Exhibit 10.20


 




 





 


PURCHASE AGREEMENT


 


between


 


AMCOMP PREFERRED INSURANCE
COMPANY




 


and


 


 


DEKANIA
CDO II, LTD.


 










 


Dated as of April 29,
2004


 










 




 





 





















 


PURCHASE AGREEMENT


($10,000,000 Surplus Notes)


 


THIS PURCHASE AGREEMENT, dated as of April 29, 2004 (this “Purchase Agreement”), is entered into between AmCOMP Preferred Insurance Company, a stock insurance company (the
“Company”), and Dekania CDO II,
Ltd. or its assignee (the “Purchaser”).


 


WITNESSETH:


 


WHEREAS, the Company proposes to issue Ten Million
Dollars ($10,000,000) in principal amount of unsecured surplus notes (the “Securities); and


 


WHEREAS, the Securities will be issued pursuant to an
Indenture, dated as of the Closing Date (the “Indenture”),
between the Company and JPMorgan Chase Bank, a New York banking corporation, as
indenture trustee (in such capacity, the “Indenture
Trustee”).


 


NOW, THEREFORE, in consideration of the mutual
agreements and subject to the terms and conditions herein set forth, the
parties hereto agree as follows:


 


1.             Definitions.  This Purchase Agreement, the Indenture and
the Securities are collectively referred to herein as the “Operative Documents.”  All other capitalized terms used but not
defined in this Purchase Agreement shall have the respective meanings ascribed
thereto in the Indenture.


 


2.             Purchase and Sale of the
Securities.


 


(a)           The Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, the
Securities for an amount (the “Purchase
Price”) equal to Ten Million Dollars ($10,000,000).  The Purchaser shall be responsible for the
rating agency costs and expenses.


 


(b)           Delivery or transfer of, and payment
for, the Securities shall be made at 10:00 A.M. Chicago time (11:00 A.M.
New York time), on April 29, 2004 or such later date (not later than May 31,
2004 (30 days later)) as the parties may designate (such date and time of
delivery and payment for the Securities being herein called the “Closing Date”).  The Securities shall be transferred and
delivered to the Purchaser against the payment of the Purchase Price to the
Company made in immediately available funds on the Closing Date to a U.S.
account designated in writing by the Company at least two business days prior
to the Closing Date.


 


(c)           Delivery of the Securities shall be
made at such location, and in such names and denominations, as the Purchaser
shall designate at least two business days in advance of the Closing Date.  The Company agrees to have the Securities available
for inspection and checking by the Purchaser in Chicago, Illinois, not later
than 1:00 P.M., Chicago time (2:00 P.M. New York time), on the
business day prior to the Closing Date. 
The closing for the purchase and


 





















 


sale of the Securities shall occur at the offices of
Mayer, Brown, Rowe & Maw LLP, 190 South LaSalle Street, Chicago,
Illinois 60603, or such other place as the parties hereto shall agree.


 


3.             Conditions.  The obligations of the parties under this
Purchase Agreement are subject to the following conditions:


 


(a)           the representations and warranties
contained herein shall be accurate as of the date of delivery of the
Securities.


 


(b)           ]Reserved.]


 


(c)           (i) Olshan Grundman Frome
Rosenzweig & Wolosky LLP, counsel for the Company, Foley &
Lardner LLP (regulatory counsel) and Harris & Helgeson (Florida
counsel) (collectively, the “Company Counsel”) shall have delivered opinions, dated the
Closing Date, addressed to the Purchaser and JPMorgan Chase Bank, which
opinions collectively cover the matters set out in Annex A-I hereto and (ii) the
Company shall have furnished to the Purchaser a certificate signed by the
Company’s Chief Executive Officer, President or an Executive Vice President or
its Chief Financial Officer, Treasurer or Assistant Treasurer, dated the
Closing Date, addressed to the Purchaser, in substantially the form set out in Annex
A-II hereto.  In rendering their
opinions, the Company Counsel may rely as to factual matters upon certificates
or other documents furnished by officers and directors of the Company and by
government officials (provided, however, that copies of any such certificates or documents
are delivered to the Purchaser) and by and upon such other documents as such
counsel may, in its reasonable opinion, deem appropriate as a basis for the
Company Counsel’s opinion.  The Company
Counsel may specify the jurisdictions in which they are admitted to practice
and that they are not admitted to practice in any other jurisdiction and are
not an expert in the law of any other jurisdiction.  If any of the Company Counsel is not admitted
to practice in the State of New York, the opinion of the Company Counsel may
assume, for purposes of the opinion, that the laws of the State of New York are
substantively identical, in all respects material to the opinion, to the
internal laws of the state in which such counsel is admitted to practice.  Such Company Counsel opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).


 


(d)           The Purchaser shall have been
furnished the opinion of Mayer, Brown, Rowe & Maw LLP, special tax
counsel for the Purchaser, dated the Closing Date, addressed to the Purchaser
and JPMorgan Chase Bank in substantially the form set out in Annex B hereto.


 


(e)           The Purchaser shall have
received the opinion of Gardere Wynne Sewell LLP, special counsel for the
Indenture Trustee, dated the Closing Date, addressed to the Purchaser, in
substantially the form set out in Annex C
hereto.


 


(f)            The Company shall have furnished to
the Purchaser a certificate of the Company, signed by the Chief Executive
Officer, President or an Executive Vice President and by the Chief Financial
Officer, Treasurer or Assistant Treasurer of the Company, dated the Closing
Date, as to clauses (i) and (ii) below.


 


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(i)            the
representations and warranties in this Purchase Agreement are true and correct
on and as of the Closing Date with the same effect as if made on the Closing
Date, and the Company has complied with all the agreements and satisfied all
the conditions to be performed or satisfied at or prior to the Closing Date;
and


 


(ii)           since
the date of the Financial Statements, Interim Financial Statements and
Statutory Financial Statements (each as defined below), there has been no
material adverse change in the condition (financial or other), earnings,
business or assets of the Company and its subsidiaries, whether or not arising
from transactions occurring in the ordinary course of business.


 


(g)           Subsequent to the execution of this
Purchase Agreement, there shall not have been any change, or any development
involving a prospective change, in or affecting the condition (financial or
other), earnings, business or assets of the Company and its subsidiaries,
whether or not occurring in the ordinary course of business, the effect of
which is, in the Purchaser’s judgment, so material and adverse as to make it
impractical or inadvisable to proceed with the purchase of the Securities.


 


(h)           Prior to the Closing Date, the
Company shall have furnished to the Purchaser and its counsel such further
information, certificates and documents as the Purchaser or its counsel may
reasonably request.


 


If any of the conditions specified in this Section 3 shall
not have been fulfilled when and as provided in this Purchase Agreement, or if
any of the opinions, certificates and documents mentioned above or elsewhere in
this Purchase Agreement shall not be reasonably satisfactory in form and
substance to the Purchaser or its counsel, this Purchase Agreement and all the
Purchaser’s obligations hereunder may be canceled at, or at any time prior to,
the Closing Date by the Purchaser.  Notice
of such cancellation shall be given to the Company in writing or by telephone
or facsimile confirmed in writing.


 


Each certificate signed
by any officer of the Company and delivered to the Purchaser or the Purchaser’s
counsel in connection with the Operative Documents and the transactions
contemplated hereby and thereby shall be deemed to be a representation and
warranty of the Company and not by such officer in any individual capacity.


 


4.             Representations
and Warranties of the Company.  The Company represents
and warrants to, and agrees with, the Purchaser as follows:


 


(a)           Neither the Company nor any of its “Affiliates”
(as defined in Rule 501(b) of Regulation D (“Regulation D”) under the Securities Act
(as defined below)), nor any person acting on its or their behalf, has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of any of the Securities under the Securities Act of 1933, as
amended (the “Securities Act”).


 


(b)           Neither the Company nor any of its
Affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of any of the Securities.


 


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(c)           The Securities (i) are not and
have not been listed on a national securities exchange registered under section 6
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or quoted on a U.S.
automated interdealer quotation system and (ii) are not of an open-end
investment company, unit investment trust or face-amount certificate company
that are, or are required to be, registered under section 8 of the Investment
Company Act of 1940, as amended (the “Investment
Company Act”), and the Securities otherwise satisfy the eligibility
requirements of Rule 144A(d)(3) promulgated pursuant to the
Securities Act (“Rule 144A(d)(3)”).


 


(d)           Neither the Company nor any of its
Affiliates, nor any person acting on its or their behalf, has engaged, or will
engage, in any “directed selling efforts” within the meaning of Regulation S
under the Securities Act with respect to the Securities.


 


(e)           The Company is not and, immediately
following consummation of the transactions contemplated hereby and the
application of the net proceeds therefrom, will not be, an “investment company”
or an entity “controlled” by an “investment company,” in each case within the
meaning of section 3(a) of the Investment Company Act.


 


(f)            The Company has not paid or agreed
to pay to any person any compensation for soliciting another to purchase any of
the Securities, except for the sales commission the Company has agreed to pay
to Dekania Capital Management, LLC (or to the Company’s introducing agent,
Benfield Advisory, Inc., on behalf of Dekania Capital Management II,  LLC), pursuant to the letter agreement
between the Company and Dekania Capital Management, LLC, dated October 22,
2003.


 


(g)           The Indenture has been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Indenture Trustee, will be a legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and to general principles of equity.


 


(h)           The Securities have been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered to the Indenture Trustee for authentication in
accordance with the Indenture and, when authenticated in the manner provided
for in the Indenture and delivered to the Purchaser against payment therefor in
accordance with this Agreement, will constitute legal, valid and binding
obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and to general principles of equity.


 


(i)            This Purchase Agreement has been
duly authorized, executed and delivered by the Company.


 


(j)            Except as set forth on Schedule 4(j),
neither the issue and sale of the Securities, nor the execution and delivery of
and compliance with the Operative Documents by the Company, nor the
consummation of the transactions contemplated herein or therein, (i) will


 


5





















 


conflict with or constitute a violation or breach of
the charter or bylaws of the Company or any subsidiary of the Company or any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, governmental authority, agency or instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or their respective properties or assets (collectively, the “Governmental Entities”), (ii) will
conflict with or constitute a violation or breach of, or a default or Repayment
Event (as defined below) under, or result in the creation or imposition of any
pledge, security interest, claim, lien or other encumbrance of any kind (each,
a “Lien”) upon any property or
assets of the Company or any of the Company’s subsidiaries pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument (A) to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or (B) to which any of
the property or assets of any of them is subject, or any judgment, order or
decree of any court, governmental authority or arbitrator, except, in the case
of this clause (ii), for such conflicts, breaches, violations, defaults,
Repayment Events (as defined below) or Liens which (x) would not, singly or in
the aggregate, adversely affect the consummation of the transactions
contemplated by the Operative Documents and (y) would not, singly or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), earnings, business, liabilities and assets (taken as a whole) or
business prospects of the Company and its subsidiaries taken as a whole,
whether or not occurring in the ordinary course of business (a “Material Adverse Effect”) or (iii) require
the consent, approval, authorization or order of any court or Governmental
Entity not already obtained provided that the payment of principal of and
premium, if any, and interest on the Securities is subject to the prior approval
of the Florida Office of
Insurance Regulation and is payable solely from Available
Surplus.  As used herein, a “Repayment Event” means any event or
condition which gives 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 prior to its scheduled
maturity.


 


(k)           The Company has been duly
incorporated and is validly existing as a stock insurance company in good standing under the laws
of Florida,
with all requisite power and authority to own, lease and operate its properties
and conduct the business it transacts and proposes to transact, and is duly qualified
to transact business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its activities requires such qualification,
except when the failure of the Company to be so qualified would not, singly or
in the aggregate, have a Material Adverse Effect.


 


(l)            The Company has no subsidiaries that
are material to its business, financial condition or earnings other than those
subsidiaries listed in Schedule 1 attached hereto (collectively,
the “Significant Subsidiaries”).  Each Significant Subsidiary has been duly
incorporated and is validly existing as an organization in good standing under
the laws of the jurisdiction in which it is chartered or organized, with all
requisite power and authority to own, lease and operate its properties and
conduct the business it transacts and proposes to transact.  Each Significant Subsidiary is duly qualified
to transact business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its activities requires such qualification,
except when the failure to be so qualified would not, singly or in the
aggregate, have a Material Adverse Effect.


 


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(m)          The Company and each of its
subsidiaries holds all necessary approvals, authorizations, orders, licenses,
consents, registrations, qualifications, certificates and permits (including,
without limitation, insurance licenses from the insurance departments of the
various states and jurisdictions in which the Company’s insurance subsidiaries
write insurance business or otherwise conduct insurance or reinsurance
business, as the case may be, or as may be required by any applicable insurance
statutes of such states or other jurisdictions (collectively, the “Insurance Licenses”)) (collectively,
including the Insurance Licenses, the “Government
Licenses”) of and from Governmental Entities necessary to conduct
their respective businesses as are now being conducted, and neither the Company
nor any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Government License, except where the
failure to be so licensed or approved, or the receipt of an unfavorable
decision, ruling or finding, would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Government Licenses are valid and in full
force and effect, except where the invalidity or the failure of such Government
Licenses to be in full force and effect would not, singly or in the aggregate,
have a Material Adverse Effect; and the Company and its subsidiaries are in
compliance with all applicable laws, rules, regulations, judgments, orders,
decrees and consents, except when the failure to be in compliance would not,
singly or in the aggregate, have a Material Adverse Effect.


 


(n)           All of the issued and outstanding shares of capital stock or other equity
interests of the Company and each of its subsidiaries are
validly issued, fully paid and non-assessable; all of the issued and
outstanding capital stock of each subsidiary of the Company is owned by the
Company, directly or through subsidiaries, free and clear of any Lien, claim or
equitable right; and none of the issued and outstanding capital stock of the
Company or any subsidiary was issued in violation of any preemptive or similar
rights arising by operation of law, under the charter or by-laws of such entity
or under any agreement to which the Company or any of its subsidiaries is a
party.


 


(o)           Neither the Company nor any of its
subsidiaries is (i) in violation of its respective charter or by-laws or
similar organizational documents or (ii) in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument to which the Company or any such subsidiary is a party or by
which it or any of them may be bound or to which any of the property or assets
of any of them is subject, except, in the case of clause (ii), when such
violation or default would not, singly or in the aggregate, have a Material
Adverse Effect.


 


(p)           Except as set forth on Schedule 4(p),
there is no action, suit or proceeding before or by any Governmental Entity,
arbitrator or court, domestic or foreign, now pending or, to the knowledge of
the Company after due inquiry, threatened against or affecting the Company or
any of its subsidiaries, except for such actions, suits or proceedings that, if
adversely determined, would not, singly or in the aggregate, adversely affect
the consummation of the transactions contemplated by the Operative Documents or
have a Material Adverse Effect; and the aggregate of all pending legal or
governmental proceedings to which the Company or any of its subsidiaries is a
party or of which any of their respective properties or assets is subject,


 


7





















 


including ordinary routine litigation incidental to
the business, are not expected to result in a Material Adverse Effect.


 


(q)           The accountants of the Company who
certified the Financial Statements (as defined below) are independent public
accountants of the Company and its subsidiaries within the meaning of the
Securities Act, and the rules and regulations of the Securities and
Exchange Commission (the “Commission”)
thereunder.


 


(r)            The audited consolidated financial
statements (including the notes thereto) and schedules of the Company and its
consolidated subsidiaries for the fiscal year ended December 31, 2002 (the
“Financial Statements”) provided
to the Purchaser are the most recent available audited consolidated financial
statements of the Company and its consolidated subsidiaries, and fairly present
in all material respects, in accordance with U.S. generally accepted accounting
principles (“GAAP”), if
available, the financial position of the Company and its consolidated
subsidiaries, and the results of operations and changes in financial condition
as of the dates and for the periods therein specified, subject to the
adjustments identified on Schedule 2(r). 
Such consolidated financial statements and schedules have been prepared
in accordance with GAAP consistently applied throughout the periods involved
(except as otherwise noted therein).


 


(s)           The
statutory financial statements dated as of December 31, 2003 (the “Statutory Financial Statements”) of each
of the Company’s insurance company subsidiaries have, for each relevant period,
been prepared in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the National
Association of Insurance Commissioners and, with respect to each insurance
company subsidiary, each appropriate insurance department of the state of
domicile of such insurance company subsidiary, and such accounting practices
have been applied on a consistent basis throughout the periods involved
(whether GAAP or SAP, as applicable, the “Applicable Accounting Principles”),
subject to the adjustments identified on Schedule 2(s).


 


(t)            Except as identified on Schedule 4(t), neither the Company nor any
of its subsidiaries has any material liability, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its subsidiaries that could give rise to any such liability),
except for (i) liabilities set forth in the Financial Statements or the
Interim Financial Statements and (ii) normal fluctuations in the amount of
the liabilities referred to in clause (i) above occurring in the
ordinary course of business of the Company and all of its subsidiaries since
the date of the most recent balance sheet included in such Financial
Statements.


 


(u)           The Statement of Actuarial Opinion Annual Statement of the Company,
dated December 31, 2003
(the “Regulatory Reports”), provided to the Purchaser
is the
most recently available such report, and the information therein fairly
presents in all material respects the financial position of the Company and its
subsidiaries.  None of the Company or any
of its


 


8





















 


subsidiaries has been requested by a Governmental
Entity to republish, restate or refile any regulatory or financial report.


 


(v)           Except as identified on Schedule 2(v),
since the respective dates of the Financial Statements, Statutory Financial
Statements and Regulatory Reports, there has not been (A) any material
adverse change or development with respect to the condition (financial or
otherwise), earnings, business, assets or business prospects of the Company and
its subsidiaries, taken as a whole, whether or not occurring in the ordinary
course of business or (B) any dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock other
than regular quarterly dividends on the Company’s common stock.


 


(w)          The authorized capitalization of the
Company and its subsidiary insurance companies are as set forth in the
Financial Statements, the Interim Financial Statements, the Statutory Financial
Statements and Regulatory Reports and meet all applicable regulatory
requirements with respect thereto.


 


(x)            [Reserved].


 


(y)           Neither the Company nor any of its subsidiaries, or any of their
respective officers, directors, employees or representatives, is subject or is
party to, or has received any notice from any Regulatory Agency (as defined
below) that any of them will become subject or party to any investigation with
respect to, any cease-and-desist order, agreement, civil monetary penalty,
consent agreement, memorandum of understanding or other regulatory enforcement
action, proceeding or order with or by, or is a party to any commitment letter
or similar undertaking to, or is subject to any directive by, or has been a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of, any Regulatory Agency that, in any such case, currently
restricts in any material respect the conduct of their business or that in any
material manner relates to their capital and surplus adequacy, reserves, their
marketing or sales practices, their ability or authority to pay dividends or
make distributions to their shareholders or make payments of principal or
interest on their debt obligations, their management or their business (each, a
“Regulatory Action”), nor has the
Company or any of its subsidiaries been advised by any Regulatory Agency that
it is considering issuing or requesting any such Regulatory Action; and there
is no unresolved violation, criticism or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of the
Company or any of its subsidiaries, except when such unresolved violation,
criticism or exception would not, singly or in the aggregate, have a Material
Adverse Effect.  As used herein, the term
“Regulatory Agency” means any
federal or state agency charged with the supervision or regulation of insurance
companies or holding companies of insurance companies, or engaged in the
insurance of insurance company reserves, or any court, administrative agency or
commission or other governmental agency, authority or instrumentality having
supervisory or regulatory authority with respect to the Company or any of its
subsidiaries.


 


(z)            No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the executive officers of the
Company, is imminent, except those which would not, singly or in the aggregate,
have a Material Adverse Effect.


 


9





















 


(aa)         Except
as set forth on Schedule 4(aa), no filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of,
any Governmental Entity, other than those that have been made or obtained, is
necessary or required for the performance by the Company of its obligations
under the Operative Documents, as applicable, or the consummation by the
Company of the transactions contemplated by the Operative Documents.


 


(bb)         The
Company and each subsidiary of the Company has good and marketable title to all
of its respective real and personal properties, in each case free and clear of
all Liens and defects, except for those that would not, singly or in the
aggregate, have a Material Adverse Effect; and all of the leases and subleases
under which the Company or any subsidiary of the Company holds properties are
in full force and effect, except when the failure of such leases and subleases
to be in full force and effect would not, singly or in the aggregate, have a
Material Adverse Effect, and none of the Company or any subsidiary of the
Company has any notice of any claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary of the Company
under any such leases or subleases, or affecting or questioning the rights of
such entity to the continued possession of the leased or subleased premises
under any such lease or sublease, except for such claims that would not, singly
or in the aggregate, have a Material Adverse Effect.


 


(cc)         The information provided by the Company
pursuant to this Purchase Agreement does not, as of the date hereof, and will
not, as of the Closing Date, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.


 


5.             Representations
and Warranties of the Purchaser.   The Purchaser
represents and warrants to, and agrees with, the Company as follows:


 


(a)           The Purchaser is aware that the
Securities have not been and will not be registered under the Securities Act
and may not be offered or sold within the United States or to “U.S. persons”
(as defined in Regulation S under the Securities Act) except in accordance with
Rule 903 of Regulation S under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act.


 


(b)           The Purchaser is an “accredited
investor,” as such term is defined in Rule 501(a) of Regulation D
under the Securities Act.


 


(c)           Neither the Purchaser, nor any of the
Purchaser’s affiliates, nor any person acting on the Purchaser’s or the
Purchaser’s Affiliate’s behalf has engaged, or will engage, in any form of “general
solicitation or general advertising” (within the meaning of Regulation D under
the Securities Act) in connection with any offer or sale of the Securities.


 


(d)           The Purchaser understands and
acknowledges that (i) no public market exists for any of the Securities
and that it is unlikely that a public market will ever exist for the
Securities, (ii) the Purchaser is purchasing the Securities for its own
account, for investment and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of


 


10





















 


the Securities Act or other applicable securities
laws, subject to any requirement of law that the disposition of its property be
at all times within its control and subject to its ability to resell such
Securities pursuant to an effective registration statement under the Securities
Act or pursuant to an exemption therefrom or in a transaction not subject
thereto, and the Purchaser agrees to the legends and transfer restrictions
applicable to the Securities contained in the Indenture, and (iii) the
Purchaser has had the opportunity to ask questions of, and receive answers and
request additional information from, the Company and is aware that it may be
required to bear the economic risk of an investment in the Securities.


 


(e)           The Purchaser is a company with
limited liability duly incorporated, validly existing and in good standing
under the laws of the jurisdiction in which it is organized with all requisite (i) power
and authority to execute, deliver and perform the Operative Documents to which
it is a party, to make the representations and warranties specified herein and
therein and to consummate the transactions contemplated herein and (ii) right
and power to purchase the Securities.


 


(f)            This Purchase Agreement has been
duly authorized, executed and delivered by the Purchaser and no filing with, or
authorization, approval, consent, license, order registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Purchase Agreement or to consummate the transactions contemplated herein.


 


6.             Agreements
of the Company.  The Company agrees with the Purchaser as
follows:


 


(a)           During the period from the date of
this Agreement to the Closing Date, the Company shall use its best efforts and
take all action necessary or appropriate to cause its representations and
warranties contained in Section 4 hereof to be true as of the
Closing Date, after giving effect to the transactions contemplated by this
Purchase Agreement, as if made on and as of the Closing Date.


 


(b)           The Company will arrange for the
qualification of the Securities for sale under the laws of such jurisdictions
as the Purchaser may designate and will maintain such qualifications in effect
so long as required for the sale of the Securities.  The Company will promptly advise the
Purchaser of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose.


 


(c)           The Company will not permit any of
its Affiliates to, nor will it permit any person acting on its behalf (other
than the Purchaser) to, resell any Securities that have been acquired by any of
them.


 


(d)           The Company will not permit any of
its Affiliates, or any person acting on its behalf, to engage in any “directed
selling efforts” within the meaning of Regulation S under the Securities Act
with respect to the Securities.


 


11





















 


(e)           The Company will not permit any of
its Affiliates, or any person acting on its behalf, to, directly or indirectly,
make offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of any of the
Securities under the Securities Act.


 


(f)            The Company will not permit any of
its Affiliates, or any person acting on its behalf, to engage in any form of “general
solicitation or general advertising” (within the meaning of Regulation D) in
connection with any offer or sale of any of the Securities.


 


(g)           So long as any of the Securities are
outstanding, (i) the Securities shall not be listed on a national
securities exchange registered under section 6 of the Exchange Act or
quoted in a U.S. automated interdealer quotation system, (ii) the Company
shall not be an open-end investment company, unit investment trust or
face-amount certificate company that is, or is required to be, registered under
section 8 of the Investment Company Act and (iii) the Securities
shall otherwise satisfy the eligibility requirements of Rule 144A(d)(3).


 


(h)           The Company shall furnish to (i) the
holders and subsequent holders of the Securities, (ii) Dekania Capital
Management, LLC (at 1818 Market Street, 28th Floor, Philadelphia,
Pennsylvania 19013, or such other address as designated by Dekania Capital
Management, LLC) and (iii) any beneficial owner of the Securities
reasonably identified to the Company (which identification may be made by
either such beneficial owner or by Dekania Capital Management, LLC), a duly
completed and executed certificate in the form attached hereto as Annex D,
including the financial statements referenced in such Annex, which certificate
and financial statements shall be so furnished by the Company not later than
forty-five (45) days after the end of each of the first three fiscal quarters
of each fiscal year of the Company and not later than ninety (90) days after
the end of each fiscal year of the Company.


 


(i)            The Company shall, during any period
in which it is not subject to and in compliance with section 13 or 15(d) of
the Exchange Act, or it is not exempt from such reporting requirements pursuant
to and in compliance with Rule 12g3-2(b) under the Exchange Act,
provide to each holder of the Securities and to each prospective purchaser (as
designated by such holder) of the Securities, upon the request of such holder
or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under
the Securities Act.  If the Company is
required to register under the Exchange Act, such reports filed in compliance
with Rule 12g3-2(b) shall be sufficient information as required
above.  This covenant is intended to be
for the benefit of the Purchaser, the holders of the Securities and the
prospective purchasers designated by the Purchaser and such holders, from time
to time, of the Securities.


 


(j)            The Company will not, until one
hundred eighty (180) days following the Closing Date, without the Purchaser’s
prior written consent, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of, directly or indirectly, (i) any
Securities or other securities of the Company having terms substantially
identical to the Securities other than as contemplated by this Purchase
Agreement or (ii) any other securities convertible into, or exercisable or
exchangeable for, any Securities or other securities of the Company having
terms substantially identical to the Securities.


 


12





















 


7.             Payment
of Expenses.  The Company agrees to pay all costs and
expenses incident to the performance of the obligations of the Company under
this Purchase Agreement, whether or not the transactions contemplated herein
are consummated or this Purchase Agreement is terminated, including all costs
and expenses incident to (i) the authorization, issuance, sale and
delivery of the Securities and any taxes payable in connection therewith; (ii) the
fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 6(b); (iii) the
fees and expenses of the counsel, the accountants and any other experts or
advisors retained by the Company; (iv) the fees and all reasonable
expenses of the Indenture
Trustee and any other trustee or paying agent appointed under the Operative
Documents, including the fees and disbursements of counsel for such trustees,
which fees shall not exceed a $2,000 acceptance fee, and $4,000 in
administrative fees annually and (v) $25,000 for the fees and expenses of
Mayer, Brown, Rowe & Maw LLP, special counsel retained by the
Purchaser.


 


Except as provided in this Section 7, if
the sale of the Securities provided for in this Purchase Agreement is not
consummated because any condition set forth in Section 3 hereof to
be satisfied by the Company is not satisfied, because this Purchase Agreement
is terminated pursuant to Section 9 or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder other
than by reason of a default by the Purchaser, the Company will reimburse the
Purchaser upon demand for all reasonable out-of-pocket expenses (including the
fees and expenses of the Purchaser’s counsel specified in clause (v) of
the immediately preceding paragraph) that shall have been incurred by the
Purchaser in connection with the proposed purchase and sale of the
Securities.  The Company shall not in any
event be liable to the Purchaser for the loss of anticipated profits from the
transactions contemplated by this Purchase Agreement.


 


8.             Indemnification.  (a)  The Company agrees to
indemnify and hold harmless the Purchaser, the Purchaser’s affiliates, Dekania
Capital Management, LLC and Merrill
Lynch & Co. (collectively, the “Entity Indemnified Parties”), the Entity
Indemnified Parties’ respective directors, officers, employees and agents and
each person who “controls” the Entity Indemnified Parties within the meaning of
either the Securities Act or the Exchange Act (collectively, with the Entity
Indemnified Parties, the “Indemnified
Parties”) against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, or are
based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any information or documents furnished or made
available to the Purchaser by or on behalf of the Company, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or (iii) the
breach or alleged breach of any representation, warranty or agreement of the
Company contained herein, and the Company agrees to reimburse each such
Indemnified Party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.  This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.


 


13





















 


(b)           Promptly after receipt by an
Indemnified Party of notice of the commencement of any action, such Indemnified
Party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, promptly notify the
indemnifying party in writing of the commencement thereof; but the failure to
so notify the indemnifying party (i) will not relieve the indemnifying
party from liability under paragraph (a) above unless and to the extent
that such failure results in the forfeiture by the indemnifying party of
material rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any Indemnified Party other than the
indemnification obligation provided in paragraph (a) above.  Purchaser shall be entitled to appoint
counsel to represent the Indemnified Party in any action for which
indemnification is sought.  An
indemnifying party may participate at its own expense in the defense of any
such action; provided, that
counsel to the indemnifying party shall not (except with the consent of the
Indemnified Party) also be counsel to the Indemnified Party.  In no event shall the indemnifying party be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from its own counsel for all Indemnified Parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.  An indemnifying party
will not, without the prior written consent of the Indemnified Parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not the Indemnified Parties
are actual or potential parties to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of each Indemnified Party from all liability arising out of such claim, action,
suit or proceeding.


 


9.             Termination. 
This Purchase Agreement shall be subject to termination in the absolute
discretion of the Purchaser, by notice given to the Company prior to delivery
of and payment for the Securities, if prior to such time (i) a downgrading
shall have occurred in the rating accorded the Company’s debt securities or
preferred stock by any “nationally recognized statistical rating organization,”
as that term is used by the Commission in Rule 15c3-1(c)(2)(vi)(F) under
the Exchange Act, or such organization shall have publicly announced that it
has under surveillance or review, with possible negative implications, its rating
of the Company’s debt securities or preferred stock, (ii) the Company
shall be unable to sell and deliver to the Purchaser at least $10,000,000
principal amount of Securities, (iii) the Company or any of its
subsidiaries that is an insurance
company shall cease to be “adequately-capitalized” under the statutes, rules,
regulations, codes or ordinances of any Regulatory Agency within the meaning of
any applicable regulations of any Regulatory Agency, or any formal
administrative or judicial action is taken by any appropriate state or federal
insurance regulator against the Company or any of its
subsidiary insurance companies for unsafe and unsound insurance practices, or
violations of law, (iv) a suspension or material limitation in trading in
securities generally shall have occurred on the New York Stock Exchange, (v) a
suspension or material limitation in trading in any of the Company’s securities
shall have occurred on the exchange or quotation system upon which the Company’s
securities are traded, if any, (vi) a general moratorium on commercial
insurance activities shall have been declared either by federal or Florida
authorities or (vii) there shall have occurred any outbreak or escalation
of hostilities, or declaration by the United States of a national emergency or
war or other calamity or crisis, the effect of which on financial markets is
such as to make it, in the Purchaser’s judgment, impracticable or inadvisable
to proceed with the offering or delivery of the Securities.


 


14





















 


10.           Representations and Indemnities to Survive. 
The respective agreements, representations, warranties, indemnities and
other statements of the Company or any of its officers or trustees and of the
Purchaser set forth in or made pursuant to this Purchase Agreement will remain
in full force and effect, regardless of any investigation made by or on behalf
of the Purchaser, the Company or any of their respective officers, directors,
trustees or controlling persons, and will survive delivery of and payment for
the Securities.  The provisions of Sections
7 and 8 shall survive the termination or cancellation of this
Purchase Agreement.


 


11.           Amendments. 
This Purchase Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement by
each of the parties hereto.


 


12.           Notices. 
All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Purchaser, will be mailed, delivered by hand or
courier or sent by facsimile and confirmed to the Purchaser c/o Dekania Capital
Management II, LLC, 1818 Market Street, 28th Floor, Philadelphia,
Pennsylvania 19103, Attention: Adam Schneider, Facsimile: (215) 861-7700; with
a copy to Mayer, Brown, Rowe & Maw LLP, 190 South LaSalle Street,
Chicago, Illinois 60603, Attention:  J.
Paul Forrester, Facsimile: (312) 701-7711, or other address as the Purchaser
shall designate for such purpose in a notice to the Company; and if sent to the
Company, will be mailed, delivered by hand or courier or sent by facsimile and
confirmed to it at AmCOMP Preferred
Insurance Company, 701 U.S.
Highway One, Suite 200, North Palm Beach, Florida 33408, Attention: Kumar Gursahaney, Facsimile: 
(561) 863-2646.


 


13.           Successors and Assigns.  This Purchase Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. 
Nothing expressed or mentioned in this Purchase Agreement is intended or
shall be construed to give any person other than the parties hereto and the
affiliates, directors, officers, employees, agents and controlling persons
referred to in Section 8 hereof and their successors, assigns,
heirs and legal representatives, any right or obligation hereunder.  None of the rights or obligations of the
Company under this Purchase Agreement may be assigned, whether by operation of
law or otherwise, without the Purchaser’s prior written consent.  The rights and obligations of the Purchaser
under this Purchase Agreement may be assigned by the Purchaser without the
Company’s consent; provided that
the assignee assumes the obligations of the Purchaser under this Purchase
Agreement.


 


14.           Applicable Law. 
THIS PURCHASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW).


 


15.           Submission to Jurisdiction. 
ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH
RESPECT TO OR ARISING OUT OF THIS PURCHASE AGREEMENT MAY BE BROUGHT IN OR
REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW
YORK, OR OF THE UNITED STATES OF AMERICA FOR THE


 


15





















 


SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN
THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS PURCHASE
AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND
COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS PURCHASE AGREEMENT.


 


16.           Counterparts and Facsimile. 
This Purchase Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.  This Purchase Agreement
may be executed by any one or more of the parties hereto by facsimile.


 


16





















 


IN WITNESS WHEREOF, this Purchase Agreement has been
entered into as of the date first written above.


 


 


	
   

  	
   

  	
  AMCOMP PREFERRED
  INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Debra C. Ruedisili

  
	
   

  	
   

  	
   

  	
  Name: Debra Cerre-Ruedisili

  
	
   

  	
   

  	
   

  	
  Title:President, Vice
  Chairman,

  Chief Operating Officer and Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEKANIA CDO II,
  LTD.,

  
	
   

  	
   

  	
  By:

  	
  Dekania Capital
  Management, LLC,

  as Collateral Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ James J. McEntee III

  
	
   

  	
   

  	
   

  	
    James J. McEntee III
  Chief Operating Officer

  



 


17





















 


SCHEDULE 1


 


List of
Significant Subsidiaries


 


AmCOMP
Assurance Corporation


 


18





















 


SCHEDULE 2(r)


 


During the
course of the Company’s current audit by its independent auditors for the years
ended December 31, 2003 and 2001 it was determined that certain
adjustments will be made to the Financial Statements.  The Company estimates that the impact of the
adjustments on the Financial Statements will be an increase of approximately
$1.2 million in stockholders equity at December 31, 2002.  This increase is primarily attributable to
adjustments of certain reinsurance related transactions.


 


19





















 


SCHEDULE 2(s)


 


During the
course of the Company’s current audit by its independent auditors for the years
ended December 31, 2003 and 2001, the Company determined that there were
certain adjustments to the Statutory Financial Statements.  The Company estimates that there will be a
reduction in statutory surplus of approximately $2.1 million in the aggregate
for the years 2001, 2002 and 2003.  The
decrease is primarily attributable to adjustments for certain reinsurance transactions,
an adjustment in a state assessment rate, and income tax adjustments.


 


20





















 


SCHEDULE 2(t)


 


The Company
has determined that included in the audit adjustments referenced in Schedule 2(s)
there are income tax adjustments of approximately $1.7 million in the aggregate
for the years ended 2001, 2002 and 2003. 
The majority of the adjustment is intercompany related and would be
eliminated on the Company’s consolidated audited financial statements for the
years ended December 31, 2003, 2002 and 2001.  In addition, the Company has determined that
there is an additional liability of approximately $1.3 million associated with
the reinsurance adjustment and a reduction in liabilities of approximately
$700,000 in expenses payable.


 


21





















 


SCHEDULE 2(v)


 


See
disclosures under Schedules 2(r), 2(s) and 2(t).


 


22





















 


SCHEDULE 4(j)


 


•                  The Company has
a credit facility with AmSouth Bank (“AmSouth”) which provides for aggregate
borrowing of $12.5 million (the “AmSouth Credit Facility”).  At December 31, 2003, the principal
balance of the AmSouth Credit Facility was $11,607,000.  The loan is collateralized by $25.5 million
of surplus notes issued by the Company or by its Significant Subsidiaries to
AmCOMP Incorporated and all of the outstanding stock of the Company.  The AmSouth Credit Facility contains various
restrictive covenants including provisions pertaining to levels of indebtedness.  The Company shall obtain the consent from
AmSouth with respect to the sale of the Securities.


 


•                  The issuance and
sale of the Securities is required to be approved by the Florida Office of
Insurance Regulation which approval was obtained on April 28, 2004.


 


23





















 


SCHEDULE 4(p)


 


•                  The Company,
AmCOMP Incorporated and AmCOMP Assurance Corporation (the “AmComp Parties”) are
defendants in identical actions commenced in Pennsylvania and Florida courts by
the Insurance Commissioner of Pennsylvania, acting in her capacity as
liquidator of Reliance Insurance Company. 
The complaints in those actions allege that preferential payments were
made by Reliance under the formerly existing reinsurance agreements with the
insurance subsidiaries and seeks damages in the amount of approximately $2.3
million.  The AmCOMP Parties have made
various motions addressed to these complaints and the time to answer the
complaints has not as yet expired.  The
AmCOMP Parties believe that they have a variety of factual and legal defenses
to the claim made in the actions.


 


24





















 


SCHEDULE 4(aa)


 


•                  The issuance and
sale of the Securities is required to be approved by the Florida Office of
Insurance Regulation which approval was obtained on April 28, 2004.


 


25





















 


ANNEX A-I


 


Pursuant to Section 3(c)(i) of the Purchase
Agreement, Olshan Grundman Frome Rosenzweig & Wolosky, LLP, counsel
for the Company, Foley & Lardner LLP, regulatory counsel, and Harris &
Helgeson, Florida counsel shall deliver opinions which collectively cover the
following matters:


 


(i)            the
Company and each Significant Subsidiary is validly existing as a stock
insurance company in good standing under the laws of the jurisdiction in which
it is chartered or organized; each of the Company and the Significant
Subsidiaries has full corporate power and authority to own or lease its
properties and to conduct its business as such business is currently conducted
in all material respects; all outstanding shares of capital stock of the
Significant Subsidiaries have been duly authorized and validly issued, and are
fully paid and nonassessable and owned of record and beneficially, directly or
indirectly by the Company; the Company has corporate power and authority to (i) execute
and deliver, and to perform its obligations under, the Operative Documents to
which it is a party and (iii) issue and perform its obligations under the
Securities;


 


(ii)           neither
the issue and sale of the Securities nor the execution and delivery of and
compliance with the Operative Documents by the Company nor the consummation of
the transactions contemplated thereby will constitute a breach or violation of
the charter or by-laws of the Company;


 


(iii)          the
Indenture has been duly authorized, executed and delivered by the Company and,
assuming the Indenture has been duly authorized, executed and delivered by the
Indenture Trustee, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally and to general principles of equity;


 


(iv)          the
Securities have been duly authorized and executed by the Company and delivered
to the Indenture Trustee for authentication in accordance with the Indenture
and, when authenticated in accordance with the provisions of the Indenture and
delivered to the Purchaser or its designee against payment therefor, will
constitute legal, valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable against the Company in accordance
with their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally and to general principles of equity;


 


(v)           the
Company is not and, following the issuance of the Securities and the
consummation of the transactions contemplated by the Operative Documents and
the application of the proceeds therefrom, the Company will not be, an “investment
company” or an entity “controlled” by an “investment company,” in each case
within the meaning of Section 3(a) of the Investment Company Act;


 


(vi)          assuming
that the Securities are sold in a manner contemplated by, and in accordance
with the Purchase Agreement, it is not necessary in connection with


 


A-I-1





















 


the
offer, sale and delivery of the Securities by the Company to the Purchaser, to
register any of the Securities under the Securities Act or to require
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended;


 


(vii)         the
Purchase Agreement has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and to general principles of equity;


 


(viii)        [Reserved];


 


(ix)           to
the best of our knowledge, neither the Company nor any Significant Subsidiaries
of the Company are in breach or violation of, or default under, with or without
notice or lapse of time or both, its articles of incorporation or charter,
by-laws or other governing documents; the execution, delivery and performance
of the Operative Documents and the consummation of the transactions
contemplated by the Purchase Agreement and the Operative Documents do not and
will not (A) result in the creation or imposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the Company
or the Significant Subsidiaries, or (B) conflict with, constitute a
material breach or violation of, or constitute a material default under, with
or without notice or lapse of time or both, any of the terms, provisions or
conditions of (x) the Articles of Incorporation or Charter, By-Laws or other
governing documents of the Company or its Significant Subsidiaries, or (y) to
the best of our knowledge, any material contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease, franchise, license or any other
agreement or instrument to which the Company or its Significant Subsidiaries is
a party or by which any of them or any of their respective properties may be
bound or (z) any order, decree, judgment, franchise, license, permit, rule or
regulation of any court, arbitrator, government, or governmental agency or
instrumentality, domestic or foreign, known to us having jurisdiction over the
Company or its Significant Subsidiaries or any of their respective properties
which, in the case of each of (A) or (B) above, is material to the
Company and the Significant Subsidiaries on a consolidated basis; and


 


(x)            except for filings,
registrations or qualifications that may be required by applicable securities
laws and except as set forth on Schedule 4(j), no authorization,
approval, consent or order of, or filing, registration or qualification with,
any person (including, without limitation, any court, governmental body or
authority) is required under the laws of the State of Florida in connection
with the transactions contemplated by the Operative Documents in connection
with the offer and sale of the Securities as contemplated by the Operative
Documents, except as have already been obtained.


 


A-I-2





















 


ANNEX A-II


 


Pursuant to Section 3(c)(ii) of the Purchase
Agreement, the Company shall provide an Officers’ Certificate, to the effect
that:


 


(i)            all
of the issued and outstanding shares of capital stock of each Significant
Subsidiary are owned of record by the Company, and the issuance of the
Securities is not subject to any contractual preemptive rights known to such [counsel/officer];


 


(ii)           no
consent, approval, authorization or order of any court or governmental
authority is required for the issue and sale of the Securities, the execution
and delivery of and compliance with the Operative Documents by the Company or
the consummation of the transactions contemplated in the Operative Documents,
except such approvals (specified in such certificate) as have been obtained;


 


(iii)          to
the best of our knowledge, except as set forth on Schedule 4(p) to
the Purchase Agreement, (A) no action, suit or proceeding at law or in
equity is pending or threatened to which the Company or the Significant
Subsidiaries are or may be a party, and (B) no action, suit or proceeding
is pending or threatened against or affecting the Company or the Significant
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Operative Documents or the issuance and
sale of the Securities, as contemplated therein, or the condition (financial or
otherwise), earnings, affairs, business, or results of operations of the
Company and the Significant Subsidiaries on a consolidated basis;


 


(iv)          the
Company is duly registered as a stock insurance company under the [state regulatory
statute] of [state of domicile] and the regulations thereunder of the [state regulatory agency], and the capital
reserves accounts of the Company and its insurance subsidiaries are in
compliance with all applicable regulatory authorities with jurisdiction over
such entities;


 


(v)           the
execution, delivery and performance of the Operative Documents by the Company and
the consummation by the Company of the transactions contemplated by the
Operative Documents, (a) will not result in any violation of the charter
or bylaws of the Company or the charter or bylaws of its subsidiaries, and (b) will
not conflict with, or result in a breach of any of the terms or provisions of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the creation or
imposition of any lien, charge and encumbrance upon any assets or properties of
the Company or any Significant Subsidiary under, (x) any agreement, indenture,
mortgage or instrument that the Company or any Significant Subsidiary is a
party to or by which it may be bound or to which any of its assets or properties
may be subject, or (y) any existing applicable law, rule or administrative


 


A-II-1





















 


regulation
of any court or governmental agency or authority having jurisdiction over the
Company or any Significant Subsidiary or any of their respective assets or
properties, except in case of (b), where any such violation, conflict, breach,
default, lien, charge or encumbrance, would not have a material adverse effect
on the assets, properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as whole; and


 


(vi)          to the best of our
knowledge, neither the Company nor any of its “Affiliates” (as defined in Rule 501(b) of
Regulation D under the Securities Act (“Regulation D”) has, directly or
indirectly, made offers or sales of any security, or solicited offers to buy
any security, under circumstances that would require the registration of any of
the Securities being issued pursuant to this transaction under the Securities Act,
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of any of the
Securities, or engaged, nor will engage, in any “directed selling efforts”
within the meaning of Regulation S under the Securities Act with respect to the
Securities.


 


A-II-2





















 


ANNEX B


 


Pursuant to Section 3(d) of the Purchase
Agreement, Mayer, Brown, Rowe & Maw LLP, special tax counsel for the
Purchaser, shall deliver an opinion to the effect that, for United States
federal income tax purposes, the Securities will constitute indebtedness of the
Company.


 


In rendering such opinions, such counsel may (A) state
that its opinion is limited to the federal laws of the United States and (B) rely
as to matters of fact, to the extent deemed proper, on certificates of
responsible officers of the Company and public officials.


 


B-1





















 


ANNEX C


 


Pursuant to Section 3(e) of the Purchase
Agreement, Gardere Wynne Sewell LLP, special counsel for the Indenture Trustee,
shall deliver an opinion to the effect that:


 


(i)                                     JPMorgan
Chase Bank is a banking corporation with trust powers, duly and validly
existing under the laws of the State of New York, with corporate power and
authority to execute, deliver and perform its obligations under the Indenture
and to authenticate and deliver the Securities, and is duly eligible and
qualified to act as Trustee under the Indenture pursuant to Section 6.1;


 


(ii)                                  The
Indenture has been duly authorized, executed and delivered by JPMorgan Chase
Bank and constitutes the valid and binding obligation of JPMorgan Chase Bank,
enforceable against it in accordance with its terms except (A) as may be
limited by bankruptcy, fraudulent conveyance, fraudulent transfer, insolvency,
reorganization, liquidation, receivership, moratorium or other similar laws now
or hereafter in effect relating to creditors’ rights generally, and by general
equitable principles, regardless of whether considered in a proceeding in
equity or at law and (B) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought;


 


(iii)                               Neither the execution or
delivery by JPMorgan Chase Bank of the Indenture, the authentication and
delivery of the Securities by JPMorgan Chase Bank pursuant to the terms of the
Indenture, nor the performance by JPMorgan Chase Bank of its obligations under
the Indenture (A) requires the consent or approval of, the giving of
notice to or the registration or filing with, any governmental authority or
agency under any existing law of the State of New York governing the banking or
trust powers of JPMorgan Chase Bank or (B) violates or conflicts with the
Restated Organization Certificate or By-laws of JPMorgan Chase Bank or any law
or regulation of the State of New York governing the banking or trust powers of
JPMorgan Chase Bank;


 


(iv)                              the
Securities have been duly authenticated and delivered by JPMorgan Chase Bank.


 


In rendering such opinions, such counsel may (A) state
that its opinion is limited to the laws of the State of New York and (B) rely
as to matters of fact, to the extent deemed proper, on certificates of
responsible officers of JPMorgan Chase Bank, the Company and public officials.


 


C-1





















 


ANNEX D


 


Officer’s
Financial Certificate


 


The undersigned, the [Chairman/Vice Chairman/Chief
Executive Officer/President/Vice President] [Chief Financial
Officer/Treasurer/Assistant Treasurer], hereby certifies, pursuant to Section 6(h) of
the Purchase Agreement, dated as of April 29, 2004, between AmCOMP
Preferred Insurance Company (the “Company”) and Dekania CDO II, Ltd., that, as
of [date], [20    ], the Company had the following ratios
and balances:


 


[For each
subsidiary insurance company provide:]


 


[INSURANCE
COMPANY]


As of [Quarterly/Annual
Financial Dates]


 


 


	
  NAIC
  Risk-Based Capital Ratio (authorized control level)

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Policyholders’ Surplus

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Consolidated
  Debt to Total Policyholders’ Surplus

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Assets

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NAIC
  Class 1 & 2 Rated Investments to Total Fixed Income Investments

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  NAIC
  Class 1 & 2 Rated Investments to Total Investments

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Return on
  Policyholders’ Surplus

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  [For Property & Casualty Companies
  also provide:]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [Expense Ratio]

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Loss and LAE Ratio

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Combined Ratio

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Premiums Written (annualized) to Policyholders’ Surplus

  	
   

  	
   

  	
  %

  



 










* A table describing the quarterly report calculation
procedures is provided on page 


 


[FOR FISCAL YEAR END:  Attached hereto are the audited consolidated
financial statements (including the balance sheet, income statement and
statement of cash flows, and notes thereto, together with the report of the
independent accountants thereon) of the Company and its consolidated
subsidiaries for the three years ended [date], [20    ],  and all required Statutory Financial
Statements (as defined in the Purchase Agreement) of the Company and its
subsidiaries for the year ended [date], [20    ].


 


D-1





















 


[FOR FISCAL QUARTER END:  Attached
hereto are the unaudited consolidated and consolidating financial statements
(including the balance sheet and income statement) of the Company and its
consolidated subsidiaries and all required Statutory Financial Statements (as
defined in the Purchase Agreement) of the Company and its subsidiaries for the
year ended [date], [20   ] for the fiscal quarter ended [date],
[20   ].


 


The financial statements fairly present in all
material respects, in accordance with U.S. generally accepted accounting
principles (“GAAP”), the financial position of the Company and its consolidated
subsidiaries, and the results of operations and changes in financial condition
as of the date, and for the [       
quarter interim] [annual] period ended [date], 20   , and such financial statements
have been prepared in accordance with GAAP consistently applied throughout the
period involved (expect as otherwise noted therein).


 


The above referenced financial statements fairly
present in all material respects in accordance with Applicable Accounting
Principles as defined in the Indenture) the financial position of the subject
insurance company and have been prepared in accordance with Applicable
Accounting Principles.


 


IN WITNESS WHEREOF, the undersigned has executed this
Officer’s Financial Certificate as of this        
day of
                ,
20


 


 


	
   

  	
  AmCOMP
  Preferred Insurance Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Its:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AmCOMP
  Preferred Insurance Company

  
	
   

  	
  P.O. Box
  88806

  
	
   

  	
  North Palm
  Beach, Florida 33408

  
	
   

  	
  (561)
  863-2616

  



 


D-2





















 


ANNEX D


 


Definitions for Officer’s Financial
Certificate


 


	
  ITEM

  	
   

  	
  Definition/Formula

  
	
  NAIC Risk Based Capital Ratio-P&C

  	
   

  	
  (Total
  Adjusted Capital/Authorized Control Level Risk-Based Capital)/2

  
	
  NAIC Risk Based
  Capital Ratio-Life

  	
   

  	
  ((Total
  Adjusted Capital-Asset Valuation Reserve)/Authorized Control Level Risk-Based
  Capital)/2

  
	
  Total Capital
  and Surplus-Life

  	
   

  	
  Common Capital Stock + Preferred Capital Stock +
  Aggregate Write-Ins for other than special surplus funds + Surplus Notes
  +Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for Special
  Surplus Funds + Unassigned Funds (Surplus) — Treasury Stock

  
	
  Total Capital
  and Surplus-P&C

  	
   

  	
  Aggregate Write-Ins for Special Surplus Funds +
  Common Capital Stock + Preferred Capital Stock + Aggregate Write Ins for
  other than special surplus funds + Surplus Notes +Gross Paid-In and
  Contributed Surplus + Unassigned Funds (Surplus) — Treasury Stock

  
	
  Total
  Class 1 & 2 Rated Investments to Total Fixed Income Investments

  	
   

  	
  (Total Class 1 + Total Class 2 Rated
  Investments)/Total Fixed Income Investments

  
	
  Total
  Class 1 & 2 Rated Investments to Total Investments

  	
   

  	
  (Total Class 1 + Total Class 2 Rated
  Investments)/Total Investments

  
	
  Total Assets

  	
   

  	
  Total Assets

  
	
  Return on
  Policyholders’ Surplus

  	
   

  	
  Net Income/Policyholders’ Surplus

  
	
  Expense Ratio

  	
   

  	
  Other Underwriting Expenses Incurred/Net premiums
  Earned

  
	
  Loss and LAE
  Ratio

  	
   

  	
  (Losses Incurred + Loss Expenses Incurred)/Net
  Premiums Earned

  
	
  Combined Ratio

  	
   

  	
  Expense Ratio + Loss and LAE Ratio

  
	
  Net Premiums
  Written (annualized) to Policyholders’ Surplus

  	
   

  	
  Net Premiums Written/Policyholders’ Surplus

  



 


F-1