officers and directors. The agreements generally provide that, to the extent permitted by law, we must indemnify each person for judgments, expenses, fines, penalties and amounts paid in settlement of claims that result from the fact that they were was an officer, director or employee of the Company.

The underwriting agreement (Exhibit 1.1) will provide for indemnification by the underwriters of Raymond James & Associates, Inc., our directors, our officers who sign the registration statement, and our controlling persons for some liabilities, including liabilities arising under the Securities Act.

The preceding discussion of indemnification agreements, our restated articles of incorporation and Section 2.02-1 of the Texas Business Corporation Act is not intended to be exhaustive and is qualified in its entirety by the indemnity agreements, restated articles of incorporation and Section 2.02-1 of the Texas Business Corporation Act.

Item 15. Recent Sales of Unregistered Securities

None.

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Item 16. Exhibits and Financial Statement Schedules

EXHIBIT INDEX

Exhibit Number	Description
1.1	Form of Underwriting Agreement. (19)
2.1	Merger Agreement and Plan of Merger, dated June 5, 2006, among American Physicians Service Group, Inc., APSG ACQCO, Inc., and American Physicians Insurance Exchange, as amended. (14)
3.1	Restated Articles of Incorporation of American Physicians Service Group, Inc., as amended (3)
3.2	Amended and Restated Bylaws of American Physicians Service Group, Inc. (16)
4.1	Specimen of Common Stock Certificate of American Physicians Service Group, Inc. (1)
4.2	Rights Agreement, dated as of August 15, 1999, between American Physicians Service Group, Inc. and American Stock Transfer & Trust Company, which includes the form of Statement of Resolutions setting forth the terms of the Junior Participating Preferred Stock, Series A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C. (7)
5.1	Opinion of Akin Gump Strauss Hauer & Feld LLP regarding legality of securities being registered. (19)
10.1*	Amended and Restated 1995 Incentive and Non-Qualified Stock Option Plan. (10)
10.2*	Form of Stock Option Agreement (ISO). (4)
10.3*	Form of Stock Option Agreement (Non-Qualified). (4)
10.4*	Profit Sharing Plan and Trust, effective December 1, 1984, of American Physicians Service Group, Inc. (2)
10.5*	2005 Incentive and Non-Qualified Stock Option Plan. (13)
10.6*	Deferred Compensation Master Plan. (13)
10.7*	Executive Employment Agreement between American Physicians Service Group, Inc. and Kenneth S. Shifrin. (10)
10.8	Consulting Agreement between APS Investment Services, Inc. and William A. Searles. (10)
10.9*	Executive Employment Agreement between American Physicians Service Group, Inc. and William H. Hayes. (10)
10.10*	Executive Employment Agreement between American Physicians Service Group, Inc. and Maury L. Magids. (16)
10.11*	Executive Employment Agreement between American Physicians Service Group, Inc. and Timothy L. LaFrey. (17)
10.12*	Stock Purchase Agreement dated October 1, 2003 between American Physicians Service Group, Inc. and FPIC Insurance Group, Inc. (11)
10.13	Revolving Promissory Note dated April 15, 2004 between American Physicians Service Group, Inc. and PlainsCapital Bank. (12)
10.14	Commercial Loan Agreement dated April 15, 2004 between American Physicians Service Group, Inc. and PlainsCapital Bank. (12)
10.15	Managing General Agency Agreement between American Physicians Insurance Agency, Inc. and American Physicians Insurance Exchange, effective as of May 29, 1996. (15)
10.16	Management Agreement of Attorney-in-Fact, dated August 13, 1975, between APS Facilities Management, Inc. and American Physicians Insurance Exchange. (15)

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Exhibit Number	Description
10.17	Managing General Agency Agreement between American Physicians Insurance Company and American Physicians Insurance Agency, Inc., dated as of April 1, 2007. (18)
10.18	Advisory Services Agreement between American Physicians Insurance Company and API Advisory, LLC, dated as of April 1, 2007. (18)
10.19	Official Order TDI No. 14-04518 of the Commissioner of Insurance of the State of Texas dated January 26, 2007 adopting the Plan of Conversion and Merger of American Physicians Service Group, Inc. and American Physicians Insurance Company. (18)
10.20	Official Order TDI No. 14-04518 of the Commissioner of Insurance dated April 2, 2007, effective April 1, 2007 adopting the American Physicians Insurance Company Articles of Incorporation. (18)
10.21	Excess of Loss Reinsurance Contract, effective January 2007, issued to American Physicians Insurance Exchange. (19)
21.1	List of subsidiaries of American Physicians Service Group, Inc. (18)
23.1	Independent Registered Public Accountants Consent of BDO Seidman, LLP. (18)
23.2	Independent Registered Public Accountants Consent of Deloitte & Touche LLP (18)
24.1	Power of Attorney (see signature page).

(*) Executive Compensation plans and arrangements.

(1) Filed as an Exhibit to the Registration Statement on Form S-1, Registration No. 2-85321, of the Company, and incorporated herein by reference.

(2) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1984 and incorporated herein by reference.

(3) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1990 and incorporated herein by reference.

(4) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1995 and incorporated herein by reference.

(5) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1997 and incorporated herein by reference.

(6) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1998 and incorporated herein by reference.

(7) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated September 22, 1999 and incorporated herein by reference.

(8) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1999 and incorporated herein by reference.

(9) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2000 and incorporated herein by reference.

(10) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002 and incorporated herein by reference.

(11) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2003 and incorporated herein by reference.

(12) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2004.

(13) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated June 17, 2005.

(14) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated August 25, 2006 and incorporated herein by reference.

(15) Filed as an Exhibit to the Registration Statement on Form S-4/A, Registration No. 333-137012, of the Company, filed January 26, 2007 and incorporated herein by reference.

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(16) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2006.

(17) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated March 26, 2007.

(18) Filed as an Exhibit to the Registration Statement on Form S-1, Registration No. 333-143241, of the Company, filed May 24, 2007 and incorporated herein by reference.

(19) Filed herewith.

Item 17. Undertakings

(1) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, such registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(2) The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, Texas, on this 18^th day of June, 2007.

AMERICAN PHYSICIANS SERVICE GROUP, INC.
By:	/s/    KENNETH S. SHIFRIN
	Chairman of the Board and
	Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title(s)	Date
/s/    KENNETH S. SHIFRIN         Kenneth S. Shifrin	Director, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	June 18, 2007
/s/    W. H. HAYES         W. H. Hayes	Senior Vice President—Finance, Secretary and Chief Financial Officer (Principal Financial Officer)	June 18, 2007
/s/    THOMAS R. SOLIMINE         Thomas R. Solimine	Controller (Principal Accounting Officer)	June 18, 2007
* Timothy L. LaFrey	Director, President and Chief Operating Officer	June 18, 2007
* Norris C. Knight, Jr., M.D.	Director	June 18, 2007
* Lew N. Little, Jr.	Director	June 18, 2007
* Jackie Majors	Director	June 18, 2007
* William J. Peche, M.D.	Director	June 18, 2007
* William A. Searles	Director	June 18, 2007
* Cheryl Williams	Director	June 18, 2007

*By:	/S/ WILLIAM H. HAYES
	William H. Hayes Attorney-in-Fact

EXHIBIT INDEX

Exhibit Number	Description
1.1	Form of Underwriting Agreement. (19)
2.1	Merger Agreement and Plan of Merger, dated June 5, 2006, among American Physicians Service Group, Inc., APSG ACQCO, Inc., and American Physicians Insurance Exchange, as amended. (14)
3.1	Restated Articles of Incorporation of American Physicians Service Group, Inc., as amended (3)
3.2	Amended and Restated Bylaws of American Physicians Service Group, Inc. (16)
4.1	Specimen of Common Stock Certificate of American Physicians Service Group, Inc. (1)
4.2	Rights Agreement, dated as of August 15, 1999, between American Physicians Service Group, Inc. and American Stock Transfer & Trust Company, which includes the form of Statement of Resolutions setting forth the terms of the Junior Participating Preferred Stock, Series A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C. (7)
5.1	Opinion of Akin Gump Strauss Hauer & Feld LLP regarding legality of securities being registered. (19)
10.1*	Amended and Restated 1995 Incentive and Non-Qualified Stock Option Plan. (10)
10.2*	Form of Stock Option Agreement (ISO). (4)
10.3*	Form of Stock Option Agreement (Non-Qualified). (4)
10.4*	Profit Sharing Plan and Trust, effective December 1, 1984, of American Physicians Service Group, Inc. (2)
10.5*	2005 Incentive and Non-Qualified Stock Option Plan. (13)
10.6*	Deferred Compensation Master Plan. (13)
10.7*	Executive Employment Agreement between American Physicians Service Group, Inc. and Kenneth S. Shifrin. (10)
10.8	Consulting Agreement between APS Investment Services, Inc. and William A. Searles. (10)
10.9*	Executive Employment Agreement between American Physicians Service Group, Inc. and William H. Hayes. (10)
10.10*	Executive Employment Agreement between American Physicians Service Group, Inc. and Maury L. Magids. (16)
10.11*	Executive Employment Agreement between American Physicians Service Group, Inc. and Timothy L. LaFrey. (17)
10.12*	Stock Purchase Agreement dated October 1, 2003 between American Physicians Service Group, Inc. and FPIC Insurance Group, Inc. (11)
10.13	Revolving Promissory Note dated April 15, 2004 between American Physicians Service Group, Inc. and PlainsCapital Bank. (12)
10.14	Commercial Loan Agreement dated April 15, 2004 between American Physicians Service Group, Inc. and PlainsCapital Bank. (12)
10.15	Managing General Agency Agreement between American Physicians Insurance Agency, Inc. and American Physicians Insurance Exchange, effective as of May 29, 1996. (15)
10.16	Management Agreement of Attorney-in-Fact, dated August 13, 1975, between APS Facilities Management, Inc. and American Physicians Insurance Exchange. (15)
10.17	Managing General Agency Agreement between American Physicians Insurance Company and American Physicians Insurance Agency, Inc., dated as of April 1, 2007. (18)

Exhibit Number	Description
10.18	Advisory Services Agreement between American Physicians Insurance Company and API Advisory, LLC, dated as of April 1, 2007. (18)
10.19	Official Order TDI No. 14-04518 of the Commissioner of Insurance of the State of Texas dated January 26, 2007 adopting the Plan of Conversion and Merger of American Physicians Service Group, Inc. and American Physicians Insurance Company. (18)
10.20	Official Order TDI No. 14-04518 of the Commissioner of Insurance dated April 2, 2007, effective April 1, 2007 adopting the American Physicians Insurance Company Articles of Incorporation. (18)
10.21	Excess of Loss Reinsurance Contract, effective January, 2007, issued to American Physicians Insurance Exchange. (19)
21.1	List of subsidiaries of American Physicians Service Group, Inc. (18)
23.1	Independent Registered Public Accountants Consent of BDO Seidman, LLP. (18)
23.2	Independent Registered Public Accountants Consent of Deloitte & Touche LLP (18)
24.1	Power of Attorney (see signature page).

(*) Executive Compensation plans and arrangements.

(1) Filed as an Exhibit to the Registration Statement on Form S-1, Registration No. 2-85321, of the Company, and incorporated herein by reference.

(2) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1984 and incorporated herein by reference.

(3) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1990 and incorporated herein by reference.

(4) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1995 and incorporated herein by reference.

(5) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1997 and incorporated herein by reference.

(6) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1998 and incorporated herein by reference.

(7) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated September 22, 1999 and incorporated herein by reference.

(8) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1999 and incorporated herein by reference.

(9) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2000 and incorporated herein by reference.

(10) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002 and incorporated herein by reference.

(11) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2003 and incorporated herein by reference.

(12) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2004.

(13) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated June 17, 2005.

(14) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated August 25, 2006 and incorporated herein by reference.

(15) Filed as an Exhibit to the Registration Statement on Form S-4/A, Registration No. 333-137012, of the Company, filed January 26, 2007 and incorporated herein by reference.

(16) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 2006.

(17) Filed as an Exhibit to the Current Report on Form 8-K of the Company dated March 26, 2007.

(18) Filed as an Exhibit to the Registration Statement on Form S-1, Registration No. 333-143241, of the Company, filed May 24, 2007 and incorporated by reference herein.

(19) Filed herewith.

EX-1.1

Exhibit 1.1

2.3 Million Shares*

AMERICAN PHYSICIANS SERVICE GROUP, INC.

Common Stock

UNDERWRITING AGREEMENT

St. Petersburg, Florida

    , 2007

Raymond James & Associates, Inc.

as Representative of the Several Underwriters

listed on Schedule I hereto

c/o Raymond James & Associates, Inc.

880 Carillon Parkway

St. Petersburg, Florida 33716

Ladies and Gentlemen:

American Physicians Service Group, Inc., a Texas corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”), and a certain shareholder of the Company named in Schedule II hereto (the “Selling Shareholder”) proposes, subject to the terms and conditions stated herein, to sell to the Underwriters, an aggregate of Two Million Three Hundred Thousand (2,300,000) shares of the Company’s Common Stock, par value $.10 per share (the “Common Stock”), of which (a) Two Million (2,000,000) shares are to be issued and sold by the Company, and (b) Three Hundred Thousand (300,000) shares are to be sold by the Selling Shareholder. The aggregate of 2,300,000 shares to be purchased from the Company and the Selling Shareholder are called the “Firm Shares.” In addition, the Company has agreed to sell to the Underwriters, upon the terms and conditions stated herein, up to an additional Three Hundred Forty-Five Thousand (345,000) shares of Common Stock (the “Additional Shares”) to cover over-allotments by the Underwriters, if any. The Firm Shares and the Additional Shares are collectively referred to in this Agreement as the “Shares.” Raymond James & Associates, Inc. is acting as the Representative of the several Underwriters and in such capacity is referred to in this Agreement (this “Agreement”) as the “Representative.”

* Plus an additional 345,000 shares subject to Underwriter's over-allotment option.

The Company wishes to confirm as follows its agreement with you and the other several Underwriters, on whose behalf you are acting, in connection with the several purchases of the Shares from the Company and the Selling Shareholder.

1. Registration Statement and Prospectus. The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) in accordance in all material respects 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. 333-143241), including a prospectus subject to completion, relating to the Shares. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto, at the time when it becomes effective and as thereafter amended by any post-effective amendment, is referred to in this Agreement as the “Registration Statement.” The prospectus in the form included in the Registration Statement or, if the prospectus included in the Registration Statement omits certain information in reliance upon Rule 430A under the Act and such information is thereafter included in a prospectus filed with the Commission pursuant to Rule 424(b) under the Act or as part of a post-effective amendment to the Registration Statement after the Registration Statement becomes effective, the prospectus as so filed, is referred to in this Agreement as the “Prospectus.” If the Company files another registration statement with the Commission to register a portion of the Shares pursuant to Rule 462(b) under the Act (the “Rule 462 Registration Statement”), then any reference to “Registration Statement” herein shall be deemed to include the registration statement on Form S-1 (File No. 333-143241) and the Rule 462 Registration Statement, as each such registration statement may be amended pursuant to the Act. The prospectus subject to completion in the form included in the Registration Statement at the time of the initial filing of such Registration Statement with the Commission and as such prospectus is amended from time to time until the date of the Prospectus is referred to in this Agreement as the “Preliminary Prospectus.” For purposes of this Agreement, “free writing prospectus” has the meaning ascribed to it in Rule 405 under the Act, and “Issuer Free Writing Prospectus” shall mean each free writing prospectus prepared by or on behalf of the Company or used or referred to by the Company in connection with the offering of the Common Stock. “Time of Sale Information” shall mean the Preliminary Prospectus together with the free writing prospectuses, if any, each identified in Schedule III hereto, other than a road show that is a free writing prospectus but is not required to be filed pursuant to Rule 433 under the Act. All references in this Agreement to the Registration Statement, the Rule 462 Registration Statement, a Preliminary Prospectus, the Prospectus or the Time of Sale Information, or any amendments or supplements to any of the foregoing, shall be deemed to refer to and include any documents incorporated by reference therein, and shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

2. Agreements to Sell and Purchase. Upon the terms and conditions set forth herein, (i) the Company agrees to issue and sell an aggregate of 2,000,000 Firm Shares to the Underwriters and (ii) the Selling Shareholder agrees to sell an aggregate 300,000 Firm Shares to the Underwriters. Upon the basis of the representations, warranties and agreements of the Company and the Selling Shareholder herein contained and subject to all the terms and conditions set forth herein, each Underwriter agrees, severally and not jointly, to purchase from the Company and the Selling Shareholder, at a purchase price of [                 and     /100 $            ] per Share (the “purchase price per Share”), the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto.

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The Company hereby also agrees to sell to the Underwriters, and, upon the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, the Underwriters shall have the right for 30 days from the date of the Prospectus to purchase from the Company up to 345,000 Additional Shares at the purchase price per Share for the Firm Shares. The Additional Shares may be purchased solely for the purpose of covering over-allotments, if any, made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter, severally and not jointly, agrees to purchase the number of Additional Shares (subject to such adjustments as you may determine to avoid fractional shares) that bears the same proportion to the total number of Additional Shares to be purchased by the Underwriters as the number of Shares set forth opposite the name of such Underwriter in Schedule I hereto bears to the total number of Shares. The option to purchase Additional Shares may be exercised at any time within 30 days after the date of the Prospectus, but no more than once.

3. Terms of Public Offering. The Company has been advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus.

Not later than the close of business on the second business day following the date the Shares are released by the Underwriters for sale to the public, the Company shall deliver or cause to be delivered copies of the Prospectus in such quantities and at such places as the Representative shall request.

4. Delivery of the Shares and Payment Therefor. Delivery to the Underwriters of the Firm Shares and payment therefor shall be made at the offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida at 10:00 a.m., St. Petersburg, Florida time, on [            ], or such other place, time and date not later than 1:30 p.m., St. Petersburg, Florida time, on June             , 2007 as the Representative shall designate by notice to the Company (the time and date of such closing are called the “Closing Date”). The place of closing for the Firm Shares and the Closing Date may be varied by agreement between the Representative and the Company. The Company and the Selling Shareholder hereby acknowledge that circumstances under which the Representative may provide notice to postpone the Closing Date as originally scheduled include any determination by the Company, the Selling Shareholder or the Representative to recirculate to the public copies of an amended or supplemented Prospectus or a delay as contemplated by the provisions of Section 11 hereof.

Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at the offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, at 10:00 a.m., St. Petersburg, Florida time, on such date or dates (the “Additional Closing Date”) (which may be the same as the Closing Date, but shall in no event be earlier than the Closing Date nor earlier than two nor later than five business days after the giving of the notice hereinafter referred to) as shall be specified in a written notice, from the Representative on behalf of the Underwriters to the Company and the Selling

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Shareholder, of the Underwriters’ determination to purchase a number, specified in such notice, of Additional Shares. Such notice may be given at any time within 30 days after the date of the Prospectus and must set forth (i) the aggregate number of Additional Shares as to which the Underwriters are exercising the option and (ii) the names and denominations in which the certificates for which the Additional Shares are to be registered. The place of closing for the Additional Shares and the Additional Closing Date may be varied by agreement between you and the Company.

The Company and the Selling Shareholder shall timely deliver the Firm Shares and any Additional Shares through the facilities of The Depository Trust Company (“DTC”) unless the Representative shall otherwise instruct.

It is understood that the Representative has been authorized, for its own account and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price per Share for the Firm Shares and the Additional Shares, if any, that the Underwriters have agreed to purchase. Raymond James and Associates, Inc., individually and not as a Representative of the Underwriters, may, but shall not be obligated to, make payment for any Shares to be purchased by any Underwriter whose funds shall not have been received by the Representative by the Closing Date or the Additional Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement.

The Selling Shareholder hereby agrees that he will pay all stock transfer taxes, stamp duties and other similar taxes, if any, payable upon the sale or delivery of the Shares to be sold by such Selling Shareholder to the several Underwriters, or otherwise in connection with the performance of such Selling Shareholder’s obligations hereunder.

5. Covenants and Agreements.

5.1 Covenants and Agreements of the Company. The Company covenants and agrees with the several Underwriters as follows:

(a) The Company will use its best efforts to cause the Registration Statement and any amendments thereto to become effective, if they have not already become effective, and will advise you promptly and, if requested by you, will confirm such advice in writing (i) when the Registration Statement has become effective and the time and date of any filing of any post-effective Registration Statement or any amendment or supplement to any Preliminary Prospectus or the Prospectus and the time and date that any post-effective amendment to the Registration Statement becomes effective, (ii) if Rule 430A under the Act is employed, when the Prospectus has been timely filed pursuant to Rule 424(b) under the Act, (iii) of the receipt of any comments of the Commission, or any request by the Commission for amendments or supplements to the Registration Statement, any Preliminary Prospectus or the Prospectus or for additional information, (iv) 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 of any proceeding for such purposes and (v) within the period of time referred to in Section 5.1(h) below, of any change in the Company’s

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condition (financial or other), business, prospects, properties, net worth or results of operations, or of any event that comes to the attention of the Company that makes any statement made in the Registration Statement or the Prospectus (as then amended or supplemented) untrue in any material respect or that requires the making of any additions thereto or changes therein in order to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading in any material respect, or of the necessity to amend or supplement the Prospectus (as then amended or supplemented) to comply with the Act or any other law. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. The Company will provide the Underwriters with copies of the Prospectus, in such number as the Underwriters may reasonably request, and file with the Commission such Prospectus in accordance with Rule 424(b) of the Act, including in accordance with any timing requirements of Rule 424(b).

(b) The Company will make available to you, or furnish upon request, without charge, two signed duplicate originals of the Registration Statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits thereto, and will also make available to you, or furnish upon request, without charge, such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto as you may reasonably request.

(c) The Company will promptly file with the Commission any amendment or supplement to the Registration Statement or the Prospectus that may, in the reasonable judgment of the Company or the Representative, be required by the Act or requested by the Commission.

(d) The Company will make available, or furnish upon request, a copy of any amendment or supplement to the Registration Statement or to the Prospectus or any Issuer Free Writing Prospectus to you and counsel for Underwriters and obtain your consent prior to filing any of those with the Commission.

(e) The Company will not make any offer relating to the Common Stock that would constitute an Issuer Free Writing Prospectus without your prior consent.

(f) The Company will retain in accordance with the Act all Issuer Free Writing Prospectuses not required to be filed pursuant to the Act; and if at any time after the date hereof any events shall have occurred as a result of which any Issuer Free Writing Prospectus, as then amended or supplemented, would conflict with the information in the Registration Statement, the most recent Preliminary Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or, if for any other reason it shall be necessary to amend or supplement any Issuer Free Writing Prospectus, to notify you and, upon your request, to file such document and to prepare and make available, or furnish upon request, without charge to each Underwriter as many copies as they may from time to time reasonably request of an amended or supplemented Issuer Free Writing Prospectus that will correct such conflict, statement or omission or effect such compliance.

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(g) Prior to the execution and delivery of this Agreement, the Company has delivered or will deliver to you, without charge, in such quantities as you have requested or may hereafter reasonably request, copies of each form of the Preliminary Prospectus. Consistent with the provisions of Section 5.1(h) hereof, 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 several Underwriters and by dealers, prior to the date of the Prospectus, of each Preliminary Prospectus so made available or furnished by the Company.

(h) As soon after the execution and delivery of this Agreement as is practicable and thereafter from time to time for such period as in the reasonable opinion of counsel for the Underwriters a prospectus is required by the Act to be delivered in connection with sales by any Underwriter or a dealer (the “Prospectus Delivery Period”), and for so long a period as you may request for the distribution of the Shares, the Company will deliver to each Underwriter and each dealer, without charge, as many copies of the Prospectus and the Time of Sale Information (and of any amendment or supplement thereto) as they may reasonably request. The Company consents to the use of the Prospectus and the Time of Sale Information (and of any amendment or supplement thereto) 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 several Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Act to be delivered in connection with sales by any Underwriter or dealer. If at any time prior to the later of (i) the completion of the distribution of the Shares pursuant to the offering contemplated by the Registration Statement or (ii) the expiration of prospectus delivery requirements with respect to the Shares under Section 4(3) of the Act and Rule 174 thereunder, any event shall occur that, in the reasonable judgment of the Company or counsel for the Underwriters, is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with the Act or any other law, the Company will forthwith prepare and, subject to Section 5.1(a) hereof, file with the Commission and use its best efforts to cause to become effective as promptly as possible an appropriate supplement or amendment thereto, and will make available, or furnish upon request, to each Underwriter who has previously requested Prospectuses, without charge, a reasonable number of copies thereof.

(i) The Company will cooperate with you and counsel for the Underwriters in connection with the registration or qualification of the Shares for offering and sale by the several Underwriters and by dealers under the securities or Blue Sky laws of such jurisdictions as you may reasonably designate and will file such consents to service of process or other documents as may be reasonably necessary in order to effect and maintain such registration or qualification for so long as required to complete the distribution of the Shares; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to general service of process in suits, other than those arising out of the offering or sale of the Shares, as contemplated by this Agreement and the Prospectus, in any jurisdiction where it is not now so subject. In the event that the qualification of the Shares in any jurisdiction is suspended, the Company shall so advise you promptly in writing. No registration or qualification of its Common Stock for sale in non issuer transactions under (or exemptions from the application of) the Blue Sky laws of each state are necessary to permit market making transactions and secondary trading.

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(j) The Company will make generally available to its security holders a consolidated earnings statement (in form complying with the provisions of Rule 158), which need not be audited, covering a twelve-month period commencing after the effective date of the Registration Statement and the Rule 462 Registration Statement, if any, and ending not later than 15 months thereafter, as soon as practicable after the end of such period, which consolidated earnings statement shall satisfy the provisions of Section 11(a) of the Act.

(k) During the period ending five years from the date hereof, the Company will make available to you and, upon your request, to each of the other Underwriters, or furnish upon request, (i) as soon as available, a copy of each proxy statement, quarterly or annual report or other report of the Company mailed to shareholders or filed with the Commission, the National Association of Securities Dealers, Inc. (the “NASD”) or the Nasdaq Stock Market (“NASDAQ”) or any national securities exchange and (ii) from time to time such other information concerning the Company as you may reasonably request.

(l) The Company will apply the net proceeds from the sale of the Shares to be sold by it hereunder in accordance in all material respects with the statements under the caption “Use of Proceeds” in the Prospectus.

(m) For a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus (the “Lock-Up Period”), not to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the Common Stock issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights), or sell or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the grant of options pursuant to option plans existing on the date hereof), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (3) file or cause to be filed a registration statement, including any amendments, with respect to the registration of any shares of Common Stock or securities convertible, exercisable or exchangeable into Common Stock or any other securities of the Company or (4) publicly disclose the intention to do any of the foregoing, in each case without the prior written consent of the Representative on behalf of the Underwriters, and to cause each officer, director and shareholder of the Company set forth on Schedule IV hereto to furnish to the Representative, prior to the Closing Date, a letter or letters, substantially in the form of Exhibit A hereto (except to the extent certain letters are tailored with respect to the exercise of stock options) (the “Lock-Up Agreements”); notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or announces material news or a material event relating to the Company occurs or (2) prior to the

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expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, then the restrictions imposed in the preceding paragraph shall continue to apply until the expiration of the 18-day period beginning on the date of issuance of the earnings release or the announcement of the material news or the occurrence of the material event, unless the Representative, on behalf of the Underwriters, waives such extension in writing.

The foregoing restrictions shall not apply to: (a) the sale of Common Stock to the Underwriters pursuant to this Agreement; (b) the grant or exercise of stock options granted pursuant to the Company’s 1995 and 2005 Incentive and Non-Qualified Stock Option Plans, provided that, except to the extent provided in the Lock-Up Agreements with respect to certain officers, directors and shareholders of the Company, the restrictions shall apply to any shares of the Company’s capital stock issued upon such exercise; (c) repurchases by the Company of its Common Stock pursuant to its share repurchase program; or (d) sales or other dispositions of shares of any class of the Company’s capital stock, in each case that are made exclusively between and among such Selling Shareholder and members of the such Selling Shareholder’s family or affiliates of the such Selling Shareholder; provided that it shall be a condition to any such transfer described in clause (c) that (i) the transferee/donee agrees with the Representative, on behalf of the Underwriters, to be bound by the terms of the lock-up letter agreement substantially in the form of Exhibit A hereto, (ii) no filing by any party (donor, donee, transferor or transferee) under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Exchange Act”), shall be required or shall be voluntarily made in connection with such transfer or distribution (other than a filing on a Form 5, Schedule 13D or Schedule 13G (or 13D-A or 13G-A) made after the expiration of the Lock-Up Period), (iii) each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act and the Exchange Act) to make, and shall agree to not voluntarily make, any public announcement of the transfer or disposition, and (iv) such Selling Shareholder notifies the Representative at least two business days prior to the proposed transfer or disposition.

(n) Prior to the Closing Date or the Additional Closing Date, as the case may be, the Company will furnish to you, as promptly as possible, copies of any unaudited interim consolidated financial statements of the Company and its subsidiaries for any quarterly period subsequent to the periods covered by the financial statements appearing in the Prospectus.

(o) The Company will comply with all provisions of any undertakings contained in the Registration Statement.

(p) The Company will not at any time, directly or indirectly, take any action designed, or which might reasonably be expected to cause or result in, or which will constitute, stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of any of the Shares, except with respect to repurchases by the Company of its Common Stock pursuant to its share repurchase program.

(q) The Company will timely file with NASDAQ all documents and notices required by NASDAQ of companies that have or will issue securities that are traded on NASDAQ.

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(r) The Company shall engage and maintain, at its expense, a transfer agent and, if necessary under the jurisdiction of its incorporation or the rules of any national securities exchange on which the Common Stock will be listed, a registrar (which, if permitted by applicable laws and rules may be the same entity as the transfer agent) for the Common Stock.

(s) If this Agreement shall terminate or be terminated (i) by the Company or (ii) by the Underwriters because of any inability, failure or refusal on the part of the Company to perform in all material respects any agreement herein or to comply in all material respects with any of the terms or provisions hereof or to fulfill in all material respects any of the conditions of this Agreement, the Company agrees to reimburse you and the other Underwriters for all out-of-pocket expenses (including travel expenses and reasonable fees and expenses of counsel for the Underwriters, but excluding wages and salaries paid by you) reasonably incurred by you in connection herewith.

5.2 Covenants and Agreements of the Selling Shareholder. The Selling Shareholder covenants and agrees with the several Underwriters as follows:

(a) The Selling Shareholder will execute and deliver a Lock-Up Agreement.

(b) The Selling Shareholder will review the Prospectus and will comply with all agreements and satisfy all conditions on its part to be complied with or satisfied pursuant to this Agreement on or prior to the Closing Date and will advise the Underwriters prior to the Closing Date if any statements to be made on behalf of the Selling Shareholder in the certificate contemplated by Section 9(k) hereof would be inaccurate if made as of the Closing Date.

(c) On the Closing Date, all stock transfer and other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Firm Shares to be sold by the Selling Shareholder to the Underwriters hereunder will have been fully paid for by the Selling Shareholder and all laws imposing such taxes will have been fully complied with.

(d) In order to document the Underwriters’ compliance with the reporting and withholding provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder, with respect to the transactions herein contemplated, the Selling Shareholder shall deliver to you at least two days prior to the Closing Date a properly completed and executed United States Treasury Department Substitute Form W-9.

(e) At any time prior to the Closing Date or the Additional Closing Date, as the case may be, if there is any change in the information referred to in Section 6.2(e) hereof, the Selling Shareholder will immediately notify the Representative of such change.

6. Representations and Warranties.

6.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each Underwriter on the date hereof, and shall be deemed to represent and warrant to each Underwriter on the Closing Date and the Additional Closing Date, as the case may be, that:

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(a) The Company was not at the time of initial filing of the Registration Statement and at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Act) of the Common Stock, is not on the date hereof and will not be on the applicable Delivery Date an “ineligible issuer” (as defined in Rule 405).

(b) The Registration Statement conformed in all material respects, and any amendments to the Registration Statement filed after the date hereof will conform in all material respects when filed with the Commission, to the requirements of the Act. The most recent Preliminary Prospectus conformed in all material respects, and the Prospectus will conform in all material respects, when filed with the Commission pursuant to Rule 424(b), to the requirements of the Act.

(c) The Registration Statement does not 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 not misleading; provided, that no representation or warranty is made as to information contained in or omitted from the Registration Statement in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Underwriter specifically for inclusion therein.

(d) The Prospectus will not 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 the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Underwriter specifically for inclusion therein.

(e) The Time of Sale Information does not, and will not at the time of sale of the Shares, 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 the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Time of Sale Information in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Underwriter specifically for inclusion therein.

(f) Each Issuer Free Writing Prospectus (including, without limitation, any road show that is a free writing prospectus under Rule 433), when considered together with the Time of Sale Information at the time of sale of the Shares, did not 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 the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from each Issuer Free Writing Prospectus filed or used by the Company or the Time of Sale Information in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 14.

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(g) Each Issuer Free Writing Prospectus conformed or will conform in all material respects to the requirements of the Act on the date of first use, and the Company has complied with all prospectus delivery and any filing requirements applicable to such Issuer Free Writing Prospectus pursuant to the Act. The Company has not made any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representative. The Company has retained in accordance with the Act all Issuer Free Writing Prospectuses that were not required to be filed pursuant to the Act. The Company has taken all actions necessary under Rule 433(d)(8) of the Act so that any “road show” (as defined in Rule 433) in connection with the offering of the Stock will not be required to be filed pursuant to the Act.

(h) The capitalization of the Company is and will be as set forth in the Prospectus as of the date set forth therein. All the outstanding shares of Common Stock of the Company have been, and as of the Closing Date and the Additional Closing Date, as the case may be, will be, duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights; except as set forth in the Time of Sale Information and the Prospectus, the Company is not a party to or bound by any outstanding options, warrants or similar rights to subscribe for, or contractual obligations to issue, sell, transfer or acquire, any of its capital stock or any securities convertible into or exchangeable for any of such capital stock; the Shares to be issued and sold to the Underwriters by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against full payment therefor in accordance with the terms hereof will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights; the capital stock of the Company conforms to the description thereof in the Registration Statement, the Time of Sale Information and the Prospectus (or any amendment or supplement thereto); and the delivery of certificates for the Shares being sold by the Company against payment therefor pursuant to the terms of this Agreement will pass valid title to the Shares being sold by the Company, free and clear of any claim, encumbrance or defect in title, to the several Underwriters purchasing such shares in good faith and without notice of any lien, claim or encumbrance. The certificates for the Shares being sold by the Company are in valid and sufficient form.

(i) Each of the Company and its subsidiaries is a corporation duly organized and validly existing as a corporation in good standing under the laws of the state of its incorporation with full corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Registration Statement, the Time of Sale Information and the Prospectus (and any amendment or supplement thereto) and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to so register or qualify has not had or will not have a material adverse effect on the condition (financial or other), business, properties, net worth, results of operations or prospects of the Company and its subsidiaries (a “Material Adverse Effect”).

(j) The issued shares of capital stock of each of the Company’s subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company free and clear of any security interests, liens, encumbrances, equities or claims. As used in this Agreement, “subsidiaries” shall have the meaning set forth in Rule 405 of the Act, and shall include the subsidiaries of the Company identified on Schedule V attached hereto.

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(k) There are no legal or governmental proceedings pending or, to the best knowledge of the Company, threatened, against the Company or its subsidiaries or to which the Company or its subsidiaries or any of their properties are subject, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) but are not described as required. Except as described in the Registration Statement, the Time of Sale Information and Prospectus, there is no action, suit, inquiry, proceeding or investigation by or before any court or governmental or other regulatory or administrative agency or commission pending or, to the best knowledge of the Company, threatened, against or involving the Company or its subsidiaries, which might individually or in the aggregate prevent or adversely affect the transactions contemplated by this Agreement or result in a Material Adverse Effect, nor to the Company’s knowledge, is there any basis for any such action, suit, inquiry, proceeding or investigation. There are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement, the Time of Sale Information or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement that are not described, filed or incorporated by reference in the Registration Statement, the Time of Sale Information and the Prospectus as required by the Act. All such contracts to which the Company or any of its subsidiaries is a party, with respect to which the unenforceability of such contracts could reasonably be expected to have a Material Adverse Effect, have been duly authorized, executed and delivered by the Company or the applicable subsidiary, constitute valid and binding agreements of the Company or the applicable subsidiary and are enforceable against the Company or the applicable subsidiary in accordance with the terms thereof, except as enforceability thereof may be limited by (i) the application of bankruptcy, reorganization, insolvency and other laws affecting creditors’ rights generally and (ii) equitable principles being applied at the discretion of a court before which any proceeding may be brought. Neither the Company nor the applicable subsidiary has received notice or been made aware that any other party is in breach of or default to the Company under any of such contracts.

(l) Neither the Company nor any of its subsidiaries is (i) in violation of (A) its articles of incorporation or bylaws, or other organizational documents, (B) any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of its subsidiaries, the violation of which would have a Material Adverse Effect or (C) any decree of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries; or (ii) in default in any material respect in the performance of any obligation, agreement or condition contained in (A) any bond, debenture, note or any other evidence of indebtedness or (B) any agreement, indenture, lease or other instrument (each of (A) and (B), an “Existing Instrument”) to which the Company or any of its subsidiaries is a party or by which any of their properties may be bound, which default would have a Material Adverse Effect; and there does not exist any state of facts that constitutes an event of default on the part of the Company or any of its subsidiaries as defined in such documents or that, with notice or lapse of time or both, would constitute such an event of default.

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(m) The Company’s execution and delivery of this Agreement and the performance by the Company of its obligations under this Agreement have been duly and validly authorized by the Company and has been duly executed and delivered by the Company, and this Agreement constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent enforceability may be limited by (i) the application of bankruptcy, reorganization, insolvency and other laws affecting creditors’ rights generally and (ii) equitable principles being applied at the discretion of a court before which any proceeding may be brought, except as rights to indemnity and contribution hereunder may be limited by federal or state securities laws.

(n) None of the issuance and sale of the Shares by the Company, the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby (i) requires any consent, approval, authorization or other order of or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required for the registration of the Shares under the Act, approval of the NASD, the listing of the Shares for trading on NASDAQ, the registration of the Common Stock under the Exchange Act and compliance with the securities or Blue Sky laws of various jurisdictions, all of which will be, or have been, effected in accordance with this Agreement and except for the NASD’s clearance of the underwriting terms of the offering contemplated hereby as required under the NASD’s Rules of Fair Practice), (ii) conflicts with or will conflict with or constitutes or will constitute a breach of, or a default under, the Company’s articles of incorporation or the Company’s bylaws or any agreement, indenture, lease or other instrument to which the Company or any of its subsidiaries is a party or by which any of its properties may be bound, (iii) violates any statute, law, regulation, ruling, filing, judgment, injunction, order or decree applicable to the Company or any of its subsidiaries or any of their properties, or (iv) results in a breach of, or default or Debt Repayment Triggering Event (as defined below) under, or results in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or requires the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, defaults, liens, charges or encumbrances that will not, individually or in the aggregate, result in a Material Adverse Effect. As used herein, a “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries.

(o) Except as described in the Time of Sale Information and the Prospectus, and except for options to purchase capital stock issued pursuant to the Company’s 1995 and 2005 Incentive and Non-Qualified Stock Option Plans, neither the Company nor any of its subsidiaries has outstanding and at the Closing Date and the Additional Closing Date, as the case may be, will have outstanding any options to purchase, or any warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, any shares of Common Stock or any such warrants or convertible securities or obligations. No holder of securities of the Company has rights to the registration of any securities of the Company, other than the Selling Shareholder with respect to the Shares included in the Registration Statement, as a result of or in connection with the filing of the Registration Statement or the consummation of the transactions contemplated hereby that have not been satisfied or heretofore waived in writing.

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(p) Each of BDO Seidman, LLP and Deloitte & Touche LLP, the independent registered public accounting firms who have certified the financial statements (including the related notes thereto and supporting schedules) filed as part of the Registration Statement and the Prospectus (or any amendment or supplement thereto), are independent public accountants as required by the Act and the Exchange Act.

(q) The financial statements, together with related schedules and notes, included in the Registration Statement, the Time of Sale Information and the Prospectus (and any amendment or supplement thereto), present fairly in all material respects the financial condition, results of operations, cash flows and changes in financial position of the Company on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data set forth in the Registration Statement and Prospectus (and any amendment or supplement thereto) is accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. The pro forma consolidated financial statements together with related notes thereto included in the Registration Statement and the Prospectus (and any amendment or supplement thereto) present fairly in all material respects the information contained therein, have been prepared in accordance with the Commission’s rules and regulations with respect to pro forma financial statements and have been properly presented on the bases described therein. Additionally, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. No other financial statements or schedules are required to be included in the Registration Statement.

(r) Except as disclosed in the Registration Statement, the Time of Sale Information and the Prospectus (or any amendment or supplement thereto), since the date of the latest audited financial statements included therein, (i) neither the Company nor any of its subsidiaries has incurred any material liabilities or obligations, indirect, direct or contingent, or entered into any transaction that is not in the ordinary course of business, (ii) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance, (iii) neither the Company nor any of its subsidiaries has paid or declared any dividends or other distributions with respect to its capital stock, or issued any shares of its capital stock or granted any options with respect to its capital stock (other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants, in each case as such plans, options rights or warrants are described in each of the most recent Preliminary Prospectus and the Prospectus) and the Company is not in default under the terms of any class of capital stock of the Company or any outstanding debt obligations, (iv) there has not been any change in the authorized or outstanding capital stock of the Company or any material change in the indebtedness of the Company (other than in the ordinary course of business) and (v) there has not

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been any material adverse change, or any development involving or that may reasonably be expected to result in a Material Adverse Effect, in the condition (financial or otherwise), business, properties, net worth or result of operations of the Company.

(s) Since [            ], all offers and sales of the Company’s capital stock and other debt or other securities prior to the date hereof have been made in compliance with or have been the subject of an available exemption from the Act, and all other applicable state and federal laws or regulations, or any actions under the Act or any state or federal laws or regulations in respect of any such offers or sales are effectively barred by effective waivers or statutes of limitation.

(t) The Common Stock (including the Shares) is registered pursuant to Section 12(b) of the Exchange Act and is listed on NASDAQ, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from NASDAQ, nor has the Company received any notification that the Commission or the NASD is contemplating terminating such registration or listing.

(u) Other than excepted activity pursuant to Regulation M under the Exchange Act, including but not limited to repurchases by the Company of its Common Stock pursuant to its share repurchase program, the Company has not taken and will not take, directly or indirectly, any action that constituted, or any action designed to, or that might reasonably be expected to cause or result in or constitute, under the Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or for any other purpose.

(v) The Company and each of its subsidiaries have filed (or timely obtained extensions to file) all tax returns required to be filed through the date hereof (other than certain state or local tax returns, as to which the failure to file, individually or in the aggregate, would not have a Material Adverse Effect), which returns are complete and correct, and neither the Company nor any subsidiary is in default in the payment of any taxes that were payable pursuant to said returns or any assessments with respect thereto. Except as disclosed in the Time of Sale Information and the Prospectus, all deficiencies asserted as a result of any federal, state, local or foreign tax audits have been paid or finally settled and no issue has been raised in any such audit that, by application of the same or similar principles, reasonably could be expected to result in a Material Adverse Effect with respect to any other period not so audited. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any federal, state, local or foreign tax return for any period. On the Closing Date and the Additional Closing Date, as the case may be, all stock transfer and other taxes that are required to be paid in connection with the sale of the shares to be sold by the Company to the Underwriters will have been fully paid by the Company and all laws imposing such taxes will have been complied with.

(w) Except as set forth in the Time of Sale Information and the Prospectus, there are no transactions with “affiliates” (as defined in Rule 405 promulgated under the Act) or any officer, director or security holder of the Company (whether or not an affiliate) that are required by the Act to be disclosed in the Registration Statement. Additionally, no relationship,

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direct or indirect, exists between the Company or any of its subsidiaries on the one hand, and the directors, officers, shareholders, customers or suppliers of the Company or any subsidiary on the other hand that is required by the Act to be disclosed in the Registration Statement, the Time of Sale Information and the Prospectus that is not so disclosed.

(x) The Company is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an investment company within the meaning of the Investment Company Act of 1940, as amended.

(y) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, each of the Company and its subsidiaries has good and valid title to all property (real and personal) described in the Time of Sale Information and the Prospectus as being owned by it, free and clear of all liens, claims, security interests or other encumbrances except (i) such as are described in the Time of Sale Information and the Prospectus or (ii) such as are not materially burdensome and do not have or will not result in a Material Adverse Effect to the use of the property or the conduct of the business of the Company. All property (real and personal) held under lease by the Company and its subsidiaries is held by it under valid, subsisting and enforceable leases with only such exceptions as in the aggregate are not materially burdensome and do not have or result in a Material Adverse Effect to the use of the property or the conduct of the business of the Company.

(z) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, each of the Company and its subsidiaries has all permits, licenses, franchises, approvals, consents and authorizations of governmental or regulatory authorities (hereinafter “permit” or “permits”) as are necessary to own its properties and to conduct its business in the manner described in the Time of Sale Information and the Prospectus, subject to such qualifications as may be set forth in the Time of Sale Information and the Prospectus, except where the failure to have obtained any such permit has not had and will not have a Material Adverse Effect; each of the Company and its subsidiaries has operated and is operating its business in material compliance with and not in material violation of all of its obligations with respect to each such permit and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination of any such permit or result in any other material impairment of the rights of any such permit, subject in each case to such qualification as may be set forth in the Time of Sale Information and the Prospectus; and, except as described in the Time of Sale Information and the Prospectus, such permits contain no restrictions that are materially burdensome to the Company or any of its subsidiaries.

(aa) The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (iii) access to material assets is permitted only in accordance with management’s general or specific authorizations and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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(bb) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, neither the Company nor any of its subsidiaries, since each has been a subsidiary of the Company, nor, to the Company’s knowledge, any employee or agent of the Company or any of its subsidiaries, has, directly or indirectly, (i) made any unlawful contribution to any candidate for political office, or failed to disclose fully any contribution in violation of law or (ii) made any payment to any federal, state, local or foreign governmental official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof or applicable foreign jurisdictions.

(cc) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, the Company and its subsidiaries are (i) in compliance with any and all applicable federal, state, local and foreign 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”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance 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 other approvals would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in the Time of Sale Information and the Prospectus, neither the Company nor any of its subsidiaries has been named as a “potentially responsible party” under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended. Except as set forth in the Time of Sale Information and the Prospectus, neither the Company nor any of its subsidiaries owns, leases or occupies any property that appears on any list of hazardous sites compiled by any state or local governmental agency.

(dd) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, each of the Company and its subsidiaries owns and has full right, title and interest in and to, or has valid licenses to use, each material trade name, trademark, service mark, patent, copyright, approval, trade secret and other similar rights (collectively “Intellectual Property”) under which the Company and its subsidiaries conduct all or any material part of its business, and the Company has not created any lien or encumbrance on, or granted any right or license with respect to, any such Intellectual Property except where the failure to own or obtain a license or right to use any such Intellectual Property has not and will not have a Material Adverse Effect; there is no claim pending against the Company or its subsidiaries with respect to any Intellectual Property and the Company and its subsidiaries have not received notice or otherwise become aware that any Intellectual Property that it uses or has used in the conduct of its business infringes upon or conflicts with the rights of any third party. Neither the Company nor any of its subsidiaries has become aware that any material Intellectual Property that it uses or has used in the conduct of its business infringes upon or conflicts with the rights of any third party.

(ee) APS Financial Corporation is a member of the NASD. William A. Searles, the chairman of the board of directors of APS Investment Services, Inc., the direct parent company of APS Financial Corporation, is also a member of the board of directors of the Company.

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(ff) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, the Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which it is engaged; and neither the Company nor any of its subsidiaries has reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a comparable cost.

(gg) Except as disclosed in the Preliminary Prospectus or the Prospectus, the Company’s subsidiary that is engaged in the business of insurance, American Physicians Insurance Company (including, prior to April 1, 2007, American Physicians Insurance Exchange, its predecessor-in-interest) (together, “API”), has made no material change in its insurance reserving practices since December 31, 2006.

(hh) API has all licenses or registrations (together, “Insurance Licenses”) required to be duly licensed or registered as an insurer, as the case may be, under the insurance laws (including laws that relate to companies that control insurance companies) and the rules, regulations and interpretations of the insurance regulatory authorities thereunder (collectively, “Insurance Laws”), of each jurisdiction in which the conduct of its business as described in the Prospectus requires such licensing or registration, except for such jurisdictions in which the failure to be so licensed would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and its subsidiaries, as applicable, have made all required filings under applicable holding company statutes or other Insurance Laws in each jurisdiction where such filings are required, except, for such jurisdictions in which the failure to have filed would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and its subsidiaries have all other necessary authorizations, approvals, orders, consents, certificates, permits, licenses, registrations and qualifications of and from all insurance regulatory authorities necessary to conduct API’s insurance business (together with the Insurance Licenses, the “Insurance Licenses and Authorizations”) necessary to conduct its business as described in the Prospectus and all of the foregoing are in full force and effect, except where the failure to have such authorizations, approvals, orders, consents, certificates, permits, licenses, registrations or qualifications or their failure to be in full force and effect would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and its subsidiaries have fulfilled and performed all obligations necessary to maintain the Insurance Licenses and Authorizations. There is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or investigation that would result in the revocation, termination or suspension of any of the Insurance Licenses and Authorizations that would, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor its subsidiaries have received any notification from any insurance regulatory authority or other governmental authority to the effect that any additional Insurance Licenses and Authorizations are needed to be obtained by either the Company or its subsidiaries. Except as otherwise described in the Prospectus, no insurance regulatory authority has issued to the Company or any of its subsidiaries any order impairing, restricting or prohibiting (A) the payment of dividends by the Company or any of its subsidiaries, (B) the making of a distribution to any holder of capital stock of the Company or any subsidiary, (C) the repayment to the Company of any loans or advances to any subsidiary from the Company, (D) the payment of fees or charges to the Company by any of its subsidiaries or (E) the transfer of any subsidiary’s property or assets to the Company or any other subsidiary of the Company.

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(ii) Except as disclosed in the Prospectus, the authority of API to write the classes and lines of insurance authorized by such licenses, certificates, permits and other authorizations as described in the Prospectus is unrestricted and neither the Company, nor any of its subsidiaries, is a party to any agreement, formal or informal, with any regulatory official or other person limiting the ability of the Company or any of its subsidiaries from making full use of the licenses, certificates, permits and other authorizations issued to it or requiring any such company 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.

(jj) All reinsurance treaties and arrangements to which API is a party are in full force and effect and API is not in violation of, or in default in the performance, observance or fulfillment of, any obligation, agreement, covenant or condition contained therein, except where the failure to be in full force and effect or where such violation or default would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; API has not received any notice from any of the other parties to such treaties, contracts or agreements that such other party intends not to perform such treaty and, to the knowledge of the Company and API, none of the other parties to such treaties or arrangements will be unable to perform such treaty or arrangement except to the extent adequately and properly reserved for in the financial statements of API included in the Preliminary Prospectus or the Prospectus, except where such nonperformance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; API is not, nor has it ever been, a party to a contract of financial reinsurance, finite risk insurance or reinsurance wherein the amount of risk or potential risk transferred to or from API is insufficient to permit API to classify properly the contract or other arrangement as a transfer of risk, or where such contract or other arrangement may need to be subsequently reclassified so as to change the accounting treatment thereof under applicable statutory accounting principles. API is not, nor has it ever been, a party to any separate written or oral agreement with its reinsurers, excluding any amendments to a reinsurance treaty to which API is a party, that would under any circumstance reduce, limit, mitigate or affect any actual or potential loss to the parties under a reinsurance treaty to which API is a party.

(kk) The Company reasonably believes that it has no costs or liabilities related to Environmental Laws that would, individually or in the aggregate, result in a Material Adverse Effect.

(ll) Except as otherwise disclosed in the Time of Sale Information and the Prospectus, the Company and its subsidiaries and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company, its subsidiaries or their “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA and all other applicable state and federal laws. “ERISA Affiliate” means, with respect to the Company or a subsidiary, any member of any group or organization described in Sections 414(b), (c), (m) or (o) of the Code of which the Company or such

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subsidiary is a member. No “reportable event” (as defined in ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates. No “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined in ERISA). Neither the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification.

(mm) The statements (including the assumptions described therein) included in the Registration Statement, the Time of Sale Information and the Prospectus under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” (i) are within the coverage of Rule 175(b) under the Act to the extent such data constitute forward looking statements as defined in Rule 175(c) and (ii) were made by the Company with a reasonable basis and reflect the Company’s good faith estimate of the matters described therein.

(nn) The Company and its subsidiaries have complied and will comply in all material respects with wage and hour determinations issued by the U.S. Department of Labor under the Service Contract Act of 1965 and the Fair Labor Standards Act in paying its employees’ salaries, fringe benefits and other compensation for the performance of work or other duties in connection with contracts with the U.S. government, and have complied and will comply in all material respects with the requirements of the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Civil Rights Act of 1964 (Title VII), the National Labor Relations Act, the Vietnam Era Veteran’s Readjustment Act, the Age Discrimination in Employment Act, as amended by the Older Workers’ Benefit Protection Act, and federal, state and local labor laws, each as amended except where the failure to comply with any such requirements has not, and will not, have a Material Adverse Effect.

6.2 Representations and Warranties of the Selling Shareholder. The Selling Shareholder hereby represents and warrants to each Underwriter on the date hereof, and shall be deemed to represent and warrant to each Underwriter on the Closing Date and the Additional Closing Date, as the case may be, that:

(a) The Selling Shareholder is the lawful owner of the Shares to be sold by such Selling Shareholder pursuant to this Agreement and has, and on the Closing Date and the Additional Closing Date, as the case may be, will have, good and valid title to such Shares, free of all restrictions on transfer, liens, encumbrances, security interests, equities and claims whatsoever.

(b) The Selling Shareholder has, and on the Closing Date and the Additional Closing Date, as the case may be, will have, full legal right, power and authority, and all authorization and approval required by law, to enter into this Agreement.

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(c) This Agreement has been duly authorized, executed and delivered by the Selling Shareholder and is a valid and binding agreement of such Selling Shareholder, enforceable as to the Selling Shareholder in accordance with its terms, except to the extent enforceability may be limited by (i) the application of bankruptcy, reorganization, insolvency and other laws affecting creditors’ rights generally and (ii) equitable principles being applied at the discretion of a court before which a proceeding may be brought, except as rights to indemnity and contribution hereunder may be limited by federal or state securities laws.

(d) None of the sale of the Shares by the Selling Shareholder, the execution, delivery or performance by the Selling Shareholder of this Agreement, the compliance by the Selling Shareholder with all the provisions hereof and thereof or the consummation by the Selling Shareholder of the transactions contemplated hereby and thereby (i) requires any consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body or administrative agency or other governmental body, agency or official (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflicts with or will conflict with or constitutes or will constitute a breach of or a default under any agreement, indenture, lease or other instrument to which the Selling Shareholder is a party or by which the Selling Shareholder or any property of such Selling Shareholder is bound or (iii) violates any statute, law, regulation, ruling, filing, judgment, injunction, order or decree applicable to the Selling Shareholder or any property of the Selling Shareholder.

(e) The information in the Prospectus under the caption “Selling Shareholder” that specifically relates to such Selling Shareholder does not, and will not on the Closing Date or the Additional Closing Date, if as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(f) Other than excepted activity pursuant to Regulation M under the Exchange Act, such Selling Shareholder has not taken and will not take, directly or indirectly, any action that constituted, or any action designed to, or that might reasonably be expected to cause or result in or constitute, under the Act or otherwise, stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

(g) The Selling Shareholder has, and upon delivery of and payment for the Shares to be sold by the Selling Shareholder pursuant to this Agreement will have, good and valid title to or a valid “security entitlement” within the meaning of Section 8-501 of the New York Uniform Commercial Code (the “UCC”) in respect of, the Shares to be sold by the Selling Shareholder hereunder on such Closing Date, free and clear of all liens, encumbrances, equities or claims. Upon payment for the Shares to be sold by the Selling Shareholder, delivery of such Shares, as directed by the Underwriters, to Cede & Co. (“Cede”) or such other nominee as may be designated by DTC, registration of such Shares in the name of Cede or such other nominee and the crediting of such Shares on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within

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the meaning of Section 8-105 of the UCC to such Shares). For purposes of this representation, the Selling Shareholder may assume that when such payment, delivery and crediting occur, (A) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its articles of incorporation, bylaws and applicable law, (B) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (C) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC.

(h) The Selling Shareholder does not have any registration or other similar rights to have any equity or debt securities registered for sale by the Company under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as are being exercised in the offering contemplated by this Agreement or such rights as have been duly waived.

(i) The Selling Shareholder is not prompted to sell shares of Common Stock by any information concerning the Company that is not set forth in the Registration Statement.

(j) The Registration Statement did not as of the date and time it, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission, the Prospectus will not as of its date and on the applicable Closing Date, the Time of Sale Information did not as of 4:30 pm (New York City time) on the date of this Agreement (the “Applicable Time”), and each Issuer Free Writing Prospectus (including, without limitation, any road show written communication that is a free writing prospectus under Rule 433), when considered together with the Time of Sale Information, did not as of the Applicable 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 the light of the circumstances under which they were made, not misleading; provided that the foregoing representation and warranty shall apply only to the extent that any statements in or omissions from the Registration Statement, the Prospectus, the Time of Sale Information or any Issuer Free Writing Prospectus, as applicable, are statements or omissions concerning the Selling Shareholder (it being understood that any statements or omissions concerning the Selling Shareholder for the purposes of this Section 6.2(j) refers only to information concerning the Selling Shareholder in his capacity as Selling Shareholder, and not to information concerning the Selling Shareholder in his capacity as an officer or director of the Company).

(k) On the Closing Date (and the Additional Closing Date, if any), all stock transfer and other taxes that are required to be paid in connection with the sale of the shares to be sold by the Selling Shareholder to the Underwriters will have been fully paid by the Selling Shareholder, and all laws imposing such taxes will have been complied with.

7. Expenses. Whether or not the transactions contemplated hereby are consummated or this Agreement becomes effective or is terminated, the Company agrees to pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies

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thereof and of any Preliminary Prospectus to the Underwriters and dealers; (ii) the printing and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, the Prospectus, each Preliminary Prospectus, the Time of Sale Information, the Blue Sky memoranda, the Master Agreement Among Underwriters, this Agreement, the Selected Dealers Agreement and all amendments or supplements to any of them as may be reasonably requested for use in connection with the offering and sale of the Shares; (iii) consistent with the provisions of Section 5.1(i), all expenses in connection with the qualification of the Shares for offering and sale under state securities laws or Blue Sky laws, excluding attorneys’ fees and out-of-pocket expenses of the counsel for the Underwriters in connection therewith; (iv) the filing fees incident to securing any required review by the NASD of the fairness of the terms of the sale of the Shares, excluding fees and disbursements of the Underwriters’ counsel relating thereto; (v) the fees and expenses associated with listing the Shares on NASDAQ; (vi) the cost of preparing stock certificates; (vii) the costs and charges of any transfer agent or registrar; (viii) the cost of the tax stamps, if any, in connection with the issuance and delivery of the Shares to the respective Underwriters; (ix) all other fees, costs and expenses referred to in Item 13 of the Registration Statement; and (x) the transportation, lodging, graphics and other expenses incidental to the Company’s preparation for and participation in the “roadshow” for the offering contemplated hereby. Except as provided in this Section 7 and Section 8 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel. In addition, in the event that the proposed offering is terminated for the reasons set forth in Section 5.1(s) hereof, the Company agrees to reimburse the Underwriters as provided in Section 5.1(s).

8. Indemnification and Contribution. Subject to the limitations in this paragraph below, the Company agrees to indemnify and hold harmless you and each other Underwriter, the directors, officers, employees and agents of each Underwriter, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorneys’ fees and expenses (collectively, “Damages”) arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, in the Registration Statement, the Time of Sale Information, any Issuer Free Writing Prospectus or the Prospectus or in any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except to the extent that any such Damages arise out of or are based upon an untrue statement or omission or alleged untrue statement or omission that has been made therein or omitted therefrom in reliance upon and in conformity with the information furnished in writing to the Company by or on behalf of any Underwriter through you, expressly for use in connection therewith, (ii) any inaccuracy in or breach of the representations and warranties of the Company contained herein or any failure of the Company to perform its obligations hereunder or under law or (iii) any inaccuracy in or breach of the representations and warranties of the Selling Shareholder; provided, however, that with respect to any untrue statement or omission made in any Preliminary Prospectus, the indemnity agreement contained in this paragraph shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter or to any officer, director, employee or agent

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of any Underwriter) from whom the person asserting any such Damages purchased the Shares concerned if both (A) a copy of the Time of Sale Information was not sent or given to such person at or prior to the written confirmation of the sale of such Shares to such person as required by the Act and (B) the untrue statement or omission in the Preliminary Prospectus was corrected in the Time of Sale Information. This indemnification shall be in addition to any liability that the Company may otherwise have.

Subject to the limitations in this paragraph below, the Selling Shareholder agrees to indemnify and hold harmless you and each other Underwriter, the directors, officers, employees and agents of each Underwriter, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all Damages arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus or in the Registration Statement, the Time of Sale Information, any free writing prospectus or the Prospectus or in any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except to the extent that any such Damages arise out of or are based upon an untrue statement or omission or alleged untrue statement or omission that has been made therein or omitted therefrom in reliance upon and in conformity with the information not expressly relating to the Selling Shareholder or the offering by them of their shares of Common Stock or furnished in writing to the Company by or on behalf of any Underwriter through you expressly for use in connection therewith or (ii) any inaccuracy in or breach of the representations and warranties of such Selling Shareholder contained herein or any failure of the Selling Shareholder to perform its obligations hereunder or under law; provided, however, that with respect to any untrue statement or omission made in any Preliminary Prospectus, the indemnity agreement contained in this paragraph shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter or to any officer, director, employee or agent of any Underwriter) from whom the person asserting any such Damages purchased the Shares concerned if both (A) a copy of the Time of Sale Information was not sent or given to such person at or prior to the written confirmation of the sale of such Shares to such person as required by the Act and (B) the untrue statement or omission in the Preliminary Prospectus was corrected in the Time of Sale Information. This indemnification shall be in addition to any liability that the Selling Shareholder may otherwise have.

In addition to their other obligations under this Section 8, the Company and the Selling Shareholder, severally and not jointly, agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any inaccuracy in the representations and warranties of the Company or the Selling Shareholder herein or failure to perform their respective obligations hereunder, all as set forth in this Section 8, the party against whom indemnification is being sought will reimburse each Underwriter on a monthly basis for all reasonable legal or other out-of-pocket expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding (to the extent documented by reasonably itemized invoices therefor), notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligation of the Company or the Selling Shareholder to reimburse each

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Underwriter for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, each Underwriter shall promptly return it to the person(s) from whom it was received. Any such interim reimbursement payments that are not made to the Underwriters within 30 days of a request for reimbursement shall bear interest compounded daily at a rate determined on the basis of the base lending rate announced from time to time by The Wall Street Journal from the date of such request.

If any action or claim shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought jointly and severally against the Company and the Selling Shareholder, such Underwriter or such controlling person shall promptly notify in writing the party against whom indemnification is being sought (the “indemnifying party” or “indemnifying parties”), and such indemnifying party shall assume the defense thereof, including the employment of counsel reasonably acceptable to such Underwriter or such controlling person and the payment of all reasonable fees of and expenses incurred by such counsel. Such Underwriter or any such controlling person 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 such Underwriter or such controlling person, unless (i) the indemnifying party has agreed in writing to pay such fees and expenses, (ii) the indemnifying party has failed to assume the defense and employ counsel reasonably acceptable to the Underwriter or such controlling person or (iii) the named parties to any such action (including any impleaded parties) include both such Underwriter or such controlling person and the indemnifying party, and such Underwriter or such controlling person shall have been advised by its counsel that one or more legal defenses may be available to the Underwriter that may not be available to the Company or the Selling Shareholder, or that representation of such indemnified party and any indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such Underwriter or such controlling person but the Company and the Selling Shareholder, as applicable, shall not be liable for the fees and expenses of more than one counsel for the Underwriters and such controlling persons)). The indemnifying party shall not be liable for any settlement of any such action effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any Underwriter and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment, but in the case of a judgment only to the extent stated in this Section 8.

Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Selling Shareholder, the Company its directors, and its officers who sign the Registration Statement and any person who controls the Company, within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing several indemnity from the Company and the Selling Shareholder to each Underwriter, but only with respect to information furnished in writing by or on behalf of such Underwriter through you expressly for

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use in the Registration Statement, the Prospectus, the Time of Sale Information, any Issuer Free Writing Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto. If any action or claim shall be brought or asserted against the Selling Shareholder, the Company, its directors, or its officers or any such controlling person based on the Registration Statement, the Prospectus, the Time of Sale Information or any Preliminary Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter pursuant to this paragraph, such Underwriter shall have the rights and duties given to the Company and the Selling Shareholder by the immediately preceding paragraph (except that if the Company and the Selling Shareholder shall have assumed the defense thereof such Underwriter 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 such Underwriter’s expense), and the Selling Shareholder, the Company, its directors, and its officers and any such controlling persons, shall have the rights and duties given to the Underwriters by the immediately preceding paragraph.

In any event, the Company or the Selling Shareholder will not, without the prior written consent of the Representatives, settle or compromise or consent to the entry of any judgment in any proceeding or threatened claim, action, suit or proceeding in respect of which the indemnification may be sought hereunder (whether or not the Representatives or any person who controls the Representatives within the meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of all Underwriters and such controlling persons from all liability arising out of such claim, action, suit or proceeding.

If the indemnification provided for in this Section 8 is unavailable or insufficient for any reason whatsoever to an indemnified party in respect of any Damages referred to herein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Damages (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholder, respectively, on the one hand, and the Underwriters on the other hand, from the offering and sale of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative and several fault of the Company and the Selling Shareholder, respectively, on the one hand, and the Underwriters on the other hand, in connection with the statements or omissions that resulted in such Damages as well as any other relevant equitable considerations. The relative and several benefits received by the Company and the Selling Shareholder, respectively, on the one hand, and the Underwriters on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Shareholder bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus; provided that, in the event that the Underwriters shall have purchased any Additional Shares hereunder, any determination of the relative benefits received by the Company and the Selling Shareholder or the Underwriters from the offering of the Shares shall include the net proceeds (before deducting expenses) received by the Company and the Selling Shareholder, and the underwriting discounts and commissions

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received by the Underwriters, from the sale of such Additional Shares, in each case computed on the basis of the respective amounts set forth in the notes to the table on the cover page of the Prospectus. The relative fault of the Company and the Selling Shareholder, respectively, on the one hand, and the Underwriters on the other hand, 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 or the Selling Shareholder, on the one hand, or by the Underwriters on the other hand and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company, the Selling Shareholder, and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 was determined by a pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount of the underwriting commissions received by such underwriter in connection with the Shares underwritten by it and distributed to the public. 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 Underwriters’ obligations to contribute pursuant to this Section 8 are several in proportion to the respective numbers of Firm Shares set forth opposite their names in Schedule I hereto (or such numbers of Firm Shares increased as set forth in Section 10 hereof) and not joint.

Notwithstanding any provision in this Section 8, any Damages for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as Damages are incurred after receipt of reasonably itemized invoices therefor. The indemnity, contribution and reimbursement agreements contained in this Section 8 and the representations and warranties of the Company and the Selling Shareholder set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, the Selling Shareholder, its directors or officers or any person controlling the Company or the Selling Shareholder, (ii) acceptance of any Shares and payment therefor hereunder and (iii) any termination of this Agreement. A successor to any Underwriter or any person controlling any Underwriter, the Selling Shareholder, the Company, its directors, or its officers or any person controlling the Company or the Selling Shareholder, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8.

It is agreed that any controversy arising out of the operation of the interim reimbursement arrangements set forth in this Section 8, including the amounts of any requested reimbursement

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payments and the method of determining such amounts, shall be settled by arbitration conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such arbitration must be commenced by service of a written demand for arbitration or written notice of intention to arbitrate, therein electing the arbitration tribunal. In the event the party demanding arbitration does not make such designation of an arbitration tribunal in such demand or notice, then the party responding to said demand or notice is authorized to do so. Such arbitration would be limited to the operation of the interim reimbursement provisions contained in this Section 8, and would not resolve the ultimate propriety or enforceability of the obligation to reimburse expenses that is created by the provisions of this Section 8.

9. Conditions of Underwriters’ Obligations. The several obligations of the Underwriters to purchase the Firm Shares hereunder are subject to the following conditions:

(a) The Registration Statement shall have become effective not later than 5:00 p.m., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by the Representative, and all filings required by Rules 424(b), 430A and 462 under the Act shall have been timely made.

(b) You shall be reasonably satisfied that since the respective dates as of which information is given in the Registration Statement, the Time of Sale Information and Prospectus, (i) there shall not have been any material change in the capital stock of the Company or any material change in the indebtedness (other than in the ordinary course of business) of the Company, (ii) except as set forth or contemplated by the Registration Statement, the Time of Sale Information or the Prospectus, no material oral or written agreement or other transaction shall have been entered into by the Company that is not in the ordinary course of business or that could reasonably be expected to result in a material reduction in the future earnings of the Company, (iii) no loss or damage (whether or not insured) to the property of the Company shall have been sustained that had or could reasonably be expected to have a Material Adverse Effect, (iv) no legal or governmental action, suit or proceeding affecting the Company or any of its properties that is material to the Company or that affects or could reasonably be expected to affect the transactions contemplated by this Agreement shall have been instituted or threatened and (v) there shall not have been any material change in the condition (financial or otherwise), business, management, results of operations or prospects of the Company or its subsidiaries that makes it impractical or inadvisable in your judgment to proceed with the public offering or purchase of the Shares as contemplated hereby.

(c) You shall have received on the Closing Date (and the Additional Closing Date, if any) an opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to the Company, substantially in the form attached hereto as Exhibit B.

(d) You shall have received on the Closing Date or Additional Closing Date, as the case may be, an opinion of Morris, Manning & Martin, LLP as counsel for the Underwriters, dated the Closing Date or Additional Closing Date, as the case may be, with respect to the issuance and sale of the Shares, the Registration Statement and other related matters as you may reasonably request, and the Company and its counsel shall have furnished to your counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters.

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(e) You shall have received letters addressed to you and dated the date hereof and the Closing Date or the Additional Closing Date, as the case may be, from (i) the firm of Deloitte & Touche LLP, independent registered public accountants, substantially in the form attached hereto as Exhibit C, (ii) the firm of BDO Seidman, LLP, independent registered public accountants and (iii) the Chief Financial Officer of the Company, substantially in the forms heretofore approved by you.

(f)(i) No stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and no proceedings for that purpose shall be pending or, to the knowledge of the Company, shall be threatened or contemplated by the Commission at or prior to the Closing Date or Additional Closing Date, as the case may be; (ii) no order suspending the effectiveness of the Registration Statement or the qualification or registration of the Shares under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending or, to the knowledge of the Company, threatened or contemplated by the authorities of any jurisdiction; (iii) any request for additional information on the part of the staff of the Commission or any such authorities shall have been complied with to the satisfaction of the staff of the Commission or such authorities; (iv) after the date hereof, no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to you and you did not object thereto in good faith; and (v) all of the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except for such representations and warranties qualified by materiality, which representations and warranties shall be true and correct in all respects) on and as of the date hereof and on and as of the Closing Date or Additional Closing Date, as the case may be, as if made on and as of the Closing Date or Additional Closing Date, as the case may be, and you shall have received a certificate, dated the Closing Date and signed by the chief executive officer and the chief financial officer of the Company (or such other officers as are acceptable to you) to the effect set forth in this Section 9(f) and in Sections 9(b) and 9(h) hereof.

(g) The Company shall not have failed in any material respect at or prior to the Closing Date or the Additional Closing Date, as the case may be, to have performed or complied with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date or Additional Closing Date, as the case may be.

(h) The Company shall have furnished or caused to have been furnished to you such further certificates and documents as you shall have reasonably requested.

(i) At or prior to the Closing Date, you shall have received the written Lock-Up Agreements from each of the persons listed on Schedule IV hereto.

(j) At or prior to the effective date of the Registration Statement, you shall have received a letter or oral notification from the Corporate Financing Department of the NASD confirming that such Department has determined to raise no objections with respect to the fairness or reasonableness of the underwriting terms and arrangements of the offering contemplated hereby.

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(k) On the Closing Date (and the Additional Closing Date, if any), all stock transfer and other taxes that are required to be paid in connection with the sale of the shares to be sold by the Company and the Selling Shareholder to the Underwriters will have been fully paid by the Company and the Selling Shareholder, as applicable, and all laws imposing such taxes will have been complied with.

(l) You shall be satisfied that, and you shall have received a certificate dated the Closing Date or Additional Closing Date, as the case may be, from the Selling Shareholder to the effect that, as of the Closing Date or Additional Closing Date, as the case may be: (i) the representations and warranties made by such Selling Shareholder herein are true and correct in all material respect on the Closing Date and (ii) the Selling Shareholder has complied with all obligations and satisfied all conditions that are required to be performed or satisfied on his or its part at or prior to the Closing Date or Additional Closing Date, as the case may be.

All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and your counsel.

The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the satisfaction on and as of the Additional Closing Date of the conditions set forth in this Section 9, except that, if the Additional Closing Date is other than the Closing Date, the certificates, opinions and letters referred to in this Section 9 shall be dated as of the Additional Closing Date and the opinions called for by paragraphs (c) and (d) shall be revised to reflect the sale of Additional Shares.

If any of the conditions hereinabove provided for in this Section 9 shall not have been satisfied when and as required by this Agreement, this Agreement may be terminated by you by notifying the Company of such termination in writing or by telegram at or prior to such Closing Date, but you shall be entitled to waive any of such conditions.

10. Effective Date of Agreement. This Agreement shall become effective upon the later of (a) the execution and delivery hereof by the parties hereto and (b) release of notification of the effectiveness of the Registration Statement by the Commission; provided, however, that the provisions of Sections 7 and 8 shall at all times be effective.

11. Defaulting Underwriters. If any one or more of the Underwriters shall fail or refuse to purchase Firm Shares that it or they have agreed to purchase hereunder, and the aggregate number of Firm Shares that such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Firm Shares, each non-defaulting Underwriter shall be obligated, severally, in the proportion in which the number of Firm Shares set forth opposite its name in Schedule I hereto bears to the aggregate number of Firm Shares set forth opposite the names of all non-defaulting Underwriters or in such other proportion as you may specify in the Master Agreement Among Underwriters, to purchase

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the Firm Shares that such defaulting Underwriter or Underwriters agreed, but failed or refused to purchase. If any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case that does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven (7) days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement.

12. Termination of Agreement. This Agreement shall be subject to termination in your absolute discretion, without liability on the part of any Underwriter to the Company by notice to the Company, if prior to the Closing Date or the Additional Closing Date (if different from the Closing Date and then only as to the Additional Shares), as the case may be, in your sole judgment, (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the NASDAQ, (ii) trading in securities generally on the NASDAQ shall have been suspended or materially limited, or minimum or maximum prices shall have been generally established on such exchange, or additional material governmental restrictions, not in force on the date of this Agreement, shall have been imposed upon trading in securities generally by any such exchange or by order of the Commission or any court or other governmental authority, (iii) a general moratorium on commercial banking activities shall have been declared by either federal or New York State authorities (iv) any downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act and (v) any such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities or (vi) there shall have occurred any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions or other material event the effect of which on the financial markets of the United States is such as to make it, in your judgment, impracticable or inadvisable to market the Shares or to enforce contracts for the sale of the Shares. Notice of such cancellation shall be promptly given to the Company and its counsel by telecopy or telephone and shall be subsequently confirmed by letter.

13. Failure of the Selling Shareholder to Sell and Deliver the Shares. If the Selling Shareholder shall fail to sell and deliver to the Underwriters the Shares to be sold and delivered by the Selling Shareholder at the Closing Date pursuant to this Agreement, then the Underwriters may at their option, by written notice from the Representative to the Company and the Selling Shareholder, either (i) terminate this Agreement without any liability on the part of any Underwriter or, except as provided in Sections 7 and 8 hereof, the Company or the Selling Shareholder or (ii) purchase the Shares that the Company has agreed to sell and deliver in accordance with the terms hereof. If the Selling Shareholder shall fail to sell and deliver to the Underwriters the Shares to be sold and delivered by the Selling Shareholder pursuant to this Agreement at the Closing Date or Additional Closing Date, then the Underwriters shall have the

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right, by written notice from the Representative to the Company and the Selling Shareholder, to postpone the Closing Date or the Additional Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected.

14. Information Furnished by the Underwriters. The Company acknowledges that (i) [the paragraph immediately following footnote (    ) on the cover page] of the Registration Statement and (ii) [the             ,              and              paragraphs] under the caption “Underwriting” in any Preliminary Prospectus, constitute the only information furnished by or on behalf of the Underwriters through you or on your behalf as such information is referred to in Sections 5.2(e), 6.1(a), 6.1(b), and 8 hereof.

15. Miscellaneous. Except as otherwise provided in Sections 5 and 12 hereof, notice given pursuant to any of the provisions of this Agreement shall be in writing and shall be delivered:

(a) to the Company

American Physicians Service Group, Inc.

1301 South Capital of Texas Highway

Suite C-300

Austin, Texas 78746

Phone: 512.328.0888

Fax: 512.314.4398

Attention: Kenneth S. Shifrin

with a copy to

Akin Gump Strauss Hauer & Feld LLP

1700 Pacific Avenue

Suite 4100

Dallas, Texas 75201-4675

Phone: 214.969.2783

Fax: 214.969.4343

Attention: J. Kenneth Menges Jr., P.C.

(b) to the Underwriters

Raymond James & Associates, Inc.

880 Carillon Parkway

St. Petersburg, Florida 33716

Phone: 727.567.2400

Fax: 727.573.8274

Attention: Bonnie Bishop, Equity Syndicate

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with a copy to

Morris, Manning & Martin, LLP

1600 Atlanta Financial Center

3343 Peachtree Road, NE

Atlanta, Georgia 30326-1044

Phone: 404.504.7606

Fax: 404.395.9532

Attention: Ward S. Bondurant, Esq.

This Agreement has been and is made solely for the benefit of the several Underwriters, the Company and its directors and officers and the Selling Shareholder.

16. Applicable Law; Counterparts. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without reference to choice of law principles thereunder.

This Agreement may be signed in various counterparts, which together shall constitute one and the same instrument.

This Agreement shall be effective when, but only when, at least one counterpart hereof shall have been executed on behalf of each party hereto.

The Company, the Selling Shareholder and the Underwriters each hereby irrevocably waive any right they may have to a trial by jury in respect to any claim based upon or arising out of this Agreement or the transactions contemplated hereby.

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Please confirm that the foregoing correctly sets forth the agreement among the Company, the Selling Shareholder, and the several Underwriters.

Very truly yours,
American Physicians Service Group, Inc.
Timothy L. Lafrey, President and Chief Operating Officer
Selling Shareholder:
By:
	Kenneth S. Shifrin

CONFIRMED as of the date first above mentioned, on behalf of the other several Underwriters named in Schedule I hereto.
RAYMOND JAMES & ASSOCIATES, INC.
By:
	Authorized Representative

Signature Page to Underwriting Agreement

SPOUSAL CONSENT

The undersigned spouse of Kenneth S. Shifrin hereunto subscribes her name in evidence of her agreement and consent to the disposition made of any interest she may have, including any community property interests, in the capital stock of American Physicians Service Group, Inc. referred to in the foregoing Agreement, and to all other provisions of such Agreement.

Name: Yvonne Shifrin

SCHEDULE I

Name	Number Firm Shares
Total:

SCHEDULE II

Schedule of Selling Shareholder

Shareholder	Number of Firm Shares to be Sold
Kenneth S. Shifrin	300,000

SCHEDULE III

Free Writing Prospectuses

SCHEDULE IV

Persons Subject to Lock-Up Agreements

Kenneth S. Shifrin

Timothy L. LaFrey

William H. Hayes

Maury L. Magids

Thomas R. Solimine

Norris C. Knight, Jr., M.D.

Lew N. Little, Jr.

Jackie C. Majors

William J. Peche, M.D.

William A. Searles

Cheryl Williams

George Conwill

Marc J. Zimmermann

SCHEDULE V

Subsidiaries

1. APS Insurance Services, Inc.

2. American Physicians Insurance Agency, Inc.

3. American Physicians Insurance Company

4. APS Investment Services, Inc.

5. APS Financial Corporation, Inc.

6. APS Asset Management, Inc.

7. APS Capital Corp.

EXHIBIT A

                         , 2007

American Physicians Service Group, Inc.

1301 S. Capital of Texas Highway

Suite C-300

Austin, Texas 78746

Raymond James & Associates, Inc.

As Representative of the Several Underwriters

c/o Raymond James & Associates, Inc.

880 Carillon Parkway

St. Petersburg, FL 33716

Re: American Physicians Service Group, Inc. (the “Company”) - Restriction on Stock Sales

Dear Sirs:

This letter is delivered to you pursuant to the Underwriting Agreement (the “Underwriting Agreement”) to be entered into by the Company, as issuer, and Raymond James & Associates, Inc., as the representative (the “Representative”) of certain underwriters (the “Underwriters”) to be named therein. Upon the terms and subject to the conditions of the Underwriting Agreement, the Underwriters intend to effect a public offering of Common Stock, par value $ .10 per share, of the Company (the “Shares”), as described in and contemplated by the registration statement of the Company on Form S-1, File No. 333-143241 (the “Registration Statement”), as filed with the Securities and Exchange Commission on May 24, 2007 (the “Offering”).

The undersigned recognizes that it is in the best financial interests of the undersigned, as an officer or director, or an owner of stock, options, warrants or other securities of the Company (the “Company Securities”), that the Company complete the proposed Offering.

The undersigned further recognizes that the Company Securities held by the undersigned are, or may be, subject to certain restrictions on transferability, including those imposed by United States federal securities laws. Notwithstanding these restrictions, the undersigned has agreed to enter into this letter agreement to further assure the Underwriters that the Company Securities of the undersigned, now held or hereafter acquired, will not enter the public market at a time that might impair the underwriting effort.

Therefore, as an inducement to the Underwriters to execute the Underwriting Agreement, the undersigned hereby acknowledges and agrees that the undersigned will not (i) offer, sell,

A-1

contract to sell, pledge, grant any option to purchase or otherwise dispose of (collectively, a “Disposition”) any Company Securities, or any securities convertible into or exercisable or exchangeable for, or any rights to purchase or otherwise acquire, any Company Securities held by the undersigned or acquired by the undersigned after the date hereof, or that may be deemed to be beneficially owned by the undersigned (collectively, the “Lock-Up Shares”), pursuant to the Rules and Regulations promulgated under the Securities Act of 1933, as amended (the “Act”), and the Securities Exchange Act of 1934, as amended, for a period commencing on the date hereof and ending 180 days after the date of the Company’s Prospectus first filed pursuant to Rule 424(b) under the Act, inclusive (the “Lock-Up Period”), without the prior written consent of Raymond James & Associates, Inc. or (ii) exercise or seek to exercise or effectuate in any manner any rights of any nature that the undersigned has or may have hereafter to require the Company to register under the Act the undersigned’s sale, transfer or other disposition of any of the Lock-Up Shares or other securities of the Company held by the undersigned, or to otherwise participate as a selling securityholder in any manner in any registration effected by the Company under the Act, including under the Registration Statement, during the Lock-Up Period, notwithstanding the foregoing, if (x) during the last 17 days of the Lock-Up Period, the Company issues a release concerning earnings or material news or a material event relating to the Company occurs; or (y) prior to the expiration of the Lock-Up Period, the Company announces it will release earnings results during the 16 day period beginning on the last day of the Lock-Up Period; the restrictions imposed in this letter agreement shall continue to apply until the expiration of the 18 day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. The foregoing restrictions are expressly agreed to preclude the undersigned from engaging in any hedging, collar (whether or not for any consideration) or other transaction that is designed to or reasonably expected to lead or result in a Disposition of Lock-Up Shares during the Lock-Up Period, even if such Lock-Up Shares would be disposed of by someone other than such holder. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option or reversal or cancellation thereof) with respect to any Lock-Up Shares or with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from Lock-Up Shares.

Notwithstanding the agreement not to make any Disposition during the Lock-Up Period, you have agreed that the foregoing restrictions shall not apply to:

(1) the Company Securities being offered in the prospectus included in the Registration Statement; or

(2) any grant or exercise of options pursuant to the Company’s 1995 and 2005 Incentive and Non-Qualified Stock Option Plans.

It is understood that, if the Underwriting Agreement (other than the provisions thereof that survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares, you will release the undersigned from the obligations under this letter agreement.

In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Lock-Up Shares if such transfer would

A-2

constitute a violation or breach of this letter. This letter shall be binding on the undersigned and the respective successors, heirs, personal representatives and assigns of the undersigned. Capitalized terms used but not defined herein have the respective meanings assigned to such terms in the Underwriting Agreement.

Very truly yours,

Signature of Securityholder

A-3

EXHIBIT B

Legal Opinions of Akin, Gump, Strauss, Hauer & Feld, L.L.P.

See Attached

B-1

EXHIBIT B

Deloitte & Touche LLP Comfort Letter

B-1

EX-5.1

Exhibit 5.1

June 18, 2007

American Physicians Service Group, Inc.

1301 Capital of Texas Highway, Suite C-300

Austin, TX 78746-6550

Ladies and Gentlemen:

We have acted as special counsel to American Physicians Service Group, Inc., a Texas corporation (the “Company”), in connection with the registration, pursuant to a registration statement on Form S-1, as amended (the “Registration Statement”) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of the offering and sale by the Company of up to 2,345,000 shares (the “Company Shares”) of the Company’s common stock, par value $0.10 per share (“Common Stock”), and the offering and sale by the selling shareholder listed in the Registration Statement (the “Selling Shareholder”) of up to 300,000 shares of Common Stock (the “Selling Shareholder Shares”) and sold pursuant to the terms of an underwriting agreement to be executed by the Company, the Selling Shareholder and Raymond James & Associates, Inc., as the representative of certain underwriters named therein. The Company Shares and the Selling Shareholder Shares are collectively referred to as the “Shares.”

We have examined originals or certified copies of such corporate records of the Company and other certificates and documents of officials of the Company, public officials and others as we have deemed appropriate for purposes of this letter. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to authentic original documents of all copies submitted to us as conformed and certified or reproduced copies. For the purpose of the opinion rendered below, we have assumed that in connection with the issuance of the Shares, the Company will receive consideration in an amount not less than the aggregate par value of the Shares covered by each such issuance.

Based upon the foregoing and subject to the assumptions, exceptions, qualifications and limitations set forth hereinafter, we are of the opinion that (i) when the Registration Statement relating to the Company Shares has become effective under the Act, the terms of the sale of the Company Shares have been duly established in conformity with the Company’s certificate of incorporation and, when issued, sold and delivered as described in the Registration Statement, the Company Shares will be duly authorized and validly issued and are fully paid and non-assessable, and (ii) when the Registration Statement relating to the Selling Shareholder Shares

American Physicians Service Group, Inc.

June 18, 2007

Page 2

has become effective under the Act, when sold and delivered as described in the Registration Statement, the Selling Shareholder Shares will be duly authorized and validly issued and are fully paid and non-assessable.

The opinions and other matters in this letter are qualified in their entirety and subject to the following: we express no opinion as to the laws of any jurisdiction other than any published constitutions, treaties, laws, rules or regulations or judicial or administrative decisions (“Laws”) of the Laws of the State of Texas.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Prospectus forming a part of the Registration Statement under the caption “Legal Matters.” In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act and the rules and regulations thereunder. We also consent to your filing copies of this opinion as an exhibit to the Registration Statement.

Very truly yours,

/s/ AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.

AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.

EX-10.21

Exhibit 10.21

EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2007

ISSUED TO

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Austin, Texas

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

ARTICLE 1 BUSINESS REINSURED	1
ARTICLE 2 COVER, LIMIT, AND RETENTION	1
ARTICLE 3 COMMENCEMENT AND TERMINATION	2
ARTICLE 4 TERRITORY	3
ARTICLE 5 WARRANTIES	3
ARTICLE 6 EXCLUSIONS	3
ARTICLE 7 PREMIUM	4
ARTICLE 8 REPORTS AND REMITTANCES	5
ARTICLE 9 DEFINITIONS	5
ARTICLE 10 NET RETAINED LINES	8
ARTICLE 11 CURRENCY	8
ARTICLE 12 TAXES	8
ARTICLE 13 ALLOCATED LOSS ADJUSTMENT EXPENSES	9
ARTICLE 14 NOTICE OF LOSS AND LOSS SETTLEMENTS	9
ARTICLE 15 OFFSET	10
ARTICLE 16 SEVERABILITY	10
ARTICLE 17 ACCESS TO RECORDS	11
ARTICLE 18 COMMUTATION	11
ARTICLE 19 ERRORS AND OMISSIONS	11
ARTICLE 20 LOSS FUNDING	11
ARTICLE 21 ARBITRATION	13
ARTICLE 22 SERVICE OF SUIT	14
ARTICLE 23 INSOLVENCY	14
ARTICLE 24 MOST FAVORED TERMS	15
ARTICLE 25 THIRD PARTY RIGHTS	16
ARTICLE 26 INTERMEDIARY	16
ARTICLE 27 PARTICIPATION	17

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

This Agreement is made and entered into by AMERICAN PHYSICIANS INSURANCE EXCHANGE (APIE), Austin, Texas (NAIC 32557), (hereinafter called the “Reinsured”) and the Reinsurers specifically identified on the signature pages of this Agreement (hereinafter called the “Reinsurers”).

ARTICLE 1

BUSINESS REINSURED

This Agreement will indemnify the Reinsured in respect of Ultimate Net Loss, which may be incurred by the Reinsured as a result of any Claims that are made during the term of this Agreement on Policies in force during the coverage period, and classified as:

Medical Professional Liability of physicians, surgeons, dentists, medical groups and affiliated health care professionals, management service organizations, and surgery centers. Further, Premises Liability, and incidental Commercial General Liability coverages, when written in conjunction with Medical Professional Liability for physicians, surgeons, dentists, medical groups and affiliated health care professionals, management service organizations and surgery centers.

All Policies shall be written on a Claims-Made basis, and they may include “Prior Acts” coverage and/or Extended Discovery Endorsements that are attached thereto. Premiums and any Claims made on Extended Discovery Endorsements shall be allocated back to the last day the original Policy was in force.

All subject Policies will be underwritten by APMC Insurance Services, Inc. and/or its affiliate, American Physicians Insurance Agency (APIA), and shall be subject to the terms and conditions contained herein.

Fronting arrangements with any carrier require the prior approval, in writing, of the Reinsurers.

ARTICLE 2

COVER, LIMIT, AND RETENTION

A. Section A

With respect to all Policies that are the subject of the Business Reinsured:

The Reinsurers shall pay up to USD 750,000 Ultimate Net Loss, each and every Loss, each and every Insured, excess of a retention equal to USD 250,000 Ultimate Net Loss, each and every Loss, each and every Insured.

Page 1 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

B. Section B

In addition to Section A, with respect to all policies that are the subject of the Business Reinsured:

The Reinsurers shall pay up to USD 1,350,000 Ultimate Net Loss, each and every Loss Occurrence, excess of a retention equal to USD 350,000 Ultimate Net Loss, each and every Loss Occurrence. Any retention under Section A shall inure to the Reinsured’s benefit under this Section B. Further, only amounts retained by the Reinsured under Section A will apply to this Section B.

C. Extra Contractual Obligations (ECO) and Excess of Policy Limits (XPL)

The Reinsurers shall pay 80% of each and every ECO /XPL (as defined in Article 9 hereof), up to a maximum of USD 2,000,000 per Loss Occurrence. This limit is in addition to, and not part of, limits provided by Section A and/or Section B.

D. Allocated Loss Adjustment Expenses

As respects both Sections A and B hereon, Reinsurers shall also be obligated to pay a pro rata share of all Allocated Loss Adjustment Expenses. Allocated Loss Adjustment Expenses will be paid in addition to the amount of the indemnity recovery, based on the ratio that the Reinsurers’ portion of the Loss (indemnity only) bears to the total amount of Loss (indemnity only), as set forth in ARTICLE 13, ALLOCATED LOSS ADJUSTMENT EXPENSES.

As respects Section C hereon, Allocated Loss Adjustment Expenses will be pro-rated as per the original loss under Section A and/or Section B; in the event there is no loss under Section A and/or Section B, Allocated Loss Adjustment Expenses will be included within Section C limit and retention. If there is no Loss under Sections A, B or C hereof, Allocated Loss Adjustment Expenses shall not be covered by this Agreement.

Notwithstanding the foregoing, the maximum amount recoverable under this reinsurance, including allocated loss adjustment expenses, shall not exceed 250% of the reinsurance premium ceded to the Reinsurers under this Agreement.

ARTICLE 3

COMMENCEMENT AND TERMINATION

This Agreement is in effect from 12:01 a.m., Central Standard Time, January 1, 2007 until 12:01 a.m., Central Standard Time, January 1, 2008, and applies to all Claims that are made during the term of the Agreement under Policies in force during that period, including any Extended Discovery Endorsements attached thereto.

In the event of termination, business in force at the termination date will be run off until cancellation, natural expiry or first anniversary date, whichever first occurs, plus the period of discovery allowed under Extended Discovery Endorsements. Premium base for run off shall be premiums earned during the run off period. At the option of the Reinsured this Agreement may be terminated on a cut-off basis, and the Reinsurers shall incur no liability for Claims that are made subsequent to the effective date of the termination. However, if the Reinsured does not elect termination on a cut-off basis within 60 days of the termination date, the Agreement will automatically be terminated on a run-off basis.

Page 2 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

In the event a Claim is made against an Extended Discovery Endorsement, the Loss shall be deemed to have been made on the last day of the original Policy to which such Extended Discovery Endorsement attaches.

ARTICLE 4

TERRITORY

This Agreement will apply on the same territorial basis as the original policies issued by the Reinsured.

ARTICLE 5

WARRANTIES

It is warranted for purposes of this Agreement:

A. The maximum Policy limit subject hereunder shall be USD 1,000,000/3,000,000, or so deemed.

B. As respects Section B of Article 2, COVER, LIMIT, AND RETENTION, at least two insureds must be involved in the same Loss Occurrence before any recovery can be made hereunder.

ARTICLE 6

EXCLUSIONS

This Agreement does not cover:

A. Policies not underwritten by APMC Insurance Services, Inc. and its affiliate, American Physicians Insurance Agency, Inc., Austin, Texas and business not specifically identified in the Article 1, BUSINESS REINSURED.

B. Reinsurance assumed, except for business written by a fronting carrier that has been approved by the Reinsurers in accordance with ARTICLE 1, BUSINESS REINSURED.

C. Financial Guaranty and Insolvency.

D. Business written on a co-indemnity basis where the Reinsured is not the controlling carrier.

E. Aggregate Excess and Umbrella business.

F. Business excluded by the attached Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.

Page 3 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

G. Liability of the Reinsured arising by contract, operation of law or otherwise from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund’ means any guarantee fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Reinsured of part or all of any claim, debt, charge, fee, or other obligation of an insurer or its successors or assigns which has been declared by any competent authority to be insolvent or which is otherwise deemed unable to meet any claim, debt, charge, fee, or other obligation in whole or in part.

H. War Risks as excluded in the attached North American War Exclusion Clause (Reinsurance).

I. Legal Expense Coverage for legal expenses and/or fines and penalties, as applicable, incurred as a result of disciplinary proceedings covered by endorsements which are ceded to a separate, unrelated reinsurance agreement written with NAS Insurance Services.

J. Business excluded by the attached Terrorism Exclusion Clause- Reinsurance (Casualty).

ARTICLE 7

PREMIUM

A. Provisional Premium

In respect to Business Reinsured that is the subject of Sections A, B, and C of ARTICLE 2, COVER, LIMITS, AND RETENTION:

The Reinsured will pay to the Reinsurers a Provisional Premium equal to 12.50% of the Reinsured’s Annual Subject Premium, which is estimated at $56,176,000. The Provisional Premium will be payable quarterly in advance, at the beginning of each quarter, in installments equal to $1,755,500.

The Provisional Premium will be calculated within 60 days following the expiration of this Agreement. The Provisional Premium will be calculated by applying the provisional rate of 12.5% to the actual Subject Premium for this Agreement. Any additional (return) premium due to (from) Reinsurers will be paid within 60 days of the date of the adjustment.

B. Premium Adjustments

Premium Adjustments-The first adjustment will be made at twelve months after the expiration of this Agreement. However, there will be no downward adjustment in the Provisional Premium until twenty-four (24) months after the expiration of this Agreement. The adjusted premium will be calculated and the provisional premium paid to date shall be adjusted between the parties as appropriate. The adjusted premium will be calculated according to the following formula:

Subject Premium, multiplied by 4.5%, plus 105% of Incurred Losses, including Allocated Loss Adjustment Expenses.

Page 4 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

The premium developed utilizing this formula will be subject to:

1) A Minimum Premium equal to the Subject Premium multiplied by a Minimum Rate of 7%, and

2) A Maximum Premium determined by multiplying the Subject Premium times the Maximum Rate of 17.5%.

Premium will be adjusted annually thereafter until all losses applicable to the Agreement are finally settled and paid.

ARTICLE 8

REPORTS AND REMITTANCES

A. Within 60 days after the expiration of the Agreement, the Reinsured will furnish the Reinsurers with the actual Subject Premium for the expiring Agreement.

B. The Reinsured will furnish the Reinsurers with any other information that the Reinsurers may require to prepare its Annual Statement and which is reasonably available to the Reinsured.

ARTICLE 9

DEFINITIONS

A. “Allocated Loss Adjustment Expenses” shall mean all costs and expenses allocable to a specific Claim that are incurred by the Reinsured in the investigation, defense, adjustment or settlement of any Claim, Loss, or legal proceeding (other than the office expenses of the Reinsured and salaries of their regular employees), less any recoveries of such expenses. Allocated Loss Adjustment Expenses shall also include litigation expenses, court costs, and costs of supersedeas and appeal bonds, post-judgment interest, if any, and Declaratory Judgment Expenses.

B. “Declaratory Judgment Expenses” shall mean all legal expenses, incurred in the representation of the Reinsured in litigation brought to determine the Reinsureds’ defense and/or indemnification obligations that are allocable to any specific Claims or Losses applicable to Policies subject to this Agreement. In addition, the Reinsured shall promptly notify the Reinsurer of any Declaratory Judgment Expenses subject to this Agreement.

Page 5 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

C. Excess of Policy Limits Obligations shall mean any amounts for which the Reinsured would have been contractually liable to pay had it not been for the limit of the original Policy on business reinsured hereunder, and which arise because of, but not limited to, the following:

1) Failure by the Reinsured to settle within the Policy limit;

2) By reason of alleged or actual negligence, fraud or bad faith in rejecting an offer or settlement; or

3) By reason of alleged or actual negligence, fraud or bad faith in the preparation of the defense or in the trial of any action against its insured or in the preparation or prosecution of an appeal consequent upon such action.

The date upon which any Excess of Policy Limits Obligation is incurred by the Reinsured shall be deemed, in all circumstances, to be the date of the original Loss.

However, this Article shall not apply where the obligation has been incurred due to the fraud of a member of the Board of Directors or a corporate officer of the Reinsured acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any Loss covered hereunder.

D. “Extended Discovery Endorsement” shall mean coverage for Claims that are made after the expiration or termination of the Reinsured Policy on Losses that would have been covered under the expired or terminated Policy had the claim been made during the term of that Policy.

E. “Extra Contractual Obligations” shall mean those liabilities not covered under any other provision of this Agreement and which arise from the handling of any Claim on business covered hereunder. Such liabilities may arise because of, but not limited to, the following:

1) By reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement, or

2) By reason of alleged or actual negligence, fraud or bad faith in preparation of the defense or in trial of any action against its insured or in the preparation or prosecution of any appeal consequent to such action.

The date upon which any Extra Contractual Obligation is incurred by the Reinsured shall be deemed, in all circumstances, to be the date of the original Loss.

However, this Article shall not apply where the obligation has been incurred due to the fraud of a member of the Board of Directors or a corporate officer of the Reinsured acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any Loss covered hereunder.

F. “Insured” shall mean each physician or entity that is provided a separate “Each Loss” Limit of Liability in the Policy issued by the Reinsured. In the event that the policy is written on a Single Limit basis, all claims arising from the same incident or series of

Page 6 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

related services, regardless of the number of (a) persons injured, (b) claims made, (c) claimants making claims, (d) subsequent related claims, or (e) individuals or groups covered by the policy against which the claim(s) is (are) made, including vicarious liability, shall constitute one Loss for the purposes of this Agreement. Any such Loss shall be subject to the limits and retention as specified in Section A of ARTICLE 2, COVER, LIMIT, AND RETENTION.

G. “Loss” shall mean any Claim that is made during the Policy period. Further, the definitions of “Claim” and “When a Claim is made” shall be the same as those contained in the original Policy issued by the Reinsured.

The term “Loss Occurrence” shall mean any one Loss or series of Losses arising out of or caused by one professional liability incident covered by the Policy or Policies issued by the Reinsured. The parties to this Agreement recognize that a Loss Occurrence, as defined herein, may involve multiple Policies and/or Insureds.

Irrespective of the number of Policies and/or Insureds involved in the same Loss Occurrence, the date of Loss, for all Losses involved in the same Loss Occurrence, shall be deemed to be the date that the first Claim was made, for purposes of this Agreement. The date of Loss so determined shall apply to all Section A Losses and the Section B Loss arising out of the same Loss Occurrence,

The date of Loss for any Claim being reported under an Extended Discovery Endorsement, whether such coverage is automatically extended under the Policy or by specific endorsement, is deemed to be the termination or expiration date of the original Policy.

H. “Policy(ies)” as used in this Agreement shall mean any binder, Policy, or contract of insurance issued on Policies, accepted or held covered, by or on behalf of the Reinsured through APMC Insurance Services, Inc., or American Physicians Insurance Agency. Furthermore, it shall also mean any Extended Discovery Endorsement attached thereto.

I. “Subject Premium” shall mean the Reinsured’s Gross Earned Premium on business covered hereunder, excluding Earned Premium on Administrative Defense Coverage ceded under other reinsurance. Further, Subject Premium does not include: 1) Maintenance Fees charged by the Reinsured, even if such fees are part of the Reinsured’s Earned Premium; and 2) any change in Earned or Unearned Premium due to provisions for Death, Disability and Retirement Reserves. subject to Items A and B of ARTICLE 2, COVER, LIMIT, AND RETENTION, less earned premium paid for other reinsurances, recoveries under which would inure to the benefit of those other coverages. It is understood that premium paid for Extended Discovery Endorsements, if any, will be considered earned when paid, and will be ascribed in its entirety to the last day that the original Policy was in force.

Page 7 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

J. “Ultimate Net Loss” shall mean the actual Loss, including interest accrued prior to judgment, paid by the Reinsured (such Loss to exclude Allocated Loss Adjustment Expenses, which will be handled in accordance with Article 13, ALLOCATED LOSS ADJUSTMENT EXPENSES). Salvages and all other recoveries under all reinsurance which inures to the benefit of this Agreement (whether recovered or not) shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.

All salvages, recoveries, or payments recovered or received subsequent to Loss settlements hereunder shall be applied as if recovered or received prior to the aforesaid settlements and all necessary adjustments shall be made by the parties hereto.

Nothing in this clause shall be construed to mean that Losses are not recoverable hereunder until the Reinsured’s Ultimate Net Loss has been ascertained.

ARTICLE 10

NET RETAINED LINES

This Agreement applies only to that portion of any insurances covered by this Agreement which the Reinsured retains net for their own account, and in calculating the amount of any Loss hereunder and also in computing the amount in excess of which this Agreement attaches, only Loss or Losses in respect of that portion of any insurances or reinsurances which the Reinsured retains net for their own account shall be included, it being agreed that the amount of the Reinsurers’ liability hereunder in respect of any Loss or Losses shall not be increased by reason of the inability of the Reinsured to collect from any other Reinsurers, whether specific or general, any amounts which may have become due from them whether such inability arises from the insolvency of such other Reinsurers or otherwise. The Reinsured shall retain the first $250,000 of each Section A Loss, and/or the first $350,000 of each Section B Loss Occurrence and/or 20% of any ECO / XPL obligation net and unreinsured.

ARTICLE 11

CURRENCY

All of the provisions of this Agreement are expressed in terms of U.S. dollars; therefore, all statistics must be reported in U.S. dollars, and all payments must be made in U.S. dollars. Amounts paid or received by the Reinsured in other currencies shall be converted into U.S. dollars at the rate of exchange prevailing on the date at which such transactions occur.

ARTICLE 12

TAXES

The Reinsured will be liable for taxes (except Federal Excise Tax) on premiums reported to the Reinsurers hereunder.

Federal Excise Tax applies only to those Reinsurers, excepting Underwriters at Lloyd’s, London and other Reinsurers exempt from the Federal Excise Tax, who are domiciled outside the United States of America.

Page 8 of 29

AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

The Reinsurers have agreed to allow for the purpose of paying the Federal Excise Tax 1% of the premium payable hereon to the extent such premium is subject to Federal Excise Tax.

In the event of any return of premium becoming due hereunder, the Reinsurers will deduct 1% from the amount of the return, and the Reinsured or their agent should take steps to recover the Tax from the U.S. Government.

ARTICLE 13

ALLOCATED LOSS ADJUSTMENT EXPENSES

The Reinsurers shall pay their respective portion of Allocated Loss Adjustment Expenses in addition to the losses as stated in ARTICLE 2, COVER, LIMIT, AND RETENTION. However, if a verdict, judgment or award is reversed or reduced, or a subrogation or salvage recovery made, the Reinsured and the Reinsurers will share expenses incurred in securing such reversal or reduction or recovery in the same proportion that each benefits from the reversal or recovery. However, expenses incurred up to the time of the original Loss, verdict, judgment, or award will be shared in proportion to what each party’s share in such Loss, verdict or judgment would have been.

ARTICLE 14

NOTICE OF LOSS AND LOSS SETTLEMENTS

The Reinsured will provide the Reinsurers with bordereaux as follows:

1. The Reinsured will provide an annual bordereau listing all open Claims at the expiration of the Agreement and annually thereafter.

2. The Reinsured will provide a quarterly bordereau within 30 days of the end of each quarter which includes any changes made during the preceding quarter. This will include:

a. Any Claims which have been closed within the quarter, and

b. Any Claims which have been opened within the quarter.

In addition, the Reinsured will advise the Reinsurers of any developments that may materially affect the position of the Reinsurers. The Reinsured will provide individual narrative reports for any Claim meeting the following criteria:

1. Any new Claim that has been opened with a reserve at or over $200,000, or any existing Claim for which the reserve has been increased to at or over $200,000. However, reports are NOT required when the following circumstances apply:

a. Only one physician is involved in the Claim and the Policy limit is $200,000 per Claim, or less, or

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b. Multiple physicians covered by the same Policy are involved in the Claim and the Policy is written on a Single Limit basis and the Policy limit is $200,000 per Claim, or less

2. For previously reported Claims, an update shall be provided if there is a significant development in the Claim that the Reinsured believes would be of interest to the Reinsurers.

3. Any Claim involving an Extra Contractual Obligation or Excess of Policy Limits Loss.

Isolated and inadvertent omissions or oversights with respect to said notification shall not relieve the Reinsurers from liability

The Reinsured shall have the responsibility to investigate, defend, or negotiate settlements of all Claims and lawsuits related to Policies written and reinsured under this Agreement.

The Reinsurers, at their own expense, may associate with the Reinsured in the defense of any claim or suit or proceeding which involves or is likely to involve the reinsurance provided under this Agreement, and the Reinsured will cooperate in every respect in the defense of such Claim, suit, or proceeding.

The Reinsurers will pay their share of Loss settlements immediately upon receipt of proof of Loss from the Reinsured.

ARTICLE 15

OFFSET

Each party to this Agreement together with their successors or assigns shall have and may exercise, at any time, the right to offset any balance or balances due the other (or, if more than one, any other). Such offset may include balances due under this Agreement and any other agreements heretofore or hereafter entered into between the parties regardless of whether such balances arise from premiums, Losses or otherwise, and regardless of capacity of any party, whether as assuming Reinsurer and/or ceding insurer, under the various agreements involved, provided however, that in the event of insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of Section 7427 of the Insurance Law of the State of New York to the extent such statute or any other applicable law, statute or regulation governing such offset shall apply.

ARTICLE 16

SEVERABILITY

If any provision of this Agreement shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Agreement or the enforceability of such provision in any other jurisdiction.

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ARTICLE 17

ACCESS TO RECORDS

The Reinsurers or their duly authorized representative shall at all reasonable times have free access to the books and records of the Reinsured so long as they relate to the Business Reinsured under this Agreement.

ARTICLE 18

COMMUTATION

At any time commencing no sooner than twelve months after the end of the Agreement, either the Reinsured or the Reinsurers may approach the other party to the Agreement in order to request a commutation thereof. Both parties will use a good faith effort to reach an equitable settlement of the liabilities in question, which shall include (but not be limited to) mutually acceptable outstanding reserves for Losses and Allocated Loss Adjustment Expenses, including a provision for Losses and Allocated Loss Adjustment Expenses incurred but not reported. Should the parties reach such an agreement to settle all outstanding liabilities, it is agreed that such settlement shall be a full and final discharge of any and all such liabilities reinsured hereunder.

ARTICLE 19

ERRORS AND OMISSIONS

Any inadvertent error, omission, or delay in complying with the terms and conditions of the Agreement shall not be held to relieve either party hereto from any liability which would attach to it hereunder if such error, omission, or delay had not been made, provided such error, omission, or delay is rectified as soon as possible upon discovery.

ARTICLE 20

LOSS FUNDING

This clause is only applicable to those Reinsurers who cannot qualify for credit by the state having jurisdiction over the Reinsured’s loss reserves.

As regards Policies issued by the Reinsured coming within the scope of this Agreement, the Reinsured agrees that, when they shall file with the insurance department or set up on their books reserves for Losses covered hereunder which they shall be required to set up by law, they will forward to the Reinsurers a statement showing the proportion of such Loss reserves which is applicable to them.

The Reinsurers hereby agree that they will apply for and secure delivery to the Reinsured a clean, irrevocable and unconditional Letter of Credit issued a bank approved by the N.A.I.C. The amount of the Letter of Credit in respect of Incurred But Not Reported (IBNR) Losses shall be calculated as the difference between the premium ceded, as calculated in accordance with ARTICLE 7- PREMIUM, and the paid and outstanding Losses. The amount of the Letter of Credit shall not exceed the total reinsurance premium ceded in respect of this Agreement.

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The Letter of Credit shall be “Evergreen” and shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless thirty (30) days prior to any expiration date the issuing bank shall notify the Reinsured by certified or registered mail that it elects not to consider the Letter of Credit extended for any additional period.

The Reinsured, or their successors in interest, undertake to use and apply any amounts which they may draw upon such Credit pursuant to the terms of the Agreement under which the Letter of Credit is held, and for the following purposes only:

1) To pay the Reinsurers’ share or to reimburse the Reinsured for the Reinsurers’ share of any liability for Loss reinsured by this Agreement, the payment of which has been agreed by the Reinsurers and which has not otherwise been paid.

2) To make refund of any sum which is in excess of the actual amount required to pay the Reinsurers’ share of any liability reinsured by this Agreement.

3) In the event of expiration of the Letter of Credit as provided for above, to establish deposit of the Reinsurers’ share of known and reported Losses and Allocated Loss Adjustment Expenses relating thereto under this Agreement. Such cash deposit shall be held in an interest bearing account separate from the Reinsured’s other assets, and interest thereon shall accrue to the benefit of the Reinsurers. It is understood and agreed that this procedure will be implemented only in exceptional circumstances and that, if it is implemented, the Reinsured will ensure that a rate of interest is obtained for the Reinsurers on such a deposit account that is at least equal to the rate which would be paid by the issuing bank in New York, and further that the Reinsured will account to the Reinsurers on an annual basis for all interest accruing on the cash deposit account for the benefit of the Reinsurers.

The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Reinsured of the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Reinsured.

At quarterly intervals, or as otherwise agreed, the Reinsured shall prepare a specific statement, for the sole purpose of amending the Letter of Credit, of the Reinsurers’ share of known and reported outstanding Losses and Allocated Loss Adjustment Expenses relating thereto. If the statement shows that, on the basis of this bordereaux, the Reinsurers’ share of IBNR Losses and Allocated Loss Adjustment Expenses exceeds the balance of credit as of the statement date, the Reinsurers shall, within thirty (30) days after receipt of notice of such excess, secure delivery to the Reinsured of an amendment to the Letter of Credit increasing the amount of credit by the amount of such difference. If, however, the statement shows that the Reinsurers’ share of IBNR Losses plus Allocated Loss Adjustment Expenses relating thereto is less than the balance of credit as of the statement date, the Reinsured shall, within thirty (30) days after receipt of written

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request from the Reinsurers, release such excess credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of credit available by the amount of such excess credit.

All expenses incurred in the establishment or maintenance of such Letters of Credit shall be for the account of the Reinsurers.

ARTICLE 21

ARBITRATION

As a condition precedent to any right of action hereunder, any irreconcilable dispute between the parties to this Agreement, including, without limitation, any disputes as to its actual formation or validity, will be submitted for decision to a board of arbitration composed of two arbitrators and an umpire. Any dispute arising out of this Agreement shall be resolved in the State of Texas, and the laws of the State of Texas shall govern the interpretation and application of this Agreement.

Arbitration shall be initiated by the delivery of a written notice of demand for arbitration by one party to the other within a reasonable time after the dispute has arisen.

The members of the board of arbitration (“the board”) shall be disinterested active or retired or former officials of insurance or reinsurance companies, or Underwriters at Lloyd’s, London, not under the control or management of either party to this Agreement and who have experience in the class of business which is the subject matter of this Agreement. Each party shall appoint its arbitrator and the two arbitrators shall choose an umpire before instituting the hearing. If the respondent fails to appoint its arbitrator within four weeks after being requested to do so by the claimant, the latter shall also appoint the second arbitrator. If the two arbitrators fail to agree upon the appointment of an umpire within four weeks after their nominations, the deficiency shall be supplied on the application of the claimant by an appointment made by the American Arbitration Association. Notwithstanding the appointment of any third arbitrator by the American Arbitration Association, the arbitration proceedings shall not be governed by the American Arbitration Association’s commercial arbitration rules.

Each party shall submit its case to the arbitrators within 120 days of the selection of the third arbitrator or within such longer period as may be agreed by the arbitrators.

The board shall make its decision with regard to the custom and usage of the insurance and reinsurance business. The board shall issue its decision in writing based upon a hearing in which evidence may be introduced without following strict rules of evidence but in which cross-examination and rebuttal shall be allowed. The board shall make its decision within 60 days following the termination of the hearings unless the parties consent to an extension. The majority decision of the board shall be final and binding upon all parties to the proceeding. Judgment may be entered upon the award to the board in any court having jurisdiction.

It is expressly agreed that the jurisdiction of the arbitrators to make or render any decision or award shall be limited by the limits of liability expressly set forth herein, and that the arbitrators shall not have jurisdiction to make any decision or render any award exceeding such expressly stated liability limits of the Reinsurers subscribing to this Agreement.

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Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the umpire. The remaining costs of the arbitration proceedings shall be allocated by the board.

ARTICLE 22

SERVICE OF SUIT

This Clause applies only to Reinsurers domiciled outside the United States of America or, should the Reinsured be authorized to do business in the State of New York, all Reinsurers unauthorized in New York as respects suits instituted in New York.

It is agreed that in the event of the failure of the Reinsurers hereon to pay any amount claimed to be due hereunder, the Reinsurers hereon, at the request of the Reinsured, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of the Reinsurers’ right to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States district court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

It is further agreed that service of process in such suit may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019-6829, and that in any suit instituted against the Reinsurers upon this Agreement, the Reinsurers will abide by the final decision of such court or of any appellate court in the event of an appeal.

The above-named are authorized and directed to accept service of process on behalf of the Reinsurers in any such suit and/or upon the request of the Reinsured to give a written undertaking to the Reinsured that they will enter a general appearance upon the Reinsurer’s behalf in the event such a suit shall be instituted.

Further, pursuant to any statute in any state, territory or district of the United States which makes provision therefore, the Reinsurers hereon hereby designate the superintendent, commissioner, or director of insurance or other officer specified for that purpose in the statute or his successor or successors in office as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the Reinsured or any beneficiary hereunder arising out of this Agreement, and hereby designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE 23

INSOLVENCY

In the event of the insolvency of the Reinsured, reinsurance under this Agreement shall be payable by the Reinsurers on the basis of the liability of the Reinsured under Policy or Policies reinsured without diminution because of the insolvency of the Reinsured, to the Reinsured or to its liquidator, receiver, or statutory successor.

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It is agreed, however, that the liquidator or receiver or statutory successor of the insolvent Reinsured shall give written notice to the Reinsurers of the pendency of a Claim against the insolvent Reinsured on the Policy or Policies reinsured within a reasonable time after such Claim is filed in the insolvency proceeding and that during the pendency of such Claim, the Reinsurers may investigate such Claim and interpose, at its own expense, in the proceeding when such Claim is to be adjudicated, any defense or defenses which it may deem available to the Reinsured or its liquidator or receiver or statutory successor. The expense thus incurred by the Reinsurers shall be chargeable, subject to court approval, against the insolvent Reinsured as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Reinsured solely as a result of the defense undertaken by the Reinsurers.

When two or more Reinsurers are involved in the same Claim and a majority in interest elects to interpose defense to such Claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred by the insolvent Reinsured.

Should the Reinsured go into liquidation or should a receiver be appointed, the Reinsurers shall be entitled to deduct from any sums which may be due or may become due to the Reinsured under this reinsurance Agreement any sums which are due to the Reinsurers by the Reinsured under this reinsurance Agreement and which are payable at a fixed or stated date as well as any other sums due the Reinsurers which are permitted to be offset under applicable law.

It is the mutual intent of the parties, that in the event of insolvency of the Reinsured, this Article shall be read to conform with the state or regulatory requirements of the jurisdiction in which the liquidation or receivership is conducted. In the event that any provision of this clause is in conflict with such state or regulatory requirements, then such provision shall be reformed to be in compliance with such state or regulatory requirement.

ARTICLE 24

MOST FAVORED TERMS

Except for customary differences in terms for unauthorized and/or foreign Reinsurers, and except for percentage participations, the Reinsured represents that this Agreement is offered on the basis of equal terms for all Reinsurers. The phrase “equal terms” means that all of the terms, conditions, and provisions of this Agreement are identical for each Reinsurer hereon. In the event any Reinsurer to this Agreement is afforded more favorable terms than those herein set forth, this Agreement, at the option of the Reinsurer, shall be construed as containing the more favorable terms afforded such Reinsurer, as though such terms were actually provided herein from the date they were granted to such other Reinsurers.

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ARTICLE 25

THIRD PARTY RIGHTS

Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third party or any persons not parties to this Agreement.

ARTICLE 26

INTERMEDIARY

Gallagher Healthcare Insurance Services (GHIS) is hereby recognized as the Intermediary negotiating this Agreement for all business hereunder. All communications, including notices, premiums, return premiums, commissions, taxes, Losses, Allocated Loss Adjustment Expenses, salvages and Loss settlements relating thereto shall be transmitted to the Reinsurers or the Reinsured through Gallagher Healthcare Insurance Services, 9821 Katy Freeway, Suite 700, Houston, Texas 77024. Payments by the Reinsured to the Intermediary shall be deemed to constitute payment to the Reinsurers. Payments by the Reinsurers to the Intermediary shall be deemed only to constitute payment to the Reinsured to the extent that such payments are actually received by the Reinsured.

IN WITNESS WHEREOF, the Reinsured, by their authorized representatives, have executed this Agreement as of the following date(s):

In Austin, Texas, this          day of                     , 2007.

AMERICAN PHYSICIANS INSURANCE EXCHANGE

By:

Title:

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ARTICLE 27

PARTICIPATION

PARTICIPATION: EXCESS OF LOSS REINSURANCE CONTRACT EFFECTIVE: January 1, 2007

This Agreement obligates the Reinsurers for 100% of the interests and liabilities set forth under this Agreement.

The subscribing Reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing Reinsurers are not responsible for the subscription of any co-subscribing Reinsurer who for any reason does not satisfy all or part of its obligations.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives, have executed this Agreement.

PARTICIPATING REINSURERS

Swiss Reinsurance America	39.5	%
Transatlantic Reinsurance Company	20.25	%
ACE Tempest Re USA, LLC on behalf of ACE Property and Casualty Insurance Company	11.25	%
Hannover Ruckversicherungs	9.00	%
	80.00	%

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PARTICIPATION: EXCESS OF LOSS REINSURANCE CONTRACT EFFECTIVE: January 1, 2007

This Agreement obligates the Reinsurers for the proportion shown below of the interests and liabilities set forth under this Agreement.

The subscribing Reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing Reinsurers are not responsible for the subscription of any co-subscribing Reinsurer who for any reason ‘ does not satisfy all or part of its obligations.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives, have executed this Agreement as of the following dates:

In Armonk, New York, this          day of                     , 2006.

For and on behalf of:

Swiss Reinsurance America Corporation	39.5%
By:	By:
Title:	Title:
Name:	Name:

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PARTICIPATION: EXCESS OF LOSS REINSURANCE CONTRACT EFFECTIVE: January 1, 2007

This Agreement obligates the Reinsurers for the proportion shown below of the interests and liabilities set forth under this Agreement.

The subscribing Reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing Reinsurers are not responsible for the subscription of any co-subscribing Reinsurer who for any reason does not satisfy all or part of its obligations.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives, have executed this Agreement as of the following dates:

In New York, New York, this          day of             , 2006.

For and on behalf of:

Transatlantic Reinsurance Company	20.25%
By:
Title:

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PARTICIPATION: EXCESS OF LOSS REINSURANCE CONTRACT EFFECTIVE: January 1, 2007

This Agreement obligates the Reinsurers for the proportion shown below of the interests and liabilities set forth under this Agreement.

The subscribing Reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing Reinsurers are not responsible for the subscription of any co-subscribing Reinsurer who for any reason does not satisfy all or part of its obligations.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives, have executed this Agreement as of the following dates:

In Philadelphia, Pennsylvania this          day of                     , 2006.

For and on behalf of:

ACE Tempest Re USA, LLC on behalf of ACE Property and Casualty Insurance Company	11.25%
By:
Title:

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PARTICIPATION: EXCESS OF LOSS REINSURANCE CONTRACT EFFECTIVE: January 1, 2007

This Agreement obligates the Reinsurers for the proportion shown below of the interests and liabilities set forth under this Agreement.

The subscribing Reinsurers’ obligations under contracts of reinsurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing Reinsurers are not responsible for the subscription of any co-subscribing Reinsurer who for any reason does not satisfy all or part of its obligations.

IN WITNESS WHEREOF, the parties hereto, by their authorized representatives, have executed this Agreement as of the following dates:

In Hannover, Germany, this          day of                     , 2007.

For and on behalf of:

9.00%	Hannover Ruckversicherungs- Aktiengesellschaft Hannover, Germany
9.00%

By:

Title:

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WAR RISKS EXCLUSION

As regards interests which at time of Loss or damage are on shore, no liability shall attach hereto in respect of any Loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority.

This War Risks Exclusion shall not, however, apply to interests which at time of Loss or damage are within the territorial limits of the United States of America comprising the fifty States of the Union and the District of Columbia, its territories and possessions, including the Panama Canal Zone and the Commonwealth of Puerto Rico and including bridges between the United States of America and Mexico (provided they are under United States ownership), Canada, St. Pierre, and Miguelon, provided such interests are insured under Policies, endorsements, or binders containing a standard war or hostilities or warlike operations clause.

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TERRORISM EXCLUSION CLAUSE - REINSURANCE (CASUALTY)

Notwithstanding any provision to the contrary within this Agreement or any endorsement thereto, this reinsurance Agreement does not cover any liability, Loss, cost or expense of whatsoever nature directly or indirectly caused by, resulting from, arising out of or in connection with any act of terrorism regardless of any other cause contributing concurrently or in any other sequence to the liability, Loss, cost or expense.

For the purpose of this exclusion, terrorism means any actual or threatened violent act or act harmful to human life, tangible or intangible property or infrastructure, directed towards or having the effect of (a) influencing or protesting against any de jure or de facto government or policy thereof or (b) intimidating, coercing or putting in fear a civilian population or section thereof.

In any action suit or other proceedings where the Reinsurers allege that by reason of this exclusion a liability, Loss, cost or expense is not covered by this reinsurance Agreement, the burden of proving that such liability, Loss, cost or expense is covered shall be upon the Reinsureds.

TERR-CAS

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NUCLEAR INCIDENT EXCLUSION CLAUSE

LIABILITY - REINSURANCE - USA

(Wherever the word “Reinsured” appears in this clause, it should be deemed to read “Reassured”, “Reinsured”, “Company” or whatever other word is employed throughout the text of the reinsurance agreement to which this clause is attached to designate the reinsured or companies reinsured.)

(1) This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or indirect Reinsurer of any such member, subscriber or association.

(2) Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause Ill in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion Provision):

Limited Exclusion Provision

I. It is agreed that the policy does not apply under any liability coverage.

to injury, sickness, disease, death or destruction

bodily injury or property damage

with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability.

II. Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmer Comprehensive Personal Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.

III. The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either

(a) become effective on or after 1st May, 1960, or

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(b) become effective before that date and contain the Limited Exclusion Provision set out above; provided this paragraph (2) shall not be applicable to Family Automobile Policies. Special Automobile Policies, or policies or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof.

(3) Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverage:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision):

Broad Exclusion Provision

It is agreed that the policy does not apply:

I. Under any Liability Coverage

to injury, sickness, disease, death or destruction

bodily injury or property damage

(a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or

(b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.

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II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating

to immediate medical or surgical death

first aid

to expenses incurred with respect

to bodily injury, sickness, disease or death

bodily injury

resulting from the hazardous properties from the properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

III. Under any Liability Coverage

to injury, sickness, disease, death or destruction

bodily injury or property damage

resulting from the hazardous properties of nuclear material, if

(a) the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom.

(b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or

(c) the injury, sickness, disease, death or destruction bodily injury or property damage

arising out of the furnishings by an insured or services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories or possessions or Canada, this exclusion (c) applies only

to injury to or destruction of property at such nuclear facility.

property damage to such nuclear facility and any property threat.

IV. As used in this endorsement

“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material or byproduct material, “source material”, “special nuclear material”, and “byproduct material” have the meanings given

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them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material other than tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content, and (2) resulting from the operation by any person or organization of any nuclear facility included under the first two paragraphs of the definition of nuclear facility; “nuclear facility” means

(a) any nuclear reactor,

(b) any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste,

(c) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235.

(d) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste,

and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;

With respect to injury to or destruction of property, the word “injury” or “destruction” “property damage” includes all forms of radioactive contamination of property, includes all forms of radioactive contamination of property.

V. The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to

(a) Garage and Automobile Policies issued by the Reassured on New York risks, or

(b) statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental Authority having jurisdiction thereof.

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AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

(4) Without in any way restricting the operation of paragraph (1) of this Clause, it is understood that paragraphs (2) and (3) above are not applicable to original liability policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference of Canada.

NOTE. The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a Limited Exclusion

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AMERICAN PHYSICIANS INSURANCE EXCHANGE

Excess of Loss Reinsurance Contract

Effective January 1, 2007

PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

(GENERAL LIABILITY)

This Contract does not cover General Liability Policies issued to the companies identified below in the Pharmaceutical / Medical Company Exclusion Listing, including all affiliates and subsidiaries thereof.

ABBOTT LABORATORIES

AKZO NOBEL

ALLERGAN

ALPHARMA

ALTANA AG

AMGEN

ASTELLAS

ASTRAZENECA

BARR LABORATORIES

BAXTER INTERNATIONAL

BAYER AG/SCHERING AG

BEAUFOUR IPSEN

BIOGEN

BIOMET

BOEHRINGER INGELHEIM

BOSTON SCIENTIFIC CORPORATION

BRISTOL-MYERS SQUIBB

CHIRON / NOVARTIS

CSL

DAIICHI PHARMACEUTICAL / SANKYO

DAINIPPON PHARMACEUTICAL / SUMITOMO

EDWARDS LIFESCIENCES

EISAI

ELAN

FOREST LABORATORIES

GENENTECH

GENERAL ELECTRIC HEALTHCARE

GENZYME

GLAXOSMITHKLINE

GUIDANT

HOSPIRA

IVAX / TEVA PHARMACEUTICAL

JOHNSON & JOHNSON

KING PHARMACEUTICALS

KYOWA HAKKO KOGYO

LABORATOIRE SERVIER

LILLY (ELI)

LUNDBECK

MEDIMMUNE

MEDTRONIC

MERCK & CO

MERCK KGAA

MINNESOTA MINING & MANUFACTURING

MYLAN LABORATORIES

NOVARTIS / CHIRON

NOVO NORDISK

OTSUKA PHARMACEUTICAL

PFIZER

PLIVA

PROCTER & GAMBLE

PURDUE FREDERICK / PRA HOLDING

ROCHE

SANKYO / DAIICHI PHARMACEUTICAL

SANOFI-AVENTIS

SCHERING AG / BAYER AG

SCHERING-PLOUGH

SCHWARZ PHARMA

SERONO

SHIONOGI

SHIRE PHARMACEUTICALS

SMITH & NEPHEW

SOLVAY

ST. JUDE MEDICAL

STRYKER

SUMITOMO PHARMACEUTICALS / DAINIPPON

SYNTHES-STRATEC

TAKEDA

TANABE

TAP PHARMACEUTICAL PRODUCTS

TEVA PHARMACEUTICAL / IVAX

TYCO HEALTHCARE

UCB

WATSON PHARMACEUTICAL

WYETH

ZIMMER US

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