EXHIBIT 10
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT ("Agreement"), dated the 20th day of February
2002, is made by and between American Physicians Capital, Inc., a Michigan
corporation ("ACAP"), on the one hand, and Stilwell Value Partners III, L.P.,
Stilwell Value Partners V, L.P., Stilwell Associates, L.P., Stilwell Partners,
L.P., Stilwell Value, LLC, The Margaret de Fleur Foundation, Inc., and Joseph
Stilwell (collectively, the "Stilwell Group"), and Spencer L. Schneider
("Stilwell Director") on the other.
WHEREAS, ACAP, the Stilwell Group and the Stilwell Director have agreed
that it is in their mutual interests to enter into this Agreement as hereinafter
described.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, and agreements contained herein, and other good and
valuable consideration, the parties hereto mutually agree as follows:
1. Representations and Warranties of Stilwell Group. The Stilwell Group
hereby represents and warrants to ACAP as follows:
a. The Stilwell Group has beneficial ownership of 480,000
shares of common stock of ACAP and has full and complete authority to
enter into this Agreement and to bind the entire number of shares of
the common stock of ACAP which it holds, or may hold, including any
shares purchased in the future, to the terms of this Agreement. This
Agreement constitutes a valid and binding agreement of the Stilwell
Group. No "affiliate" or "associate" (as such terms are defined in the
Exchange Act) of the Stilwell Group beneficially owns any shares or
rights to acquire shares of common stock of ACAP.
b. There are no arrangements, agreements or understandings
between the Stilwell Group and ACAP other than as set forth in this
Agreement.
2. Representations and Warranties of ACAP. ACAP hereby represents and
warrants to the Stilwell Group, as follows:
a. ACAP has full power and authority to enter into and perform
its obligations under this Agreement, and the execution and delivery of
this Agreement by ACAP has been duly authorized by the Board of
Directors of ACAP and requires no further Board of Directors or
stockholder action. The Board of Directors of ACAP or APA (as defined
below) may be referred to hereinafter individually as the "Board", or
collectively as the "Boards". This Agreement constitutes a valid and
binding obligation of ACAP and the performance of its terms does not
constitute a violation of its articles of incorporation or by-laws.
b. There are no arrangements, agreements or understandings
between the Stilwell Group and ACAP other than as set forth in this
Agreement.
3. Representations and Warranties of the Stilwell Director. The
Stilwell Director hereby represents and warrants to ACAP as follows:
a. The Stilwell Director is a person who qualifies under all
applicable Michigan laws and regulations governing directors of
insurance companies. No "affiliate" or "associate" (as such terms are
defined in the Exchange Act) of the Stilwell Director beneficially owns
any shares or rights to acquire shares of ACAP.
b. No event has occurred with respect to the Stilwell Director
that would require disclosure in an ACAP report or other document filed
pursuant to the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to Item
401(f) of Regulation S-K.
4. Stilwell Group's Prohibited Conduct. No member of the Stilwell
Group, the Stilwell Director, or any of their affiliates or associates, shall,
directly or indirectly,
a. solicit (as such term is used in the proxy rules of the
Securities and Exchange Commission) proxies or consents, or participate
in any manner in the solicitation of proxies or consents, from ACAP's
stockholders to elect persons to the Board of Directors or to approve
shareholder proposals,
b. make any public statement critical of ACAP, its Directors
or management,
c. initiate any litigation against ACAP or any of its
Directors or officers, except to enforce the terms of this Agreement,
d. make or be the proponent of any shareholder proposal,
whether pursuant to Rule 14a-8 of the Exchange Act or otherwise,
e. acquire, offer or propose to acquire, or agree to acquire
(except, in any case, by way of stock dividends or other distributions
or offerings made available to holders of ACAP common stock generally),
directly or indirectly, or retain ownership of any ACAP common stock,
if when taken together with the ACAP common stock beneficially owned by
the Stilwell Group would constitute more than 5% of the then
outstanding shares of ACAP; provided, however, that in the event that
the Stilwell Group's beneficial ownership exceeds such percentage as a
result of stock repurchases by ACAP pursuant to Section 7 of this
Agreement, the Stilwell Group shall, reasonably promptly after becoming
aware of such situation, dispose of a sufficient number of shares such
that the ACAP common stock beneficially owned by the Stilwell Group
does not constitute more than such percentage, and provided further,
that "beneficial ownership" shall have the meaning ascribed thereto
under Section 13(d) of the Exchange Act,
f. make any public announcement with respect to any proposal
or offer involving, or propose to enter into, or assist or encourage
any other person with respect to, directly or indirectly, any merger,
consolidation, business combination, tender or exchange offer, sale or
purchase of assets, sale or purchase of securities, dissolution,
liquidation, restructuring, recapitalization or similar transactions of
or involving ACAP, or to propose as a Director any of the foregoing
types of transactions,
g. form, join or in any way participate in any "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to
ACAP common stock,
h. deposit any ACAP common stock in any voting trust or
subject any ACAP common stock to any arrangement or agreement with
respect to the voting of any ACAP common stock,
i. execute any written consent as shareholders with respect to
ACAP or its common stock, except as set forth herein,
j. otherwise act, alone or in concert with others, to control
or seek to control or influence or seek to influence the stockholders,
management, the Board or policies of ACAP, other than through
non-public communications with the directors of ACAP; provided, that,
subject to clause (f) above, nothing herein shall limit the Stilwell
Director from acting in his capacity as a director of ACAP in
accordance with his fiduciary duties at any meeting of the Board of
Directors, including the Stilwell Director's ability to discuss and
vote upon the items in clause (f) above,
k. seek, alone or in concert with others, (i) to call a
meeting of shareholders, (ii) representation on the Board of ACAP or
its subsidiaries, except as set forth herein, or (iii) the removal of
any member of the ACAP Board or any of its subsidiaries,
l. make any publicly disclosed proposal regarding any of the
foregoing,
m. publicly make any request to amend, waive or terminate any
provision of this Agreement, or
n. take or cause others to take any action inconsistent with
any of the foregoing.
5. Voting at Meetings of Stockholders. At all meetings of Stockholders
the Stilwell Group and the Stilwell Director shall vote all of the shares of
ACAP common stock beneficially owned by its members for each of ACAP's nominees
for election to the ACAP Board of Directors, for the ratification of the
appointment of ACAP's independent auditors and, in other matters, in accordance
with the recommendation of the ACAP Board of Directors, or, if so directed by
the Board, pro rata with all other shareholders. Upon execution of this
Agreement by all the parties hereto, and when it is duly approved by ACAP's
Board, the Stilwell Group hereby irrevocably withdraws its Notice of Intent to
Nominate dated January 29, 2002.
6. Directorships and Committees. ACAP agrees that upon the execution of
the Agreement, the Stilwell Director will be appointed to the Board of Directors
of ACAP and the Board of Directors of American Physicians Assurance Corporation
("APA").
a. The Stilwell Director will be appointed to the Class of
Directors of ACAP whose terms expire at the 2002 Annual Meeting of
Stockholders.
b. ACAP and APA agree to make all necessary amendments to
their by-laws or articles of incorporation to enable the Stilwell
Director to sit on the Boards, including to expand the Boards.
c. The Stilwell Director will be entitled to receive the
identical compensation and benefits being paid to the other
non-employee directors of ACAP.
d. The Stilwell Group shall not provide, and the Stilwell
Director shall not accept, any incentive or compensation to the
Stilwell Director that would influence the Stilwell Director to
recommend that ACAP enter into a transaction for the sale of ACAP or to
recommend any other significant initiative affecting ACAP and its
stockholders.
e. If the Stilwell Director resigns from any Board, is removed
from any Board for cause, or if he dies or becomes disabled, the
Stilwell Group will be entitled to replace the Stilwell Director with
another individual ("Replacement Director"), who is reasonably
determined by the Board of ACAP to be qualified to serve and if the
Replacement Director is qualified, ACAP and APA shall take all actions
to immediately appoint the Replacement Director to the respective
Boards. The procedure for the selection of a Replacement Director shall
be as follows: The Stilwell Group will propose a Replacement Director
to ACAP (the "Proposed Replacement"). If the Proposed Replacement is
not reasonably determined by ACAP to be acceptable, Stilwell shall be
entitled to propose additional candidates to ACAP until ACAP approves a
candidate to be the Replacement Director. The Replacement Director will
serve out the remaining term of the Stilwell Director. The Replacement
Director will enjoy all of the rights and benefits of this Agreement
and shall be bound by its terms. If the Board of ACAP does not appoint
a Replacement Director, this will be deemed a breach by ACAP.
f. For so long as the Stilwell Director, or Replacement
Director, is a member of the Board of Directors of ACAP and APA, he
will, subject to applicable law and the rules of the SEC and NASDAQ, be
appointed to the Audit Committee.
g. ACAP and its Board agree to nominate and support the
Stilwell Director, or Replacement Director, for re-election to the
Board of ACAP at the expiration of his first term (i.e., for nomination
and re-election at the 2002 annual shareholder's meeting for the class
of directors whose terms expire in 2005), and he shall be re-appointed
to the Board of APA. If the Stilwell Director or the Replacement
Director is not re-nominated to the ACAP Board or re-appointed to the
APA Board, this will be deemed a breach by ACAP.
7. Stock Repurchases. The Stilwell Group has requested that the ACAP
Board shall authorize the repurchase of a sufficient number of its outstanding
shares of common stock so that (i) the number of shares outstanding on December
31, 2002 is at least fifteen percent (15%) less than the number of shares
outstanding on December 31, 2001, and (ii) the number of shares outstanding on
December 31, 2003 is at least fifteen percent (15%) less than the number of
shares outstanding on December 31, 2002. For purposes of this paragraph,
outstanding shares shall mean all shares entitled to vote, and shall exclude all
treasury shares. ACAP agrees that, in light of all factors its Board considers
appropriate, the Board shall promptly consider increasing ACAP's existing share
repurchase program and in particular consider the request of the Stilwell Group,
and that the Board will further monitor such repurchase program during fiscal
2002 and 2003 in light of all relevant factors, including among others, whether
ACAP's shares are trading below the book value per share of ACAP and its
consolidated subsidiaries, the availability and alternative uses of ACAP's
excess capital, regulatory considerations, the reaction of rating agencies to
any proposed repurchase, and the market price of ACAP's shares. Notwithstanding
the foregoing, ACAP shall not be required to authorize or consummate any
repurchases described herein (i) if the ACAP Board determines in good faith that
such action is not in the best interests of ACAP or its shareholders, or (ii) if
any governmental regulatory agency threatens or commences regulatory action
against ACAP or any of its subsidiaries as a direct or indirect result of such
repurchases.
8. Litigation. ACAP will not, directly or indirectly, initiate any
litigation against the Stilwell Group or the Stilwell Director, except to
enforce the terms of this Agreement.
9. Dispositions. The Stilwell Group agrees that any disposition of
shares of common stock of ACAP will be made in open market transactions in a
manner designed to effect an orderly disposition of such shares. The Stilwell
Group further agrees that it will not transfer or dispose of any shares of ACAP
common stock if, as a result of such disposition or transfer, to the knowledge
of any member of the Stilwell Group, the person making such acquisition will
beneficially own, together with its affiliates and any member of a "group"
(within the meaning of the Exchange Act) in which such acquiror is a party,
immediately following such acquisition 5% or more of the ACAP common stock then
outstanding.
10. Certification of Ownership. The Stilwell Group shall, upon request
of ACAP, certify to ACAP as to the amount of shares it beneficially owns.
11. Termination. This Agreement shall terminate and the Stilwell
Director shall immediately tender his resignation from the Board of ACAP and
APA, if requested by the Board of ACAP as a result of a majority vote, other
than the Stilwell Director, in favor of such resignation by the Board of ACAP,
upon the earlier of (i) the Stilwell Group having beneficial ownership of less
than one percent of the outstanding shares of common stock of ACAP; (ii) any
person becoming the beneficial owner of more than 50% of ACAP's voting stock,
including any merger, acquisition or other type of business combination, (iii)
the dissolution, merger or any other transaction which results in the failure of
Stilwell Value Partners V, L.P., Stilwell Associates, L.P., or Stilwell Value
LLC to exist as legal entities; provided that at the option of ACAP, this
Agreement shall be binding on their respective successors and it shall be a
condition of such dissolution or other transaction that such successor so agree,
(iv) the death or incapacity of Joseph Stilwell; or (v) the third anniversary of
the execution of this Agreement. This Agreement shall not otherwise be
terminated without the written consent of all of the parties.
12. Public Announcement. The parties shall promptly disclose the
existence of this Agreement after its execution pursuant to a joint press
release in the form annexed hereto as
Attachment A, however, neither party shall disclose the existence of this
Agreement until the press release is issued.
13. Material Nonpublic Information. In connection with this Agreement
and the Stilwell Group's ongoing relationship with ACAP, there may be instances
in which material nonpublic information concerning ACAP will be divulged to the
Stilwell Group by ACAP, the Stilwell Director, or other ACAP representatives or
agents. The Stilwell Group and its representatives expressly acknowledge that
federal and state securities laws prohibit any person who misappropriates
material nonpublic information about a company from purchasing or selling
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. The Stilwell Group and the
Stilwell Director (and any Replacement Director) acknowledge that the Stilwell
Director (and any Replacement Director) will be subject to ACAP's insider
trading and disclosure policies, as in effect from time to time, at any time
while they are on the Boards to the same extent as the other directors of ACAP.
To the extent SEC Regulation FD may apply, in accordance with Section 243.100
(2)(ii) of Regulation FD, the Stilwell Group expressly agrees to maintain
material nonpublic information concerning ACAP in confidence.
14. Remedies. ACAP, the Stilwell Group and the Stilwell Director
acknowledge and agree that a breach or threatened breach by either party may
give rise to irreparable injury inadequately compensable in damages, and
accordingly each party shall be entitled to injunctive relief to prevent a
breach of the provisions hereof and to enforce specifically the terms and
provisions hereof in any state or federal court having jurisdiction, in addition
to any other remedy to which such aggrieved party may be entitled to at law or
in equity. In the event either party institutes any legal action to enforce such
party's rights under, or recover damages for breach of, this Agreement, the
prevailing party or parties in such action shall be entitled to recover from the
other party or parties all costs and expenses, including but not limited to
reasonable attorneys' fees, court costs, witness fees, disbursements and any
other expenses of litigation or negotiation incurred by such prevailing party or
parties.
15. Notices. All notice requirements and other communications shall be
deemed given when delivered or on the following business day after being sent by
overnight courier with a nationally recognized courier service such as Federal
Express, addressed to the Stilwell Group, the Stilwell Director and ACAP as
follows:
ACAP:
Mr. William Cheeseman
1301 North Hagadorn Road
East Lansing, Michigan 48823
With a copy to:
Lori M. Silsbury, Esq.
Dykema Gossett PLLC
124 W. Allegan
800 Michigan National Tower
Lansing, Michigan 48933
The Stilwell Group:
Mr. Joseph Stilwell
26 Broadway 23rd Floor
New York, New York 10004
With a copy to:
Joseph Fink, Esq.
Dickinson Wright PLLC
215 South Washington Square, Suite 200
Lansing, Michigan 48933-1816
The Stilwell Director:
Spencer L. Schneider, Esq.
145 Hudson Street
New York, New York 10013
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties in connection therewith not referred
to herein.
17. Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, and
signature pages may be delivered by facsimile, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
18. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Michigan, without
regard to choice of law principles that would compel the application of the laws
of any other jurisdiction.
20. Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
21. Successors and Assigns. This Agreement shall not be assignable by
any of the parties to this Agreement, except the terms shall be applicable to a
Replacement Director. This Agreement, however, shall be binding on successors of
the parties hereto.
22. Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made herein shall survive
the execution and delivery of this Agreement.
23. Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.
24. Further Action. Each party agrees to execute any and all documents,
and to do and perform any and all acts and things necessary or proper to
effectuate or further evidence the terms and provisions of this Agreement.
25. Consent to Jurisdiction. Each of the parties hereby irrevocably
submits to the exclusive jurisdiction of any United States Federal or state
court sitting in the State of Michigan in any action or proceeding arising out
of or relating to this Agreement and each of the parties hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such court.
26. Expenses. Each party agrees to bear its own expenses in connection
with the transactions contemplated hereby.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PHYSICIANS CAPITAL, INC.
/s/ William B. Cheeseman
-------------------------
By: WILLIAM B. CHEESEMAN
President and CEO
STILWELL VALUE PARTNERS III, L.P.
/s/ Joseph Stilwell
-------------------
By: STILWELL VALUE LLC
General Partner, by Joseph Stilwell,
Managing and Sole Member
STILWELL VALUE PARTNERS V, L.P.
/s/ Joseph Stilwell
-------------------
By: STILWELL VALUE LLC
General Partner, by Joseph Stilwell,
Managing and Sole Member
STILWELL ASSOCIATES, L.P.
/s/ Joseph Stilwell
-------------------
By: STILWELL VALUE LLC
General Partner, by Joseph Stilwell
Managing and Sole Member
STILWELL PARTNERS, L.P.
/s/ Joseph Stilwell
-------------------
By: JOSEPH STILWELL
General Partner
STILWELL VALUE, LLC
/s/ Joseph Stilwell
-------------------
By: JOSEPH STILWELL
Managing and Sole Member
THE MARGARET DE FLEUR
FOUNDATION, INC.
/s/ Joseph Stilwell
-------------------
By: JOSEPH STILWELL
President
SPENCER L. SCHNEIDER
/s/ Spencer L. Schneider
------------------------
JOSEPH STILWELL
/s/ Joseph Stilwell
-------------------
ATTACHMENT A
FOR IMMEDIATE RELEASE
Contact:
Ms. Sheila Wright
Media Relations
American Physicians Capital, Inc.
1301 North Hagadorn Road
East Lansing, Michigan 48823
Phone: (517) 324-6782
- ----------------------------
AMERICAN PHYSICIANS CAPITAL, INC. ADDS NEW MEMBER TO ITS BOARD OF DIRECTORS
East Lansing, Michigan, February __, 2002 -- American Physicians Capital, Inc.
(NASDAQ: ACAP) and The Stilwell Value Group, one of the Company's largest
shareholders, announced an agreement where a representative of The Stilwell
Group will join the Company's board of directors immediately, and will be one of
the nominees to stand for election at the Company's 2002 annual meeting.
The Stilwell Group has agreed to a three-year "standstill" and will support the
slate of directors at the 2002 annual meeting and during the term of the
standstill agreement. APCapital agreed to consider a request of The Stilwell
Group to use a portion of its excess capital to significantly increase the
Company's share repurchase program in each of the fiscal years 2002 and 2003.
Any future expansion of the Company's repurchase program will be subject to,
among other things, the board's fiduciary duty and regulatory approvals. The
Stilwell Group had previously noticed its intention to nominate two people to
the board, to be elected at the 2002 annual meeting. In connection with the
agreement, The Stilwell Group has withdrawn its nomination notice.
Spencer L. Schneider, an attorney in private practice in New York City, will
immediately join the board of directors as a representative of the Stilwell
Group.
William B. Cheeseman, APCapital president and CEO, said: "The Company has been
looking to expand the board of directors to include representatives with
additional experience and expertise, and we are pleased Mr. Schneider will be
joining the board as a representative of the investment community. The Company
plans to review the Stilwell Group's proposal to expand the Company's existing
share repurchase program in its upcoming meetings."
Joseph Stilwell, general partner of The Stilwell Group, stated: "We are
delighted to be working with Mr. Cheeseman with respect to share repurchases in
order to maximize shareholder value for all of the Company's shareholders."
Forward-Looking Statements: Certain statements made by American Physicians
Capital, Inc. in this release may constitute forward-looking statements within
the meaning of the federal securities laws. While we believe any forward-
looking statements we have made are reasonable, they are subject to risks and
uncertainties, and actual results could differ materially. These risks and
uncertainties include, but are not limited to, the following: the potential
inadequacy of our loss and loss adjustment expense reserves, liabilities imposed
that exceed our policy limits and reserves, increased pressures on premium rates
and our potential inability to obtain rate increases, adverse changes in the
health care industry, our potential inability to obtain adequate and affordable
reinsurance coverage from creditworthy reinsurers, adverse regulatory changes in
Michigan, our potential inability to execute our growth strategy, the loss of
our relationships with medical associations, an interruption or change in our
principal third-party distribution relationship, a reduction in our A.M. Best
Company rating, our potential inability to obtain anticipated processing
efficiencies, negative changes in financial market conditions, a significant
increase in inflation in the markets in which we compete, a downturn in general
economic conditions, and any other factors listed or discussed in the reports
filed by APCapital with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934. APCapital does not undertake, and expressly
disclaims any obligation, to update or alter its forward-looking statements
whether as a result of new information, future events or otherwise, except as
required by law.
[ACAP TAG LINE]