S-1/A

As filed with the Securities and Exchange Commission on January 17, 2013

Registration No.: 333-183276

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pre-Effective Amendment No. 3 to

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

ATLAS FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Cayman Islands	6331	27-5466079
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

150 NW Point Boulevard

Elk Grove Village, IL 60007

(847) 472-6700

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Scott D. Wollney

President, Chief Executive Officer and Director

Atlas Financial Holdings, Inc.

150 NW Point Boulevard

Elk Grove Village, IL 60007

(847) 472-6700

(Name, address, including zip code, and telephone number, including

area code, of agent for service)

Copies to:

Douglas S. Ellenoff, Esq.	Brian J. Fahrney, Esq.
Adam S. Mimeles, Esq.	Sean M. Carney, Esq.
Ellenoff Grossman & Schole LLP	Sidley Austin LLP
150 East 42nd Street	One South Dearborn Street
New York, New York 10017	Chicago, Illinois 60603
(212) 370-1300	(312) 853-7000
(212) 370-7889 - Facsimile	(312) 853-7036 - Facsimile

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of the registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [  ]

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price per Ordinary Share			Proposed Maximum Aggregate Offering Price		Amount of Registration Fee (5)
Ordinary shares, $.003 par value (1)(2) (3) (4)	5,324,500	$	6.15	$	32,745,675	$	4,466.51

(1)	Pursuant to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(2)	Includes those shares being registered on behalf of Kingsway America Inc.
(3)	The 3,130,000 restricted voting shares sold by Kingsway America Inc. convert automatically into ordinary shares upon the sale contemplated by this registration statement.
(4)	Includes ordinary shares that the underwriter has the option to purchase to cover over-allotments, if any.
(5)	$4,604.78 previously paid.

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

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Preliminary Prospectus Dated January 17, 2013

4,630,000 Ordinary Shares

This is the initial public offering in the United States of the ordinary shares of Atlas Financial Holdings, Inc.

An aggregate of 4,630,000 shares are being offered in this prospectus. We are offering 1,500,000 of our ordinary shares and the selling shareholder named in this prospectus is offering 3,130,000 of our ordinary shares. We will not receive any proceeds from the sale of the ordinary shares being offered by the selling shareholder. To date, our ordinary shares have been exclusively listed on the TSX Venture Exchange (“TSXV”) under the symbol “AFH.” We have applied to have our ordinary shares listed for trading on the Nasdaq Capital Market, or NASDAQ, under the symbol “AFH.”

As of January 17, 2013, the last reported sale price of our ordinary shares on the TSXV was C$[•] (or $[•], based on assumed exchange rate of C$[•] per $1 U.S.).

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our ordinary shares involves a high degree of risk. See “Risk Factors” beginning on page 10 of this prospectus for certain risk factors that you should consider before making a decision to invest in our ordinary shares.

		Per Share		Total
Initial public offering price	$		$
Underwriting discounts, and commissions (1)	$		$
Proceeds, before expenses, to Atlas Financial Holdings, Inc.	$		$
Proceeds, before expenses, to selling shareholder	$		$

(1) See “” beginning on page 91 for disclosure regarding the underwriting discounts and certain expenses payable to the underwriters by us.

We have granted the underwriters a 30-day option to purchase up to an additional 694,500 ordinary shares from us at the public offering price, less the underwriting discount specified above, to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Sandler O’Neill + Partners, L.P., on behalf of the underwriters, expects to deliver the shares to purchasers against payment on or about , 2013

SANDLER O’NEILL + PARTNERS, L.P.

CANACCORD GENUITY

The date of this Prospectus is  , 2013

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Summary Consolidated Financial Data	8
Risk Factors	10
Cautionary Note Regarding Forward-Looking Statements	25
Use of Proceeds	26
Dividend Policy	26
Dilution	27
Selling Shareholder	28
Market for Common Equity and Related Shareholder Matters	29
Capitalization	30
Unaudited Pro Forma Consolidated Financial Data	31
Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Business	60
Management	68
Executive Compensation	73
Beneficial Ownership of Ordinary Shares and Selling Shareholder	78
Certain Relationships and Related Party Transactions	80
Description of Securities	82
U.S. Tax Considerations	87
Underwriting	91
Shares Eligible for Future Sale	94
Legal Matters	95
Experts	95
Where You Can Find Additional Information	95
Index to Financial Statements	96

You should rely only on the information contained in this prospectus. Neither we nor the underwriters have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the underwriters are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operation and prospects may have changed since that date.

We use market data, demographic data, industry forecasts and projections throughout this prospectus. We have obtained certain market and industry data from publicly available industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on historical market data, and there is no assurance that any of the projected amounts will be achieved. We believe that the market and industry research others have performed are reliable, but we have not independently verified this information.

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PROSPECTUS SUMMARY

Our Business

We are a financial services holding company incorporated under the laws of the Cayman Islands. Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector, which is carried out through our insurance subsidiaries, American Country Insurance Company, or American Country, and American Service Insurance Company, Inc., or American Service, together with American Country, which we refer to as our “insurance subsidiaries”. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business auto. Our goal is to be the preferred specialty commercial transportation insurer in any geographic areas where our value proposition delivers benefit to all stakeholders.

We were formed as JJR VI, a Canadian capital pool company, on December 21, 2009 under the laws of Ontario, Canada. On December 31, 2010, we completed a reverse merger wherein American Service and American Country were transferred to us by Kingsway America Inc., or KAI, a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a Canadian public company whose shares are traded on the Toronto and New York Stock Exchanges. Prior to the transaction, each of American Service and American Country were wholly owned subsidiaries of KAI. American Country commenced operations in 1979. With roots dating back to 1925 selling insurance for taxi cabs, American Country is one of the oldest insurers of U.S. taxi and livery business. In 1983, American Service began as a non-standard personal and commercial auto insurer writing business in the Chicago, Illinois area.

In connection with the acquisition of American Service and American Country, we streamlined the operations of the insurance subsidiaries to focus on the “light” commercial automobile lines of business we believe will produce favorable underwriting results. Over the past two years, we have disposed of non-core assets and placed into run-off certain non-core lines of business previously written by the insurance subsidiaries. Our focus going forward is the underwriting of commercial automobile insurance in the U.S.

Substantially all of our new premiums written are in “light” commercial automobile lines of business. Our core commercial automobile line of business accounted for 92.6% of our gross premium written in the nine month period ended September 30, 2012, compared with 44.0% of our gross premium written in the nine month period ended September 30, 2011. For the same period, the gross premium written from our core commercial automobile line of business increased by 183% relative to the nine month period ended September 30, 2011.

We are committed to the “light” commercial automobile lines of business. The insurance subsidiaries distribute their products through a network of independent retail agents, and actively wrote insurance in 31 states as of September 30, 2012. Together, American Country and American Service are licensed to write property and casualty, or P&C, insurance in 47 states in the United States. American Country and American Service actively wrote commercial automobile insurance in more states during 2012 than in any prior year.

Market

Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector. The “light” commercial automobile policies we underwrite provide coverage for lightweight commercial vehicles typically with the minimum limits prescribed by statute, municipal or other regulatory requirements. The majority of our policyholders are individual owners or small fleet operators.

The “light” commercial automobile sector is a subset of the historically profitable commercial automobile insurance industry segment. Commercial automobile insurance has outperformed the overall P&C industry in each of the past ten years based on data compiled by A.M. Best & Company, or A.M. Best, an established credit rating organization exclusively serving the insurance industry. A recent survey by A.M. Best estimates the total market for commercial automobile liability insurance to be $24 billion. The size of the commercial automobile insurance market can be affected significantly by many factors, such as the underwriting capacity and underwriting criteria of automobile insurance carriers and general economic conditions. Historically, the commercial automobile insurance market has been characterized by periods of price competition and excess capacity followed by periods of higher premium rates and shortages of underwriting capacity.

We believe there is a positive correlation between the economy and commercial automobile insurance in general. Operators of “light” commercial automobiles may be less likely than other business segments within the commercial automobile insurance market to take vehicles out of service as their businesses and business reputations rely heavily on availability. With respect to

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certain business lines such as the taxi line, there are also other factors such as the cost and limited supply of medallions which may discourage a policyholder from taking vehicles out of service in the face of reduced demand for the use of the vehicle.

Competitive Strengths

Our value proposition is driven by our competitive strengths, which include the following:

Focus on niche commercial insurance business. We target niche markets that support adequate pricing and believe we are able to adapt to changing market needs ahead of our competitors through our strategic focus and increasing scale. We develop and deliver superior specialty commercial automobile insurance products priced to meet our customers’ needs and strive to generate consistent underwriting profit for our insurance subsidiaries. We have experienced a favorable trend in loss ratios in 2012 attributable to the increased composition of commercial auto as a percentage of the total written premium. We expect the loss ratio to continue decreasing as we complete the transition away from non-standard automobile insurance and other non-core lines of business.

Strong market presence with recognized brands and long-standing distribution relationships. American Country and American Service have a long heritage as insurers of taxi, livery and para-transit businesses. Both of the insurance subsidiaries have strong brand recognition and long-standing distribution relationships in our target markets. Through regular interaction with our retail producers, we strive to thoroughly understand each of the markets we serve in order to deliver strategically priced products to the right market at the right time.

Sophisticated underwriting and claims handling expertise. Atlas has extensive experience and expertise with respect to underwriting and claims management in our specialty area of insurance. Our well-developed underwriting and claims infrastructure includes an extensive data repository, proprietary technologies, deep market knowledge and established market relationships. Analysis of the substantial data available through our operating companies drives our product and pricing decisions. We believe that our underwriting and claims handling expertise provides enhanced risk selection, high quality service to our customers and greater control over claims expenses. We are committed to maintaining this underwriting and claims handling expertise as a core competency as our volume of business increases.

Scalable operations positioned for growth. Significant progress has also been made in aligning our cost base to our expected revenue going forward. The core functions of the insurance subsidiaries were integrated into a common operating platform. Consequently, we believe that both insurance subsidiaries are well positioned to begin returning to the volume of premium they wrote in the recent past with better than industry level profitability from the efficient operating infrastructure honed in 2011.

Experienced management team. We have a talented and experienced management team led by our President and Chief Executive Officer, Scott Wollney, who has more than 21 years of experience in the property and casualty insurance industry. Our senior management team has worked in the property and casualty industry for an average of 21 years and with the insurance subsidiaries, directly or indirectly, for an average of 12 years.

Strategy

We seek to deploy our capital to maximize the return for our shareholders, either by investing in growing our operations or by pursuing other capital initiatives, depending upon insurance and capital market conditions. We focus on our key strengths and seek to expand our geographic footprint and products only to the extent these activities support our vision and mission. We will identify and prioritize market expansion opportunities based on the comparative strength of our value proposition relative to competitors, the market opportunity and the legal and regulatory environment.

We intend to continue to grow profitably by undertaking the following:

Re-establish legacy distribution relationships. We are focused on re-establishing relationships with independent agents that have been our distribution partners in the past. We seek to develop and maintain strategic distribution relationships with a relatively small number of independent agents, with substantial market presence, in each state in which we currently operate. We expect to continue to increase the distribution of our core products in the states where we are actively writing insurance and re-capture insurance premium historically written by the insurance subsidiaries.

Expand our market presence. We are committed to continuing to diversify geographically by leveraging our experience, historical data and market research to expand our business in previously untapped geographic markets. Utilizing our established brands and market relationships we have made significant inroads in new states where we had no presence in 2011. We will

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continue to expand into additional states where we are licensed, but not currently active, and states where we are not currently licensed to the extent that our market expansion criteria is met in a given state.

Acquire complementary books of business and insurance companies. We plan to opportunistically pursue acquisitions of complementary books of business and insurance companies provided market conditions support this activity. We will evaluate each acquisition opportunity based on its expected economic contribution to our results and support of our market expansion initiatives.

Our Challenges

As part of your evaluation of our business, you should take into account the challenges we face in implementing our strategies, including the following:

Estimating Our Loss Reserves. We maintain loss reserves to cover our estimated ultimate liability for unpaid losses and loss adjustment expenses for reported and unreported claims incurred as of the end of each accounting period. These reserves represent management’s estimates of what the ultimate settlement and administration of claims will cost. Pursuant to applicable insurance regulations, these reserves are reviewed by an independent actuary on an annual basis. Setting reserves is inherently uncertain and there can be no assurance that current or future reserves will prove adequate. If our loss reserves are inadequate, it will have an unfavorable impact on our results. A summary of the favorable and unfavorable developments in our loss reserves in the previous 10-year period is on page 57.

Reliance on Independent Agents. We rely on independent agents and other producers to bind insurance policies and collect premiums. We have very limited oversight over these agents and other producers and in the event an independent agent exceeds their authority by binding us to a risk that does not comply with our underwriting guidelines or fails to collect or remit premiums to us, our results of operations could be adversely affected.

Maintaining Our Financial Strength Ratings. In January 2012, A.M. Best affirmed the financial strength rating of “B” to our insurance subsidiaries. To maintain these ratings, our insurance company subsidiaries must maintain their capitalization and operating performance at a level consistent with projections provided to A.M. Best, as well as satisfy various other rating requirements. If A.M. Best downgrades our ratings, it is likely that we will not be able to compete as effectively and our ability to sell insurance policies could decline. As a result, our financial results would be adversely affected.

Attracting, Developing and Retaining Experienced Personnel. To sustain our growth as a property and casualty insurance company operating in specialty and niche markets, we must continue to attract, develop and retain management, marketing, distribution, underwriting, customer service and claims personnel with expertise in the products we offer. The loss of key personnel, or our inability to recruit, develop and retain additional qualified personnel, could materially and adversely affect our business, growth and profitability.

For further discussion of these and other challenges, see “Risk Factors.”

2012 Third Quarter Financial Results

On November 12, 2012 we announced our 2012 third quarter financial results. Our third quarter financial results reflect our strategic focus on specialty commercial automobile lines of insurance and the winding down of certain non-core lines of business.

Gross premium written related to our core commercial automobile line of business was $22.1 million in the three month period ended September 30, 2012, representing a 313.4% increase relative to the three month period ended September 30, 2011. The increase in our commercial auto gross premium written was a result of the strategic focus on these core lines of business coupled with our recent geographic expansion and positive response from new and existing agents. The increase was also the result of a new business arrangement in New York to provide excess coverage for taxis above the levels of risk retained by the insured that was implemented in the third quarter.

Our combined ratio for the three month period ended September 30, 2012 improved to 97.6%, compared to 119.7% for the three month period ended September 30, 2011 and 111.5% for the three month period ended June 30, 2012. The improvement in the combined ratio was attributable to reductions in the loss ratio, acquisition cost ratio and other underwriting expense ratio. These reductions were primarily due to the shift away from non-core lines of business and several recent cost saving initiatives.

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Our basic and diluted earnings per common share in the three month period ended September 30, 2012 was $0.24. Book value per basic and diluted common share at September 30, 2012 was $6.46, an increase of $0.30 compared to June 30, 2012. This resulted in an annualized return on common equity of 15.0% for the three month period ended September 30, 2012.

For further discussion of our 2012 third quarter financial results, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Recent Developments

Reverse Stock Split

On December 7, 2012, we held a shareholder meeting where a one-for-three reverse stock split was unanimously approved. When the reverse stock split takes effect, it will decrease our authorized and outstanding ordinary shares and restricted voting shares at a ratio of one-for-three. The primary objective of the reverse stock split is to increase the per share price of our ordinary shares to meet certain listing requirements of the NASDAQ Capital Market. Unless otherwise noted, all share and per share values in this prospectus reflect the one-for-three reverse stock split.

Acquisition of Gateway Insurance Company

On January 2, 2013 we acquired Camelot Services, Inc., or Camelot Services, a privately owned insurance holding company, and its sole subsidiary, Gateway Insurance Company, or Gateway, from Hendricks Holding Company, Inc., or Hendricks, an unaffiliated third party. Gateway provides specialized commercial insurance products, including commercial automobile insurance to niche markets such as taxi, black car and sedan service owners and operators.

Gateway is a St. Louis, Missouri-based insurance company that currently underwrites approximately $10.0 million of annual taxi and limousine net written premium. Gateway is an admitted carrier in 46 states plus the District of Columbia. Our acquisition of Gateway expanded our core commercial automobile lines to a total of 39 states and the District of Columbia, including California, Hawaii, Montana, Nebraska, North Dakota, South Dakota, Washington and West Virginia.

Under the terms of the stock purchase agreement, the purchase price equaled the tangible GAAP book value of Camelot Services at December 31, 2012, subject to certain pre and post-closing adjustments, including, among others, claim development between the signing of the stock purchase agreement and December 31, 2012. Additional consideration may be paid to the seller, or returned to us by the seller, depending upon, among other things, the future development of Gateway’s actual loss reserves for certain lines of business and the utilization of certain deferred tax assets over time. Gateway also writes workers’ compensation insurance, which was terminated as part of the transaction. An indemnity reinsurance agreement was entered into pursuant to which 100% of Gateway’s workers’ compensation business was ceded to a third party captive reinsurer funded by the seller as part of the transaction.

The total purchase price for all of Camelot’s outstanding shares was $14.9 million, consisting of a combination of cash and Atlas preferred shares. Consideration consisted of a $6.0 million dividend paid by Gateway immediately prior to the closing, $2.0 million of Atlas preferred shares (consisting of a total of 2 million shares) and $6.9 million in cash. Under the terms of the stock purchase agreement, the closing price was reduced due to reserve strengthening of approximately $8.0 million that Camelot Services recognized prior to closing. Approximately $4.3 million of this reserve strengthening was related to commercial automobile reserves, a portion of which was related to the long-haul truck program that is currently in run off. The amount of pre-closing reserve strengthening was consistent with the conclusions of an independent actuarial analysis of the reserves of Gateway. In addition to this pre-closing reserve strengthening, we have contractual protections to offset up to $2.0 million of future reserve development. We have also agreed to provide the sellers up to $2.0 million in additional consideration in the event of favorable reserve development.

2012 Fourth Quarter Premium

We have not yet finalized our financial statement close process for the three month period ended December 31, 2012 and our independent auditors have not yet completed their year-end audit. The financial data for the three month period ended December 31, 2012 presented below are preliminary, based upon our estimates and subject to the completion of our financial statement close process and year-end audit. This summary is not a comprehensive statement of our financial results for this period. Important factors that could cause actual results to differ materially from our preliminary estimates are set forth under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our consolidated financial statements as of and for the year ended December 31, 2012 will not be available until after this offering is completed, and consequently, will not be available to you prior to investing in this offering.

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Gross premium written for the three months ended December 31, 2012 is expected to be approximately $10.7 million, representing a 17.8% increase relative to the three month period ended December 31, 2011. The expected increase in our gross premium written as compared to the prior year is primarily attributable to an increase in our commercial auto gross premium written as a result of the strategic focus on these core lines of business, coupled with our recent geographic expansion and positive response from new and existing agents. Gross premium written related to our core commercial automobile line of business is expected to be approximately $9.5 million for the three month period ended December 31, 2012, representing a 121.7% increase relative to the three month period ended December 31, 2011. Gross premium written for the three months ended December 31, 2012 is expected to be 54.2% less than the prior quarter due to the seasonal nature of our business.

Net premium earned for the three months ended December 31, 2012 is expected to be approximately $11.9 million, representing a 31.2% increase relative to the three month period ended December 31, 2011 and a 9.0% increase relative to the prior quarter. The expected increase in net premium earned is related primarily to the increase in commercial auto gross premium written during 2012.

For the full year, gross premium written is expected to be approximately $55.0 million, up from $42.0 million in 2011, and net premium earned is expected to be approximately $38.7 million, up from $35.7 million in 2011. We expect our core commercial automobile lines of business will account for 91.8% of gross premium written in 2012, compared to 44.7% of our gross premium written in 2011. In 2012, the gross premium written from our core commercial automobile lines is expected to increase by 169.0% relative to 2011.

Corporate Information

The address of our registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Our operating headquarters are located at 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, USA. We maintain a website at http://www.atlas-fin.com. Information on our website or any other website does not constitute a part of this prospectus.

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The Offering

Ordinary shares offered by Atlas	1,500,000 shares
Ordinary shares offered by selling shareholder	3,130,000 shares
Total offering	4,630,000 shares
Ordinary shares outstanding prior to this offering	6,144,390 shares(1)
Ordinary shares outstanding after this offering	7,644,390 shares
Over-allotment option	The underwriters have an option to purchase a maximum of 694,500 additional shares from us to cover over-allotments. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds	We estimate that our net proceeds from the sale of the ordinary shares that we are offering will be approximately $[•] million, based on an assumed offering price of $[•] per share (the U.S. dollar equivalent of the last reported sale price of our ordinary shares on the TSXV based on an assumed exchange rate of C$[•] per $1 U.S.), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of ordinary shares being offered by the selling shareholder. The principal purposes of our initial offering in the United States are to create a public market for our ordinary shares in the United States and thereby enable future access to the United States public equity markets by us and our shareholders, and to obtain additional capital. We intend to use the net proceeds to us from our offering for working capital, to acquire complementary businesses or other assets, to repurchase preferred shares, which accrue dividends on a cumulative basis at a rate of $0.045 per share per year (4.5%), or for other general corporate purposes; however we do not have any specific uses of the net proceeds planned. See “Use of Proceeds”
Dividend Policy	We did not declare or pay cash dividends on our capital stock during 2010, 2011, 2012 or to date in 2013. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant.
Proposed NASDAQ Trading Symbol	We have applied for listing of our ordinary shares on the NASDAQ Capital Market (“NASDAQ”) under the symbol “AFH.”
TSX Venture Exchange Symbol	“AFH”
Risk factors	Investing in our ordinary shares involves substantial risk. You should carefully consider all the information in this prospectus prior to making a decision to invest in our ordinary shares. In particular, we urge you to consider carefully the factors set forth in the section of this prospectus entitled “Risk Factors” beginning on page 10.

(1) Ordinary shares outstanding prior to this offering includes 3,887,469 restricted voting shares owned by Kingsway America Inc. or their wholly owned subsidiaries, which automatically convert into ordinary shares upon sale pursuant hereto.

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Unless otherwise indicated, all information in this prospectus relating to the number of ordinary shares to be outstanding immediately after the completion of this offering:

• excludes 1,327,834 ordinary shares issuable pursuant to warrants, all of which are exercisable within sixty days of the date hereof, 225,617 options, 103,138 of which are exercisable within sixty days of the date hereof, and 2,540,000 ordinary shares issuable upon conversion of 20,000,000 non-voting preferred shares outstanding as of the date hereof (based upon a conversion rate of 0.1270 as of the date hereof);

• includes 757,469 restricted voting common shares that will remain issued and outstanding following completion of this offering, assuming the sale of all shares offered by the selling shareholder under this prospectus, which rank equally with the ordinary shares as to dividends;

• assumes no exercise by the underwriter of its option to purchase up to 694,500 additional shares from us; and

• reflects the one-for-three reverse stock split to be effected prior to the offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated financial data. We have derived the unaudited quarterly results for the years 2010 and 2011 from our audited consolidated financial statements for those years included elsewhere in this prospectus. The consolidated statements of income data for the nine months ended September 30, 2012 have been derived from our unaudited consolidated financial statements for that period appearing elsewhere in this prospectus. The data for the first and second quarters of 2012 were derived from our unaudited consolidated financial statements for those periods, which are not part of this prospectus. In our opinion, such financial statements include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of our results in any future period. The summary of our consolidated financial data set forth below should be read together with our consolidated financial statements and the related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus.

(in ‘000s, except per share data)
	2012								2011												2010
	Q3		Q2			Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Gross Premium Written	$	23,353	$	9,242		$	11,754		$	9,081		$	10,928		$	7,856		$	14,166		$	9,273		$	10,163		$	8,558		$	18,704
Net Premium Earned	10,934		7,552			8,310			9,079			8,797			9,062			8,809			11,595			10,192			12,515			19,301
Underwriting income/(loss)	264		(868		)	(617		)	(6,325		)	(1,729		)	(1,278		)	(1,906		)	(4,723		)	(2,393		)	(12,805		)	(4,061		)
Net income/(loss) attributable to Atlas	1,657		130			135			(3,024		)	1,066			193			(705		)	(11,430		)	(664		)	(8,135		)	(1,583		)
Net income/(loss) attributable to common shareholders(1)	1,455		(72		)	(64		)	(3,228		)	862			(9		)	(905		)	(11,430		)	(664		)	(8,135		)	(1,583		)
Basic earnings/(loss) per common share(1)	$	0.24	$	(0.01	)	$	—		$	(0.53	)	$	0.14		$	—		$	(0.15	)	$	(1.86	)	$	(0.11	)	$	(1.33	)	$	(0.26	)
Diluted earnings/(loss) per common share(1)	$	0.24	$	(0.01	)	$	—		$	(0.53	)	$	0.14		$	—		$	(0.15	)	$	(1.86	)	$	(0.11	)	$	(1.33	)	$	(0.26	)

(1) References to “common shares” and “common shareholders” refer to both the ordinary shares and restricted voting common shares and the shareholders of each. The restricted voting common shares rank equally with the ordinary shares as to dividends.

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	Nine Months Ended September 30,						Year Ended December 31,
	2012			2011			2011			2010
Gross Premium Written	$	44,349		$	32,951		$	42,031		$	46,698
Net Premium Earned	26,795			26,668			35,747			53,603
Underwriting loss	(1,222		)	(4,913		)	(11,238		)	(23,984		)
Net income/(loss) attributable to Atlas	1,922			555			(2,470		)	(21,812		)
Net income/(loss) attributable to common shareholders (1)	1,316			(51		)	(3,280		)	(21,812		)
Basic earnings/(loss) per common share (1)	$	0.21		$	(0.01	)	$	(0.54	)	$	(3.56	)
Diluted earnings/(loss) per common share (1)	0.21			(0.01		)	(0.54		)	(3.56		)

(1) References to “common shares” and “common shareholders” refer to both the ordinary shares and restricted voting common shares and the shareholders of each. The restricted voting common shares rank equally with the ordinary shares as to dividends.

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in our ordinary shares. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the market price of our ordinary shares could decline, and you could lose part or all of your investment.

The insurance subsidiaries’ provisions for unpaid claims may be inadequate, which would result in a reduction in our net income and might adversely affect our financial condition.

Our success depends upon our ability to accurately assess and price the risks covered by the insurance policies that we write. We establish reserves to cover our estimated liability for the payment of losses and expenses related to the administration of claims incurred on the insurance policies we write. Establishing an appropriate level of reserves is an inherently uncertain process. Our provisions for unpaid claims do not represent an exact calculation of actual liability, but are estimates involving actuarial and statistical projections at a given point in time of what we expect to be the cost of the ultimate settlement and administration of known and unknown claims. The process for establishing the provision for unpaid claims reflects the uncertainties and significant judgmental factors inherent in estimating future results of both known and unknown claims and as such, the process is inherently complex and imprecise. We utilize a third party actuarial firm to assist us in estimating the provision for unpaid claims. These estimates are based upon various factors, including:

• actuarial and statistical projections of the cost of settlement and administration of claims reflecting facts and circumstances then known;

• historical claims information;

• assessments of currently available data;

• estimates of future trends in claims severity and frequency;

• judicial theories of liability;

• economic factors such as inflation;

• estimates and assumptions regarding judicial and legislative trends, and actions such as class action lawsuits and judicial interpretation of coverages or policy exclusions; and

• the level of insurance fraud.

Most or all of these factors are not directly quantifiable, particularly on a prospective basis, and the effects of these and unforeseen factors could negatively impact our ability to accurately assess the risks of the policies that we write. In addition, there may be significant reporting lags between the occurrence of the insured event and the time it is actually reported to the insurer and additional lags between the time of reporting and final settlement of claims. Unfavorable development in any of these factors could cause the level of reserves to be inadequate. The following factors may have a substantial impact on future claims incurred:

• the amounts of claims payments;

• the expenses that the insurance subsidiaries incur in resolving claims;

• legislative and judicial developments; and

• changes in economic conditions, including inflation.

As time passes and more information about the claims becomes known, the estimates are adjusted upward or downward to reflect this additional information. Because of the elements of uncertainty encompassed in this estimation process, and the extended time it can take to settle many of the more substantial claims, several years of experience may be required before a meaningful comparison can be made between actual losses and the original provision for unpaid claims. The development of the provision for unpaid claims is shown by the difference between estimates of claims as of the initial year end and the re-estimated liability at each subsequent year end. Favorable development (reserve redundancy) means that the original claims estimates were higher than subsequently determined or re-estimated. Unfavorable development (reserve deficiency) means that the original claims estimates were lower than subsequently determined or re-estimated.

For example, at the end of 2010, a detailed review of claim payment and reserving practices was performed, which led to significant changes in both practices, increasing ultimate loss estimates and accelerating claim payments. Reserves were

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adjusted at that time by approximately $2.3 million to account for these changes, primarily during the second and third quarters of 2010. This review continued into 2011 and Atlas recorded a $1.8 million adjustment to further strengthen its reserves for claims related to policies issued while the insurance subsidiaries were under previous ownership in years preceding 2010. We cannot guarantee that we will not have additional unfavorable reserve developments in the future. In addition, we may in the future acquire other insurance companies. We cannot guarantee that the provisions for unpaid claims of the companies that we acquire are or will be adequate. Government regulators could require that we increase reserves if they determine that provisions for unpaid claims are understated. Increases to the provision for unpaid claims causes a reduction in our insurance subsidiaries’ surplus which could cause a downgrading of our insurance subsidiaries’ ratings. Any such downgrade could, in turn, adversely affect their ability to sell insurance policies.

In recent periods, Gateway has recorded material reserve deficiencies, and its reserves may be inadequate to pay claims, which could result in a reduction of our net income and might adversely affect our financial position.

We became responsible for the historical loss reserves established by Gateway’s management upon completion of the Gateway acquisition. While the stock purchase agreement provides for certain protections in this regard, there can be no assurances they will be sufficient to offset any further adverse development to Gateway’s historical loss reserves. Gateway recognized approximately $8.0 million in reserve strengthening in the fourth quarter of 2012. During the years ended 2011 and 2010, their provision for losses and loss adjustment expenses net of reinsurance recoveries increased by approximately $1.7 million and $2.4 million, respectively, as a result of changes in estimated losses incurred with respect to insured events in prior years. Any such further adverse development in Gateway’s reserves would reduce our net income and have an adverse effect on our financial position.

Our success depends on our ability to accurately price the risks we underwrite.

Our results of operations and financial condition depend on our ability to underwrite and set premium rates accurately for a wide variety of risks. Adequate rates are necessary to generate premiums sufficient to pay losses, loss settlement expenses and underwriting expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate pricing techniques; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to undertake these efforts successfully, and as a result price our products accurately, is subject to a number of risks and uncertainties, some of which are outside our control, including:

• the availability of sufficient reliable data and our ability to properly analyze available data;

• the uncertainties that inherently characterize estimates and assumptions;

• our selection and application of appropriate pricing techniques; and

• changes in applicable legal liability standards and in the civil litigation system generally.

Consequently, we could under price risks, which would adversely affect our profit margins, or we could overprice risks, which could reduce our sales volume and competitiveness. In either case, our profitability could be materially and adversely affected.

Our insurance subsidiaries rely on independent agents and other producers to bind insurance policies on and to collect premiums from our policyholders, which exposes us to risks that our producers fail meet their obligations to us.

Our insurance subsidiaries market and distribute automobile insurance products through a network of independent agents and other producers in the United States. Gateway also relies on independent agents to distribute its insurance products and we do not have existing relationships with many of Gateway’s independent agents. We rely, and will continue to rely, heavily on these producers to attract new business. Independent producers generally have the ability to bind insurance policies and collect premiums on our behalf, actions over which we have a limited ability to exercise preventative control. In the event that an independent agent exceeds their authority by binding us on a risk that does not comply with our underwriting guidelines, we may be at risk for that policy until we effect a cancellation. Any improper use of such authority may result in losses that could have a material adverse effect on our business, results of operations and financial condition. In addition, in accordance with industry practice, policyholders often pay the premiums for their policies to producers for payment to us. These premiums may be considered paid when received by the producer and thereafter the customer is no longer liable to us for those amounts, whether or not we have actually received these premium payments from the producer. Consequently, we assume a degree of risk associated with our reliance on independent agents in connection with the settlement of insurance premium balances.

Our insurance subsidiaries may be unable to mitigate their risk or increase their underwriting capacity through reinsurance arrangements, which could adversely affect our business, financial condition and results of operations. If reinsurance rates

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rise significantly or reinsurance becomes unavailable or reinsurers are unable to pay our claims, we may be adversely affected.

In order to reduce underwriting risk and increase underwriting capacity, our insurance subsidiaries transfer portions of our insurance risk to other insurers through reinsurance contracts. We generally purchase reinsurance from third parties in order to reduce our liability on individual risks. Reinsurance does not relieve us of our primary liability to our insurance subsidiaries’ insureds. Through the nine month period ended September 30, 2012, we had ceded premium written of $4.9 million to our reinsurers. The availability, cost and structure of reinsurance protection are subject to prevailing market conditions that are outside of our control and which may affect our level of business and profitability. Our company’s ability to provide insurance at competitive premium rates and coverage limits on a continuing basis depends in part upon the extent to which we can obtain adequate reinsurance in amounts and at rates that will not adversely affect our competitive position. There are no assurances that we will be able to maintain our current reinsurance facilities, which generally are subject to annual renewal. If we are unable to renew any of these facilities upon their expiration or to obtain other reinsurance facilities in adequate amounts and at favorable rates, we may need to modify our company’s underwriting practices or reduce our company’s underwriting commitments, which could adversely affect our results of operations.

Our insurance subsidiaries are subject to credit risk with respect to the obligations of reinsurers and certain of our insureds. The inability of our risk sharing partners to meet their obligations could adversely affect our profitability.

Although the reinsurers are liable to us to the extent of risk ceded to them, we remain ultimately liable to policyholders on all risks, even those reinsured. As a result, ceded reinsurance arrangements do not limit our ultimate obligations to policyholders to pay claims. We are subject to credit risks with respect to the financial strength of our reinsurers. We are also subject to the risk that their reinsurers may dispute their obligations to pay our claims. As a result, we may not recover sufficient amounts for claims that we submit to reinsurers, if at all. As of September 30, 2012, we had an aggregate of $7.0 million of unsecured reinsurance recoverables. In addition, our reinsurance agreements are subject to specified limits and we would not have reinsurance coverage to the extent that it exceeds those limits.

Effective immediately after the close of the Gateway transaction, we entered into a reinsurance agreement with a third party reinsurer, which covers all in-force premium and loss reserves for Gateway’s workers’ compensation program. Along with the reserves, any go-forward premium written for the workers’ compensation program will be ceded in its entirety to this third party reinsurer under the terms of this reinsurance agreement. While Gateway will remain liable to its insureds, we expect to have no net exposure to any losses related to this workers’ compensation business subsequent to the effective date of the acquisition, provided the reinsurer continues to make payments to us and otherwise complies with the terms of this reinsurance agreement, although no assurances thereof can be given.

With respect to insurance programs, the insurance subsidiaries are subject to credit risk with respect to the payment of claims and on the portion of risk exposure either ceded to captives established by their clients or deductibles retained by their clients. No assurance can be given regarding the future ability of these entities to meet their obligations. The inability of our risk sharing partners to meet their obligations could adversely affect our profitability.

The exclusions and limitations in our policies may not be enforceable.

Many of the policies we issue include exclusions or other conditions that define and limit coverage, which exclusions and conditions are designed to manage our exposure to certain types of risks and expanding theories of legal liability. In addition, many of our policies limit the period during which a policyholder may bring a claim under the policy, which period in many cases is shorter than the statutory period under which these claims can be brought by our policyholders. While these exclusions and limitations help us assess and control our loss exposure, it is possible that a court or regulatory authority could nullify or void an exclusion or limitation, or legislation could be enacted modifying or barring the use of these exclusions and limitations. This could result in higher than anticipated losses and claims handling expenses by extending coverage beyond our underwriting intent or increasing the number or size of claims, which could have a material adverse effect on our operating results. In some instances, these changes may not become apparent until some time after we have issued the insurance policies that are affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a policy is issued.

The occurrence of severe catastrophic events may have a material adverse effect on our financial results and financial condition.

Although our business strategy generally precludes us from writing significant amounts of catastrophe exposed business, most property and casualty insurance contains some exposure to catastrophic loss. We have only limited exposure to natural and

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man-made disasters, such as hurricane, typhoon, windstorm, flood, earthquake, acts of war, acts of terrorism and political instability. While we carefully manage our aggregate exposure to catastrophes, modeling errors and the incidence and severity of catastrophes, such as hurricanes, windstorms and large-scale terrorist attacks are inherently unpredictable, and our losses from catastrophes could be substantial. In addition, it is possible we may experience an unusual frequency of smaller losses in a particular period. In either case, the consequences could be substantial volatility in our financial condition or results of operations for any fiscal quarter or year, which could have a material adverse effect on our our ability to write new business. These losses could deplete our shareholders’ equity. Increases in the values and geographic concentrations of insured property and the effects of inflation have resulted in increased severity of industry losses from catastrophic events in recent years and we expect that those factors will increase the severity of catastrophe losses in the future. Though we built an expanded presence in New York during the third quarter of 2012, we do not believe our exposure in that state to Hurricane Sandy to be material.

The risk models we use to quantify catastrophe exposures and risk accumulations may prove inadequate in predicting all outcomes from potential catastrophe events.

We use widely accepted and industry-recognized catastrophe risk modeling programs to help us quantify our aggregate exposure to any one event. As with any model of physical systems, particularly those with low frequencies of occurrence and potentially high severity of outcomes, the accuracy of the model’s predictions is largely dependent on the accuracy and quality of the data provided in the underwriting process and the judgments of our employees and other industry professionals. These models do not anticipate all potential perils or events that could result in a catastrophic loss to us. Furthermore, it is often difficult for models to anticipate and incorporate events that have not been experienced during or as a result of prior catastrophes. Accordingly, it is possible for us to be subject to events or contingencies that have not been anticipated by our catastrophe risk models and which could have a material adverse effect on our reserves and results of operations.

Financial Risks

We are a holding company dependent on the results of operations of our subsidiaries and their ability to pay dividends and other distributions to us.

Atlas is a holding company with no significant operations of its own and a legal entity separate and distinct from our company’s insurance subsidiaries. As a result, our company’s only sources of income are dividends and other distributions from our insurance subsidiaries. We will be limited by the earnings of those subsidiaries, and the distribution or other payment of such earnings to it in the form of dividends, loans, advances or the reimbursement of expenses. The payment of dividends, the making of loans and advances or the reimbursement of expenses by our insurance subsidiaries is contingent upon the earnings of those subsidiaries and is subject to various business considerations and various statutory and regulatory restrictions imposed by the insurance laws of the domiciliary jurisdiction of such subsidiaries. In Illinois and Missouri, the states of domicile of American Service, American Country and Gateway, dividends may only be paid out of earned surplus and cannot be paid when the surplus of the company fails to meet minimum requirements or when payment of the dividend or distribution would reduce its surplus to less than the minimum amount. The state insurance regulator must be notified in advance of the payment of an extraordinary dividend and be given the opportunity to disapprove any such dividend. Our insurance subsidiaries cannot currently pay any dividends to Atlas without regulatory approval. In addition, prior to entering into any loan or certain other agreements between one or more of our insurance companies and Atlas or our other affiliates, advance notice must be provided to the state insurance regulator and the insurance regulator has the opportunity to disapprove such loan or agreement. Additionally, insurance regulators have broad powers to prevent reduction of statutory capital and surplus to inadequate levels and could refuse to permit the payment of dividends calculated under any applicable formula. As a result, we may not be able to receive dividends or other distributions from our insurance subsidiaries at times and in amounts necessary to meet our operating needs, to pay dividends to shareholders or to pay corporate expenses. The inability of our insurance subsidiaries to pay dividends or make other distributions could have a material adverse effect on our business and financial condition.

Our insurance subsidiaries are subject to minimum capital and surplus requirements. Failure to meet these requirements could subject us to regulatory action.

Our insurance company subsidiaries are subject to minimum capital and surplus requirements imposed under the laws of Illinois and each state in which they issue policies. Any failure by one of our insurance subsidiaries to meet minimum capital and surplus requirements imposed by applicable state law will subject it to corrective action, which may include requiring adoption of a comprehensive financial plan, revocation of its license to sell insurance products or placing the subsidiary under state regulatory control. Any new minimum capital and surplus requirements adopted in the future may require us to increase the capital and surplus of our insurance company subsidiaries, which we may not be able to do. Upon the completion of the Gateway acquisition, we became subject to minimum capital and surplus requirements imposed under the laws of Missouri with regard to Gateway and the additional states where Gateway issues policies.

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The pro forma financial statements included in this prospectus are presented for illustrative purposes only and may not be an indication of the combined company’s future financial condition or results of operations.

The pro forma financial statements contained in this prospectus, relating to the Gateway acquisition, are presented for illustrative purposes only and may not be an indication of the combined company’s future financial condition or results of operations for several reasons. For example, the pro forma financial statements have been derived from the historical financial statements of Atlas and Gateway and certain adjustments, estimates and assumptions have been made regarding the combined company after giving effect to the acquisition. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with accuracy. Moreover, the pro forma financial statements do not reflect all costs that are expected to be incurred by the combined company in connection with the acquisition. For example, the impact of any incremental costs incurred in integrating the businesses of the two companies is not reflected in the pro forma financial statements. As a result, the actual financial condition and results of operations of the combined company may not be consistent with, or evident from, these pro forma financial statements.

In addition, the assumptions used in preparing the pro forma financial data, as well as the 2012 Fourth Quarter Premium Written data, may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the stock price of the combined company. See “Unaudited Pro Forma Condensed Combined Financial Data.”

We are subject to assessments and other surcharges from state guaranty funds, mandatory reinsurance arrangements and state insurance facilities, which may reduce our profitability.

Virtually all states require insurers licensed to do business therein to bear a portion of the unfunded obligations of impaired or insolvent insurance companies. These obligations are funded by assessments, which are levied by guaranty associations within the state, up to prescribed limits, on all member insurers in the state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer was engaged. Accordingly, the assessments levied on us by the states in which we are licensed to write insurance may increase as we increase our premiums written. In addition, as a condition to the ability to conduct business in certain states, insurance companies are required to participate in mandatory reinsurance funds. The effect of these assessments and mandatory reinsurance arrangements, or changes in them, could reduce our profitability in any given period or limit our ability to grow our business.

Market fluctuations, changes in interest rates or a need to generate liquidity could have significant and negative effects on our investment portfolio. We may not be able to realize our investment objectives, which could significantly reduce our net income.

We depend on income from our securities portfolio for a substantial portion of our earnings. Investment returns are an important part of our overall profitability. A significant decline in investment yields in the securities portfolio or an impairment of securities owned could have a material adverse effect on our business, results of operations and financial condition. We currently maintain and intend to continue to maintain a securities portfolio comprised primarily of fixed income securities. As of September 30, 2012, our investment portfolio was invested in fixed income securities. We cannot predict which industry sectors in which we maintain investments may suffer losses as a result of potential declines in commercial and economic activity, or how any such decline might impact the ability of companies within the affected industry sectors to pay interest or principal on their securities and cannot predict how or to what extent the value of any underlying collateral might be affected. Accordingly, adverse fluctuations in the fixed income or equity markets could adversely impact profitability, financial condition or cash flows. Historically, we have not had the need to sell our investments to generate liquidity. If we are forced to sell portfolio securities that have unrealized losses for liquidity purposes rather than holding them to maturity or recovery, we would recognize investment losses on those securities when that determination was made.

Our ability to achieve our investment objectives is affected by general economic conditions that are beyond our control. General economic conditions can adversely affect the markets for interest rate sensitive securities, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the value of fixed maturity securities. U.S. and global markets have been experiencing volatility since mid-2007. Initiatives taken by the U.S. and foreign governments have helped to stabilize the financial markets and restore liquidity to the banking system and credit markets. In addition, markets in the United States and around the world experienced volatility in 2011 due, in part, to sovereign debt downgrades. Although economic conditions and financial markets have somewhat stabilized, if market conditions were to deteriorate, our investment portfolio could be adversely affected.

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Difficult conditions in the economy generally may materially adversely affect our business, results of operations, and statement of financial position and these conditions may not improve in the near future.

Current market conditions and the instability in the global financial markets present additional risks and uncertainties for our business. In particular, deterioration in the public debt markets could lead to additional investment losses and an erosion of capital as a result of a reduction in the fair value of investment securities. The severe downturn in the public debt and equity markets, reflecting uncertainties associated with the mortgage crisis, worsening economic conditions, widening of credit spreads, bankruptcies and government intervention in large financial institutions, created significant unrealized losses in our securities portfolio at certain stages in 2009.

Economic uncertainty has recently been exacerbated by the increased potential for default by one or more European sovereign debt issuers, the potential partial or complete dissolution of the Eurozone and its common currency and the negative impact of such events on global financial institutions and capital markets generally. Actions or inactions of European governments may impact these actual or perceived risks. In the U.S. during 2011, one rating agency downgraded the U.S.’s long-term debt credit rating from AAA. Future actions or inactions of the United States government, including a shutdown of the federal government, could increase the actual or perceived risk that the U.S. may not ultimately pay its obligations when due and may disrupt financial markets.

Atlas’ portfolio is managed by Asset Allocation Management (“AAM”), an SEC registered investment advisor specializing in the management of insurance company portfolios. We and our investment manager consider these issues in connection with current asset allocation decisions with the object of avoiding them going forward. However, depending on market conditions going forward, we could again incur substantial realized and additional unrealized losses in future periods, which could have an adverse impact on the results of operations and financial condition. There can be no assurance that the current market conditions will improve in the near future. We could also experience a reduction in capital in the insurance subsidiaries below levels required by the regulators in the jurisdictions in which we operate. Certain trust accounts for the benefit of related companies and third parties have been established with collateral on deposit under the terms and conditions of the relevant trust agreements. The value of collateral could fall below the levels required under these agreements putting the subsidiary or subsidiaries in breach of the agreement.

We may not have access to capital in the future.

We may need new or additional financing in the future to conduct our operations, or expand our business. However, we may be unable to raise capital on favorable terms, or at all, including as a result of disruptions, uncertainty and volatility in the global credit markets, or due to any sustained weakness in the general economic conditions and/or financial markets in Canada, the United States or globally. From time-to-time, we may rely on access to financial markets as a source of liquidity for operations, acquisitions and general corporate purposes.

The limited public float and trading volume for our shares may have an adverse impact on the share price or make it difficult to liquidate.

Our securities are held by a relatively small number of shareholders. Future sales of substantial amounts of our shares in the public market, or the perception that these sales could occur, may adversely impact the market price of our shares and our shares could be difficult to liquidate.

Our ordinary shares will be listed on both the TSXV and the NASDAQ which may increase the volatility of our ordinary share price on both exchanges.

Upon completion of the offering, we expect our ordinary shares to be dual listed on NASDAQ and the TSX Venture Exchange. However, once our ordinary shares are dual listed, the trading volume of our ordinary shares on each particular exchange may decrease. As a result of this diminished trading volume, the stock price of our ordinary shares may be more volatile.

Our business depends upon key employees, and if we are unable to retain the services of these key employees or to attract and retain additional qualified personnel, our business may suffer.

Our operations depend, to a great extent, upon the ability of executive management and other key employees to implement our business strategy and our ability to attract and retain additional qualified personnel in the future. The loss of the services of any of our key employees, or the inability to identify, hire and retain other highly qualified personnel in the future, could adversely affect the quality and profitability of our business operations. In addition, our company must forecast volume and other factors in changing business environments with reasonable accuracy and adjust our hiring and employment levels accordingly. Our

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failure to recognize the need for such adjustments, or our failure or inability to react appropriately on a timely basis, could lead our company either to over-staffing (which could adversely affect our cost structure) or under-staffing (which could impair our ability to service current product lines and new lines of business). In either event, our financial results and customer relationships could be adversely affected.

Compliance Risks

We are subject to comprehensive regulation, and our results may be unfavorably impacted by these regulations.

As a holding company which owns insurance companies domiciled in the United States, we and our insurance subsidiaries are subject to comprehensive laws and regulations. These laws and regulations generally delegate regulatory, supervisory and administrative powers to state insurance regulators. Insurance regulations are generally designed to protect policyholders rather than shareholders, and are related to matters including:

• rate setting;

• the National Association of Insurance Commissioner’s Risk Based Capital (RBC) ratio and solvency standards, as adopted by the state insurance departments which regulate our subsidiaries;

• restrictions on the amount, type, nature, quality and quantity of securities in which insurers may invest;

• the maintenance of adequate reserves for unearned premiums and unpaid claims;

• restrictions on the types of terms that can be included in insurance policies;

• standards for accounting;

• marketing practices;

• claims settlement practices;

• the examination of insurance companies by regulatory authorities, including periodic financial and market conduct examinations;

• the licensing of insurers and their agents;

• limitations on dividends and transactions with affiliates;

• approval of certain reinsurance transactions; and

• insolvency proceedings.

Such rules and regulations are expected to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. A significant amount of resources have been committed to monitor and address any internal control issues, and failure to do so could adversely impact operating results. State insurance departments also conduct periodic examinations of the affairs of insurance companies and require filing of annual and other reports relating to the financial condition of insurance companies, holding company issues and other matters. Our business depends on compliance with applicable laws and regulations and our ability to maintain valid licenses and approvals for our operations. Regulatory authorities may deny or revoke licenses for various reasons, including violations of regulations. Changes in the level of regulation of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities could have a material adverse affect on our operations. In addition, we could face individual, group and class-action lawsuits by our policyholders and others for alleged violations of certain state laws and regulations. Each of these regulatory risks could have an adverse effect on our profitability. It is not possible to predict the future impact of changing federal and state regulation on our operations, and there can be no assurance that laws and regulations enacted in the future will not be more restrictive than existing laws and regulations. New or more restrictive regulations, including changes in current tax or other regulatory interpretations affecting an alternative risk transfer insurance model, could make it more expensive for our company to conduct our businesses, restrict the premiums our subsidiaries are able to charge or otherwise change the way it does business. In addition, economic and financial market turmoil or other conditions, circumstances or events may result in U.S. federal oversight of the insurance industry in general.

Our business is subject to risks related to litigation and regulatory actions.

We may from time-to-time be subject to a variety of legal and regulatory actions relating to our current and past business operations, including, but not limited to:

• disputes over coverage or claims adjudication, including claims alleging that we have acted in bad faith in the administration of claims by our policyholders;

• disputes regarding sales practices, disclosure, premium refunds, licensing, regulatory compliance and compensation arrangements;

• limitations on the conduct of our business;

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• disputes with our agents, producers or network providers over compensation and termination of contracts and related claims;

• disputes with taxing authorities regarding tax liabilities; and

• disputes relating to certain businesses acquired or disposed of by us.

As insurance industry practices and regulatory, judicial and industry conditions change, unexpected and unintended issues related to pricing, claims, coverage and business practices may emerge. Plaintiffs often target P&C insurers in purported class action litigation relating to claims handling and insurance sales practices. The resolution and implications of new underwriting, claims and coverage issues could have a negative effect on our business by extending coverage beyond our underwriting intent, increasing the size of claims or otherwise requiring them to change their practices. The effects of unforeseen emerging claim and coverage issues could negatively impact revenues, results of operations and reputation. Current and future court decisions and legislative activity may increase our exposure to these types of claims. Multi-party or class action claims may present additional exposure to substantial economic, non-economic or punitive damage awards. The loss of even one of these claims, if it resulted in a significant damage award or a judicial ruling that was otherwise detrimental, could create a precedent in the industry that could have a material adverse effect on our results of operations and financial condition. This risk of potential liability may make reasonable settlements of claims more difficult to obtain. We cannot determine with any certainty what new theories of recovery may evolve or what their impact may be on our business.

We have been and may be subject to governmental or administrative investigations and proceedings in the context of our highly regulated sectors of activity. For example, our insurance subsidiaries have been subject to numerous inquiries related to the substantial ownership interest in us held by KAI. The result of these inquiries could lead to additional requirements being placed on us or our insurance subsidiaries or other conditions, any of which could increase our costs of regulatory compliance and could have an adverse affect on our ability to operate our business. As a general matter, we cannot predict the outcome of regulatory investigations, proceedings and reviews, and cannot guarantee that such investigations, proceedings or reviews or related litigation or changes in operating policies and practices would not materially adversely affect our results of operations and financial condition. In addition, if we were to experience difficulties with our relationship with a regulatory body in a given jurisdiction, it could have a material adverse effect on our ability to do business in that jurisdiction.

Our business could be adversely affected as a result of changing political, regulatory, economic or other influences.

The insurance industry is subject to changing political, economic and regulatory influences. These factors affect the practices and operation of insurance and reinsurance organizations. Legislatures in the United States and other jurisdictions have periodically considered programs to reform or amend their respective insurance and reinsurance regulatory systems. Recently, the insurance and reinsurance regulatory framework has been subject to increased scrutiny in many jurisdictions. Changes in current insurance regulation may result in increased governmental involvement in the insurance industry or may otherwise change the business and economic environment in which insurance industry participants operate. Historically, the automobile insurance industry has been under pressure from time to time from regulators, legislators or special interest groups to reduce, freeze or set rates at levels that are not necessarily related to underlying costs or risks, including initiatives to reduce automobile and other commercial line insurance rates. These changes may limit the ability of the insurance subsidiaries to price automobile insurance adequately and could require us to discontinue unprofitable product lines, make unplanned modifications of our products and services, or result in delays or cancellations of sales of our products and services.

Strategic Risks

Our geographic concentration ties our performance to the business, economic, regulatory and other conditions of certain states.

Some jurisdictions (including, most notably New York, Illinois, Michigan, and Louisiana) generate a more significant percentage of our total premiums than others. Our revenues and profitability are subject to the prevailing regulatory, legal, economic, political, demographic, competitive, weather and other conditions in the principal states in which we do business. Changes in any of these conditions could make it less attractive for us to do business in such states and would have a more pronounced effect on us compared to companies that are more geographically diversified. In addition, our exposure to severe losses from localized perils, such as earthquakes, hurricanes, tropical storms, tornadoes, wind, ice storms, hail, fires, terrorism, riots and explosions, is increased in those areas where we have written significant numbers of property/casualty insurance policies. Given our geographic concentration, negative publicity regarding our products and services could have a material adverse effect on our business and operations, as could other regional factors impacting the local economies in that market.

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In order to operate in a profitable manner, we need to maintain our current level of premiums written. We may experience difficulty in managing historic and future growth, which could adversely affect our results of operations and financial condition.

We believe that, given our fixed costs associated with underwriting and administering our insurance operations, our insurance subsidiaries must maintain annual net written premiums in excess of approximately $50 million in order to achieve our targeted levels of profitability. In order to maintain and increase this level of premiums written, we intend to expand geographically and increase our market share via our expanded distribution network. Continued growth could impose significant demands on management, including the need to identify, recruit, maintain and integrate additional employees. Growth may also place a strain on management systems and operational and financial resources, and such systems, procedures and internal controls may not be adequate to support operations as they expand.

The integration and management of acquired books of business, acquired businesses and other growth initiatives involve numerous risks that could adversely affect our profitability, and are contingent on many factors, including:

• expanding our financial, operational and management information systems;

• managing our relationships with independent agents, brokers, and legacy program managers including maintaining adequate controls;

• expanding our executive management and the infrastructure required to effectively control our growth;

• maintaining ratings for certain of our insurance subsidiaries;

• increasing the statutory capital of our insurance subsidiaries to support growth in written premiums;

• accurately setting claims provisions for new business where historical underwriting experience may not be available;

• obtaining regulatory approval for appropriate premium rates where applicable; and

• obtaining the required regulatory approvals to offer additional insurance products or to expand into additional states or other jurisdictions.

Our failure to grow our premiums written or to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

A significant portion of our products in the New York City market are distributed by a single agent, and any decrease in the amount of our products distributed by this agent, or underperformance of the book of business controlled by this agent, could adversely impact our business.

In the third quarter of 2012, we implemented our New York “excess taxi program” with a single agent writing business in the New York City market, which is a new business arrangement to provide excess coverage above the levels of risk retained by the insured. This agent has since become our most significant agent responsible for approximately 28% and 53% of our gross premium written for the nine month period ended September 30, 2012 and the three-month period ended September 30, 2012, respectively. This agent was not responsible for any written premium in the fourth quarter 2012. We do not have an exclusive relationship with this agent, and there can be no assurance that this relationship will continue in the future. If this agent reduces its marketing of our products or moves some or all of its business to another carrier, then our business, financial condition and results of operations would be adversely affected. In addition, due in part to our limited experience with this program, and with the New York City market in general, it is uncertain whether policies issued pursuant to this program will be profitable. For example, if risks associated with these clients differ from those reflected in our underwriting policies, then our business, financial condition and results of operations would be adversely affected.

Engaging in acquisitions involves risks and if we are unable to effectively manage these risks our business may be materially harmed.

Acquisitions of similar insurance providers, such as Gateway, are expected to be a material component of our growth strategy, subject to availability of suitable opportunities and market conditions. From time to time we may engage in discussions concerning acquisition opportunities and, as a result of such discussions, may enter into acquisition transactions. Upon the announcement of an acquisition, our share price may fall depending on numerous factors, including but not limited to, the intended target, the size of the acquisition, the purchase price and the potential dilution to existing shareholders. It is also possible that an acquisition could dilute earnings per share. Acquisitions entail numerous risks, including the following:

• difficulties in the integration of the acquired business;

• assumption of unknown material liabilities, including deficient provisions for unpaid claims;

• diversion of management’s attention from other business concerns;

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• failure to achieve financial or operating objectives; and

• potential loss of policyholders or key employees of acquired companies.

We may be unable to integrate or profitably operate any business, operations, personnel, services or products we may acquire in the future, which may result in our inability to realize expected revenue increases, cost savings, increases in geographic or product presence, and other projected benefits from the acquisition. Integration may result in the loss of key employees, disruption to our existing businesses or the business of the acquired company, or otherwise harm our ability to retain customers and employees or achieve the anticipated benefits of the acquisition. Time and resources spent on integration may also impair our ability to grow our existing businesses. Also, the negative effect of any financial commitments required by regulatory authorities or rating agencies in acquisitions or business combinations may be greater than expected.

Provisions in our organizational documents, corporate laws and the insurance laws of Illinois and other states could impede an attempt to replace or remove management or directors or prevent or delay a merger or sale, which could diminish the value of our shares.

Our Memorandum of Association, Articles of Association and Code of Regulations and the corporate laws and the insurance laws of various states contain provisions that could impede an attempt to replace or remove management or directors or prevent the sale of the insurance subsidiaries that shareholders might consider to be in their best interests. These provisions include, among others:

• requiring a vote of holders of 5% of the ordinary shares to call a special meeting of shareholders;

• requiring a two-thirds vote to amend the Articles of Association;

• requiring the affirmative vote of a majority of the voting power of shares represented at a special meeting of shareholders; and

• statutory requirements prohibiting a merger, consolidation, combination or majority share acquisition between insurance subsidiaries and an interested shareholder or an affiliate of an interested shareholder without regulatory approval.

These provisions may prevent shareholders from receiving the benefit of any premium over the market price of our shares offered by a bidder in a potential takeover, and may adversely affect the prevailing market price of our shares if they are viewed as discouraging takeover attempts.

In addition, insurance regulatory provisions may delay, defer or prevent a takeover attempt that shareholders may consider in their best interest. For example, under applicable state statutes, subject to limited exceptions, no person or entity may, directly or indirectly, acquire control of a domestic insurer without the prior approval of the state insurance regulator. Under the insurance laws, “control” (including the terms “controlling,” “controlled by” and “under common control with”) is generally defined to include acquisition of a certain percentage or more of an insurer’s voting securities (such as 10% or more under Illinois and Missouri law). These requirements would require a potential bidder to obtain prior approval from the insurance departments of the states in which the insurance subsidiaries are domiciled and commercially domiciled and may require pre-acquisition notification in other states. Obtaining these approvals could result in material delays or deter any such transaction. Regulatory requirements could make a potential acquisition of our company more difficult and may prevent shareholders from receiving the benefit from any premium over the market price of our shares offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our shares if they are viewed as discouraging takeover attempts in the future.

Market and Competition Risks

Because the insurance subsidiaries are commercial automobile insurers, conditions in that industry could adversely affect their business.

The majority of the gross premiums written by our insurance subsidiaries are generated from commercial automobile insurance policies. Adverse developments in the market for commercial automobile insurance, including those which could result from potential declines in commercial and economic activity, could cause our results of operations to suffer. The commercial automobile insurance industry is cyclical. Historically, the industry has been characterized by periods of price competition and excess capacity followed by periods of higher premium rates and shortages of underwriting capacity. These fluctuations in the business cycle have negatively impacted and could continue to negatively impact the revenues of our company. The results of the insurance subsidiaries, and in turn, us, may also be affected by risks, to the extent they are covered by the insurance policies we issue, that impact the commercial automobile industry related to severe weather conditions, floods, hurricanes, tornadoes, earthquakes and tsunamis, as well as explosions, terrorist attacks and riots. The insurance subsidiaries’ commercial automobile

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insurance business may also be affected by cost trends that negatively impact profitability, such as a continuing economic downturn, inflation in vehicle repair costs, vehicle replacement parts costs, used vehicle prices, fuel costs and medical care costs. Increased costs related to the handling and litigation of claims may also negatively impact profitability. Legacy business previously written by us also includes private passenger auto, surety and other P&C insurance business. Adverse developments relative to previously written business could have a negative impact on our results.

The insurance and related businesses in which we operate may be subject to periodic negative publicity which may negatively impact our financial results.

The products and services of the insurance subsidiaries are ultimately distributed to individual and business customers. From time-to-time, consumer advocacy groups or the media may focus attention on insurance products and services, thereby subjecting the industry to periodic negative publicity. We also may be negatively impacted if participants in one or more of our markets engage in practices resulting in increased public attention to our business. Negative publicity may also result in increased regulation and legislative scrutiny of practices in the P&C insurance industry as well as increased litigation. These factors may further increase our costs of doing business and adversely affect our profitability by impeding our ability to market our products and services, requiring us to change our products or services or by increasing the regulatory burdens under which we operate.

The highly competitive environment in which we operate could have an adverse effect on our business, results of operations and financial condition.

The commercial automobile insurance business is highly competitive and, except for regulatory considerations, there are relatively few barriers to entry. Many of our competitors are substantially larger and may enjoy better name recognition, substantially greater financial resources, higher ratings by rating agencies, broader and more diversified product lines and more widespread agency relationships than us. Our underwriting profits could be adversely impacted if new entrants or existing competitors try to compete with our products, services and programs or offer similar or better products at or below our prices. Insurers in our markets generally compete on the basis of price, consumer recognition, coverages offered, claims handling, financial stability, customer service and geographic coverage. Although pricing is influenced to some degree by that of our competitors, it is not in our best interest to compete solely on price, and we may from time-to-time experience a loss of market share during periods of intense price competition. Our business could be adversely impacted by the loss of business to competitors offering competitive insurance products at lower prices. This competition could affect our ability to attract and retain profitable business. Pricing sophistication and related underwriting and marketing programs use a number of risk evaluation factors. For auto insurance, these factors can include but are not limited to vehicle make, model and year; driver age; territory; years licensed; loss history; years insured with prior carrier; prior liability limits; prior lapse in coverage; and insurance scoring based on credit report information. We believe our pricing model will generate future underwriting profits, however past performance is not a perfect indicator of future driver performance.

If we are not able to attract and retain independent agents and brokers, our revenues could be negatively affected.

We market and distribute our insurance programs exclusively through independent insurance agents and specialty insurance brokers. As a result, our business depends in large part on the marketing efforts of these agents and brokers and on our ability to offer insurance products and services that meet the requirements of the agents, the brokers and their customers. However, these agents and brokers are not obligated to sell or promote our products and many sell or promote competitors’ insurance products in addition to our products. Some of our competitors have higher financial strength ratings, offer a larger variety of products, set lower prices for insurance coverage and/or offer higher commissions than we do. Therefore, we may not be able to continue to attract and retain independent agents and brokers to sell our insurance products. The failure or inability of independent agents and brokers to market our insurance products successfully could have a material adverse impact on our business, financial condition and results of operations.

If we are unable to maintain our claims-paying ratings, our ability to write insurance and to compete with other insurance companies may be adversely impacted. A decline in rating could adversely affect our position in the insurance market, make it more difficult to market our insurance products and cause our premiums and earnings to decrease.

Financial ratings are an important factor influencing the competitive position of insurance companies. Third party rating agencies assess and rate the claims-paying ability of insurers and reinsurers based upon criteria that they have established. Periodically these rating agencies evaluate the business to confirm that it continues to meet the criteria of the ratings previously assigned. Financial strength ratings are an important factor in establishing the competitive position of insurance companies and may be expected to have an effect on an insurance company’s premiums. The insurance subsidiaries are rated by A.M. Best, which issues independent opinions of an insurer’s financial strength and its ability to meet policyholder obligations. A.M. Best

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ratings range from “A++” (Superior) to “F” (In Liquidation), with a total of 16 separate rating categories. The objective of A.M. Best’s rating system is to provide potential policyholders and other interested parties an opinion of an insurer’s financial strength and ability to meet ongoing obligations, including paying claims.

On January 30, 2012, A.M. Best affirmed the financial strength rating of American Country and American Service as “B” and the outlook assigned to all ratings is “Stable.” There is a risk that A.M. Best will not maintain these ratings in the future. If the insurance subsidiaries’ ratings are reduced by A.M. Best, their competitive position in the insurance industry could suffer and it could be more difficult to market their insurance products. A downgrade could result in a significant reduction in the number of insurance contracts written by the subsidiaries and in a substantial loss of business to other competitors with higher ratings, causing premiums and earnings to decrease. Rating agencies evaluate insurance companies based on financial strength and the ability to pay claims, factors that may be more relevant to policyholders than to investors. Financial strength ratings by rating agencies are not ratings of securities or recommendations to buy, hold or sell any security and should not be relied upon as such.

As is customary upon the disclosure of a pending acquisition, in the fourth quarter 2012, A.M. Best placed Atlas and its subsidiaries under review. The review reflects the inherent risk associated with integrating Gateway’s ongoing business into the Company’s existing infrastructure, while overseeing the run off of Gateway’s non-core lines, and the increase in financial leverage of Atlas as a result of funding the transaction, in part, with the issuance of preferred stock. We expect the review to be complete in the first quarter 2013.

Our ability to generate written premiums is impacted by seasonality which may cause fluctuations in our operating results and to our stock price.

The P&C insurance business is seasonal in nature. While our net premiums earned are generally stable from quarter to quarter, our gross premiums written follow the common renewal dates for the “light” commercial risks that represent our core lines of business. For example, January 1^st and March 1^st are common taxi cab renewal dates in Illinois and New York, respectively. Net underwriting income is driven mainly by the timing and nature of claims, which can vary widely. Our ability to generate written premiums is also impacted by the timing of policy periods in the states in which we operate. As a result of this seasonality, investors may not be able to predict our annual operating results based on a quarter-to-quarter comparison of our operating results. Additionally, this seasonality may cause fluctuations in our stock price. We believe seasonality will have an ongoing impact on our business.

U.S. Tax Risks

If our company were not to be treated as a U.S. corporation for U.S. federal income tax purposes, certain tax inefficiencies would result and certain adverse tax rules would apply.

Pursuant to certain “expatriation” provisions of the U.S. Internal Revenue Code of 1986, as amended, the reverse merger agreement relating to the reverse merger transaction described below provides that the parties intend to treat our company as a U.S. corporation for U.S. federal income tax purposes. The expatriation provisions are complex, are largely unsettled and subject to differing interpretations, and are subject to change, perhaps retroactively. If our company were not to be treated as a U.S. corporation for U.S. federal income tax purposes, certain tax inefficiencies and adverse tax consequences and reporting requirements would result for both our company and the recipients and holders of stock in our company, including that dividend distributions from our insurance subsidiaries to us would be subject to 30% U.S. withholding tax, with no available reduction and that members of the consolidated group may not be permitted to file a consolidated U.S. tax return resulting in the acceleration of cash tax outflow and potential permanent loss of tax benefits associated with net operating loss carry-forwards that could have otherwise been utilized.

Our use of losses may be subject to limitations and the tax liability of our company may be increased.

Our ability to utilize the NOLs is subject to the rules of Section 382 of the Internal Revenue Code. Section 382 generally restricts the use of NOLs after an “ownership change.” An ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directly or indirectly, five (5%) percent or more of our common stock or are otherwise treated as five (5%) percent stockholders under Section 382 and the regulations promulgated thereunder increase their aggregate percentage ownership of our stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders over a three-year rolling period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carryforwards. This annual limitation is generally equal to the product of the value of our stock on the date of the ownership change, multiplied by the long-term tax-

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exempt rate published monthly by the Internal Revenue Service. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL carryforwards.

The rules of Section 382 are complex and subject to varying interpretations. Because of our numerous equity issuances, which have included the issuance of various classes of convertible securities and warrants, uncertainty exists as to whether we may have undergone an ownership change in the past or will undergo one as a result of this offering. Even if this offering does not cause an ownership change, it may increase the likelihood that we may undergo an ownership change in the future. Based on our recent stock prices, we believe any ownership change would limit our ability to utilize the portion of our NOLs that are currently not subject to limitation. Accordingly, no assurance can be given that our NOLs will be fully available. As a result, we could pay taxes earlier and in larger amounts than would be the case if the NOLs were available to reduce the federal income taxes without restriction. Future sales of stock by KAI, including sales in this offering, could conceivably trigger another ownership change according to Section 382.

Atlas has the following total net operating loss carry-forwards as of the period ended September 30, 2012.

Net Operating Loss Carry-Forward by Expiry (in ‘000s)
Year of Occurrence	Year of Expiration	Amount
2001	2021	$	14,750
2002	2022	4,317
2006	2026	7,825
2007	2027	5,131
2008	2028	1,949
2009	2029	1,949
2010	2030	1,949
2011	2031	7,762
2012	2032	1,074
Total		$	46,706

Further limitations on the utilization of losses may apply because of the “dual consolidated loss” rules, which will also require our company to recapture into income the amount of any such utilized losses in certain circumstances. As a result of the application of these rules, the future tax liability of our company and our insurance subsidiaries could be significantly increased. In addition, taxable income may also be recognized by our company or our insurance subsidiaries in connection with the 2010 reverse merger transaction.

Risks Related to this Offering

There has been no public market the United States for our ordinary shares prior to this offering and an active trading market for our ordinary shares may not develop, continue or be liquid following this offering.

Prior to this offering, our ordinary shares have been exclusively listed on the TSXV under the symbol “AFH”, and there has been no public market for them in the United States. There is a risk that no active trading market will develop, continue or be liquid in the United States and that our ordinary shares will not be resold at or above our public offering price. Prior to the effective date of this offering, we have applied to have our ordinary shares listed on the NASDAQ Capital Market under the symbol “AFH.” The public offering price of our ordinary shares has been determined by agreement among us and the underwriters, but there is a risk that our ordinary shares will trade below the public offering price following the completion of this offering. See “Underwriting.” The market value of our ordinary shares could be substantially affected by general market conditions, including the extent to which a secondary market develops for our ordinary shares following the completion of this offering, the extent of institutional investor interest in us, our financial and operating performance and general stock and bond market conditions. In addition, we may not have coverage by security analysts, which could serve to limit the distribution of news and limit investor interest in our shares.

Assuming an active market for our ordinary shares develops, the market price and trading volume of our ordinary shares may be volatile following this offering.

Even if an active trading market develops for our ordinary shares, their per share trading price may be volatile due in part to the limited public float and trading volume for our shares and the fact that our ordinary shares will be dual listed on NASDAQ and the TSX Venture Exchange. In addition, the trading volume in our ordinary shares may fluctuate and cause significant price variations to occur. If the per share trading price of our ordinary shares declines significantly, you may be unable to resell your shares at or above the public offering price. There is a risk that the per share trading price of our ordinary shares will fluctuate or decline significantly in the future.

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Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our ordinary shares include:

• actual or anticipated variations in our quarterly operating results;

• changes in our cash flows from operations or earnings estimates;

• publication of research reports about us or the insurance industry;

• changes in market valuations of similar companies;

• adverse market reaction to any additional debt we incur or equity we may issue in the future;

• additions or departures of key management personnel;

• actions by institutional shareholders;

• speculation in the press or investment community;

• our underlying asset value;

• the extent of investor interest in our securities;

• investor confidence in the stock and bond markets, generally;

• changes in tax laws;

• failure to meet earnings estimates;

• changes in our claims-paying ratings;

• general market and economic conditions; and

• future sales of substantial amounts of our shares in the public market, or the perception that these sales could occur.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our ordinary shares.

We do not anticipate paying any cash dividends for the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, for working capital and other general corporate purposes. We do not intend to pay any dividends to holders of our ordinary shares. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain on an investment in our ordinary shares. We did not declare or pay cash dividends on our capital stock during 2010, 2011 or to date in 2012. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant. Holders of our preferred shares are entitled to dividends on a cumulative basis whether or not declared by our board of directors, at a rate of $0.045 per preferred share per year, which must be paid or declared and set apart before any dividend may be paid on our ordinary shares. In addition, the insurance laws and regulations governing our insurance company subsidiaries contain restrictions on the ability to pay dividends, or to make other distributions to us, which may limit our ability to pay dividends to our shareholders.

Purchasers in this offering can expect future dilution in the book value of their investment.

The exercise of outstanding warrants and options and the conversion of preferred shares will result in dilution of your investment at the time of such exercise or conversion. In addition, if we raise funds by issuing additional ordinary shares, such newly issued shares would dilute your ownership interest. Accordingly, investors in this offering can expect to own a smaller percentage of the company as we continue with our business and expand the scope of our operations.

The requirements of being a United States public company may strain our resources and divert management’s attention.

As a United States public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (which we refer to herein as the Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of The NASDAQ Stock Market and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could

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adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants to comply with these requirements, which will increase our costs and expenses.

In addition, changing laws, regulations and standards in the United States relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business and operating results may be adversely affected.

For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act), we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

We will remain an “emerging growth company” for up to five years, although if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of any June 30^th before that time, we would cease to be an “emerging growth company” as of the following December 31^st.

As a result of disclosure of information in this prospectus and in filings required of a public company in the United States, our business, results of operations, cash flows and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for these shares and our stock price may be more volatile.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of an extended transaction period for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include the matters described under “Risk Factors,” changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

• expectations regarding our potential growth;

• our inability to have our securities listed for trading on the NASDAQ Capital Market or another national securities exchange, or once initially listed, to maintain such listings;

• our financial performance;

• our competitive position;

• the introduction and proliferation of competitive products;

• an inability to achieve sustained profitability;

• failure to implement our short- or long-term growth strategies;

• operating and capital expenditures by us and the insurance and reinsurance industry;

• the cost of retaining and recruiting our key personnel or the loss of such key personnel;

• risks associated with the expansion of our business in size and geography;

• we have a single agent in New York, on a non-exclusive basis, distributing a product which provides excess coverage above the levels of risk retained by otherwise self-insured taxi operators, who was responsible for approximately 28% of our gross premium written in the nine month period ended September 30, 2012;

• operational risk;

• risks associated with our integration of Gateway;

• geopolitical events and regulatory changes;

• changing interpretations of generally accepted accounting principles;

• general economic conditions;

• our ability to obtain additional financing, if necessary;

• the adverse effect our the ordinary shares issued pursuant to this offeringmay have on the market price of our ordinary shares;

• our business strategies;

• compliance with applicable laws; and

• our liquidity.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it, and is expressly qualified in its entirety by the foregoing cautionary statements. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of the ordinary shares that we are offering will be approximately $[•] million, based on an assumed offering price of $[•] per share (the U.S. dollar equivalent of the last reported sale price of our ordinary shares on the TSXV based on an assumed exchange rate of C$[•] per $1 U.S.), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that our net proceeds will be approximately $[•] million.

We will not receive any of the proceeds from the sale of the ordinary shares being offered by the selling shareholder.

The principal purposes of our initial offering in the United States are to create a public market for our ordinary shares and thereby enable future access to the public equity markets by us and our shareholders, and to obtain additional capital. We intend to use the net proceeds to us from our offering for working capital, to acquire complementary businesses or other assets, to repurchase preferred shares, which accrue dividends on a cumulative basis at a rate of $0.045 per share per year (4.5%), or for other general corporate purposes; however we do not have any specific uses of the net proceeds planned.

Pending other uses, we intend to invest the proceeds to us in investment-grade, interest-bearing securities such as money market funds, certificates of deposit, or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from our offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

DIVIDEND POLICY

We did not declare or pay cash dividends on our capital stock during 2010, 2011, 2012 or to date in 2013. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant. Holders of our preferred shares are entitled to dividends on a cumulative basis whether or not declared by our board of directors, at a rate of $0.045 per preferred share per year, which must be paid or declared and set apart before any dividend may be paid on our ordinary shares. In addition, the insurance laws and regulations governing our insurance company subsidiaries contain restrictions on the ability to pay dividends, or to make other distributions to us, which may limit our ability to pay dividends to our shareholders.

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DILUTION

If you invest in our ordinary shares, your ownership interest will experience immediate book value dilution to the extent of the difference between the initial public offering price per ordinary share and the net tangible book value per ordinary share after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share attributable to the existing shareholders for the presently outstanding ordinary shares. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of ordinary shares outstanding.

Our pro-forma net tangible book value as of September 30, 2012 was $39.7 million, or $6.46 per ordinary share. After giving effect to our sale of shares in this offering, assuming an initial public offering price of $[•] per ordinary share (the U.S. dollar equivalent of the last reported sale price of our ordinary shares on the TSXV as of January [•], 2013 based on an assumed exchange rate of C$[•] per $1 U.S.), and the application of the estimated net proceeds as described under “Use of Proceeds,” our as adjusted net tangible book value at September 30, 2012 would have been approximately $[•] million, or $[•] per ordinary share. This represents an immediate increase in net tangible book value per share of $[•] to existing shareholders and an immediate dilution of $[•] per share to new investors.

The following table illustrates this per share dilution (amounts in $000’s of U.S. dollars).

Assumed initial public offering price per ordinary share	$ [•]
Net tangible book value per share at September 30, 2012	6.46
Decrease per ordinary share attributable to new investors in the offering	[•]
Pro forma net tangible book value per ordinary share after this offering	[•]
Dilution per ordinary share to new investors	[•]

If the underwriters were to fully exercise their option to purchase additional ordinary shares, the pro forma net tangible book value per ordinary share after giving effect to this offering would be $[•]. This represents an increase in net tangible book value of $[•] per ordinary share to existing stockholders and dilution of $[•] per ordinary share to new investors.

A $1.00 increase (decrease) in the assumed initial public offering price of $[•] per ordinary share would decrease (increase) our pro-forma net tangible book value deficiency after giving effect to the offering by $[•] million, or by $[•] per ordinary share, assuming no change to the number of ordinary shares offered by us as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and estimated expenses.

The following table sets forth on the pro forma basis described above, as of September 30, 2012, the number of ordinary shares purchased from us, the total consideration paid to us and the average price per share paid by existing shareholders and to be paid by new investors purchasing ordinary shares in this offering, before deducting underwriting discounts and commissions and estimated offering expenses.

	Shares Purchased		Total Consideration
	Number	Percent	Amount (in thousands)	Percent	Average Price Per Share
Existing Shareholders	[•]	[•]	$[•]	[•]	$[•]
New investors	[•]	[•]	[•]	[•]	[•]
Total	[•]	100%	$[•]	100%	$[•]

If the underwriters exercise their over-allotment option in full, the percentage of shares of common stock held by existing stockholders will decrease to approximately [•]% of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors will be increased to [•], or approximately [•]% of the total number of shares of our common stock outstanding after this offering.

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SELLING SHAREHOLDER

The following table sets forth information as of the date of this prospectus, to our knowledge, about the beneficial ownership of our ordinary shares by the selling shareholder, KAI, both before and immediately after the offering.

We believe that the selling shareholder has sole voting and investment power with respect to all of the ordinary shares beneficially owned by it.

The percent of beneficial ownership for the selling shareholder is based on 3,887,469 restricted voting shares outstanding as of the date of this prospectus. Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, securities held by the selling shareholder that are currently exercisable or exercisable within 60 days of the date of this prospectus for ordinary shares are considered outstanding and beneficially owned by the selling shareholder for the purpose of computing its percentage ownership but are not treated as outstanding for the purpose of computing the percentage ownership of any other shareholder.

Information about the selling shareholder may change over time. Any changed information will be set forth in an amendment to the registration statement or supplement to this prospectus, to the extent required by law.

	Restricted Voting Shares Beneficially Owned Prior to the Offering			Restricted Voting Shares Beneficially Owned After the Offering(1)
Name of Selling Shareholder	Number(2)	Percent(2)	Ordinary Shares Offered by this Prospectus(3)	Number	Percent
Kingsway America Inc. 150 Pierce Road, Suite 600 Itasca, Illinois 60143	3,887,469	100.0%	3,130,000	757,469	100%

(1)    Assumes the sale of all shares offered under this prospectus (shares issued under our stock option plan not included).

(2) Includes 525,981 restricted voting shares owned by Mendota Insurance Company, and 627,122 restricted voting shares owned by Universal Casualty Company, both of which are wholly owned subsidiaries of KAI.

(3) Restricted voting shares offered by the selling shareholder are automatically converted into ordinary shares pursuant to this offering.

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MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

As of September 30, 2012, there were 100 shareholders of record of our ordinary shares, of which 1,542,764 were issued and outstanding. Additionally, there were 4,601,621 restricted voting shares outstanding, all of which convert to ordinary shares upon the sale of such shares by KAI or their subsidiaries. Our ordinary shares have been exclusively listed on the TSXV under the symbol “AFH” since January 6, 2011. There is currently no established public trading market for our ordinary shares in the United States.

Set forth below are the high and low listing prices of the ordinary shares during 2011, 2012 and the first quarter of 2013, through January 17, 2013 per the TSXV, assuming retroactive application of the one-for-three reverse stock split (in Canadian dollars):

Summary of Share Prices
	High	Low
2013
First Quarter (through January 17, 2013)	C$6.30	C$6.30
2012
Fourth Quarter	C$6.75	C$5.55
Third Quarter	C$6.00	C$3.60
Second Quarter	C$5.55	C$2.46
First Quarter	C$6.00	C$3.75
2011
Fourth Quarter	C$6.00	C$4.80
Third Quarter	C$6.00	C$4.44
Second Quarter	C$5.58	C$3.75
First Quarter	C$5.97	C$3.30

During 2011, 2012 or to date in 2013, we did not repurchase any of our equity securities. We also did not pay any dividends during 2011, 2012 or to date in 2013 and have no current plans to pay dividends to our ordinary shareholders. The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation (or sooner, if we declare dividends) is $1.42 million as of September 30, 2012.

For more information regarding dividends, refer to “Dividend Policy” section of this prospectus.

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CAPITALIZATION

The following table sets forth a summary of our capitalization on an historical basis as of September 30, 2012, and should be read in conjunction with our interim consolidated financial statements and notes included in this prospectus. The table also summarizes our capitalization on an as adjusted basis assuming: (1) the effectiveness of the 1:3 share consolidation approved by shareholders on December 7, 2012; (2) the completion of this initial public offering at an assumed initial public offering price of $[•] per ordinary share (the U.S. dollar equivalent of the last reported sale price as of January [•], 2013 of our ordinary shares on the TSXV based on an assumed exchange rate of C$[•] to $1 U.S.); (3) net proceeds to us from this initial public offering of $[•] after payment of estimated underwriting discounts, commissions and related expenses of $[•]; and (4) the intended application of the net proceeds of this offering.

(in ‘000s, except share and per share data)	September 30, 2012
Shareholders’ Equity	Actual			Adjusted
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding actual and as adjusted. Liquidation value $1.00 per share.	$	18,000		$	—
Ordinary shares, par value per share $0.003, 266,666,667 shares authorized, 1,542,764 shares issued and outstanding actual, and [•] issued and outstanding as adjusted	4
Restricted voting common shares, par value per share $0.003, 33,333,334 shares authorized, 4,601,621 shares issued and outstanding actual, and [•] issued and outstanding as adjusted	14
Additional paid-in capital	152,739
Retained deficit	(113,919		)
Accumulated other comprehensive income, net of tax	2,265
Total Shareholders’ Equity	$	59,103		$	—

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following unaudited condensed consolidated pro forma financial statements are based on the historical financial statements of Atlas Financial Holdings, Inc. and Camelot Services, Inc., after giving effect to the acquisition of Camelot Services, which was consummated on January 2, 2013. These estimates and assumptions are subject to change upon the finalization of valuations, which are contingent upon final appraisals, identifiable intangible assets and any other adjustments until the consummation of the acquisition. Revisions to the preliminary purchase price allocation could result in significant deviation from the accompanying pro forma information. Atlas’ management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the transactions contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited condensed consolidated pro forma financial information.

The following unaudited pro forma condensed consolidated financial statements and explanatory notes present how the financial statements of Atlas may have appeared had the acquisition occurred on January 1, 2011 (with respect the results of statements of comprehensive income) or as of September 30, 2012 (with respect to statement of financial position information). Certain amounts from Camelot Services’ historical financial statements have been reclassified to conform to Atlas’ presentation.

These unaudited pro forma condensed consolidated financial statements have been derived from and should be read together with the historical financial statements and related notes of Atlas included in its annual report on Form 10-K for the year ended December 31, 2011 and its quarterly report on Form 10-Q for the nine month period ended September 30, 2012, both of which have been filed with the Securities and Exchange Commission.

The unaudited pro forma condensed consolidated financial information has been prepared by management, are presented for illustrative purposes only, and do not purport to represent what the results of operations or financial position of Atlas would have been had the acquisition actually occurred as of the dates indicated, nor is it indicative of future financial position or results of operations for any period.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	September 30, 2012
(in ‘000s)	Historical									Pro Forma
	Atlas			Camelot			Adjustments			Notes	Combined
Assets
Investments, available for sale
Fixed income securities, at fair value	$	109,555		$	35,608		$	(11,946	)	4.a.	$	133,217
Equity securities, at fair value	—			3,076			—				3,076
Cash and cash equivalents	12,151			8,931			(12,895		)	3.a.	8,187
Accrued investment income	807			228			—				1,035
Accounts receivable and other assets	24,811			10,589			—				35,400
Reinsurance recoverables, net	6,983			5,741			12,857			4.a.	25,581
Prepaid reinsurance premiums	2,219			—			—				2,219
Deferred policy acquisition costs	4,501			1,676			(1,676		)	2.b., 4.a	4,501
Deferred tax asset, net	6,343			—			208			7.b.	6,551
Software and office equipment, net	1,157			979			(784		)	2.c.	1,352
Assets held for sale	166			—			—				166
Investment in investees	1,250			—			—				1,250
Total Assets	$	169,943		$	66,828		$	(14,236	)		$	222,535
Liabilities
Claims liabilities	$	73,574		$	30,871		$	—			$	104,445
Unearned premiums	28,325			11,946			—				40,271
Due to reinsurers and other insurers	4,658			—			—				4,658
Other liabilities and accrued expenses	4,283			3,557			—				7,840
Notes Payable	—			1,051			(1,051		)	2.a.	—
Total Liabilities	$	110,840		$	47,425		$	(1,051	)		$	157,214
Shareholders’ Equity
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2012	$	18,000		$	—		$	2,000		3.b.	$	20,000
Ordinary voting common shares, par value per share $0.003, 266,666,667 shares authorized, 1,542,764 shares issued and outstanding at September 30, 2012	4			1			—				5
Restricted voting common shares, par value per share $0.003, 33,333,334 shares authorized, 4,601,621 shares issued and outstanding at September 30, 2012	14			—			—				14
Additional paid-in capital	152,739			30,928			(14,895		)	3.a, 3.b.	168,772
Retained deficit	(113,919		)	(13,491		)	317			2.a.,2.b.,2.c., 7.b.	(127,093		)
Accumulated other comprehensive income, net of tax	2,265			1,965			(607		)	4.b., 4.c.	3,623
Total Shareholders’ Equity	$	59,103		$	19,403		$	(13,185	)		$	65,321
Total Liabilities and Shareholders’ Equity	$	169,943		$	66,828		$	(14,236	)		$	222,535

See accompanying notes to unaudited condensed consolidated pro forma financial statements.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in ‘000s, except per share data)	Nine Months Ended September 30, 2012
	Historical									Pro Forma
	Atlas			Camelot			Adjustments			Notes	Combined
Net premiums earned	$	26,795		$	19,148		$	(11,260	)	4.d., 5	$	34,683
Net investment income	1,878			930			(404		)	4.b.	2,404
Net investment gains (losses)	1,098			(90		)	920			4.c.	1,928
Other income	169			(200		)	74			2.a.	43
Total revenue	29,940			19,788			(10,670		)		39,058
Net claims incurred	18,477			19,109			(14,269		)	4.d., 5, 6.a.	23,317
Other underwriting expenses	9,541			7,496			(5,809		)	4.d., 5	11,228
Total expenses	28,018			26,605			(20,078		)		34,545
Income from operations before income tax (benefit)/expense	1,922			(6,817		)	9,408				4,513
Income tax expense	—			2,641			(2,641		)	7.a., 7.b.	—
Net income attributable to parent	1,922			(9,458		)	12,049				4,513
Less: Preferred share dividends	606			—			68			8	674
Net income/(loss) attributable to common shareholders	$	1,316		$	(9,458	)	$	11,981			$	3,839
Other comprehensive income/(loss) related to Available for Sale Securities:
Changes in net unrealized gains	$	1,899		$	1,053		$	—			$	2,952
Reclassification to income of net gains	(632		)	136			(920		)		(1,416		)
Effect of income tax	(427		)	(404		)	313				(518		)
Other comprehensive income/(loss) for the period	840			785			(607		)		1,018
Total comprehensive income/(loss)	$	2,762		$	(8,673	)	$	11,442			$	5,531
Basic weighted average common shares outstanding	6,146,179										6,146,179
Earnings/(loss) per common share, basic	$	0.21									$	0.62
Diluted weighted average common shares outstanding	6,150,585										6,150,585
Earnings/(loss) per common share, diluted	$	0.21									$	0.62

See accompanying notes to unaudited condensed consolidated pro forma financial statements.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in ‘000s, except per share data)	Year Ended December 31, 2011
	Historical									Pro Forma
	Atlas			Camelot			Adjustments			Notes	Combined
Net premiums earned	$	35,747		$	23,989		$	(11,796	)	4.d., 5	$	47,940
Net investment income	3,280			1,231			(470		)	4.b.	4,041
Net investment gains	4,201			227			553			4.c.	4,981
Other income	124			(188		)	120			2.a.	56
Total revenue	43,352			25,259			(11,593		)		57,018
Net claims incurred	28,994			20,440			(9,873		)	4.d., 5, 6.b.	39,561
Other underwriting expenses	17,991			9,520			(6,103		)	4.d., 5	21,408
Total expenses	46,985			29,960			(15,976		)		60,969
Income from operations before income tax (benefit)/expense	(3,633		)	(4,701		)	4,383				(3,951		)
Income tax expense	(1,163		)	(1,570		)	1,570			7.a., 7.b.	(1,163		)
Net income attributable to parent	(2,470		)	(3,131		)	2,813				(2,788		)
Less: Preferred share dividends	810						90			8	900
Net loss attributable to common shareholders	$	(3,280	)	$	(3,131	)	$	2,723			$	(3,688	)
Other comprehensive income/(loss) related to:
Changes in net unrealized gains	$	154		$	1,667		$	—			$	1,821
Reclassification to income of net gains	(3,469		)	(344		)	(553		)		(4,366		)
Settlement of pension plan	2,473			—			—				2,473
Effect of income tax	(789		)	(450		)	188				(1,051		)
Other comprehensive income/(loss) for the period	(1,631		)	873			(365		)		(1,123		)
Total comprehensive income/(loss)	$	(4,101	)	$	(2,258	)	$	2,448			$	(3,911	)
Basic weighted average common shares outstanding	6,124,542										6,124,542
Earnings/(loss) per common share, basic	$	(0.54	)								$	(0.60	)
Diluted weighted average common shares outstanding	6,124,542										6,124,542
Earnings/(loss) per common share, diluted	$	(0.54	)								$	(0.60	)

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Atlas Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements

Basis of Presentation

The unaudited pro forma consolidated financial information gives effect to the acquisition of Camelot Services as if it had occurred (i) on September 30, 2012 for the purposes of the unaudited condensed consolidated pro forma statement of financial position and (ii) on January 1, 2011 for the purposes of the unaudited condensed consolidated pro forma statements of comprehensive income for the year ended December 31, 2011 and for the nine months ended September 30, 2012. The unaudited condensed consolidated pro forma financial information has been prepared by Atlas’ management. Certain amounts from Camelot Services’ historical consolidated financial statements have been reclassified to conform to Atlas’ presentation.

General

This unaudited pro forma consolidated financial information has been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated pro forma statement of financial position as of September 30, 2012 and the unaudited condensed consolidated pro forma statements of comprehensive income for the year ended December 31, 2011 and the nine months ended September 30, 2012 have been prepared using the following information:

• Unaudited historical consolidated financial statements of Atlas as of September 30, 2012 and for the nine months ended September 30, 2012;

• Unaudited historical consolidated financial statements of Camelot as of September 30, 2012 and for the nine months ended September 30, 2012;

• Audited historical consolidated financial statements of Atlas for the year ended December 31, 2011;

• Audited historical consolidated financial statements of Camelot for the year ended December 31, 2011; and

• Such other supplementary information as considered necessary to reflect the proposed acquisition in the unaudited pro forma condensed consolidated financial information.

Purchase Price and Related Considerations

On October 25, 2012, Atlas announced it had entered into a stock purchase agreement for the acquisition of Camelot Services from Hendricks. Such agreement was entered into on October 24, 2012, by and among Atlas and Hendricks. The transaction closed on January 2, 2013.

The total purchase price for all of Camelot’s outstanding shares was $14.9 million, purchased with a combination of cash and Atlas preferred shares. Consideration consisted of a $6.0 million dividend paid by Gateway immediately prior to the closing, $2.0 million of Atlas preferred shares (consisting of a total of 2 million shares) and $6.9 million in cash. Under the terms of the stock purchase agreement, the closing price was reduced due to reserve strengthening of approximately $8.0 million that Camelot Services recognized prior to closing. Approximately $4.3 million of this reserve strengthening was related to commercial automobile reserves, a portion of which was related to the long-haul truck program that is currently in run off. The amount of pre-closing reserve strengthening was consistent with the conclusions of an independent actuarial analysis of the reserves of Gateway. In addition to this pre-closing reserve strengthening, we have contractual protections to offset up to $2.0 million of future reserve development. We have also agreed to provide the sellers up to $2.0 million in additional consideration in the event of favorable reserve development.

Gateway has historically underwritten other commercial insurance products that will not be underwritten by Atlas. Gateway previously wrote workers’ compensation insurance, which we did not acquire as part of the transaction. An indemnity reinsurance agreement was entered into pursuant to which 100% of Gateway’s workers’ compensation business was ceded to an affiliate of the seller as part of the transaction. Under the terms of the stock purchase agreement, certain other underwriting expenses associated with the workers’ compensation business were assumed by the seller. In May 2012, Gateway ceased underwriting commercial automobile liability insurance for long-haul truck operators.

Atlas began consolidating Camelot Services effective January 1, 2013. The purchase consideration is allocated to the assets acquired and liabilities assumed, including separately identified intangible assets, based on their fair values as of the close of the acquisition. Direct costs of the acquisition are accounted for separately from the business combination and are expensed as incurred. As the values of certain assets and liabilities are preliminary in nature, they are subject to adjustment as

35

additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and loss reserves. The valuations will be finalized within six months of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill.

1. For purposes of presentation in the unaudited condensed consolidated pro forma financial information, the allocation of the actual purchase consideration is as follows:

Estimated Purchase Consideration (in ‘000s)
Cash	$	12,895
Preferred Stock	2,000
Total	$	14,895
Pro Forma Preliminary Allocation of Purchase Price (in ‘000s)
Cash and investments	$	46,700
Other current assets	16,886
Property and equipment	195
Deferred policy acquisition costs	674
Total Assets	$	64,455
Claims liabilities	$	36,879
Unearned premiums	9,357
Accounts payable and other liabilities	3,324
Total Liabilities	$	49,560

The amounts outlined above are subject to change in accordance with the Stock Purchase Agreement dated October 25, 2012, such that the final purchase price will be determined based upon the audited financial statements of Camelot as of December 31, 2012.

2. Adjustments to book value of the acquired assets and liabilities are as follows:

a. Effective prior to the closing balance sheet, Hendricks forgave Camelot’s note related to a software purchase for its worker’s compensation business in the amount of $1.1 million. The related interest expense of $74,000 and $120,000 has been eliminated from the pro forma statements of comprehensive income for September 30, 2012 and December 31, 2011, respectively.

b. Deferred acquisition costs of $765,000 related to the taxi and truck lines of business will be eliminated from Camelot’s book value according to the purchase price calculations of the stock purchase agreement.

c. Software related to the workers’ compensation line of business of $784,000 will be eliminated from Camelot’s book value and is not being acquired under the terms of the stock purchase agreement.

d. Gateway management incentives related to 2012 activities, including the successful sale of Gateway, are the sole responsibility of the seller, Hendricks, and have not been accounted for in these results.

3. The total purchase consideration of $14.9 million consisted of cash, in the amount of $12.9 million, and Atlas preferred shares, in the estimated amount of $2.0 million. The details of this consideration are as follows:

a. Cash of $6.9 million was derived from an extraordinary dividend from Atlas’ insurance subsidiaries and cash of $6.0 million was derived from an extraordinary dividend from Gateway. These extraordinary dividends have received regulatory approval and have been paid.

b. $2.0 million of Atlas preferred shares, consisting of a total of 2 million shares, were issued to Hendricks according to the terms of the stock purchase agreement. The preferred shares accrue dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. Upon liquidation, dissolution or winding-up of Atlas, holders of preferred shares receive the greater of $3.00 per share plus all declared and unpaid dividends or the amount they would receive in liquidation if the preferred shares had been converted to ordinary voting common shares

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immediately prior to liquidation. Preferred shares are convertible into ordinary voting common shares at the option of the holder at any date that is after the five year anniversary date of issuance at the rate of 0.1270 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of $3.00 per share plus accrued and unpaid dividends commencing at two years from the issuance date.

4. Effective immediately after the close of the transaction, Gateway entered into a reinsurance agreement with a third party reinsurer. The reinsurance agreement covers all in-force premium and loss reserves for Gateway's workers' compensation program. Along with the reserves, any go-forward premium written for the workers' compensation program will be ceded in its entirety to this third party reinsurer under the terms of this reinsurance agreement. While Gateway remains liable to its insureds, Atlas does not expect to have any net exposure to losses related to this workers' compensation business.

The effects of the reinsurance agreement on the statement of financial position and statements of comprehensive income are as follows:

a. These balances were adjusted to reflect assets that will be ceded to the third party reinsurer as collateral for the net liabilities associated with the workers’ compensation premium, including loss reserves in the amount of $6.6 million, plus unearned premium reserves of $6.2 million, and less deferred policy acquisition costs of $911,000. The amount due from reinsurers and other insurers was increased by an equal amount to reflect the reinsurance recoverable from this third party reinsurer.

b. There will be a reduction in net investment income of $404,000 for the nine months ended September 30, 2012 and $470,000 for the year ended December 31, 2011 to reflect the pro forma decrease in cash and cash equivalents by $12.9 million as a result of dividends paid from both Atlas and Camelot Services and the pro forma net reduction of Camelot Services’ invested assets by $11.9 million as a result of the workers’ compensation reinsurance agreement.

c. Realization of gains of $920,000 for the nine months ended September 30, 2012 and $553,000 for the year ended December 31, 2011 to reflect the net reduction of Camelot Services’ invested assets by $11.9 million in connection with the workers’ compensation reinsurance agreement.

d. The following table identifies the adjustments to the statement of comprehensive income as a result of removing the impacts of the workers’ compensation lines of business as if the reinsurance transaction were in place as of January 1, 2011:

	For the Nine Months Ended			For the Year Ended
(in ‘000s)	September 30, 2012			December 31, 2011
Net premiums earned	$	(7,173	)	$	(7,133	)
Net claims incurred	(5,781		)	(6,318		)
Other underwriting expenses	(3,213		)	(3,500		)
Total expenses	(8,994		)	(9,818		)
Income from operations before income tax (benefit)/expense	$	1,821		$	2,685

5. During 2012, Gateway exited its truck line of business and placed into run-off claims related to this line of business. The following table identifies the adjustments to the statement of comprehensive income as a result of removing the impacts of the truck lines of business as if these lines were run-off as of January 1, 2011:

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	For the Nine Months Ended			For the Year Ended
(in ‘000s)	September 30, 2012			December 31, 2011
Net premiums earned	$	(4,087	)	$	(4,663	)
Net claims incurred	(3,878		)	(5,357		)
Other underwriting expenses	(2,596		)	(2,603		)
Total expenses	(6,474		)	(7,960		)
Income from operations before income tax (benefit)/expense	$	2,387		$	3,297

6. Camelot recorded loss and loss adjustment expense development of $4.8 million in its September 30, 2012 financial statement that related to periods prior to 2012. The table below indicates the amount of loss and loss adjustment expense development by line of business:

(in ‘000s)	2011		2010 & Prior		Total
Taxi	$	1,801	$	390	$	2,191
Truck	1,429		103		1,532
Contractors	1,029		58		1,087
Total	$	4,259	$	551	$	4,810

a. A reduction to net claims incurred equal to $4.8 million was recorded in the September 30, 2012 pro forma statement of comprehensive income to remove the loss and loss adjustment expense development related to periods of 2011 and prior from the 2012 results.

b. An adjustment equal to $1.8 million was made to increase the net claims incurred relating to the impact of 2011 taxi loss and loss adjustment expense development for year 2011. Since the workers’ compensation and the truck lines of business were eliminated in items 4 and 5 above, no further adjustments to the 2011 net claims incurred were necessary.

7. Adjustments to income tax expense are as follows:

a. Camelot recorded tax expense of $2.6 million in its September 30, 2012 statement of comprehensive income. This adjustment was made to establish an allowance against its deferred tax assets as it relates to the balance as of December 31, 2011. A reversal adjustment was made to the income tax line of the pro forma statement of comprehensive income for the nine months ended September 30, 2012 in the amount of $2.6 million to eliminate the impact of this adjustment. Also, an adjustment of $1.6 million was made to eliminate the income taxes in the December 31, 2011 statement of comprehensive income relating to the establishment of the deferred tax allowance as if it had occurred on January 1, 2011.

b. Income tax adjustments related to the impact of adjustment 4.c. above of $28,000 and $180,000 for the nine months ended September 30, 2012 and the year ended December 31, 2012 were offset by decreases in the deferred tax allowance.

8. Accrued dividends were adjusted by $67,500 for the nine months ended September 30, 2012 and by $90,000 for the year ended December 31, 2011 to reflect the issuance of $2.0 million of Atlas preferred shares to Hendricks.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that may include, but are not limited to, statements with respect to estimates of future expenses, revenue and profitability; trends affecting financial condition, cash flows and results of operations; the availability and terms of additional capital; dependence on key suppliers and other strategic partners; industry trends and the competitive and regulatory environment; the successful integration of Gateway; the impact of losing one or more senior executives or failing to attract additional key personnel; and other factors referenced in this prospectus. Our actual results could differ materially from those discussed in the forward-looking statements. Forward-looking statements contained herein are made as of the date of this prospectus and we disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

In this discussion and analysis, the term “common share” refers to the summation of restricted voting shares and ordinary shares when used to describe loss or book value per common share.

Forward-looking statements

This report contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, which may include, but are not limited to, statements with respect to estimates of future expenses, revenue and profitability; trends affecting financial condition and results of operations; the availability and terms of additional capital; dependence on key suppliers, and other strategic partners; industry trends and the competitive and regulatory environment; the impact of losing one or more senior executives or failing to attract additional key personnel; and other factors referenced in this report.

Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Atlas to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political, regulatory and social uncertainties.

Although Atlas has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this report and Atlas disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty in them.

Overview

We are a financial services holding company incorporated under the laws of the Cayman Islands. Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector, which is carried out through our insurance subsidiaries, American Country Insurance Company, or American Country, and American Service Insurance Company, Inc., or American Service, together with American Country, which we refer to as our “insurance subsidiaries”. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business auto. Our goal is to always be the preferred specialty commercial transportation insurer in any geographic areas where our value proposition delivers benefit to all stakeholders. We are licensed to write property and casualty, or P&C, insurance in 47 states in the United States. The insurance subsidiaries distribute their products through a network of independent retail agents, and actively wrote insurance in 31 states as of September 30, 2012. Our acquisition of Gateway expanded the number of states in which we are actively writing our core commercial auto lines to 39 states and the District of Columbia.

Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector. Over the past two years, we have disposed of non-core assets and placed into run-off certain noncore lines of business previously written by the insurance subsidiaries. Our focus going forward is the underwriting of commercial automobile insurance in the U.S. Substantially all of our new premiums written are in “light” commercial automobile lines of business.

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Commercial Automobile

The Company’s primary target market is made up of taxi, limousine and non-emergency para-transit operators with one to ten units. The “light” commercial automobile policies we underwrite provide coverage for light weight commercial vehicles typically with the minimum limits prescribed by statute, municipal or other regulatory requirements. The majority of our policyholders are individual owners or small fleet operators. In certain jurisdictions like Illinois and New York, we have also been successful working with larger operators who retain a meaningful amount of their own risk of loss through self-insurance or self-funded captive insurance entity arrangements.  In these cases, we provide support in the areas of day to day policy administration and claims handling consistent with the value proposition we offer to all of our insureds, generally on a fee for service basis.  We may also provide excess coverage above the levels of risk retained by the insureds where a better than average loss ratio is expected.  Through these arrangements, we are able to effectively utilize the significant specialized operating infrastructure we maintain to generate revenue from business segments that may otherwise be more price sensitive in the current market environment.

The “light” commercial automobile sector is a subset of the historically profitable commercial automobile insurance industry segment. Commercial automobile insurance has outperformed the overall P&C industry in each of the past ten years based on data compiled by A.M. Best. A recent survey by A.M. Best estimates the total U.S. market for commercial automobile liability insurance to be $24 billion. The size of the commercial automobile insurance market can be affected significantly by many factors, such as the underwriting capacity and underwriting criteria of automobile insurance carriers and general economic conditions. Historically, the commercial automobile insurance market has been characterized by periods of price competition and excess capacity followed by periods of higher premium rates and shortages of underwriting capacity.

We believe that there is a positive correlation between the economy and commercial automobile insurance in general. Operators of “light” commercial automobiles may be less likely than other business segments within the commercial automobile insurance market to take vehicles out of service as their businesses and business reputations rely heavily on availability. With respect to certain business lines such as the taxi line, there are also other factors such as the cost and limited supply of medallions which may discourage a policyholder from taking vehicles out of service in the face of reduced demand for the use of the vehicle.

Non-Standard Automobile

Non-standard automobile insurance is principally provided to individuals who do not qualify for standard automobile insurance coverage because of their payment history, driving record, place of residence, age, vehicle type or other factors. Such drivers typically represent higher than normal risks and pay higher insurance rates for comparable coverage.

Consistent with Atlas’ focus on commercial automobile insurance, Atlas has transitioned away from the non-standard auto line in 2012. Atlas ceased renewals of policies of this type in 2011, allowing surplus and resources to be devoted to the expected growth of the commercial automobile business. The negative written premium within the non-standard auto line reflects policies canceled mid-term.

Other

This line of business is primarily comprised of Atlas’ surety business. Our surety program primarily consists of U.S. Customs bonds. We engage a former affiliate, Avalon Risk Management, to help coordinate marketing, customer service and claim handling for the surety bonds written. This program is 100% reinsured to an unrelated third party.

Revenues

We derive our revenues primarily from premiums from our insurance policies and income from our investment portfolio. Our underwriting approach is to price our products to generate consistent underwriting profit for the insurance companies we own. As with all P&C insurance companies, the impact of price changes is reflected in our financial results over time. Price changes on our in-force policies occur as they are renewed, which generally takes twelve months for our entire book of business and up to an additional twelve months to earn a full year of premium at the renewal rate.

We approach investment and capital management with the intention of supporting insurance operations by providing a stable source of income to supplement underwriting income. The goals of our investment policy are to protect capital while optimizing investment income and capital appreciation and maintaining appropriate liquidity. We follow a formal investment policy and the Board reviews the portfolio performance at least quarterly for compliance with the established guidelines.

Expenses

Net claims incurred expenses are a function of the amount and type of insurance contracts we write and of the loss experience of the underlying risks. We record net claims incurred based on an actuarial analysis of the estimated losses we expect to be reported on contracts written. We seek to establish case reserves at the maximum probable exposure based on our historical claims experience. Our ability to estimate net claims incurred accurately at the time of pricing our contracts is a critical factor

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in determining our profitability. The amount reported under net claims incurred in any period includes payments in the period net of the change in the value of the reserves for net claims incurred between the beginning and the end of the period.

Commissions and other underwriting expenses consist principally of brokerage and agent commissions and to a lesser extent premium taxes. The brokerage and agent commissions are reduced by ceding commissions received from assuming reinsurers that represent a percentage of the premiums on insurance policies and reinsurance contracts written and vary depending upon the amount and types of contracts written.

Other operating and general expenses consist primarily of personnel expenses (including salaries, benefits and certain costs associated with awards under our equity compensation plans, such as stock compensation expense) and other general operating expenses. Our personnel expenses are primarily fixed in nature and do not vary with the amount of premiums written.

In this discussion and analysis, the term “common share” refers to the summation of restricted voting shares and ordinary shares when used to describe loss or book value per common share.

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Consolidated Performance

Third Quarter 2012 Highlights (comparisons are to third quarter 2011 unless otherwise noted):

• Gross premium written increased by 113.7%, which included an increase of 313.4% in our core commercial auto business, with a significant portion from our excess taxi program without which growth would have been 80.9%.

• We actively distributed our core products in 31 states during the three month period ended September 30, 2012.

• The combined ratio improved by 22.1% to 97.6%, which represents the first quarter under 100% since our inception.

• Underwriting results improved by $2.0 million and we returned to underwriting profitability.

• Net income for the three month period ended September 30, 2012 was $1.7 million.

• Basic and diluted earnings per ordinary common share was $0.24, net of accounting treatment for preferred shares.

• Book value per diluted common share on September 30, 2012 was $6.46, compared to $6.16 at June 30, 2012.

The following financial data is derived from Atlas’ unaudited condensed consolidated financial statements for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011.

Selected Financial Information (in ‘000s)
	Three Month Periods Ended						Nine Month Periods Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Gross premium written	$	23,353		$	10,928		$	44,349		$	32,951
Net premium earned	10,934			8,797			26,795			26,668
Losses on claims	7,165			6,984			18,477			20,596
Acquisition costs	1,813			1,720			4,582			5,343
Other underwriting expenses	1,692			1,822			4,959			5,642
Net underwriting income/(loss)	264			(1,729		)	(1,222		)	(4,913		)
Net investment and other income	1,393			2,795			3,144			5,468
Net income before tax	1,657			1,066			1,922			555
Income tax expense	—			—			—			—
Net income	$	1,657		$	1,066		$	1,922		$	555
Net income/(loss) attributable to common shareholders	1,455			864			1,316			(51		)
Key Financial Ratios:
Loss ratio	65.5		%	79.4		%	69.0		%	77.2		%
Acquisition cost ratio	16.6		%	19.6		%	17.1		%	20.0		%
Other underwriting expense ratio	15.5		%	20.7		%	18.5		%	21.2		%
Combined ratio	97.6		%	119.7		%	104.6		%	118.4		%
Return on equity (annualized)	11.4		%	7.2		%	4.4		%	1.2		%
Return on common equity (annualized)	15.0		%	8.6		%	4.5		%	(0.2		)%
Earnings/(loss) per common share, basic and diluted	$	0.24		$	0.14		$	0.21		$	(0.01	)
Book value per common share, basic and diluted	$	6.46		$	6.56		$	6.46		$	6.56

Third Quarter 2012

Atlas’ combined ratio for the three month period ended September 30, 2012 was 97.6%, compared to 119.7% for the three month period ended September 30, 2011 and 111.5% for the three month period ended June 30, 2012.

As planned, core commercial automobile lines continue to be the most significant component of Atlas’ gross premium written as a result of the strategic focus on these core lines of business coupled with positive response from new and existing agents. Gross premium written related to these core commercial lines increased by 313.4% for the three month period ended September 30, 2012 as compared to the three month period ended September 30, 2011. As a result, the overall loss ratio for the three month period ended September 30, 2012 improved to 65.5% compared to 79.4% in the three month period ended September 30, 2011 and 71.6% for the three month period ended June 30, 2012.

Net investment and other income generated $1.4 million of income for the three month period ended September 30, 2012, of which $779,000 are realized gains. This resulted in a 4.6% annualized yield for the three month period ended September 30, 2012, compared to $2.0 million of realized gains and a 7.4% annualized yield for the three month period ended September 30, 2011.

Overall, Atlas generated net income of $1.7 million for the three month period ended September 30, 2012. After taking the impact of the liquidation preference of the preferred shares into consideration, basic and diluted earnings per common share in the three month period ended September 30, 2012 was $0.24. This compares to net income of $1.1 million or earnings of $0.14

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per common share diluted in the three month period ended September 30, 2011 and income of $130,000 or a loss per share of $0.01 per common share diluted in the three month period ended June 30, 2012.

Year to Date September 30, 2012

Atlas’ combined ratio for the nine month period ended September 30, 2012 was 104.6%, compared to 118.4% for the nine month period ended September 30, 2011. This improvement in the combined ratio was mostly attributable to the loss ratio reduction, from 77.2% to 69.0%, as a result of the exiting of the non-standard automobile lines. Our commercial automobile lines of business grew 183.0% during the nine month period ended September 30, 2012 versus the nine month period ended September 30, 2011.

Investment performance and other income generated $3.1 million of income for the nine month period ended September 30, 2012, of which $1.1 million are realized gains. This resulted in a 3.2% annualized yield for the nine month period ended September 30, 2012, compared to 4.7% in the nine month period ended September 30, 2011 when we realized $2.8 million in gains. Cash and invested assets were $121.7 millionas of the period ended September 30, 2012 and were $6.2 million lower than December 31, 2011, resulting primarily from the payment of claim settlements. This reduction in cash and invested assets is in line with expectations.

Overall, Atlas generated net income of $1.9 million for the nine month period ended September 30, 2012. After taking the impact of the liquidation preference of the preferred shares into consideration, basic and diluted earnings per common share in the nine month period ended September 30, 2012 was $0.21. This compares to net income of $555,000 or a loss of $0.01 per common share diluted in the nine month period ended September 30, 2011.

Book value per common share diluted as of the period ended September 30, 2012 was $6.46, compared to $6.56as of the period ended September 30, 2011 and $6.16 as at the three month period ended June 30, 2012.

Application of Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining:

• Fair value and impairment of financial assets;

• Deferred policy acquisition costs recoverability;

• Reserve for property-liability insurance claims and claims expense estimation; and

• Deferred tax asset valuation.

In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. It is reasonably likely that changes in these items could occur from period to period and result in a material impact on our consolidated financial statements.

A brief summary of each of these critical accounting estimates follows. For a more detailed discussion of the effect of these estimates on our consolidated financial statements, and the judgments and assumptions related to these estimates, see the referenced sections of this document. For a complete summary of our significant accounting policies, see the notes to the consolidated financial statements.

Fair values of financial instruments - Atlas has used the following methods and assumptions in estimating its fair value disclosures:

Fair values for bonds and equity securities are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or values obtained from independent pricing services through a bank trustee.

Atlas’ fixed income portfolio is managed by Asset Allocation Management (“AAM”), an SEC registered investment advisor specializing in the management of insurance company portfolios. Management works directly with AAM to ensure that Atlas benefits from their expertise and also evaluates investments as well as specific positions independently using internal resources. AAM has a team of credit analysts for all investment grade fixed income sectors. The investment process begins with an independent analyst review of each security’s credit worthiness using both quantitative tools and qualitative review. At the issuer level, this includes reviews of past financial data, trends in financial stability, projections for the future, reliability of the management team in place, market data (credit spread, equity prices, trends in this data for the issuer and the issuer’s industry). Reviews also consider industry trends and the macro-economic environment. This analysis is continuous, integrating new information as it becomes available. In short, Atlas does not rely on rating agency ratings to make investment decisions, but instead with the support of its independent investment advisors, does independent fundamental credit analysis to find the best securities possible. AAM has found that over time this process creates an ability to sell securities prior to rating agency

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downgrades or to buy securities before upgrades. As of the period ended September 30, 2012, this process did not generate any significant difference in the rating assessment between Atlas’ review and the rating agencies.

Atlas employs specific control processes to determine the reasonableness of the fair value of its financial assets. These processes are designed to supplement those performed by AAM to ensure that the values received from them are accurately recorded and that the data inputs and the valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. For example, on a continuing basis, Atlas assesses the reasonableness of individual security values which have stale prices or whose changes exceed certain thresholds as compared to previous values received from AAM or to expected prices. The portfolio is reviewed routinely for transaction volumes, new issuances, any changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for market valuations. When fair value determinations are expected to be more variable, they are validated through reviews by members of management or the Board of Directors who have relevant expertise and who are independent of those charged with executing investment transactions.

Impairment of financial assets - Atlas assesses, on a quarterly basis, whether there is objective evidence that a financial asset or group of financial assets is impaired. An investment is considered impaired when the fair value of the investment is less than its cost or amortized cost. When an investment is impaired, the Company must make a determination as to whether the impairment is other-than-temporary.

Under U.S. GAAP, with respect to an investment in an impaired debt security, other-than temporary impairment (OTTI) occurs if (a) there is intent to sell the debt security, (b) it is more likely than not it will be required to sell the debt security before its anticipated recovery, or (c) it is probable that all amounts due will be unable to be collected such that the entire cost basis of the security will not be recovered. If Atlas intends to sell the debt security, or will more likely than not be required to sell the debt security before the anticipated recovery, a loss in the entire amount of the impairment is reflected in net realized gains (losses) on investments in the consolidated statements of comprehensive income. If Atlas determines that it is probable it will be unable to collect all amounts and Atlas has no intent to sell the debt security, a credit loss is recognized in net realized gains (losses) on investments in the consolidated statements of comprehensive income to the extent that the present value of expected cash flows is less than the amortized cost basis; any difference between fair value and the new amortized cost basis (net of the credit loss) is reflected in other comprehensive income (losses), net of applicable income taxes.

Deferred policy acquisition costs - Atlas defers brokers’ commissions, premium taxes and other underwriting and marketing costs directly relating to the successful acquisition of premiums written to the extent they are considered recoverable. These costs are then expensed as the related premiums are earned. The method followed in determining the deferred policy acquisition costs limits the deferral to its realizable value by giving consideration to estimated future claims and expenses to be incurred as premiums are earned. Changes in estimates, if any, are recorded in the accounting period in which they are determined. Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs. Atlas’ deferred policy acquisition costs are reported net of deferred ceding commissions.

Valuation of deferred tax assets - Deferred taxes are recognized using the asset and liability method of accounting. Under this method the future tax consequences attributable to temporary differences in the tax basis of assets, liabilities and items recognized directly in equity and the financial reporting basis of such items are recognized in the financial statements by recording deferred tax liabilities or deferred tax assets.

Deferred tax assets related to the carry-forward of unused tax losses and credits and those arising from temporary differences are recognized only to the extent that it is probable that future taxable income will be available against which they can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.

In assessing the need for a valuation allowance, Atlas considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized or if it is deemed premature to conclude that these assets will be realized in the near future, a valuation allowance is recorded.

Claims liabilities - The provision for unpaid claims represent the estimated liabilities for reported claims, plus those incurred but not yet reported and the related estimated loss adjustment expenses. Unpaid claims expenses are determined using case-basis evaluations and statistical analyses, including insurance industry loss data, and represent estimates of the ultimate cost of all claims incurred. Although considerable variability is inherent in such estimates, management believes that the liability for unpaid claims is adequate. The estimates are continually reviewed and adjusted as necessary; such adjustments are included in current operations and are accounted for as changes in estimates.

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Operating Results

Gross Premium Written

The following table summarizes gross premium written by line of business.

Gross Premium Written by Line of Business (in ‘000s)
	Three Month Periods Ended							Nine Month Periods Ended
	September 30, 2012			September 30, 2011		% Change		September 30, 2012			September 30, 2011		% Change
Commercial automobile	$	22,119		$	5,350	313.4	%	$	41,045		$	14,504	183.0	%
Non-standard automobile	(31		)	4,342		(100.7	)%	(540		)	14,012		(103.9	)%
Other	1,265			1,236		2.3	%	3,843			4,435		(13.3	)%
Total	$	23,353		$	10,928	113.7	%	$	44,348		$	32,951	34.6	%

Third Quarter 2012

For the three month period ended September 30, 2012, gross premium written was $23.4 million compared to $10.9 million in the three month period ended September 30, 2011, and $9.2 million in the three month period ended June 30, 2012, representing a 113.7%increase and 152.7%increase, respectively. The increase relative to the three month period ended September 30, 2011 is due primarily to the substantial growth of the core commercial auto business, which offset the exit of the non-standard auto line of business. In the three month period ended September 30, 2012, we implemented a new business arrangement in New York to provide excess coverage above the levels of risk retained by the insured. Total premium related to this program was $12.4 million in the three month period ended September 30, 2012 and is included in the commercial automobile line of business. Below we will refer to the arrangement as the “excess taxi program” where it is relevant to explain certain variances. The increase relative to the three month period ended June 30, 2012 is primarily the result of the excess taxi program.

In the three month period ended September 30, 2012, gross premium written from commercial automobile was $22.1 million, representing a 313.4%increase relative to the three month period ended September 30, 2011 and a 169.5%increase compared to the three month period ended June 30, 2012. This substantial increase is primarily the result of the excess taxi program but also the planned expansion of the commercial auto business. Removing the impact of the excess taxi program, our traditional commercial automobile premium written was $9.7 million, an increase of 80.9% versus the three month period ended September 30, 2011 and 17.9% relative to the three month period ended June 30, 2012. The cessation of non-standard auto written premium allowed Atlas to focus its resources on its core line of business. As a percentage of the insurance subsidiaries’ overall book of business, commercial auto gross premium written represented 94.7% of gross premium written in the three month period ended September 30, 2012 compared to 49.0% during the three month period ended September 30, 2011 and 88.8% in the three month period ended June 30, 2012.

Commercial automobile insurance has outperformed the overall P&C industry in each of the past ten years based on data compiled by A.M. Best. Each of the specialty business lines on which Atlas’ strategy is focused is a subset of this industry segment.

Year to Date September 30, 2012

For the nine month period ended September 30, 2012, gross premium written was $44.3 million compared to $33.0 million in the nine month period ended September 30, 2011, representing a 34.6%increase. This increase was attributable to significant gains in commercial automobile premium. Our exit from the non-standard auto line of business is having a lesser impact on total premium written as the year goes forward.

In the nine month period ended September 30, 2012, gross premium written from commercial automobile was $41.0 million, representing a 183.0%increase relative to the nine month period ended September 30, 2011. As a percentage of the insurance subsidiaries’ overall book of business, commercial auto gross premium written represented 92.6% of gross premium written in the nine month period ended September 30, 2012 compared to 44.0% during the nine month period ended September 30, 2011.

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Geographic Concentration

Gross Premium Written by State (in ‘000s)
	Three Month Periods Ended								Nine Month Periods Ended
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
New York	$	12,991	55.6	%	$	323	3.0	%	$	15,324	34.6	%	$	1,487	4.5	%
Louisiana	2,436		10.4	%	1,388		12.7	%	2,739		6.2	%	1,391		4.2	%
Michigan	1,561		6.7	%	930		8.5	%	5,285		11.9	%	2,648		8.0	%
Illinois	1,538		6.6	%	5,303		48.5	%	8,551		19.3	%	20,618		62.6	%
Minnesota	566		2.4	%	663		6.1	%	2,160		4.9	%	1,745		5.3	%
Virginia	482		2.1	%	23		0.2	%	1,143		2.6	%	7		—	%
Texas	308		1.3	%	95		0.9	%	1,164		2.6	%	435		1.3	%
Indiana	253		1.1	%	710		6.5	%	368		0.8	%	2,330		7.1	%
Georgia	208		0.9	%	—		—	%	811		1.8	%	—		—	%
Other	3,010		12.9	%	1,493		13.6	%	6,803		15.3	%	2,290		7.0	%
Total	$	23,353	100.0	%	$	10,928	100.0	%	$	44,348	100.0	%	$	32,951	100.0	%

Third Quarter 2012

As illustrated by the data in Table 3 above, 55.6% of Atlas’ gross premium written for the three month period ended September 30, 2012 came from New York and 72.7% came from the three states currently producing the most premium volume (New York, Louisiana and Michigan), as compared to 69.7% in the three month period ended September 30, 2011 (Illinois, Michigan and Louisiana) and 47.8% in the three month period ended June 30, 2012 (Illinois, Minnesota and Michigan). This is the first quarter where Atlas’ largest top three states by premium volume did not include Illinois, further highlighting the results of its commitment to diversifying geographically by expanding in new areas of the country, and leveraging experience, historical data and research. Our increase in New York is primarily due to the excess taxi program. The decline in Illinois is primarily attributable to Atlas’ exit from non-standard insurance lines as well as re-allocation of resources to pursuits in new markets.

Though we built an expanded presence in New York, we do not believe there was material exposure to our business due to Hurricane Sandy.

Year to Date September 30, 2012

Atlas saw similar geographic diversification in the nine month period ended September 30, 2012 compared to the nine month period ended September 30, 2011. 65.8% of our premium volume came from the top three states (Michigan, Illinois and New York) in 2012, compared to 77.7% in 2011 (Illinois, Michigan and Indiana).

The decline of written premiums for the nine month period ended September 30, 2012 versus the nine month period ended September 30, 2011 in Illinois and Indiana is primarily attributable to Atlas’ exiting the non-standard automobile insurance lines as well as re-allocating resources to pursuits in new markets. The majority of the 2011 non-standard automobile written premiums came from those two states. This was mostly offset by gains in commercial auto premiums in other states, both in established markets such as Michigan and New York and new states.

Ceded Premium Written

Ceded premium written is equal to premium ceded under the terms of Atlas’ inforce reinsurance treaties. Ceded premium written increased38.6% to $2.0 million for the three month period ended September 30, 2012 compared with $1.4 million for the three month period ended September 30, 2011, and increased37.7% from $1.4 million for the three month period ended June 30, 2012. This change is the result of the business mix within our total premium base.

In the nine month period ended September 30, 2012, ceded premium written increased6.5% to $4.9 million from $4.6 million for the nine month period ended September 30, 2011.

Net Premium Written

Net premium written is equal to gross premium written less the ceded premium written under the terms of Atlas’ inforce reinsurance treaties. Net premium written increased124.9% to $21.4 million for the three month period ended September 30, 2012 compared with $9.5 million for the three month period ended September 30, 2011 and increased173.7% versus the three month period ended June 30, 2012. These changes are attributed to the combined effects of the issues cited in the ‘Gross Premium Written’ and ‘Ceded Premium Written’ sections above.

The success of our focus on commercial auto insurance in 2012 is more pronounced when viewed in terms of net premium written. As a percentage of the total net premium written, commercial auto represented 100.1% for the three month period

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ended September 30, 2012 and 101.5% for the three month period ended June 30, 2012, versus only 53.3% in the three month period ended September 30, 2011. Premium credits in the non-standard personal lines caused the percentage of core commercial auto premium to exceed 100% of the total net written premium for each of the last two three month periods.

Similarly, in the nine month period ended September 30, 2012, commercial auto insurance comprised 101.0% of the total net premium written versus just 49.5% in the nine month period ended September 30, 2011. As indicated above, premium credits in the non-standard personal lines caused the percentage of core commercial auto premium to exceed 100% of the total net written premium for the nine month period ended September 30, 2012.

Net Premium Earned

Premiums are earned ratably over the term of the underlying policy. Net premium earned was $10.9 million in the three month period ended September 30, 2012, a 24.3%increase compared with $8.8 million in the three month period ended September 30, 2011 and a 44.8%increase versus the three month period ended June 30, 2012.

In the nine month period ended September 30, 2012, net premium earned was $26.8 million, a 0.5%increase compared to $26.7 million for the nine month period ended September 30, 2011.

The increase in net premiums earned is attributable to the excess taxi program and strong growth in commercial auto lines. Net earned premiums on our core lines were $10.5 million in the three month period ended September 30, 2012, a 161.8%increase compared with $4,013 in the three month period ended September 30, 2011 and a 68.8%increase versus the three month period ended June 30, 2012. Similarly, net earned premiums on our core lines for the nine month period ended September 30, 2012 were $21.9 million, a 91.7%increase compared to the nine month period ended September 30, 2011.

Claims Incurred

The loss ratio relating to the claims incurred in the three month period ended September 30, 2012 was 65.5% compared to 79.4% in the three month period ended September 30, 2011 and 71.6% for the three month period ended June 30, 2012.

For the nine month period ended September 30, 2012, the loss ratio was 69.0%, compared to 77.2% for the nine month period ended September 30, 2011.

Loss ratios improved in the three month period ended September 30, 2012 relative to prior periods. This is primarily attributable to the increased composition of commercial auto as a percentage of the total written premium, which has historically had a better overall underwriting result. Further, the excess taxi program also contributed significantly to favorable loss results in the three month period ended September 30, 2012. We believe that our extensive experience and expertise with respect to underwriting and claims management in all our commercial lines will allow us to continue this decreasing trend since we expect 100% of net earned premium to be related to core lines of business in 2013. The Company is committed to retain this claim handling expertise as a core competency as the volume of business increases.

Acquisition Costs

Acquisition costs represent commissions and taxes incurred on net premium earned. Acquisition costs were $1.8 million in the three month period ended September 30, 2012 or 16.6% of net premium earned, as compared to 19.6% in the three month period ended September 30, 2011 and 18.5% in the three month period ended June 30, 2012.

For the nine month period ended September 30, 2012, the ratio was 17.1% as compared to 20.0% in the nine month period ended September 30, 2011.

The favorable trend in acquisition costs is primarily due to the shift away from non-standard automobile insurance which carries higher commission rates.

Other Underwriting Expenses

The other underwriting expense ratio was 15.5% in the three month period ended September 30, 2012 compared to 20.7% in the three month period ended September 30, 2011 and 21.4% in the three month period ended June 30, 2012. This decline is attributable to a significant increase in premium earned in the three month period ended September 30, 2012 as well as a reduction in employee head count since 2011.

For the nine month period ended September 30, 2012, this ratio was 18.5%, as compared to 21.2% for the nine month period ended September 30, 2011. However, 2011 includes $627,000 in non-recurring expenses (detailed below) which unfavorably impacted the year-to-date ratio by 2.4%. After adjustment for these non-recurring expenses, other underwriting expenses remained static year over year.

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First Quarter 2011 Non-recurring Expenses (in ‘000s)
Expense Item	Description	Non-recurring Expense
Licenses, taxes and assessments	Amounts paid in Q1 2011	$	198
Professional fees	Legal and Accounting fees	121
Salary and benefits	Q1 staff reduction impacts	174
EDP expense	Decommissioning software expenses previously capitalized	84
Occupancy/Miscellaneous expense	Straight-line lease adjustment	50
Total non-recurring expenses		$	627

Net Investment Income

Investment Results (in ‘000s)
	Three Month Periods Ended						Nine Month Periods Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Average securities at cost(1)	$	120,734		$	144,028		$	123,245		$	153,753
Interest income after expenses	613			719			1,878			2,651
Percent earned on average investments (annualized)	2.0		%	2.0		%	2.0		%	2.3		%
Net realized gains	$	779		$	1,962		$	1,098		$	2,813
Total investment income	1,392			2,681			2,976			5,464
Total realized yield (annualized)	4.6		%	7.4		%	3.2		%	4.7		%

(1)Includes cash as well as the investment in Oak Street (see note 5 to condensed consolidated financial statements).

Investment income (excluding net realized gains) decreased by 14.7% to $613,000 in the three month period ended September 30, 2012, compared to $719,000 in the three month period ended September 30, 2011, and decreased by 6.8% from $657,000 for the three month period ended June 30, 2012. These amounts are primarily comprised of interest income. This is attributable to the timing of asset disposals and the mix of securities on hand. The annualized realized yield on invested assets (including net realized gains of $779,000) in the three month period ended September 30, 2012decreased to 4.6% as compared with 7.4% in the three month period ended September 30, 2011 and increased compared to 3.2% for the three month period ended June 30, 2012. This is primarily due to the relative absence of realized gains during the three month period ended June 30, 2012 versus those periods.

On a year-to-date basis, interest income decreased by 29.2% to $1.9 million from $2.7 million for the nine month period ended September 30, 2011. This decrease correlates with a similar decline in the average securities held, which is consistent with our expectations for claim payout patterns. The annualized realized yield on invested assets (including realized gains) decreased to 3.2% from 4.7%, due primarily to a reduction in realized gains year over year.

Net Realized Investment Gains (Losses)

Net realized investment gains in the three month period ended September 30, 2012 were $779,000 compared to $2.0 million in the three month period ended September 30, 2011 and $291,000 during the three month period ended June 30, 2012. On a year-to-date basis, realized gains were $1.1 million in the nine month period ended September 30, 2011 compared to $2.8 million for the nine month period ended September 30, 2012. The difference is the result of management’s decision to sell certain securities consistent with the Company’s liquidity needs and expected duration of claim payment triangles during favorable market conditions.

Miscellaneous Income (Loss)

Atlas recorded miscellaneous income in the three month period ended September 30, 2012 of $1,000 compared to $113,000 for the three month period ended September 30, 2011 and $51,000 in the three month period ended June 30, 2012. Miscellaneous income prior to June 30, 2012 was primarily comprised of rental income from our corporate headquarters in Elk Grove Village, Illinois, which has subsequently been sold.

Combined Ratio

Underwriting profitability, as opposed to overall profitability or net earnings, is measured by the combined ratio. The combined ratio is the sum of the loss and loss adjustment (LAE) expense ratio, the acquisition cost ratio and the underwriting expense ratio. Atlas’ combined ratio for the three month periods ended September 30, 2012 and 2011 are summarized in the table below. The underwriting loss is attributable to the factors described in the ‘Claims Incurred’, ‘Acquisition Costs’, and ‘Other Underwriting Expenses’ sections above. This is the first quarter that we have achieved a combined ratio below 100% since our inception in December 2010.

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Combined Ratios (in ‘000s)
Three Month Periods Ended	September 30, 2012			September 30, 2011			June 30, 2012
Net premium earned	$	10,934		$	8,797		$	7,552
Underwriting expenses(1)	10,670			10,526			8,420
Combined ratio	97.6		%	119.7		%	111.5		%

Nine Month Periods Ended	September 30, 2012			September 30, 2011
Net premium earned	$	26,795		$	26,669
Underwriting expenses(1)	28,018			31,582
Combined ratio	104.6		%	118.4		%

(1) Underwriting expenses are the combination of claims incurred, acquisition costs, and other underwriting expenses.

Income/Loss before Income Taxes

Atlas generated pre-tax income of $1.7 million in the three month period ended September 30, 2012, compared to pre-tax income of $1.1 million in the three month period ended September 30, 2011 and pre-tax income of $130,000 in the three month period ended June 30, 2012.

In the nine month period ended September 30, 2012, Atlas generated pre-tax income of $1.9 million compared to income of $555,000 in the nine month period ended September 30, 2011.

Income Tax Benefit

Atlas recognized no tax expense in the three month period ended September 30, 2012, nor during the three month period ended September 30, 2011 or the three month period ended June 30, 2012. The following table reconciles tax benefit from applying the statutory U.S. Federal tax rate of 34.0% to the actual percentage of pre-tax income provided for the three month periods ended September 30, 2012 and 2011.

Tax Rate Reconciliation (in ‘000s)
	Three Month Periods Ended											Nine Month Periods Ended
	September 30, 2012					September 30, 2011						September 30, 2012					September 30, 2011
	Amount			%			Amount			%		Amount			%		Amount			%
Expected income tax benefit at statutory rate	$	563		34.0	%		$	362		34.0	%	$	653		34.0	%	$	(174	)	34.0	%
Valuation allowance	(566		)	(34.2	)%		(384		)	(56.0	)%	(658		)	(34.2	)%	131			(25.6	)%
Nondeductible expenses	5			0.3	%		22			22.0	%	10			0.5	%	43			(8.4	)%
Other	(2		)	(0.1	)%					—	%	(5		)	(0.3	)%				—	%
Total	$	—		—	%		$	—		—	%	$	—		—	%	$	—		—	%

Upon the transaction forming Atlas on December 31, 2010, a yearly limitation as required by U.S. tax law Section 382 that applies to changes in ownership on the future utilization of Atlas’ net operating loss carry-forwards was calculated. The insurance subsidiaries’ prior parent retained those tax assets previously attributed to the insurance subsidiaries which could not be utilized by Atlas as a result of this limitation. As a result, Atlas’ ability to recognize future tax benefits associated with a portion of its deferred tax assets generated during prior years and the current year have been permanently limited to the amount determined under U.S. tax law Section 382. The result is a maximum expected net deferred tax asset which Atlas has available after the merger which is believed more-likely-than-not to be utilized in the future, after consideration of valuation allowance.

Net Income/(Loss) and Earnings/(Loss) per Common Share

Atlas earned$1.7 million during the three month period ended September 30, 2012 versus income of $1.1 million during the three month period ended September 30, 2011 and income of $130,000 for the three month period ended June 30, 2012. After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted earnings per common share in the three month period ended September 30, 2012 was $0.24 versus earnings per common share of $0.14 in the three month period ended September 30, 2011 and a loss per common share of $0.01 in the three month period ended June 30, 2012.

For the three month period ended September 30, 2012, there were 6,144,384 weighted average common shares outstanding used to compute basic earnings per share and 6,149,301 used for diluted earnings per share. For the three month period ended September 30, 2011, there were 6,124,990 weighted average common shares outstanding used to compute basic earnings per share and 6,138,496 shares for diluted earnings per common share. Finally, there were 6,144,385 common shares used to compute basic and diluted loss per common share for the three month period ended June 30, 2012.

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Atlas earned$1.9 million during the nine month period ended September 30, 2012 compared to income of $555,000 during the nine month period ended September 30, 2011. The basic and diluted earnings per common share in the nine month period ended September 30, 2012 was $0.21 compared to a loss of $0.01 in the nine month period ended September 30, 2011.

Book Value per Common Share

Book value per common share was as follows.

(in ‘000s, except for shares and per share data)	September 30, 2012		June 30, 2012		September 30, 2011
Shareholders' Equity	$	59,103	$	57,031	$	58,781
Preferred stock in Equity	18,000		18,000		18,000
Accumulated dividends on preferred stock	1,416		1,212		606
Common Equity	39,687		37,819		40,175
Common shares outstanding	6,144,385		6,144,385		6,125,629
Book value per common share outstanding	$	6.46	$	6.16	$	6.56

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Financial Condition

Consolidated Statements of Financial Condition
(in ‘000s, except for shares and per share data)
	September 30, 2012 (unaudited)			December 31, 2011
Assets
Investments, available for sale
Fixed income securities, at fair value (Amortized cost $106,122 and $101,473)	$	109,555		$	103,491
Equity securities, at fair value (cost $0 and $994)	—			1,141
Total Investments	109,555			104,632
Cash and cash equivalents	12,151			23,249
Accrued investment income	807			586
Accounts receivable and other assets (Net of allowance of $385 and $4,254)	24,811			9,579
Reinsurance recoverables, net	6,983			8,044
Prepaid reinsurance premiums	2,219			2,214
Deferred policy acquisition costs	4,501			3,020
Deferred tax asset, net	6,343			6,775
Software and office equipment, net	1,157			440
Assets held for sale	166			13,634
Investment in investees	1,250			—
Total Assets	$	169,943		$	172,173
Liabilities
Claims liabilities	$	73,574		$	91,643
Unearned premiums	28,325			15,691
Due to reinsurers and other insurers	4,658			5,701
Other liabilities and accrued expenses	4,283			2,884
Total Liabilities	$	110,840		$	115,919
Shareholders’ Equity
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2012 and December 31, 2011. Liquidation value $1.00 per share	$	18,000		$	18,000
Ordinary voting common shares, par value per share $0.003, 266,666,667 shares authorized, 1,542,764 shares issued and outstanding at September 30, 2012 and 1,541,842 at December 31, 2011	4			4
Restricted voting common shares, par value per share $0.003, 33,333,334 shares authorized, 4,601,621 shares issued and outstanding at September 30, 2012 and December 31, 2011	14			14
Additional paid-in capital	152,739			152,652
Retained deficit	(113,919		)	(115,841		)
Accumulated other comprehensive income, net of tax	2,265			1,425
Total Shareholders’ Equity	59,103			56,254
Total Liabilities and Shareholders’ Equity	$	169,943		$	172,173

Investments

Investments Overview and Strategy

Atlas aligns its securities portfolio to support the liabilities and operating cash needs of the insurance subsidiaries, to preserve capital and to generate investment returns. Atlas invests predominantly in corporate and government bonds with relatively short durations that correlate with the payout patterns of Atlas’ claims liabilities. A third-party investment management firm manages Atlas’ investment portfolio pursuant to the Company’s investment policies and guidelines as approved by its Board of Directors. Atlas monitors the third-party investment manager’s performance and its compliance with both its mandate and Atlas’ investment policies and guidelines.

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Atlas’ investment guidelines stress the preservation of capital, market liquidity to support payment of liabilities and the diversification of risk. With respect to fixed income securities, Atlas generally purchases securities with the expectation of holding them to their maturities; however, the securities are available for sale if liquidity needs arise.

Portfolio Composition

Atlas held securities with a fair value of $109.6 millionas of the period ended September 30, 2012, which was comprised of fixed income securities. The securities held by the insurance subsidiaries must comply with applicable regulations that prescribe the type, quality and concentration of securities. These regulations in the various jurisdictions in which the insurance subsidiaries are domiciled permit investments in government, state, municipal and corporate bonds, preferred and common equities, and other high quality investments, within specified limits and subject to certain qualifications.

The following table summarizes the fair value of the securities portfolio, including cash and cash equivalents, as at the dates indicated.

Fair Value of Securities Portfolio (in ‘000s)
September 30, 2012		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed Income:
U.S.	- Government	$	37,356	$	1,099	$	—	$	38,456
	- Corporate	44,100		1,709		—		45,809
	- Commercial mortgage backed	20,372		490		—		20,862
	- Other asset backed	4,293		135		—		4,428
Total Fixed Income		$	106,121	$	3,433	$	—	$	109,555

December 31, 2011		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed Income:
U.S.	- Government	$	44,835	$	911	$	—	$	45,746
	- Corporate	35,572		825		24		36,373
	- Commercial mortgage backed	17,493		208		—		17,701
	- Other asset backed	3,573		99		1		3,671
Total Fixed Income		$	101,473	$	2,043	$	25	$	103,491
Equities		994		147		—		1,141
Total		$	102,467	$	2,190	$	25	$	104,632

Liquidity and Cash Flow Risk

The following table summarizes the fair value by contractual maturities of the fixed income securities portfolio excluding cash and cash equivalents at the dates indicated.

Fair Value of Fixed Income Securities by Contractual Maturity Date (in ‘000s)
As at:	September 30, 2012				December 31, 2011
	Amount		%		Amount		%
Due in less than one year	$	18,085	16.5	%	$	29,407	28.4	%
Due in one through five years	21,803		19.9	%	27,317		26.4	%
Due after five through ten years	21,806		19.9	%	10,242		9.9	%
Due after ten years	47,861		43.7	%	36,525		35.3	%
Total	$	109,555	100.0	%	$	103,491	100.0	%

As of the period ended September 30, 2012, 36.4% of the fixed income securities, including treasury bills, bankers’ acceptances, government bonds and corporate bonds had contractual maturities of five years or less. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. Atlas holds cash and high grade short-term assets which, along with fixed income security maturities, management believes are sufficient for the payment of claims on a timely basis. In the event that additional cash is required to meet obligations to policyholders, Atlas believes that high quality securities portfolio provides us with sufficient liquidity. With a weighted average duration of 3.5 years, changes in interest rates will have a modest market value impact on the Atlas

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portfolio relative to longer duration portfolios. Atlas can and typically does hold bonds to maturity by matching duration with the anticipated liquidity needs.

Market Risk

Market risk is the risk that Atlas will incur losses due to adverse changes in interest rates, currency exchange rates or equity prices. Having disposed of a majority of its asset backed securities, its primary market risk exposure in the fixed income securities portfolio is to changes in interest rates. Because Atlas’ securities portfolio is comprised of primarily fixed income securities that are usually held to maturity, periodic changes in interest rate levels generally impact its financial results to the extent that the securities in its available for sale portfolio are recorded at market value. During periods of rising interest rates, the market value of the existing fixed income securities will generally decrease and realized gains on fixed income securities will likely be reduced. The reverse is true during periods of declining interest rates.

Credit Risk

Credit risk is defined as the risk of financial loss due to failure of the other party to a financial instrument to discharge an obligation. Atlas is exposed to credit risk principally through its investments and balances receivable from policyholders and reinsurers. It monitors concentration and credit quality risk through policies designed to limit and monitor its exposure to individual issuers or related groups (with the exception of U.S. government bonds) as well as through ongoing review of the credit ratings of issuers in the securities portfolio. Credit exposure to any one individual policyholder is not material. The Company’s policies, however, are distributed by agents who may manage cash collection on its behalf pursuant to the terms of their agency agreement. Atlas has policies to evaluate the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurers’ insolvency.

The following table summarizes the composition of the fair value of the fixed income securities portfolio, excluding cash and cash equivalents, as of the dates indicated, by ratings assigned by Fitch, S&P or Moody’s Investors Service. The fixed income securities portfolio consists of predominantly very high quality securities in corporate and government bonds with 91.3% rated ‘A’ or better as of the period ended September 30, 2012 compared to 95.3% as of the year ended December 31, 2011.

Credit Ratings of Fixed Income Securities Portfolio (in ‘000s)
As at:	September 30, 2012				December 31, 2011
	Amount		% of Total		Amount		% of Total
AAA/Aaa	$	58,613	53.6	%	$	54,717	52.9	%
AA/Aa	14,775		13.5	%	21,567		20.8	%
A/A	26,477		24.2	%	22,380		21.6	%
BBB/Baa	9,690		8.8	%	4,827		4.7	%
Total Securities	$	109,555	100.0	%	$	103,491	100.0	%

Other-than-temporary impairment

Atlas recognizes losses on securities for which a decline in market value was deemed to be other-than-temporary. Management performs a quarterly analysis of the securities holdings to determine if declines in market value are other-than-temporary. Atlas did not recognize charges for securities impairments that were considered other-than-temporary for the three month period ended September 30, 2012, the three month period ended September 30, 2011 or the three month period ended June 30, 2012.

The length of time securities may be held in an unrealized loss position may vary based on the opinion of the appointed investment manager and their respective analyses related to valuation and to the various credit risks that may prevent us from recapturing the principal investment. In cases of securities with a maturity date where the appointed investment manager determines that there is little or no risk of default prior to the maturity of a holding, Atlas would elect to hold the security in an unrealized loss position until the price recovers or the security matures. In situations where facts emerge that might increase the risk associated with recapture of principal, Atlas may elect to sell securities at a loss. Atlas had no material gross unrealized losses in its portfolio as of the period ended September 30, 2012, as of the period ended September 30, 2011, or as of the year ended December 31, 2011.

Estimated impact of changes in interest rates and securities prices

For Atlas’ available-for-sale fixed income securities held as of the period ended September 30, 2012, a 100 basis point increase in interest rates on such held fixed income securities would have increased net investment income and income before taxes by approximately $127. Conversely, a 100 basis point decrease in interest rates on such held fixed income securities would decrease net investment income and income before taxes by $127.

A 100 basis point increase would have also decreased other comprehensive income by approximately $4,106 due to “mark-to-market” requirements; however, holding investments to maturity would mitigate this impact. Conversely, a 100 basis point

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decrease would increase other comprehensive income by the same amount. The impacts described here are approximately linear to the change in interest rates.

Due from Reinsurers and Other Insurers

Atlas purchases reinsurance from third parties in order to reduce its liability on individual risks and its exposure to large losses. Reinsurance is coverage purchased by one insurance company from another for part of the risk originally underwritten by the purchasing (ceding) insurance company. The practice of ceding insurance to reinsurers allows an insurance company to reduce its exposure to loss by size, geographic area, and type of risk or on a particular policy. An effect of ceding insurance is to permit an insurance company to write additional insurance for risks in greater number or in larger amounts than it would otherwise insure independently, based on its statutory capital, risk tolerance and other factors.

Atlas generally purchases reinsurance to limit net exposure to a maximum amount on any one loss of $500,000 with respect to commercial automobile liability claims. Atlas also purchases reinsurance to protect against awards in excess of its policy limits. Atlas continually evaluates and adjusts its reinsurance needs based on business volume, mix, and supply levels.

Reinsurance ceded does not relieve Atlas of its ultimate liability to its insured in the event that any reinsurer is unable to meet their obligations under its reinsurance contracts. Therefore, Atlas enters into reinsurance contracts with only those reinsurers deemed to have sufficient financial resources to provide the requested coverage. Reinsurance treaties are generally subject to cancellation by the reinsurers or Atlas on the anniversary date and are subject to renegotiation annually. Atlas regularly evaluates the financial condition of its reinsurers and monitors the concentrations of credit risk to minimize its exposure to significant losses as a result of the insolvency of a reinsurer. Atlas believes that the amounts it has recorded as reinsurance recoverables are appropriately established. Estimating amounts of reinsurance recoverables, however, is subject to various uncertainties and the amounts ultimately recoverable may vary from amounts currently recorded. Atlas had $7.0 million recoverable from third party reinsurers (exclusive of amounts prepaid) and other insurers as of the period ended September 30, 2012 as compared to $8.0 millionas of the year ended December 31, 2011.

Estimating amounts of reinsurance recoverables is also impacted by the uncertainties involved in the establishment of provisions for unpaid claims. As underlying reserves potentially develop, the amounts ultimately recoverable may vary from amounts currently recorded. Atlas’ reinsurance recoverables are generally unsecured. Atlas regularly evaluates its reinsurers, and the respective amounts recoverable, and an allowance for uncollectible reinsurance is provided for, if needed.

Atlas’ largest reinsurance partners are Great American Insurance Company (“Great American”), a subsidiary of American Financial Group, Inc. and Gen Re, a subsidiary of Berkshire Hathaway, Inc. Great American has a financial strength rating of “A+” from Standard & Poor’s, while Gen Re has a financial strength rating of “Aa1” from Moody’s. Gateway’s largest reinsurance partner is Maiden Re, which has an “A-” rating from A.M. Best.

Deferred Tax Asset

Components of Deferred Tax (in ‘000s)
As of:	September 30, 2012			December 31, 2011
Deferred tax assets:
Unpaid claims and unearned premiums	$	3,471		$	3,004
Loss carry-forwards	15,880			15,558
Bad debts	131			1,297
Other	1,456			1,338
Valuation Allowance	(11,703		)	(12,361		)
Total gross deferred tax assets	$	9,235		$	8,836
Deferred tax liabilities:
Investment securities	$	1,167		$	740
Deferred policy acquisition costs	1,530			1,027
Other	195			294
Total gross deferred tax liabilities	2,892			2,061
Net deferred tax assets	$	6,343		$	6,775

Atlas established a valuation allowance of approximately $11.7 million and $12.4 million for its gross future deferred tax assets as of the period ended September 30, 2012 and as of the year ended December 31, 2011, respectively.

Based on Atlas’ expectations of future taxable income, as well as the reversal of gross future deferred tax liabilities, management believes it is more likely than not that Atlas will fully realize the net future tax assets, with the exception of the aforementioned valuation allowance. Atlas has therefore established the valuation allowance as a result of the potential inability

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to utilize a portion of its net operating losses in the U.S. which are subject to a yearly limitation. The uncertainty over the Company’s ability to utilize a portion of these losses over the short term has led to the recording of a valuation allowance.

Our ability to utilize the NOLs is subject to the rules of Section 382 of the Internal Revenue Code.  For more information, see “Risk Factors - U.S. Tax Risks - Our use of losses may be subject to limitations and the tax liability of our company may be increased.”

Atlas has the following total net operating loss carry-forwards as of the period ended September 30, 2012.

Net Operating Loss Carry-Forward by Expiry (in ‘000s)
Year of Occurrence	Year of Expiration	Amount
2001	2021	$	14,750
2002	2022	4,317
2006	2026	7,825
2007	2027	5,131
2008	2028	1,949
2009	2029	1,949
2010	2030	1,949
2011	2031	7,762
2012	2032	1,074
Total		$	46,706

Assets Held for Sale

On May 22, 2012, Atlas closed the sale of the headquarters building to 150 Northwest Point, LLC, a Delaware limited liability company. As of the year ended December 31, 2011, the property was recorded as a component of assets held for sale on Atlas’ statement of financial position.

The total sales price of the property, which was paid in cash, amounted to $14.0 million, less closing costs and related expenses of approximately $633,000. In connection with the sale, the Company also wrote down an accrual of approximately $792,000 held for real estate taxes. Approximately $830,000 of the sales price was held in escrow for real estate taxes. Atlas recognized a gain on the sale of this property of $213,000, which will be deferred and recognized over the 5 year lease term. In the three month period ended September 30, 2012, Atlas recognized $5,000 as income.

There are two properties located in Alabama which are still for sale. These properties are listed for sale for amounts greater than carried values. Both were assets of Southern United Fire Insurance Company, which was merged into American Service in February 2010.

Claims Liabilities

The table below shows the amounts of total case reserves and incurred but not reported (“IBNR”) claims provision as of the period ended September 30, 2012 and as of the year ended December 31, 2011. The provision for unpaid claims decreased by 19.7% to $73.6 millionas of the period ended September 30, 2012 compared to $91.6 millionas of the year ended December 31, 2011. During the three month period ended September 30, 2012, case reserves decreased by 11.2% compared to December 31, 2011, while IBNR reserves decreased by 39.6% generally due to the reporting of claims related to prior accident years and case reserve changes, which are consistent with management’s expectations.

Provision for Unpaid Claims by Type - Gross (in ‘000s)
As at:	September 30, 2012		December 31, 2011		YTD% Change
Case reserves	$	57,050	$	64,276	(11.2	)%
IBNR	16,524		27,367		(39.6	)%
Total	$	73,574	$	91,643	(19.7	)%

Provision for Unpaid Claims by Line of Business - Gross (in ‘000s)
As at:	September 30, 2012		December 31, 2011		YTD% Change
Non-standard auto	$	12,472	$	23,863	(47.7	)%
Commercial auto	55,025		58,700		(6.3	)%
Other	6,077		9,080		(33.1	)%
Total	$	73,574	$	91,643	(19.7	)%

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Provision for Unpaid Claims by Line of Business - Net of Reinsurance Recoverables (in ‘000s)
As at:	September 30, 2012		December 31, 2011		YTD% Change
Non-standard Auto	$	10,091	$	21,157	(52.3	)%
Commercial Auto	52,752		56,328		(6.3	)%
Other	4,134		6,332		(34.7	)%
Total	$	66,977	$	83,817	(20.1	)%

The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011 were as follows.

Claims Liabilities (in ‘000s)
	Three Month Periods Ended				Nine Month Periods Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Unpaid claims, beginning of period	$	77,350	$	112,011	$	91,643	$	132,579
Less: reinsurance recoverable	8,153		1,968		7,825		6,477
Net beginning unpaid claims reserves	69,197		104,043		83,818		126,102
Incurred related to:
Current year	6,976		6,962		18,141		20,600
Prior years	190		17		337		(4		)
	7,166		6,979		18,478		20,596
Paid related to:
Current year	2,302		4,279		6,224		8,455
Prior years	7,082		14,660		29,093		46,160
	9,384		18,939		35,317		54,615
Net unpaid claims, end of period	$	66,979	$	92,083	$	66,979	$	92,083
Add: reinsurance recoverable	6,595		9,374		6,595		9,374
Unpaid claims, end of period	$	73,574	$	101,457	$	73,574	$	101,457

The process of establishing the estimated provision for unpaid claims is complex and imprecise as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results will deviate, perhaps substantially, from the best estimates made.

The reduction of the provision for unpaid claims is consistent with the change in written premium in prior years. However, because the establishment of reserves is an inherently uncertain process involving estimates, current provisions may not be sufficient. Adjustments to reserves, both positive and negative, are reflected quarterly in the statement of income as estimates are updated.

The financial statements are presented on a calendar year basis for all data. Claims payments and changes in reserves, however, may be made on accidents that occurred in prior years, not on business that is currently insured. Calendar year losses consist of payments and reserve changes that have been recorded in the financial statements during the applicable reporting period, without regard to the period in which the accident occurred. Calendar year results do not change after the end of the applicable reporting period, even as new claim information develops. Accident year losses consist of payments and reserve changes that are assigned to the period in which the accident occurred. Accident year results will change over time as the estimates of losses change due to payments and reserve changes for all accidents that occurred during that period.

The table below summarizes the changes over time in the provision for unpaid loss and loss adjustment expenses. The first section of the table shows the provision for unpaid loss and loss adjustment expenses recorded at the balance sheet date for each of the indicated years. The original provision for each year is presented on a gross basis as well as net of estimated reinsurance recoverable on unpaid loss and loss adjustment expenses.The second section displays the cumulative amount of payments made through the end of each subsequent year with respect to each original provision. The third section presents the re-estimation over subsequent years of each year’s original net liability for unpaid loss and loss adjustment expenses as more information becomes known and trends become more apparent. The final section compares the latest re-estimation to the original estimate for each year presented in the table on both a gross and net basis.

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The development of the provision for unpaid loss and loss adjustment expenses is shown by the difference between the original estimates and the re-estimated liabilities at each subsequent year-end. The re-estimated liabilities at each year-end are based on actual payments in full or partial settlement of claims plus re-estimates of the payments required for claims still open or IBNR claims. Favorable development (redundancy) means that the original estimated provision was higher than subsequently re-estimated. Unfavorable development (deficiency) means that the original estimated provision was lower than subsequently re-estimated. The cumulative development represents the aggregate change in the estimates over all prior years.

The data in this table is shown as of December 31, 2011, the last date on which it was fully compiled. It does not reflect any changes to claims, reserves or assumptions which may have occurred since that date.

Provision for Unpaid Claims, Net of Recoveries from Reinsurers as of December 31, 2011 (in ‘000s)
	2011		2010			2009			2008 (1)			2007			2006			2005			2004			2003			2002			2001
Gross reserves for unpaid claims and claims expenses
	$	91,643	$	132,579		$	179,054		$	173,652		$	183,649		$	191,171		$	202,677		$	195,437		$	189,262		$	193,909		$	175,104
Less: Reinsurance recoverable on unpaid claims and claims expenses
	7,825		6,477			5,196			103,612			107,837			111,911			95,215			90,596			91,079			94,510			38,779
Reserve for unpaid claims and claims expenses, net
	83,818		126,102			173,858			70,040			75,812			79,260			107,462			104,841			98,183			99,399			136,325
Cumulative paid on originally established reserve as of:
One year later			$	58,562		$	76,835		$	(38,449	)	$	29,811		$	29,917		$	30,637		$	37,220		$	41,426		$	46,083		$	51,260
Two years later						125,455			13,573			2,812			49,804			52,182			56,126			66,428			75,709			84,175
Three years later									43,671			38,650			33,742			66,806			69,801			77,919			91,773			104,423
Four years later												59,370			57,853			60,877			78,028			85,576			97,764			114,623
Five years later															69,428			75,935			76,174			89,396			101,725			118,347
Six years later																		81,347			85,150			88,820			103,935			120,455
Seven years later																					88,755			93,142			104,484			121,990
Eight years later																								95,401			106,560			123,240
Nine years later																											107,625			123,965
Ten years later																														124,707
Unpaid claims as of:
One year later			$	69,230		$	102,173		$	114,284		$	46,338		$	50,772		$	76,344		$	62,895		$	57,873		$	61,668		$	65,338
Two years later						56,268			65,101			75,258			31,322			56,428			46,081			35,431			33,838			39,466
Three years later									35,500			43,336			46,116			43,015			34,082			25,491			20,460			21,682
Four years later												21,859			25,534			26,714			26,833			19,231			14,710			12,591
Five years later															11,061			15,329			14,797			16,245			12,300			9,269
Six years later																		6,712			9,359			8,674			10,780			9,515
Seven years later																					4,339			6,108			5,523			8,446
Eight years later																								3,300			4,105			3,624
Nine years later																											2,539			3,275
Ten years later																														2,102
Re-estimated liability as of:
One year later			$	127,792		$	179,008		$	75,835		$	76,149		$	80,689		$	106,981		$	100,115		$	99,299		$	107,751		$	116,598
Two years later						181,723			78,674			78,070			81,126			108,610			102,207			101,859			109,547			123,641
Three years later									79,171			81,986			79,858			109,821			103,883			103,410			112,233			126,105
Four years later												81,229			83,387			87,591			104,861			104,807			112,474			127,214
Five years later															80,489			91,264			90,971			105,641			114,025			127,616
Six years later																		88,059			94,509			97,494			114,715			129,970
Seven years later																					93,094			99,250			110,007			130,436
Eight years later																								98,701			110,665			126,864
Nine years later																											110,164			127,240
Ten years later																														126,809
As of December 31, 2011: Cumulative (redundancy) deficiency
			$	1,690		$	7,865		$	9,131		$	5,417		$	1,229		$	(19,403	)	$	(11,747	)	$	518		$	10,765		$	(9,516	)
Cumulative (redundancy) deficiency as a % of reserves originally established- net
			1.3		%	4.5		%	13.0		%	7.1		%	1.6		%	-18.1		%	-11.2		%	0.5		%	10.8		%	-7.0		%
Re-estimated liability- gross
			$	134,223		$	187,715		$	194,560		$	196,966		$	200,740		$	212,901		$	209,876		$	211,744		$	227,169		$	235,021
Less: Re-established reinsurance recoverable
			6,431			5,992			115,389			115,737			120,251			124,842			116,782			113,043			117,005			108,212
Re-estimated provision- net
			127,792			181,723			79,171			81,229			80,489			88,059			93,094			98,701			110,164			126,809
Cumulative deficiency– gross
			1,645			8,661			20,908			13,317			9,569			10,224			14,439			22,482			33,260			59,917
(1) Negative payment as of one year later results from the commutation of reinsured reserves by Kingsway Re.

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Our claims reserving practices are designed to set reserves that in the aggregate are adequate to pay all claims at their ultimate settlement value. Thus, our reserves are not discounted for inflation or other factors. Also, our reserves are the same on both a U.S. GAAP and statutory basis of accounting.

Due to Reinsurers

The decrease in due to reinsurers is consistent with the payout patterns of the underlying claims liabilities.

Off-Balance Sheet Arrangements

As of September 30, 2012, Atlas has the following cash obligations related to its operating leases. The remainder of 2012 is negative due to rent abatement received in the lease of our headquarters building.

Operating Lease Commitments (in ‘000s)
Year	2012	2013	2014	2015	2016 and beyond	Total
Amount	$(6)	$776	$683	$693	$995	$3,141

Shareholders’ Equity

The table below identifies changes in shareholders’ equity for the nine month periods endedSeptember 30, 2012 and September 30, 2011.

Changes in Shareholders’ Equity (in ‘000s)
	Preferred Shares		Ordinary Voting Common Shares		Restricted Voting Common Shares		Additional Paid-in Capital		Retained Deficit			Accumulated Other Comprehensive Income (loss)			Total
Balance December 31, 2011	$	18,000	$	4	$	14	$	152,652	$	(115,841	)	$	1,425		$	56,254
Net income									1,922						1,922
Other comprehensive income												840			840
Share-based compensation							84								84
Stock options exercised							3								3
Balance September 30, 2012	$	18,000	$	4	$	14	$	152,739	$	(113,919	)	$	2,265		$	59,103
Balance December 31, 2010	$	18,000	$	4	$	14	$	152,466	$	(113,371	)	$	3,056		$	60,169
Net loss									555						555
Other comprehensive loss												(2,046		)	(2,046		)
Share-based compensation							84								84
Stock options exercised							19								19
Balance September 30, 2011	$	18,000	$	4	$	14	$	152,569	$	(112,816	)	$	1,010		$	58,781

As of January 17, 2013, there are 2,256,921 ordinary voting common shares, 3,887,469 restricted voting common shares and 20,000,000 preferred shares issued and outstanding.

The holders of restricted voting shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders.

All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway, or its affiliated entities. The restricted voting common shares will convert to ordinary voting common shares in the event that these Kingsway owned shares are sold to non-affiliates of the Company.

Preferred shares are not entitled to vote and 18,000,000 are beneficially owned or controlled by Kingsway and 2,000,000 are beneficially owned and controlled by Hendricks. They accrue dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. Upon liquidation, dissolution or winding-up of Atlas, holders of preferred shares receive the greater of $1.00 per share plus all declared and unpaid dividends or the amount they would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary voting common shares immediately prior to liquidation.

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Preferred shares are convertible into ordinary voting common shares at the option of the holder at any date that is after December 31, 2015, the fifth year after issuance at the rate of 0.1270 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of $3.00 per share plus accrued and unpaid dividends commencing at the earlier of December 31, 2012, two years from issuance date, or the date at which Kingsway’s beneficial interest is less than 10%. We issued 2 million shares to Hendricks in connection with the acquisition of Gateway.

The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation or sooner, if Atlas declares dividends, is $1.4 millionas of the period ended September 30, 2012. The accumulation of these dividends has an unfavorable impact on book value per share of $0.23as of the period ended September 30, 2012 and an unfavorable impact to earnings per share of $0.03 for the three month period ended September 30, 2012.

Liquidity and Capital Resources

The purpose of liquidity management is to ensure there is sufficient cash to meet all financial commitments and obligations as they become due. The liquidity requirements of Atlas’ business have been met primarily by funds generated from operations, asset maturities and income and other returns received on securities. Cash provided from these sources is used primarily for payment of claims and operating expenses. The timing and amount of catastrophe claims are inherently unpredictable and may create increased liquidity requirements.

As a holding company, Atlas may derive cash from its subsidiaries generally in the form of dividends and in the future may charge management fees to the extent allowed by statute or other regulatory approval requirements to meet its obligations. The insurance subsidiaries fund their obligations primarily through premium and investment income and maturities in their securities portfolio. Refer also to the discussion “Investments Overview and Strategy.” The insurance subsidiaries require regulatory approval for the return of capital and, in certain circumstances, payment of dividends. In the event that dividends and management fees available to the holding company are inadequate to service its obligations, the holding company would need to raise capital, sell assets or incur debt obligations. As at September 30, 2012, Atlas did not have any outstanding debt, and therefore, no near term debt service obligations. Atlas currently has no material commitments for capital expenditures.

The following table summarizes consolidated cash flow activities.

Summary of Cash Flows (in ‘000s)
	Nine Month Periods Ended
	September 30, 2012			September 30, 2011
Cash Used by Operating Activities	$	(19,344	)	$	(31,532	)
Cash Provided by Investing Activities	8,243			42,603
Cash Provided by Financing Activities	3			19
Net decrease in cash	$	(11,098	)	$	11,090

Cash used in operations during the nine month period ended September 30, 2012 was favorable relative to the nine month period ended September 30, 2011 primarily as a result of fewer payments for claims ($35.3 million versus $54.6 million). Cash generated by investing activities during the nine month period ended September 30, 2012 was unfavorable relative to the nine month period ended September 30, 2011 primarily as a result of the timing and nature of investment purchases and sales.

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BUSINESS

Overview

We are a financial services holding company incorporated under the laws of the Cayman Islands. Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector, which is carried out through our insurance subsidiaries, American Country Insurance Company, or American Country, and American Service Insurance Company, Inc., or American Service, together with American Country, which we refer to as our “insurance subsidiaries”. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business auto. Our goal is to be the preferred specialty commercial transportation insurer in any geographic areas where our value proposition delivers benefit to all stakeholders.

We were formed as JJR VI, a Canadian capital pool company, on December 21, 2009 under the laws of Ontario, Canada. On December 31, 2010, we completed a reverse merger wherein American Service and American Country were transferred to us by Kingsway America Inc., or KAI, a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a Canadian public company whose shares are traded on the Toronto and New York Stock Exchanges. Prior to the transaction, each of American Service and American Country were wholly owned subsidiaries of KAI. American Country commenced operations in 1979. With roots dating back to 1925 selling insurance for taxi cabs, American Country is one of the oldest insurers of U.S. taxi and livery business. In 1983, American Service began as a non-standard personal and commercial auto insurer writing business in the Chicago, Illinois area.

In connection with the acquisition of American Service and American Country, we streamlined the operations of the insurance subsidiaries to focus on the “light” commercial automobile lines of business we believe will produce favorable underwriting results. Over the past two years, we have disposed of non-core assets and placed into run-off certain non-core lines of business previously written by the insurance subsidiaries. Our sole focus going forward is the underwriting of commercial automobile insurance in the U.S.

The address of our registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Our operating headquarters are located at 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, USA. We maintain a website at http://www.atlas-fin.com. Information on our website or any other website does not constitute a part of this prospectus.

On December 31, 2010, following the reverse merger transaction described immediately hereafter, we filed a Certificate of Registration by Way of Continuation in the Cayman Islands to re-domesticate as a Cayman Islands company. In addition, on December 30, 2010 we filed a Certificate of Incorporation on Change of Name to change our name to Atlas Financial Holdings, Inc. Our current organization is a result of a reverse merger transaction involving the following companies:

(a) JJR VI, sponsored by JJR Capital, a Toronto based merchant bank;

(b) American Insurance Acquisition Inc., or American Acquisition, a corporation formed under the laws of Delaware as a wholly owned subsidiary of Kingsway America Inc., or KAI. KAI is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a Canadian public company formed under the laws of Ontario and whose shares are traded on the Toronto and New York Stock Exchanges; and

(c) Atlas Acquisition Corp., a Delaware corporation wholly-owned by JJR VI and formed for the purpose of merging with and into American Acquisition.

Prior to the transaction, each of American Service and American Country were wholly owned subsidiaries of KAI. In connection with the reverse merger transaction, KAI transferred 100% of the capital stock of each of American Service and American Country to American Acquisition (another wholly owed subsidiary of KAI) in exchange for C$35.1 million of common and C$18.0 million of preferred shares of American Acquisition and promissory notes worth C$7.7 million, aggregating C$60.8 million. In addition, American Acquisition raised C$8.0 million through a private placement offering of subscription receipts to qualified investors in both the United States and Canada at a price of C$2.00 per subscription receipt.

All references to share counts and per share values in connection with the reverse merger transaction are presented prior to the one-for-three reverse split. KAI received 13,804,861 restricted voting common shares of our company, which we refer to as “restricted voting shares”, then valued at $27.8 million, along with 18,000,000 non-voting preferred shares of our company then valued at C$18.0 million and C$8.0 million cash for total consideration of C$60.8 million in exchange for 100% of the outstanding shares of American Acquisition and full payment of certain promissory notes. Investors in the American

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Acquisition private placement offering of subscription receipts received 3,983,502 of our ordinary shares, which we refer to as “ordinary shares”, plus warrants to purchase one ordinary share of our company for each subscription receipt at C$2.00 at any time until December 31, 2013. Every 10 common shares of JJR VI held by the shareholders of JJR VI immediately prior to the reverse merger were, upon consummation of the merger, consolidated into one ordinary share of JJR VI. Upon re-domestication in the Cayman Islands, these consolidated shares were then exchanged on a one-for-one basis for our ordinary shares.

Substantially all of our new premiums written are in “light” commercial automobile lines of business. In the nine month period ended September 30, 2012, gross premium written from commercial automobile was $41.0 million, representing a 183.0%increase relative to the nine month period ended September 30, 2011. As a percentage of the insurance subsidiaries’ overall book of business, commercial auto gross premium written represented 92.6% of gross premium written in the nine month period ended September 30, 2012 compared to 44.0% during the nine month period ended September 30, 2011.

The following table summarizes gross premium written by line of business.

Gross Premium Written by Line of Business (in ‘000s)
	2012									2011
	Q3			Q2			Q1			Q4		Q3		Q2		Q1
Commercial automobile	$	22,119		$	8,209		$	10,718		$	4,286	$	5,350	$	2,545	$	6,609
Non-standard automobile	(31		)	(143		)	(366		)	3,401		4,342		3,709		5,960
Other	1,265			1,176			1,402			1,394		1,236		1,602		1,597
Total	$	23,353		$	9,242		$	11,754		$	9,081	$	10,928	$	7,856	$	14,166

We are committed to the “light” commercial automobile lines of business. The insurance subsidiaries distribute their products through a network of independent retail agents, and actively wrote insurance in 31 states as of September 30, 2012. Together, American Country and American Service are licensed to write property and casualty, or P&C, insurance in 47 states in the United States. American Country and American Service actively wrote commercial automobile insurance in more states during 2012 than in any prior year. Our acquisition of Gateway expanded our core commercial auto lines to 39 states and the District of Columbia.

Market

Our core business is the underwriting of commercial automobile insurance policies, focusing on the “light” commercial automobile sector. The “light” commercial automobile policies we underwrite provide coverage for light weight commercial vehicles typically with the minimum limits prescribed by statute, municipal or other regulatory requirements. The majority of our policyholders are individual owners or small fleet operators.

The “light” commercial automobile sector is a subset of the historically profitable commercial automobile insurance industry segment. Commercial automobile insurance has outperformed the overall P&C industry in each of the past ten years based on data compiled by A.M. Best. A recent survey by A.M. Best estimates the total market for commercial automobile liability insurance to be $24 billion. The size of the commercial automobile insurance market can be affected significantly by many factors, such as the underwriting capacity and underwriting criteria of automobile insurance carriers and general economic conditions. Historically, the commercial automobile insurance market has been characterized by periods of price competition and excess capacity followed by periods of higher premium rates and shortages of underwriting capacity.

We believe that there is a positive correlation between the economy and commercial automobile insurance in general. Operators of “light” commercial automobiles may be less likely than other business segments within the commercial automobile insurance market to take vehicles out of service as their businesses and business reputations rely heavily on availability. With respect to certain business lines such as the taxi line, there are also other factors such as the cost and limited supply of medallions which may discourage a policyholder from taking vehicles out of service in the face of reduced demand for the use of the vehicle.

Competitive Strengths

Our value proposition is driven by our competitive strengths, which include the following:

Focus on niche commercial insurance business. We target niche markets that support adequate pricing and believe we are able to adapt to changing market needs ahead of our competitors through our strategic commitment and increasing scale. We

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develop and deliver superior specialty commercial automobile insurance products priced to meet our customers’ needs and strive to generate consistent underwriting profit for our insurance subsidiaries. We have experienced a favorable trend in loss ratios in 2012 attributable to the increased composition of commercial auto as a percentage of the total written premium. We expect the loss ratio to continue decreasing as we complete the transition away from non-standard automobile insurance and other non-core lines of business.

There are a limited number of competitors specializing in these lines of business. Management believes a strong value proposition is very important to attract new business and can result in desirable retention levels as policies renew on an annual basis. There are also a relatively limited number of agents who specialize in these lines of business. As a result, strategic agent relationships are important to ensure efficient distribution.

Strong market presence with recognized brands and long-standing distribution relationships. American Country and American Service have a long heritage as insurers of taxi, livery and para-transit businesses. Both of the insurance subsidiaries have strong brand recognition and long-standing distribution relationships in our target markets. Through regular interaction with our retail producers, we strive to thoroughly understand each of the markets we serve in order to deliver strategically priced products to the right market at the right time.

Sophisticated underwriting and claims handling expertise. Atlas has extensive experience and expertise with respect to underwriting and claims management in our specialty area of insurance. Our well-developed underwriting and claims infrastructure includes an extensive data repository, proprietary technologies, deep market knowledge and established market relationships. Analysis of the substantial data available through our operating companies drives our product and pricing decisions. We believe our underwriting and claims handling expertise provides enhanced risk selection, high quality service to our customers and greater control over claims expenses. We are committed to maintaining this underwriting and claims handling expertise as a core competency as our volume of business increases.

Scalable operations positioned for growth. Significant progress has also been made in aligning our cost base to our expected revenue going forward. The core functions of the insurance subsidiaries were integrated into a common operating platform. We believe that both insurance subsidiaries are well positioned to begin returning to the volume of premium they wrote in the recent past with better than industry level profitability from the efficient operating infrastructure honed in 2011.

Experienced management team. We have a talented and experienced management team led by our President and Chief Executive Officer, Scott Wollney, who has more than 21 years of experience in the property and casualty insurance industry. Our senior management team has worked in the property and casualty industry for an average of 21 years and with the insurance subsidiaries, directly or indirectly, for an average of 12 years.

Strategic Focus

Vision

Our goal is to be the preferred specialty commercial transportation insurer in any geographic areas where our value proposition delivers benefit to all stakeholders.

Mission

We develop and deliver superior specialty insurance products priced to meet our customers’ needs and generate consistent underwriting profit for our insurance subsidiaries. These products are distributed to the insured through independent retail agents utilizing our company’s operating platform.

We seek to achieve our vision and mission through the design, sophisticated pricing and efficient delivery of specialty transportation insurance products. Through constant interaction with our retail producers, we strive to thoroughly understand each of the markets we serve in order to deliver strategically priced products to the right market at the right time. Analysis of the substantial data available through our operating companies drives our product and pricing decisions. We focus on our key strengths and seek to expand our geographic footprint and products only to the extent these activities support our vision and mission. We target niche markets that support adequate pricing and believe we are able to adapt to changing market needs ahead of our competitors through our strategic commitment and increasing scale.

Outlook

Over the past two years, through dispositions and by placing certain lines of business into run-off, the insurance subsidiaries have streamlined operations to focus on the lines of business they believe will produce favorable underwriting results.

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Significant progress has also been made in aligning the cost base to our expected revenue base going forward. The core functions of the insurance subsidiaries were integrated into a common operating platform. Management believes that both insurance subsidiaries are well positioned to begin returning to the volume of premium they wrote in the recent past with better than industry level profitability. The insurance subsidiaries have a long heritage with respect to their continuing lines of business and will benefit from the efficient operating infrastructure honed in 2011. American Country and American Service actively wrote business in 31 states during 2012, representing more states than in any prior year, utilizing our well developed underwriting and claim methodology. Our acquisition of Gateway expanded our core commercial auto lines to 39 states and the District of Columbia.

The following table summarizes historical commercial automobile gross premium written by our insurance subsidiaries, American Country and American Service (full year 2012 gross premium written is shown).

Annual Gross Premium Written (in ‘000s)
	2012		2011		2010		2009		2008		2007		2006		2005
Commercial automobile	$	50,546	$	18,790	$	13,729	$	67,836	$	88,225	$	118,894	$	111,024	$	127,375

We believe that the most significant opportunities going forward are: (i) continued re-energizing of distribution channels with the objective of recapturing business generated prior to 2009, (ii) building business in previously untapped geographic markets where our insurance subsidiaries are licensed, but not recently active, and (iii) opportunistically acquiring books of business or similar insurance companies, provided market conditions support this activity. Primary potential risks related to these activities include: (i) insurance market conditions remaining “soft” for a sustained period of time, (ii) not being able to achieve the expected support from distribution partners, and (iii) the insurance subsidiaries not successfully maintaining their recently improved ratings from A.M. Best.

We seek to deploy our capital to maximize the return for our shareholders, either by investing in growing our operations or by pursuing other capital initiatives, depending upon insurance and capital market conditions. We focus on our key strengths and seek to expand our geographic footprint and products only to the extent these activities support our vision and mission. We will identify and prioritize market expansion opportunities based on the comparative strength of our value proposition relative to competitors, the market opportunity and the legal and regulatory environment.

We intend to continue to grow profitably by undertaking the following:

Re-establish legacy distribution relationships. We are focused on re-establishing relationships with independent agents that have been our insurance subsidiaries’ distribution partners in the past. We seek to develop and maintain strategic distribution relationships with a relatively small number of independent agents, with substantial market presence, in each state in which we currently operate. We expect to continue to increase the distribution of our core products in the states where we are actively writing insurance and re-capture insurance premium historically written by the insurance subsidiaries.

Expand our market presence. We are committed to continuing to diversify geographically by leveraging our experience, historical data and market research to expand our business in previously untapped geographic markets. Utilizing our established brands and market relationships we have made significant inroads in new states where we had no active business in 2011. We will continue to expand into additional states where we are licensed, but not currently active, and states where we are not currently licensed to the extent that our market expansion criteria is met in a given state.

Acquire complementary books of business and insurance companies. We plan to opportunistically pursue acquisitions of complementary books of business and insurance companies provided market conditions support this activity. We will evaluate each acquisition opportunity based on its expected economic contribution to our results and support of our market expansion initiatives. Our recent acquisition of Gateway Insurance Company, as discussed under “Recent Developments” is consistent with this aspect of our strategy.

Geographic Markets

Currently, we distribute insurance only in the United States. Through our insurance subsidiaries, we are licensed to write P&C insurance in 47 states in the United States. The following table reflects, in percentages, the principal geographic distribution of premiums written for the nine month period ended September 30, 2012. No other jurisdiction accounted for more than 5%.

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Distribution of Net Premium Written by Jurisdiction
New York	34.6%
Illinois	19.3%
Michigan	11.9%
Louisiana	6.2%

The diagram below outlines the states where we are focused on actively writing new insurance policies and where we believe the comparative strength of our value proposition, the market opportunity, and the legal and regulatory environment are favorable (states darkened in the below diagram). With the completion of the acquisition of Gateway, we have increased the footprint of our current market focus to 39 states and the District of Columbia through the addition of California, Hawaii, Montana, Nebraska, North Dakota, South Dakota, Washington and West Virginia. 

Gateway historically issued commercial automobile insurance policies in the state of Florida. We do not plan to actively write insurance for new policyholders in Florida going forward and are in the process of satisfying the regulatory requirements to withdraw from that state.

Agency Relationships

Independent agents are recruited by us directly and through marketing efforts targeting the specialty niche upon which we focus. Interested agents are evaluated based on their experience, expertise and ethical dealing. Typically, our company enters into distribution relationships with one out of every ten agents seeking an agency contract. We are generally interested in acting as one of a relatively small number of insurance partners with whom their independent agents place business and are also careful not to oversaturate the distribution channel in any given geographic market. This helps to ensure that we are able to receive the maximum number of submissions for underwriting evaluation without unnecessary downstream pressure from agents to write business that does not fit our underwriting model. Agents receive commission as a percentage of premiums

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(generally 10% to 15%) as their primary compensation from us. Larger agents are also eligible for profit sharing based on the growth and underwriting profitability related to their book of business with us. The quality of business presented and written by each independent agent is evaluated regularly by our underwriters and is also reviewed quarterly by senior management. Key metrics for evaluation include overall accuracy and adequacy of underwriting information, performance relative to agreed commitments, support with respect to claims presented by their customers (as applicable) and overall underwriting profitability of the agent’s book of business. While we rely on our independent agents for distribution and customer support, underwriting and claim handling responsibilities are retained by us. Many of our agents have had direct relationships with either or both of the subsidiaries for a number of years. Gateway also distributes its taxi and limousine products through independent agents. We believe their distribution channel and independent agent relationships are complementary to ours.

Seasonality

The P&C insurance business is seasonal in nature. While our net premiums earned generally follow a stable trend from quarter to quarter, our gross premiums written follow certain common renewal dates for the light commercial risks that represent our core lines of business. For example, January 1^st and March 1^st are common taxi cab renewal dates in Illinois and New York, respectively. Net underwriting income is driven mainly by the timing and nature of claims, which can vary widely. Our ability to generate written premium is also impacted by the timing of policy periods in the states in which we operate.

Competition

The insurance industry is price competitive in all markets in which the insurance subsidiaries operate. Our company strives to employ disciplined underwriting practices with the objective of rejecting under priced risks. A recent survey by A.M Best & Company estimates the total market for commercial automobile liability insurance to be $24 billion. We believe our company requires only 1% market share to achieve our business plan. We believe our current market share is approximately 0.2%.

Our company competes on a number of factors such as distribution strength, pricing, agency relationships, policy support, claim service, and market reputation. In our core commercial automobile lines, the primary offerings are policies at the minimum prescribed limits in each state, as established by statutory, municipal and other regulations. We believe our company differentiates itself from many larger companies competing for this specialty business by exclusively focusing on these lines of insurance. We believe our exclusive focus results in the deployment of underwriting and claims professionals more in tune with issues common in commercial automobile lines, and provides the customer better service.

In the specialty insurance market, American Country and American Service compete against, among others, American Transit Insurance Company (New York only), Canal Insurance Company, CNA Financial Corporation, Carolina Casualty Insurance Company, Empire Fire & Marine Insurance Company (subsidiary of Zurich Financial Services Ltd.), Global Liberty Insurance Company of New York, Granada Insurance Company, Hereford Holding Company, Inc., Hartford Financial Services Group, Lancer Financial Group, MAPFRE USA, Maya Assurance Company, Mercury General Corporation, National Indemnity Company (subsidiary of Berkshire Hathaway, Inc.), National Interstate Corporation, Northland Insurance Company (subsidiary of Travelers Companies, Inc.), Safeco Corporation (subsidiary of Liberty Mutual), Scottsdale Insurance Company (National Casualty Company) and ULLICO, Inc.

To compete successfully in the specialty commercial insurance industry, we rely on our ability to: identify markets that are most likely to produce an underwriting profit; operate with a disciplined underwriting approach; offer diversified products and geographic platforms; practice prudent claims management; reserve appropriately for unpaid claims; strive for cost containment through economies of scale where deemed appropriate; and provide services and competitive commissions to our independent agents.

Regulation

We are subject to extensive regulation, particularly at the state level. The method, extent and substance of such regulation varies by state but generally has its source in statutes which establish standards and requirements for conducting the business of insurance and that delegate regulatory authority to a state insurance regulatory agency. In general, such regulation is intended for the protection of those who purchase or use insurance products issued by our insurance subsidiaries, not the holders of securities issued by us. These rules have a significant impact on our business and relate to a wide variety of matters including accounting methods, agent and company licensure, claims procedures, corporate governance, examination, investing practices, policy forms, pricing, trade practices, reserve adequacy and underwriting standards.

In recent years, the state insurance regulatory framework has come under increased federal scrutiny. Most recently, pursuant to the Dodd-Frank Regulatory Reform Act of 2010, the Federal Insurance Office was formed for the purpose of, among other

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things, examining and evaluating the effectiveness of the current insurance and reinsurance regulatory framework. In addition, state legislators and insurance regulators continue to examine the appropriate nature and scope of state insurance regulation.

Many state laws require insurers to file insurance policy forms and/or insurance premium rates and underwriting rules with state insurance regulators. In some states, such rates, forms and/or rules must be approved prior to use. While these requirements vary from state to state, generally speaking, regulators review premium rates to ensure they are not excessive, inadequate or unfairly discriminatory.

As a result, the speed with which an insurer can change prices in response to competition or increased costs depends, in part, on whether the premium rate regulations (i) require prior approval of the premium rates to be charged, (ii) permit the insurer to file and use the forms, rates and rules immediately, subject to further review, or (iii) permit the insurer to immediately use the forms, rates and/or rules and to subsequently file them with the regulator. When a state significantly restricts both underwriting and pricing, it can become more difficult for an insurer to make adjustments quickly in response to changes which could affect profitability.

Insurance companies are required to report their financial condition and results of operation in accordance with statutory accounting principles prescribed or permitted by state insurance regulators in conjunction with the National Association of Insurance Commissioners (the “NAIC”). State insurance regulators also prescribe the form and content of statutory financial statements, perform periodic financial examinations of insurers, set minimum reserve and loss ratio requirements, establish standards for the types and amounts of investments and require minimum capital and surplus levels. Such statutory capital and surplus requirements include risk-based capital (“RBC”) rules promulgated by the NAIC. These RBC standards are intended to assess the level of risk inherent in an insurance company’s business and consider items such as asset risk, credit risk, underwriting risk and other business risks relevant to its operations. In accordance with RBC formulas, a company’s RBC requirements are calculated and compared to its total adjusted capital to determine whether regulatory intervention is warranted. At December 31, 2011, the total adjusted capital of each of our insurance subsidiaries exceeded the minimum levels required under RBC rules.

It is difficult to predict what specific measures at the state or federal level will be adopted or what effect any such measures would have on us.

Facilities

Our corporate headquarters is located at 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, USA. The facility consists of one office building totaling 176,844 net rentable square feet of office space on 7.2 acres. On May 22, 2012, we closed a transaction related to the sale of the headquarters building in Elk Grove Village to Northwest Point, LLC.  The total sales price of the property, which was paid in cash, amounted to $14.0 million, less closing costs and related expenses of approximately $633,000. In connection with the sale, our company also wrote down an accrual of approximately $792,000 held for real-estate taxes. Approximately $830,000 of the sales price was held in escrow for real-estate taxes. 

There is no material relationship between the purchaser of the property and us or any of our affiliates, directors or officers. Cash proceeds from the transaction, net of the funds held in escrow for real-estate taxes, were approximately $12.4 million and will be used to support plans for future growth. Including the benefit of the real-estate tax escrow write down, combined cash and non-cash proceeds from the transaction was $13.2 million.

We remain in the building as a tenant, occupying approximately 30,600 square feet for a term of 60 months beginning May 22, 2012, unless terminated or extended pursuant to the lease agreement. We are paying an annual rent equal to approximately $642,000 or approximately $53,000 per month, with a nominal annual escalation beginning on the first anniversary date of the lease agreement. We believe the facility is suitable and adequate for our current business needs.

We also own approximately 50 acres of vacant land in Alabama which was transferred to us from Southern United. It is also currently held for sale.

Upon completion of the Gateway acquisition, we assumed a lease for 12,937 square feet of office space in St. Louis, Missouri which is effective through February 2016. We currently pay a monthly rent equal to approximately $28,000. Some of the expense related to the lease will be shared with the sublessor. Expense related to the lease is included in our pro forma post-acquisition financial exhibits.

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Employees

As of the date of this prospectus, we had 106 full-time employees. American Country and American Service together have 77 full-time employees, 70 of whom work at the corporate offices in Elk Grove Village, Illinois, 4 of whom work in New York and 3 of whom work remotely. Our acquisition of Gateway increased head count by 29, the majority of whom work at Gateway offices in Missouri.

Legal Proceedings

In connection with our operations, we are, from time to time, named as defendants in actions for damages and costs allegedly sustained by the plaintiffs. While it is not possible to estimate the outcome of the various proceedings at this time, such actions have generally been resolved with minimal damages or expense in excess of amounts provided and our company does not believe that it will incur any significant additional loss or expense in connection with such actions.

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MANAGEMENT

Executive Officers and Directors

Our directors and executive officers as of the date of this prospectus are as follows:

Name	Age	Position
Scott D. Wollney	43	President, Chief Executive Officer and Director
Gordon G. Pratt	50	Chairman of the Board
Jordan M. Kupinsky	39	Director
Larry G. Swets, Jr.	37	Director
Paul A. Romano	50	Vice President and Chief Financial Officer
Bruce W. Giles	52	Vice President, Underwriting
Joseph A. Shugrue	48	Vice President, Claims
Leslie A. DiMaggio	43	Vice President, Operations

Scott Wollney

Mr. Wollney has been our President and Chief Executive Officer, and a Director, since December 31, 2010. From July 2009 until that time, Mr. Wollney was President and Chief Executive Officer of KAI, prior to which he was the President and Chief Executive Officer of Lincoln General Insurance Company (a subsidiary of KAI) from May 2008 to March 2009. From January 1998 to May 2008, he was President of Avalon Risk Management, Inc. Mr. Wollney’s education coupled with his significant and varied experience as an executive manager and director qualifies him for his role with Atlas.  He has experience building successful businesses as well as re-organizing challenged companies around a focused strategy to address legacy issues and set them on a path for future success.  Mr. Wollney has direct experience and expertise with respect to the numerous disciplines which are critical to insurance business.

Gordon Pratt

Mr. Pratt has been our Chairman of the Board since December 31, 2010. Since March 2004, Mr. Pratt has been a Managing Member of Fund Management Group LLC in Connecticut. From June 2004 to April 2006, he was also the Senior Vice-President, Finance of the Willis Group in New York, prior to which he was the Managing Director of Hales Capital Advisors LLC and the Managing Partner of Distribution Partners Investment Capital L.P. Mr. Pratt has also served as Chairman and Vice Chairman of the boards of directors of NASDAQ listed companies, including United Insurance Holdings Corp. He holds a Master of Management degree from Northwestern University as well as a Bachelor of Arts degree from Cornell University. Mr. Pratt’s education, background and experience qualify him for his role with Atlas.  Mr. Pratt has evaluated financial statements for more than 50 insurance companies and/or their holding company parents. Such evaluations include companies’ uses of accounting estimates, accruals and provisions.  Mr. Pratt has made investment decisions and offered his opinion to company management teams based upon his evaluations concerning financial statements, which cover a wide range of complexity and accounting issues.  Additionally, from his service as a member of certain boards of directors, he has an understanding of internal controls and procedures for financial reporting for insurance companies and/or insurance holding company parents.

Jordan Kupinsky

Mr. Kupinsky has been a Director of Atlas since December 31, 2010. Since 2008, Mr. Kupinsky has been a Managing Director with Windsor Private Capital Inc. and its predecessor JJR Capital Corp. Prior to joining Windsor, he was a Vice President at Greenhill & Co., an independent global investment banking firm, listed on the NYSE, focused on mergers & acquisitions, financial restructuring and merchant banking, from March 2006 to May 2008. Prior to joining Greenhill, Mr. Kupinsky held the positions of Vice President of Corporate Development and General Counsel at Minacs Worldwide Inc., a publicly traded company on the Toronto Stock Exchange from July 2002 to February 2005. Mr. Kupinsky began his career practicing corporate and securities law at Torys LLP in Toronto (from 1997 to 1999) and was also an investment banking associate at Houlihan Lokey Howard & Zukin from 1999 to 2002. He holds a joint MBA and LL.B. degree from the Schulich School of Business and Osgoode Hall Law School at York University. Mr. Kupinsky’s education, background and experience qualify him for his role with Atlas.  Mr. Kupinsky has experience in financial statement review with both public and private companies.  His direct experience includes securities law, financial analysis and corporate governance.

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Larry Swets, Jr.

Mr. Swets has been a Director of Atlas since December 31, 2010. Since June 30, 2010, Mr. Swets has been the CEO of Kingsway Financial Services Inc. one of our shareholders, prior to which he was the Executive VP, Corporate Development of Kingsway Financial Services Inc. since January 2010. From June 2007 through March 2010, Mr. Swets was a director of United Insurance Holdings Corp. From June 2007 through September 2008, Mr. Swets was the CFO, Secretary, Treasurer and Executive Vice-President of FMG Acquisition Corp. He was the Managing Director of Itasca Financial LLC from May 2005 until January 2010. Mr. Swets holds a Chartered Financial Analyst designation from the CFA Institute. He received a Masters of Science degree from De Paul University in 1999 and a Bachelors of Business and Finance degree from Valparaiso University in 1997. Mr. Swets’ education, background and experience qualify him for his role with Atlas.  He has extensive experience with both private and public insurance businesses at both the executive management and board levels.

Paul Romano

Mr. Romano has been our Vice President and Chief Financial Officer since December 31, 2010. From March 2010 until that time, he served as Vice President and Treasurer of KAI, prior to which he was the Vice President, Data Management of Lincoln General Insurance Company from October 2008 to March 2009. From 2002 through 2008, he held various Vice President and Director positions with American Country Insurance Company and its affiliates. Mr. Romano holds a Certified Public Accountant designation in the State of Illinois. He received a Master of Business Administration degree from the Northwestern University Kellogg Graduate School of Management in 1996 and a Bachelor of Science, Accounting, from the University of Illinois in 1984.

Bruce Giles

Mr. Giles has been our Vice President, Underwriting since our December 31, 2010. Mr. Giles was previously Assistant Vice President of Commercial Underwriting for Kingsway America Inc., prior to which he held various positions with Kingsway America Inc. from December 2003 to June 2010. From 1981 to 2003, he held various positions with Allstate Insurance Group, CIGNA and other insurance companies..

Joseph Shugrue

Mr. Shugrue has been our Vice President, Claims since December 31, 2010. Mr. Shugrue previously held various senior management positions with American Service and Kingsway America Inc. beginning in March 2004. Prior to that time, he held positions with other specialized insurance businesses beginning in October 1986.

Leslie DiMaggio

Ms. DiMaggio has been our Vice President, operations since December 31, 2010. Ms. DiMaggio was previously the Vice President, Information Technology for Kingsway Financial Services Inc. from November 2008 to June 2010, prior to which she was the President, CEO and COO of Southern United Fire Insurance Company from April 2007 to November 2008. From 2000 until 2008, she held various other executive positions at Kingsway America Inc. Prior to that, she worked at other specialty insurance companies.

Corporate Governance Practices and Code of Ethics

Board Leadership Structure and Risk Oversight

Currently, Gordon Pratt serves as the Chairman of the Board and Scott Wollney serves as our President & Chief Executive Officer. The Board recognizes that no single leadership structure is right for all companies and, depending on the circumstances, other leadership structures might be appropriate. The Board believes, however, that the current leadership structure is effective and appropriate, allows for a separation of oversight between management and non-management, provides an experienced Chairman with whom the Chief Executive Officer can discuss issues facing us, and gives a significant voice to non-management directors.

Board Meetings

During the fiscal year ended December 31, 2012, there were 10 meetings of the Board and each director attended at least 75% of all meetings of the Board and the Audit Committee (if he was a member). All of the directors attended the 2012 annual meeting of Shareholders.

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Determination of Independence of Nominees for Election

The Board assumes overall responsibility for our direction through its delegation to senior management and through the ongoing function of the Board and its committees, as applicable.

Directors are considered independent if they have no direct or indirect material relationship with us. A “material relationship” is a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment. In determining whether a material relationship exists, the Board consults with our legal counsel to ensure that its determinations are consistent with relevant securities and other laws, rules and regulations and court decisions.

Further, the Board has adopted corporate governance guidelines that are contained in the National Instrument 58-101 Disclosure of Corporate Governance Practices, (“NI 58-101”), which prescribes certain disclosure of our corporate governance practices, and National Policy 58-201 Corporate Governance Guidelines (“NP 58-201”), which provides non-prescriptive guidelines on corporate governance practices for reporting issuers. The Board believes that good corporate governance improves corporate performance and benefits the shareholders. This discussion addresses our compliance with NI 58-101.

There are four directors on the Board, of which two are independent directors for purposes of NI 58-101 and NP 58-201. Scott Wollney is not independent as he is a member of our management. Larry Swets is not independent as he is a member of management of Kingsway Financial Services, Inc., a company that may have a material relationship with us.

Orientation and Continuing Education

The Board is committed to having appropriate levels of knowledge among members of the Board relative both to us and our industry. New members to the Board are oriented through direct interaction with the balance of the Board and management and will have visibility to past and current corporate records as well as operating results. Committee chairpersons and other members of the Board maintain subject matter expertise through activities relating both to us and other educational resources.

Compensation

The Compensation Committee is responsible for making recommendations to the Board in respect of director and executive officer remuneration matters, with the overall objective of ensuring maximum shareholder benefit from the retention of high quality board and executive team members. For details on the compensation of the Chief Executive Officer, Chief Financial Officer and Directors, please see the section below entitled “Executive Compensation”.

Assessments

The Board, through its Corporate Governance and Nominating Committee, regularly assesses the overall performance of the Board, the committees, and the individual directors through a combination of formal and informal means.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater-than-ten-percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To date, none of our directors, officers and greater-than-ten-percent shareholders have filed reports in connection with Section 16(a).

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Committees of the Board

The Board has three standing committees to assist it in carrying out its duties. The standing committees are: (i) Audit Committee; (ii) Compensation Committee; and (iii) Corporate Governance and Nominating Committee.

(i) Audit Committee

The Audit Committee is elected annually at the first meeting of the Board held after our annual meeting of shareholders. During the fiscal year ended December 31, 2012, the Audit Committee met 8 times. In addition, the Audit Committee meets quarterly with our external auditors.

The Audit Committee is comprised of Jordan Kupinsky (Chairman), Gordon Pratt and Larry Swets. Except for Mr. Swets, each member of the Audit Committee is independent. We follow the independence standards set forth in Multilateral Instrument 52-110 Audit Committees (“MI52-110”). We are currently in compliance with the “independent director” requirements under NASDAQ Rule 5605(c)(2) and Rule 10A-3 of the Exchange Act pursuant to the exception in NASDAQ Rule 5615(b)(1) and Rule 10A-3(b)(1) of the Exchange Act which allows companies that are conducting an initial public offering and have an Audit Committee comprised of a majority of independent directors to have a one year phase-in period to comply with the “independent director” requirements.

The Board has determined that Mr. Kupinsky and Mr. Pratt, because of their accounting and financial management expertise discussed above, are both considered an “audit committee financial expert” as that term is defined under the Exchange Act and, accordingly, that at least one audit committee financial expert is serving on the Corporation’s audit committee.  MI 52-110 provides that an individual is “financially literate” if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s financial statements.  All of the members of the audit committee are financial iterate as that term is defined.

The Audit Committee assists the board of directors in fulfilling its oversight responsibilities. The principal responsibilities of the Audit Committee include: (i) performing our external audit function including the qualifications, independence, appointment and oversight of the work of the external auditors; (ii) ensuring that we meet our accounting and financial reporting requirements and that we report our financial information to the public; (iii) making certain that we are in compliance with all legal and regulatory requirements relating to our oversight responsibilities; (iv) drafting our risk management policies; and (v) overseeing our system of internal controls and management’s information systems.

NASDAQ Compliance

We also intend to comply with NASDAQ independence and other compliance requirements. Specifically, we intend to have a majority independent board of directors, an audit committee, compensation commitee and nominating committee consisting solely of independent directors and an independent audit committee chaired by an audit committee financial expert. Further, we intend to establish a formal director nomination process and we certify that the independent directors will have regularly scheduled executive sessions in which only they are present.

Relevant Education and Experience

Mr. Kupinsky has been actively involved in our Board as an independent director and member of the Audit Committee since the date of formation of the capital pool company. Prior to the reverse merger, Mr. Kupinsky has considerable experience in corporate finance, mergers and acquisitions, financial restructuring and merchant banking. Mr. Kupinsky has experience in financial statement review with both public and private companies. Mr. Kupinsky holds a Masters of Business Administration degree and a JD from the Schulich School of Business and Osgoode Hall Law School.

Mr. Pratt has more than 25 years experience in insurance company financial statement analysis and assessment. He holds a Master of Management degree in Finance from Northwestern’s Kellogg School of Management. His experience includes service as a director of eight insurance companies and/or such insurance companies’ holding company parents, including service as chairman or vice chairman of the board of directors of two publicly-traded insurance companies and/or such insurance companies’ holding company parents, and service as a member of the Audit Committee for one insurance company’s holding company parent. Mr. Pratt had specialized training in insurance company statutory and GAAP accounting while serving as an officer of The Chase Manhattan Bank, N.A. As a partner in four private equity funds focused on investment in insurance companies and insurance-related businesses, Mr. Pratt has evaluated financial statements for more than 50 insurance companies and/or their holding company parents, including such companies’ use of accounting estimates, accruals, and

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provisions. He has made investment decisions and offered his opinion to company managements as a result of his evaluation concerning such financial statements, which covered a wide range of complexity and accounting issues. From his service as a member of certain boards of directors, he has an understanding of internal controls and procedures for financial reporting for insurance companies and/or insurance holding company parents.

Mr. Swets holds a Chartered Financial Analyst designation from the CFA Institute. He received a Masters of Science degree from De Paul University in 1999 and a Bachelors of Business and Finance degree from Valparaiso University in 1997. He has served as executive officer and director of public and private companies.

Audit Committee Oversight

At no time since the commencement of our most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.

(ii) Compensation Committee

The Compensation Committee is comprised of Larry Swets, Jr. (Chairman), Jordan Kupinsky and Gordon Pratt. Except for Mr. Swets, each member of the Compensation Committee is independent. We are currently in compliance with the “independent director” requirements under the NASDAQ rules pursuant to NASDAQ Rule 5615(b)(1) which allows companies that are conducting an initial public offering and have a Compensation Committee comprised of a majority of independent directors to have a one year phase-in period to comply with the “independent director” requirements. The Compensation Committee met one time during the fiscal year ended December 31, 2012.

The Compensation Committee oversees our remuneration policies and practices. The principal responsibilities of the Compensation Committee include: (i) considering our overall remuneration strategy and, where information is available, verifying the appropriateness of existing remuneration levels using external sources for comparison; (ii) comparing the nature and amount of our directors’ and executive officers’ compensation to performance against goals set for the year while considering relevant comparative information, independent expert advice and our financial position; and (iii) making recommendations to the Board in respect of director and executive officer remuneration matters, with the overall objective of ensuring maximum shareholder benefit from the retention of high quality board and executive team members.

The Compensation Committee reviewed executive compensation with management in the course of the 2012 budgeting process. Authority was extended to management within the approved budget for compensation. Neither we nor the Board engaged a compensation consultant in the years ended December 31, 2011 or 2012.

(iii) Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee is comprised of Jordan Kupinsky (Chairman), Larry Swets and Scott Wollney. Jordan Kupinsky is considered the only independent member of the Corporate Governance and Nominating Committee. We are currently in compliance with the “independent director” requirements under the NASDAQ rules pursuant to NASDAQ Rule 5615(b)(1) which allows companies that are conducting an initial public offering and have a Nominating Committee comprised of at least one independent director to have a ninety day phase-in period to ensure that the Nominating Committee has a majority of independent directors and a one year phase-in period to comply with the “independent director” requirements. The Corporate Governance and Nominating Committee met one time during the fiscal year ended December 31, 2011.

The Corporate Governance and Nominating Committee oversees our approach to corporate governance matters. The principal responsibilities of the Corporate Governance and Nominating Committee include: (i) monitoring and overseeing the quality and effectiveness of our corporate governance practices and policies; (ii) considering nominees for our independent directors; (iii) adopting and implementing corporate communications policies and ensuring the effectiveness and integrity of communication and reporting to our shareholders and the public generally; (iv) planning for the succession of our directors and executive officers, including appointing, training and monitoring senior management to ensure that the board and management have appropriate skill and experience; and (v) administering the Board’s relationship with our management.

Our company receives suggestions for potential director nominees from many sources, including members of the Board, advisors, and Shareholders. Any such nominations, together with appropriate biographical information, should be submitted to us in accordance with our policies governing submissions of nominees discussed below. Any candidates submitted by a Shareholder or Shareholder group are reviewed and considered in the same manner as all other candidates. Qualifications for consideration as a board nominee may vary according to the particular areas of expertise being sought as a complement to the

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existing board composition. However, qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting us, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Corporation matters. The Corporate Governance and Nominating Committee seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to us and our Shareholders, though our company does not have a formal policy with regard to the consideration of diversity in identifying director nominees. The independent directors, in addition to any other board members as may be desirable, evaluate potential nominees, whether proposed by Shareholders or otherwise, by reviewing their qualifications, reviewing results of personal and reference interviews and reviewing such other information as may be deemed relevant.

Candidates whose evaluations are favorable are then recommended by the Corporate Governance and Nominating Committee for selection by the full Board. The Board then selects and recommends candidates for nomination as directors for shareholders to consider and vote upon at the annual meeting. In general, our company does not employ executive search firms, or pay a fee to any third party, to locate qualified candidates for director positions.

Code of Business Conduct and Ethics

Our company has a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. The Code of Ethics is designed to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure of financial information in the public filings and our communications and compliance with applicable laws, rules and regulations. The Code of Business Conduct and Ethics is posted on our website at www.atlas-fin.com, under “Investor Relations” and a written copy is available to Shareholders upon written request to us, to the attention of Scott Wollney. Information contained on our website, www.atlas-fin.com, is not deemed part of, nor is it incorporated by reference into, this registration statement.

Limitation on Liability and Indemnification of Officers and Directors

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as a provision purporting to provide indemnification against civil fraud or the consequences of committing a crime. 

Our memorandum and articles of association permit indemnification of officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained in their capacities as such unless such losses or damages arise from breach of trust, breach of duty, dishonesty, fraud or willful default of such directors or officers. 

Atlas provides additional indemnification for our directors and senior executive officers separate from that provided in our memorandum and articles of association. These agreements, among other things, require us to indemnify such persons for certain expenses, including attorneys’ fees, judgments, penalties fines and settlement amounts actually and reasonably incurred by such person in any action or proceeding arising out of their services as one of our directors or executive officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request, including liability arising out of negligence or active or passive wrongdoing by the officer or director.

Our company also maintains a directors and officers liability insurance policy for our directors and officers. 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted with respect to our directors or officers or persons controlling us under the foregoing provisions, our company has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United States law.

EXECUTIVE COMPENSATION

Compensation for executives is reviewed annually by the Compensation Committee of the Board. Current compensation was set based on the following criteria: (i) our size and scale; (ii) nature of our strategic objectives; and (iii) each executive’s role and responsibility. Industry data (such as surveys compiled by Towers Watson for the property & casualty insurance industry) as well as the potential for incentive compensation is also taken into consideration in the regular evaluation of base salary.

Employment agreements were executed with our executives in 2011 with an initial effective term of January 1, 2011 through December 31, 2013. These agreements provide for compensation based on a combination of base salary and incentive compensation. Incentive compensation for 2011 and 2012 was based primarily on our achieving certain financial and

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operational objectives, such as the successful expansion into new states and the establishment of significant new agent relationships (”cornerstone agents”). Amounts paid in 2011 and 2012 are shown in the Summary Compensation Table under the heading “Bonus.” Incentive compensation in subsequent years will be based on a combination of financial results and the achievement of strategic objectives, as determined by the Compensation Committee of the Board. Under the current plan, incentive compensation can be paid in an amount up to 75% of the executive’s base salary. Final determination of incentive compensation is subject to approval by the Board. See also “Employment Agreements with Named Executive Officers” below.

Subject to the terms and conditions of our stock option plan, the Compensation Committee of the Board is responsible for granting option-based awards to executive officers as an incentive. In determining appropriate grants, the Compensation Committee considers contributions to our operating results as well as expectations relative to near and longer term strategic goals and objectives in support of profitable growth.

The maximum number of ordinary shares reserved for issuance under the stock option plan together with all other security based plans is equal to 10% of issued and outstanding ordinary shares at the date of grant. The exercise price of options granted under the plan cannot be less than the volume weighted average trading price of Atlas’ ordinary shares for the five preceding trading days. Options generally vest over a three year period and expire ten years from grant date.

On January 18, 2011, Atlas granted options to purchase 123,250 ordinary shares of Atlas stock to officers and directors at an exercise price of C$6.00 per share. The options vest 25% at date of grant and 25% on each of the next three anniversary dates and expire on January 18, 2021.

On January 11, 2013, Atlas granted options to purchase 91,667 ordinary shares under the Company’s stock option plan, all of which were granted to the Company’s officers. The granted options have an exercise price of C$6.45 and vest equally on the first, second and third anniversary of the grant date. The options expire on January 11, 2023.

In connection with completion of the offering of our ordinary shares, the Compensation Committee of the Board expects to undertake a review of our executive and director compensation, including our stock option plan. This review will include, among other considerations, comparisons to industry data, including the executive and director compensation programs of other publicly traded property and casualty insurance companies. We expect that following the closing of the offering, our executive compensation and director compensation will be increased to bring us in line with other public companies in our industry. These changes may also include changes to our stock option plan for directors and officers.

Summary Compensation Table

The following table sets forth information concerning the total compensation for the years ended December 31, 2012, December 31, 2011 and December 31, 2010 earned by the Chief Executive Officer, the Chief Financial Officer, and our two highest paid executive officers whose total compensation exceeded $100,000, if any (collectively, the “Named Executive Officers”) and our directors.

Name and Principal Position	Year	Salary (US$)		Bonus (US$)		Option Awards ($)(1)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings	All Other Compensation (US$)(4)		Total Compensation ($)
Scott Wollney(2) Chief Executive Officer and Director	2012	$	275,000	$	110,000	—	—	—	$	9,000	$	394,000
	2011	275,000		—		30,900	—	—	8,654		314,554
	2010	—		—		—	—	—	—		N/A
Paul A. Romano(2) Vice-President and Chief Financial Officer	2012	$	175,000	$	70,000	—	—	—	$	7,200	$	252,200
	2011	175,000		—		30,900	—	—	6,646		212,546
	2010	—		—		—	—	—	—		N/A
Leslie DiMaggio(3) VP Operations	2012	$	175,000	$	70,000	—	—	—	—		$	245,000
	2011	175,000		—		30,900	—	—	—		205,900
	2010	—		—		—	—	—	—		N/A
Joseph Shugrue(3) VP Claims	2012	$	175,000	$	70,000	—	—	—	—		245,000
	2011	175,000		—		30,900	—	—	—		205,900
	2010	—		—		—	—	—	—		N/A

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Notes:

(1)	The amounts shown in this column are valued based on the aggregate grant date fair value computed in accordance Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. Black-Scholes option pricing model was used to estimate the fair value of the 2011 option awards using the following assumptions - risk-free interest rate of 2.27% to 3.13%; dividend yield of 0.0%; expected volatility of 100%; and expected life of 6 to 9 years. Each of the individuals noted in the above Summary Compensation Table received an option to purchase 25,000 ordinary shares during the year ended December 31, 2011, at an exercise price of C$6.00 per ordinary share and expiring January 18, 2021.
(2)	Scott Wollney and Paul Romano became our Chief Executive Officer and our Chief Financial Officer, respectively, effective at 11:59 p.m. on December 31, 2010, upon the closing of the reverse merger under TSXV Policy 2.4. Pursuant to the reverse merger, American Country and American Service, together with their holding company American Acquisition, merged with and into our wholly-owned subsidiary. For the year ended December 31, 2010, Messrs Wollney and Romano did not receive any compensation from us; however, they did receive compensation from Kingsway Financial Services, Inc., the former parent of American Acquisition, American Country and American Service, for services provided to Kingsway Financial Services Inc. and its subsidiaries in various capacities including but not limited to their capacities as officers of American Acquisition, American Country and American Service. No compensation was paid directly by American Acquisition, American Country or American Service to Messrs. Wollney and Romano.
(3)	Leslie DiMaggio and Joseph Shugrue were appointed as VP Operations and VP Claims of our insurance subsidiaries, respectively on December 31, 2010.
(4)	Includes annual car allowance.

Employment Agreements with Named Executive Officers

Concurrently with the completion of the Reverse merger, we entered into employment agreements with each of Scott Wollney, Paul Romano, Joseph Shugrue, and Leslie DiMaggio. The key terms of such employment agreements include:

(a)	employment being “at-will” and, subject to the severance and post-termination obligations described below, the employment agreement being terminable by either party at any time;
(b)	an annual base salary as set out in the table under the heading “Summary Compensation Table”;
(c)	the executive being entitled to participate in such employee benefit plans as we shall approve including, retirement plans, paid vacation and sick days/paid time off, disability plans, our stock option plan, or such other plans as may be offered from time to time; and
(d)	severance payments and post-termination obligations as further described below under “Termination and Change of Control Benefits”.

Stock Option Plans

On January 3, 2011, we adopted a 10% rolling stock option plan in order to advance our interests by providing certain “Eligible Persons” (any Employee, Officer, Director, or Consultant who is approved for participation in the Plan by the Compensation Committee) with incentives. In accordance with TSXV Policy 4.4 - Incentive Stock Options, rolling option plans must receive shareholder approval annually at our annual meeting.

The stock option plan provides for the granting of options to purchase ordinary shares to Eligible Persons. Options may be granted at the discretion of the Compensation Committee in such number that may be determined at the time of grant, subject to the limits set out in the stock option plan. The number of ordinary shares issuable under the stock option plan is not more than 10% of the number of ordinary shares that are issued and outstanding as of the date of the grant of an option. Any increase in the issued and outstanding ordinary shares will result in an increase in the available number of ordinary shares issuable under the stock option plan, and any exercises of options or expirations or terminations of options will make new grants available under the stock option plan.

The exercise price of all options is established by the Compensation Committee at the time of grant, provided that the exercise price shall not be less than the market price of the ordinary shares on the date of grant. Under the stock option plan, market price is equal to the volume weighted average trading price of the ordinary shares on the TSXV (the principal stock exchange on which the ordinary shares are then listed for trading) for the five trading days immediately preceding the date on which the option is granted. The expiry of options is also established by the Compensation Committee at the time of the grant, provided that the options have a maximum term of ten years. The Compensation Committee may determine when any option will become exercisable and may determine that the Option will be exercisable in installments or pursuant to a vesting schedule.

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As of the date of this prospectus, we had 225,617 outstanding options, at an average exercise price of C$6.04 per ordinary share.

On January 11, 2013, Atlas granted options to purchase 91,667 ordinary shares under the Company’s stock option plan, all of which were granted to the Company’s officers. The granted options have an exercise price of C$6.45 and vest equally on the first, second and third anniversary of the grant date. The options expire on January 11, 2023.

Outstanding Equity Awards at 2012 Fiscal Year End

The following table sets forth all equity awards held by the Named Executive Officers that were outstanding at the end of the most recently completed fiscal year.

Outstanding Equity Awards as at December 31, 2012
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)	Number of Securities Underlying  Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date
Scott Wollney Chief Executive Officer and Director	4,167	4,167	C$6.00	January 18, 2021
Paul A. Romano Vice-President and Chief Financial Officer	4,167	4,167	C$6.00	January 18, 2021
Leslie DiMaggio VP Operations	4,167	4,167	C$6.00	January 18, 2021
Joseph Shugrue VP Claims	4,167	4,167	C$6.00	January 18, 2021

(1) These options were granted on January 18, 2011 and 25% of the ordinary shares subject to the option vested on the date of grant and the remaining 75% of the ordinary shares subject to the option vest in 25% increments on each of the first through third anniversaries of the date of grant.

Pension Plan Benefits

Our company does not currently maintain any pension or retirement plans that provide for payments or benefits at, following, or in connection with retirement.

Termination and Change of Control Benefits

We are party to employment agreements with the Named Executive Officers pursuant to which, if we terminate the executive without Cause (as defined in the employment agreement), or the executive’s employment is terminated in connection with a Change of Control (as defined in the employment agreement), the executive will be entitled to certain payments and benefits as set out below.

If terminated without Cause:	Continuation of base salary for: (1)	Lump-sum Payment equal to:	Continuation of employee health benefits covered under COBRA for: (1) (2)
During Year 1	24 months	100% of base salary	24 months
During Year 2	24 months	50% of base salary	12 months
During Year 3	12 months	Most recently awarded bonus	12 months

Notes:

(1)	The continuation of base salary and COBRA benefits will cease on the first of the month immediately following the date on which the executive becomes employed by a subsequent employer.
(2)	Continuation coverage will continue for the period set forth in this column, or the maximum period of time allowed by law, if shorter.

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If, after a Change of Control (as defined in the employment agreement), the executive maintains employment with us (or our successor) for at least 180 days, the executive may terminate his employment at will and will be entitled to certain severance payments and post-termination benefits. Such payments and benefits shall be determined based upon the length of such executives employment and shall mirror the payments and benefits that would have been in effect had we terminated the executive’s employment without cause on such date.

2012 Director Compensation

During the fiscal year ended December 31, 2012, we paid cash compensation for services rendered to the non-employee members of our Board, and we reimburse the out-of-pocket expenses of our directors incurred in connection with attendance at or participation in meetings of the Board. The compensation of our Board was set based on the following criteria: (i) our size and scale; (ii) our perceived risk factors; and (iii) each member’s role and responsibility.

The following table shows the compensation paid to directors for the most recently completed fiscal year. Named Executive Officers, who also act as our directors, do not receive any additional compensation for services rendered in such capacity, other than as paid by us to such officers in their capacity as officers. See “Summary Compensation Table” for information regarding the compensation paid to our Named Executive Officers.

Name	Fees Earned or Paid in Cash($)	Share-Based Awards($)	Non-Equity Incentive Plan Compensation ($)	All Other Compensation ($)	Total Compensation ($)
Jordan Kupinsky(1)	$50,000	Nil	Nil	Nil	$	50,000
Gordon Pratt(2)	$60,000	Nil	Nil	Nil	$	60,000
Larry Swets, Jr. (2)	$40,000	Nil	Nil	Nil	$	40,000

Notes:

(1)	As of December 31, 2012, Mr. Kupinsky had an aggregate of 37,895 option awards outstanding and 0 share awards outstanding.
(2)	As of December 31, 2012, each of Mr. Pratt and Mr. Swets had an aggregate of 27,195 option awards outstanding and 0 share awards outstanding.

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BENEFICIAL OWNERSHIP OF ORDINARY SHARES AND SELLING SHAREHOLDER

The following table sets forth information concerning the beneficial ownership of the ordinary common shares and restricted voting common shares held as of the date of this prospectus by (i) each person known to us to own beneficially more than 5% of the issued and outstanding ordinary shares or restricted voting common shares, (ii) each of our directors, (iii) each of the executive officers, (iv) all directors and executive officers as a group, and (v) the selling shareholder.

Each of the warrants and options included in this beneficial ownership table are exercisable within 60 days of the date of this prospectus.

Name and Address of Beneficial Owner	Amount of Ordinary Shares Owned (1)(2)(8)	Amount of Restricted Voting Shares Owned (1)(8)	Percentage of Class of Shares	Percentage of Total Outstanding Common Shares
5% Beneficial Owners
Atlas Investors LLC (3) Four Forest Park Farmington, CT 06032	776,698	—	29.29%	11.87%
Kingsway America Inc. 150 Pierce Road, 6th Floor Itasca, Illinois  60143 (5)	—	3,887,469	100.00%	63.27%
Magnolia Capital Partners, LLC 15 East 5th Street, Suite 3200 Tulsa, OK 74103 (6)	540,574	—	23.95%	8.79%
Officers and Directors
Scott Wollney	320,353	—	13.41%	5.08%
Jordan Kupinsky	61,297	—	2.96%	*
Gordon Pratt (4)	776,698	—	29.47%	11.87%
Larry Swets, Jr.	13,597	—	*	*
Paul Romano	72,989	—	3.36%	1.18%
Joseph Shugrue	88,584	—	4.02%	1.43%
Bruce Giles	72,429	—	3.34%	1.17%
Leslie DiMaggio	82,675	—	3.77%	1.34%
All Directors and Executive Officers as a Group (8 individuals) (7)	1,488,622	—	61.23%	23.28%

* -- Less than 1% of the outstanding ordinary shares

Notes:

(1) As of the date of this registration statement, there were 2,256,921 Ordinary Shares and 3,887,469 Restricted Voting Shares outstanding. Included in the shares above are the following convertible securities, exercisable within 60 days of the date hereof, that are deemed to be beneficially owned by the persons holding them for the purpose of computing that person’s percentage ownership: Scott Wollney holds 157,015 warrants and 6,250 options; Jordan Kupinsky holds 31,096 options; Gordon Pratt (managed through Atlas Investors LLC, see (3) below) holds 381,550 warrants and 20,396 options; Larry Swets, Jr. holds 20,396 options; Paul Romano holds 33,767 warrants and 6,250 options; Joseph Shugrue holds 42,209 warrants and 6,250 options; Bruce Giles holds 33,767 warrants and 6,250 options; and Leslie DiMaggio holds 38,832 warrants and 6,250 options. These shares are not treated as outstanding for the purpose of computing the percentage beneficial ownership of any other person.

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(2)	Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of a vested option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of Ordinary Shares outstanding on the Record Date.
(3)	Managed by Gordon Pratt, Managing Member, who is our director.
(4)	Held through Atlas Investors LLC, of which he is a Managing Member.
(5)	Includes 525,981 shares held by Mendota Insurance Company, a 100% owned subsidiary of Kingsway America, Inc.
(6)	Messrs. James Adelson and Stephen Heyman exercise control and direction over 540,574 ordinary shares (which includes 34 shares of Atlas held prior to the October 2, 2012 share purchase agreement).
(7)	The aggregate number of shares held by the officers and directors as a group and the corresponding percentage ownership of the officers and directors as a group include convertible securities that are exercisable within 60 days of the date hereof, that are deemed to be beneficially owned by the persons holding them.
(8)	Reflects a one-for-three share consolidation, with all fractional shares rounded up to the nearest whole share.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We were formed as JJR VI, a Canadian capital pool company, on December 21, 2009 under the laws of Ontario, Canada. On December 31, 2010, following the reverse merger transaction described immediately hereafter, we filed a Certificate of Registration by Way of Continuation in the Cayman Islands to re-domesticate as a Cayman Islands company. In addition, on December 30, 2010 we filed a Certificate of Incorporation on Change of Name to change our name to Atlas Financial Holdings, Inc. Our current organization is a result of a reverse merger transaction involving the following companies:

(a) JJR VI, sponsored by JJR Capital, a Toronto based merchant bank;

(b) American Insurance Acquisition Inc., or American Acquisition, a corporation formed under the laws of Delaware as a wholly owned subsidiary of Kingsway America Inc., or KAI. KAI is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a Canadian public company formed under the laws of Ontario and whose shares are traded on the Toronto and New York Stock Exchanges; and

(c) Atlas Acquisition Corp., a Delaware corporation wholly-owned by JJR VI and formed for the purpose of merging with and into American Acquisition.

Prior to the transaction, each of American Service and American Country were wholly owned subsidiaries of KAI. In connection with the reverse merger transaction, KAI transferred 100% of the capital stock of each of American Service and American Country, to American Acquisition (another wholly owned subsidiary of KAI) in exchange for C$35.1 million of common and C$18.0 million of preferred shares of American Acquisition and promissory notes worth C$7.7 million, aggregating C$60.8 million. In addition, American Acquisition raised C$8.0 million through a private placement offering of subscription receipts to qualified investors at a price of C$2.00 per subscription receipt.

All references to share counts and per share values in connection with the reverse merger transaction are presented prior to the one-for-three reverse split. KAI received 13,804,861 restricted voting common shares of our company, which we refer to as “restricted voting shares”, then valued at $27.8 million, along with 18,000,000 non-voting preferred shares of our company then valued at C$18.0 million and C$8.0 million cash in exchange for total consideration of C$60.8 million in the form of 100% of the outstanding shares of American Acquisition and full payment of certain promissory notes. Investors in the American Acquisition private placement offering of subscription receipts received 3,983,502 of our ordinary shares, which we refer to as “ordinary shares”, plus warrants to purchase one ordinary share of our company for each subscription receipt at C$2.00 at any time until December 31, 2013. Every 10 common shares of JJR VI held by the shareholders of JJR VI immediately prior to the reverse merger were, upon consummation of the merger, consolidated into one ordinary share of JJR VI. Upon re-domestication in the Cayman Islands, these consolidated shares were then exchanged on a one-for-one basis for our ordinary shares.

In 2010, Atlas’ insurance subsidiaries remitted management fees monthly to KAI for managerial services. During the first six months of 2010, those management fees included rent for Atlas’ Elk Grove Village headquarters building. That building was contributed to Atlas on June 30, 2010 and rental payments ceased at that time. Management fees paid to KAI totaled approximately $0 and $2.6 million for the year ended December 31, 2011 and 2010, respectively.

Atlas’ insurance subsidiaries received $158,000 in regularly scheduled monthly mortgage payments for the six months ended June 30, 2010 under mortgage loan agreements with KAI which were secured by the Elk Grove Village headquarters building. In June 2010, American Service forgave the $1.7 million remaining balance of its mortgage loan from KAI and American Country was paid the $1.8 million total remaining balance of its mortgage loan from KAI.

The amounts due to Universal Casualty Company, a wholly owned subsidiary of KAI, relate primarily to claim handling services provided to Atlas.

For the year ended December 31, 2011 and 2010, Atlas incurred $2.3 million and $4.5 million, respectively, in commissions to Avalon Risk Management, Inc. (“Avalon”). In the year ended December 31, 2011 and 2010, Atlas also incurred expenses of $137,000 and $125,000 respectively, for marketing services performed by Avalon. Avalon was a KFSI subsidiary through October 2009, and has certain investors and directors in common with Atlas. Avalon acts as a program manager for a surety program primarily consisting of U.S. Customs bonds. In this capacity they are responsible for coordinating marketing, customer service and claim handling for the surety bonds written under this agreement. This program is 100% reinsured by an unrelated third party.

During 2010, dividends of $16.7 million were paid to KAI by the insurance subsidiaries of Atlas.

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At the time of the reverse merger, Jordan Kupinsky was a director of JJR VI Acquisition Corp., Scott Wollney was an executive officer of Kingsway America Inc. and American Acquisition, and Larry Swets, Jr. was a director of Kingsway America Inc. The reverse merger was negotiated on an arm’s length basis. Copies of the Annual Report and Filing Statement dated December 16, 2010 are available on SEDAR at www.sedar.com but are not deemed part of or incorporated by reference to this prospectus.

No director or senior officer, and no associate or affiliate of the foregoing persons, no insider and no family member of such persons has or has had any material interest, direct or indirect, in any transactions during the fiscal year ended December 31, 2011, or any transaction, or any proposed transaction, which has materially affected or will materially affect us.

A transition agreement between KAI and American Acquisition is currently in place whereby the two companies provide certain services to each other. The agreement was designed to enable the uninterrupted operation of the insurance subsidiaries following the reverse merger transaction. Such services include accounting support services, auto claims handling services related to private passenger auto policies and tax return preparation services. In addition, Atlas is provided certain claims handling services by Universal Casualty Company under a similar agreement (a wholly owned subsidiary of KAI).

In connection with Atlas' acquisition of American Country and American Service in the reverse merger, a price protection agreement was executed with KAI.  Pursuant to this agreement, financial protectionis provided in the event that actual losses paid at any time in the future for exposures existing on or before September 30, 2010 exceed the claims reserves which were carried on the books of our insurance subsidiaries for these exposures as at September 30, 2010.  If such paid development exceeds $1 million, the agreement provides protection in the form of a reimbursement obligation for 90% of up to $10 million of additional claims development.

For a description of the Registration Rights Agreement entered into in connection with the issuance of 13,804,861 of our restricted voting shares to KAI see “Shares Eligible for Future Sale” section of this prospectus for more information.

There is now a limited amount of support, primarily in the area of IT, provided by the Company’s insurance subsidiaries to its former owner under such agreements.  Costs related to these activities are passed on the former owner and are immaterial relative to the Company’s revenue and expense structure.

As at September 30, 2012 and December 31, 2011, Atlas reported net amounts receivable from (payable to) affiliates as follows which are included within other assets and accounts payable and accrued expenses on the balance sheets (all amounts in ‘000s).

As at:	September 30, 2012			December 31, 2011
Kingsway America Inc.	$	58		$	291
Universal Casualty Company	(50		)	(500		)
Kingsway Amigo Insurance Company	2			(1		)
Total	$	10		$	(210	)

Avalon was a KFSI subsidiary through October 2009, and had certain investors and directors in common with Atlas. As of September 30, 2012, Atlas and Avalon no longer have any common directors nor investors. Avalon acts as a program manager for our surety program primarily consisting of U.S. Customs bonds. In this capacity they are responsible for coordinating marketing, customer service and claim handling for the surety bonds written under this agreement. This program is 100% reinsured by an unrelated third party.

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DESCRIPTION OF SECURITIES

Ordinary Shares

Upon the closing of this offering, our authorized capital stock will consist of 266,666,667 ordinary shares. As of the date of this prospectus, we have 6,144,390 ordinary shares outstanding held of record by 19 stockholders.

Voting Rights

The holders of our ordinary shares are entitled to receive notice of, and to attend, speak and vote at all meetings of shareholders, except those at which holders of a specific class are entitled to vote separately as a class. Ordinary shares will carry one vote per share held.

Dividends

Subject to the rights, privileges, restrictions and conditions attached to any other classes of our shares ranking prior to the ordinary shares, the holders of ordinary shares are entitled to receive any dividends that are declared by our board of directors at the times and for the amounts that the board of directors may, from time to time, determine. The ordinary shares rank equally with the restricted voting shares as to dividends on a share-for-share basis and all dividends declared shall be declared in equal or equivalent amounts per share on all ordinary shares and restricted voting shares, without preference or distinction.

Rights in the Case of Liquidation, Winding-Up or Dissolution

Subject to the rights, privileges, restrictions and conditions attached to the other classes of our shares ranking prior to the ordinary shares, in the case of our liquidation, dissolution or winding-up or other distribution of our assets among our shareholders for the purpose of winding up our affairs, the holders of ordinary shares shall be entitled to receive our remaining property and shall be entitled to share equally with the holders of our restricted voting shares, share-for-share, in all distributions of such assets.

Subdivision or Consolidation

No subdivision or consolidation of the ordinary shares shall occur unless, simultaneously, the restricted voting shares are subdivided or consolidated in the same manner, so as to maintain and preserve the relative rights of the holders of the shares of each of the said classes.

Conversion

In the event that an offer is made to purchase our restricted voting shares and the offer is one which is required, pursuant to applicable securities legislation or the rules of a stock exchange on which the restricted voting shares are then listed, to be made to all or substantially all of the holders of the restricted voting shares, each ordinary voting share shall become convertible at the option of the holder into one restricted voting share at any time while the offer is in effect until one day after the time prescribed by applicable securities legislation for the offeror to take up and pay for such shares as are to be acquired pursuant to the offer. The conversion right may only be exercised in respect of ordinary shares for the purpose of depositing the resulting restricted voting shares pursuant to the offer and for no other reason, including with respect to voting rights attached thereto, which are deemed to remain subject to the provisions concerning the voting rights for ordinary shares notwithstanding their conversion. Our registrar and transfer agent shall deposit the resulting restricted voting shares on behalf of the holder.

Should the restricted voting shares issued upon conversion and tendered in response to the offer be withdrawn by the holders or not taken up by the offeror, or should the offer be abandoned or withdrawn, the restricted voting shares resulting from the conversion shall be automatically reconverted, without further act on the part of us or the holder, to ordinary shares.

The ordinary shares may not be converted into restricted voting shares, or vice versa, other than in accordance with the conversion procedure set out in our articles.

As of the date of this prospectus, there are outstanding warrants to purchase up to 1,327,834 ordinary shares and outstanding options to purchase up to 225,617 ordinary shares at exercise prices ranging between $3.00 and $6.45 per share.

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Restricted Voting Shares

Upon the closing of this offering, our authorized capital stock will consist of 33,333,334 restricted voting shares. As of the date of this prospectus, we have 3,887,469 restricted voting shares outstanding held of record by 1 stockholder.

Voting Rights

Each restricted voting share entitles the holder to receive notice of, to attend, speak and vote at all meetings of shareholders, except those at which holders of a specific class are entitled to vote separately as a class. Restricted voting shares will carry one vote per share held, except where the number of outstanding restricted voting shares exceeds 30% of the total number of all issued and outstanding voting shares. If the foregoing threshold is surpassed at any time, the votes attached to each restricted voting share will decrease automatically without further act or formality to equal the maximum permitted vote per restricted voting share such that the restricted voting shares as a class shall not carry more than 30% of the total voting rights attached to the aggregate outstanding voting shares.

Dividends

Subject to the rights, privileges, restrictions and conditions attached to any other class of our shares ranking prior to the restricted voting shares, the holders of restricted voting shares are entitled to receive any dividends that are declared by our board of directors at the times and for the amounts that our board of directors may, from time to time, determine. The restricted voting shares shall rank equally with our ordinary shares as to dividends on a share-for-share basis and all dividends shall be declared in equal or equivalent amounts per share on all ordinary shares and restricted voting shares without preference or distinction.

Rights in the Case of Liquidation, Winding-Up or Dissolution

Subject to the rights, privileges, restrictions and conditions attached to the other classes of our shares ranking prior to the restricted voting shares, in the case of our liquidation, dissolution or winding-up or other distribution of our assets among our shareholders for the purpose of winding up our affairs, the holders of restricted voting shares shall be entitled to receive our remaining property and shall be entitled to share equally with the holders of ordinary shares, share-for-share, in all distributions of such assets.

Subdivision or Consolidation

No subdivision or consolidation of the restricted voting shares shall occur unless, simultaneously, the ordinary shares are subdivided or consolidated in the same manner, so as to maintain and preserve the relative rights of the holders of the shares of each of the said classes.

Conversion

Upon the disposition of any restricted voting share such that the restricted voting share ceases to be beneficially owned or controlled, directly or indirectly, by KFSI or KAI (and, for this purpose, such restricted voting share is also not held, directly or indirectly, by a partnership, corporation or other entity in which KFSI or KAI holds, directly or indirectly, ten percent (10%) or more of the capital, profits, value or voting interests), such restricted voting shares shall be mandatorily converted into fully paid and non-assessable ordinary shares with each restricted voting share converting into one of our ordinary shares.

In the event that an offer is made to purchase ordinary shares and the offer is one which is required, pursuant to applicable securities legislation or the rules of a stock exchange on which the ordinary shares are then listed, to be made to all or substantially all of the holders of ordinary shares, each restricted voting share shall become convertible at the option of the holder into one ordinary voting share at any time while the offer is in effect until one day after the time prescribed by applicable securities legislation for the offeror to take up and pay for such shares as are to be acquired pursuant to the offer. The conversion right may only be exercised in respect of restricted voting shares for the purpose of depositing the ordinary shares pursuant to the offer and for no other reason, including notably with respect to voting rights attached thereto, which are deemed to remain subject to the provisions concerning the voting rights for restricted voting shares notwithstanding their conversion. Our registrar and transfer agent shall deposit the ordinary shares on behalf of the holder.

Should the ordinary shares issued upon conversion and tendered in response to the offer be withdrawn by the holders or not taken up by the offeror, or should the offer be abandoned or withdrawn, the ordinary shares resulting from the conversion shall be automatically reconverted, without further act on the part of us or the holder, into restricted voting shares.

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The restricted voting shares may not be converted into ordinary shares, or vice versa, other than in accordance with the conversion procedure set out in our articles.

Preferred Shares

Upon the closing of this offering, our authorized capital stock will consist of 20,000,000 preferred shares. As of the date of this prospectus, we have 20,000,000 preferred shares outstanding, of which 18,000,000 are beneficially owned by Kingsway and 2,000,000 are beneficially owned by Hendricks.

Voting Rights

Except as otherwise required under applicable law, the holders of preferred shares will not be entitled to vote at any general meeting of the company, but (for the avoidance of doubt) may vote at a separate class meeting convened in accordance with the company’s articles of association.

Dividends

Dividends on the preferred shares shall accrue on a daily basis at the prorated annual rate of $0.045 per preferred share and shall be cumulative. The holders of preferred shares shall be entitled to receive dividends or distributions, when and as declared by our board of directors. We may elect to pay dividends on the preferred shares to each of preferred shares pro rata in additional preferred shares with a value equal to the amount of the dividends, provided to the extent we do not pay a dividend on the preferred shares in cash or in additional shares, the dividend shall accrue and accumulate compounded yearly whether or not such dividend was declared. No dividends shall be paid on any ordinary shares or restricted voting shares until dividends on the preferred shares shall have been paid or declared and set apart. The holders of the preferred shares will be entitled to the greater of the dividend on the ordinary shares (on an as converted basis) and the preferred shares in that fiscal year.

Liquidation Preference

Upon any liquidation, dissolution, or winding up of our company, whether voluntary or involuntary, before any distribution or payment shall be made to any of the holders of our ordinary shares or restricted voting shares, the holders of preferred shares are entitled to receive out of our assets, an amount in cash or kind for each preferred share equal to the greater of (i) US$1.00 per preferred share (as such amount shall be appropriately adjusted to take into account stock splits, stock dividends and similar events) plus all declared and unpaid dividends thereon and (ii) the amount such holder would receive in liquidation if the preferred share had been converted to restricted voting shares or ordinary shares, as applicable, immediately prior to the liquidation.

If, upon any liquidation, the assets of Atlas are insufficient to pay the liquidation amount, then our net assets will be distributed among the holders of the preferred shares ratably in proportion to the full amounts to which they would otherwise be entitled and such distributions may be made in cash or in property taken at our fair value, or both, at the election of our board of directors.

After payment in full of the liquidation amount, including without limitation all declared and unpaid dividends on the preferred shares, our assets legally available for distribution, if any, will be distributed ratably to the holders of ordinary shares and restricted voting shares.

Conversion

Each preferred share shall be convertible, at the option of the holder thereof, at any time or from time-to-time after the date that is the fifth (5th) anniversary of the issuance date of such share, at our office or any transfer agent for the preferred shares, into such number of fully paid and non-assessable shares of ordinary shares as is determined by multiplying the number of the preferred shares by the “Conversion Factor” at the time in effect for such share. The initial Conversion Factor per share per preferred share shall be equal to 0.1270; provided, however, that such Conversion Factor shall be subject to adjustment as provided in our articles. Notwithstanding the foregoing, upon the disposition of a preferred share such that the preferred share ceases to be beneficially owned and controlled by KFSI or KAI (and, for this purpose, such preferred share is also not held, directly or indirectly, by a partnership, corporation or other entity in which KFSI or KAI holds, directly or indirectly, ten percent (10%) or more of the capital, profits, value or voting interests) such preferred share shall be convertible into ordinary shares rather than restricted voting shares.

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Adjustments

The Conversion Factor of the preferred shares is subject to adjustment as provided in our articles.

Optional Redemption

We may redeem all or any of the outstanding preferred shares at any time or times at a redemption price equal to US$1.00 per share, payable in cash plus all accrued and unpaid dividends calculated to the redemption date, whether or not such dividends have been declared, commencing on the earlier of (i) two years after their date of issuance and (ii) the date the preferred share is transferred to a party such that the preferred share ceases to be beneficially owned or controlled directly or indirectly by KFSI or KAI (and, for this purpose, such preferred share is also not held directly or indirectly by a partnership, corporation or other entity in which KFSI or KAI holds, directly or indirectly, ten percent (10%) or more of the capital, profits, value or voting interests). We must give at least sixty (60) days prior written notice to each holder whose preferred shares are to be so redeemed. In the event that less than all of the outstanding preferred shares are to be redeemed, unless otherwise agreed to by the holders of 100% of the then outstanding preferred shares in writing, we will select those shares to be redeemed from each holder of preferred shares pro rata, in proportion to the number of preferred shares held by such holders.  

Reverse Stock Split

On December 7, 2012, we held a shareholder meeting where a one-for-three reverse stock split was unanimously approved. When the reverse stock split takes effect, it will decrease our authorized and outstanding ordinary shares and restricted voting shares at a ratio of one-for-three. The primary objective of the reverse stock split is to increase the per share price of our ordinary shares to meet certain listing requirements of the NASDAQ Capital Market. As a result, the conversion factor for our preferred shares will decrease to 0.1270 ordinary shares for each preferred share.

Registration Rights

The three holders of an aggregate of 4,601,621 ordinary shares and restricted voting shares of the company initially held by KAI, are entitled to certain rights with respect to registration of such shares under the Securities Act pursuant to the terms of the company’s registration rights agreement dated as of December 31, 2010 between the company and KAI. These shares are referred to as registrable securities and the related registration rights are described in additional detail below.

Piggyback Registration Rights

If the company registers any of its securities for public sale, the company will have to register all registrable securities that the holders of such securities request in writing be registered within 15 days of mailing of notice by the company to such holders. However, this right does not apply to a registration relating to any of the company’s stock plans, the offer and sale of debt securities, a corporate reorganization or other transaction under Rule 145 of the Securities Act. The managing underwriters of any underwritten offering will have the right to limit, due to marketing reasons, the number of shares so registered. If the number of securities requested to be included in such offering exceeds the number of shares that can be sold in an orderly manner within a price range acceptable to the company, then the company will include in such registration statement: first, the securities the company proposes to sell; second, the registrable securities requested to be included in such registration; and third, any other securities of the company requested to be included in such registration, in such manner as the company may determine.

Demand Registration Rights

Upon written request of a holder or holders of such registrable securities, the company is required to file a registration statement on Form S-3 or any successor form thereto for a public offering of all or any portion of the registrable securities held by the requesting holder or holders, and as long as the reasonably anticipated aggregate price to the public is at least $5,000,000, and the company is entitled to use Form S-3 to register such registrable securities, then the company will be obligated to use our reasonable efforts to register the sale of all registrable securities that holders may request in writing. The company will be obligated to prepare and file a registration statement relating to the registrable securities within 45 days after receiving an initial demand notice from the holders. Thereafter, the company will use commercially reasonable efforts to cause the registration statement to become effective not later than 90 days from the date of filing. Additionally, the company will be required to provide prompt written notice of such registration of the registrable securities to all holders of outstanding registrable securities at least 30 days prior to filing. Such holders then have 15 days following receipt of such notice to demand their registrable securities be included in such registration statement. The company may postpone the filing of a registration statement for up to 120 days once in a 12 month period if in the good faith judgment of the company’s board of directors such

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registration would be detrimental to the company. KAI’s shares are being registered pursuant to such demand registration rights.

Registration Expenses

The company will pay all expenses incurred in connection with the piggyback registration rights described above, except for underwriting discounts and selling commissions. The holder or holders or the registrable securities will pay all expenses incurred in connection with the demand registration rights on Form S-3 as described above, except for underwriting discounts and selling commissions. All underwriting discounts and selling commissions in connection with any piggyback registration and demand registration described above will be borne by the participating sellers in proportion to the number of registrable securities sold by each or as they may otherwise agree. Expenses related to this offering, excluding underwriting discounts and selling commissions, shall be shared between the Company and KAI such that each of the Company and the KAI will pay that amount of the aggregate expenses proportionate to the number of shares that such party sells in this offering.

Expiration of Registration Rights

The registration rights described above will terminate as to a given holder of registrable securities, when such holder of registrable securities can sell all of such holder’s registrable securities without restriction pursuant to Rule 144(b)(1) promulgated under the Securities Act.

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U.S. TAX CONSIDERATIONS

The following is a discussion of the material U.S. federal income and estate tax considerations relating to the purchase, ownership and disposition of our ordinary shares by holders that purchase our ordinary shares pursuant to this offering and hold such ordinary shares as a capital asset within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based on the Code, the U.S. Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. This discussion does not address all of the U.S. federal tax considerations that may be relevant to specific holders in light of their particular circumstances or to Non-U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, brokers, dealers or traders in securities, commodities or currencies or other holders that mark their securities to market for U.S. federal income tax purposes, foreign governments, international organizations, controlled foreign corporations, passive foreign investment companies, tax-exempt entities, certain former citizens or residents of the United States, persons deemed to sell our ordinary shares under the constructive sale provisions of the Code, or holders that hold our ordinary shares as part of a straddle, hedge, conversion or other integrated transaction). This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal gift or alternative minimum tax considerations. The following discussion also assumes we are treated as a U.S. corporation for U.S. federal income tax purposes. See “Risk Factors - U.S.”

As used in this discussion, the term “U.S. Holder” means a beneficial owner of our ordinary shares that is for U.S. federal income tax purposes:

• an individual who is a citizen or a resident of the United States;

• a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

• an estate that is subject to U.S. federal income tax on income regardless of its source; or

• a trust if (i) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all of its substantial decisions or (ii) it has in effect a valid election under applicable U.S. Treasury regulations to be treated as a United States person.

A “Non-U.S. Holder” means a beneficial owner of our ordinary shares (other than a partnership) that is not a U.S. Holder.

If an entity treated as a partnership for U.S. federal income tax purposes invests in our ordinary shares, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner and upon certain determinations made at the partner level. Any such entity should consult its own tax advisor regarding the U.S. federal tax considerations applicable to it and its partners relating to the purchase, ownership and disposition of our ordinary shares.

PERSONS CONSIDERING AN INVESTMENT IN OUR ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. INCOME, ESTATE, GIFT AND OTHER TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Treatment as a U.S. Corporation

As described above under “Risk Factors-U.S. Tax Risks,” pursuant to certain “expatriation” provisions of the Code, the reverse merger agreement relating to the reverse merger transaction provides that the parties intend to treat our company as a U.S. corporation for U.S. federal income tax purposes. The expatriation provisions are complex, are largely unsettled and subject to differing interpretations, and are subject to change, perhaps retroactively. If our company were not to be treated as a U.S. corporation for U.S. federal income tax purposes, holders could be subject to materially different consequences than those described below. The remainder of this discussion assumes that we are properly treated as a U.S. corporation.

U.S. Holders

Distributions on Ordinary Shares

As described in the section entitled “Dividend Policy,” we do not currently expect to declare or pay dividends on our ordinary shares for the foreseeable future. A U.S. Holder that receives a distribution with respect to our ordinary shares, including a constructive distribution, of cash or property, generally will be required to include the amount of such distribution in gross income as a dividend to the extent of our current and accumulated “earnings and profits,” as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds our current and accumulated “earnings and profits,” such distribution will

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be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in our ordinary shares and thereafter as gain from the sale or exchange of ordinary shares. (See “Sale or exchange of ordinary shares” below.) Dividends received on ordinary shares generally will be eligible for the “dividends received deduction” available to corporate U.S. Holders. Under current law, for taxable years beginning before January 1, 2013, a dividend paid by us generally will be eligible to be taxed at the preferential tax rates applicable to long-term capital gains if the U.S. Holder receiving such dividend is an individual, estate, or trust. A U.S. Holder generally will be eligible for the reduced rate only if the U.S. Holder has held our ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. The reduced rate does not apply to individual taxpayers who have made an election to treat the dividends as “investment income” that may be offset against investment expense.

Sale or Exchange of Ordinary Shares

A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of our ordinary shares in an amount equal to the difference, if any, between the amount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in such ordinary shares. A holder’s adjusted tax basis in our ordinary shares generally will equal the holder’s purchase price for that share. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if the ordinary shares is held for more than one year. Preferential tax rates presently apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are presently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

Backup Withholding Tax and Information Reporting Requirements

Unless a holder of ordinary shares is a corporation or other exempt recipient, payments to holders of ordinary shares of dividends or the proceeds of sales or other dispositions of our ordinary shares that are made within the United States or through certain United States-related financial intermediaries may be subject to information reporting. Such payments may also be subject to U.S. federal backup withholding tax if the holder of our ordinary shares fails to supply a correct taxpayer identification number or otherwise fails to comply with applicable U.S. information reporting or certification requirements. Any amount withheld from a payment to a holder of ordinary shares under the backup withholding rules is allowable as a credit against such holder’s U.S. federal income tax and may entitle such holder to a refund, provided that the required information is furnished to the IRS.

Non-U.S. Holders

Distributions on Ordinary Shares

As described in the section entitled “Dividend Policy,” we do not currently expect to declare or pay dividends on our ordinary shares for the foreseeable future. Subject to the discussion below under “-Payments to Foreign Financial Institutions and Non-financial Foreign Entities” and “-Information Reporting and Backup Withholding”, if we make a distribution of cash or other property (other than certain pro rata distributions of our ordinary shares) in respect of our ordinary shares, the distribution will be treated as a dividend to the extent it is paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If the amount of a distribution exceeds our current and accumulated earnings and profits, such excess generally will be treated first as a tax-free return of capital to the extent of the Non-U.S. Holder’s tax basis in such ordinary shares, and then as gain realized on the sale or other disposition of the ordinary shares and will be treated as described under the section entitled “-Sale, Exchange or Other Disposition of Ordinary Shares” below.

Distributions treated as dividends on our ordinary shares that are paid to or for the account of a Non-U.S. Holder and are not effectively connected with a U.S. trade or business conducted by such Non-U.S. Holder generally will be subject to U.S. federal withholding tax at a rate of 30%, or at a lower rate if provided by an applicable tax treaty and the Non-U.S. Holder provides the documentation (generally, Internal Revenue Service (“IRS”) Form W-8BEN) required to claim benefits under such tax treaty to the applicable withholding agent prior to the payment of the dividends. Non-U.S. Holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

If, however, a dividend is effectively connected with the conduct of a trade or business in the United States by a Non-U.S. Holder (and, if required by an applicable tax treaty that a Non-U.S. Holder relies upon, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States), such dividend generally will not be subject to the 30% U.S. federal withholding tax if such Non-U.S. Holder provides the appropriate documentation (generally, IRS Form W-8ECI) to the applicable withholding agent. Instead, such Non-U.S. Holder generally will be subject to U.S. federal income tax on such dividend in substantially the same manner as a U.S. holder (except as provided by an applicable tax treaty). In addition, a Non-

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U.S. Holder that is a corporation may be subject to a branch profits tax at the rate of 30% (or a lower rate if provided by an applicable tax treaty) on its effectively connected earnings and profits for the taxable year, subject to certain adjustments.

Sale, Exchange or Other Disposition of Ordinary Shares

Subject to the discussion below under “-Payments to Foreign Financial Institutions and Non-financial Foreign Entities” and “-Information Reporting and Backup Withholding”, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on gain recognized on the sale, exchange or other disposition of our ordinary shares unless:

• we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (i) the five year period ending on the date of such sale, exchange or disposition and (ii) such Non-U.S. Holder’s holding period with respect to our ordinary shares, and certain other conditions are met;

• such gain is effectively connected with the conduct of a trade or business in the United States by such Non-U.S. Holder, in which event such Non-U.S. Holder generally will be subject to U.S. federal income tax on such gain in substantially the same manner as a U.S. holder (except as provided by an applicable tax treaty) and, if it is a corporation, may also be subject to a branch profits tax at the rate of 30% (or a lower rate if provided by an applicable tax treaty) on all or a portion of its effectively connected earnings and profits for the taxable year, subject to certain adjustments; or

• such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale, exchange or disposition and certain other conditions are met.

Generally, a corporation is a “United States real property holding corporation” if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We do not believe that we are, and we do not presently anticipate that we will become, a United States real property holding corporation.

Payments to Foreign Financial Institutions and Non-financial Foreign Entities

Payments of any dividend on, or any gross proceeds from the sale, exchange or other disposition of, our ordinary shares to a Non-U.S. Holder that is a “foreign financial institution” or a “non-financial foreign entity” (to the extent such dividend or any gain from such sale, exchange or disposition is not effectively connected with the conduct of a trade or business in the United States by such Non-U.S. Holder) generally will be subject to the U.S. federal withholding tax at the rate of 30% unless such Non-U.S. Holder complies with certain additional U.S. reporting requirements or an exception otherwise applies.

For this purpose, a foreign financial institution includes, among others, a non-U.S. entity that (i) is a bank, (ii) holds, as a substantial portion of its business, financial assets for the account of others or (iii) is engaged (or holds itself out as being engaged) primarily in the business of investing, reinvesting or trading in securities, partnership interests, commodities or any interest in securities, partnership interests or commodities (as such terms are defined in the Code). A foreign financial institution generally will be subject to this 30% U.S. federal withholding tax unless it (i) enters into an agreement with the IRS pursuant to which such foreign financial institution agrees (x) to comply with certain information, verification, due diligence, reporting, and other procedures established by the IRS with respect to “United States accounts” (generally depository or custodial accounts maintained by a foreign financial institution (as well as non-traded debt or equity interests in such foreign financial institution) held by one or more “specified United States persons” or foreign entities with one or more “substantial United States owners” (as such terms are defined in the Code) and (y) to withhold on (1) its account holders that either fail to comply with reasonable requests for certain information as specified in the Code or fail to provide certain permissible waivers and (2) its account holders that are foreign financial institutions that do not enter into such an agreement with the IRS or (ii) is otherwise exempted by the IRS in future guidance.

A non-financial foreign entity generally will be subject to this 30% U.S. federal withholding tax unless such entity (i) provides the applicable withholding agent with either (x) a certification that such entity does not have any “substantial United States owners” (as defined in the Code) or (y) information regarding the name, address and taxpayer identification number of each “substantial United States owner” of such entity or (ii) is otherwise exempted by the IRS in future guidance. These reporting requirements generally will not apply to certain specified types of entities, including, but not limited to, a corporation the stock of which is regularly traded on an established securities market and certain affiliated corporations, foreign governments and international organizations.

Although this legislation currently applies to applicable payments made after December 31, 2012, the IRS has recently issued proposed Treasury regulations providing that the withholding provisions described above will generally apply to payments of dividends on our ordinary shares made on or after January 1, 2014, and to payments of gross proceeds from a sale or other disposition of such stock on or after January 1, 2015.

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Non-U.S. Holders should consult their own tax advisor regarding the application of these withholding and reporting rules.

Information Reporting and Backup Withholding

Generally, the amount of dividends on our ordinary shares paid to a Non-U.S. Holder, the name and address of the recipient and the amount of any tax withheld from such dividends must be reported annually to the IRS and to the Non-U.S. Holder. In addition, separate information reporting and backup withholding rules that apply to payments to certain U.S. persons generally will not apply to payments with respect to our ordinary shares to a Non-U.S. Holder if such Non-U.S. Holder certifies under penalties of perjury that it is not a United States person (generally by providing an IRS Form W-8BEN) or otherwise establishes an exemption.

Proceeds from the sale, exchange or other disposition of our ordinary shares by a Non-U.S. Holder effected through a non-U.S. office of a U.S. broker or of a non-U.S. broker with certain specified U.S. connections generally will be subject to information reporting (but not backup withholding) unless such Non-U.S. Holder certifies under penalties of perjury that it is not a United States person (generally by providing an IRS Form W-8BEN) or otherwise establishes an exemption. Proceeds from the sale, exchange or other disposition of our ordinary shares by a Non-U.S. Holder effected through a U.S. office of a broker generally will be subject to information reporting and backup withholding unless such Non-U.S. Holder certifies under penalties of perjury that it is not a United States person (generally by providing an IRS Form W-8BEN) or otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability if the required information is furnished by such Non-U.S. Holder on a timely basis to the IRS.

U.S. Federal Estate Tax

In the case of an individual Non-U.S. Holder, ordinary shares owned or treated as owned at such time by such individual will be included in his or her gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.

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UNDERWRITING

We and the selling shareholder are offering the ordinary shares described in this prospectus in an underwritten offering in which we, Sandler O’Neill & Partners, L.P., as representative of the underwriters for the offering, and the selling shareholder will enter into an underwriting agreement with respect to the ordinary shares being offered. Subject to the terms and conditions contained in the underwriting agreement, the underwriter named below has severally agreed to purchase the respective number of ordinary shares set forth opposite its name below.

Name	Number of Ordinary Shares
Sandler O’Neill & Partners, L.P.
Canaccord Genuity Inc.
Total

The underwriting agreement provides that the underwriters’ obligations to purchase ordinary shares depends on the satisfaction of the conditions contained in the underwriting agreement, including:

•the representations and warranties made by us are true and agreements have been performed;

•the absence of a material adverse change, in their determination, in the financial markets or in our business; and

•the delivery of customary closing documents.

Subject to these conditions, the underwriters are committed to purchase and pay for all of the ordinary shares offered by this prospectus, if any such shares are purchased. However, the underwriters are not obligated to take or pay for the ordinary shares covered by the underwriters’ over-allotment option described below, unless and until that option is exercised.

Over-Allotment Option

We have granted Sandler O’Neill & Partners, L.P., as representative of the underwriters for the offering, an option, exercisable no later than 30 days after the date of the underwriting agreement, to purchase up to an aggregate of 694,500 additional ordinary shares at the public offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus. We will be obligated to sell these ordinary shares to the underwriters to the extent the over-allotment option is exercised. The underwriters may exercise this option only to cover over-allotments, if any, made in connection with the sale of our ordinary shares offered by this prospectus.

Commissions and Expenses

The underwriters propose to offer our ordinary shares directly to the public at the offering price set forth on the cover page of this prospectus and to dealers at the public offering price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may re-allow, a concession not in excess of $ per share on sales to other brokers and dealers. After the public offering of our ordinary shares, the underwriters may change the offering price, concessions and other selling terms.

The following table shows the per share and total underwriting discounts and commissions that we will pay to the underwriters and the proceeds we will receive before expenses. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

	Per Share	Total without over-allotment exercise	Total with over-allotment exercise
Initial public offering price	$	$	$
Underwriting discount	$	$	$
Proceeds to us (before expenses)	$	$	$
Proceeds to the selling shareholder (before expenses)	$	$	$

In addition to the underwriting discount, we will reimburse the underwriters for their reasonable out-of-pocket non-legal expenses incurred in connection with their engagement as underwriters, regardless of whether this offering is consummated, including, without limitation, marketing, syndication and travel expenses. Further, we will reimburse the underwriters for their legal fees incurred in connection with their engagement as underwriters, regardless of whether this offering is consummated. We will also pay for filing fees incident to, and the fees and disbursements of counsel for the underwriters in connection with,

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securing any required review of the terms of this offering. We estimate that the total expenses of this offering, exclusive of the underwriting discounts and commissions, will be approximately $784,000 of which approximately $254,000 are payable by us.

Offering Price Determination

Prior to this offering, there has been no public market in the United States for our ordinary shares. Our ordinary shares have been exclusively listed on the TSXV under the symbol “AFH” since January 6, 2011. The initial public offering price will be determined by negotiations between us, the selling shareholder, and the representative of the underwriters. In determining the initial public offering price of our ordinary shares, the representative will consider:

•the history and prospects for the industry in which we compete; 

•our financial information, including our results of operations and current financial condition;

•our earning prospects;

•our management;

•the prevailing securities markets at the time of this offering; and

•the recent market prices of and the demand for publicly traded stock of comparable companies.

Indemnification

We have agreed to indemnify the underwriters, and persons who control the underwriters, against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of these liabilities.

Lock-Up Agreement

We, our directors and executive officers and certain of our shareholders, including the selling shareholder, have entered into lock-up agreements with the underwriters. Under these agreements, (i) for a period of 180 days after the date of the underwriting agreement, we and each of our directors and executive officers may not, and (ii) for a period of 180 days after the date of the underwriting agreement the selling shareholder may not, in each case or without the prior written approval of the underwriters, subject to limited exceptions:

• offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any of our ordinary shares or any securities convertible into or exchangeable or exercisable for our ordinary shares, whether now owned or hereafter acquired or with respect to which such person has or hereafter acquires the power of disposition, or file any registration statement under the Securities Act, with respect to any of the foregoing, or

• enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of our ordinary shares, whether any such swap or transaction is to be settled by delivery of our ordinary shares or other securities, in cash or otherwise.

Listing

We have applied to list our ordinary shares on the NASDAQ Capital Market under the symbol “AFH.” Atlas ordinary shares have been listed on the TSX Venture Exchange (“TSXV”) under the symbol “AFH” since January 6, 2011.

Stabilization

In connection with this offering, the underwriters may, but are not obligated to, engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids.

• Stabilizing transactions permit bids to purchase ordinary shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or mitigating a decline in the market price of ordinary shares while the offering is in progress. 

• Over-allotment transactions involve sales by the underwriters of ordinary shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position that may be either a covered short position or a naked short position. In a covered short position, the number of ordinary shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked

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short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market. 

• Syndicate covering transactions involve purchases of ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.

• Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or mitigating a decline in the market price of our ordinary shares. As a result, the price of our ordinary shares in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our ordinary shares. These transactions may be effected on the NASDAQ Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Our Relationship with the Underwriters

Certain of the underwriters and/or their affiliates have engaged, and may in the future engage, in commercial and investment banking transactions with us in the ordinary course of their business. They have received, and expect to receive, customary compensation and expense reimbursement for these commercial and investment banking transactions.

Pricing of the Offering

Prior to our public offering, there has been no public market in the United States for our ordinary shares. Our ordinary shares have been exclusively listed on the TSXV under the symbol “AFH” since January 6, 2011. The public offering price will be determined by negotiations among us and the representative of the underwriters. Among the factors considered in determining the public offering price were our results of operations, our current financial condition or future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, our management, and certain financial and operating information of publicly traded companies engaged in activities similar to ours. The assumed initial public offering price referred to in this prospectus is subject to change as a result of market conditions and other factors. Neither we nor the underwriters can assure investors that an active trading market for the shares will develop, or that after the offering the shares will trade in the public market at or above the initial public offering price.

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SHARES ELIGIBLE FOR FUTURE SALE

Our ordinary shares are listed on the TSXV under the symbol AFH. Prior to this offering, there has not been a public market for our ordinary shares in the United States, and there is no guarantee that a market will develop in the United States. Future sales of substantial amounts of shares of our ordinary shares could cause the prevailing market price for our ordinary shares to fall or impair our ability to raise equity capital in the future.

Following the completion of this offering, we will have outstanding 7,644,385 ordinary shares, based on the number of ordinary shares outstanding as of January [•], 2013. This includes3,130,000 ordinary shares that the selling shareholder is selling in this offering, which shares may be resold in the public market immediately following offering.

Of the 6,144,390 ordinary shares outstanding prior to this offering, 757,469 ordinary shares not offered and sold in this offering as well as shares subject to employee stock options and certain options and warrants will be upon issuance, “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.

As a result of the securities described below and subject to the provisions of Rules 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:

• 72,325 shares subject to currently outstanding options, none of which have been exercised as of the date hereof; and

• 1,327,834 shares subject to currently outstanding warrants, none of which have been exercised as of the date hereof.  

Rule 144

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144.

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon the expiration of the lock-up agreements described below, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

• 1% of the number of ordinary shares then outstanding, which will equal approximately 78,110 shares immediately after our offering; or

• the average weekly trading volume of the ordinary shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

In general, under SEC Rule 701 as currently in effect, any of our employees, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of our offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will, subject to the lock-up restrictions described below, be eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

Lock-Up Agreements and Market Standoff Provisions

Prior to the date of this prospectus, the directors and officers of the company have entered into a lock-up agreement whereby (i) the directors and officers will not be able to sell their shares for 180 days, and (ii) the selling shareholder will not be able to sell its remaining shares for 180 days following the date of this prospectus.

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Registration Rights

We are party to a certain Registration Rights Agreement with Kingsway America Inc. Upon written request of a holder or holders of registrable securities, the company is required to file a registration statement on Form S-3 or any successor form thereto for a public offering of all or any portion of the registrable securities held by the requesting holder or holders, and as long as the reasonably anticipated aggregate price to the public is at least $5,000,000, and the company is entitled to use Form S-3 to register such registrable securities, then we will be obligated to use our reasonable efforts to register the sale of all registrable securities that holders may request in writing. We will be obligated to prepare and file a registration statement relating to the registrable securities within 45 days after receiving an initial demand notice from the holders. Thereafter, we will use commercially reasonable efforts to cause the registration statement to become effective not later than 90 days from the date of filing. Additionally, we will be required to provide prompt written notice of such registration of the registrable securities to all holders of outstanding registrable securities at least 30 days prior to filing. Such holders then have 15 days following receipt of such notice to demand their registrable securities be included in such registration statement. We may postpone the filing of a registration statement for up to 120 days once in a 12 month period if in the good faith judgment of our board of directors such registration would be detrimental to us. These shares currently held by KAI that form a part of this registration statement are being registered following the demand of KAI that such shares be registered. Further, if we register any of our securities for public sale, we will have to use all commercially reasonable efforts to register all registrable securities that the holders of such securities request in writing be registered within 15 days of mailing of notice by us to all holders of the proposed registration. However, this right does not apply to a registration relating to any of our stock plans, the offer and sale of debt securities, a corporate reorganization or other transaction under Rule 145 of the Securities Act, or a registration on any registration form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the registrable securities. The managing underwriter of any underwritten offering will have the right to limit, due to marketing reasons, the number of shares registered by these holders. If the number of securities requested to be included in such offering exceeds the number of shares that can be sold in an orderly manner within a price range acceptable to the company, then the company will include in such registration statement: first, the securities the company proposes to sell; second, the registrable securities requested to be included in such registration; and third, any other securities of the company requested to be included in such registration, in such manner as the company may determine. See “Description of Capital Stock-Registration Rights” for additional information.

LEGAL MATTERS

The validity of the ordinary shares offered hereby will be passed upon for us by Conyers Dill & Pearman Ltd. Ellenoff Grossman & Schole LLP, New York, New York is acting as United States securities counsel to Atlas. Sidley Austin LLP, Chicago, IL is acting as counsel to the underwriters.

EXPERTS

Johnson Lambert LLP, an independent registered public accounting firm, has audited our consolidated financial statements for the year ended December 31, 2011, as set forth in their report. For the year ended December 31, 2010, KPMG LLP audited our consolidated financial statements, as set forth in their report.

KPMG LLP was discharged on June 20, 2011. KPMG LLP had not issued a report in the last two fiscal years containing a disclaimer or adverse opinion, or that was qualified or modified. Our decision to discharge KPMG LLP was approved by our audit committee and board or directors. We had no disagreements with KPMG LLP at any time during their tenure as our independent accountant as to a matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference to the subject matter of the disagreement in their report, nor have there been any reportable events.

We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on both Johnson Lambert LLP’s and KPMG LLP’s report, given their authority as experts in accounting and auditing.

Brown Smith Wallace LLC, an independent public accounting firm, has audited, under U.S. Generally Accepted Auditing Standards, the consolidated financial statements of Camelot Services, Inc. and its sole subsidiary Gateway Insurance Company, a non-issuer entity, for the years ended December 31, 2011 and December 31, 2010, as set forth in their report.  We have included the financial statements of Camelot Services in the prospectus in reliance on Brown Smith Wallace LLC’s report, given their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the ordinary shares offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the ordinary offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

Atlas Financial Holdings, Inc. is also listed on the TSX Venture Exchange (TSXV) under the trading symbol AFH. Additional information relating to Atlas is available on SEDAR at www.sedar.com, which can also be accessed from our website at www.atlas-fin.com. This information is not deemed part of or incorporated by reference to this registration statement.

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INDEX TO FINANCIAL STATEMENTS

Atlas Financial Holdings, Inc.

Audited Consolidated Financial Statements

	Page
Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Financial Position	F-3
Consolidated Statement of Comprehensive Income	F-4
Consolidated Statements of Shareholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

Unaudited Consolidated Financial Statements

Condensed Consolidated Statements of Financial Position as of September 30, 2012 (unaudited) and December 31, 2011	F-29
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-30
Condensed Consolidated Statements of Stockholders' Equity for the Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-31
Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-32
Notes to Condensed Consolidated Financial Statements (unaudited)	F-33

Camelot Services, Inc.

Audited Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-47
Consolidated Statements of Financial Position	F-48
Consolidated Statement of Comprehensive Income	F-50
Consolidated Statements of Shareholders’ Equity	F-51
Consolidated Statements of Cash Flows	F-52
Notes to Consolidated Financial Statements	F-53

Unaudited Consolidated Financial Statements

Condensed Consolidated Statements of Financial Position as of September 30, 2012 (unaudited) and December 31, 2011	F-67
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-69
Condensed Consolidated Statements of Stockholders' Equity for the Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-70
Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2012 and 2011 (unaudited)	F-71
Notes to Condensed Consolidated Financial Statements (unaudited)	F-72

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Atlas Financial Holdings, Inc.:

We have audited the accompanying consolidated statement of financial position of Atlas Financial Holdings, Inc. and subsidiaries (the Company) as of December 31, 2010, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Atlas Financial Holdings, Inc. as of December 31, 2010, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Chicago, IL

April 15, 2011

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Atlas Financial Holdings, Inc.

We have audited the accompanying consolidated statement of financial position of Atlas Financial Holdings, Inc. (”the Company”) as of December 31, 2011, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the period ended December 31, 2011. These consolidated financial statements and financial statement schedules listed on Item 15 of the Company’s Form 10-K are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas Financial Holdings, Inc as of December 31, 2011, and the results of its operations and its cash flows for the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ Johnson Lambert & Co. LLP

Arlington Heights, Illinois

March 26, 2012

(except for Note 18, as to which the date is January 17, 2013)

F-2

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in '000s, except for share and per share data)
	December 31,
	2011			2010
Assets
Investments, available for sale
Fixed income securities, at fair value (Amortized cost $101,473 and $148,531)	$	103,491		$	154,011
Equity securities, at fair value (cost $994 and $0)	1,141			—
Total Investments	104,632			154,011
Cash and cash equivalents	23,249			19,037
Accrued investment income	586			1,293
Accounts receivable and other assets (Net of allowance of $4,254 and $4,212)	9,579			13,340
Reinsurance recoverables, net	8,044			4,277
Prepaid reinsurance premiums	2,214			6,999
Deferred policy acquisition costs	3,020			3,804
Deferred tax asset, net	6,775			6,399
Software and office equipment, net	440			1,274
Assets held for sale	13,634			15,004
Total Assets	$	172,173		$	225,438
Liabilities
Claims liabilities	$	91,643		$	132,579
Unearned premiums	15,691			17,061
Due to reinsurers and other insurers	5,701			9,614
Other liabilities and accrued expenses	2,884			6,015
Total Liabilities	$	115,919		$	165,269
Shareholders’ Equity
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at December 31, 2011 and December 31, 2010. Liquidation value $1.00 per share	$	18,000		$	18,000
Ordinary shares, par value per share $0.003, 266,666,667 shares authorized, 1,541,842 shares issued and outstanding at December 31, 2011 and 1,517,834 at December 31, 2010	4			4
Restricted voting common shares, par value per share $0.003, 33,333,334 shares authorized, 4,601,621 shares issued and outstanding at December 31, 2011 and December 31, 2010	14			14
Additional paid-in capital	152,652			152,464
Retained deficit	(115,841		)	(113,371		)
Accumulated other comprehensive income, net of tax	1,425			3,056
Total Shareholders’ Equity	$	56,254		$	60,167
Total Liabilities and Shareholders’ Equity	$	172,173		$	225,436
See accompanying Notes to Consolidated Financial Statements.

F-3

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in ‘000s, except for shares and per share data)
	Year ended December 31,
	2011			2010
Net premiums earned	$	35,747		$	53,603
Net claims incurred	28,994			48,074
Acquisition costs	7,294			11,115
Other underwriting expenses	10,697			18,398
Underwriting loss	(11,238		)	(23,984		)
Net investment income	3,280			4,616
Net investment gains	4,201			888
Other income (expense), net	124			(757		)
Loss from operations before income tax (benefit)/expense	(3,633		)	(19,237		)
Income tax (benefit)/expense	(1,163		)	2,575
Net loss attributable to Atlas	$	(2,470	)	$	(21,812	)
Other comprehensive loss:
Changes in net unrealized gains (losses)	$	154		$	3,514
Reclassification to income of net (gains) losses	(3,469		)	(203		)
Effect of income tax	—			—
Pension Liability
Settlement of pension plan	2,473			—
Minimum pension liability adjustment	—			(153		)
Effect of income tax	(789		)	—
Other comprehensive (loss)/income for the period	(1,631		)	3,158
Total comprehensive loss	(4,101		)	(18,654		)
Basic weighted average common shares outstanding	6,124,542			6,119,455
Loss per common share, basic	$	(0.54	)	$	(3.56	)
Diluted weighted average common shares outstanding	6,124,542			6,119,455
Loss per common share, diluted	$	(0.54	)	$	(3.56	)
See accompanying Notes to Consolidated Financial Statements

F-4

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in ‘000s)
	Preferred Shares		Ordinary Shares		Restricted Voting Common Shares		Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Income (loss)			Total
Balance December 31, 2009	$	18,000	$	4	$	14	$	82,675		$	(47,714	)	$	(433	)	$	52,546
Net loss										(21,812		)				(21,812		)
Capital Contribution							26,994									26,994
Dividends Paid							(16,700		)							(16,700		)
Merger of Southern United							59,944			(43,845		)	331			16,430
Forgiveness of debt							(447		)							(447		)
Other comprehensive income													3,158			3,158
Balance December 31, 2010	$	18,000	$	4	$	14	$	152,466		$	(113,371	)	$	3,056		$	60,169
Net loss										(2,470		)				(2,470		)
Other comprehensive loss													(3,315		)	(3,315		)
Share-based compensation							113									113
Stock options exercised							73									73
Settlement of pension plan, net of tax													1,684			1,684
Balance December 31, 2011	$	18,000	$	4	$	14	$	152,652		$	(115,841	)	$	1,425		$	56,254
See accompanying Notes to Consolidated Financial Statements.

F-5

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in ‘000s)
	Year Ended December 31,
	2011			2010
Operating Activities
Net loss	$	(2,470	)	$	(21,812	)
Adjustments to reconcile net loss to net cash used by operating activities:
Forgiveness of mortgage loan	—			1,695
Amortization of fixed assets	218			3,370
Settlement of pension plan	2,544			—
Share-based compensation expense	113			—
(Gain)/loss on sale of fixed assets	(54		)	3
Deferred income taxes	(1,163		)	2,875
Net realized gains	(4,147		)	(891		)
Amortization of bond premiums and discounts	953			1,431
Net changes in operating assets and liabilities, net of effects of the merger of subsidiary:
Accounts receivable and other assets, net	3,762			13,074
Due from reinsurers and other insurers	1,018			(5,255		)
Deferred policy acquisition costs	784			5,750
Income taxes receivable	—			271
Other assets and accrued investment income	707			493
Unpaid claims	(40,936		)	(36,936		)
Unearned premium	(1,370		)	(16,789		)
Due to reinsurers and other insurers	(3,913		)	9,193
Accounts payable and accrued liabilities	(3,207		)	(1,472		)
Net change in other balances	—			(7,466		)
Net cash used by operating activities	$	(47,161	)	$	(52,466	)
Financing activities:
Capital contributions	$	—		$	—
Options exercised	73
Dividends paid	—			(16,700		)
Issuance of notes payable	—			—
Net cash provided/(used) by financing activities	$	73		$	(16,700	)
Investing activities:
Purchase of securities	$	(64,563	)	$	(25,826	)
Proceeds from sales and maturities of securities	113,823			106,684
Sale of assets held for sale	2,436			—
Cash acquired from merger of subsidiary	—			3,871
Net (purchases)/additions of software and other equipment	(396		)	(3,221		)
Net cash provided by investing activities	$	51,300		$	81,508
Net change in cash and cash equivalents	4,212			12,342
Cash and cash equivalents, beginning of year	19,037			6,695
Cash and cash equivalents, end of year	$	23,249		$	19,037
Supplementary disclosure of cash information:
Represented by:
Cash on hand and balances with banks	$	23,249		$	2,329
Investments with original maturities less than 30 days	—			16,708
Cash and cash equivalents, end of year	$	23,249		$	19,037
Cash paid for:
Interest	—			—
Income taxes	—			(227		)
See accompanying Notes to Consolidated Financial Statements.

F-6

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(All amounts in thousands of US dollars, except for amounts preceded by “C” as thousands of Canadian dollars, share and per share amounts)

Formation and Description of the Business (shares shown in this section reflect pre-split values)

Atlas Financial Holdings, Inc. (“Atlas”, or “The Company”) is a financial services holding company formed on December 31, 2010 in a transaction amongst:

(a) JJR VI Acquisition Corporation (“JJR VI”), a Canadian Capital Pool Company sponsored by JJR Capital, a Toronto based merchant bank,

(b) American Insurance Acquisition Inc., (“American Acquisition”), a corporation formed under the laws of Delaware by Kingsway America Inc. (“KAI”), a subsidiary of Kingsway Financial Services Inc. (“KFSI”), a Canadian public company formed under the laws of Ontario and whose shares are traded on the Toronto and New York Stock Exchanges, and

(c) Atlas Acquisition Corp, a Delaware corporation formed by JJR VI.

Prior to the transaction, KAI transferred 100% of the capital stock of American Service Insurance Company (“American Service”) and American Country Insurance Company (“American Country,” together with American Service the “insurance subsidiaries”), to American Acquisition in exchange for common and preferred shares of American Acquisition and promissory notes aggregating C$60,780. In addition, American Acquisition raised C$7,967 through a private placement offering of subscription receipts to qualified investors at a price of C$2.00 per subscription receipt.

All references to share counts and per share values in connection with the reverse merger transaction are presented prior to the one-for-three reverse stock split. KAI received 13,804,861 restricted voting common shares valued at $27,760, along with 18,000,000 non-voting preferred shares valued at $18,000 and C$7,967 cash in exchange for 100% of the outstanding shares of American Acquisition and full payment of the promissory notes. Investors in the American Acquisition subscription receipts received 1,327,834 ordinary shares plus warrants to purchase one ordinary voting common share for each subscription receipt at C$6.00 at any time until December 31, 2013. JJR VI common shares held by former shareholders of JJR VI were consolidated on the basis of one post-consolidation JJR VI common share for every 10 pre-consolidation JJR VI common shares. The post-consolidation JJR VI common shares were then exchanged on a one-for-one basis for ordinary shares of Atlas.

Atlas commenced operations on December 31, 2010. Atlas ordinary shares have been listed on the TSX Venture Exchange (“TSXV”) under the symbol “AFH” since January 6, 2011.

The primary business of Atlas is commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the “light” commercial automobile sector including taxi cabs, non-emergency paratransit, limousine, livery and business auto. 

The business of the Company is carried on through its insurance subsidiaries. The insurance subsidiaries distribute their insurance products through a network of retail independent agents. Together, American Country and American Service are licensed to write property and casualty insurance in 47 states in the United States. The management and operating infrastructure of American Country is integrated with that of American Service.

On February 25, 2010, while under KAI ownership, Southern United Fire Insurance Company (Southern United) merged into American Service. The transaction was accounted for as a merger of companies under common control with the Southern United assets and liabilities included at their carrying values and its results of operations included in the financial statements from the date of the merger.

F-7

Summary of Significant Accounting Policies

Basis of presentation - These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (”U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated. To conform to the current year presentation, certain amounts in the prior years’ consolidated financial statements and notes have been reclassified.

Classification of assets and liabilities - It is not customary in the insurance and financial services industries to classify assets and liabilities as current (settled in 1 year or less) and non-current (settled beyond 1 year). Assets and liabilities that could otherwise be classified as current include cash and cash equivalents, accrued investment income, accounts receivable and other assets, due from reinsurers and other insurers, income tax receivable, deferred policy acquisition costs, assets held for sale, accounts payable and accrued expenses, due to reinsurers and other insurers. Balances that would otherwise be classified as non-current include deferred tax assets and office equipment. All other assets and liabilities include balances that are both current and non-current.

Reverse acquisition continuation accounting - Atlas was formed through a reverse triangular merger and these consolidated financial statements are those of Atlas and subsidiaries and have been prepared in accordance with Accounting Standard Codification (”ASC”) 805 Business Combinations. Financial statements prepared following the reverse merger are presented in the name of the legal parent acquirer, Atlas, but are a continuation of the financial statements of the accounting acquirer, American Acquisition, with an adjustment for the capital structure (that is the number and type of equity interests, including equity instruments issued to effect the merger) of Atlas, as the legal parent acquirer and accounting acquiree. Accordingly, and as a result of the December 31, 2010 merger date, shareholders’ equity at December 31, 2010 reflects the common shares outstanding at the date of the merger together with the ordinary shares, restricted voting common shares and preferred shares that were issued to effect the merger, and also reflect the historical retained earnings (retained deficit) balances of American Acquisition, as the accounting acquirer.

Estimates and assumptions - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and changes in estimates are recorded in the accounting period in which they are determined. The liability for unpaid loss and loss adjustment expenses and related amounts recoverable from reinsurers represents the most significant estimate in the accompanying financial statements. Significant estimates in the accompanying financial statements also include the fair values of investments in bonds, deferred tax asset valuation, premium receivable bad debt allowance and deferred policy acquisition cost recoverability.

Business combinations - The reverse merger was consummated and Atlas commenced operations on December 31, 2010. In accordance with ASC 805 Business Combinations, American Acquisition is considered the accounting acquirer and Atlas (formerly JJR VI), the legal acquirer, is considered to be the accounting acquiree. Accordingly, the consolidated financial statements for all periods presented herein are a continuation of the financial statements of American Acquisition adjusted for the legal capital of Atlas.

Principles of consolidation - The consolidated financial statements include the accounts of Atlas and the entities it controls, its subsidiaries. Subsidiaries are entities over which Atlas, directly or indirectly, has the power to govern the financial and operating policies in order to obtain the benefits from their activities, generally accompanying an equity shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to Atlas and would be de-consolidated from the date that control ceases. The operating results of subsidiaries acquired or disposed of during the year will be included in the consolidated statement of operations from the effective date of acquisition and up to the effective date of disposal, as appropriate. All significant intercompany transactions and balances are eliminated in consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Atlas.

F-8

The following are Atlas’ subsidiaries, all of which are 100% owned, either directly or indirectly, together with the jurisdiction of incorporation that are included in consolidated financial statements:

American Insurance Acquisition Inc. (Delaware)

American Country Insurance Company (Illinois)

American Service Insurance Company, Inc. (Illinois)

Financial Instruments - Financial instruments are recognized and derecognized using trade date accounting, since that is the date Atlas contractually commits to the purchase or sale with the counterparty.

Effective interest method - Atlas utilizes the effective interest method for calculating the amortized cost of a financial asset and to allocate interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash flows through the expected life of the financial instrument. Interest income is reported net of amortization of premium and accretion of discount. Realized gains and losses on disposition of available-for-sale securities are based on the net proceeds and the adjusted cost of the securities sold, using the specific identification method.

Financial assets - Atlas classifies financial assets as described below. Management determines the classification at initial recognition based on the purpose of the financial asset.

Cash and cash equivalents -Cash and cash equivalents include cash and highly liquid securities with original maturities of 90 days or less.

Available-for-sale (“AFS”) - Investments in fixed income securities are classified as available-for-sale. Securities are classified as available-for-sale when Atlas may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields or alternative investments, and for other reasons. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of income tax, included as a separate component of accumulated other comprehensive income (loss) in shareholder’s equity.

Accounts receivable and other assets - Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. These assets are recognized initially at fair value, together with directly attributable transaction costs and subsequently measured at amortized cost. Accounts receivable include premium balances due and uncollected and installment premiums not yet due from agents and insureds.

Atlas evaluates the collectibility of accounts receivable based on a combination of factors. When aware of a specific customer’s inability to meet its financial obligations, such as in the case of bankruptcy or deterioration in the customer’s operating results or financial position, Atlas records a specific reserve for bad debt to reduce the related receivable to the amount Atlas reasonably believes is collectible. Atlas also records reserves for bad debt for all other customers based on a variety of factors, including the length of time the receivables are past due and historical collection experience. Accounts are reviewed for potential write-off on a case-by-case basis. Accounts deemed uncollectible are written off, net of expected recoveries. If circumstances related to specific customers change, the Company’s estimates of the recoverability of receivables could be further adjusted.

Premiums receivable are shown net of bad debt allowance of $4,254 and $4,212 at December 31, 2011 and December 31, 2010, respectively. Bad debt expense of $248 and $2,766 was incurred in the years ended December 31, 2011 and December 31, 2010, respectively. Atlas’ allowance for bad debt primarily relates to a single agent. Settlement proceedings with this agent were ongoing as of December 31, 2011. The entire receivable balance from this agency was fully reserved as of December 31, 2011. A settlement executed in April 2012, which resulted in a minor recovery of previously reserved amounts, will be reflected in Atlas’ financial statements for the six month period ended June 30, 2012.

Impairment of financial assets - Atlas assesses, on a quarterly basis, whether there is evidence that a financial asset or group of financial assets is impaired. An investment is considered impaired when the fair value of the investment is less than its cost or amortized cost. When an investment is impaired, the Company must make a determination as to whether the impairment is other-than-temporary.

F-9

Under ASC guidance, with respect to an investment in an impaired debt security, other-than temporary impairment (OTTI) occurs if (a) there is intent to sell the debt security, (b) it is more likely than not it will be required to sell the debt security before its anticipated recovery, or (c) it is probable that all amounts due will be unable to be collected such that the entire cost basis of the security will not be recovered. If Atlas intends to sell the debt security, or will more likely than not be required to sell the debt security before the anticipated recovery, a loss in the entire amount of the impairment is reflected in net realized gains (losses) on investments in the consolidated statements of income. If Atlas determines that it is probable it will be unable to collect all amounts and Atlas has no intent to sell the debt security, a credit loss is recognized in net realized gains (losses) on investments in the consolidated statements of income to the extent that the present value of expected cash flows is less than the amortized cost basis; any difference between fair value and the new amortized cost basis (net of the credit loss) is reflected in other comprehensive income (losses), net of applicable income taxes.

There were no other-than-temporary impairments recognized in 2011.

Fair values of financial instruments - Atlas has used the following methods and assumptions in estimating its fair value disclosures:

Fair values for bonds are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or values obtained from independent pricing services.

Atlas’ fixed income portfolio is managed by Asset Allocation Management (“AAM”), an SEC registered investment advisor specializing in the management of insurance company portfolios. Management works directly with AAM to ensure that Atlas benefits from their expertise and also evaluates investments as well as specific positions independently using internal resources. AAM has a team of credit analysts for all investment grade fixed income sectors. The investment process begins with an independent analyst review of each security’s credit worthiness using both quantitative tools and qualitative review. At the issuer level, this includes reviews of past financial data, trends in financial stability, projections for the future, reliability of the management team in place, market data (credit spread, equity prices, trends in this data for the issuer and the issuer’s industry). Reviews also consider industry trends and the macro-economic environment. This analysis is continuous, integrating new information as it becomes available. In short, Atlas does not rely on rating agency ratings to make investment decisions, but instead with the support of its independent investment advisors, do independent fundamental credit analysis to find the best securities possible. AAM has found that over time this process creates an ability to sell securities prior to rating agency downgrades or to buy securities before upgrades. As of December 31, 2011, this process did not generate any significant difference in the rating assessment between Atlas’ review and the rating agencies.

Atlas employs specific control processes to determine the reasonableness of the fair value of its financial assets. These processes are designed to supplement those performed by AMM to ensure that the values received from them are accurately recorded and that the data inputs and the valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. For example, on a continuing basis, Atlas assesses the reasonableness of individual security values which have stale prices or whose changes exceed certain thresholds as compared to previous values received from those AMM or to expected prices. The portfolio is reviewed routinely for transaction volumes, new issuances, any changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for market valuations. When fair value determinations are expected to be more variable, they are validated through reviews by members of management or the Board of Directors who have relevant expertise and who are independent of those charged with executing investment transactions.

Deferred policy acquisition costs (DAC) - Atlas defers producers’ commissions, premium taxes and other underwriting and marketing costs directly relating to the acquisition of premiums written to the extent they are considered recoverable. These costs are then expensed as the related premiums are earned. The method followed in determining the deferred policy acquisition costs limits the deferral to its realizable value by giving consideration to estimated future claims and expenses to be incurred as premiums are earned. Changes in estimates, if any, are recorded in the accounting period in which they are determined. Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs. Atlas’ deferred policy acquisition costs are reported net of ceding commissions.

F-10

Deferred policy acquisition costs for the years ended December 31 follows:

	2011		2010
Balance, beginning of year	$	3,804	$	9,399
Acquisition costs deferred	6,510		5,520
Amortization charged to income	7,294		11,115
Balance, end of year	$	3,020	$	3,804

When anticipated losses, loss adjustment expenses, commissions and other acquisition costs exceed recorded unearned premium, and any future installment premiums on existing policies, a premium deficiency reserve is recognized by recording an additional liability for the deficiency, with a corresponding charge to operations. Atlas utilizes anticipated investment income as a factor in its premium deficiency calculation. In 2011 and 2010, Atlas concluded that no premium deficiency adjustments were necessary.

Income taxes - Income taxes expense (benefit) includes all taxes based on taxable income (loss) of Atlas and its subsidiaries and are recognized in the statement of operations except to the extent that they relate to items recognized directly in other comprehensive income, in which case the income tax effect is also recognized in other comprehensive income.

Deferred taxes are recognized using the asset and liability method of accounting. Under this method the future tax consequences attributable to temporary differences in the tax basis of assets, liabilities and items recognized directly in equity and the financial reporting basis of such items are recognized in the financial statements by recording deferred tax liabilities or deferred tax assets.

Deferred tax assets related to the carry-forward of unused tax losses and credits and those arising from temporary differences are recognized only to the extent that it is probable that future taxable income will be available against which they can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment.

When considering the extent of the valuation allowance on Atlas’ deferred tax asset, the weight given by management to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. GAAP states that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets. However, the strength and trend of earnings, as well as other relevant factors are considered.

Office equipment and software – Office equipment is stated at historical cost less deprecation. Subsequent costs are included in the asset’s carrying amount or capitalized as a separate asset only when it is probable that future economic benefits will be realized. Repairs and maintenance are recognized as an expense during the period incurred. Depreciation on equipment is provided on a straight-line basis over the estimated useful lives which range from 5 years for vehicles, 7 years for furniture and the term of the lease for leased equipment.

Insurance contracts – Contracts under which Atlas’ insurance subsidiaries accept risk at the inception of the contract from another party (the insured holder of the policy) by agreeing to compensate the policyholder or other insured beneficiary if a specified future event (the insured event) adversely affects the holder of the policy are classified as insurance contracts. All policies are short-duration contracts.

Revenue Recognition - Premium income is recognized on a pro rata basis over the terms of the respective insurance contracts. Unearned premiums represent the portion of premiums written that are related to the unexpired terms of the policies in force.

Claims liabilities - The provision for unpaid claims represent the estimated liabilities for reported claims, plus those incurred but not yet reported and the related estimated loss adjustment expenses. Unpaid claims expenses are determined using case-basis evaluations and statistical analyses, including insurance industry loss data, and represent estimates of the ultimate cost of all claims

F-11

incurred. Although considerable variability is inherent in such estimates, management believes that the liability for unpaid claims is adequate. The estimates are continually reviewed and adjusted as necessary; such adjustments are included in current operations and are accounted for as changes in estimates.

Reinsurance - As part of Atlas’ insurance risk management policies, portions of its insurance risk is ceded to reinsurers. Reinsurance premiums and claims expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and claims ceded to other companies have been reported as a reduction of premium revenue and claims incurred expense. Commissions paid to Atlas by reinsurers on business ceded have been accounted for as a reduction of the related policy acquisition costs. Reinsurance receivables are recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. Prepaid reinsurance premiums are recorded for unearned premiums that have been ceded to other companies.

Share-based payments - Atlashas a stock-based compensation plan which is described fully in Note 10. Under ASC 718 Compensation-Stock Compensation (“ASC 718”), the fair-value method of accounting is used to determine and account for equity settled transactions and to determine stock-based compensation awards granted to employees and non-employees using the Black-Scholes option pricing model. Compensation expense is recognized over the period that the stock options vest, with a corresponding increase to additional paid in capital.

For option awards with graded vesting, ASC 718 provides two options: on a straight-line basis over the service period for each separately vesting portion of the award (as if the award were in effect multiple awards), or on a straight line basis over the service period for the entire award. Atlas has chosen the latter policy. Atlas recognized $113 in stock compensation expense in 2011 and none in 2010.

Post-employment benefits - Prior to December 31, 1997, substantially all salaried employees of American Country were covered by a defined benefit pension plan known as the American Country Pension Plan (the “pension plan”). The pension plan was dissolved in the fourth quarter 2011 and the plan assets were distributed. The dissolution resulted in the immediate recognition of $2,544 in prior service costspreviouslyrecorded in Accumulated Other Comprehensive Income, which are shown within Other Underwriting Expenses.

Until its dissolution, periodic net pension expense was based on the cost of incremental benefits for employee service during the period, interest on projected benefit obligation, actual return on plan assets and amortization of actuarial gains and losses.

Operating segments - Atlas is in a single operating segment – property and casualty insurance.

Presentation of equity and cash flows: Ordinary and restricted voting common shares are reflected as par value amounts with any remaining consideration upon issuance recorded in additional paid in capital. In 2010, the Company reported the total consideration within the common share equity amounts in the consolidated statement of financial position. The Company has adjusted the prior period common share and additional paid in capital amounts to conform to the presentation in 2011.

In the consolidated statements of cash flows, adjustments to reconcile net income (loss) to cash used in operating activities includes a non cash expense for forgiveness of mortgage loan and net realized investment gains and losses. In 2010, the amount of the expense for forgiveness of mortgage loan was reported as an increase to the net loss amount rather than a reduction. The Company has adjusted the prior period cash flows for the immaterial error in presentation.

Emerging Growth Company: The Company is an “emerging growth company” under the JOBS Act and, except as set forth below, will take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to opt out of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

F-12

2. PENDING ACCOUNTING STANDARDS

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts - In October 2010, the Financial Accounting Standards Board (”FASB”) issued guidance modifying the definition of the types of costs incurred by insurance entities that can be capitalized in the acquisition of new and renewal insurance contracts. The guidance specifies that the costs must be directly related to the successful acquisition of insurance contracts. The guidance also specifies that advertising costs should be included as deferred acquisition costs only when the direct−response advertising accounting criteria are met. The new guidance is effective for reporting periods beginning after December 15, 2011. Atlas’ current policy for accounting for acquisition costs is already materially consistent with this guidance. Therefore the adoption of this guidance will not have an impact of on our financial statements.

Amendments to Fair Value Measurement and Disclosure Requirements - In May 2011, the FASB issued guidance that clarifies the application of existing fair value measurement and disclosure requirements and amends certain fair value measurement principles, requirements and disclosures. Changes were made to improve consistency in global application. The guidance is to be applied prospectively for reporting periods beginning after December 15, 2011. Early adoption is not permitted. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.

Presentation of Comprehensive Income - In June and December 2011, the FASB issued guidance amending the presentation of comprehensive income and its components. Under the new guidance, a reporting entity has the option to present comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance is effective for reporting periods beginning after December 15, 2011 and is to be applied retrospectively. The new guidance affects presentation only and will have no material impact on the Company’s results of operations or financial position.

3. INVESTMENTS

The amortized cost, gross unrealized gains and losses and fair value for Atlas’ investments are as follows:

December 31, 2011		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Term Deposits		$	—	$	—	$	—	$	—
Bonds:
U.S.	- Government	44,835		911		—		45,746
	- Corporate	35,572		825		24		36,373
	- Commercial mortgage backed	17,493		208		—		17,701
	- Other asset backed	3,573		99		1		3,671
Total Fixed Income		$	101,473	$	2,043	$	25	$	103,491
Equities		994		147		—		1,141
Totals		$	102,467	$	2,190	$	25	$	104,632

December 31, 2010		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Term Deposits		$	7,898	$	3	$	—	$	7,901
Fixed Income:
U.S.	- Government	67,388		2,117		—		69,505
	- Corporate	62,429		3,011		—		65,440
	- Commercial mortgage backed	8,445		270		—		8,715
	- Other asset backed	2,371		79		—		2,450
Total Fixed Income		$	148,531	$	5,480	$	—	$	154,011
Equities		—		—		—		—
Totals		$	148,531	$	5,480	$	—	$	154,011

F-13

The following tables summarize carrying amounts of fixed income securities by contractual maturity. As certain securities and debentures have the right to call or prepay obligations, the actual settlement dates may differ from contractual maturity.

As at December 31, 2011	One year or less			One to five years			Five to ten years			More than ten years			Total
Fixed Income Securities	$	29,407		$	27,317		$	10,242		$	36,525		$	103,491
Percentage of total	28.4		%	26.4		%	9.9		%	35.3		%	100.0		%

As at December 31, 2010	One year or less			One to five years			Five to ten years			More than ten years			Total
Fixed Income Securities	$	21,556		$	88,564		$	24,026		$	19,865		$	154,011
Percentage of total	14.0		%	57.5		%	15.6		%	12.9		%	100.0		%

The following table summarizes the change in unrealized gains and losses for the years ended December 31:

		2011			2010
Term Deposits		$	(3	)	$	3
Fixed Income:
U.S.	-Government	(1,206		)	852
	- Corporate	(2,210		)	386
	- Commercial mortgage backed	(62		)	33
	- Other asset backed	19			2,037
Equities		147
Totals		$	(3,315	)	$	3,311

The following table summarizes the components of net investment income for the years ended December 31:

		2011			2010
Total investment income
	Interest (from fixed income securities)	$	3,791		$	4,915
	Dividends	12			—
	Other	—			—
Investment expenses		(523		)	(299		)
Net investment income		$	3,280		$	4,616

The following table summarizes the components of net investment gains for the years ended December 31:

	2011		2010
Fixed income securities	$	4,149	$	888
Equities	—		—
Other	52		—
Net investment gains (losses)	$	4,201	$	888

Management performs a quarterly analysis of Atlas’ investment holdings to determine if declines in fair value are other than temporary. The analysis includes some or all of the following procedures as deemed appropriate by management:

• identifying all security holdings in unrealized loss positions that have existed for at least six months or other circumstances that management believes may impact the recoverability of the security;

• obtaining a valuation analysis from third party investment managers regarding these holdings based on their knowledge, experience and other market based valuation techniques;

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• reviewing the trading range of certain securities over the preceding calendar period;

• assessing if declines in market value are other than temporary for debt security holdings based on their investment grade credit ratings from third party security rating agencies;

• assessing if declines in market value are other than temporary for any debt security holding with a non-investment grade credit rating based on the continuity of its debt service record; and

• determining the necessary provision for declines in market value that are considered other than temporary based on the analyses performed.

The risks and uncertainties inherent in the assessment methodology utilized to determine declines in market value that are other than temporary include, but may not be limited to, the following:

• the opinion of professional investment managers could be incorrect;

• the past trading patterns of individual securities may not reflect future valuation trends;

• the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company’s financial situation; and

• the debt service pattern of non-investment grade securities may not reflect future debt service capabilities and may not reflect a company’s unknown underlying financial problems.

There were no impairments recorded in the years ended December 31, 2011 or December 31, 2010 as a result of the above analysis performed by management to determine declines in market value that may be other than temporary. All securities as of December 31, 2011 and 2010 in an unrealized loss position have been in said position for less than 12 months.

4. FINANCIAL AND CREDIT RISK MANAGEMENT

By virtue of the nature of Atlas’ business activities, financial instruments make up the majority of the balance sheet. The risks which arise from transacting financial instruments include credit risk, market risk, liquidity risk and cash flow risk. These risks may be caused by factors specific to an individual instrument or factors affecting all instruments traded in the market. Atlas has a risk management framework in place to monitor, evaluate and manage the risks assumed in conducting its business. Atlas’ risk management policies and practices are as follows:

Credit risk - Atlas is exposed to credit risk principally through its fixed income securities and balances receivable from policyholders and reinsurers. Atlas controls and monitors concentration and credit quality risk through policies to limit and monitor its exposure to individual issuers or related groups (with the exception of U.S. Government bonds) as well as through ongoing review of the credit ratings of issuers held in the securities portfolio. Atlas’ credit exposure to any one individual policyholder is not material. Atlas has policies requiring evaluation of the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvency.

The following table summarizes the credit exposure of Atlas from its investments in fixed income securities and term deposits by rating as assigned by Fitch, Standard & Poor’s or Moody’s Investor Services, using the higher of these ratings for any security where there is a split rating:

	2011				2010
	Amount		% of Total		Amount		% of Total
AAA/Aaa	$	54,717	52.9	%	$	88,684	57.6	%
AA/Aa	21,567		20.8	%	26,388		17.1	%
A/A	22,380		21.6	%	35,027		22.7	%
BBB/Baa	4,827		4.7	%	3,851		2.5	%
CCC/Caa or lower or not rated	—		—		61		0.1	%
Total Securities	$	103,491	100.0	%	$	154,011	100.0	%

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Equity price risk - This is the risk of loss due to adverse movements in equity prices. Atlas’ investment in equity securities comprises a small percentage of its total portfolio, and as a result, the exposure to this type of risk is minimal.

Foreign currency risk - Atlas is not currently exposed to material changes in the U.S. dollar currency exchange rates with any other foreign currency.

Liquidity and cash flow risk - Liquidity risk is the risk of having insufficient cash resources to meet current financial obligations without raising funds at unfavorable rates or selling assets on a forced basis. Liquidity risk arises from general business activities and in the course of managing the assets and liabilities of Atlas. There is the risk of loss to the extent that the sale of a security prior to its maturity is required to provide liquidity to satisfy policyholder and other cash outflows. Cash flow risk arises from risk that future inflation of policyholder cash flow exceeds returns on long-term investment securities. The purpose of liquidity and cash flow management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they fall due. The liquidity and cash flow requirements of Atlas’ business have been met primarily by funds generated from operations, asset maturities and income and other returns received on securities. Cash provided from these sources is used primarily for claims and claim adjustment expense payments and operating expenses. The timing and amount of catastrophe claims are inherently unpredictable and may create increased liquidity requirements.

Fair value - Fair value amounts represent estimates of the consideration that would currently be agreed upon between knowledgeable, willing parties who are under no compulsion to act.

Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. The calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values.

Atlas records the available for sale securities held in its securities portfolio at their fair value. Atlas primarily uses the services of external securities pricing vendors to obtain these values. The securities are valued using quoted market prices or prices established using observable market inputs. In volatile market conditions, these quoted market prices or observable market inputs can change rapidly causing a significant impact on fair value and financial results recorded.

Atlas employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The hierarchy is comprised of quoted market prices (Level 1), third party models using observable market information (Level 2) and internal models without observable market information (Level 3). The following table summarizes Atlas’ investments at fair value as at the years ended December 31, 2011 and December 31, 2010:

December 31, 2011	Level 1		Level 2		Level 3		Total
Fixed Income Securities	$	13,363	$	90,128	$	—	$	103,491
Equities	1,141		—		—		1,141
Totals	$	14,504	$	90,128	$	—	$	104,632

December 31, 2010	Level 1		Level 2		Level 3		Total
Fixed Income Securities	$	27,561	$	126,450	$	—	$	154,011
Equities	—		—		—		—
Totals	$	27,561	$	126,450	$	—	$	154,011

There were no transfers in or out of Level 2 during either period.

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Capital Management - The Company manages capital using both regulatory capital measures and internal metrics. The company’s capital is primarily derived from common shareholders’ equity, retained deficit and accumulated other comprehensive income (loss).

As a holding company, Atlas derives cash from its insurance subsidiaries generally in the form of dividends to meet its obligations, which will primarily consist of operating expense payments. Atlas’ insurance subsidiaries fund their obligations primarily through premium and investment income and maturities in the securities portfolio. The insurance subsidiaries require regulatory approval for the return of capital and, in certain circumstances, prior to the payment of dividends. In the event that dividends available to the holding company are inadequate to cover its operating expenses, the holding company would need to raise capital, sell assets or incur future debt.

The insurance subsidiaries must each maintain a minimum statutory capital and surplus of $1,500 under the provisions of the Illinois Insurance Code. Dividends may only be paid from statutory unassigned surplus, and payments may not be made if such surplus is less than a stipulated amount. The dividend restriction is the greater of statutory net income or 10% of total statutory capital and surplus.

Net loss computed under statutory-basis accounting for American Country and American Service were $(2,328) and $(497) respectively for the year ended December 31, 2011 (unaudited), versus $(1,451) and $(5,351) for the year ended December 31, 2010 (unaudited). Statutory capital and surplus of the insurance subsidiaries was $49,954 (unaudited) and $45,560 at December 31, 2011 and 2010, respectively.

Atlas did not pay any dividends to its common shareholders during 2011 and has no current plans to pay dividends to its common shareholders.

A risk based capital formula is used by the National Association of Insurance Commissioners (”NAIC”) to identify property and casualty insurance companies that may not be adequately capitalized. The NAIC requires that capital and surplus not fall below 200% of the authorized control level. As of December 31, 2011, based on the unaudited statutory basis financial statements, both the insurance subsidiaries are above the required risk based capital levels, with risk based capital ratio estimates for American Country and American Service of 592.5% and 803.4%. The insurance subsidiaries had approximately $36,402 of capital in excess of the 200% minimum described above. As of December 31, 2010, the comparable risk based capital ratio estimates for American Country and American Service were 322% and 536%, and estimated capital in excess of the 200% level was approximately $26,100.

5. INCOME TAXES

The effective tax rate was (32.0)% and 13.4% for the years ended December 30, 2011 and 2010, respectively, compared to the U.S. statutory income tax rate of 34% as shown below:

Year ended December 31,	2011					2010
	Amount			%		Amount			%
Expected income tax benefit at statutory rate	$	(1,235	)	(34.0	)%	$	(6,541	)	(34.0	)%
Valuation allowance	—			—	%	(9,476		)	(49.3	)%
Nondeductible expenses	5			0.1	%	183			1.0	%
Tax implications of qualifying transaction	75			2.1	%	18,412			95.7	%
Other	(8		)	(0.2	)%	(3		)	—	%
Total	$	(1,163	)	(32.0	)%	$	2,575		13.4	%

Atlas carried deferred tax assets on its balance sheet that were generated by its subsidiaries, primarily related to net operating loss carry-forwards. The qualifying transaction caused a change in control for tax purposes which triggered Internal Revenue Code Section 382. Section 382 created a yearly limit on its deferred tax assets such that a portion of the operating loss deferred tax assets would never be able to be utilized. In addition, as a result of the structure of the transaction, the seller, Kingsway, retains a portion of those deferred tax assets as dictated by the Internal Revenue Code. Kingsway, in general, retained those portions of the net operating loss deferred tax assets that Atlas would have otherwise not been able to use due to the Section 382 limit mentioned

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above. Since the removal of the deferred tax asset from the balance sheet without an off-setting cash recoverable from the U.S. Government, this removal created a reconciling item from Atlas’ statutory income tax rate.

Income tax expense consists of the following for the years ended December 31:

	2011			2010
Current tax expense/(benefit)	$	—		$	(300	)
Deferred tax (benefit)/expense	(1,163		)	2,875
Total	$	(1,163	)	$	2,575

The components of deferred income tax assets and liabilities as of December 31 are as follows:

	2011			2010
Deferred tax assets:
Unpaid claims and unearned premiums	$	3,004		$	4,218
Loss carry-forwards	15,558			13,252
Pension expense	—			841
Bad debts	1,297			1,356
Other	1,338			1,394
Valuation Allowance	(12,361		)	(11,288		)
Total gross deferred tax assets	$	8,836		$	9,773
Deferred tax liabilities:
Investment securities	740			1,863
Deferred policy acquisition costs	1,027			1,293
Other	294			218
Total gross deferred tax liabilities	$	2,061		$	3,374
Net deferred tax assets	$	6,775		$	6,399

Amounts and expiration dates of the operating loss carry forwards as of December 31, 2011 are as follows:

Year of Occurrence	Year of Expiration	Amount
2001	2021	$	14,750
2002	2022	4,317
2006	2026	7,825
2007	2027	5,131
2008	2028	1,949
2009	2029	1,949
2010	2030	1,949
2011	2031	7,762
Total		$	45,632

Atlas established a valuation allowance of approximately $12,361 and $11,288 for its gross deferred tax assets at December 31, 2011 and December 31, 2010 respectively.

In assessing the need for a valuation allowance, Atlas considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized or if it is deemed premature to conclude that these assets will be realized in the near future, a valuation allowance is recorded. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. GAAP states that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets.

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Atlas’ assessment also accounted for the following evidence:

◦ Recent spin-off from prior ownership - Atlas was formed on December 31, 2010 in a reverse merger transaction.  Consideration was made as to the impact of this transaction on future earnings.

◦ Nature, frequency, and severity of current and cumulative financial reporting losses - A pattern of objectively-measured recent financial reporting losses is heavily weighted as a source of negative evidence. Cumulative pre-tax losses in the three-year period ending with the current quarter are generally considered to be significant negative evidence regarding future profitability. However, the strength and trend of earnings are also considered, as well as other relevant factors. Atlas did not consider historical information as relevant due to the significant changes in business operations beginning on January 1, 2011;

◦ Trends in quarterly earnings from operating activities during the period - When performing the assessment, Atlas excluded certain non-operating items which impacted 2011 results: (1) a $2,544 charge upon settlement of the American Country Pension Plan (see Note 10 below); (2) a $1,800 reserve strengthening adjustment related to claims incurred under prior ownership (See Note 8 below); (3) $627 in non-recurring costs relating to the transactions that created Atlas.

◦ Sources of future taxable income - Future reversals of existing temporary differences are heavily-weighted sources of objectively verifiable positive evidence. Projections of future taxable income exclusive of reversing temporary differences are a source of positive evidence only when the projections are combined with a history of recent profits and can be reasonably estimated. Otherwise, these projections are considered inherently subjective and generally will not be sufficient to overcome negative evidence that includes relevant cumulative losses in recent years, particularly if the projected future taxable income is dependent on an anticipated turnaround to profitability that has not yet been achieved. In such cases, future taxable income is generally given no weight for the purposes of assessing the valuation allowance pursuant to GAAP; and

◦ Tax planning strategies - If necessary and available, tax planning strategies could be implemented to accelerate taxable amounts to utilize expiring carry-forwards. These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted.

At the end of 2011, Atlas’ operations (excluding the aforementioned non-operating items) had returned to a position of cumulative profits for the most recent one-year period. Further, operations showed three consecutive quarters of pre-tax operating profits (before non-operating items). Management concluded that the successful repositioning of Atlas during 2011 combined with the business plan showing continued profitability into future periods, provide assurance that future tax benefits more likely than not will be realized. Accordingly, at year-end 2011, a tax benefit was realized and the valuation was reduced against net deferred tax assets.

Atlas accounts for uncertain tax positions in accordance with the income taxes accounting guidance. Atlas has analyzed filing positions in the federal and state jurisdiction where it is required to file tax returns, as well as the open tax years in these jurisdictions. Atlas believes that its federal and state income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal and state income tax positions have been recorded. Atlas would recognize interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. Atlas did not incur any federal income tax related interest income, interest expense or penalties for the years ended December 31, 2011 or 2010. Tax years 2006 through 2010 are subject to examination by the Internal Revenue Service.

6. ASSETS HELD FOR SALE

As at December 31, 2011, Atlas had three properties held for sale with an aggregate carrying value of $13,634, including its headquarters building in Elk Grove Village, Illinois. All of the properties’ individual carrying values were less than their respective appraised values net of reasonably estimated selling costs at the time those appraisals were received and at the time properties were deemed to be held for sale. All properties were listed for sale through brokers at the appraised values and above carrying values as of December 31, 2011. Atlas expects to re-invest the proceeds from the sale of real estate in its investment portfolio which will support strategic growth initiatives.

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The Elk Grove Village building and property were previously owned by KAI and were contributed to Atlas as a capital contribution in June 2010. The other two properties, all located in Alabama, were assets of Southern United Fire Insurance Company which was merged into American Service in February 2010.

7. UNDERWRITING POLICY AND REINSURANCE CEDED

Underwriting Risk - Underwriting risk is the risk that the total cost of claims and acquisition expenses will exceed premiums received and can arise from numerous factors, including pricing risk, reserving risk, catastrophic loss risk, reinsurance coverage risk and that loss and loss adjustment expense reserves are not sufficient.

Reinsurance Ceded - As is customary in the insurance industry, Atlas reinsures portions of certain insurance policies it writes, thereby providing a greater diversification of risk and minimizing exposure on larger risks. Atlas remains contingently at risk with respect to any reinsurance ceded and would incur an additional loss if an assuming company were unable to meet its obligation under the reinsurance treaty.

Atlas monitors the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium, ceded loss reserve balances and ceded paid losses. These policies mitigate the risk of credit quality or dispute from becoming a danger to financial strength. To date, the Company has not experienced any material difficulties in collecting reinsurance recoverables.

Gross premiums written and ceded premiums, losses and commissions as of and for the year ended December 31 are as follows:

	2011		2010
Gross premiums written	$	42,031	$	46,679
Ceded premiums written	6,173		14,201
Net premiums written	35,858		32,478
Ceded premiums earned	$	7,653	$	7,434
Ceded losses and loss adjustment expenses	2,767		3,628
Ceded unpaid losses and loss adjustment expenses	7,825		5,192
Ceded unearned premiums	2,214		3,694
Other amounts due from reinsurers	219		2,390
Ceded commissions	2,412		5,441

8. UNPAID CLAIMS

Claims liabilities - The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the year ended December 31, 2011 and 2010 were as follows:

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	2011		2010
Unpaid claims, beginning of period	$	132,579	$	169,520
Less: reinsurance recoverable	6,477		5,197
Net beginning unpaid claims reserves	126,102		164,323
Incurred related to:
Current year	27,303		42,739
Prior years	1,691		5,335
	28,994		48,074
Paid related to:
Current year	12,715		18,994
Prior years	58,563		76,835
	71,278		95,829
Net unpaid claims of subsidiary acquired	—		9,534
Net unpaid claims, end of period	$	83,818	$	126,102
Add: reinsurance recoverable	7,825		6,477
Unpaid claims, end of period	$	91,643	$	132,579

At the end of 2010, a detailed review of claim payment and reserving practices was performed, which led to significant changes in both practices, increasing ultimate loss estimates and accelerating claim payments. Reserves were adjusted at that time to account for these changes, primarily during the second and third quarters of 2010. This review continued into 2011 and Atlas recorded a $1,800 adjustment to further strengthen its reserves for claims related to policies issued while the insurance subsidiaries were under previous ownership in years preceding 2010. The establishment of the estimated provision for unpaid claims is based on known facts and interpretation of circumstances and is therefore a complex and dynamic process influenced by a large variety of factors. These factors include the Atlas’ experience with similar cases and historical trends involving claim payment patterns, loss payments, pending levels of unpaid claims, product mix or concentration, claims severity and claim frequency patterns.

Other factors include the continually evolving and changing regulatory and legal environment, actuarial studies, professional experience and expertise of the Atlas’ claims department personnel and independent adjusters retained to handle individual claims, the quality of the data used for projection purposes, existing claims management practices including claims handling and settlement practices, the effect of inflationary trends on future claims settlement costs, court decisions, economic conditions and public attitudes. In addition, time can be a critical part of the provision determination, since the longer the span between the incidence of a loss and the payment or settlement of the claims, the more variable the ultimate settlement amount can be. Accordingly, short tail claims such as property claims, tend to be more reasonably predictable than long tail claims, such as general liability and automobile accident benefit claims that are less predictable.

Consequently, the process of establishing the estimated provision for unpaid claims is complex and imprecise as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results will deviate, perhaps substantially, from the best estimates made.

As the processes of management and the independent appointed actuary are undertaken independently, the provision for unpaid claims recorded by management can differ from the independent appointed actuary’s central estimate.

Comparing management’s selected reserve estimate to the actuarial central estimate and range of reasonable reserves independently determined by the independent appointed actuary continues to be an important step in the reserving process of the Company, however; where differences exist and the Company believes the internally developed reserve estimate to be more accurate, management’s estimate will not change. We believe this to be consistent with industry practice for companies with a robust reserving process in place. As of December 31, 2011, the Company’s carried reserves were within the range of reasonable reserves of its independent appointed actuary. As of December 31, 2011, the carrying value of unpaid claims was $91,643. There is no active market for policy liabilities; hence market value is not determinable. The carrying value of unpaid claims does not take into consideration the time value of money or make explicit provisions for adverse deviation. Fair value of unpaid claims would include such considerations.

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9. STOCK OPTIONS AND WARRANTS

Stock options - Stock option activity for years ended December 31, 2011 and December 31, 2010 is as follows:

	2011			2010
	Number		Avg. Price	Number		Avg. Price
Outstanding, beginning of period	36,867		C$3.00	--		--
Granted	123,250		C$6.00	44,000		C$3.00
Exercised	(24,008	)	C$3.00	--		--
Expired	--		--	(7,134	)	C$3.00
Outstanding, end of period	136,109		C$5.70	36,866		C$3.00

Information about options outstanding at December 31, 2011 is as follows:

Grant Date	Expiration Date	Exercise Price	Remaining Contractual Life (Years)	Number Outstanding	Number Exercisable
January 18, 2011	January 18, 2021	C$6.00	9.1	123,250	30,813
March 18, 2010	March 31, 2012	C$3.00	0.3	2,159	2,159
March 18, 2010	March 18, 2020	C$3.00	8.2	10,700	10,700
Total			8.8 wtd. average	136,109	43,672

On March 18, 2010, JJR VI issued options to purchase 83,334 common shares to the agent that assisted JJR VI in raising capital (the “IPO agent”) and options to purchase 356,667 shares to directors. All of the options were vested at the date of grant. Options to purchase 71,334 shares held by directors expired before the merger as a result of a director resignation. All outstanding JJR VI options were exchanged for Atlas options without modification on the basis of 1 Atlas option for each 10 JJR VI options and the exercise price was changed from C$0.30 to C$3.00, which was on the same basis as the JJR VI exchange ratio for shares, and thus did not represent any additional value or related expense. This resulted in 8,334 and 28,534 Atlas options for the agent and former JJR VI directors, respectively, outstanding after the merger. In total, 24,008 of these options were exercised in 2011. The options granted on March 18, 2010 have an aggregate intrinsic value of $39, as of December 31, 2011.

On January 6, 2011, Atlas adopted a stock option plan in order to advance the interests of Atlas by providing incentives to eligible persons defined in the plan. The maximum number of ordinary shares reserved for issuance under the plan together with all other security based plans is equal to 10% of issued and outstanding ordinary shares at the date of grant. The exercise price of options granted under the plan cannot be less than the volume weighted average trading price of Atlas’ ordinary shares for the five preceding trading days. Options generally vest over a three year period and expire ten years from grant date.

On January 18, 2011, Atlas granted options to purchase 123,250 ordinary shares of Atlas stock to officers and directors at an exercise price of C$6.00 per share. The options vest 25% at date of grant and 25% on each of the next three anniversary dates and expire on January 18, 2021. The weighted average grant date fair value of the options is $3.72 per share. As of December 31, 2011 the options had no aggregate intrinsic value.

The Black-Scholes option pricing model was used to estimate the fair value of compensation expense using the following assumptions – risk-free interest rate 2.27% to 3.13%; dividend yield 0.0%; expected volatility 100%; expected life of 6 to 9 years.

In accordance with ASC 718, Atlas has recognized stock compensation expense on a straight-line basis over the requisite service period of the last separately vesting portion of the award. In 2011, Atlas recognized $113 in expense, which is a component of other underwriting expenses on the income statement. Total unrecognized stock compensation expense associated with the January 18, 2011 grant is $337 as of December 31, 2011 which will be recognized ratably over the next three years.

The weighted average exercise price of all the shares exercisable at December 31, 2011 is $5.13.

Warrants - On November 1, 2010, American Acquisition closed a private placement and issued 1,327,834 subscription receipts for ordinary shares of Atlas and warrants to purchase 1,327,834 ordinary shares of Atlas for C$6.00 per share in connection with

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the merger. The subscription receipts were converted to Atlas ordinary shares in connection with the merger. All the warrants were still outstanding at December 31, 2011 and expire on December 31, 2013.

Atlas ordinary shares were trading on the TSXV for C$4.80 on December 30, 2011 (the last trading day of the 2011 calendar year).

10. OTHER EMPLOYEE BENEFIT PLANS

Defined Contribution Plan

In January 2011, Atlas formed a defined contribution 401(k) plan covering all qualified employees of Atlas and its subsidiaries. Employees can choose to contribute up to 60% of their annual earnings but not more than $16,500 for 2011 to the plan. Qualifying employees age 50 and older can contribute an additional $5,500 in 2011. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant. Atlas contributions are discretionary. Employees are 100% vested in their own contributions and vest in Atlas contributions based on years of service with 100% vested after five years. Atlas’ contributions were $105 in 2011.

Prior to 2011, eligible employees participated in a defined contribution 401(k) plan maintained by KAI (“the Kingsway Plan”) with features identical to Atlas’ current plan (the “Atlas Plan”). Employer contributions to the Kingsway Plan attributable to the Atlas insurance subsidiaries were $144in 2011 and $130 in 2010, and are included in Other Underwriting Expenses. Assets of the Kingsway Plan attributable to Atlas’ employees, were transferred to the Atlas Plan in March 2011.

Defined Benefit Plan – Prior to December 31, 1997, substantially all salaried employees of American Country were covered by a defined benefit pension plan known as the American Country Pension Plan (the “pension plan”). Benefits were based on the employee’s length of service and wages and benefits, as defined by the pension plan. The funding policy of the pension plan was generally to contribute amounts required to maintain minimum funding standards in accordance with the Employee Retirement Income Security Act. Effective December 31, 1997, upon resolution by the board of directors, the pension plan was frozen. During 2010, American Country made an application to the U.S. Internal Revenue Service to dissolve the pension plan and distribute the net plan assets to the beneficiaries. In the fourth quarter of 2011, the plan assets were fully distributed. As a result of the plan liquidation, the Company recognized a settlement charge of $2,544 within other underwriting expenses in the fourth quarter of 2011. The settlement impact was previously reflected as an unrecognized adjustment to other comprehensive income and therefore, has created a nil impact to shareholders’ equity.

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			2011			2010
Change in Benefit Obligation
	Benefit Obligation, beginning of year		$	5,110		$	4,913
	Interest cost		228			263
	Actuarial losses		(28		)	192
	Benefits paid		(229		)	(258		)
	Settlement of obligation		(5,081		)	—
	Benefit Obligation, end of year		$	—		$	5,110
Change in Plan Assets
	Fair value of plan assets, beginning of year		$	3,993		$	3,869
	Actual return on plan assets		17			244
	Employer contributions		1,300			138
	Benefits Paid		(229		)	(258		)
	Settlement of obligation		(5,081		)	—
	Fair value of plan assets, end of year		$	—		$	3,993
Funded Status, end of year			$	—		$	1,117
Items unrecognized as component of net pension cost, end of year (pre-tax)			—			2,473
Deferred income tax			—			(789		)
Items unrecognized as component of net pension cost, end of year			—			1,684
Components of net pension cost
	Interest cost		$	229		$	263
	Expected return on plan assets		(177		)	(268		)
	Amortization of:
		Prior Service Cost	—			—
		Actuarial Losses	61			64
Subtotal			$	113		$	59
Expense resulting from settlement of plan			2,544			—
Net periodic pension cost			$	2,657		$	59

Weighted average assumptions used to determine net pension cost for the years ended December 31:

	2011	2010	2009
Weighted average discount rate	5.25%	5.5%	6.0%
Rate of increase in compensation	n/a	n/a	n/a
Expected long-term rate of return	5.0%	7.0%	7.0%
Weighted average discount rate used to determine end of year benefit obligation	n/a	5.25%	5.5%

Employee Stock Purchase Plan - In the second quarter of 2011, Atlas initiated the Atlas Employee Stock Purchase Plan (the “ESPP”) to encourage continued employee interest in the operation, growth and development of Atlas and to provide an additional investment opportunity to employees. Beginning in June 2011, full time and permanent part time employees working more than 30 hours per week are allowed to invest up to 5% of adjusted salary in Atlas ordinary shares. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant.. Employees who signed up for the ESPP by May 30, 2011 each received an additional 100 ordinary shares as an initial participation incentive. Atlas will also pay administrative costs related to this plan. In 2011, Atlas’ incurred total expenses of $38 related to the plan.

11. COMMITMENTS AND CONTINGENCIES

Legal proceedings:

In connection with its operations, the Company and its subsidiaries are, from time to time, named as defendants in actions for damages and costs allegedly sustained by the plaintiffs. While it is not possible to estimate the outcome of the various proceedings

F-24

at this time, such actions have generally been resolved with minimal damages or expense in excess of amounts provided and the Company does not believe that it will incur any significant additional loss or expense in connection with such actions.

Collateral pledged:

As of December 31, 2011, bonds and term deposits with an estimated fair value of $11,843 were on deposit with state and provincial regulatory authorities, versus $9,294 as of December 31, 2010. Also, from time to time, the Company pledges securities to third parties to collateralize liabilities incurred under its policies of insurance. At December 31, 2011, the amount of such pledged securities was $10,396 versus $1,629 at December 31, 2010. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company’s standard risk management controls. These assets and investment income related thereto remain the property of the Company while pledged. Neither the state and/or provincial regulatory authorities nor any other third party has the right to re-pledge or sell said securities held on deposit.

Collateral held:

In the normal course of business, the Company receives collateral on certain business transactions to reduce its exposure to credit risk. As of December 31, 2011, the amount of such pledged securities was $240. The Company is normally permitted to sell or re-pledge the collateral it receives under terms that are common and customary to standard collateral holding and are subject to the Company’s standard risk management controls.

12. SHARE CAPITAL

The share capital for the common shares:

As at December 31,		2011			2010
	Shares Authorized	Shares Issued and Outstanding	Amount		Shares Issued and Outstanding (1)	Amount
Ordinary	266,666,667	1,541,842	$	4	1,517,834	$	4
Restricted	33,333,334	4,601,621	14		4,601,621	14
Total common shares	300,000,001	6,143,463	$	18	6,119,455	$	18

(1) Summation of 1,327,834 ordinary shares (refer above) and 190,000 shares issued to former JJR VI shareholders (no cash paid).

The restricted voting common shares are convertible to ordinary shares at the option of the holder in the event that an offer is made to purchase all or substantially all of the restricted voting common shares.

All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway. In the event that such shares are disposed of such that Kingsway’s beneficial interest is less than 10% of the issued and outstanding restricted voting common shares, the restricted voting common shares shall be converted into fully paid and non-assessable ordinary shares.

F-25

The restricted voting common shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders.

Preferred shares are not entitled to vote. Preferred shareholders are entitled to dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of U.S. $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. In liquidation, dissolution or winding-up of Atlas, preferred shareholders receive the greater of US$1.00 per share plus all declared and unpaid dividends or the amount it would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary shares immediately prior to liquidation. Preferred shares are convertible into ordinary shares at the option of the holder at any date after the fifth year of issuance at the rate of 0.1270 ordinary shares for each preferred share. The conversion rate is subject to change if the number of ordinary shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of US$1.00 per share plus accrued and unpaid dividends commencing at the earlier of two years from issuance date of the preferred shares or the date the preferred shares are transferred to a party other than Kingsway or its subsidiaries or entities in which KAI holds a 10% or greater interest.

The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation or sooner, if Atlas declares dividends, is $810 as at December 31, 2011.

13. EARNINGS PER SHARE

Earnings per ordinary and restricted voting common for the year ended December 31, 2011 and 2010 is as follows:

		2011			2010
Net loss attributable to Atlas		$	(2,470	)	$	(21,812	)
Less: Preferred share dividends		(810		)	—
Net loss attributable to common shareholders		(3,280		)	(21,812		)
Basic:
	Weighted average common shares outstanding	6,124,542			6,119,455
Basic loss per common share		$	(0.54	)	$	(3.56	)
Diluted:
	Weighted average common shares outstanding	6,124,542			6,119,455
	Dilutive potential ordinary shares	—			—
Dilutive average common shares outstanding		6,124,542			6,119,455
Dilutive loss per common share		$	(0.54	)	$	(3.56	)

For 2011 and 2010, basic loss per common share has been computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. As required by continuation accounting, Atlas assumed the same number of common shares outstanding for all of 2010.

Diluted loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding each period plus the incremental number of shares added as a result of converting dilutive potential ordinary shares, calculated using the treasury stock method. Atlas’ dilutive potential common shares consist of outstanding stock options and warrants to purchase ordinary shares. The effects of options and warrants to issue ordinary shares are excluded from the computation of diluted loss per share in periods in which the effect would be anti-dilutive. For the year ended December 31, 2011, potential ordinary shares were anti-dilutive due to the net loss attributable to common shareholders.

14. RELATED PARTY TRANSACTIONS

The business of Atlas is carried on through its insurance subsidiaries. Atlas’ insurance subsidiaries have been a party to various transactions with affiliates in the past, although activity in this regard has diminished over time. Related party transactions, including services provided to or received by Atlas’ insurance subsidiaries, are carried out in the normal course of operations and

F-26

are measured at the amount of consideration paid or received as established and agreed upon by the parties. Management believes that consideration paid for such services approximates fair value.

At December 31, 2011 and December 31, 2010, Atlas reported net amounts receivable from (payable to) affiliates as follows which are included within other assets and accounts payable and accrued expenses on the balance sheets:

As at year ended December 31,	2011			2010
Kingsway America Inc.	$	291		$	2,058
Universal Casualty Company	(500		)	—
Kingsway Amigo Insurance Company	(1		)	(13		)
Hamilton Risk Management Inc.	—			(1		)
Total	$	(210	)	$	2,044

In 2010, Atlas’ insurance subsidiaries remitted management fees monthly to KAI for managerial services. During the first six months of 2010, those management fees included rent for Atlas’ Elk Grove Village headquarters building. That building was contributed to Atlas on June 30, 2010 and rental payments ceased at that time. Management fees paid to KAI totaled approximately $0 and$2,643 for the year ended December 31, 2011 and 2010, respectively.

Atlas’ insurance subsidiaries received $158 in regularly scheduled monthly mortgage payments for the six months ended June 30, 2010 under mortgage loan agreements with KAI which were secured by the Elk Grove Village headquarters building. In June 2010, American Service forgave the $1,695 remaining balance of its mortgage loan from KAI and American Country was paid the $1,767 total remaining balance of its mortgage loan from KAI.

The amounts due to Universal Casualty Company relate primarily to claim handling services provided to Atlas.

For the year ended December 31, 2011 and 2010, Atlas incurred $2,279 and $4,463, respectively, in commissions to Avalon Risk Management, Inc. (“Avalon”). In the year ended December 31, 2011 and 2010, Atlas also incurred expenses of $137 and $125 respectively, for marketing services performed by Avalon. Avalon was a KFSI subsidiary through October 2009, and has certain investors and directors in common with Atlas. Avalon acts as a program manager for a surety program primarily consisting of U.S. Customs bonds. In this capacity they are responsible for coordinating marketing, customer service and claim handling for the surety bonds written under this agreement. This program is 100% reinsured by an unrelated third party.

During 2010, dividends of $16,700 were paid to KAI by the insurance subsidiaries of Atlas.

15. ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income is comprised of the following:

As at December 31,	2011							2010
	Pre-tax		Tax			Post-tax		Pre-tax			Tax			Post-tax
Available-for-sale securities	$	2,165	$	(740	)	$	1,425	$	5,478		$	(737	)	$	4,741
Pension liability	—		—			—		(2,474		)	789			(1,685		)
Total	$	2,165	$	(740	)	$	1,425	$	3,004		$	52		$	3,056

16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

F-27

	1st Quarter						2nd Quarter						3rd Quarter						4th Quarter
	2011			2010			2011			2010			2011			2010			2011			2010
Gross Premium Written	$	14,166		$	18,704		$	7,856		$	8,558		$	10,928		$	10,163		$	9,081		$	9,273
Net Premium Earned	8,809			19,301			9,062			12,515			8,797			10,192			9,079			11,595
Underwriting loss	(1,906		)	(4,061		)	(1,278		)	(12,805		)	(1,729		)	(2,393		)	(6,325		)	(4,723		)
Net (loss)/income attributable to Atlas	(705		)	(1,583		)	193			(8,135		)	1,066			(664		)	(3,024		)	(11,430		)
Net (loss)/income attributable to common shareholders	(905		)	(1,583		)	(9		)	(8,135		)	862			(664		)	(3,228		)	(11,430		)
Basic earnings (loss) per share	$	(0.15	)	$	(0.27	)	$	—		$	(1.32	)	$	0.14		$	(0.12	)	$	(0.53	)	$	(1.86	)
Diluted earnings (loss) per share	(0.15		)	(0.27		)	—			(1.32		)	0.14			(0.12		)	(0.53		)	(1.86		)

17. SUBSEQUENT EVENTS

As of March 26, 2012, there were no subsequent events which had a material impact on the 2011 consolidated financial statements.

18. CHANGE IN CAPITAL STRUCTURE

On December 7, 2012, we held a shareholder meeting where a one-for-three reverse stock split was unanimously approved. When the reverse stock split takes effect, it will decrease our authorized and outstanding ordinary shares and restricted voting shares at a ratio of one-for-three. The primary objective of the reverse stock split is to increase the per share price of our ordinary shares to meet certain listing requirements of the NASDAQ Capital Market. All consolidated financial statements and per share amounts have been retroactively adjusted for the above reverse stock split.

F-28

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in '000s, except for share and per share data)

	September 30, 2012 (unaudited)			December 31, 2011
Assets
Investments, available for sale
Fixed income securities, at fair value (Amortized cost $106,122 and $101,473)	$	109,555		$	103,491
Equity securities, at fair value (cost $0 and $994)	—			1,141
Total Investments	109,555			104,632
Cash and cash equivalents	12,151			23,249
Accrued investment income	807			586
Accounts receivable and other assets (Net of allowance of $385 and $4,254)	24,811			9,579
Reinsurance recoverables, net	6,983			8,044
Prepaid reinsurance premiums	2,219			2,214
Deferred policy acquisition costs	4,501			3,020
Deferred tax asset, net	6,343			6,775
Software and office equipment, net	1,157			440
Assets held for sale	166			13,634
Investment in investees	1,250			—
Total Assets	$	169,943		$	172,173
Liabilities
Claims liabilities	$	73,574		$	91,643
Unearned premiums	28,325			15,691
Due to reinsurers and other insurers	4,658			5,701
Other liabilities and accrued expenses	4,283			2,884
Total Liabilities	$	110,840		$	115,919
Shareholders’ Equity
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2012 and December 31, 2011. Liquidation value $1.00 per share	$	18,000		$	18,000
Ordinary voting common shares, par value per share $0.003, 266,666,667 shares authorized, 1,542,764 shares issued and outstanding at September 30, 2012 and 1,541,842 at December 31, 2011	4			4
Restricted voting common shares, par value per share $0.003, 33,333,334 shares authorized, 4,601,621 shares issued and outstanding at September 30, 2012 and December 31, 2011	14			14
Additional paid-in capital	152,739			152,652
Retained deficit	(113,919		)	(115,841		)
Accumulated other comprehensive income, net of tax	2,265			1,425
Total Shareholders’ Equity	$	59,103		$	56,254
Total Liabilities and Shareholders’ Equity	$	169,943		$	172,173

See accompanying Notes to Condensed Consolidated Financial Statements.

F-29

ATLAS FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in '000s, except for share and per share data)

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Net premiums earned	$	10,934		$	8,797		$	26,795		$	26,668
Net investment income	613			719			1,878			2,652
Net investment gains	779			1,962			1,098			2,813
Other income	1			113			169			3
Total revenue	12,327			11,591			29,940			32,136
Net claims incurred	7,165			6,984			18,477			20,596
Acquisition costs	1,813			1,720			4,582			5,343
Other underwriting expenses	1,692			1,822			4,959			5,642
Total expenses	$	10,670		$	10,526		$	28,018		$	31,581
Income from operations before income tax (benefit)/expense	$	1,657		$	1,066		$	1,922		$	555
Income tax expense	—			—			—			—
Net income attributable to Atlas	$	1,657		$	1,066		$	1,922		$	555
Less: Preferred share dividends	202			202			606			606
Net income/(loss) attributable to common shareholders	1,455			864			1,316			(51		)
Other comprehensive income/(loss):
Changes in net unrealized (losses)/gains	$	942		$	(96	)	$	1,899		$	43
Reclassification to income of net gains	(353		)	(1,185		)	(632		)	(2,089		)
Effect of income tax	(200		)	—			(427		)	—
Other comprehensive income/(loss) for the period	389			(1,281		)	840			(2,046		)
Total comprehensive income/(loss)	$	2,046		$	(215	)	$	2,762		$	(1,491	)
Basic weighted average common shares outstanding	6,144,384			6,124,990			6,146,179			6,124,175
Earnings/(loss) per common share, basic	$	0.24		$	0.14		$	0.21		$	(0.01	)
Diluted weighted average common shares outstanding	6,149,301			6,138,496			6,150,585			6,124,175
Earnings/(loss) per common share, diluted	$	0.24		$	0.14		$	0.21		$	(0.01	)

See accompanying Notes to Condensed Consolidated Financial Statements.

F-30

ATLAS FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(in ‘000s)	Preferred Shares		Ordinary Voting Common Shares		Restricted Voting Common Shares		Additional Paid-in Capital		Retained Deficit			Accumulated Other Comprehensive Income (loss)			Total
Balance December 31, 2010	$	18,000	$	4	$	14	$	152,466	$	(113,371	)	$	3,056		$	60,169
Net loss									555						555
Other comprehensive loss												(2,046		)	(2,046		)
Share-based compensation							84								84
Stock options exercised							19								19
Balance September 30, 2011	$	18,000	$	4	$	14	$	152,569	$	(112,816	)	$	1,010		$	58,781
Balance December 31, 2011	$	18,000	$	4	$	14	$	152,652	$	(115,841	)	$	1,425		$	56,254
Net income									1,922						1,922
Other comprehensive income												840			840
Share-based compensation							84								84
Stock options exercised							3								3
Balance September 30, 2012	$	18,000	$	4	$	14	$	152,739	$	(113,919	)	$	2,265		$	59,103
See accompanying Notes to Condensed Consolidated Financial Statements.

F-31

ATLAS FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in ‘000s)	Nine Month Periods Ended
	September 30, 2012			September 30, 2011
Operating Activities
Net income	$	1,922		$	555
Adjustments to reconcile net income to net cash used by operating activities:
Adjustments for non-cash items	(113		)	(1,804		)
Changes in other operating assets and liabilities	(3,084		)	839
Changes in net claims liabilities	(18,069		)	(31,122		)
Net cash flows used in operating activities	(19,344		)	(31,532		)
Investing activities
Proceeds from sale and maturity of investments	42,820			71,085
Purchases of investments	(47,333		)	(30,282		)
Purchases of property and equipment and other	(586		)	(183		)
Proceeds from sale of property and equipment	13,342			1,983
Net cash flows provided by investing activities	8,243			42,603
Financing activities
Options exercised	3			19
Net cash flows provided by financing activities	3			19
Net (decrease)/increase in cash and cash equivalents	(11,098		)	11,090
Cash and cash equivalents, beginning of period	23,249			19,037
Cash and cash equivalents, end of period	$	12,151		$	30,127
See accompanying Notes to Condensed Consolidated Financial Statements.

F-32

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Atlas Financial Holdings, Inc. (”Atlas”, or “The Company”) and its insurance subsidiaries, American Country Insurance Company (“American Country”) and American Service Insurance Company, Inc. (“American Service”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and the results of operations. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the audited financial statements and the footnotes thereto included in the Company’s latest Annual Report on Form 10-K (as amended).

Beginning with the three month period ended September 30, 2012, Atlas has changed where certain items appear on its Statement of Comprehensive Income according to rule 7-04 of Regulation S-X.

The primary business of Atlas, which is carried out through its insurance subsidiaries, is the underwriting of commercial automobile insurance policies in the United States, with a niche market orientation and focus on insurance in the “light” commercial automobile sector. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business autos. Automobile insurance products provide insurance coverage in three major areas: liability, accident benefits and physical damage. Liability insurance provides coverage subject to policy terms and conditions where the insured is determined to be responsible and/or liable for an automobile accident, for the payment for injuries and property damage to third parties. Accident benefit policies or personal injury protection policies provide coverage for loss of income, medical and rehabilitation expenses for insured persons who are injured in an automobile accident, regardless of fault. Physical damage coverage subject to policy terms and conditions provides for the payment of damages to an insured automobile arising from a collision with another object or from other risks such as fire or theft. In the short run, automobile physical damage and liability coverage generally provides more predictable results than automobile accident benefit or personal injury insurance.

Atlas’ insurance subsidiaries distribute their insurance products through a network of independent retail agents. Together, American Country and American Service are licensed to write property and casualty (“P&C”) insurance in 47 states in the United States. The management and operating infrastructure of the insurance subsidiaries are fully integrated.

Seasonality - The P&C insurance business is seasonal in nature. While Atlas’ net premiums earned are generally stable from quarter to quarter, Atlas’ gross premiums written follow the common renewal dates for the “light” commercial risks that represent its core lines of business. For example, January 1 and March 1 are common taxi cab renewal dates in Illinois and New York, respectively. Net underwriting income is driven mainly by the timing and nature of claims, which can vary widely. Atlas’ ability to generate written premium is also impacted by the timing of policy periods in the states in which Atlas operates.

The accounting policies followed in these unaudited condensed consolidated financial statements are comparable as those applied in Atlas’ audited annual consolidated financial statements on Form 10-K for the period ended December 31, 2011. Atlas has consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect.

2. NEW ACCOUNTING STANDARDS

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts - In October 2010, the Financial Accounting Standards Board (”FASB”) issued guidance modifying the definition of the types of costs incurred by insurance entities that can be capitalized in the acquisition of new and renewal insurance contracts. The guidance specifies that the costs must be directly related to the successful acquisition of insurance contracts. The guidance also specifies that advertising costs should be included as deferred acquisition costs only when the direct−response advertising accounting criteria are met. The new guidance became effective for reporting periods beginning after December 15, 2011. Atlas’ previous policy for accounting for acquisition costs was already consistent with this guidance. Therefore the adoption of this guidance in the three and nine month periods endedSeptember 30, 2012 did not have an impact on our financial statements.

Amendments to Fair Value Measurement and Disclosure Requirements - In May 2011, the FASB issued guidance that clarifies the application of existing fair value measurement and disclosure requirements and amends certain fair value measurement principles, requirements and disclosures. Changes were made to improve consistency in global application. The guidance is to be applied prospectively for reporting periods beginning after December 15, 2011. Early adoption was not permitted. The impact of adoption was not material to the Company’s results of operations or financial position.

Presentation of Comprehensive Income - In June and December 2011, the FASB issued guidance amending the presentation of comprehensive income and its components. Under the new guidance, a reporting entity has the option to present comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance is effective for reporting periods beginning after December 15, 2011 and is to be applied retrospectively. The new guidance affected presentation only and had no material impact on the Company’s results of operations or financial position.

F-33

3. EARNINGS PER SHARE

Earnings per ordinary and restricted voting common share (collectively, the “common shares”) for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011 is as follows:

in ‘000s, except share and per share amounts		Three Month Periods Ended				Nine Month Periods Ended
		September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Net income attributable to Atlas		$	1,657	$	1,066	$	1,922	$	555
Less: Preferred share dividends		202		202		606		606
Net income/(loss) attributable to common shareholders		1,455		864		1,316		(51		)
Basic:
	Weighted average common shares outstanding	6,144,384		6,124,990		6,146,179		6,124,175
Basic earnings/(loss) per common share		$	0.24	$	0.14	$	0.21	$	(0.01	)
Diluted:
	Weighted average common shares outstanding	6,144,384		6,124,990		6,146,179		6,124,175
	Dilutive potential ordinary shares	4,917		13,507		4,406		—
Dilutive average common shares outstanding		6,149,301		6,138,497		6,150,585		6,124,175
Dilutive earnings/(loss) per common share		$	0.24	$	0.14	$	0.21	$	(0.01	)

For 2012 and 2011, basic earnings/(loss) per common share has been computed by dividing net income(loss) attributable to common shareholders for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings/(loss) per share is computed by dividing net income/(loss) attributable to common shareholders by the weighted average number of common shares outstanding each period plus the incremental number of shares added as a result of converting dilutive potential ordinary shares, calculated using the treasury stock method. Atlas’ dilutive potential ordinary shares consist of outstanding stock options and warrants to purchase ordinary voting common shares. The effects of options and warrants to issue ordinary voting common shares are excluded from the computation of diluted loss per share in periods in which the effect would be anti-dilutive. For both the three and nine month periods endedSeptember 30, 2012 and September 30, 2011, potential ordinary voting common shares were dilutive due to the achievement of net income attributable to common shareholders.

4. INVESTMENTS

The amortized cost, gross unrealized gains and losses and fair value for Atlas’ investments are as follows (all amounts in ‘000s):

September 30, 2012		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed Income:
U.S.	- Government	$	37,357	$	1,099	$	—	$	38,456
	- Corporate	44,100		1,709		—		45,809
	- Commercial mortgage backed	20,372		490		—		20,862
	- Other asset backed	4,293		135		—		4,428
Total Fixed Income		$	106,122	$	3,433	$	—	$	109,555

December 31, 2011		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed Income:
U.S.	- Government	$	44,835	$	911	$	—	$	45,746
	- Corporate	35,572		825		24		36,373
	- Commercial mortgage backed	17,493		208		—		17,701
	- Other asset backed	3,573		99		1		3,671
Total Fixed Income		$	101,473	$	2,043	$	25	$	103,491
Equities		994		147		—		1,141
Totals		$	102,467	$	2,190	$	25	$	104,632

F-34

The following tables summarize carrying amounts of fixed income securities by contractual maturity (all amounts in ‘000s). As certain securities and debentures have the right to call or prepay obligations, the actual settlement dates may differ from contractual maturity.

As of the period ended September 30, 2012	One year or less			One to five years			Five to ten years			More than ten years			Total
Fixed Income Securities	$	18,085		$	21,803		$	21,806		$	47,861		$	109,555
Percentage of total	16.5		%	19.9		%	19.9		%	43.6		%	100.0		%

As of the year ended December 31, 2011	One year or less			One to five years			Five to ten years			More than ten years			Total
Fixed Income Securities	$	29,407		$	27,317		$	10,242		$	36,525		$	103,491
Percentage of total	28.4		%	26.4		%	9.9		%	35.3		%	100.0		%

Management performs a quarterly analysis of Atlas’ investment holdings to determine if declines in fair value are other than temporary. The analysis includes some or all of the following procedures as deemed appropriate by management:

◦ identifying all security holdings in unrealized loss positions that have existed for at least six months or other circumstances that management believes may impact the recoverability of the security;

◦ obtaining a valuation analysis from third party investment managers regarding these holdings based on their knowledge, experience and other market based valuation techniques;

◦ reviewing the trading range of certain securities over the preceding calendar period;

◦ assessing if declines in market value are other than temporary for debt security holdings based on credit ratings from third party security rating agencies; and

◦ determining the necessary provision for declines in market value that are considered other than temporary based on the analyses performed.

The risks and uncertainties inherent in the assessment methodology utilized to determine declines in market value that are other than temporary include, but may not be limited to, the following:

◦ the opinion of professional investment managers could be incorrect;

◦ the past trading patterns of individual securities may not reflect future valuation trends;

◦ the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company’s financial situation; and

◦ the debt service pattern of non-investment grade securities may not reflect future debt service capabilities and may not reflect a company’s unknown underlying financial problems.

There were no impairments recorded in the three month period ended September 30, 2012 or the year ended December 31, 2011 as a result of the above analysis performed by management to determine declines in fair value that may be other than temporary. All securities in an unrealized loss position as of the period ended September 30, 2012 and as of the year ended December 31, 2011 have been in said position for less than 12 months.

The following table summarizes the components of net investment income for the three month periods ended September 30, 2012 and 2011(all amounts in ‘000s):

		September 30, 2012			September 30, 2011
Total investment income
	Interest (from fixed income securities)	$	680		$	905
	Income from equity method investment	18			—
Investment expenses		(85		)	(186		)
Net investment income		$	613		$	719

Collateral pledged:

As of the period ended September 30, 2012, bonds and term deposits with a fair value of $9.8 million were on deposit with state and provincial regulatory authorities, versus $11.8 millionas of the year ended December 31, 2011. Also, from time to time, the Company pledges securities to third parties to collateralize liabilities incurred under its policies of insurance. As of the period

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ended September 30, 2012, the amount of such pledged securities was $11.6 million versus $10.4 million at December 31, 2011. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company’s standard risk management controls. These assets and investment income related thereto remain the property of the Company while pledged. Neither the state and/or provincial regulatory authorities nor any other third party has the right to re-pledge or sell said securities held on deposit.

5. INVESTMENT IN INVESTEES

Investment in investees represents Atlas’ investment in the member’s capital of Oak Street Real Estate Capital ATCO SMA LLC (”Oak Street”). Atlas holds a non-controlling interest in Oak Street, a limited liability company that owns and manages a commercial office building in Wisconsin. Therefore, Atlas has accounted for the investment under the equity method. The carrying values, estimated fair values and economic interest at September 30, 2012 are below.

The estimated fair value of our investment in Oak Street approximates carrying value due to the investees not being actively traded at September 30, 2012.

Investment in:	Economic Interest		Carrying Value (in ‘000s)		Est Fair Value (in ‘000s)
Oak Street	6.39	%	$	1,250	$	1,250

Atlas received distributions from Oak Street of $18,000 during the three month period ended September 30, 2012. As well, Atlas’ equity in the net income of Oak Street was $18,000 during the three month period ended September 30, 2012, which is reflected as investment income for the three and nine month periods endedSeptember 30, 2012.

6. FINANCIAL AND CREDIT RISK MANAGEMENT

By virtue of the nature of Atlas’ business activities, financial instruments make up the majority of the balance sheet. The risks which arise from transacting financial instruments include credit risk, market risk, liquidity risk and cash flow risk. These risks may be caused by factors specific to an individual instrument or factors affecting all instruments traded in the market. Atlas has a risk management framework in place to monitor, evaluate and manage the risks assumed in conducting its business. Atlas’ risk management policies and practices are as follows:

Credit risk - Atlas is exposed to credit risk principally through its fixed income securities and balances receivable from policyholders and reinsurers. Atlas controls and monitors concentration and credit quality risk through policies to limit and monitor its exposure to individual issuers or related groups (with the exception of U.S. Government bonds) as well as through ongoing review of the credit ratings of issuers held in the securities portfolio. Atlas’ credit exposure to any one individual policyholder is not material. Atlas has policies requiring evaluation of the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvency.

Atlas’ allowance for bad debt as of the year ended December 31, 2011 primarily related to a single agent. Settlement proceedings with this agent were executed in April 2012, and resulted in a minor recovery of previously fully reserved amounts. In the three month period ended September 30, 2012 there was additional favorable activity related to the allowance for bad debt, which resulted in income of $159,000 for the quarter and $105,000 for the nine month period ended September 30, 2012. In the three month period ended September 30, 2011, Atlas recognized $33,000 in bad debt expense and $147,000 for the nine month period ended September 30, 2011.

Equity price risk - This is the risk of loss due to adverse movements in equity prices. Atlas’ investment in equity securities comprises a small percentage of its total portfolio, and as a result, the exposure to this type of risk is minimal.

Foreign currency risk - Atlas is not currently exposed to material changes in the U.S. dollar currency exchange rates with any other foreign currency.

Liquidity and cash flow risk - Liquidity risk is the risk of having insufficient cash resources to meet current financial obligations without raising funds at unfavorable rates or selling assets on a forced basis. Liquidity risk arises from general business activities and in the course of managing the assets and liabilities of Atlas. There is the risk of loss to the extent that the sale of a security prior to its maturity is required to provide liquidity to satisfy policyholder and other cash outflows. Cash flow risk arises from risk that future inflation of policyholder cash flow exceeds returns on long-term investment securities. The purpose of liquidity and cash flow management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they fall due. The liquidity and cash flow requirements of Atlas’ business have been met primarily by funds generated from operations, asset maturities and income and other returns received on securities. Cash provided from these sources is used primarily for claims and claim adjustment expense payments and operating expenses. The timing and amount of catastrophe claims are inherently unpredictable and may create increased liquidity requirements.

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Fair value - Fair value amounts represent estimates of the consideration that would currently be agreed upon between knowledgeable, willing parties who are under no compulsion to act.

Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. The calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values.

Atlas records the available for sale securities held in its securities portfolio at their fair value. Atlas primarily uses the services of external securities pricing vendors to obtain these values. The securities are valued using quoted market prices or prices established using observable market inputs. In volatile market conditions, these quoted market prices or observable market inputs can change rapidly causing a significant impact on fair value and financial results recorded.

Atlas employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The hierarchy is comprised of quoted market prices (Level 1), third party models using observable market information (Level 2) and internal models without observable market information (Level 3). The following table summarizes Atlas’ investments at fair value as at the three month period ended September 30, 2012 and as of the year ended December 31, 2011(all amounts in ‘000s):

September 30, 2012	Level 1		Level 2		Level 3		Total
Fixed Income Securities	$	19,013	$	90,542	$	—	$	109,555
Equities	—		—		—		—
Totals	$	19,013	$	90,542	$	—	$	109,555

December 31, 2011	Level 1		Level 2		Level 3		Total
Fixed Income Securities	$	13,363	$	90,128	$	—	$	103,491
Equities	1,141		—		—		1,141
Totals	$	14,504	$	90,128	$	—	$	104,632

Of the total portfolio of fixed income securities, only holdings of U.S. Treasury Securities are classified within Level 1. There were no transfers in or out of Level 2 during either period.

Capital Management - The Company manages capital using both regulatory capital measures and internal metrics. The Company’s capital is primarily derived from common shareholders’ equity, retained deficit and accumulated other comprehensive income (loss).

As a holding company, Atlas could derive cash from its insurance subsidiaries generally in the form of dividends to meet its obligations, which will primarily consist of operating expense payments. Atlas’ insurance subsidiaries fund their obligations primarily through premium and investment income and maturities in the securities portfolio. The insurance subsidiaries require regulatory approval for the return of capital and, in certain circumstances, prior to the payment of dividends. In the event that dividends available to the holding company are inadequate to cover its operating expenses, the holding company would need to raise capital, sell assets or incur future debt.

The insurance subsidiaries must each maintain a minimum statutory capital and surplus of $1.5 million under the provisions of the Illinois Insurance Code. Dividends may only be paid from statutory unassigned surplus, and payments may not be made if such surplus is less than a stipulated amount. The dividend restriction is the greater of statutory net income or 10% of total statutory capital and surplus.

Net losses computed under statutory-basis accounting for American Country and American Service were $2.3 million and $497,000 respectively for the year ended December 31, 2011, versus $1.5 million and $5.4 million for the year ended December 31, 2010. Statutory capital and surplus of the insurance subsidiaries was $50.0 million and $45.6 million at December 31, 2011 and 2010, respectively.

Atlas did not declare or pay any dividends to its common shareholders during the three month period ended September 30, 2012 or in the year ended December 31, 2011, and has no current plans to pay dividends to its common shareholders.

7. INCOME TAXES

The effective tax rate was 0.0% for both of the three month periods ended September 30, 2012 and 2011 compared to the U.S. statutory income tax rate of 34% as shown below (all amounts in ‘000s):

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	Three Month Periods Ended											Nine Month Periods Ended
	September 30, 2012					September 30, 2011						September 30, 2012					September 30, 2011
	Amount			%			Amount			%		Amount			%		Amount			%
Expected income tax benefit at statutory rate	$	563		34.0	%		$	362		34.0	%	$	653		34.0	%	$	(174	)	34.0	%
Valuation allowance	(566		)	(34.2	)%		(384		)	(56.0	)%	(658		)	(34.2	)%	131			(25.6	)%
Nondeductible expenses	5			0.3	%		22			22.0	%	10			0.5	%	43			(8.4	)%
Other	(2		)	(0.1	)%					—	%	(5		)	(0.3	)%				—	%
Total	$	—		—	%		$	—		—	%	$	—		—	%	$	—		—	%

Income tax expense consists of the following for the nine month periods endedSeptember 30, 2012 and September 30, 2011:

	2012		2011
Current tax expense/(benefit)	$	—	$	—
Deferred tax (benefit)/expense	—		—
Total	$	—	$	—

Upon the transaction forming Atlas on December 31, 2010, a yearly limitation as required by U.S. tax law Section 382 that applies to changes in ownership on the future utilization of Atlas’ net operating loss carry-forwards was calculated. The insurance subsidiaries’ prior parent retained those tax assets previously attributed to the insurance subsidiaries which could not be utilized by Atlas as a result of this limitation. As a result, Atlas’ ability to recognize future tax benefits associated with a portion of its deferred tax assets generated during prior years and the current year have been permanently limited to the amount determined under U.S. tax law Section 382. The result is a maximum expected net deferred tax asset which Atlas has available after the merger which is believed more-likely-than-not to be utilized in the future, after consideration of valuation allowance.

The components of deferred income tax assets and liabilities as of September 30, 2012 and December 31, 2011 are as follows (all amounts in ‘000s):

	September 30, 2012			December 31, 2011
Deferred tax assets:
Unpaid claims and unearned premiums	$	3,471		$	3,004
Loss carry-forwards	15,880			15,558
Bad debts	131			1,297
Other	1,456			1,338
Valuation allowance	(11,703		)	(12,361		)
Total deferred tax assets, net of allowance	$	9,235		$	8,836
Deferred tax liabilities:
Investment securities	1,167			740
Deferred policy acquisition costs	1,530			1,027
Other	195			294
Total gross deferred tax liabilities	$	2,892		$	2,061
Net deferred tax assets	$	6,343		$	6,775

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Amounts and expiration dates of the operating loss carry forwards as of September 30, 2012 are as follows (all amounts in ‘000s):

Year of Occurrence	Year of Expiration	Amount
2001	2021	$	14,750
2002	2022	4,317
2006	2026	7,825
2007	2027	5,131
2008	2028	1,949
2009	2029	1,949
2010	2030	1,949
2011	2031	7,762
2012	2032	1,074
Total		$	46,706

Atlas established a valuation allowance of $11.7 million and $12.4 million for its gross deferred tax assets as of the period ended September 30, 2012 and as of the year ended December 31, 2011, respectively.

Atlas accounts for uncertain tax positions in accordance with the income taxes accounting guidance. Atlas has analyzed filing positions in the federal and state jurisdiction where it is required to file tax returns, as well as the open tax years in these jurisdictions. Atlas believes that its federal and state income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal and state income tax positions have been recorded. Atlas would recognize interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. Atlas did not incur any federal income tax related interest income, interest expense or penalties for the three month periods ended September 30, 2012 and 2011. Tax years 2006 through 2011 are subject to examination by the Internal Revenue Service.

8. ASSETS HELD FOR SALE

On May 22, 2012, Atlas closed the sale of the headquarters building to 150 Northwest Point, LLC, a Delaware limited liability company. Atlas also leased back one floor of the building after the sale for a 5 year term. As of the year ended December 31, 2011, the property was recorded as a component of assets held for sale on Atlas’ statement of financial position.

The total sales price of the property, which was paid in cash, amounted to $14.0 million, less closing costs and related expenses of approximately $633,000. In connection with the sale, the Company also wrote down an accrual of approximately $792,000 held for real-estate taxes. Approximately $830,000 of the sales price was held in escrow for real estate taxes.

Atlas recognized a gain on the sale of the property of $213,000, which will be deferred and recognized over the 5 year lease term. In the three month period ended September 30, 2012, Atlas recognized $5,000 as income.

There are two properties located in Alabama which remain for sale. These properties are listed for amounts greater than carried values. Both were assets of Southern United Fire Insurance Company, which was merged into American Service in February 2010.

9. UNDERWRITING POLICY AND REINSURANCE CEDED

Underwriting Risk - Underwriting risk is the risk that the total cost of claims and acquisition expenses will exceed premiums received and can arise from numerous factors, including pricing risk, reserving risk, catastrophic loss risk, reinsurance coverage risk and that loss and loss adjustment expense reserves are not sufficient.

Reinsurance Ceded - As is customary in the insurance industry, Atlas reinsures portions of certain insurance policies it writes, thereby providing a greater diversification of risk and minimizing exposure on larger risks. Atlas remains contingently at risk with respect to any reinsurance ceded and would incur an additional loss if an assuming company were unable to meet its obligation under the reinsurance treaty.

Atlas monitors the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium, ceded loss reserve balances and ceded paid losses. These policies mitigate the risk of credit quality or dispute from becoming a danger to financial strength. To date, the Company has not experienced any material difficulties in collecting reinsurance recoverables.

Gross premiums written and ceded premiums, losses and commissions as of and for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011 are as follows (all amounts in ‘000s):

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	Three Month Periods Ended					Nine Month Periods Ended
	September 30, 2012			September 30, 2011		September 30, 2012		September 30, 2011
Gross premiums written	$	23,353		$	10,928	$	44,349	$	32,950
Ceded premiums written	1,965			1,418		4,925		4,624
Net premiums written	21,388			9,510		39,424		28,326
Ceded premiums earned	$	1,707		$	1,733	$	4,920	$	5,899
Ceded losses and loss adjustment expenses	(749		)	1,760		662		3,862
Ceded commissions	526			496		1,578		1,856
Ceded unpaid losses and loss adjustment expenses	6,595			9,374
Ceded unearned premiums	2,219			2,419
Other amounts due from reinsurers	388			475

10. UNPAID CLAIMS

Claims liabilities - The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011 were as follows (all amounts in ‘000s):

	Three Month Periods Ended				Nine Month Periods Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Unpaid claims, beginning of period	$	77,350	$	112,011	$	91,643	$	132,579
Less: reinsurance recoverable	8,153		1,968		7,825		6,477
Net beginning unpaid claims reserves	69,197		104,043		83,818		126,102
Incurred related to:
Current year	6,976		6,962		18,141		20,600
Prior years	190		17		337		(4		)
	7,166		6,979		18,478		20,596
Paid related to:
Current year	2,302		4,279		6,224		8,455
Prior years	7,082		14,660		29,093		46,160
	9,384		18,939		35,317		54,615
Net unpaid claims, end of period	$	66,979	$	92,083	$	66,979	$	92,083
Add: reinsurance recoverable	6,595		9,374		6,595		9,374
Unpaid claims, end of period	$	73,574	$	101,457	$	73,574	$	101,457

The process of establishing the estimated provision for unpaid claims is complex and imprecise as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results will deviate, perhaps substantially, from the best estimates made.

11. STOCK OPTIONS AND WARRANTS

Stock options - Stock option activity for the nine month periods endedSeptember 30, 2012 and September 30, 2011 are as follows (all prices in Canadian dollars):

	September 30, 2012				September 30, 2011
	Number		Avg. Price		Number		Avg. Price
Outstanding, beginning of period	136,109		$	5.70	36,867		$	3.00
Granted			—		123,250		6.00
Exercised	(922	)	3.00		(6,175	)	3.00
Expired	(1,237	)	3.00				—
Outstanding, end of period	133,950		$	5.76	153,942		$	5.40

Information about options outstanding at September 30, 2012 is as follows:

F-40

Grant Date	Expiration Date	Number Outstanding	Number Exercisable
January 18, 2011	January 18, 2021	123,250	61,625
March 18, 2010	March 18, 2020	10,700	10,700
Total		133,950	72,325

On January 18, 2011, Atlas granted options to purchase 123,250 ordinary shares of Atlas stock to officers and directors at an exercise price of C$6.00 per share. The options vest 25% at date of grant and 25% on each of the next three anniversary dates and expire on January 18, 2021. The weighted average grant date fair value of the options granted on January 18, 2011 is C$3.72 per share.

The Black-Scholes option pricing model was used to estimate the fair value of compensation expense using the following assumptions – risk-free interest rate 2.27% to 3.13%; dividend yield 0.0%; expected volatility 100%; expected life of 6 to 9 years.

In accordance with Accounting Standard Codification 718 (Stock-Based Compensation), Atlas has recognized stock compensation expense on a straight-line basis over the requisite service period of the last separately vesting portion of the award. In the nine month periods endedSeptember 30, 2012 and September 30, 2011 respectively, Atlas recognized $84,000 and $84,000 in expense, which is a component of other underwriting expenses on the income statement. Total unrecognized stock compensation expense associated with the January 18, 2011 grant is $253,000 as of the period ended September 30, 2012 which will be recognized ratably through the next 2.2 years.

The weighted average exercise price of all the shares exercisable at September 30, 2012 and December 31, 2011 was C$5.55 and the grants have a weighted average remaining life of 8.2 years. The stock options granted on January 18, 2011 have an intrinsic value of $0as of the period ended September 30, 2012.

Warrants - On November 1, 2010, American Acquisition closed a private placement where it issued 3,983,502 subscription receipts for ordinary voting common shares of Atlas and warrants to purchase 1,327,834 ordinary voting common shares of Atlas for C$6.00 per share in connection with the merger. The subscription receipts were converted to Atlas ordinary voting shares in connection with the merger. All the warrants were still outstanding at September 30, 2012 and expire on December 31, 2013.

Atlas’ closing stock price on September 28, 2012 (the last trading day of the quarter) was C$5.25.

12. OTHER EMPLOYEE BENEFIT PLANS

Defined Benefit Plan – Prior to December 31, 1997, substantially all salaried employees of American Country were covered by a defined benefit pension plan known as the American Country Pension Plan (the “pension plan”). Benefits were based on the employee’s length of service and wages and benefits, as defined by the pension plan. The funding policy of the pension plan was generally to contribute amounts required to maintain minimum funding standards in accordance with the Employee Retirement Income Security Act. Effective December 31, 1997, upon resolution by the board of directors, the pension plan was frozen. During 2010, American Country made an application to the U.S. Internal Revenue Service to dissolve the pension plan and distribute the net plan assets to the beneficiaries. In the fourth quarter of 2011, the plan assets were fully distributed. As a result of the plan liquidation, the Company recognized a settlement charge of $2.5 million within other underwriting expenses in the fourth quarter of 2011. The settlement impact was previously reflected as an unrecognized adjustment to other comprehensive income and therefore, had created a nil impact to shareholders’ equity.

Defined Contribution Plan - In January 2011, Atlas formed a defined contribution 401(k) plan covering all qualified employees of Atlas and its subsidiaries. Employees can choose to contribute up to 60% of their annual earnings but not more than $17,000 for 2011 to the plan. Qualifying employees age 50 and older can contribute an additional $5,500 in 2012. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant. Atlas contributions are discretionary. Employees are 100% vested in their own contributions and vest in Atlas contributions based on years of service with 100% vested after five years. Company contributions were $82,000 and $78,000 for the three and nine month periods endedSeptember 30, 2012 and September 30, 2011, respectively.

Employee Stock Purchase Plan - In the second quarter of 2011, Atlas initiated the Atlas Employee Stock Purchase Plan (the “ESPP”) to encourage continued employee interest in the operation, growth and development of Atlas and to provide an additional investment opportunity to employees. Beginning in June 2011, full time and permanent part time employees working more than 30 hours per week are allowed to invest up to 5% of adjusted salary in Atlas ordinary voting common shares. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant. Employees who signed up for the ESPP by May 30, 2011 each received an additional 100 ordinary voting common shares as an initial participation incentive. Atlas will also pay administrative costs related to this plan. In the nine month periods endedSeptember 30, 2012 and September 30, 2011, Atlas incurred costs related to the plan of $37,000 and $24,000 respectively.

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Upon completion of the Gateway acquisition, all Gateway employees were transferred to both the Atlas 401(k) plan and the Employee Stock Purchase Plan.

13. SHARE CAPITAL

The share capital for the common shares:

As of:		September 30, 2012			December 31, 2011
	Shares Authorized	Shares Issued and Outstanding	Amount (in ‘000s)		Shares Issued and Outstanding		Amount (in ‘000s)
Ordinary	266,666,667	1,542,764	$	4	1,541,842	1	$	4
Restricted	33,333,334	4,601,621	14		4,601,621	5	14
Total common shares	300,000,001	6,144,385	$	18	6,143,463	6	$	18

All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway America Inc., (”Kingsway”) a wholly owned subsidiary of Kingsway Financial Services Inc. or other Kingsway subsidiaries. In the event that such shares are disposed of such that Kingsway’s beneficial interest is less than 10% of the issued and outstanding restricted voting common shares, the restricted voting common shares shall be converted into fully paid and non-assessable ordinary voting common shares.

The restricted voting common shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders.

The restricted voting common shares will convert to ordinary voting common shares in the event that these Kingsway owned shares are sold to non-affiliates of the Company.

Preferred shares are not entitled to vote and are beneficially owned or controlled by Kingsway. Preferred shareholders are entitled to dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of U.S. $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. In liquidation, dissolution or winding-up of Atlas, preferred shareholders receive the greater of US$1.00 per share plus all declared and unpaid dividends or the amount it would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary voting common shares immediately prior to liquidation. Preferred shares are convertible into ordinary voting shares at the option of the holder at any date after the fifth year of issuance at the rate of 0.1270 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of US$1.00 per share plus accrued and unpaid dividends commencing at the earlier of two years from issuance date (December 31, 2012) of the preferred shares or the date the preferred shares are transferred to a party other than Kingsway or its subsidiaries or entities in which Kingsway holds a 10% or greater interest.

The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation or sooner, if Atlas declares dividends, is $1.4 millionas of the period ended September 30, 2012.

14. DEFERRED POLICY ACQUISITION COSTS

Deferred policy acquisition costs for the nine month periods endedSeptember 30, 2012 and September 30, 2011 (in ‘000s):

	September 30, 2012		September 30, 2011
Balance, beginning of period	$	3,020	$	3,804
Acquisition costs deferred	6,063		5,111
Amortization charged to income	4,582		5,343
Balance, end of period	$	4,501	$	3,572

15. RELATED PARTY TRANSACTIONS

The business of Atlas is carried on through its insurance subsidiaries. Atlas’ insurance subsidiaries have been a party to various transactions with affiliates in the past, although activity in this regard has diminished over time. Related party transactions, including services provided to or received by Atlas’ insurance subsidiaries, are carried out in the normal course of operations and are measured at the amount of consideration paid or received as established and agreed upon by the parties. Such transactions typically include claims handling services, marketing services and commission payments. Management believes that consideration paid for such services approximates fair value.

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For the nine month periods endedSeptember 30, 2012 and September 30, 2011, Atlas incurred $1.5 million and $1.7 million, respectively, in commissions to Avalon Risk Management, Inc. (“Avalon”). In the nine month periods endedSeptember 30, 2012 and September 30, 2011, Atlas also incurred expenses of $0 and $105,000 respectively, for marketing services performed by Avalon. Avalon was a KFSI subsidiary through October 2009, and had certain investors and directors in common with Atlas. As of September 30, 2012, Atlas and Avalon no longer have any common directors nor investors. Avalon acts as a program manager for a surety program primarily consisting of U.S. Customs bonds. In this capacity they are responsible for coordinating marketing, customer service and claim handling for the surety bonds written under this agreement. This program is 100% reinsured by an unrelated third party.

As at September 30, 2012 and December 31, 2011, Atlas reported net amounts receivable from (payable to) affiliates as follows which are included within other assets and accounts payable and accrued expenses on the balance sheets (all amounts in ‘000s):

As at:	September 30, 2012			December 31, 2011
Kingsway America Inc.	$	58		$	291
Universal Casualty Company	(50		)	(500		)
Kingsway Amigo Insurance Company	2			(1		)
Total	$	10		$	(210	)

16. SUBSEQUENT EVENTS

Kingsway Sale of Atlas Shares

On September 28th, 2012, Kingsway entered into a stock purchase agreement to sell 540,541 shares of Atlas to a third party, which received regulatory approval in the fourth quarter. On October 4th, 2012, Kingsway entered into a separate agreement to sell 173,611 shares to a third party. This transaction settled in the fourth quarter. None of these shares are included in the shares registered hereunder on behalf of the selling shareholders.

Acquisition of Gateway Insurance Company

On January 2, 2013 we acquired Camelot Services, Inc., or Camelot Services, a privately owned insurance holding company, and its sole subsidiary, Gateway Insurance Company, or Gateway, from Hendricks Holding Company, Inc., or Hendricks, an unaffiliated third party. Gateway provides specialized commercial insurance products, including commercial automobile insurance to niche markets such as taxi, black car and sedan service owners and operators.

Gateway is a St. Louis, Missouri-based insurance company that currently underwrites approximately $10.0 million of annual taxi and limousine net written premium. Gateway is an admitted carrier in 46 states plus the District of Columbia. Our acquisition of Gateway expanded our core commercial automobile lines to 39 states and the District of Columbia, including California, Hawaii, Montana, Nebraska, North Dakota, South Dakota, Washington and West Virginia.

Under the terms of the stock purchase agreement, the purchase price equaled the tangible GAAP book value of Camelot Services at December 31, 2012, subject to certain pre and post-closing adjustments, including, among others, development between the signing of the stock purchase agreement and December 31, 2012. Additional consideration may be paid to or received from the seller depending upon, among other things, the development of Gateway’s actual loss reserves for certain lines of business and the utilization of certain deferred tax assets over time. Gateway also writes workers’ compensation insurance, which will be terminated as part of the transaction. An indemnity reinsurance agreement was entered into pursuant to which 100% of Gateway’s workers’ compensation business was ceded to a third party captive reinsurer funded by the seller as part of the transaction.

The total purchase price for all of Camelot’s outstanding shares was $14.9 million, consisting of a combination of cash and Atlas preferred shares. Consideration consisted of a $6.0 million dividend paid by Gateway immediately prior to the closing, $2.0 million of Atlas preferred shares (a total of 2 million shares issued to Hendricks) and $6.9 million in cash. Under the terms of the stock purchase agreement, the closing price was reduced due to reserve strengthening of approximately $8.0 million that Camelot Services recognized prior to closing. Approximately $4.3 million of this reserve strengthening was related to commercial automobile reserves, a portion of which was related to the long-haul truck program that is in run off. The amount of pre-closing reserve strengthening was consistent with the conclusions of an independent actuarial analysis of the reserves of Gateway. In addition to this pre-closing reserve strengthening, Atlas has contractual protections to offset up to $2.0 million of future adverse reserve development. Atlas also agreed to provide the sellers up to $2.0 million in contractual protection in the event of favorable reserve development.

F-43

Reverse Stock Split

On December 7, 2012, we held a shareholder meeting where a one-for-three reverse stock split was unanimously approved. When the reverse stock split takes effect, it will decrease our authorized and outstanding ordinary shares and restricted voting shares at a ratio of one-for-three. The primary objective of the reverse stock split is to increase the per share price of our ordinary shares to meet certain listing requirements of the NASDAQ Capital Market. Unless otherwise noted, all historical share and per share values in this prospectus reflect the one-for-three reverse stock split.

Stock Option Grant

On January 11, 2013, Atlas granted options to purchase 91,667 ordinary shares under the Company’s stock option plan, all of which were granted to the Company’s officers. The granted options have an exercise price of C$6.45 and vest equally on the first, second and third anniversary of the grant date. The options expire on January 11, 2023.

F-44

Camelot Services, Inc.

and Subsidiary

Consolidated Financial Statements

With

Independent Auditors’ Report

December 31, 2011

F-45

Table of Contents                                            

Page

Independent Auditors’ Report                                    F-47

Consolidated Financial Statements

Consolidated Balance Sheets                                F-48

Consolidated Statements of Operations and Comprehensive Income (Loss)            F-50

Consolidated Statements of Changes in Shareholder's Equity                    F-51

Consolidated Statements of Cash Flows                            F-52

Notes to Consolidated Financial Statements                            F-53

F-46

Independent Auditors’ Report

Board of Directors and Shareholder

Camelot Services, Inc.

St. Louis, Missouri

We have audited the accompanying consolidated balance sheets of Camelot Services, Inc. and subsidiary (Missouri corporations) as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholder’s equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Camelot Services, Inc. and subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Due to significant adverse claim development, the Company has recorded $5 million of additional claims loss expense during the nine months ended September 30, 2012 relating to the 2011 accident years and prior. Additionally, the Company has changed its estimate for a deferred tax valuation allowance during 2012. These items are further discussed in Note Q to the financial statements.

/s/ Brown Smith Wallace LLC

St. Louis, Missouri

March 20, 2012

F-47

**All amounts in whole dollars

CAMELOT SERVICES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 2011 and 2010
	2011		2010
ASSETS
Investments and Cash
Cash and cash equivalents	$	1,402,296	$	3,215,860
Fixed maturities available-for-sale at fair
value (amortized cost $37,414,408 at 2011
and $32,144,598 at 2010)	39,765,830		33,112,720
Equity securities available-for-sale at fair value
(cost of $3,295,664 at 2011 and $3,244,002
at 2010)	2,734,738		2,743,202
Total Investments and Cash	43,902,864		39,071,782
Receivables
Premium and agent balances receivable, net of
allowance of $187,225 at 2011 and $341,652 at 2010	9,594,321		9,082,165
Reinsurance recoverable on loss and loss
adjustment expense	3,734,381		1,799,232
Federal income taxes recoverable	—		554,841
State income taxes recoverable	128,756		—
Receivable for securities	306,938		—
Interest and dividends accrued	298,568		288,815
Total Receivables	14,062,964		11,725,053
Other Assets
Deferred income taxes	2,940,659		1,793,798
Deferred policy acquisition costs	1,883,881		1,560,334
Property and equipment, net	1,130,360		554,891
Other assets	288,466		495,412
Total Other Assets	6,243,366		4,404,435
TOTAL ASSETS	$	64,209,194	$	55,201,270
The accompanying notes are an integral part of these consolidated financial statements.

F-48

	2011			2010
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Reserve for losses and loss
adjustment expenses	$	23,815,196		$	19,223,591
Unearned premiums	13,733,578			12,009,017
Accounts payable and accrued expenses	3,334,276			2,489,556
Note payable	1,249,395			1,505,409
Total Liabilities	42,132,445			35,227,573
SHAREHOLDER’S EQUITY
Common stock, $1 stated value;
40,000 shares authorized; 500 shares
issued and outstanding	500			500
Additional paid-in capital	24,927,805			20,567,805
Retained earnings (deficit)	(4,033,277		)	(903,039		)
Accumulated other comprehensive income	1,181,721			308,431
Total Shareholder’s Equity	22,076,749			19,973,697
TOTAL LIABILITIES AND SHAREHOLDER’S
EQUITY	$	64,209,194		$	55,201,270

F-49

CAMELOT SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive
Income (Loss)
Years ended December 31, 2011 and 2010
	2011			2010
Revenues
Premiums earned, net	$	23,989,257		$	19,961,702
Investment income, net of expenses	1,231,205			1,184,716
Realized gains on sale of investments	226,892			389,202
Total revenues	25,447,354			21,535,620
Expenses
Losses and loss adjustment expenses	20,439,922			17,402,623
Other underwriting expenses	9,520,008			8,125,991
Total expenses	29,959,930			25,528,614
Other expense	187,504			32,509
Total other expense	187,504			32,509
Loss before provision for
income taxes	(4,700,080		)	(4,025,503		)
Income Taxes
Current expense (benefit)	26,897			(538,666		)
Deferred income tax benefit	(1,596,739		)	(813,045		)
Total income tax benefit	(1,569,842		)	(1,351,711		)
NET LOSS	(3,130,238		)	(2,673,792		)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding gains arising
during the period, net of tax	1,100,182			699,768
Less: reclassification adjustment for gains
included in net income	(226,892		)	(389,202		)
Other comprehensive income, net of tax	873,290			310,566
COMPREHENSIVE INCOME (LOSS)	$	(2,256,948	)	$	(2,363,226	)
The accompanying notes are an integral part of these consolidated financial statements.

F-50

CAMELOT SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholder’s Equity
Years ended December 31, 2011 and 2010
								Accumulated
			Additional		Retained			Other
	Common		Paid-In		Earnings			Comprehensive
	Stock		Capital		(Deficit)			Income			Total
Balance at December 31, 2009	$	500	$	17,567,805	$	1,770,753		$	(2,135	)	$	19,336,923
Net loss	—		—		(2,673,792		)	—			(2,673,792		)
Additional paid-in capital	—		3,000,000		—			—			3,000,000
Net unrealized gains on securities
available-for-sale securities, net of
deferred income taxes of $159,988	—		—		—			310,566			310,566
Balance at December 31, 2010	500		20,567,805		(903,039		)	308,431			19,973,697
Net loss	—		—		(3,130,238		)	—			(3,130,238		)
Additional paid-in capital	—		4,360,000		—			—			4,360,000
Net unrealized gains on securities
available-for-sale securities, net of
deferred income taxes of $449,877	—		—		—			873,290			873,290
Balance at December 31, 2011	$	500	$	24,927,805	$	(4,033,277	)	$	1,181,721		$	22,076,749
The accompanying notes are an integral part of these consolidated financial statements.

F-51

CAMELOT SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 2011 and 2010
	2011			2010
Cash flows from operating activities
Net loss	$	(3,130,238	)	$	(2,673,792	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized gains on sale of investments	(226,892		)	(389,202		)
Depreciation	125,034			38,814
Net amortization of investment premiums and discounts	157,209			46,310
Deferred income taxes	(1,596,739		)	(812,704		)
(Increase) decrease in operating assets:
Premiums and agent balances receivable	(512,156		)	(725,255		)
Reinsurance recoverable on loss and loss adjustment expense	(1,935,149		)	(974,418		)
Interest and dividends accrued	(9,753		)	(46,968		)
Federal income taxes recoverable	554,841			(429,694		)
State income taxes recoverable	(128,756		)	—
Receivable for securities	(306,938		)	—
Policy acquisition costs deferred	(323,547		)	(158,561		)
Other assets	206,946			(128,562		)
Increase in operating liabilities:
Reserve for losses and loss adjustment expenses	4,591,605			6,928,562
Unearned premiums	1,724,561			1,163,126
Accounts payable and accrued expenses	844,720			345,802
Net cash provided by operating activities	34,748			2,183,458
Cash flows from investing activities
Purchases of property and equipment	(700,503		)	(504,259		)
Proceeds from sales of investments	10,188,787			10,887,074
Purchases of investments	(15,440,582		)	(19,796,593		)
Net cash used in investing activities	(5,952,298		)	(9,413,778		)
Cash flows from financing activities
Additional paid-in capital	4,360,000			3,000,000
Proceeds from long-term debt	—			1,500,000
Payments on long-term debt	(256,014		)	—
Net cash provided by financing activities	4,103,986			4,500,000
DECREASE IN CASH AND CASH EQUIVALENTS	(1,813,564		)	(2,730,320		)
Cash and cash equivalents, beginning of year	3,215,860			5,946,180
Cash and cash equivalents, end of year	$	1,402,296		$	3,215,860
The accompanying notes are an integral part of these consolidated financial statements.

F-52

CAMELOT SERVICES, INC.

Notes to Consolidated Financial Statements

December 31, 2011

**All amounts in whole dollars

Note A - Nature of Business

Camelot Services, Inc. (“Camelot”) is a wholly-owned subsidiary of Hendricks Holding Company, Inc. (“Hendricks”) and is the parent company of Gateway Insurance Company (“Gateway”). The Company specializes in Commercial Lines of business by offering three niche programs. The Public Auto Program has many years of experience in writing the Commercial Auto line of business for small to mid-size taxi and limousine drivers. In 2007, Gateway began writing business in the Contractors Program that specializes in the General Liability, Commercial Auto and Workers Compensation lines of business for roofing contractors. In 2008, Gateway began writing business in the Long-Haul Truck Program that specializes in the Commercial Auto, Cargo, and General Liability lines of business for small to mid-size truckers. Gateway maintains insurance licenses in 47 states, including the District of Columbia.

Note B - Summary of Significant Accounting Policies

Described below are the significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of Camelot and its wholly-owned subsidiary, Gateway, collectively referred to as the “Company.” All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting practices generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported in the consolidated financial statements.

Premium Revenues

Gateway writes premiums for commercial vehicle business, general liability, and workers compensation calling for insureds' to pay premiums on a periodic basis. Gateway records written premiums and uncollected premiums and agents' balances deferred on these monthly writings equal to the annual amount at inception of the policy.

Premiums are recognized as income over the terms of the related insurance policies. Unearned premium reserves represent the portion of the premiums written that relate to the unexpired terms of policies in force. Such reserves are computed on a pro rata method.

Unpaid Losses and Loss Adjustment Expense

The reserves for unpaid losses and loss adjustment expenses include amounts determined on the basis of individual claims and actuarially determined estimates of losses incurred but not reported. Such liabilities are necessarily based on estimates and, while management believes the amount is adequate, the ultimate liability may be in excess of or less than the amounts provided. The methods of making such estimates and for establishing the resulting liabilities are continually reviewed and updated based upon current circumstances and any adjustments resulting there from are reflected in operations.

The reserves for unpaid losses and loss adjustment expenses are reported net of receivables for salvage and subrogation

F-53

of approximately $686,000 and $494,000 at December 31, 2011 and 2010, respectively.

Cash Maintained for Deductibles

The Company maintains cash balances on behalf of certain insureds' in order to pay claims up to their deductible. These amounts are included in the Company's cash balance and the corresponding liability is included in accounts payable and accrued expenses. Cash balances maintained on behalf of others amounted to $0 at December 31, 2011 and 2010, respectively.

Investments

The Company accounts for its investments in accordance with Financial Accounting Standards Board (“FASB”) ASC 320, Investments - Debt and Equity Securities. Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination at each balance sheet date (Note D).

Fixed maturity securities are classified as available-for-sale and are stated at market value, with unrealized gains and losses, net of tax, reported as a separate component of shareholder's equity.

Equity securities are classified as available-for-sale and are stated at market value, with unrealized gains and losses, net of tax, reported as a separate component of shareholder's equity. Market value is based on third-party quoted market prices or, when unavailable, on similar assets.

Realized gains and losses are reported as a separate component of income based upon the first-in, first-out method.

Deferred Policy Acquisition Costs

Policy acquisition costs include commissions and premium taxes. These costs are deferred and amortized over the terms of the related policies to which they relate to the extent recoverable from future revenues and gross profits.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over useful lives of three to five years. Expenditures for maintenance, repairs and minor additions are charged to operations as incurred.

When property and equipment are retired or otherwise disposed of, the cost is removed from the asset account, and the corresponding accumulated depreciation is removed from the related allowance account. Any resulting gain or loss is included in results of operations.

Income Taxes

The Company employs the provisions of FASB ASC 740, Income Taxes. FASB ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based upon the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect.     

The Company has implemented the accounting guidance for uncertainty in income taxes using the provisions of FASB ASC 740. Using that guidance, tax positions initially need to be recognized in the consolidated financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open tax years (after 2008 for federal and state) based on an assessment of many factors including experience and interpretations of tax laws applied to the facts of each matter.

The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.

F-54

Cash, Cash Equivalents and Short-Term Investments

Cash and cash equivalents includes short-term investments which consist of investments with original maturities within one year of acquisition. Cash consists of all cash on hand and on deposit with financial institutions.

Premium Receivable

Premium receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to premium receivable. The valuation allowance increased (decreased) by ($154,427) and $197,257 for the years ended December 31, 2011 and 2010, respectively.

Impairment of Long Lived Assets

The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long lived assets may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. In the opinion of management, no such impairment existed at December 31, 2011 and 2010, respectively.

Subsequent Events

The Company has evaluated all subsequent events through March 20, 2012, the date the financial statements were available to be issued.

Note C -Investments

The following information summarizes the difference between amortized cost and fair value of fixed maturity investments as of December 31, 2011 and 2010:

December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
US Government Securities	$	4,078,503	$	441,473	$	—	$	4,519,976
US States, territories, possessions	1,130,215		67,574		—		1,197,789
US Political subdivisions of states	1,063,698		29,469		—		1,093,167
Special revenue and assessment	1,223,255		96,095		—		1,319,350
Industrial and miscellaneous	11,289,604		783,111		37,677		12,035,038
Mortgage backed	18,629,133		984,742		13,365		19,600,510
	$	37,414,408	$	2,402,464	$	51,042	$	39,765,830

F-55

December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
US Government Securities	$	4,752,737	$	175,252	$	9,462	$	4,918,527
US States, territories, possessions	483,599		—		26,274		457,325
US Political subdivisions of states	694,327		—		17,330		676,997
Special revenue and assessment	2,031,135		9,468		37,088		2,003,515
Industrial and miscellaneous	12,025,586		735,780		1,962		12,759,404
Mortgage backed	12,157,214		267,527		127,789		12,296,952
	$	32,144,598	$	1,188,027	$	219,905	$	33,112,720

The amortized cost and fair market value of debt securities by contractual maturity are shown below. Expected maturities will differ from contractual maturity because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:

	Amortized Cost		Fair Value
Within one year	$	1,065,287	$	1,084,075
After one year through five years	6,582,819		6,910,570
After five years through ten years	10,955,448		11,982,569
After ten years	181,721		188,106
Mortgage Backed	18,629,133		19,600,510
	$	37,414,408	$	39,765,830

The cost and estimated fair value of investments in equity securities at December 31, 2011 and 2010 as follows:

December 31, 2011	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Preferred Stock	$	6,800	$	19,800	$	—	$	26,600
Common stock	3,288,864		3,935		584,661		2,708,138
Total equity securities	$	3,295,664	$	23,735	$	584,661	$	2,734,738

December 31, 2010	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Preferred Stock	$	6,800	$	5,781	$	—	$	12,581
Common stock	3,237,202		58,819		565,400		2,730,621
Total equity securities	3,244,002		64,600		565,400		$	2,743,202

At December 31, 2011 and 2010, the Company held 40 and 56 fixed maturity and equity securities, respectively, where the estimated fair value had declined and remained below amortized cost by the amount indicated in the tables below.

F-56

	2011				2010
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Bonds, not backed by other loans
Less than 12 months	$	822,488	$	37,677	$	3,377,921	$	92,116
Loan-backed and structured securities
Less than 12 months	226,625		391		6,169,385		120,831
12 months or more	429,557		12,974		417,897		6,958
	1,478,670		51,042		9,965,203		219,905
Common Stock
Less than 12 months	1,773,071		162,371		—		—
12 months or more	631,532		422,290		1,121,192		565,400
	$	2,404,603	$	584,661	$	1,121,192	$	565,400

The Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other-than-temporary. Based on the evaluation of the issues, including, but not limited to, intentions to sell or ability to hold the fixed maturity and equity investments with unrealized losses for a period of time sufficient for them to recover; the length of time and amount of the unrealized loss; and the credit ratings of the issuers of the investments, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2011 and 2010.

The Company monitors its investment securities to identify impairments in value. The Company evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the estimated fair value has been below amortized cost, general market conditions, intent and ability to hold securities, and various other subjective factors. Based on management’s judgment, securities with other-than-temporary impairment in value are written down to management’s estimate of fair value. Included in investment related losses are other-than-temporary write-downs of equity securities of $0 and $1,000 in 2011 and 2010, respectively.

Accrued investment income at December 31, is as follows:

	2011		2010
US Government Securities	$	41,461	$	46,990
US States, territories, possessions	10,843		4,373
US Political subdivisions of states	9,402		7,905
Special revenue and assessment	20,649		32,931
Industrial and miscellaneous	148,704		152,980
Mortgage backed	66,346		43,110
Common Stock	1,163		490
Short Term Investments	—		36
	$	298,568	$	288,815

Bonds, notes and other short-term investments with fair value of approximately $5,123,000 and $4,483,000 at December 31, 2011 and 2010, respectively, were on deposit with various state departments of insurance to comply with requirements of the various states to maintain deposits for the protection of those states’ policyholders.

Net investment income by source was as follows for the year ended December 31:

F-57

			2011		2010
Investment Income
	Fixed maturity investments		$	1,290,120	$	1,214,495
	Short-term investments		3,707		3,302
	Dividends		58,495		63,525
		Total investment income	1,352,322		1,281,322
Less investment expenses			121,117		96,606
	Net investment income		$	1,231,205	$	1,184,716

Net realized gains (losses) on investments included in results of operations for the years ended December 31, 2011 and 2010 are as follows:

	December 31,
	2011			2010
Fixed maturity investments	$	229,380		$	345,591
Marketable equity securities	(2,488		)	43,611
	$	226,892		$	389,202

During 2010, the Company acquired a bond which was subsequently converted for two new bonds. The conversion was an exchange of similar bonds of the same issuer. The book value and consideration at the time of the conversion was $113,701. The conversion was accounted for as a non-cash transaction and excluded from the Company’s statement of cash flows.

Note D -Fair Value Measurements

Certain financial assets and liabilities are valued using market prices from active markets (level 1). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily-observable inputs of the instrument. Level 3 instrument valuations are unobservable inputs which are significant to fair value measurement. As of December 31, 2011, the Company did not have any assets with valuations without observable market values or other inputs that would require a high level of judgment to determine fair value (level 3 instruments).

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2011 and 2010, respectively.

Bonds: Valued at quoted market prices in less active markets; quoted market prices for similar instruments, and pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

Preferred and Common stocks:Valued at quoted market prices at year end.

Mutual funds:Valued at the net asset value (“NAV”) of shares held by the Company at year end.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

F-58

December 31, 2011	Level 1		Level 2		Level 3		Total
US Government Securities	$	—	$	4,519,976	$	—	$	4,519,976
US States, territories, possessions	—		1,197,789		—		1,197,789
US Political subdivisions of states	—		1,093,167		—		1,093,167
Special revenue and assessment	—		1,319,350		—		1,319,350
Industrial and miscellaneous	—		12,035,038		—		12,035,038
Mortgage backed	—		19,600,510		—		19,600,510
Total bonds	$	—	$	39,765,830	$	—	$	39,765,830

		Level 1		Level 2		Level 3		Total
Preferred Stock
	Industrial and miscellaneous	$	26,600	$	—	$	—	$	26,600
Common Stocks								—
	Industrial and miscellaneous	631,532		—		—		631,532
	Mutual funds	2,076,606		—		—		2,076,606
		$	2,734,738	$	—	$	—	$	2,734,738

December 31, 2010	Level 1		Level 2		Level 3		Total
US Government Securities	$	—	$	4,918,527	$	—	$	4,918,527
US States, territories, possessions	—		457,325		—		457,325
US Political subdivisions of states	—		676,997		—		676,997
Special revenue and assessment	—		2,003,515		—		2,003,515
Industrial and miscellaneous	—		12,759,404		—		12,759,404
Mortgage backed	—		12,296,952		—		12,296,952
Total bonds	$	—	$	33,112,720	$	—	$	33,112,720

		Level 1		Level 2		Level 3		Total
Preferred Stock
	Industrial and miscellaneous	$	12,581	$	—	$	—	$	12,581
Common Stocks								—
	Industrial and miscellaneous	1,121,191		—		—		1,121,191
	Mutual funds	1,609,430		—		—		1,609,430
Total preferred and common stocks		$	2,743,202	$	—	$	—	$	2,743,202

Note E - Property and Equipment

Property and equipment at December 31, 2011 and 2010 consisted of the following:

	December 31,
	2011		2010
Electronic data processing equipment	$	1,438,924	$	740,632
Furniture and equipment	93,365		91,154
Autos	25,600		25,600
	1,557,889		857,386
Less: Accumulated Depreciation	427,529		302,495
	$	1,130,360	$	554,891

F-59

Depreciation expense for years ended December 31, 2011 and 2010 was $125,034 and $38,814, respectively.

Note F -Liability for Unpaid Losses and Loss Expenses

Activity in the liabilities for unpaid losses and loss expenses is summarized as follows for:

			December 31,
			2011		2010
Balance at January 1			$	19,224,000	$	12,295,000
Less reinsurance recoverable - net			2,148,000		1,209,000
Net balance at January 1			17,076,000		11,086,000
Incurred related to
	Current year		18,697,000		15,002,000
	Prior years		1,703,000		2,401,000
		Total incurred	20,400,000		17,403,000
Paid related to
	Current year		8,152,000		5,430,000
	Prior year		9,700,000		5,983,000
		Total paid	17,852,000		11,413,000
Net balance at December 31			19,624,000		17,076,000
Plus reinsurance recoverable - net			4,191,000		2,148,000
Balance at December 31			$	23,815,000	$	19,224,000

As a result of changes in estimated losses incurred with respect to insured events in prior years, during 2011 and 2010, the provision for losses and loss adjustment expenses net of reinsurance recoveries increased by approximately $1,703,000 and $2,401,000, respectively. Changes in estimates of prior year losses incurred were the result of re-estimation of unpaid losses and loss adjustment expenses principally on the commercial auto and trucking lines of business.

Note G - Reinsurance

The Company follows a procedure of reinsuring a portion of its insurance risks by obtaining reinsurance for areas of exposure beyond specific amounts. As a result, the accompanying statements of operations reflect premiums, losses and loss expense net of related reinsurance.

Contingent liabilities exist with respect to reinsurance ceded which would become an actual liability in the event that the reinsurer is unable to meet their obligations to Gateway under existing reinsurance agreements.

The Company reinsures its commercial auto liability, general liability, and worker’s compensation coverage under excess of loss reinsurance treaties. Additional facultative reinsurance is maintained for certain commercial automobile risks exceeding the maximum policy limits under the excess of loss treaties. For both 2011 and 2010, ceded premiums are based on a percentage of premiums for the excess of loss reinsurance treaties and a fixed amount per unit for the facultative reinsurance.

Effective July 1, 2011 and 2010 the Company’s net aggregate amount insured in any one risk, including worker’s compensation, was $500,000.

The following identifies the ceded components of written and earned premiums for the years ended December 31, 2011 and 2010:

F-60

	December 31, 2011						December 31, 2010
	Written			Earned			Written			Earned
Direct	$	30,369,357		$	28,656,702		$	24,396,697		$	23,238,888
Assumed	137,102			125,199			125,302			119,984
Ceded	(4,833,523		)	(4,792,644		)	(3,367,207		)	(3,397,170		)
Net	$	25,672,936		$	23,989,257		$	21,154,792		$	19,961,702

During the years ended December 31, 2011 and 2010 total liabilities for direct unpaid losses and unpaid loss adjustment expenses were reduced by approximately $4,191,000 and $2,148,000, respectively for insurance reserves ceded to other companies. Reinsurance recoveries on paid and unpaid losses were approximately $3,026,000 and $938,000 during 2011 and 2010, respectively, which are reflected as a decrease in losses and loss adjustment expenses incurred in the consolidated statements of operations and comprehensive income (loss).

Net balances recoverable from reinsurers (comprised of unearned premiums and losses and loss adjustment expenses paid and unpaid, including incurred but not reported amounts) having unsecured portions exceeding 3% of the Company’s total capital and surplus was $3,453,000 and $821,000 for the years ended December 31, 2011 and 2010, respectively.

Note H - Income Taxes

Components of Deferred Tax Assets (DTAs) and Deferred Tax Liabilities (DTLs)

	December 31,
Description	2011			2010
Gross deferred tax assets	$	4,591,863		$	2,681,864
Gross deferred tax liabilities	(1,651,204		)	(888,066		)
Net deferred tax asset	$	2,940,659		$	1,793,798

DTAs Resulting From Book/Tax Differences In:	2011		2010
Unpaid losses and LAE	$	475,285	$	447,746
Unearned premiums	929,376		814,887
AMT credit carry-forwards	60,195		30,855
NOL carry-forward	2,870,522		1,079,574
Impaired investments	169,000		169,000
Bad debt accrual	63,658		116,164
State income taxes	20,367		20,367
Contribution carry-forward	2,999		2,982
Foreign tax credit carry-forward	460		289
Gross DTAs	$	4,591,862	$	2,681,864
DTLs Resulting From Book/Tax Differences In:
Bond market discount	$	25,100	$	23,670
Accrued dividends	395		868
Depreciable assets	245,577		38,759
Unrealized capital gains	608,765		158,888
Other	130,846		135,367
Deferred acquisition costs	640,520		530,514
Gross DTLs	$	1,651,203	$	888,066

F-61

Reconciliation of Federal Income Tax Rate to Actual Effective Rate

The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income rate to income before income taxes. The significant items causing this difference are as follows:

				Tax Effect at			Effective
Description	Amount			34%			Tax Rate
Loss before taxes	$	(4,700,080	)	$	(1,598,027	)	34.00	%
Non-deductible expenses	38,522			13,097			(0.28	)%
Tax exempt interest and DRD, net of proration	(46,130		)	(15,684		)	0.33	%
Other	90,506			30,772			(0.65	)%
Total	$	(4,617,182	)	$	(1,569,842	)	33.40	%

Operating Loss and Tax Credit Carry-forwards

At December 31, 2011, the Company had approximately $8,400,000 million in net operating loss carry-forwards available to offset against future taxable income. These losses expire through the year 2031.

Consolidated Federal Income Tax Return

Camelot Services, Inc. is the parent company of an affiliated group of companies and files a consolidated federal income tax return with the following entity:

Gateway Insurance Company

The method of allocation among companies is subject to a written agreement, approved by the Board of Directors, whereby allocation is made primarily on a separate return basis with current credit for any net operating losses or other items utilized in the consolidated tax return.

Note I -Transactions with Related Party and Affiliates

On June 29, 2011, Hendricks contributed $4,360,000 of paid-in capital to Camelot. On June 30, 2011, Camelot contributed the $4,360,000 to Gateway as additional paid-in capital.

On January 29, 2010, Hendricks contributed $3,000,000 of additional paid-in capital to Camelot. On February 1, 2010, Camelot contributed the $3,000,000 to Gateway as additional paid-in capital.

On December 15, 2010, Camelot entered into a long-term note agreement with Hendricks. The principal amount borrowed under the note agreement is $1,500,000 and bears interest at an annual rate of 8.66%. Principal and interest payments commenced on January 15, 2011 and are due in sixty monthly installments of $30,887. During 2011 the Company paid $120,039 in interest expense to Hendricks.

Gateway has marketing and sales agreements with two companies affiliated by common ownerships; Insential Inc. (Insential) and American Westbrook Insurance Services (AWIS). AWIS acquired all of the assets of American Patriot Insurance Agency (APIA), effective January 1, 2010. Agreements with Insential and AWIS (formerly APIA) were entered into for the purpose of producing premium in the workers compensation and general liability lines of business associated with the contractor industry.

During 2011, commissions earned on written premium produced by Insential and AWIS was $237,811 and $177,508, respectively. During 2010, commissions earned on written premium by Insential and AWIS was $200,920 and $108,630, respectively.

At December 31, 2011, there were no amounts due from Insential and AWIS. At December 31, 2010, amounts due from Insential and AWIS were $24,483 and $29,530, respectively.

Note J - Gateway Statutory Dividend Restriction

The maximum amount of dividends which can be paid by Gateway to its shareholder without prior approval of the Department of Insurance of the State of Missouri is limited to the greater of 10% of surplus (as of the preceding December 31) or the Company’s

F-62

net income from the previous year. All dividends must be paid from earned surplus.

There were no dividends paid during the years ended December 31, 2011 and 2010.

Note K - Benefit Plan

Gateway sponsors a 401(k) Retirement Savings Plan (RSP) for employees. All active full-time employees who are age twenty-one or over and have completed six months of service are eligible for the RSP. In addition to employee contributions to the RSP, Gateway also makes contributions to individuals’ accounts.

Gateway matched 50% up to the first 6% of the employee’s contribution, a maximum of 3% per employee during 2011 and 2010. Gateway contributed $83,540 and $71,697 to the RSP during 2011 and 2010, respectively.

Note L - Statutory Disclosures

Gateway is subject to regulation by the Missouri Department of Insurance, Financial Institutions and Professional Registration (the “Department”). Those regulations, in part, prescribe certain accounting methods for statutory purposes. As of December 31, 2011 and 2010, Gateway’s statutory assets, statutory surplus, and statutory net income (loss), as filed with the Department, were as follows:

	2011			2010
Statutory assets	$	53,519,238		$	48,739,608
Statutory surplus	16,326,527			16,843,106
Statutory net income (loss)	(4,886,671		)	(3,436,973		)

Note M- Commitments and Contingencies

The Company is subject to guaranty funds and other assessments by the states in which it writes business. Guaranty fund assessments are accrued at the time of insolvencies. At December 31, 2011 and 2010, the Company has accrued a liability for guaranty funds and other assessments of $8,246 and $8,656, respectively, and a liability for worker’s compensation assessments of $99,603 and $48,013, respectively. This represents management’s best estimate based on information received from states in which the Company writes business and may change due to factors including the company’s share of the ultimate cost of current insolvencies. During 2011 and 2010, there were no material insolvencies to report.

Various lawsuits against the Company have arisen in the course of business. Contingent liabilities arising from litigation, income taxes and other matters are not considered material in relation to the financial position of the Company.

The Company leases office equipment, furniture and property under various non-cancelable operating lease agreements that expire through February 2016. Rental expense for 2011 and 2010 was approximately $567,365 and $417,842, respectively.

At December 31, 2011, the minimum aggregate rental commitments are as follows:

Year ending December 31	Rental Space		Equipment		Total
2012	$	334,201	$	536,253	$	870,454
2013	341,808		536,253		878,061
2014	337,412		490,912		828,324
2015	341,752		418,274		760,026
2016	57,138		253,218		310,356

Note N - Concentration of Credit Risk

The Company maintains cash balances with several lending institutions in excess of the Federal Deposit Insurance limits.

At December 31, 2011, the Company did not have any bonds with a carrying value exceeding 10% of statutory surplus.

F-63

Note O - Supplemental Disclosure of Cash Flow Information

Cash paid (recovered) during the years ended December 31:

	2011			2010
Interest	$	120,039		$	—
Income taxes recovered, net	(527,944		)	(108,972		)

Note P - Discontinued Operations

Effective November 6, 2006, Gateway discontinued its Private Passenger Automobile line of business. Previously, in July 2003, Gateway discontinued the Truck Liability and Hospitality/General Liability Programs. Results of the discontinued operations of these programs are included in the Company’s consolidated statement of operations until all open claims have been closed. The income (loss) related to discontinued operations included in the Company’s consolidated statement of operations and comprehensive income (loss) for the years ended December 31, 2011 and 2010 are $4,256 and $(27,826), respectively.

Note Q- Change in Estimates and Sale of Company (Unaudited)

The Company experienced significant claim loss development in 2012 primarily related to the 2011 accident year. Accordingly, the Company recorded additional claim reserves of $5 million during the third calendar quarter related to 2011 and prior accident years.

In October 2012, the Company signed a stock purchase agreement to sell 100% of its outstanding shares to a strategic buyer. The transaction is estimated to close January 1, 2013 subject to regulatory approval and other closing conditions. The Company’s income tax net operating loss carry-forwards will be limited in the transaction. Accordingly, the Company has recorded a full valuation allowance of approximately $3 million on its net deferred tax assets as of September 30, 2012.

The table below summarizes these changes in estimates as if they were reflected in 2011 (in millions).

	2011 Balances			Adjustments for			Pro Forma 2011
Description	(audited)			Changes in Estimates			Balances
Total Assets	$	64		$	(3	)	61
Total Liabilities	42			5			47
Shareholder’s Equity	22			(8		)	14
Net Loss	(3		)	(8		)	(11	)

F-64

Camelot Services, Inc.

and Subsidiary

Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2012

F-65

Table of Contents                                                

Page

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheet                                F-38

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)            F-40

Condensed Consolidated Statements of Changes in Shareholder's Equity                F-41

Condensed Consolidated Statements of Cash Flows                            F-42

Notes to Condensed Consolidated Financial Statements                        F-43

F-66

**All amounts in whole dollars

CAMELOT SERVICES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2012
	2012
ASSETS
Investments and Cash
Cash and cash equivalents	$	8,931,207
Fixed maturities available-for-sale at fair
value (amortized cost $32,712,947)	35,608,298
Equity securities available-for-sale at fair value
(cost of $3,096,353 at 2012)	3,075,945
Total Investments and Cash	47,615,450
Receivables
Premium and agent balances receivable, net of
allowance of $451,395 at 2012 and $309,672 at 2011	10,226,302
Reinsurance recoverable on loss and loss
adjustment expense	5,741,291
Premium taxes recoverable	121,047
Interest and dividends accrued	228,185
Total Receivables	16,316,825
Other Assets
Deferred policy acquisition costs	1,676,298
Property and equipment, net	978,876
Other assets	241,679
Total Other Assets	2,896,853
TOTAL ASSETS	$	66,829,128
The accompanying notes are an integral part of these
condensed consolidated financial statements.

F-67

	2012
LIABILITIES AND SHAREHOLDER’S EQUITY
LIABILITIES
Reserve for losses and loss
adjustment expenses	$	30,870,605
Unearned premiums	11,946,177
Accounts payable and accrued expenses	3,558,155
Note payable, related party	1,050,511
Total Liabilities	47,425,448
SHAREHOLDER’S EQUITY
Common stock, $1 stated value;
40,000 shares authorized; 500 shares
issued and outstanding	500
Additional paid-in capital	30,927,805
Retained deficit	(13,491,442		)
Accumulated other comprehensive income	1,966,817
Total Shareholder’s Equity	19,403,680
TOTAL LIABILITIES AND SHAREHOLDER’S
EQUITY	$	66,829,128

F-68

CAMELOT SERVICES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Nine months ended September 30, 2012 and 2011
	2012			2011
Revenues
Premiums earned, net	$	19,148,097		$	17,798,619
Investment income, net of expenses	929,991			907,398
Realized gains (losses) on investments	(89,919		)	225,706
Total revenues	19,988,169			18,931,723
Expenses
Losses and loss adjustment expenses	19,108,813			12,925,232
Other underwriting expenses	7,495,676			6,806,081
Total expenses	26,604,489			19,731,313
Other expense	200,541			31,380
Total other expense	200,541			31,380
Loss before provision for
income taxes	(6,816,861		)	(830,970		)
Income Taxes
Deferred income tax expense (benefit)	2,641,304			(93,414		)
Total income tax expense (benefit)	2,641,304			(93,414		)
NET LOSS	(9,458,165		)	(737,556		)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding gains (losses) arising
during the period, net of tax	725,749			803,111
Less: reclassification adjustment for (gains)/losses
included in net income, net of tax	59,347			(148,966		)
Other comprehensive income (loss), net of tax	785,096			654,145
COMPREHENSIVE LOSS	$	(8,673,069	)	$	(83,411	)
The accompanying notes are an integral part of these
condensed consolidated financial statements.

F-69

CAMELOT SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholder’s Equity
Nine Months ended September 30, 2012 and 2011
								Accumulated
			Additional		Retained			Other
	Common		Paid-In		Earnings			Comprehensive
	Stock		Capital		(Deficit)			Income		Total
Balance at December 31, 2010	$	500	$	20,567,805	$	(903,039	)	$	308,431	$	19,973,697
Net loss	—		—		(737,556		)	—		(737,556		)
Additional paid-in capital	—		4,360,000		—			—		4,360,000
Net unrealized gains on securities
available-for-sale securities, net of
deferred income taxes of $336,984	—		—		—			654,145		654,145
Balance at September 30, 2011	500		24,927,805		(1,640,595		)	962,576		24,250,286
Balance at December 31, 2011	500		24,927,805		(4,033,277		)	1,181,721		22,076,749
Net loss	—		—		(9,458,165		)	—		(9,458,165		)
Additional paid-in capital	—		6,000,000		—			—		6,000,000
Net unrealized gains on securities
available-for-sale securities, net of
deferred income taxes of $299,355	—		—		—			785,096		785,096
Balance at September 30, 2012	$	500	$	30,927,805	$	(13,491,442	)	$	1,966,817	$	19,403,680
The accompanying notes are an integral part of these consolidated financial statements.

F-70

CAMELOT SERVICES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30, 2012 and 2011
	2012			2011
Cash flows from operating activities
Net loss	$	(9,458,165	)	$	(737,556	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities
Realized (gains) losses on sale of investments	89,919			(225,707		)
Depreciation	163,987			29,518
Net amortization of investment premiums and discounts	118,517			106,882
Deferred income taxes	2,641,304			(93,414		)
(Increase) decrease in operating assets:
Premiums and agent balances receivable	(631,981		)	(1,557,030		)
Reinsurance recoverable on loss and loss adjustment expense	(2,006,910		)	(570,602		)
Interest and dividends accrued	70,383			53,530
Taxes recoverable	7,709			525,501
Receivable for securities	306,938			—
Policy acquisition costs deferred	207,583			(515,467		)
Other assets	46,787			85,307
Increase in operating liabilities:
Reserve for losses and loss adjustment expenses	7,055,409			877,053
Unearned premiums	(1,787,401		)	3,072,563
Accounts payable and accrued expenses	223,879			135,007
Net cash provided by (used in) operating activities	(2,952,042		)	1,185,585
Cash flows from investing activities
Purchases of property and equipment	(12,497		)	(658,801		)
Proceeds from sales of investments	6,330,153			8,401,536
Purchases of investments	(1,637,819		)	(13,376,818		)
Net cash provided by (used in) investing activities	4,679,837			(5,634,083		)
Cash flows from financing activities
Additional paid-in capital	6,000,000			4,360,000
Payments on long-term debt	(198,884		)	(180,504		)
Net cash provided by financing activities	5,801,116			4,179,496
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	7,528,911			(269,002		)
Cash and cash equivalents, beginning of year	1,402,296			3,215,860
Cash and cash equivalents, end of year	$	8,931,207		$	2,946,858
Supplemental Cash Flow Information
Cash paid for interest	$	73,689		$	92,069
The accompanying notes are an integral part of these condensed consolidated financial statements.

F-71

CAMELOT SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2012 (Unaudited)

**All amounts in whole dollars

Note A - Nature of Business

Camelot Services, Inc. (“Camelot” or the “Company”) is a wholly-owned subsidiary of Hendricks Holding Company, Inc. (“Hendricks”) and is the parent company of Gateway Insurance Company (“Gateway”). The Company specializes in Commercial Lines of business by offering three niche programs. The Public Auto Program has many years of experience in writing the Commercial Auto line of business for small to mid-size taxi and limousine drivers. In 2007, Gateway began writing business in the Contractors Program that specializes in the General Liability, Commercial Auto and Workers Compensation lines of business for roofing contractors. In 2008, Gateway began writing business in the Long-Haul Truck Program that specializes in the Commercial Auto, Cargo, and General Liability lines of business for small to mid-size truckers. Gateway maintains insurance licenses in 47 states, including the District of Columbia.

Note B - Summary of Significant Accounting Policies

The Company's significant accounting policies have remained unchanged from December 31, 2011 and 2010, respectively. Refer to the audited consolidated financial statements as of December 31, 2011 and 2010 for a complete summary of the Company's significant accounting policies.

Subsequent Events

On October 25, 2012, Hendricks announced that it had entered into a stock purchase agreement to sell Camelot and its sole insurance subsidiary, Gateway to Atlas Financial Holdings, Inc.   Completion of the transaction is subject to customary closing conditions, including regulatory approval of the change of control of Gateway, and is expected to be completed during the first quarter of 2013.

Note C -Investments

The following information summarizes the difference between amortized cost and fair value of invested assets as of September 30, 2012:

September 30, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
US Government Securities	$	4,073,053	$	467,721	$	—	$	4,540,774
US States, territories, possessions	1,558,079		122,462		—		1,680,541
US Political subdivisions of states	1,055,616		49,614		—		1,105,230
Special revenue and assessment	1,886,110		146,219		—		2,032,329
Industrial and miscellaneous	8,481,568		971,874		—		9,453,442
Mortgage backed	15,658,521		1,146,437		8,976		16,795,982
Total fixed income investments	$	32,712,947	$	2,904,327	$	8,976	$	35,608,298

F-72

Preferred stock	6,800	10,200	—	17,000
Common stock	3,089,553	148,638	179,246	3,058,945
Total equity securities	3,096,353	158,838	179,246	3,075,945
Total invested assets	35,809,300	3,063,165	188,222	38,684,243

The Company monitors its investment securities to identify impairments in value. The Company evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the estimated fair value has been below amortized cost, general market conditions, intent and ability to hold securities, and various other subjective factors. Based on management’s judgment, securities with other-than-temporary impairment in value are written down to management’s estimate of fair value. Included in investment related losses are other-than-temporary write-downs of equity securities of $204,000 at September 30, 2012.

Note D -Fair Value Measurements

There have been no significant changes to fair value measurements since December 31, 2011 and 2010.

Note E - Liability for Unpaid Losses and Loss Expenses

As a result of changes in estimated losses incurred with respect to insured events in prior years, during the nine months ended September 30, 2012 and 2011, the provision for losses and loss adjustment expenses, net of reinsurance recoveries, increased by approximately $4,959,000 and $1,173,000, respectively. Changes in estimates of prior year losses incurred were the result of re-estimation of unpaid losses and loss adjustment expenses principally on the commercial auto and trucking lines of business.

Activity in the liabilities for unpaid losses and loss expenses for September 30 is summarized as follows:

	2012		2011
Balance at January 1	$	23,815,000	$	19,224,000
Less reinsurance recoverable - net	4,191,000		2,148,000
	$	19,624,000	$	17,076,000
Incurred related to:
Current Year	14,150,000		11,752,000
Prior Year	4,959,000		1,173,000
	19,109,000		12,925,000
Paid related to:
Current Year	3,628,000		4,582,000
Prior Year	9,975,000		8,117,000
	13,603,000		12,699,000
Net balance at September 30	$	25,130,000	$	17,302,000
Plus reinsurance recoverable - net	5,741,000		2,799,000
Balance at September 30	$	30,871,000	$	20,101,000

Note F - Reinsurance

The Company has no significant changes to its reinsurance arrangements since December 31, 2011.

F-73

September 30, 2012
Expected income tax benefit at statutory rate	(2,317,732	)	34.00	%
Valuation allowance	4,961,107		(72.78	)%
Nondeductible expenses	9,822		(0.14	)%
Other	(11,893	)	0.17	%
Total	2,641,304		(38.75	)%

September 30, 2011
Expected income tax benefit at statutory rate	(282,530	)	34.00	%
Valuation allowance	—		—	%
Nondeductible expenses	—		—	%
Other	186,116		(22.76	)%
Total	(96,414	)	11.24	%

Income tax expense consists of the following for the period ending September 30:

	2012	2011
Deferred tax expense (benefit)	2,641,304	(93,414	)

The components of the Company’s deferred tax assets and liabilities as of September 30 are as follows:

	2012		2011
Deferred tax assets:
Unpaid claims and unearned premiums	1,476,929		1,449,693
Loss carry-forwards	4,856,636		1,175,045
Bad debts	153,476		105,288
Other	322,511		220,511
Valuation allowance	(4,961,107	)	—
Total deferred tax assets, net of allowance	1,848,445		2,950,537
Deferred tax liabilities:
Investment securities	934,320		519,544
Deferred policy acquisition costs	569,942		705,772
Other	344,183		174,994
Total gross deferred tax liabilities	1,848,445		1,400,310
Net deferred tax assets	—		1,550,227

Note H - Transactions with Related Party and Affiliates

On July 16, 2012, Hendricks contributed $6,000,000 of paid-in capital to Camelot. On July 17, 2012, Camelot contributed the $6,000,000 to Gateway as additional paid-in capital.

On June 29, 2011, Hendricks contributed $4,360,000 of paid-in capital to Camelot. On June 30, 2011, Camelot contributed the $4,360,000 to Gateway as additional paid-in capital.

On December 15, 2010, Camelot entered into a long-term note agreement with Hendricks. The principal amount borrowed under the note agreement is $1,500,000 and bears interest at an annual rate of 8.66%. Principal and interest payments commenced on January 15, 2011 and are due in sixty monthly installments of $30,887. The Company paid $73,689 and $92,069 in interest expense to Hendricks during the nine month periods September 30, 2012 and 2011, respectively.

Gateway has marketing and sales agreements with two companies affiliated by common ownerships; Insential Inc. (Insential) and

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American Westbrook Insurance Services (AWIS). AWIS acquired all of the assets of American Patriot Insurance Agency (APIA), effective January 1, 2010. Agreements with Insential and AWIS (formerly APIA) were entered into for the purpose of producing premium in the workers compensation and general liability lines of business associated with the contractor industry.

During the nine months ended September 30, 2012, commissions earned on written premium produced by Insential and AWIS was $234,198 and $149,839, respectively.

There were no amounts due from Insential and AWIS at September 30, 2012.

F-75

Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Expenses Relating to this Offering

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, if any, payable by our company relating to the sale of ordinary shares being registered.  All amounts are estimates except the SEC registration fee.

SEC registration fee	$	4,467
Printing and engraving expenses	10,000
Legal fees and expenses	650,000
Accounting fees and expenses	100,000
Miscellaneous expenses	20,000
	$	784,467

Expenses related to this offering, excluding underwriting discounts and selling commissions, shall be shared between the Company and the selling shareholder such that each of the Company and the selling shareholder will pay that amount of the aggregate expenses proportionate to the number of shares that such party sells in this offering.

Item 14. Indemnification of Directors and Officers

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as a provision purporting to provide indemnification against civil fraud or the consequences of committing a crime. 

Our memorandum and articles of association permit indemnification of officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained in their capacities as such unless such losses or damages arise from breach of trust, breach of duty, dishonesty, fraud or willful default of such directors or officers. 

We have entered into indemnification agreements with our directors and senior executive officers that provide such persons with additional indemnification beyond that provided in our memorandum and articles of association. 

Our company also maintains a directors and officers liability insurance policy for our directors and officers. 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted with respect to our directors or officers or persons controlling us under the foregoing provisions, our company has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United States law.

Item 15. Recent Sales of Unregistered Securities

We were formed as JJR VI, a Canadian capital pool company, on December 21, 2009 under the laws of Ontario, Canada. On December 31, 2010, following the reverse merger transaction described immediately hereafter, we filed a Certificate of Registration by Way of Continuation in the Cayman Islands to redomesticate as a Cayman Islands company. In addition, on December 30, 2010 we filed a Certificate of Incorporation on Change of Name to change our name to Atlas Financial Holdings, Inc. All references to share counts and per share values in connection with the reverse merger transaction are presented prior to the one-for-three reverse split. Our current organization is a result of a reverse merger transaction involving the following companies:

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(a) JJR VI, sponsored by JJR Capital, a Toronto based merchant bank;

(b) American Insurance Acquisition Inc., or American Acquisition, a corporation formed under the laws of Delaware as a wholly owned subsidiary of Kingsway America Inc., or KAI. KAI is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a Canadian public company formed under the laws of Ontario and whose shares are traded on the Toronto and New York Stock Exchanges; and

(c) Atlas Acquisition Corp., a Delaware corporation wholly-owned by JJR VI and formed for the purpose of merging with and into American Acquisition.

Prior to the transaction, each of American Service and American Country were wholly owned subsidiaries of KAI. In connection with the reverse merger transaction, KAI transferred 100% of the capital stock of each of American Service and American Country, to American Acquisition (another wholly owed subsidiary of KAI) in exchange for C$35.1 million of common and C$18.0 million of preferred shares of American Acquisition and promissory notes worth C$7.7 million, aggregating C$60.8 million. In addition, American Acquisition raised C$8.0 million through a private placement offering of subscription receipts to qualified investors at a price of C$2.00 per subscription receipt.

All references to share counts and per share values in connection with the reverse merger transaction are presented prior to the one-for-three reverse stock split. KAI received 13,804,861 restricted voting common shares of our company, which we refer to as “restricted voting shares”, then valued at $27.8 million, along with 18,000,000 non-voting preferred shares of our company then valued at C$18.0 million and C$8.0 million cash in exchange for total consideration of C$60.8 million in the form of 100% of the outstanding shares of American Acquisition and full payment of certain promissory notes. Investors in the American Acquisition private placement offering of subscription receipts received 3,983,502 of our ordinary shares, which we refer to as “ordinary shares”, plus warrants to purchase one ordinary share of our company for each subscription receipt at C$2.00 at any time until December 31, 2013. Every 10 common shares of JJR VI held by the shareholders of JJR VI immediately prior to the reverse merger were, upon consummation of the merger, consolidated into one ordinary share of JJR VI. Upon redomestication in the Cayman Islands, these consolidated shares were then exchanged on a one-for-one basis for our ordinary shares.

Options

On March 18, 2010, JJR VI issued options to purchase 83,333 ordinary shares to the agent that assisted JJR VI in raising capital (the “IPO agent”) and options to purchase 356,667 shares to directors. All of the options were vested at the date of grant. Options to purchase 71,333 shares held by directors expired before the merger as a result of a director resignation. All outstanding JJR VI options were exchanged for Atlas options without modification on the basis of 1 Atlas option for each 10 JJR VI options and the exercise price was changed from C$0.30 to C$3.00, which was on the same basis as the JJR VI exchange ratio for shares, and thus did not represent any additional value or related expense. This resulted in 8,333 and 28,534 Atlas options for the agent and former JJR VI directors, respectively, outstanding after the merger. In total, 24,008 of these options were exercised in 2011. The options granted on March 18, 2010 have an aggregate intrinsic value of $39,000 as of December 31, 2011. On January 6, 2011, we adopted a stock option plan in order to advance our interests by providing incentives to eligible persons defined in the plan. The maximum number of ordinary shares reserved for issuance under the plan together with all other security based plans is equal to 10% of issued and outstanding ordinary shares at the date of grant.

The exercise price of options granted under the plan cannot be less than the volume weighted average trading price of our ordinary shares for the five preceding trading days. Options generally vest over a three year period and expire ten years from grant date. On January 18, 2011, we granted options to purchase 123,250 ordinary shares to officers and directors at an exercise price of C$6.00 per share. The options vest 25% at date of grant and 25% on each of the next three anniversary dates and expire on January 18, 2021. The weighted average grant date fair value of the options is $1.24 per share. As of September 30, 2012 the options had no aggregate intrinsic value.

On January 11, 2013, Atlas granted options to purchase 91,667 ordinary shares under the Company’s stock option plan, all of which were granted to the Company’s officers. The granted options have an exercise price of C$6.45 and vest equally on the first, second and third anniversary of the grant date. The options expire on January 11, 2023.

Warrants

Pursuant to the private placement, 1,327,834 warrants to purchase one ordinary voting share per warrant. All the warrants were still outstanding at September 30, 2012 and expire on December 31, 2013.

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Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits.

Exhibit	Description
1.01	Stock Purchase Agreement among Atlas Financial Holdings, Inc., and Hendricks Holding Company, Inc. dated as of October 24, 2012
1.02*	Form of Underwriting Agreement
3.1	Memorandum of Association of Atlas Financial Holdings, dated December 24, 2010.
3.1	Restated Certificate of Incorporation of American Country Insurance Company, Inc., as amended as of February 13, 2004
3.1	Restated Certificate of Incorporation of American Service Insurance, Inc., as amended as of June 15, 2009
3.1	Restated Certificate of Incorporation of American Insurance Acquisition, Inc., as amended December 31, 2010
4.1	Memorandum of Association of Atlas Financial Holdings, dated December 24, 2010, included in item 3.1a
4.1	By-laws of American Country Insurance Company, Inc., as amended September 14, 2005
4.1	By-laws of American Service Insurance, Inc., as amended September 20, 2005
4.1	By-laws of American Insurance Acquisition, Inc., as amended July 9, 2010
4.2	Specimen Ordinary Share Certificate
4.3	Specimen Warrant Agreement
5.1+	Opinion of Conyers Dill & Pearman Ltd.
10.1	Atlas Financial Holdings, Inc. Stock Option Plan dated January 6, 2011
10.2	Form of Atlas Employment Agreement for Executive Management, updated January 1, 2012
10.3	Employee Share Purchase Plan Agreement, as adopted June 1, 2011
10.4	Defined Contribution Plan Document dated August 11, 2011
10.5	Transition Services Agreement between Kingsway Financial Services, Inc and American Insurance Acquisition, Inc., dated December 31, 2010
10.6	Program Manager Agreement between American Service Insurance Company and both Universal Casualty Company and Kingsway America Inc., dated January 1, 2011
10.7	150 Northwest Point - Sale Agreement
10.8	150 Northwest Point - Sale Agreement, Amendment 1
10.9	150 Northwest Point - Sale Agreement, Amendment 2
10.10	150 Northwest Point - Lease Agreement
10.11*	Form of Lock-Up Agreement entered into with our directors, executive officers and the selling shareholder
14	Atlas Financial Holdings, Inc. Code of Business Conduct and Ethics, dated January 1, 2011
16	Letter from KPMG LLP regarding its concurrence with the statements made by Atlas in the current report concerning the dismissal as the registrant’s principal accountant.
21	List of Subsidiaries
23.1	Consent of Johnson Lambert LLP
23.2	Consent of KPMG LLP
23.3	Consent of Brown Smith Wallace LLC
24.1+	Power of Attorney
99.1	Audit Committee Charter
99.2*	Corporate Governance and Nominating Committee Charter

(*) To be filed.

(+) Previously filed.

(b) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or the information is included in the Registrant’s consolidated financial statements or related notes.

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Item 17. Undertakings

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

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

The undersigned Registrant hereby undertakes that:

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

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

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Elk Grove Village, State of Illinois, on this 17th day of January, 2013.

ATLAS FINANCIAL HOLDINGS, INC.

/S/    Scott D. Wollney

Scott D. Wollney

President, Chief Executive Officer and Director

(Principal Executive Officer)

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

Signature	Title	Date
/S/    Scott D. Wollney Scott D. Wollney	President, Chief Executive Officer and Director (Principal Executive Officer)	January 17, 2013
/S/    Paul A. Romano Paul A. Romano	Vice President, Chief Financial Officer (Principal Accounting Officer)	January 17, 2013
* Gordon G. Pratt	Director, Chairman of the Board	January 17, 2013
* Jordan M. Kupinsky	Director	January 17, 2013
* Larry G. Swets, Jr.	Director	January 17, 2013

*    /s/ Scott D. Wollney

Scott D. Wollney

Attorney-in-fact

II-5

EXHIBIT INDEX

Exhibit	Description
1.01	Stock Purchase Agreement among Atlas Financial Holdings, Inc., and Hendricks Holding Company, Inc. dated as of October 24, 2012
1.02*	Form of Underwriting Agreement
3.1	Memorandum of Association of Atlas Financial Holdings, dated December 24, 2010.
3.1	Restated Certificate of Incorporation of American Country Insurance Company, Inc., as amended as of February 13, 2004
3.1	Restated Certificate of Incorporation of American Service Insurance, Inc., as amended as of June 15, 2009
3.1	Restated Certificate of Incorporation of American Insurance Acquisition, Inc., as amended December 31, 2010
4.1	Memorandum of Association of Atlas Financial Holdings, dated December 24, 2010, included in item 3.1a
4.1	By-laws of American Country Insurance Company, Inc., as amended September 14, 2005
4.1	By-laws of American Service Insurance, Inc., as amended September 20, 2005
4.1	By-laws of American Insurance Acquisition, Inc., as amended July 9, 2010
4.2	Specimen Ordinary Share Certificate
4.3	Specimen Warrant Agreement
5.1+	Opinion of Conyers Dill & Pearman Ltd.
10.1	Atlas Financial Holdings, Inc. Stock Option Plan dated January 6, 2011
10.2	Form of Atlas Employment Agreement for Executive Management, updated January 1, 2012
10.3	Employee Share Purchase Plan Agreement, as adopted June 1, 2011
10.4	Defined Contribution Plan Document dated August 11, 2011
10.5	Transition Services Agreement between Kingsway Financial Services, Inc and American Insurance Acquisition, Inc., dated December 31, 2010
10.6	Program Manager Agreement between American Service Insurance Company and both Universal Casualty Company and Kingsway America Inc., dated January 1, 2011
10.7	150 Northwest Point - Sale Agreement
10.8	150 Northwest Point - Sale Agreement, Amendment 1
10.9	150 Northwest Point - Sale Agreement, Amendment 2
10.10	150 Northwest Point - Lease Agreement
10.11*	Form of Lock-Up Agreement entered into with our directors, executive officers and the selling shareholder
14	Atlas Financial Holdings, Inc. Code of Business Conduct and Ethics, dated January 1, 2011
16	Letter from KPMG LLP regarding its concurrence with the statements made by Atlas in the current report concerning the dismissal as the registrant’s principal accountant.
21	List of Subsidiaries
23.1	Consent of Johnson Lambert LLP
23.2	Consent of KPMG LLP
23.3	Consent of Brown Smith Wallace LLC
24.1+	Power of Attorney
99.1	Audit Committee Charter
99.2*	Corporate Governance and Nominating Committee Charter

(*) To be filed.

(+) Previously filed.

(b) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or the information is included in the Registrant’s consolidated financial statements or related notes.

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EX-1.1

EXHIBIT 1.01

STOCK PURCHASE AGREEMENT

AMONG

ATLAS FINANCIAL HOLDINGS, INC.,

AND

HENDRICKS HOLDING COMPANY, INC.

DATED AS OF OCTOBER 24, 2012

Table of Contents

Article I DEFINITIONS1

SECTION 1.1 Defined Terms1

Article II PURCHASE AND SALE OF CAPITAL STOCK        13

SECTION 2.1 Purchase and Sale13

SECTION 2.2 Purchase Price13

SECTION 2.3 Other Post‑Closing Adjustments15

SECTION 2.4 Closing and Effective Date20

SECTION 2.5 Closing Deliveries                        20

Article III REPRESENTATIONS AND WARRANTIES22

SECTION 3.1 Representations and Warranties of Seller22

SECTION 3.2 Representations and Warranties of Buyer39

Article IV COVENANTS                                40

SECTION 4.1 Conduct of Business of the Company40

SECTION 4.2 Access to Information43

SECTION 4.3 Consents, Approvals and Filings43

SECTION 4.4 Public Announcements44

SECTION 4.5 Subsequent Statutory Statements45

SECTION 4.6 Acquisition Proposal45

SECTION 4.7 Intercompany Accounts; Affiliate Agreements45

SECTION 4.8 Termination of Signing and Withdrawal Powers46

SECTION 4.9 Obligations of Affiliates46

SECTION 4.10 Notification of Certain Matters46

SECTION 4.11 Confidentiality; Covenant Not to Compete; Non‑Solicitation46

SECTION 4.12 Board of Directors of Buyer48

Article V CONDITIONS PRECEDENT48

SECTION 5.1 Conditions to Obligations of Buyer48

SECTION 5.2 Conditions to Obligations of Seller49

Article VI SURVIVAL50

Article VII INDEMNIFICATION50

SECTION 7.1 Obligation to Indemnify50

SECTION 7.2 Indemnification Notice Procedures53

SECTION 7.3 Third Party Claims54

SECTION 7.4 Survival56

SECTION 7.5 Indemnification Payments; Characterization56

Article VIII TAX MATTERS56

SECTION 8.1 Tax Indemnity56

SECTION 8.2 Preparation and Filing of Tax Returns57

SECTION 8.3 Tax Refunds59

SECTION 8.4Tax Notice; Tax Controversies59

SECTION 8.5 Cooperation and Controversies60

SECTION 8.6 Transfer Taxes                        60

SECTION 8.7 Code Section 338(h)(10) Election60

Article IX TERMINATION PRIOR TO THE CLOSING61

SECTION 9.1 Termination of Agreement61

SECTION 9.2 Effect of Termination; Survival                62

Article X GENERAL PROVISIONS62

SECTION 10.1 Fees and Expenses62

SECTION 10.2 Notices62

SECTION 10.3 Interpretation63

SECTION 10.4 Entire Agreement; Third‑Party Beneficiaries63

SECTION 10.5 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial        64

SECTION 10.6 Assignment64

SECTION 10.7 Specific Performance64

SECTION 10.8 Severability65

SECTION 10.9 Amendment; Modification and Waiver65

SECTION 10.10 Counterparts65

SECTION 10.11 Attorney's Fees65

SECTION 10.12 Interest65

Exhibit A - Holdback Note Terms

Exhibit B - Form of WC Reinsurance Agreement

Exhibit C - Purchase Price Calculation and Payment Methodology

Exhibit D - Buyer Note Terms

Exhibit E - Proposed Final DTAs and DTLs

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of October 24, 2012 (the “Date of this Agreement”), is made by and among , Hendricks Holding Company, Inc., a Wisconsin corporation (“Seller”), and Atlas Financial Holdings, Inc., a Cayman Islands company (“Buyer”). Buyer and Seller are sometimes referred to herein as the “Parties” and each, individually, as a “Party”.

RECITALS

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of Camelot Services, Inc., a Missouri corporation (the “Company”);

WHEREAS, the Company in turn owns all of the issued and outstanding shares of capital stock, par value $100.00 per share, of Gateway Insurance Company, a Missouri insurance company (“Gateway”) (the “Gateway Shares”); and

WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to purchase from Seller, 500 shares of the common stock, par value $1.00 per share, of the Company (the “Company Shares”), which constitutes all of the issued and outstanding shares of capital stock of the Company.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and obligations contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. For purposes of this Agreement, the following terms will have the respective meanings set forth below:

“Acquisition Proposal” means any inquiry, proposal or offer from any third party relating to, in a single transaction or series of related transactions, any (a) acquisition of assets of the Company or of Gateway, (b) acquisition of beneficial ownership of any capital stock or other securities of the Company or Gateway, or (c) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or Gateway; in each case, other than the transactions contemplated by this Agreement, including but not limited to any sale of the WC Renewal Rights, or any such transaction directly involving solely Seller's or its Affiliates' (other than the Company's or Gateway's) assets, businesses or capital stock or securities.

“Action” means any civil, criminal, administrative, investigative or informal action, audit, demand, suit, claim, arbitration, hearing, litigation, dispute, investigation or other proceeding of any kind or nature.

“Affiliate” means, with respect to any Person, any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person in question. For purposes of the foregoing, “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise.

“Affiliate Agreement” has the meaning set forth in Section 3.1(r).

“Annual DTA DTL Notice” has the meaning set forth in Section 2.3(b)(vii).

“Annual Tax Cost” has the meaning set forth in Section 2.3(b)(vii).

“Annual Tax Savings” has the meaning set forth in Section 2.3(b)(vii).

“Audited SAP Statements” has the meaning set forth in Section 3.1(d)(i).

“Book Value” has the meaning set forth in Section 2.2(a).

“Business Day” means any day other than a Saturday, a Sunday or any other day on which commercial banks in the Chicago, Illinois are required to be closed for regular banking business.

“Buyer Indemnified Parties” has the meaning set forth in Section 7.1(a).

“Buyer Material Adverse Effect” means a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated hereby on a timely basis.

“Buyer Note” has the meaning set forth in Section 2.2(c).

“Buyer Preferred Stock” means the preferred stock, par value $0.001 per share, of Buyer.

“Buyer Preferred Stock Amount” means an amount equal to (A) the Effective Date Holdback Reserves Estimate less (B) the Effective Date Holdback Reserves, plus (C) $2,000,000.

“Cash Payment” has the meaning set forth in Section 2.2(b).

“Chicago Court” has the meaning set forth in Section 10.5(a).

“CIE Claims” means all claims for losses in connection with the insurance policies or other insurance obligations under the CIE Program that create potential liabilities for Gateway (whether known or unknown as of the Closing Date).

“CIE Program” consists of the insurance policies issued in connection with and other insurance obligations created by the discontinued Casualty Indemnity Exchange business of Gateway.

“Closing” has the meaning set forth in Section 2.4.

“Closing Adjustment Amount” has the meaning set forth in Section 2.2(d)(ii).

“Closing Adjustment Payment” has the meaning set forth in Section 2.2(e).

“Closing Balance Sheet” has the meaning set forth in Section 2.2(d)(ii).

“Closing Date” has the meaning set forth in Section 2.4.

“Closing Preferred Shares” has the meaning set forth in Section 2.2(b).

“Closing Statements” has the meaning set forth in Section 2.2(d)(ii).

“Code” means the Internal Revenue Code of 1986, as amended.

“Company Actuarial Analysis” has the meaning set forth in Section 3.1(d)(iv).

“Company Contracts” has the meaning set forth in Section 3.1(m)(iii).

“Company Shares” has the meaning set forth in the Recitals.

“Constituent Documents” of a Person means, as applicable, the declaration and charter, certificate of incorporation, articles of incorporation, certificate of designations, bylaws, or any similar organizational or governing document or instrument of a Person.

“Contract” means any contract, agreement, mortgage, indenture, debenture, note, loan, bond, Lease, sublease, license, franchise, obligation, instrument, promise, understanding or other binding commitment, arrangement or undertaking of any kind whether oral or written, and whether express or implied, to which a Person is a party or by which any property or assets owned or used by such Person may be bound or affected.

“Date of this Agreement” has the meaning set forth in the introductory paragraph.

“Decrease Amount” has the meaning set forth in Section 2.3(a)(i)(C).

“Defense Notice Period” has the meaning set forth in Section 7.3(b)(i).

“Deferred Policy Acquisition Costs” means the acquisitions costs, including unearned commissions and accrued premium taxes, associated with the unearned premium reserve for all lines of business of Gateway (except for the Deferred Policy Acquisition Costs related to the WC Program, which are to be netted from ceding premium to WC Reinsurer in connection with the Loss Portfolio Transfer Agreement and the Quota Share Agreement), determined in accordance with GAAP consistently applied.

“Deferred Tax Assets” or “DTA” mean a deferred tax asset that would be recognized as a deferred tax asset under GAAP for the gross deferred tax asset before non admittance or valuation allowance considerations, determined as of the Effective Date.

“Deferred Tax Liability” or “DTL” mean a deferred tax liability that would be recognized as a deferred tax liability under GAAP for the gross deferred tax liability before non admittance or valuation allowance considerations, determined as of the Effective Date.

“Demand Notice” has the meaning set forth in Section 7.2(b).

“Disclosure Schedule” means the disclosure schedule accompanying this Agreement, dated as of the Date of this Agreement and initialed by the Parties, which will be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Agreement.

“Dispute Notice” has the meaning set forth in Section 2.2(d)(iii).

“Dispute Period” has the meaning set forth in Section 2.2(d)(iii).

“Disputed Items” has the meaning set forth in Section 2.2(d)(iii).

“DTA DTL Consultation Period” has the meaning set forth in Section 2.3(b)(iv).

“DTA DTL Notice of Disagreement” has the meaning set forth in Section 2.3(b)(iii).

“DTA DTL Review Period” has the meaning set forth in Section 2.3(b)(ii).

“Effective Date” has the meaning set forth in section 2.4(b).

“Effective Date Holdback Reserves” means Holdback Reserves as of the Effective Date.

“Effective Date Holdback Reserves Estimate” has the meaning set forth in Section 2.3(a)(i).

“Employee Benefit Plan” means (a) any pension plan, 401(k) plan, profit sharing plan, health and welfare plan, and any other “employee benefit plan” (as defined in Section 3(3) of ERISA); (b) any “multiemployer plan” (as defined in Section 3(37) of ERISA); (c) any other benefit arrangement, obligation, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to one or more present or former employees, directors, agents, or independent contractors, including, without limitation, employment agreements, severance policies or arrangements, executive compensation arrangements, incentive arrangements, sick leave, vacation pay, salary continuation, consulting or other compensation arrangements, worker's compensation, bonus plans, deferred compensation, incentive compensation, stock purchase, stock option, stock appreciation or other equity based severance, employee assistance, cafeteria (Section 125 plan), medical

reimbursement, dependent care reimbursement or other plan or agreement relating to compensation or fringe benefits; and (d) any change in control plan, deal bonus, retention program or agreement, in the case of each of (a) (d) that was or is established, maintained or sponsored by the Company or Gateway or to which the Company or Gateway contributes or which the Company or Gateway otherwise has or may have any liability, contingent or otherwise, either directly or as a result of an ERISA Affiliate.

“Environmental Laws” means any and all Requirements of Law, and any administrative or judicial interpretations thereof, relating to the protection of the environment or health and safety, including without limitation those pertaining to the use, distribution, generation, emission, discharge, handling, storage, processing, transportation, treatment, disposal, investigation, remediation and monitoring of Hazardous Materials.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all regulations and rules issued thereunder, or any successor law.

“ERISA Affiliate” means any Person that, together with the Company, is or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which Seller or the Company is or has been a general partner.

“Estimated Buyer Preferred Stock Amount” has the meaning set forth in Section 2.2(b).

“Estimated Cash Payment” has the meaning set forth in Section 2.2(d)(i).

“Estimated Closing Amounts” has the meaning set forth in Section 2.2(d)(ii).

“Estimated Closing Balance Sheet” has the meaning set forth in Section 2.2(d)(i).

“Estimated Closing Payment” has the meaning set forth in Section 2.2(d)(i).

“Estimated Loss Development Statement” has the meaning set forth in Section 2.2(a)(iv).

“Estimated Purchase Price” has the meaning set forth in Section 2.2(d)(i).

“Excess Amount” has the meaning set forth in Section 2.3(a)(i)(B).

“Extended Representations” has the meaning set forth in Article VI.

“Filing Party” has the meaning set forth in Section 8.1(c).

“Final Closing Amounts” has the meaning set forth in Section 2.2(d)(ii).

“Final DTA Adjustment” has the meaning set forth in Section 2.3(b)(vii).

“Final DTA DTL Calculation” has the meaning set forth in Section 2.3(b)(v).

“Final Determination” means: (a) a decision, judgment, decree or other order by the United States Tax Court or any other court of competent jurisdiction that has become final and unappealable; (b) a closing agreement under Section 7121 of the Code or a comparable provision of any state, local or foreign Tax Law that is binding against the IRS or other Taxing Authority; (c) any other final settlement with the IRS or other Taxing Authority; or (d) the expiration of an applicable statute of limitations.

“Final Preferred Stock Adjustment Date” means December 31, 2017 or such later date as may be reasonably requested by Seller.

“Final Preferred Stock Adjustment Determination” has the meaning set forth in Section 2.3(a)(ii)(A).

“Gateway Shares” has the meaning set forth in the Recitals.

“GAAP Financial Statements” has the meaning set forth in Section 3.1(d)(ii).

“Governmental Entity” means any federal, state, local or foreign governmental or regulatory authority, agency, commission, department, body, court or other legislative, executive, or judicial or quasi judicial governmental entity.

“Guaranty Fund” means any insolvency fund, including any guaranty fund, association, pool, plan or other facility (whether participation therein is voluntary or involuntary) that provides for the assessment of, payment by or assumption by its participants or members of a part or the whole of any claim, debt, charge, fee or other obligation of any insurer or reinsurer, or its respective successors or assigns, that has been declared insolvent by any authority having jurisdiction, or which is otherwise unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

“Hazardous Materials” means (a) any petrochemical or petroleum products, oil, waste oil, asbestos in any form that is or could become friable, and polychlorinated biphenyls; (b) any substance that may give rise to liability pursuant to, or is regulated under any applicable Environmental Laws; and (c) any materials or substances defined, listed or characterized in Environmental Laws as “hazardous,” “toxic,” “pollutant”, or “contaminant,” or words of similar meaning or regulatory effect.

“Holdback Note” means that certain promissory note, issued in connection with an Optional Redemption, pursuant to the terms set forth on Exhibit A hereto.

“Holdback Reserves” means the reserves associated with the Taxi and Truck Program and other lines of business (excluding reserves associated with the CIE Program and WC Program) as set forth on Gateway's SAP Statements.

“Holdback Reserves Estimate” means the selected point reserve estimate of the Taxi and Truck Program and other lines of business (excluding the reserves associated with the CIE Program and WC Program), as the same may be determined from time to time by a mutually agreed upon actuary; provided, that for purposes of the Estimated Closing Payment and the number of Closing Preferred Shares, the Holdback Reserves Estimate as of September 30, 2012 will be determined by Towers Watson.

“Indemnification Basket” has the meaning set forth in Section 7.1(b)(ii).

“Indemnification Cap” has the meaning set forth in Section 7.1(b)(iii).

“Indemnification Notice” has the meaning set forth in Section 7.2(a).

“Indemnified Party” has the meaning set forth in Section 7.2(a).

“Indemnifying Party” has the meaning set forth in Section 7.2(a).

“Independent Expert” means an independent certified public accounting firm with appropriate actuarial expertise in the United States of national recognition mutually agreeable to Seller and Buyer, which is not the auditor or principal accountant of either Seller or Buyer.

“Insurance Laws” means any Requirements of Law regulating the business and products of insurance and reinsurance.

“Insurance Licenses” has the meaning set forth in Section 3.1(n)(iii).

“Intellectual Property” means (a) trademarks, service marks, brand names, certification marks, collective marks, d/b/a's, domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same; (b) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations in part and renewal applications, and including renewals, extensions and reissues; (c) trade secrets, confidential information and know how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists; (d) published and unpublished works of authorship, whether copyrightable or not (including without limitation databases and other compilations of information), including mask

rights and computer software (including firmware and middleware), copyrights therein and thereto, registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (e) any other intellectual property or proprietary rights.

“IRS” means the United States Internal Revenue Service.

“IT Assets” means computers, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipment, in each case, owned by the Company or Gateway or licensed or leased by or on behalf of the Company or Gateway from any third parties.

“Knowledge” means the actual knowledge, after reasonable inquiry, of any of Daniel Boxell, Serena Lintker, Sandie Lehde and Richard Kleinschmidt.

“Law” means any foreign, federal, state or local law, ordinance, writ, statute, treaty, rule or regulation.

“Lease” means a lease, sublease, license or other agreement, including all amendments, extensions, renewals, and other agreements with respect thereto, which grants a Person the right to possess, use or occupy (or to grant others the right to possess, use or occupy) any Real Property or personal property.

“Leased Real Property” has the meaning set forth in Section 3.1(q)(iii).

“Licensed Intellectual Property” has the meaning set forth in Section 3.1(p)(i).

“Liens” means all pledges, liens, encumbrances and security interests of any kind (other than restrictions on transfer imposed by Securities Act of 1933, as amended (or any other applicable securities Laws)).

“Loss Development” means unpaid losses and loss adjustment expenses of Gateway associated with the Taxi and Truck Program, as finally determined in accordance with SAP consistently applied.

“Loss Development Decrease” has the meaning set forth in Section 2.3(a)(ii)(B).

“Loss Development Increase” has the meaning set forth in Section 2.3(a)(ii)(C).

“Loss Development Statement” has the meaning set forth in Section 2.3(a)(ii)(B).

“Loss Portfolio Transfer Agreement” means that certain Loss Portfolio Transfer Agreement, by and between Gateway and WC Reinsurer, dated as of the Closing Date, the terms of which are summarized on Exhibit B hereto.

“Losses” has the meaning set forth in Section 7.1(a).

“Material Filings” has the meaning set forth in Section 4.3(a)(iv).

“Missouri Department” means the Missouri Department of Insurance, Financial Institutions and Professional Registration.

“Multiemployer Plan” has the meaning set forth in Section 3.1(h)(xi).

“Necessary Permits” has the meaning set forth in Section 4.3(a).

“Negative Condition or Restriction” means any condition or restriction (a) that would not customarily be imposed in transactions of the type contemplated by the Transaction Agreements; (b) solely with respect to Buyer and its Affiliates, that materially differs from those statutory or regulatory obligations imposed on companies holding Insurance Licenses similar to that of Gateway and engaged in business similar to that of Gateway and would be materially adverse to Buyer; (c) that is not conditioned on the consummation of the transactions contemplated by the Transaction Agreements in accordance with the material terms of the Transaction Agreements; (d) solely with respect to Buyer and its Affiliates, that materially adversely affects the ability of Buyer or any of its Affiliates (including, following the Closing, Gateway) to conduct its business substantially in the same manner as such business is being conducted, including by requiring the sale, lease, license, disposal or holding separate of any

subsidiaries, assets, rights, product lines, licenses, categories of assets or business or other operations or interests of Buyer or any Affiliate; or (e) solely with respect to Buyer and its Affiliates, that would otherwise have a Buyer Material Adverse Effect.

“Notice Period” has the meaning set forth in Section 2.2(d)(iii).

“Optional Redemption” means the right of Buyer to redeem the Buyer Preferred Stock Amount issued to Seller at the Closing at any time following the second anniversary of the Closing, by payment of an amount equal to the Redemption Payment.

“Optional Redemption Notice” has the meaning set forth in Section 2.3(a)(iv).

“Order” means any award, decision, injunction, judgment, decree, settlement, order, process, ruling, subpoena or verdict (whether temporary, preliminary or permanent) entered, issued, made or rendered by any arbitrator, Governmental Entity or other tribunal or authority of competent jurisdiction.

“Ordinary Course of Business” means, with respect to the Company or Gateway, the ordinary course of business of the Company or Gateway, respectively, consistent with past custom and practice (including with respect to quantity and frequency).

“PBGC” has the meaning set forth in Section 3.1(h)(ix).

“Pension Plan” means all Employee Benefit Plans that are defined benefit pension plans or that are otherwise subject to Section 412 of the Code or Title IV of ERISA.

“Permits” has the meaning set forth in Section 3.1(k)(i); provided that the term “Permits” will not include the Insurance Licenses.

“Permitted Liens” means Liens for Taxes that are not yet due and payable or are being contested in good faith by appropriate proceedings.

“Person” means any natural person, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

“Post Closing Tax Year” means a taxable year that begins after the Closing Date, including the allocable portion of the Straddle Period determined under Section 8.1(b).

“Pre Closing Tax Year” means a taxable year that ends on or before the Closing Date, including the allocable portion of the Straddle Period determined under Section 8.1(b).

“Preemptive Rights” has the meaning set forth in Section 3.1(b)(ii)(B).

“Preferred Stock Share Price” means $1.00.

“Proposed Final DTAs and DTLs” has the meaning set forth in Section 2.3.

“Purchase Price” has the meaning set forth in Section 2.2(a).

“Purchase Price Calculation and Payment Methodology” has the meaning set forth in Section 2.2(a).

“Quota Share Agreement” means that certain 100% Quota Share Reinsurance Agreement, by and between Gateway and WC Reinsurer, dated as of the Closing Date.

“Real Property” means all land, together with all buildings, structures, improvements and fixtures located thereon, including all electrical, mechanical, plumbing and other building systems, fire protection, security and surveillance systems, telecommunications, computer, wiring, and cable installations, utility installations, water distribution systems, and landscaping, together with all easements and other rights and interests appurtenant thereto (including air, oil, gas, mineral, and water rights).

“Redemption Payment” means an amount equal to $1.00 for each share of Preferred Stock held by Seller on the date of the Optional Redemption (after all adjustments provided for in Section 2.3(a)(ii)(B) have been made).

“Reinsurance Contract” means any reinsurance or retrocession Contract under which Gateway may be either obligated to make payments or be eligible to continue to receive benefits, to which Gateway is a party (whether as a ceding or assuming company) or by or to which Gateway is bound or subject, as each such Contract may have been amended, modified or supplemented.

“Remaining Disputed Items” has the meaning set forth in Section 2.2(d)(iii).

“Requirements of Law” means, with respect to any Person, any Law or Order, in each case binding on that Person or such Person's property or assets.

“Resolved Items” has the meaning set forth in Section 2.2(d)(iii).

“SAP” means, as applicable, the statutory accounting practices prescribed or permitted by the Missouri Department, applied on a consistent basis.

“SAP Statements” has the meaning set forth in Section 3.1(d)(i).

“Section 338(h)(10) Election” has the meaning set forth in Section 8.7.

“Seller Indemnified Parties” has the meaning set forth in Section 7.1(c).

“Seller Material Adverse Effect” means (a) a material adverse effect on the financial condition, properties, assets, liabilities, business or results of operations of the Company or Gateway; provided, however, that a “Seller Material Adverse Effect” will exclude any such effect arising out of or in connection with: (i) changes in general economic or business conditions, including changes in the capital, insurance, or financial markets or interest or currency rates; (ii) any changes that are the result of factors generally affecting the property casualty insurance industry in the geographic areas in which the Company operates; (iii) changes in any applicable Requirements of Law or applicable SAP (provided, that, with respect to clauses (i) (iii), such change, event, circumstance or development does not (x) primarily relate to (or have the effect of primarily relating to) the Company or (y) disproportionately adversely affect the Company compared to other companies of similar size operating in the property and casualty insurance industry in similar geographic areas in which the Company operates or conducts business); (iv) any natural catastrophe events, hostility, sabotage, military action or any escalation or worsening thereof, acts of war or terrorism; (v) the negotiation, execution and delivery of this Agreement or any Transaction Agreement or the public announcement thereof; (vi) the identity of Buyer; or (vii) the effect of any action taken by Buyer or its Affiliates; or (b) a material adverse effect on the ability of Seller to perform its obligations under this Agreement, any Transaction Agreement or to consummate the transactions contemplated hereby or thereby on a timely basis.

“Seller Tax Claim” has the meaning set forth in Section 8.4.

“September 30 Holdback Reserves” means the Holdback Reserves as of September 30, 2012.

“Settlement Date” has the meaning set forth in Section 2.2(e).

“Special Dividend” has the meaning set forth in Section 2.2(c).

“Special Representations” has the meaning set forth in Article VI.

“Straddle Period” has the meaning set forth in Section 8.1(b).

“Support Services Agreement” means that certain Support Services Agreement, by and between Gateway and WC Reinsurer, dated as of the Closing Date.

“Tax Claim” has the meaning set forth in Section 8.4.

“Tax Dispute” has the meaning set forth in Section 8.2(c).

“Tax Dispute Date” has the meaning set forth in Section 8.2(c).

“Tax Indemnifying Party” has the meaning set forth in Section 8.2(c).

“Tax Package” has the meaning set forth in Section 8.5(b).

“Tax Referee” has the meaning set forth in Section 8.2(c).

“Tax Return” means any return, form (including, without limitation IRS Form 8275 or 8275 R), report or statement filed or required to be filed with respect to any Tax (including any elections, declarations, schedules or attachments thereto, and any amendment thereof) with a Taxing Authority.

“Taxes” means all federal, state, county, local, foreign and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a Taxing Authority, including all income, franchise, profits, capital gains, capital stock, gross receipts, production, customs, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, alternative minimum, add on, value added, capital taxes, withholding and other similar charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and all estimated taxes, deficiency assessments, additions to tax and penalties (civil or criminal), interest, and additional amounts imposed by any Taxing Authority on or in respect of a failure to comply with any requirement relating to such taxes or any Tax Return. “Taxes” also includes any liabilities or obligations under any agreements or arrangements with any Person with respect to the liability for, or sharing of, Taxes (including pursuant to Section 1.1502 6 of the Treasury Regulations or comparable provisions of state, local or foreign Tax Law), including any liability for Taxes as a transferee or successor, by Contract or otherwise.

“Taxi and Truck Program” means, collectively, the Taxi and Limo Program and the Truck Program.

“Taxi and Limo Program” means Gateway's public auto program writing commercial auto insurance for small to mid size taxi and limousine drivers, and also includes any paratransit or any other similar operators of light vehicles in the public automobile insurance space.

“Taxing Authority” means the IRS and any other Governmental Entity responsible for the administration of any Tax.

“Termination Date” has the meaning set forth in Section 9.1(b).

“Third Party Claim” has the meaning set forth in Section 7.3(a).

“Transaction Agreements” means, collectively, this Agreement and each other agreement or instruments executed by the Parties, and their respective Affiliates, in connection with the consummation of the transactions contemplated hereby, including, without limitation, the WC Reinsurance Agreement.

“Transfer Taxes” has the meaning set forth in Section 8.6.

“Transferred Companies” means the Company and Gateway.

“Treasury Regulations” means the final, temporary or proposed regulations promulgated by the United States Department of the Treasury Department under the Code.

“Truck Program” will mean Gateway's long haul truck program writing commercial auto, cargo and general liability insurance for small to mid size truckers.

“WC Program” means Gateway's workers' compensation line of business for roofing contractors.

“WC Reinsurance Agreement” means the Quota Share Agreement substantially in the form of Exhibit B hereto.

“WC Reinsurance Transaction” means the consummation, concurrent with the Closing, of the transactions contemplated by the WC Reinsurance Agreement.

“WC Reinsurer” means (i) Patriot Insurance Company, Ltd., a Bermuda company, or (ii) such other reinsurance entity as is designated by Seller and is reasonably acceptable to Buyer; provided that, in the case that such party under (i) or (ii) is no longer a party to the WC Reinsurance Agreement for any reason, other than by reason of a commutation of all liabilities under the WC Reinsurance Agreement, Seller will remain liable for the obligations of WC Reinsurer thereunder and for the replacement of any reinsurer with another reinsurer such that Gateway shall continue to take credit for any such reinsurance on its financial statements.

“WC Renewal Rights” means Gateway's rights to insurance policy renewals under its WC Program.

“WC Renewal Rights Proceeds” means any proceeds received by Gateway from the sale of the WC Renewal Rights between September 30, 2012 and the Closing Date.

ARTICLE II

PURCHASE AND SALE OF CAPITAL STOCK

SECTION 2.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, the Company Shares, free and clear of all Liens and Preemptive Rights.

SECTION 2.2 Purchase Price.

(a)Purchase Price Calculation. The aggregate purchase price for the Company Shares (the “Purchase Price”) will, subject to Sections 2.2(d) and 2.3 hereof, be as follows: (i) the GAAP book value of the Company as of the Closing Date after giving effect to the WC Reinsurance Transaction and disregarding any reserves for CIE Claims (the “Book Value”), minus (ii) DTAs of the Company (net of the DTLs of the Company), minus (iii) Deferred Policy Acquisition Costs, plus (iii) $2,000,000, plus (iv) any WC Renewal Rights Proceeds (in each case, as adjusted post closing pursuant to Sections 2.2(d) and 2.3). For purposes hereof, the Purchase Price calculation will be determined in accordance with GAAP consistently applied and in a manner consistent with the example calculation (prepared based on the Company's preliminary unaudited consolidated balance sheet contained in its GAAP Financial Statement as of September 30, 2012 provided to Buyer on October 23, 2012) attached hereto as Exhibit C (the “Purchase Price Calculation and Payment Methodology”).

(b)Purchase Price Payment. Subject to Sections 2.2(d) and 2.3 hereof, the Purchase Price payment will consist of the following: (i) the number of shares of Buyer Preferred Stock equal to the Buyer Preferred Stock Amount (which for purposes of Closing will be calculated as (A) the Holdback Reserves Estimate as of September 30, 2012, less (B) September 30 Holdback Reserves, plus (C) $2,000,000 (the “Estimated Buyer Preferred Stock Amount”)) divided by the Preferred Stock Share Price (the “Closing Preferred Shares”), plus (ii) if the Special Dividend has not been paid at or before Closing, the Buyer's Note (as determined pursuant to Section 2.2(c) below), plus (iii) any remaining portion of the Purchase Price will be payable in cash by wire transfer of immediately available funds to an account or account designated in writing by Seller (the “Cash Payment”). For purposes hereof, the manner of payment of the Purchase Price will be determined in a manner consistent with the example included with the Purchase Price Calculation and Payment Methodology. For purposes of Closing the amount of the Cash Payment will be estimated in accordance with Section 2.2(d)(i) (the “Estimated Cash Payment”).

(c)Special Dividend and Buyer Note. In accordance with Section 5.2(c), in the event the special dividend of six million dollars ($6,000,000) (the “Special Dividend”) requested by Gateway to be payable to Company immediately prior to Closing (followed by an immediate dividend of the same amount from Company to Seller) is not approved by the Missouri Department prior to Closing, Buyer will issue a note at Closing in favor of Seller in the amount of six million dollars ($6,000,000) less the portion of the Special Dividend (if any) actually approved by the Missouri Department (the “Buyer Note”) on the terms set forth on Exhibit D hereto. For the avoidance of doubt, in no event will the amount of the Special Dividend, Buyer Note or combination thereof exceed six million dollars ($6,000,000) in the aggregate.

(d)Adjustments to Purchase Price.

(i)Within ten (10) Business Days prior to the Closing Date, but in no event less than three (3) Business Days prior to the Closing Date, Seller will prepare and deliver (or cause to be prepared and delivered) to Buyer, a certificate of the principal financial officer of Seller that contains a reasonable good faith estimate of (A) a consolidated balance sheet of Company as of the Effective Date (the “Estimated Closing Balance Sheet”) setting forth the Book Value, DTAs, Deferred Policy Acquisition Costs and WC Renewal Rights Proceeds estimated as of the Closing Date, (B) the Purchase Price calculation as of the Effective Date (disregarding reserves for CIE Claims), as (the “Estimated Purchase Price”) and (C) the manner of payment of the Estimated Purchase Price in accordance with Section 2.2(b) at the Closing, including, the number of Closing Preferred Shares to be issued, identifying whether there will be a Special Dividend or Buyer Note and the amount of the Estimated Cash Payment, in each case, together with work papers in support thereof, which estimate will be prepared in a manner consistent with Exhibit C and will be, in all cases, reasonably acceptable to Buyer.

(ii)Not later than ninety (90) days after the Closing Date, Buyer will prepare and deliver (or cause to be prepared and delivered) to Seller (A) a balance sheet of the Company as of the Effective Date (the “Closing Balance Sheet”) setting forth the Book Value, Deferred Policy Acquisition Costs and WC Renewal Rights Proceeds as of the Effective Date (disregarding any reserves for CIE Claims), together with work papers in support thereof, which will be prepared in a manner consistent with Exhibit C (the “Closing Statements”), and (B) Buyer's computation of the amount (the “Closing Adjustment Amount”) by which each component of the Purchase Price, other than the DTAs (the “Final Closing Amounts”), exceeds or is less than the estimated amounts therefor set forth on the Estimated Closing Balance Sheet (the “Estimated Closing Amounts”).

(iii)Within sixty (60) days after Seller's receipt of the Closing Statements (the “Notice Period”), Seller will deliver notice in writing to Buyer of either (i) Seller's agreement as to the Final Closing Amounts and Buyer's computation of the Closing Adjustment Amount or (ii) Seller's dispute thereof (if any), specifying in reasonable detail the nature of its dispute (any such items in dispute, the “Disputed Items” and any such notice of the Disputed Items, the “Dispute Notice”). If Seller fails to deliver to Buyer a Dispute Notice within the Notice Period, the Final Closing Amounts and Buyer's computation of the Closing Adjustment Amount, if any, will be final and binding on the Parties. If Seller delivers a Dispute Notice to Buyer prior to the expiration of the Notice Period, each Party will cooperate and will cause its representatives to cooperate with the other Party and their representatives in good faith to seek to promptly resolve the Disputed Items. Any Disputed Items that are agreed to in writing by Seller and Buyer (such resolved Disputed Items, “Resolved Items”) within fifteen (15) days of receipt of the Dispute Notice or such other time as is mutually agreed in writing by Seller and Buyer (the “Dispute Period”) will be final and binding on the Parties. If at the end of the Dispute Period, Seller and Buyer have failed to reach agreement with respect to any Disputed Items (such unresolved Disputed Items, “Remaining Disputed Items”), such Remaining Disputed Items will, within twenty (20) days after the expiration of the Dispute Period, be submitted to the Independent Expert. The Independent Expert may consider only the Remaining Disputed Items and must resolve such Remaining Disputed Items in accordance with the terms and provisions of this Agreement. The Independent Expert will deliver to Buyer and Seller, as promptly as practicable and in any event within forty five (45) days after its appointment, a written report setting forth the resolution of each Remaining Disputed Item, the resulting adjustments to the Purchase Price (taking into account the Resolved Items and its resolution of the Remaining Disputed Items), and its computation of the Closing Adjustment Amount. Except in the case of fraud the conclusions in such report will be final and binding upon the Parties. Each of Buyer and Seller will (A) bear all of its fees, costs and expenses incurred by it and its Affiliates in connection with the resolution of the Disputed Items and (B) pay one half of the fees and costs of the Independent Expert.

(e)On or before the second (2nd) Business Day after Buyer and Seller agree (or are deemed to agree) to the Closing Adjustment Amount or Buyer and Seller receive notice of any final determination of the Closing Adjustment Amount by the Independent Expert, as applicable, (the “Settlement Date”) (A) Seller will pay to Buyer by wire transfer of immediately available funds to an account designated by Buyer the amount by which the Estimated Closing Amounts exceeds the Final Closing Amounts or (B) Buyer will pay to Seller by wire transfer of immediately available funds to an account designated by Seller the amount by which the Final Closing Amounts exceeds the Estimated Closing Amounts (either such payment, the “Closing Adjustment Payment”). The Closing

Adjustment Payment will be made by wire transfer of immediately available funds to the account or accounts designated in writing by, as applicable, Buyer or Seller.

SECTION 2.3 Other Post Closing Adjustments.

(a)Buyer Preferred Stock Amount Adjustments.

(i)Within sixty (60) days following the Effective Date, Buyer will provide Seller with a statement of Effective Date Holdback Reserves and a Holdback Reserves Estimate as of the Effective Date (“Effective Date Holdback Reserves Estimate”). If the Estimated Buyer Preferred Stock Amount exceeds the Buyer Preferred Stock Amount, Buyer will cause the number of shares of Buyer Preferred Stock equal to the excess divided by the Preferred Stock Purchase Price to be cancelled on the books of Buyer. If the Buyer Preferred Stock Amount exceeds the Estimated Preferred Stock Amount, Buyer will cause to be issued to Seller on the books of Buyer the number of shares of Buyer Preferred Stock equal to the amount of such excess divided by the Preferred Stock Purchase Price. Any disputes by Seller with respect to the Buyer Preferred Stock Amount will be resolved by the Independent Expert in a manner consistent with Section 2.2(d)(iii).

(ii)Prior to the occurrence of an Optional Redemption or the Final Preferred Stock Adjustment Date, the Buyer Preferred Stock Amount and the number of shares of Buyer Preferred Stock held by Seller will be adjusted following December 31 of each calendar year as follows (and a final adjustment using the same process will be made on the Final Preferred Stock Adjustment Date, if an Optional Redemption has not yet occurred prior to such date):

(A)Within sixty (60) days following December 31 of an applicable calendar year, Buyer will provide Seller with a statement of any Loss Developments for the twelve months ending on December 31 of such calendar year, together with the amount of any Loss Development Increase or Loss Development Decrease, if any, (each, a “Loss Development Statement”), together with any actuarial report supporting such Loss Development Increase or Loss Development Decrease prepared by or for Buyer. Subject to any reasonable non-disclosure conditions required by Buyer's independent actuary, Buyer will provide Seller with data and information reasonably requested by Seller that supports such Loss Development Statement. Any disputes by Seller with a Loss Development Statement will be resolved by the Independent Expert in a manner consistent with Section 2.2(d)(iii); provided that in connection with any such dispute, Seller (at its expense) will be entitled to select an independent actuary (which selection will be subject to the consent of Buyer (such consent not to be unreasonably withheld)) to review Buyer's actuarial report supporting the applicable Loss Development Statement; provided further, that if the amount of such Loss Development Increase or Loss Development Decrease as determined by the Independent Expert is twenty percent (20%) less or more, as the case may be, than that indicated in the Loss Development Statement, Seller's reasonable expenses of retaining such independent actuary shall be paid by Buyer.

(B)In the event of any Loss Development in excess of the applicable Holdback Reserve therefor (a “Loss Development Increase”), the Buyer Preferred Stock Amount will be reduced on a dollar for dollar basis by the amount of such Loss Development Increase (the “Excess Amount”) and Buyer will cause the number of shares of Buyer Preferred Stock held by Seller equal to the Excess Amount divided by the Preferred Stock Share Price to be cancelled on the books of the Buyer.

(C)In the event of any Loss Development that is less than the applicable Holdback Reserve therefor (a “Loss Development Decrease”) the Buyer Preferred Stock Amount will be increased by $1.00 for each dollar of such Loss Development Decrease to the extent of any prior Loss Development Increase and thereafter $0.75 for each dollar of such Loss Development Decrease (in the aggregate, the “Decrease Amount”) and Buyer will cause to be issued to Seller on the books of Buyer the number of shares of Buyer Preferred Stock equal to the Decrease Amount divided by the Preferred Stock Share Price.

(iii)In connection with an Optional Redemption:

(A)If Buyer elects to exercise its Optional Redemption rights, it will provide Seller with no less than sixty (60) days prior written notice thereof (an “Optional Redemption Notice”, and Seller will have the

right to elect, within ten (10) days of receipt of the Optional Redemption Notice, (1) that the Parties make a final determination of the amount of the Loss Development Increase or Loss Development Decrease, as the case may be, based on a Holdback Reserves Estimate (a “Final Preferred Stock Adjustment Determination”) for purposes of determining the final number of shares of Buyer Preferred Stock held by Seller on the redemption date, in which case the Redemption Payment will be paid to Seller in cash, or (2) to require the Redemption Payment to be made in the form of the Holdback Note.

(B)In the event that Seller elects a Final Preferred Stock Adjustment Determination, the Parties will use commercially reasonable efforts to cause an updated Holdback Reserves Estimate to be delivered within thirty (30) days of such election. Within ten (10) days of the receipt thereof, Buyer will prepare and deliver to Seller a statement of the aggregate estimated Loss Development based on the Holdback Reserves Estimate and the aggregate estimated Loss Development Increase or estimated Loss Development Decrease, as the case may be, which will take into account any previous adjustments pursuant to Section 2.3(a)(i) (an “Estimated Loss Development Statement”), together with any actuarial report supporting such Loss Development Increase or Loss Development Decrease prepared by or for Buyer. Subject to any reasonable non-disclosure conditions required by Buyer's independent actuary, Buyer will provide Seller with data and information reasonably requested by Seller that supports such Estimated Loss Development Statement. Any disputes by Seller with an Estimated Loss Development Statement will be resolved by the Independent Expert in a manner consistent with Section 2.2(d)(iii); provided that in connection with any such dispute, Seller (at its expense) will be entitled to select an independent actuary (which selection will be subject to the consent of Buyer (such consent not to be unreasonably withheld)) to either (i) review Buyer's actuarial report supporting the applicable Loss Development Statement or (ii) prepare an actuarial report supporting the Estimated Loss Development Statement. Any estimated Loss Development Increase or estimated Loss Development Decrease as finally determined by the Parties or the Independent Expert will result in the cancellation or issuance of shares of Buyer Preferred Stock in a manner consistent with Sections 2.3(a)(i)(B) and (C) for purposes of determining the number of shares of Buyer Preferred Stock to be redeemed; provided further, that if the amount of such estimated Loss Development Increase or Loss Development Decrease as determined pursuant to the immediately preceding sentence is twenty percent (20%) less or more, as the case may be, than that indicated in the Estimated Loss Development Statement, Seller's reasonable expenses of retaining such independent actuary shall be paid by Buyer.

(b)Deferred Tax Assets and Deferred Tax Liabilities. After the Post Closing Adjustment Payment is finalized in accordance with Section 2.2(d), but not later than five (5) months after the Effective Date, Seller will prepare, or cause to be prepared, and deliver to Buyer, a reasonably detailed calculation, including supporting information, of the DTAs and DTLs of the Transferred Companies as of the Closing Date (the “Proposed Final DTAs and DTLs”), which DTA and DTL calculation will be substantially in the form set forth on Exhibit E, as recomputed based on all of the facts and circumstances, including, but not limited to any tax elections actually made with respect to the acquisition of the Company (including, but not limited to, the Section 338(h)(10) Election, the election under Section 1.1502 36(d)(6)(i)(A) and the election under Section 1.848 2(g)(8)).

(i)In connection with Seller's preparation of the Proposed Final DTAs and DTLs, to the extent that Seller does not have all relevant information in its possession, Seller and its Representatives will be permitted to review Buyer's work papers and any work papers of Buyer's independent accountants reasonably necessary for Seller's preparation of the Proposed Final DTAs and DTLs, and Buyer will make reasonably available the individuals then in its employ, in order to respond to the reasonable inquiries of Seller; provided, however, that the independent accountants of Buyer will not be obligated to make any work papers available to Seller unless and until Seller has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such accountants.

(ii)During the thirty (30) days immediately following Seller's delivery of the Proposed Final DTAs and DTLs (the “DTA DTL Review Period”), Buyer and its representatives will be permitted to review Seller's work papers and the work papers of Seller's independent accountants relating to the Proposed Final DTAs and DTLs, as well as all of Seller's books, records and other relevant information relating to the operations and finances of the Transferred Companies with respect to the period up to and including the Closing Date, and Seller will make reasonably available the individuals then in its employ responsible for and knowledgeable about the information

used in, and the preparation of, the Proposed Final DTAs and DTLs in order to respond to the reasonable inquiries of Buyer; provided, however, that the independent accountants of Seller will not be obligated to make any work papers available to Buyer unless and until Buyer has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such accountants.

(iii)Buyer will notify Seller in writing (the “DTA DTL Notice of Disagreement”) prior to the expiration of the DTA DTL Review Period if Buyer disagrees with the Proposed Final DTAs and DTLs. The DTA DTL Notice of Disagreement will set forth in reasonable detail the basis for such dispute, the amounts involved and Buyer's calculation of such disputed amounts. In connection with Buyer's delivery of a DTA DTL Notice of Disagreement, Buyer may request access to information related to Seller's preparation of the Proposed Final DTAs and DTLs in accordance with Section 2.3(b)(ii). If no DTA DTL Notice of Disagreement is received by Buyer prior to the expiration of the Review Period, then the Proposed Final DTAs and DTLs will be deemed to have been accepted by Buyer and will become final and binding upon the parties hereto in accordance with Section 2.3(b)(v).

(iv)During the twenty (20) days immediately following the delivery of a DTA Notice of Disagreement (the “DTA Consultation Period”), Seller and Buyer will seek in good faith to resolve any differences that they may have with respect to the matters specified in the DTA Notice of Disagreement.

(v)If, at the end of the DTA DTL Consultation Period, Seller and Buyer have been unable to resolve any differences that they may have with respect to the matters specified in the DTA DTL Notice of Disagreement, then Seller and Buyer will submit all matters that remain in dispute with respect to the DTA DTL Notice of Disagreement (along with a copy of the Proposed Final DTAs and DTLs marked to indicate those line items that are in dispute, if any) to the Independent Expert. Within thirty (30) days after the submission of such matters to the Independent Expert, or as soon as practicable thereafter, the Independent Expert will make a final determination, binding on the Parties, of the Proposed Final DTAs and DTLs. With respect to each disputed line item and/or calculation, such determination, if not in accordance with the position of Seller or Buyer, will not be more favorable to Buyer than the amounts advocated by Buyer in the DTA DTL Notice of Disagreement or more favorable to Seller than the amounts advocated by Seller in the Proposed Final DTAs. In connection with the Independent Expert's review, the Independent Expert may, pursuant to Section 2.3(b)(vi), request access to such information as may be required by the Independent Expert to fulfill its obligations under this Section 2.3(b)(v). The DTAs and DTLs that are final and binding on the Parties, as determined either through (A) agreement of the Parties pursuant to Section 2.3(b)(ii) or 2.3(b)(iv), (B) Buyer's failure to timely deliver a DTA DTL Notice of Disagreement pursuant to Section 2.3(b)(iii) or (C) the action of the Independent Expert pursuant to this Section 2.3(b)(v), is referred to as the “Final DTA DTL Calculation.” For the avoidance of doubt and notwithstanding anything in this Agreement to the contrary, the parties hereto acknowledge and agree that from and after the Closing, the resolution process set forth in this Section 2.3(b) will be the sole remedy of the parties with respect to all matters and calculations expressly included in the Final DTAs and DTLs, and will not be subject to any indemnification other than pursuant to Section 8.1 of this Agreement.

(vi)The cost of the Independent Expert's review and determination will be shared equally by Seller and Buyer. During the review by the Independent Expert, Buyer and Seller will each make available to the Independent Expert interviews with such individuals, and such information, books and records and work papers, as may be reasonably required by the Independent Expert to fulfill its obligations under Section 2.3(b)(v); provided, however, that the independent accountants of Seller or Buyer will not be obligated to make any work papers available to the Independent Expert unless and until such firm has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such accountants.

(vii)The “Final DTA Adjustment” will be an amount equal to (A) the Deferred Tax Assets set forth on the Estimated Final Balance Sheet minus (B) the Deferred Tax Assets as set forth on the Final DTA DTL Calculation. If the Final DTA Adjustment is a positive amount, then no further adjustment will be made. If the Final DTA Adjustment is a negative amount, but the Final DTAs are greater than the Final DTLs, then no further adjustment will be made. If the Final DTA Adjustment is a negative amount, but the Final DTLs are greater than the Final DTAs, the Seller shall pay the Buyer an amount equal to the amount by which the Final DTLs exceed the Final DTAs. Any such payment will be made by wire transfer of immediately available funds to an account

designated by the recipient of such payment within two (2) Business Days after the Final DTA Adjustment becomes such in accordance with this Section 2.3(b)(vii), with no interest due thereon. Any payment made pursuant to this Section 2.3(b)(vii) will be treated for all Tax purposes as an adjustment to the Purchase Price.

(viii)For no longer than twenty (20) years following the Closing, within ninety (90) days following the filing of any annual U.S. federal or state income tax return for the Company or any U.S. federal income tax return which includes the Company or Gateway, Buyer will deliver a written notice (an “Annual DTA DTL Notice”) describing any Tax savings actually realized on such return with respect to any specific DTA, as set forth in the Final DTAs and DTLs, utilized on such return (“Annual Tax Savings”), and any Tax cost incurred on such return with respect to any specific DTL set forth in the Final DTAs and DTLs (“Annual Tax Cost”). The Annual DTA-DTL notice will include appropriate supporting documentation and Seller will be entitled to speak to Buyer's accountant to determine the accuracy of the Annual DTA-DTL Notice. If the Annual Tax Savings exceeds the Annual Tax Cost, Buyer will pay to Seller, within thirty (30) days after delivery of the Annual DTA DTL Notice, an amount equal to seventy-five percent (75%) of such excess. Any such payment will be made by wire transfer of immediately available funds to an account designated by the recipient of such payment within two (2) Business Days after the receipt by Seller of the Annual DTA DTL Notice. Any payment made pursuant to this Section 2.3(b)(vii) will be treated for all Tax purposes as an adjustment to the Purchase Price. For the purposes of this paragraph, Buyer will apply DTAs to reduce its taxable income once its current deferred tax assets are used and before the Buyer applies any other deferred tax assets resulting from future transactions, and will use good faith commercially reasonable efforts to use and realize the value of any outstanding DTAs.

SECTION 2.4Closing and Effective Date.

(a)Unless this Agreement has been terminated pursuant to Section 9.1, the consummation of the purchase and sale of the Company Shares and the other transactions contemplated by this Agreement (the “Closing”) will take place at 10:00 a.m. on the fifth Business Day after the satisfaction or waiver of all of the conditions set forth in Article V at the offices of DLA Piper LLP (US), 203 N. LaSalle Street, Suite 1900, Chicago, Illinois 60601, unless another date, time or place is agreed to in writing by the Parties, including by transfer of electronic or facsimile signatures, but in no event later than March 1, 2013. The actual date and time of Closing are herein referred to as the “Closing Date.”

(b)Effective Date of Closing. For convenience, the Parties agree that, for purposes of Buyer's financial accounting and reporting and the purposes specified herein, the Closing and the WC Reinsurance Transactions and Agreements will be deemed completed as of 12:01 a.m. (CST) on the morning of January 1, 2013 (such date, the “Effective Date”).

SECTION 2.5 Closing Deliveries. At the Closing, the Parties will take the following actions:

(a)Seller will deliver to Buyer:

(i)a receipt evidencing receipt by Seller of the Cash Payment;

(ii)stock certificates evidencing the Company Shares, duly endorsed in blank by Seller or accompanied by stock powers duly executed by Seller in blank in proper form for transfer, and with any required stock transfer stamps affixed thereto;

(iii)if applicable, evidence of Seller's receipt of the Special Dividend from the Company;

(iv)if applicable, a copy of the Buyer Note, duly executed by Seller;

(v)evidence of the consummation of the WC Reinsurance Transaction and a duly executed copy of the WC Reinsurance Agreement;

(vi)true, correct and complete copies (or other evidence) of all valid approvals or authorizations of, filings or registrations with, or notifications to, all Persons required to be obtained, filed or made by Seller and the Transferred Companies in satisfaction of Section 5.1(c);

(vii)a duly executed certificate of non foreign status from Seller and the Transferred Companies and any other certifications required under Sections 897 or 1445 of the Code (as applicable), in each case, sworn under penalty of perjury and in a form and manner that complies with Sections 897 or 1445 of the Code (as applicable) and the Treasury Regulations promulgated thereunder;

(viii)the officer's certificate contemplated in Section 5.1(a), (b) and (d);

(ix)resignations of the directors and officers of the Transferred Companies;

(x)evidence of the release of the Liens related to the pledge of the Company Shares to Comerica Bank;

(xi)evidence of the forgiveness of the loan amounts owed by Company to Seller and release of the note related thereto;

(xii)counterparts to each of the other Transaction Agreements to which Seller or either of the Transferred Companies is a party, duly executed by Seller or such Transferred Company, as applicable;

(xiii)a copy, certified as of the Closing Date by an officer of Seller, of the resolutions of Seller's board of directors and sole shareholder authorizing the execution and delivery of this Agreement and such other Transaction Agreements to which Seller or a Transferred Company is a party, and the consummation of the transactions contemplated hereby and thereby;

(xiv)a certificate of the Secretary or Assistant Secretary of each of Seller and the Transferred Companies, certifying (1) as to true and correct copies of each Transferred Companies' and Seller's Constituent Documents and all amendments thereto, and (2) as to the incumbency of the officers of Seller or the Transferred Companies executing any of the Transaction Agreements on behalf of Seller or the Transferred Companies;

(xv)a good standing certificate from the Secretary of State of the State of Missouri and each state where Gateway is licensed to transact insurance as of the Closing Date, to the extent Gateway is required by Law to be registered with the Secretary of State of states other than Missouri, and a certificate of compliance from the Missouri Department for Gateway, each dated as of a date within seven (7) Business Days prior to the Closing Date;

(xvi)a good standing certificate from the Secretary of State of the State of Missouri for the Company, dated as of a date within seven (7) Business Days prior to the Closing Date

(xvii)all books and records of the Transferred Companies, including all original Insurance Licenses to transact insurance where Gateway is so authorized; and

(xviii)all such additional instruments, documents and certificates provided for by this Agreement or as may be reasonably requested by Buyer in connection with the consummation of the transactions contemplated by this Agreement.

(b)Buyer will deliver to Seller:

(i)the Estimated Cash Payment, by wire transfer of immediately available funds to an account or accounts designated in writing by Seller;

(ii)if applicable, a copy of the Buyer Note, duly executed by Buyer;

(iii)evidence of the issuance of the Closing Preferred Shares in the name of Seller on the books of Buyer;

(iv)true, correct and complete copies (or other evidence) of all valid approvals or authorizations of, filings or registrations with, or notifications to, all Governmental Entities required to be obtained, filed or made by Buyer in satisfaction of Section 5.2(c);

(v)the officer's certificate contemplated in Section 5.2(a) and (b); and

(vi)all such additional instruments, documents and certificates provided for by this Agreement or as may be reasonably requested by Seller in connection with the consummation of the transactions contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1 Representations and Warranties of Seller. Except as set forth on the Disclosure Schedule, Seller hereby represents and warrants to Buyer as follows as of the date hereof and as of the Closing Date:

(a)Organization, Standing and Corporate Power.

(i)Gateway is an insurance company, and the Company is a business corporation, each duly incorporated, validly existing and in good standing under the Laws of the State of Missouri and has the requisite power and authority to own its properties and assets and to carry on its business as currently conducted. The Transferred Companies are duly qualified as a foreign corporation to do business, and are in good standing, in each jurisdiction where the character of its owned, operated or leased assets or properties or the nature of its activities makes such qualification and good standing necessary, except where the failure to be so qualified or in good standing could not reasonably be expected to have a Seller Material Adverse Effect. The execution and delivery by each such Transferred Company of each of the Transaction Agreements to which it is a party, the performance by each such Transferred Company of its obligations under each of the Transaction Agreements to which it is a party and the consummation such Transferred Company of the transactions contemplated by each of the Transaction Agreements to which it is a party, have been or will be prior to the Closing (as applicable) duly authorized by all requisite corporate action on the part of such Transferred Company. Each of the Transaction Agreements to which a Transferred Company is a party has been, or upon execution and delivery thereof, will be, duly executed and delivered by such Transferred Company. Assuming due authorization, execution and delivery by the other parties hereto or thereto, each of the Transaction Agreements to which a Transferred Company is a party constitutes, or upon execution and delivery thereof will constitute, the legal, valid and binding obligation of such Transferred Company, enforceable against it in accordance with its terms, subject in each case to the effect of applicable bankruptcy, reorganization, insolvency, moratorium fraudulent conveyance or similar Laws now or hereafter in effect relating to or affecting creditor's rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

(ii)Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Wisconsin and has the requisite power and authority to own its properties and assets and carry on its business as currently conducted. Seller has full power and authority to enter into, consummate the transactions contemplated by, and carry out its obligations under, each of the Transaction Agreements to which it is a party. The execution and delivery by Seller of each of the Transaction Agreements to which it is a party, the performance by Seller of its obligations under each of the Transaction Agreements to which it is a party and the consummation by Seller of the transactions contemplated by each of the Transaction Agreements to which it is a party, have been or will be prior to the Closing (as applicable) duly authorized by all requisite corporate action on the part of Seller. Each of the Transaction Agreements to which Seller is a party has been, or upon execution and delivery thereof, will be, duly executed and delivered by such Seller. Assuming due authorization, execution and delivery by the other parties hereto or thereto, each of the Transaction Agreements to which Seller is a party constitutes, or upon execution and delivery thereof will constitute, the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, subject in each case to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar Laws now or hereafter in effect relating to or affecting creditor's rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

(b)Capital Structure.

(i)The authorized capital stock of the Company and the authorized capital stock of Gateway consists solely of the shares described on Section 3.1(b)(i) of the Disclosure Schedule, of which 500 shares of the common stock of the Company and 38,150 shares of common stock of Gateway are issued and outstanding. All of the Company Shares and all of the Gateway Shares are duly authorized, validly issued, fully paid and nonassessable. As of the Date of this Agreement, and at all times up to and including the Closing Date, Seller will be the sole record and beneficial direct owner of all of the Company Shares, and the Company will be the sole record and beneficial direct owner of all of the Gateway Shares, each free and clear of all Liens and Preemptive Rights, except for Liens related to the pledge of the Company Shares to Comerica Bank, which liens will be released on the Closing Date.

(ii)Except as set forth in Section 3.1(b)(ii) of the Disclosure Schedule,

(A)Neither of the Transferred Companies has issued, nor currently has outstanding, any bonds, debentures, notes, debt instruments or other indebtedness;

(B)there are no outstanding or authorized (1) options, warrants, redemption rights, repurchase rights, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require Seller or its Affiliates (including either of the Transferred Companies) to purchase or issue, sell, or otherwise cause to become outstanding, as applicable, any capital stock or equity interests of either of the Transferred Companies; or (2) stock or equity appreciation, phantom stock or equity, profit participation, or similar rights with respect to the Transferred Companies ((1) and (2) collectively, “Preemptive Rights”);

(C)there are no (1) voting trusts, proxies or other agreements or understandings with respect to the voting of any shares of capital stock or equity interests of either of the Transferred Companies; (2) bonds, debentures, notes, debt instruments or other indebtedness of the Transferred Companies having the right to vote (or convertible into, or exchangeable for securities having the right to vote) on any matters on which the stockholders or equity holders of either of the Transferred Companies may vote; (3) securities or obligations exercisable or exchangeable for, or convertible into, any capital stock or equity interests of either of the Transferred Companies; or (4) agreements, commitments or understandings of any nature whatsoever, fixed or contingent, that directly or indirectly obligates Seller or any of its Affiliates (including the Transferred Companies) to grant, offer or enter into any of the foregoing; and

(D)except for portfolio investments made in the Ordinary Course of Business, neither of the Transferred Companies (x) owns, of record or beneficially, directly or indirectly, any membership interest, common stock, any other voting stock or similar equity securities (including options, warrants, rights, commitments or agreements to acquire such equity securities) of any Person or any right (contingent or otherwise) to acquire the same; or (y) otherwise possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of any Person.

(c)Non Contravention; Consents.

(i)Except as set forth on Section 3.1(c) of the Disclosure Schedule, the execution, delivery and performance of Seller and the Transferred Companies under any Transaction Agreement to which any of them is a party does not, and the consummation of the transactions contemplated hereby and thereby will not, (A) conflict with any of the provisions of the Constituent Documents of Seller or of either of the Transferred Companies; (B) conflict with, result in a breach of or default (with or without notice or lapse of time, or both) under or give rise to a right of termination under, any Contract, permit, license or instrument to which the either of the Transferred Companies is a party and to which a Governmental Entity is not a party; or (C) subject to the matters referred to in Section 3.1(c)(ii), contravene any Requirements of Law (or Insurance Licenses) applicable or issued to Seller or either of the Transferred Companies in any material respect.

(ii)No consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity is required to be made by Seller or the Transferred Companies in connection with the execution and delivery of any Transaction Agreement by Seller and such Transferred Company or the consummation by Seller or such Transferred Company of any of the transactions contemplated hereby or thereby,

except for (A) the approvals, filings and notices required under the insurance Laws of the State of Missouri necessary to, prior to the Closing, authorize the payment of the Special Dividend, (B) those consents, approvals, authorizations, declarations, filings or notices set forth in Section 3.1(c)(ii) of the Disclosure Schedule; and (C) such other consents, approvals, authorizations, declarations, filings or notices which the failure to obtain or make could not reasonably be expected to have a Seller Material Adverse Effect.

(d)Financial Statements; Reserves; Actuarial Results.

(i)Seller has previously delivered to Buyer true, correct and complete copies of (A) the annual audited statutory statements of Gateway prepared in accordance with SAP as of and for the years ended December 31, 2011, 2010 and 2009, including the exhibits, schedules and notes thereto (collectively, the “Audited SAP Statements”), and (B) the quarterly unaudited statutory statements of Gateway prepared in accordance with SAP for the periods ended March 31, 2012, June 30, 2012 and September 30, 2012, including the exhibits, schedules and notes thereto (together with the Audited SAP Statements, collectively referred to herein as the “SAP Statements”). The SAP Statements present fairly, in all material respects, the financial condition and results of operations of Gateway at the respective dates and for the periods covered by such statements in conformity with SAP applied consistently, subject to normal recurring year end adjustments. There has been no material change in Gateway's accounting policies or practices, including, without limitation, permitted practices, in each of the past three (3) fiscal years ended December 31, 2011, except as stated in the SAP Statements.

(ii)Seller has previously delivered to Buyer true, correct and complete copies of (A) the audited financial statements of the Company as of and for the years ended December 2011, 2010 and 2009 and (B) the unaudited income statements and balance sheets of Seller as of and for the nine-month period ending September 30, 2012 (collectively the “GAAP Financial Statements”). The GAAP Financial Statements present fairly, in all material respects, the financial condition and results of operations of the Company at the respective dates and for the periods covered by such statements in conformity with GAAP applied consistently, subject to normal recurring year end adjustments. There has been no material change in the Company's accounting policies in each of the past three (3) fiscal years ended December 31, 2011, except as stated in the GAAP Statements.

(iii)The aggregate reserves of Gateway recorded in the Audited SAP Statements and the GAAP Financial Statements have been determined in all material respects in accordance with generally accepted actuarial principles consistently applied. The insurance reserving practices and policies of Gateway have not changed, in any material respect, since January 1, 2012.

(iv)Seller has previously delivered to Buyer a true and complete copy of the actuarial report prepared by Gateway's actuaries for the period ending on December 31, 2011, and all attachments, addenda, supplements and modifications thereto (each, a “Company Actuarial Analysis”), and all information provided by Gateway to the actuary preparing the Company Actuarial Analysis regarding the reserves of the Company, to the extent that such information is not set forth in the SAP Statements and the GAAP Financial Statements, was, to the Knowledge of Seller, true, correct and complete. Except as set forth in Section 3.1(d)(iv) of the Disclosure Schedule, since December 31, 2011, Gateway has not adjusted its insurance reserves except in the Ordinary Course of Business.

(e)Absence of Undisclosed Liabilities. Neither of the Transferred Companies has any debts, commitments, liabilities or obligations of any kind or nature whatsoever, whether accrued, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, contingent, absolute, known or unknown, due or to become due, determined, determinable or otherwise (and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a debt, commitment, liability or obligation) except (i) as disclosed in the SAP Statements or the GAAP Financial Statements, including in the notes thereto and (ii) for liabilities or obligations that were incurred in the Ordinary Course of Business since October 1, 2012.

(f)Rights to the Company Shares and Gateway Shares. Neither the Company Shares nor the Gateway Shares are subject to any Liens or Preemptive Rights, other than with respect to the pledge of the Company Shares to Comerica Bank.

(g)Employees; Labor Matters. Neither Transferred Company is a party to any labor or collective bargaining agreement or other agreement with any labor organization applicable to any employees of the Company or Gateway. Except as set forth in Section 3.1(g) of the Disclosure Schedule there are no pending or, to the Knowledge of Seller, threatened complaints, charges or claims against either of the Transferred Companies in connection with or relating to the employment or termination of employment of any Person.

(h)Benefit Plans.

(i)Neither of the Transferred Companies has any liability with respect to any benefit plan or arrangement other than the Employee Benefit Plans specified in Section 3.1(h) of the Disclosure Schedule. The Transferred Companies and each ERISA Affiliate has made available to the Buyer a copy or description of each Employee Benefit Plan currently in effect and a copy of any applicable amendment, summary plan description, favorable advisory, determination, or opinion letter issued by the IRS, trust document, each annual report on Form 5500 (including any schedule or financial statement) for the most recent three plan years, group insurance contract, administrative service agreement, form of participant communication required by law, and reports or registration statements filed with any Governmental Entity. All such Employee Benefit Plans conform (and have at all times conformed) in all material respects to the requirements of ERISA, the Code and all other applicable Requirements of Law. Each such Employee Benefit Plan has been maintained in all material respects in accordance with its documents and with all applicable provisions of the Code, ERISA and other applicable Requirements of Law; and all reporting, disclosure, and notice requirements of ERISA, the Code and other applicable Requirements of Law have been satisfied in all material respects with respect to each Employee Benefit Plan. Except as identified in Section 3.1(h) of the Disclosure Schedule, neither Transferred Company sponsors, maintains or contributes to (or, since December 31, 2005, sponsored, maintained or contributed to), or has any liability with respect to, any (1) “employee benefit plan” subject to Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA; (2) plan or arrangement subject to Section 409A of the Code that results in additional taxation under that Code Section or provides indemnification or tax gross up for such additional taxation; or (3) plan subject to non U.S. law.

(ii)With respect to each Employee Benefit Plan, there has occurred no non exempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) or breach of any fiduciary duty described in Section 404 of ERISA that is reasonably likely to result in any material liability, direct or indirect, after the date hereof for either of the Transferred Companies or any stockholder or other equity holder, officer, director, or employee of either of the Transferred Companies.

(iii)Since December 31, 2005 (and to Seller's Knowledge, for all prior periods), the Seller and each of the Transferred Companies have paid all amounts that each of them are required to pay as contributions to the Employee Benefit Plans as of the last day of the most recent quarter of each of the Employee Benefit Plans; all benefits accrued under any funded or unfunded Employee Benefit Plan will have been paid, accrued, or otherwise adequately reserved in accordance with GAAP and SAP as of the most recent GAAP Financial Statements and SAP Statements; and all monies withheld from employee paychecks with respect to Employee Benefit Plans have been transferred to the appropriate Employee Benefit Plan in a timely manner as required by applicable Requirements of Law.

(iv)Since December 31, 2005 (and to Seller's Knowledge, for all prior periods), the Company has not incurred any liability for any excise, income or other taxes or penalties with respect to any Employee Benefit Plan, and no event has occurred and no circumstance exists or has existed that could give rise to any such liability. There are no pending or, to Seller's Knowledge, threatened claims by or on behalf of any Employee Benefit Plans, or by or on behalf of any participants or beneficiaries of any Employee Benefit Plans or other Persons, alleging any breach of fiduciary duty on the part of the Company or any of their officers, directors or employees under ERISA or any applicable Requirements of Law, or claiming benefit payments other than those made in the ordinary operation of such plans. No Employee Benefit Plan is presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the Department of Labor, or any other Governmental Entity, and no matters are pending with respect to any Employee Benefit Plan under any IRS program.

(v)No Employee Benefit Plan currently maintained by either of the Transferred Companies or to which either of the Transferred Companies may have liability, contains any provision or is subject to any

Requirements of Law that could prohibit the transactions contemplated by any Transaction Agreement or that could give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions contemplated by any Transaction Agreement, and no payments or benefits under any Employee Benefit Plan or other agreement of Seller, the Transferred Companies or any Affiliate will be considered “excess parachute payments” under Section 280G of the Code. Except as set forth in Section 3.1(h)(v) of the Disclosure Schedule, neither Seller nor either of the Transferred Companies has declared or paid any bonus compensation to any employee or officer of either of the Transferred Companies in contemplation of the transactions contemplated by any Transaction Agreement. No payments or benefits under any Employee Benefit Plan or other agreement of Seller or either of the Transferred Companies are, or are expected to be, subject to the disallowance of a deduction under Section 162(m) of the Code. Subject to applicable Requirements of Law, each Employee Benefit Plan may be amended or terminated by either of the Transferred Companies or their ERISA Affiliates at any time without the consent of participants and without liability, other than routine claims for benefits and reasonable administrative expenses.

(vi)With respect to any Employee Benefit Plan that is an employee welfare benefit plan (within the meaning of Section 3(1) of ERISA), (A) each welfare plan for which contributions are claimed as deductions under any provision of the Code is in compliance in all material respects with all applicable requirements pertaining to such deduction, (B) with respect to any welfare benefit fund (within the meaning of Section 419 of the Code) related to a welfare plan, there is no disqualified benefit (within the meaning of Section 4976(b) of the Code) that could result in the imposition of a tax under Section 4976(a) of the Code, (C) any Employee Benefit Plan that is a group health plan (within the meaning of Section 4980B(g)(2) of the Code) complies, and has complied, in all material respects, with all of the requirements of Section 4980B of the Code, ERISA, Title XXII of the Public Health Service Act, the applicable provisions of the Social Security Act, the Health Insurance Portability and Accountability Act of 1996, and other applicable Requirements of Law, and (D) no welfare plan provides health or other benefits after an employee's or former employee's retirement or other termination of employment except as required by Section 4980B of the Code.

(vii)All Persons classified by the Company as independent contractors at the present time and since December 31, 2005 (and to Seller's Knowledge, during any prior periods) satisfy and satisfied the requirements of applicable Requirements of Law to be so classified; the Transferred Companies have fully and accurately reported their compensation on IRS Forms 1099 when required to do so; and neither of the Transferred Companies have any obligations to provide benefits with respect to such Persons under Employee Benefit Plans or otherwise. No individuals are currently providing, or have provided since December 31, 2005(and to Seller's Knowledge, during any prior periods) , services to either of the Transferred Companies pursuant to a leasing agreement or similar type of arrangement, nor has the Transferred Companies entered into any arrangement whereby services will be provided by such individuals.

(viii)There have been no requests for a waiver from the IRS with respect to any minimum funding requirement under Section 412 of the Code

(ix)Neither of the Transferred Companies has incurred any liability since December 31, 2005 (and to Seller's Knowledge, during any prior periods) to the Pension Benefit Guaranty Corporation (“PBGC”) under Section 4001 et seq. of ERISA. Except as identified in Section 3.1(h)(ix) of the Disclosure Schedule, no condition exists that is reasonably likely to result in the Company incurring liability under Title IV of ERISA, either directly or with respect to any ERISA Affiliate. All premiums payable to the PBGC have been paid when due.

(x)There has not been, with regard to any Pension Plan, any reportable event, as defined in Section 4043 of ERISA, that is required to be reported to the PBGC by law or regulation.

(xi)Neither Seller nor either Transferred Company contributes to a multiemployer plan, as defined in Section 3(37) of ERISA (“Multiemployer Plan”), or has contributed to a Multiemployer Plan.

(i)Absence of Certain Changes or Events. Since January 1, 2012, there has not been any Seller Material Adverse Effect and the Transferred Companies conducted their business in all material respects in the Ordinary Course of Business. Except (i) as contemplated or permitted by this Agreement or (ii) as disclosed in Section 3.1(i)

of the Disclosure Schedule, since January 1, 2012 there has not occurred any of the actions or events listed in Section 4.1.

(j)Taxes. Except as identified in Section 3.1(j) of the Disclosure Schedule:

(i)All Tax Returns required to be filed with respect to the Transferred Companies with any relevant Taxing Authority have been duly and timely filed in the manner prescribed by applicable Requirements of Law (taking into account all valid extensions) and such Tax Returns were correct and complete in all material respect. All Taxes reflected as due and owing by the Transferred Companies have been paid. To the Knowledge of Seller, no claim has ever been made by a Taxing Authority in a jurisdiction where the Transferred Companies do not file Tax Returns that the Transferred Companies are or may be subject to taxation by that jurisdiction.

(ii)Neither of Seller nor either Transferred Company has received from any Taxing Authority (including jurisdictions where the Transferred Companies have not filed Tax Returns) any (A) written notice indicating an intent to open an audit or other review; (B) written request for information related to Tax matters; or (C) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Taxing Authority against the Transferred Companies. Section 3.1(j)(ii) of the Disclosure Schedule lists all material Tax Returns filed with respect to the Transferred Companies for taxable periods ended on or after December 31, 2005, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. Seller has delivered or made available to Buyer true, correct and complete copies of all material Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to the Transferred Companies filed or received since December 31, 2005.

(iii)Neither Seller nor the Transferred Companies with respect to the Transferred Companies has executed or filed any agreement or other document extending the period for assessment, reassessment or collection of any amounts of Taxes that will be in force after the Closing Date, and no power of attorney granted by the Transferred Companies or Seller with respect to the Transferred Companies prior to the Closing Date will remain in effect after the Closing Date. Neither Seller nor the Transferred Companies with respect to the Transferred Companies is a party to or bound by any closing agreement, offer in compromise, or similar agreement with any Taxing Authority. Neither Seller nor the Transferred Companies with respect to the Transferred Companies is a party to any Action by any Taxing Authority. To the knowledge of Seller, there are no pending or threatened Actions by any Taxing Authority.

(iv)There are no Liens for any Taxes upon the properties or assets of the Transferred Companies or on the Company Shares or the Gateway Shares, other than for current Taxes not yet due and payable.

(v)There are no Tax rulings, requests for rulings, closing agreements or other similar agreements (including any gain recognition agreements under Section 367 of the Code and applications for a material change in accounting method or to change the basis for determining items under Section 481 or Section 807 of the Code) in effect or filed with any Tax Authority relating to the Transferred Companies which could affect the Transferred Companies' liability for Taxes for any taxable period (or portion thereof) after the Closing Date.

(vi)The Transferred Companies have not received a written tax opinion with respect to any transaction relating to the Transferred Companies other than a transaction in the ordinary course of business.

(vii)No claim is pending or, to the Knowledge of Seller, threatened by a Tax Authority in a jurisdiction where the Transferred Companies do not file Tax Returns or pay Taxes that the Transferred Companies are or may be subject to Tax in that jurisdiction.

(viii)The Transferred Companies are not a party to or bound by any tax indemnity, tax sharing or tax allocation agreement.

(ix)The Transferred Companies (A) have not ever been a member of any affiliated group of corporations, within the meaning of Section 1504 of the Code, other than the group of which the Transferred Companies are is presently a member or (B) do not have liability for the Taxes of any Person under Section 1.1502

6 of the Treasury Regulations (or any similar provision of state, local, or foreign Law), as a transferee or successor, by Contract, or otherwise.

(x)The Transferred Companies are not a party to any Contract or plan that has resulted or could result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local or foreign Tax law) or (ii) any amount that will not be fully deductible as a result of Section 162(m) of the Code (or any corresponding provision of state, local or foreign Tax Law).

(xi)The Transferred Companies have not ever been a United States real property corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

(xii)The Transferred Companies have not ever been a party to any joint venture, partnership or other Contract that could reasonably be expected to be treated as a partnership for tax purposes.

(xiii)The Transferred Companies have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and complied with all information reporting, backup withholding provisions and similar provisions of applicable Tax Law.

(xiv)The Transferred Companies have sufficient information contained in their records to calculate any taxable income or allowable loss that may arise as the result of the disposition of properties or assets owned by the Transferred Companies at the Closing Date.

(xv)The Transferred Companies have not engaged in or been a “material advisor” or “promoter” (as those terms are defined in Sections 6111 and 6112 of the Code and the U.S. Treasury Regulations promulgated thereunder) with respect to any “reportable transaction” within Section 6011 of the Code and Section 1.6011 4 of the Treasury Regulations.

(xvi)The Transferred Companies have not constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax free treatment under Section 355 of the Code (1) in the two (2) years prior to the date of this Agreement or (2) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

(xvii)The Transferred Companies will not be required to include any adjustment in taxable income for any Tax period or portion thereof after the Closing Date under Section 481(c) or 807(f) of the Code (or any similar provision of the Tax Laws of any jurisdiction).

(xviii)Seller has delivered to Buyer complete and correct schedules, as of September 30, 2012 of the Tax attributes of the Transferred Companies. No Tax attribute of the Transferred Companies is currently subject to a limitation under Section 382 or Section 383 of the Code.

(xix)The Transferred Companies will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (A) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date; (B) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law); (C) installment sale or open transaction disposition made on or prior to the Closing Date; or (D) prepaid amount received on or prior to the Closing Date.

(xx)No private letter rulings, technical advice memoranda or similar agreements or rulings have been requested, entered into or issued by any Taxing Authority with respect to the Transferred Companies.

(xxi)The Transferred Companies have not entered into a gain recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8. The Company has not transferred, nor has it been deemed to have transferred, any intangible asset the transfer of which could be subject to the rules of Section 367(d) of the Code.

(xxii)Notwithstanding the foregoing, no representation is made in this Section 3.1(j) with respect to any taxable period with respect to which the statute of limitations has already closed.

(k)Compliance with Applicable Law.

(i)Except as set forth in Section 3.1(k) of the Disclosure Schedule, (A) each of the Transferred Companies have in full force and effect all federal, state, local and foreign governmental approvals, authorizations, consents, licenses and permits (excluding Insurance Licenses, collectively, “Permits”) necessary for them to own, lease or operate their properties and assets and to carry on their business as now conducted; (B) each of the Transferred Companies is in compliance with all applicable Requirements of Law in all material respects; (C) no event has occurred or circumstance exists that (with or without the giving of notice or the lapse of time or both) (x) constitutes or results, directly or indirectly, in a material violation of, or a failure to comply with, any applicable Requirements of Law by either of the Transferred Companies, or (y) would likely result in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Permit; (D) neither of Seller nor either of the Transferred Companies has received any written notice or other communication from any Governmental Entity or any other Person regarding (x) any actual, alleged, possible, or potential violation of, or failure to comply with, any applicable Requirements of Law in any material respect, or (y) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Permit which has not been resolved; and (E) all applications required to have been filed for the renewal of each Permit have been duly filed on a timely basis with the appropriate Governmental Entity, and all other material filings required to have been made with respect to each Permit have been duly made on a timely basis with the appropriate Governmental Entity.

(ii)Without limiting the generality of the representations and warranties made in Section 3.1(k)(i), and based upon the Transferred Companies' ownership, possession or operation of Real Property, if any: (A) each of the Transferred Companies is, and at all times since December 31, 2005 has been, in compliance with all Environmental Laws; (B) neither Transferred Company is subject to any outstanding Order relating to compliance with any Environmental Laws or to the investigation or cleanup of any Hazardous Materials; (C) there are no claims, actions, proceedings, investigations or violations relating to any Environmental Law pending, or, to the Knowledge of Seller, threatened against either of the Transferred Companies; and (D) to Seller's Knowledge there are no past or present actions, circumstances, conditions, events or incidents relating to the presence, handling, transportation, disposal, release or threatened release of any Hazardous Material that could reasonably be expected to impose any material obligation on either of the Transferred Companies or form the basis of any material claim under any Environmental Law.

(l)Litigation.

(i)Except in the Ordinary Course of Business in connection with the policies of insurance written by Gateway, there are no Actions or Orders issued, pending or, to the Knowledge of Seller, threatened against either of the Transferred Companies on any of their respective properties or assets, at law, in equity or otherwise, in, before or by, or otherwise involving any Governmental Entity or other Person. Seller has delivered or made available to Buyer true, correct and complete list of each current and ongoing Action and Order arising in the Ordinary Course of Business in connection with the policies of insurance written by the Company, and prior to the Closing will make available to Buyer true, correct and complete copies of all pleadings, correspondence and other documents relating to such Actions and Orders. There are no unsatisfied judgments or outstanding injunctions, decrees, or awards against either of the Transferred Companies or against any of their respective assets, businesses or properties.

(ii)Each Transferred Company is, and at all times since December 31, 2005 has been, in compliance in all material respects with all of the terms and requirements of each Order to which it, or any of the properties or assets owned or used by it, is or has been subject. Neither Seller nor either of the Transferred Companies has received any written notice or other communication from any Governmental Entity or any other Person regarding

any actual, alleged, possible or potential material violation of, or failure to comply with, any term or requirement of any Order to which either of the Transferred Companies or any of the properties or assets owned or used by either of them, is or has been subject.

(m)Contracts. Section 3.1(m) of the Disclosure Schedule lists the Contracts (other than policies of insurance written by Gateway in the Ordinary Course of Business) to which either of the Transferred Companies is a party or by which it or properties or assets owned or used by it are bound or affected which (i) involve payments to or from either of the Transferred Companies of greater than $25,000, (ii) commit either of the Transferred Companies to pay any fees, bonus or other amount upon or following any threatened or actual change in control, or change in the nature of the business of such Transferred Company or (iii) contain covenants restricting, restraining or impairing the ability of (A) either of the Transferred Companies to engage in any line of business or with any Person, to compete with any Person, to do business with any Person or in any location or to employ any person or (B) any Person to obtain products or services from either of the Transferred Companies (such Contracts, collectively, the “Company Contracts”). Seller has delivered to Buyer a correct and complete copy of each written Company Contract and Section 3.1(m) of the Disclosure Schedule contains a written summary of the terms and conditions of each oral Company Contract. Each Company Contract is the legal, valid and binding obligation of the respective Transferred Company that is a party to such Company Contract, and to the Knowledge of Seller, of each other party thereto, and is enforceable in accordance with its terms, subject in each case to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, rehabilitation, liquidation, fraudulent conveyance, preferential transfer or similar Laws now or hereafter in effect relating to or affecting creditor's rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law). Neither Transferred Company is a party thereto nor, to the Knowledge of Seller, any other party, is in material violation or default of any term of any such Company Contract and no condition or event exists which with the giving of notice or the passage of time, or both, would constitute a material violation or default of any Company Contract by such Transferred Company, or any other party thereto or permit the termination, modification, cancellation or acceleration of performance of the obligations of such Transferred Company that is a party thereto, or any other party to such Company Contract. Except as set forth in Section 3.1(m) of the Disclosure Schedule, the consummation of the transactions contemplated by the Transaction Agreements will not give rise to a right of a party or parties (other than the Company that is a party thereto) to any Company Contract to terminate, modify, cancel or accelerate the performance of the obligations of either of the Transferred Companies under such Company Contract or impose liability under the terms thereof on such Transferred Company that is a party thereto.

(n)Insurance Matters.

(i)Seller has provided Buyer with true, correct and complete copies of: (A) any reports of examination (including, without limitation, financial, market conduct and similar examinations) of Gateway issued by any insurance regulatory authority since January 1, 2006, and (B) all other filings or submissions under insurance holding company statutes and regulations made by Gateway with any insurance regulatory authority since January 1, 2006. Gateway has filed all reports, registrations, filings and submissions required to be filed with any insurance regulatory authority (including without limitation, under any applicable insurance holding company statute) since January 1, 2006. All such reports, registrations, filings and submissions were in material compliance with applicable Insurance Laws when filed or as amended or supplemented, and no material deficiencies have been asserted by any Governmental Entity with respect to such reports, registrations, filings or submissions that have not been cured or remedied to the satisfaction of the applicable insurance regulatory authority.

(ii)Except as set forth in Section 3.1(n)(ii) of the Disclosure Schedule, since December 31, 2005 (and to Seller's Knowledge, for all prior periods) (A) all policy forms issued by or on behalf of Gateway, and all policies, binders, slips, certificates and participation agreements and other agreements of insurance, whether individual or group, (including all applications, supplements, endorsements, riders and ancillary agreements in connection therewith) and all amendments, applications, brochures, illustrations and certificates pertaining thereto, are, to the extent required under applicable Insurance Laws, on forms approved by applicable insurance regulatory authorities or which have, where required by applicable Insurance Laws, been approved by all applicable Governmental Entities or filed with and not objected to (or such objection has been withdrawn or resolved) by such Governmental

Entities within the period provided by applicable Insurance Laws for objection, and all such forms comply in all material respects with, and have been administered in all material respects in accordance with, applicable Insurance Laws and (B) all premium rates established Gateway that are required to be filed with or approved by Governmental Entities have been so filed or approved, the premiums charged conform in all material respects to the premium rating plans and underwriting methodologies so filed or approved and comply in all material respects (or complied in all material respects at the relevant time) with applicable Insurance Laws, except where the failure to comply with Insurance Laws applicable to filing and approval of such forms other Insurance Laws applicable to forms and rates would not reasonably be expected to have a Seller Material Adverse Effect.

(iii)Without limiting the generality of the foregoing, (A) Gateway has conducted since December 31, 2005 (and to Seller's Knowledge, for all prior periods, other than as set forth in any market conduct examination by or on behalf of any state department of insurance or state insurance regulatory authority, which examination was provided to Gateway and disclosed to Buyer) and is conducting its business in compliance in all material respects with all Insurance Laws; (B) Gateway has held since December 31, 2005 (and to Seller's Knowledge, during all prior periods) and holds all qualifications, registrations, filings, licenses, permits, certificates, consents, approvals or authorizations issued or granted by Governmental Authorities, where applicable, necessary to write the types of insurance, reinsurance and other products written by it and otherwise as necessary for the conduct of their respective insurance and reinsurance businesses in each of the jurisdictions where Gateway conducts or operates, or has conducted or operated, its business (the “Insurance Licenses”); (C) all of the Insurance Licenses are valid and in full force and effect; (D) Gateway is not the subject of any pending or, to the Knowledge of Seller, threatened Action for or contemplating the suspension, termination, modification, limitation, cancellation, revocation, nonrenewal or impairment of its Insurance Licenses, and to the Knowledge of Seller there is no existing fact or circumstance that, individually or in the aggregate would be reasonably likely to result in the suspension, termination, modification, limitation, cancellation, revocation, nonrenewal or impairment of such Insurance Licenses and (E) since December 31, 2005 (and to Seller's Knowledge, for all prior periods), Gateway has not transacted insurance or reinsurance business in any material respect in any jurisdiction requiring it to have an Insurance License to transact such business in which it did not possess such Insurance License. Section 3.1(n)(iii) of the Disclosure Schedule sets forth a true, correct and complete list of the Insurance Licenses. Seller has made available to Buyer, prior to the date hereof, true, correct, and complete copies of the Insurance Licenses.

(iv)Gateway has marketed, sold and issued insurance products in compliance in all material respects with all applicable Requirements of Law since December 31, 2005 (and to Seller's Knowledge, during all prior periods, other than as set forth in any market conduct examination by or on behalf of any state department of insurance or state insurance regulatory authority, which examination was provided to Gateway and disclosed to Buyer). To the Knowledge of Seller, no proceeding or customer complaint has been filed with the insurance regulatory authorities that would reasonably be expected to lead to the revocation, failure to renew, limitation, suspension, restriction, or impairment of any Insurance License.

(v)Except as set forth in Section 3.1(n)(v) of the Disclosure Schedule, all Persons through whom Gateway has placed or sold insurance and reinsurance since December 31, 2005 (and to Seller's Knowledge, for all prior periods, other than as set forth in any market conduct examination by or on behalf of any state department of insurance or state insurance regulatory authority, which examination was provided to Gateway and disclosed to Buyer) were duly licensed (to the extent such licensing is required) to sell or place insurance and reinsurance in the jurisdictions where, and at the time when, they did so on behalf of the Company. Except as set forth in Section 3.1(n)(v) of the Disclosure Schedule, no agent, broker, intermediary or producer has any underwriting or binding authority on behalf of Gateway (other than underwriting and binding authority given to an agent under the terms of the agent agreement with Gateway) or is a party to any managing general agency Contract or other similar arrangement.

(vi)Except as set forth in Section 3.1(n)(vi) of the Disclosure Schedule, no claim or assessment by any Guaranty Fund is pending, neither Seller nor Gateway has received notice of any such claim or assessment, and, to the Knowledge of Seller, there is no basis for the assertion of any such claim or assessment against Gateway by any such Guaranty Fund.

(o)Brokers. Except as set forth in Schedule 3.1(o), no broker, investment banker, financial advisor or other Person is entitled to any brokers', finders', financial advisors' or similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or any of its Affiliates (including either of the Transferred Companies), except those for which Seller will be solely responsible.

(p)Intellectual Property.

(i)Except as set forth in Schedule 3.1(p)(i)(A) of the Disclosure Schedule, neither of Transferred Companies own any Intellectual Property. Except for “shrink wrapped” and similar software licenses and applications that are generally available to the public, Section 3.1(p)(i)(B) of the Disclosure Schedule sets forth a list of all third party Intellectual Property licensed to or used by the Transferred Companies (the “Licensed Intellectual Property”). Except as set forth in Section 3.1(p)(i)(B) of the Disclosure Schedule, the Transferred Companies have valid rights to use the Licensed Intellectual Property free and clear of any royalty or other payment obligation to be paid after the Closing.

(ii)To Seller's Knowledge, the Transferred Companies' use of the Licensed Intellectual Property does not conflict with or infringe on the Intellectual Property of any other Person. Neither Seller nor either of the Transferred Companies have received written notice from any other Person challenging the right of such Transferred Company to use any of the Licensed Intellectual Property.

(iii)Except as set forth in Section 3.1(p)(iii) of the Disclosure Schedule, no party to any Contract for Licensed Intellectual Property has given written notice of its intention to cancel, terminate, change the scope of rights under, or fail to renew any Contract for Licensed Intellectual Property. Neither of the Transferred Companies nor, to the Knowledge of Seller, any other party to any Contract for Licensed Intellectual Property, has repudiated in writing any material provision thereof. Each Contract for Licensed Intellectual Property is valid, subsisting and enforceable and is not subject to any outstanding Order or agreement adversely affecting the Company's use thereof or its rights thereto.

(iv)To the Knowledge of Seller, none of the Licensed Intellectual Property contains any “time bombs,” “Trojan horses”, “back doors”, “trap doors”, “worms”, viruses, bugs or faults that (x) enable or assist any Person to access without authorization any of the Licensed Intellectual Property; or (y) otherwise materially adversely affect the functionality of the Licensed Intellectual Property, except as disclosed in its documentation. To the Knowledge of Seller, no Person has gained unauthorized access to any of the Licensed Intellectual Property. To the Knowledge of Seller, none of the Licensed Intellectual Property contains any shareware, open source code, or other software whose use requires disclosure or licensing of Intellectual Property.

(q)Property and Assets.

(i)Except for Intellectual Property (which is excluded from this Section 3.1(q)), each of the Transferred Companies (A) have good and valid title to, or valid and subsisting leasehold interests in, all of its personal property assets and other rights (including IT Assets), free and clear of all Liens, except for Permitted Liens, and (B) own, have valid leasehold interests in or valid contractual rights to use, all of the material assets, tangible and intangible, used in its business (including IT Assets).

(ii)Neither Transferred Company owns, nor at any time since December 31, 2005 has any Transferred Company ever owned, any Real Property.

(iii)Except as set forth in Section 3.1(q) of the Disclosure Schedule, neither of the Transferred Companies leases any Real Property (the “Leased Real Property”) or personal property and each has the right to quiet enjoyment of all material personal property and all Leased Real Property for the full term of each such Lease (or any renewal option) relating thereto.

(iv)To the Seller's Knowledge, there is no condemnation, expropriation or other proceeding in eminent domain, pending or threatened, affecting the Leased Real Property or any portion thereof or interest therein.

(r)Certain Relationships. Except as set forth in Section 3.1(r) of the Disclosure Schedule, the Transferred Companies are not a party to any Contract with Seller or its other Affiliates, or any equityholder, partner, manager, officer or director of such Persons or, to Seller's Knowledge, any employee of such Persons (the “Affiliate Agreements”). Section 3.1(r) of the Disclosure Schedule sets forth a true and complete list of all balances due under any Affiliate Agreement as of the last Business Day of the calendar month immediately preceding the Date of this Agreement. Except as disclosed in Section 3.1(r) of the Disclosure Schedule, since January 1, 2012, there has not been any incurrence or accrual of any liability (as a result of allocations or otherwise) by the Transferred Companies or other transaction between the Transferred Companies and Seller or any of its other Affiliates, or any equityholder, partner, manager, officer or director of such Persons or, to Seller's Knowledge, any employee of such Persons, except in the Ordinary Course of Business.

(s)Reinsurance.

(i)Since December 31, 2005 (and to Seller's Knowledge, during any prior period), neither Seller nor either of the Transferred Companies has received any written notice of any material default under any Reinsurance Contract that is disclosed in Schedule F to Gateway's December 31, 2011 SAP Statement.

(ii)Neither Seller nor either of the Transferred Companies has received any written notice from any other party to a Reinsurance Contract (A) that the financial condition of such other party to any Reinsurance Contract is impaired with the result that a default thereunder may reasonably be anticipated, or (B) from any applicable reinsurer that any amount of reinsurance ceded by Gateway will be uncollectible or otherwise defaulted upon. Except as set forth on Section 3.1(s)(ii) of the Disclosure Schedule, Gateway was able to obtain full reserve credit for financial statement purposes under applicable SAP with respect to the liabilities ceded under each of the Reinsurance Contracts. Since January 1, 2012, there has not been any material change in the ability of Gateway to obtain, if so desired, full reserve credit for financial statement purposes under applicable GAAP or SAP for such liabilities.

(t)Annuities. There are no annuities of which the claimant under an insurance policy issued by Gateway is payee but for which Gateway is contingently liable.

(u)Accounts with Financial Institutions. Section 3.1(v) of the Disclosure Schedule sets forth a list of all safe deposit boxes, active bank accounts and other time or demand deposits of each of the Transferred Companies, including any brokerage and custodial accounts for securities owned by each of the Transferred Companies, together with the names and addresses of the applicable financial institution or other depository, the account number, and the identities of all Persons authorized to draw thereon or who have access thereto.

(v)Insurance. Section 3.1(w) of the Disclosure Schedule contains a list of all in force policies of insurance maintained by each of the Transferred Companies as of the date hereof with respect to its properties and the conduct of its business, other than insurance policies in connection with Employee Benefit Plans. All such policies are valid and enforceable in accordance with their terms and are in full force and effect (assuming no default by any such insurer), all premiums thereon have been paid when due and the Transferred Companies are otherwise in compliance in all material respects with the terms and provisions of such policies. No written notice of cancellation, termination or revocation or other written notice that any such policy is no longer in full force or effect or that the issuer of any policy is not willing or able to perform its obligations thereunder has been received by the Transferred Companies.

(w)Powers of Attorney. Except as disclosed on Section 3.1(w) of the Disclosure Schedule, no Person holds a power of attorney entitling such Person to bind either of the Transferred Companies except those statutory agents for service of process.

(x)Disclaimer. Except for the representations and warranties contained in this Section 3.1 or in any of the Transaction Agreements, Seller makes no other representation or warranty of any kind or nature whatsoever, oral or written, express or implied, with respect to Seller or its Affiliates (including the Transferred Companies).

SECTION 3.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows:

(a)Organization, Standing and Corporate Power. Buyer is duly organized, validly existing and in good standing under the Laws of the Cayman Islands and has the requisite power and authority to own its properties and assets and carry on its business as currently conducted. Buyer has full power and authority to enter into, consummate the transactions contemplated by, and carry out its obligations under, each of the Transaction Agreements to which it is a party. Buyer is duly qualified as a foreign company to do business, and is in good standing, in each jurisdiction where the character of its owned, operated or leased assets or properties or the nature of its activities makes such qualification and good standing necessary, except where the failure to be so qualified or in good standing could not reasonably be expected to have a Buyer Material Adverse Effect. The execution and delivery by Buyer of each of the Transaction Agreements to which it is a party, the performance by Buyer of its obligations under each of the Transaction Agreements to which it is a party and the consummation by Buyer of the transactions contemplated by each of the Transaction Agreements to which it is a party, have been or will be prior to the Closing (as applicable) duly authorized by all requisite company action on the part of Buyer. Each of the Transaction Agreements to which Buyer is a party has been, or upon execution and delivery thereof, will be, duly executed and delivered by Buyer. Assuming due authorization, execution and delivery by the other parties hereto or thereto, each of the Transaction Agreements to which Buyer is a party constitutes, or upon execution and delivery thereof will constitute, the legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms, subject in each case to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar Laws now or hereafter in effect relating to or affecting creditor's rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

(b)Preferred Stock. All of the shares of Buyer Preferred Stock to be issued at the Closing are duly authorized and will at the Closing be validly issued, fully paid and nonassessable and clear of all Liens and Preemptive Rights.

(c)Non Contravention; Consents.

(i)Except as set forth in Section 3.2(c)(i) of the Disclosure Schedule, the execution, delivery and performance by Buyer of each Transaction Agreement to which it is a party does not, and the consummation of the transactions contemplated hereby and thereby will not, (A) conflict with any of the provisions of its Constituent Documents; or (B) subject to the matters referred to in Section 3.2(c)(ii), materially contravene any Requirements of Law applicable to Buyer.

(ii)No consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity is required to be made by Buyer in connection with the execution and delivery of any Transaction Agreement by Buyer to which it is a party or the consummation by Buyer of any of the transactions contemplated hereby and thereby, except for (A) the approvals, filings and notices required under the Insurance Laws of the State of Missouri or any other state where the Company is licensed to transact insurance; (B) those consents, approvals, authorizations, declarations, filings or notices set forth in Section 3.2(c)(ii) of the Disclosure Schedule and (C) such other consents, approvals, authorizations, declarations, filings or notices which the failure to obtain or make could not reasonably be expected to have a Buyer Material Adverse Effect.

(d)Brokers. No broker, investment banker, financial advisor or other Person is entitled to any brokers', finders', financial advisors' or similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer or any of its Affiliates, except those for which Buyer will be solely responsible.

(e)Disclaimer. Except for the representations and warranties contained in this Section 3.2 or in any of the Transaction Agreements, Buyer makes no other representation or warranty of any kind or nature whatsoever, oral or written, express or implied, with respect to Buyer or its Affiliates.

ARTICLE IV

COVENANTS

SECTION 4.1 Conduct of Business of the Company.

Except as contemplated or permitted by this Agreement or as may be required by applicable Requirements of Law, from the Date of this Agreement to the Closing Date, the Transferred Companies will, and Seller will cause the Transferred Companies to, (i) conduct their business in all material respects in the Ordinary Course of Business; (ii) use their respective commercially reasonable best efforts to preserve intact its business organization and goodwill and relationships with third parties and its rights and franchises; (iii) not intentionally engage in any practice, take any action, fail to take any action or enter into any transaction or other agreement or arrangement which would reasonably be expected to cause any representation or warranty of Seller to be untrue at any time, or result in a breach of any covenant or obligation made by Seller in this Agreement; (iv) perform Gateway's obligations under the insurance policies written by it and the Transferred Companies' obligations under all Company Contracts; and (v) maintain their books and records in the usual, regular and ordinary manner consistent with past practice. Without limiting the foregoing, from the Date of this Agreement to the Closing, except as set forth in Section 4.1 of the Disclosure Schedule and as contemplated or permitted by this Agreement, the Transferred Companies will not, and Seller will not cause or permit the Transferred Companies to, take any of the following actions without the prior consent of Buyer which may not be unreasonably withheld:

(a)(i) other than the Special Dividend, declare, set aside or pay any dividends on, or make any other distributions (whether in cash, equity or property) in respect of, its outstanding equity interests; (ii) split, combine or reclassify any of its outstanding equity interests or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its outstanding equity interests; or (iii) purchase, redeem or otherwise acquire any outstanding equity interests of it or any rights, warrants or options to acquire any such equity;

(b)issue, sell, grant, pledge or otherwise encumber any of its equity interests or other securities or issue any securities convertible into, or any rights, warrants or options to acquire, any such equity interests or other securities or convertible securities;

(c)amend its Constituent Documents;

(d)(i) acquire (including by way of bulk reinsurance, merger, consolidation or acquisition of stock or assets) any Person or any division thereof or material portion of the assets thereof; (ii) enter into any agreement providing for the merger or consolidation of the Transferred Companies with any other Person; (iii) liquidate, dissolve, or wind up, or otherwise dispose of all or substantially all of its assets (including by way of bulk reinsurance, whether on an indemnity or assumption basis); (iv) consider or adopt of a plan of liquidation, dissolution, rehabilitation, restructuring, recapitalization, re domestication or other reorganization; or (v) organize any new company, subsidiary or joint venture, partnership or similar arrangement;

(e)mortgage, pledge or subject to any Lien (other than Permitted Liens) any of its properties or assets, other than Liens existing today;

(f)sell, lease, license or otherwise dispose of any property or assets, other than Investment Assets in the Ordinary Course of Business;

(g)create, incur, assume or guarantee any indebtedness, obligation or liability for money including, without limitation, the creation of any Lien (except for any Permitted Liens) on all or any portion of any property or assets of the Transferred Companies;

(h)enter into, amend or modify in any material respect, or terminate any Company Contract in excess of $25,000;

(i)make any change in its financial or statutory accounting methods, principles or practices used by it materially affecting its properties, assets or liabilities, except insofar as may be required by a change in applicable Requirements of Law, GAAP or SAP;

(j)make any payment, accrual or commitment for capital expenditures in excess of $25,000;

(k)make any material change in the business, condition, operations, properties, assets or liabilities of the Transferred Companies, other than in the Ordinary Course of Business;

(l)make any material change in the underwriting, reinsurance, marketing, pricing, claim adjustment, claim processing, claim payment, reserving, financial or accounting methods, practices or policies of Gateway, except in the Ordinary Course of Business;

(m)make any loan, advance or capital contribution to or otherwise invest in any Person;

(n)pay, discharge, settle or satisfy any material claims, Liens, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) or waive any right, in each case, other than policy claims in the Ordinary Course of Business;

(o)adopt, amend or modify any Employee Benefit Plan of the Transferred Companies which is sponsored solely by either or both of the Transferred Companies;

(p)(i) enter into any employment, consulting, deferred compensation, severance, retirement or other similar agreement with any director, officer, employee or agent of the Transferred Companies (or materially amend any such existing agreement); (ii) grant any severance or termination pay to any director, officer, employee or agent of the Transferred Companies; (iii) materially change any compensation payable to any director, officer, employee or agent of the Transferred Companies pursuant to any severance, retirement or similar policies or plans thereof; (iv) materially increase any compensation (including bonuses) payable or to become payable to any director, officer, employee or agent of the Transferred; or (v) materially alter any employment practices or the terms and conditions of employment;

(q)fail to pay in full all assessments by any Guaranty Fund;

(r)issue any new policies or underwrite any new insurance or reinsurance business of any type in any jurisdiction, whether by the Company or on its behalf, that is not in the Ordinary Course of Business;

(s)consummate any transactions in investments not in compliance with the investment policy of Gateway as in effect on the Date of this Agreement, a true and complete copy of which has previously been delivered to Buyer;

(t)(i) settle or compromise any Action or controversy relating to Taxes; (ii) make any request for a written ruling of a Governmental Entity relating to Taxes; or (iii) enter into a written and legally binding agreement with a Governmental Entity relating to Taxes;

(u)terminate, cancel or amend any insurance coverage maintained with respect to any material property of the Transferred Companies or which has not been replaced by a comparable amount of insurance coverage;

(v)make any payment under any tax allocation or similar agreement;

(w)make, revoke, or amend any Tax election of the Transferred Companies, change any annual Tax accounting period, adopt or change any method of Tax accounting, file any amended Tax Return, settle any Tax claim or assessment, surrender any right to claim a Tax refund, offset or other reduction in Tax liability, consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment or take or omit to take any other action, if such action or omission would have the effect of materially increasing the Tax liability or reducing any Tax attribute of the Transferred Companies or make any payment under any Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or understanding; or

(x)approve, or enter into any Contract or commitment, whether in writing or otherwise and whether made by or on behalf of the Transferred Companies, to take any of the actions specified in this Section 4.1.

SECTION 4.2 Access to Information.

From the Date of this Agreement until the Closing Date, Seller will and will cause the Transferred Companies to afford Buyer and its officers, employees and representatives and advisors reasonable access upon reasonable

advance notice at reasonable times during normal business hours to all of the Transferred Companies' properties, books, Contracts and records, and Seller will and will cause the Transferred Companies to furnish Buyer and its officers, employees, representatives and advisors such information concerning the Transferred Companies' business, properties, financial condition, operations and personnel as such Persons may from time to time reasonably request; provided, however, that any such investigation will be conducted in a manner that does not unreasonably interfere with the normal operations, customers and employee relations of Seller or the Transferred Companies. After the Closing Date, Seller will provide Buyer and its officers, employees and representatives and advisors with such information that such Persons may reasonably request in order to prepare Gateway's SAP Statements and to comply with regulatory requirements and requests. In addition, both before and after the Closing Date, Seller will instruct such Seller's and (prior to the Closing, only) the Transferred Companies' officers, employees and representatives and advisors to make themselves reasonably available during normal business hours upon reasonable notice to respond to any reasonable questions about the Transferred Companies by Buyer and Buyer's officers, employees and representatives and advisors.

SECTION 4.3 Consents, Approvals and Filings.

(a)Seller and Buyer will each use their commercially reasonable best efforts and will cooperate fully with each other to (i) comply as promptly as practicable with all requirements of any Governmental Entity applicable to the transactions contemplated by this Agreement; (ii) obtain as promptly as practicable all Permits set forth in Section 4.3 of the Disclosure Schedule in connection with the consummation of the transactions contemplated by this Agreement (“Necessary Permits”); (iii) obtain as promptly as practicable all consents or waivers of all third parties necessary in connection with the consummation of the transactions contemplated by this Agreement and (iv) cause the Special Dividend to be paid to the Company (followed by an immediate dividend of the same amount from Company to Seller). In connection therewith, Seller and Buyer will make and cause their respective Affiliates to make all formal filings and material supplements thereto required pursuant to applicable Requirements of Law (such formal filings and material supplements thereto, collectively, “Material Filings”) as promptly as practicable (and in no event more than twenty (20) Business Days after the date of this Agreement) in order to facilitate the prompt consummation of the transactions contemplated by the Transaction Agreements and will promptly make, and will cause their respective Affiliates to promptly make, such Material Filings as such Governmental Entities may reasonably request, including (x) Buyer causing “Form A” or similar change of control applications to be filed in each jurisdiction where required by applicable Insurance Laws with respect to the transactions contemplated by the Transaction Agreements; (y) if required by applicable Insurance Laws, Buyer causing “Form E” or similar market share notifications to be filed in each jurisdiction where required by applicable Insurance Laws and (z) Seller causing notice of Special Dividend to be filed with the Missouri Department of Insurance as required by applicable Insurance Laws. Neither Seller nor Buyer will take or cause to be taken any action that it is aware or reasonably should be aware would have the effect of delaying, impairing or impeding the receipt of any such Permits.

(b)Each Party will provide the other Party with true, correct and complete copies of all Material Filings at least three (3) Business Days in advance of the filing or submission thereof so that the other Party has a reasonable opportunity to review and comment thereon and, subject to applicable Law relating to the sharing of information, each Party will provide the other Party with true, correct and complete copies of all material correspondence, and a written summary of all material oral conversations, between such Party (and its Affiliates) on the one hand, and any Governmental Entity on the other hand and each Party, and will advise the other Party of all material communications with Governmental Entities concerning a Material Filing. Neither Party (or their respective Affiliates) may initiate an initial meeting with any Governmental Entity in advance of or in connection with any Material Filing without providing the other Party with at least three (3) Business Days advance written notice of such contemplated meeting or communication. Each Party will use commercially reasonable best efforts to provide the other Party with advance notice of any meetings or material communications with any Governmental Entity. Buyer will not be required to provide Company or Seller with information provided with Material Filings that Buyer reasonably deems to be proprietary or confidential in nature. To the extent permitted by applicable Law, each Party may request confidential treatment of Material Filings made by it. Notwithstanding anything to the contrary in this Agreement, none of Buyer, Seller or their respective Affiliates may be required to take any action under this Section 4.3 pursuant to, or otherwise agree to or accept, any Negative Conditions or Restrictions.

(c)The Parties acknowledge that they do not anticipate that Seller's holding of Buyer Preferred Stock will be considered an acquisition of “control” of Buyer for Insurance Law purposes; provided, however, if prior to the issuance of the Buyer Preferred Stock to Seller, an applicable Governmental Entity deems that Seller is acquiring “control” of Buyer under applicable Insurance Laws, then Buyer agrees to reduce the number of shares of Buyer Preferred Stock to be issued to Seller to such extent, and only to such extent, that Seller would not be considered to “control” Buyer for Insurance Law purposes, and Buyer shall issue to Seller a note at Closing in the form and following the terms of the Holdback Note in an amount equal to the Preferred Stock Purchase Price multiplied by the number of shares by which the number of shares of Buyer Preferred Stock to be issued to Seller has been reduced.

SECTION 4.4 Public Announcements. No Party or any Affiliate of such Party may issue or cause the publication of any press release or public announcement or otherwise communicate with any news media in respect of any of the Transaction Agreements or the transactions contemplated hereby and thereby without the prior written consent of the other Party (which consent may not be unreasonably withheld, conditioned or delayed), except as may be required by applicable Requirements of Law or applicable securities exchange rules, in which the case the Party (or such Party's Affiliate) required to publish such press release or public announcement will allow the other Party a reasonable opportunity to comment on such press release or public announcement in advance of such publication.

SECTION 4.5 Subsequent Statutory Statements. Seller will cause Gateway to commence preparation of and, consistent with past practice and on a timely basis, if required prior to the Closing Date, file with or submit to (as applicable) the Missouri Department and any other insurance department or other Governmental Entity with which Gateway is required to make such filings or submissions, and promptly deliver to Buyer, true, correct and complete copies of, the Quarterly Statutory Statement for the Company, for March 31, 2012 and each subsequent quarter and year ended prior to the Closing Date; provided, that all such Statutory Statements will (a) be prepared in all material respects in accordance with SAP, which preparation will not have involved the use of any material practices permitted rather than prescribed by (as applicable) the Missouri Department, unless noted otherwise in the Company's SAP Statements as were available to Buyer prior to Closing; (b) be prepared in all material respects in accordance with the books and records of Gateway; (c) present fairly in all material respects the statutory financial position of Gateway at the respective date thereof and the statutory results of operations and cash flows of Gateway for the respective periods then ended, in conformity with SAP consistently applied, subject to normal recurring year-end adjustments; (d) comply in all material respects with applicable Requirements of Law; and (e) be filed with or submitted to (as applicable) the Missouri Department and any other insurance department or other Governmental Entity with which Gateway is required to make such filings or submissions, in a timely manner on forms prescribed or permitted by the applicable Governmental Entity.

SECTION 4.6 Acquisition Proposal. After the Date of this Agreement, neither Seller nor any Affiliate of Seller (including the Transferred Companies) will itself, nor will Seller or any Affiliate of Seller (including the Transferred Companies) authorize or permit any equityholder, partner, manager, officer, director or employee of, or any investment banker, attorney, accountant or other representative or advisor of Seller or any Affiliate of Seller (including the Transferred Companies) to, directly or indirectly, (a) solicit, initiate or encourage the submission of any Acquisition Proposal; or (b) participate in any negotiations or any material discussions regarding, or furnish to any Person any information with respect to, or agree to or endorse, or take any other action to facilitate any Acquisition Proposal or any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal. Immediately after the execution and delivery of this Agreement, Seller will (i) cease and terminate, and will cause its Affiliates (including the Transferred Companies) to cease and terminate, any existing activities, discussions or negotiations with any Person(s) conducted heretofore with respect to any possible Acquisition Proposal and (ii) instruct their and their Affiliates' equityholders, partners, members, officers, directors, employees, investment bankers, attorneys, accountants and any other representatives and advisors to cease and terminate any existing activities, discussions or negotiations with any Person(s) conducted heretofore with respect to any possible Acquisition Proposal.

SECTION 4.7 Intercompany Accounts; Affiliate Agreements. Other than as set forth in Section 4.7 of the Disclosure Schedule, (a) Seller will cause all accounts receivable or payable (whether or not currently due or payable) under each Affiliate Agreement to be settled in full (without any premium or penalty) at or prior to the

Closing and (b) the Transferred Companies' participation in all Affiliate Agreements will, in each case, be terminated and discharged without any further liability or obligation to the Transferred Companies thereunder (or any premium or penalty) effective at the Closing and upon terms and pursuant to instruments reasonably satisfactory to Buyer.

SECTION 4.8 Termination of Signing and Withdrawal Powers. At least five (5) Business Days prior to the Closing Date, Seller will cause the Transferred Companies to deliver written notification to any financial institution which maintains, on behalf of Transferred Companies, any account or safe deposit box listed in Section 3.1(v) of the Disclosure Schedule notifying each such financial institution that the signing or withdrawal powers or other authority of all Persons with respect to such accounts and safe deposit boxes are revoked immediately upon receipt by such financial institution of such notice.

SECTION 4.9 Obligations of Affiliates. Seller agrees that in each instance where its Affiliates are obligated to act or refrain from acting under this Agreement during the period prior to the Closing, Seller will cause such Affiliate to so act or refrain from acting.

SECTION 4.10 Notification of Certain Matters. Seller, on the one hand, and Buyer, on the other hand, will give prompt notice to each other of (a) the occurrence, or failure to occur, of any event or the existence of any condition that has caused or could reasonably be expected to cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate at any time after the Date of this Agreement, up to and including the Closing and (b) any failure on its part to comply with or satisfy any covenant, condition or obligation to be complied with or satisfied by it under this Agreement; provided, that no such disclosure pursuant to clause (a) or (b) will be deemed to amend or supplement the Disclosure Schedule or to otherwise prevent or cure any misrepresentation, breach of warranty, or breach of covenant or obligation.

SECTION 4.11 Confidentiality; Covenant Not to Compete; Non Solicitation.

(a)Confidentiality. From and for a period of sixty (60) months after the Closing, Seller plus, prior to Closing the Transferred Companies), on the one hand, and Buyer and its Affiliates (including the Transferred Companies after Closing), on the other hand, will, and will cause their respective representatives to, maintain in confidence any written, oral or other information relating to or obtained from the other party or its Affiliates, except that the foregoing requirements of this Section 4.11(b) will not apply to the extent that (i) any such information is or becomes generally available to the public other than (A) in the case of Buyer's confidential information, as a result of disclosure by Seller or its Affiliates or any of their respective Representatives and (B) in the case of Seller's confidential information, as a result of disclosure by Buyer or any of its respective Affiliates, or any of their respective representatives, (ii) any such information is required by applicable Law, Order or a Governmental Entity to be disclosed on a non-confidential basis after prior notice has been given to the other parties (including any report, statement, testimony or other submission to such Governmental Entity), (iii) any such information is reasonably necessary to be disclosed in connection with any Action or in any dispute with respect to the Transaction Agreements (including in response to any summons, subpoena or other legal process or formal or informal investigative demand issued to the disclosing party in the course of any litigation, investigation or administrative proceeding), or(iv) any such information was or becomes available to such party on a non confidential basis and from a source (other than a party to this Agreement or any Affiliate or representative of such party) that is not bound by a confidentiality agreement with respect to such information. Each of the parties hereto will instruct its Affiliates and Representatives having access to such information of such obligation of confidentiality.

(b)Covenant Not to Compete. From the date hereof through the date that is sixty (60) months following the Closing Date, neither Seller nor its Affiliates may directly or indirectly as a partner, joint venturer, employer, consultant, shareholder, principal, manager, agent or otherwise, own, manage, operate, join, control or participate in the ownership, management, operation or control of any business, whether in corporate, limited liability company or partnership form or otherwise, which in any way engages in North America in any business which competes with the Taxi and Limo Program business of the Transferred Companies as conducted as of the date hereof; provided, however, that this covenant not to compete does not apply to any captive insurance company or other similar insurance arrangement that provides insurance or reinsurance to or for the benefit of Seller or any of its Affiliates; provided, further, that the foregoing will not in any way prohibit Seller or its Affiliates from (i) operating the

businesses conducted by Seller and its Affiliates (other than the business conducted by the Transferred Companies) as of the date hereof, including but not limited to the insurance agency and insurance brokerage businesses of Seller and its Affiliates, (ii) acquiring or starting a business that is engaged in the insurance agency, brokerage or related business, other than an insurance company; provided that if Seller or any of its Affiliates makes such an acquisition, then Seller will provide notice thereof to Buyer and use commercially reasonable efforts to provide Buyer with an opportunity to have discussions with such acquired business with respect to providing services to such business, (iii) operating the WC Program business, (iv) being a passive owner of less than 5% of the outstanding stock of any publicly traded corporation engaged in the business conducted by the Company as of the date hereof, or (v) operating a business competitive to that of the Truck Program. The foregoing covenant will not apply to an Affiliate of Seller after consummation of a change of control of such Affiliate (whether by sale of stock, sale of assets, merger, consolidation or otherwise) after which Seller (or any of its Affiliates) no longer controls such Affiliate), so long as such Affiliate is not in possession of any confidential information of either of the Transferred Companies relating to the Taxi and Limo Program.

(c)Non Solicitation. From the date hereof through the date that is thirty-six (36) months following the Closing Date, neither Seller nor its Affiliates may directly or indirectly (i) employ or solicit any employee of the Transferred Companies in any capacity whatsoever or (ii) contract with or solicit any customer of the Taxi and Limo Program business of Gateway as of the date hereof without the express written consent of Buyer; provided, that the foregoing limitations do not prohibit general, non targeted solicitations of individuals or customers or solicitations of customers or any solicitation unrelated to the business of the Transferred Companies.

In the event the covenants in this Section 4.11 are in any way found unenforceable or invalid or are in any way limited or reformed, such other covenants will not be affected thereby, and in the event any such other covenant is in any way found unenforceable or invalid or is in any way limited or reformed, the other covenants in this Section 4.11 will not be affected thereby.

SECTION 4.12 Board of Directors of Buyer. Buyer will consider in good faith, and endorse the election of if qualified, one nominee by Seller to the Buyer's board of directors, to be proposed in accordance with the Articles of Association of Buyer for inclusion as a nominee, at the 2013 annual meeting of the shareholders of Buyer and each following meeting so long as (i) the Buyer Note or Holdback Note remains outstanding or (ii) Seller continues to hold shares of Buyer Preferred Stock or converted shares of common stock of Buyer equal to at least five percent (5%) of the outstanding stock of Buyer on a fully-diluted basis.

ARTICLE V

CONDITIONS PRECEDENT

SECTION 5.1 Conditions to Obligations of Buyer. The obligations of Buyer to effect the purchase and sale of the Company Shares and the other actions to be taken at the Closing are further subject to the satisfaction or waiver by Buyer of the following conditions:

(a)Representations and Warranties. The representations and warranties of Seller set forth in this Agreement will be true and correct in all material respects as of the Date of this Agreement and as of the Closing as though made at and as of the Closing, except (x) the representations and warranties contained in Section 3.1(a) (Organization, Standing and Corporate Power), Section 3.1(b) (Capital Structure), Section 3.1(c) (Non Contravention; Consents), and Section 3.1(f) (Rights to the Company Shares) will be true and correct in all respects as of the Date of this Agreement and as of the Closing as though made at and as of the Closing and (y) to the extent that any other representations and warranties of Seller are qualified by the term “material” or “Seller Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material”) will be true and correct in all respects at and as of the Closing; and Buyer will have received a certificate signed by an executive officer of Seller to the effect set forth in this Section 5.1(a).

(b)Performance of Covenants and Obligations of Seller. Seller will have performed and complied with all of its covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by the term “material” or “Seller Material Adverse Effect”, in which case Seller will have performed and

complied with all of such covenants (as so written, including the term “material” or “Material”) in all respects through the Closing; and Buyer will have received a certificate signed by an executive officer of Seller to the effect set forth in this Section 5.1(b).

(c)Third Party Approvals. All (i) Necessary Permits and all approvals or authorizations from all Governmental Entities required of Seller and the Transferred Companies set forth in Section 5.1(c) of the Disclosure Schedule; (ii) Necessary Permits and all approvals or authorizations from all Governmental Entities required of Buyer set forth in Section 5.2(c) of the Disclosure Schedule; and (iii) approvals or authorizations from Persons other than Governmental Entities set forth in Section 5.1(c) of the Disclosure Schedule required of Seller and the Transferred Companies will, in each case, have been duly obtained by Seller, the Company and Buyer, respectively, and will be in full force and effect; provided, that such Necessary Permits and any such approvals or permits from Governmental Entities will not be subject to any Negative Conditions or Restrictions.

(d)No Actions. No Action will be pending or threatened before (or that could come before) any Governmental Entity wherein an unfavorable Order would (i) prevent consummation of any of the transactions contemplated by any Transaction Agreement; (ii) cause any of the transactions contemplated by any Transaction Agreement to be rescinded following the Closing; (iii) adversely affect the right of Buyer to own the Company Shares; or (iv) adversely affect the right of the Transferred Companies to own their properties and assets and to operate their businesses (and no such Order will be in effect); and Buyer will have received a certificate signed by an executive officer of Seller to the effect set forth in this Section 5.1(d).

(e)WC Reinsurance Transaction. The WC Reinsurance Transaction will have been consummated.

(f)Forgiveness of Loan. The loan amounts owed by Company to Seller will be forgiven and the note related thereto will be released.

(g)Delivery of Documents. Seller will have delivered, or caused to be delivered, to Buyer each of the deliverables specified in Section 2.4(a).

(h)Preferred Shareholder Requirements. Seller will have made reasonable best efforts to provide to Buyer the necessary “know your customer” documents (as required by applicable Laws of the Cayman Islands) in order for Seller to become a holder of Buyer Preferred Stock.

SECTION 5.2 Conditions to Obligations of Seller. The obligations of Seller to effect the purchase and sale of the Company Shares and the other actions to be taken at the Closing are further subject to the satisfaction or waiver by Seller of the following conditions:

(a)Representations and Warranties. The representations and warranties of Buyer set forth in this Agreement will be true and correct in all material respects as of the Date of this Agreement and as of the Closing as though made at and as of the Closing, except (x) the representations and warranties contained in Section 3.2(a) (Organization, Standing and Corporate Power) and Section 3.2(c) (Non Contravention; Consents) will be true and correct in all respects as of the Date of this Agreement and as of the Closing as though made at and as of the Closing and (y) to the extent that such representations and warranties are qualified by the term “material” or “Buyer Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material”) will be true and correct in all respects as of the Date of this Agreement and as of the Closing as though made at and as of the Closing, and Seller will have received a certificate signed on behalf of Buyer by an executive officer of Buyer to the effect set forth in this Section 5.2(a).

(b)Performance of Covenants and Obligations of Buyer. Buyer will have performed and complied with all of its covenants and obligations hereunder in all material respects through the Closing, except to the extent that such covenants and obligations are qualified by the term “material” or “Buyer Material Adverse Effect”, in which case Buyer will have performed and complied with all of such covenants and obligations (as so written, including the term “material” or “Material”) in all respects through the Closing; and Seller will have received a certificate signed by an executive officer of Buyer to the effect set forth in this Section 5.2(b).

(c)Regulatory Approvals. All Necessary Permits and all approvals or authorizations from all Governmental Entities required of Buyer set forth in Section 5.2(c) of the Disclosure Schedule will have been duly obtained by Buyer and will be in full force and effect.

(d)WC Reinsurance Transaction. The WC Reinsurance Transaction will have been consummated.

(e)Delivery of Documents. Buyer will have delivered, or caused to be delivered, to Seller each of the deliverables specified in Section 2.4(b).

ARTICLE VI

SURVIVAL

All representations and warranties contained in this Agreement will survive Closing solely for purposes of Section 7.1(a) and (b) and will terminate and expire at the close of business on the date that is twenty-four (24) months after the Closing Date except (a) for those representations and warranties contained in Section 3.1(a) (Organization, Standing and Corporate Power), Section 3.1(b) (Capital Structure), Section 3.1(f) (Rights to Company Shares) and Section 3.2(a) (Organization, Standing and Corporate Power), which will survive for ten (10) years after the Closing Date and the representations and warranties contained in Section 3.1(c) (Non Contravention; Consents) Section 3.1(o) (Brokers), Section 3.2(c) (Non Contravention; Consents) and Section 3.2(d) (Brokers) which will survive for five (5) years after the closing date (collectively, the “Special Representations”); and (b) for those representations and warranties in Section 3.1(g) (Employees; Labor Matters), Section 3.1(h) (Benefit Plans) and Section 3.1(j) (Taxes) (collectively, the “Extended Representations”), which will survive until the earlier of (i) ninety (90) days past the expiration of the applicable statute of limitations for actions against the Transferred Companies with respect to matters address in those Extended Representations, or (ii) the date that is ten (10) years after the Closing Date. All covenants and obligations contained in this Agreement will survive only until the Closing, unless such covenant provides for such obligations to continue after the Closing, and then only for the time specified therein. As used herein, “survive” solely means that a party can continue to make claims for representations, warranties or covenants that were in breach on the Closing Date (or, if different, the end time specified for such covenant), and does not mean that such representation, warranty, or covenant continues to be made as to periods after the Closing Date (or the applicable end period for a covenant, for covenants that specifically extend after the Closing Date)

ARTICLE VII

INDEMNIFICATION

SECTION 7.1 Obligation to Indemnify.

(a)Subject to the limitations set forth in this Article VII, and the expiration of representations and warranties of Seller as provided in Article VI, Seller agrees to indemnify and hold harmless Buyer, its Affiliates (including, post Closing, the Company), and their respective directors, officers, shareholders, partners, members and employees and their heirs, successors and permitted assigns (collectively, “Buyer Indemnified Parties”) from, against and in respect of any damages, losses, charges, liabilities, payments, judgments, settlements, assessments, deficiencies, Taxes, interest, penalties, costs and expenses (including, without limitation, reasonable attorneys' fees, and reasonable out of pocket disbursements) (“Losses”) imposed on, sustained, or incurred or suffered by any of the Buyer Indemnified Parties, whether in respect of Third Party Claims, claims between Seller, on the one hand, and Buyer, on the other hand, or otherwise, directly or indirectly resulting from, in connection with or arising out of:

(i)the inaccuracy or any breach of the representations and warranties of Seller contained in this Agreement or in any Transaction Agreement delivered by or on behalf of Seller at the Closing; it being understood that for purposes of this Section 7.1(a), any qualifications relating to materiality, including the term “Seller Material

Adverse Effect”, contained in any such representation or warranty will be disregarded for purposes of determining whether such representation or warranty was breached or was inaccurate;

(ii)any breach or failure by Seller to perform any of its covenants or obligations contained in this Agreement or any Transaction Agreement;

(iii)any Taxes for which Seller is responsible in accordance with Article VIII; and/or (iv) liabilities and obligations of the nature and type specified in Section 4.8;

(iv)the Company, solely to the extent that such Losses are not related to the ownership or operation of Gateway and are not specifically reflected in the 2011 GAAP Financial Statements of the Company; and

(v)any CIE Claims, whether known or unknown as of the Closing Date.

(b)The rights of the Buyer Indemnified Parties to indemnification under Section 7.1(a) will be subject to the following:

(i)If the amount of any Loss suffered or incurred by a Buyer Indemnified Party, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other Person, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith, will promptly be repaid by the Buyer Indemnified Party to Seller that has made any such indemnity payment. Buyer Indemnified Parties will use commercially reasonable efforts to recover from insurance policies or other applicable sources of recovery the maximum portion of any Losses of such Buyer Indemnified Party. Upon making any indemnity payment, Seller will, to the extent of such indemnity payment made by it, be subrogated to all rights of the Buyer Indemnified Party against any third party in respect of the indemnifiable Loss to which the indemnity payment relates; provided, however, that until the Buyer Indemnified Party recovers full payment of its indemnifiable Loss, any and all claims of Seller against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Buyer Indemnified Party's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Buyer Indemnified Party and Seller will duly execute upon request all instruments reasonably necessary to evidence and perfect the above described subrogation and subordination rights.

(ii)Except as set forth in Section 7.1(b)(iv), the Buyer Indemnified Parties will be entitled to indemnification under Section 7.1(a)(i) only to the extent that the aggregate amount of Losses exceed on a cumulative basis Two Hundred Fifty Thousand dollars ($250,000) (the “Indemnification Basket”), after which point Seller will be obligated to indemnify Buyer Indemnified Parties from and against all further Losses in excess of the Indemnification Basket.

(iii)Except as set forth in Section 7.1(b)(iv), the maximum amount for which Seller will be liable in the aggregate under Section 7.1(a)(i) will not exceed Two Million Five Hundred Thousand dollars ($2,500,000) (the “Indemnification Cap”).

(iv)Notwithstanding Sections 7.1(b)(ii), 7.1(b)(iii) and 7.1(c), Losses in connection with or arising out of any breaches or inaccuracies of any of the Special Representations or Extended Representations will not be subject to the Indemnification Cap but will instead be capped (when combined with all other Losses) at an aggregate amount equal to the total amount of the Purchase Price and Losses in connection with or arising out of any breaches or inaccuracies of any Special Representations will not be subject to the Indemnification Basket.

(v)Notwithstanding anything herein to the contrary, with respect to the indemnification obligation contained in Section 7.l(a)(v), if, following the Closing, a valid CIE Claim is presented to Gateway or the Company, then the Seller, either prior to or within 30 days following the end of such fiscal quarter in which Gateway is required by SAP to establish a reserve for such CIE Claim, if the indemnity obligations of Seller are not eligible or sufficient to offset such reserves for SAP purposes, will provide collateral in such form and in such amount as is necessary for Gateway to treat such collateral as a subrogation recovery under SAP in an amount equal to such

uncovered reserves. The Buyer agrees to cause Gateway to establish and maintain such reserves as are reasonably recommended by the Seller.

(c)Subject to the limitations set forth in this Article VII, and the expiration of representations and warranties of Buyer as provided in Article VI, Buyer agrees to indemnify and hold harmless Seller, its Affiliates (excluding, following the Closing, the Company), and their respective directors, officers, shareholders, partners, members and employees and their heirs, successors and permitted assigns (collectively, “Seller Indemnified Parties”) from, against and in respect of any Losses imposed on, sustained, or incurred or suffered by any of Seller Indemnified Parties, whether in respect of Third Party Claims, claims between Seller, on the one hand, and Buyer, on the other hand, or otherwise, directly or indirectly resulting from, in connection with or arising out of:

(i)the inaccuracy or any breach of the representations and warranties of Buyer contained in this Agreement or in any Transaction Agreement; it being understood that for purposes of this Section 7.1(c), any qualifications relating to materiality, including the term “Buyer Material Adverse Effect”, contained in any such representation or warranty will be disregarded for purposes of determining whether such representation or warranty was breached or was inaccurate; and

(ii)any breach or failure by Buyer to perform any of its covenants or obligations contained in this Agreement or in any Transaction Agreement.

(d)If the amount of any Loss suffered or incurred by a Seller Indemnified Party, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other Person, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith, will promptly be repaid by Seller Indemnified Party to Buyer. Seller Indemnified Parties will use commercially reasonable efforts to recover from insurance policies or other applicable sources of recovery the maximum portion of any Losses of such Seller Indemnified Party. Upon making any indemnity payment, Buyer will, to the extent of such indemnity payment, be subrogated to all rights of Seller Indemnified Party against any third party in respect of the indemnifiable Loss to which the indemnity payment relates; provided, however, that until Seller Indemnified Party recovers full payment of its indemnifiable Loss, any and all claims of Buyer against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to Seller Indemnified Party's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Seller Indemnified Party and Buyer will duly execute upon request all instruments reasonably necessary to evidence and perfect the above described subrogation and subordination rights.

SECTION 7.2 Indemnification Notice Procedures.

(a)A Person entitled to indemnification hereunder pursuant to Section 7.1 (an “Indemnified Party”), including pursuant to any Third Party Claim which might give rise to indemnification pursuant to Section 7.1, will provide prompt written notice (the “Indemnification Notice”) to the Party from whom indemnification is sought (the “Indemnifying Party”) of any claim or demand that it may have pursuant to Section 7.1; provided, that in the event such Indemnification Notice relates to a Third Party Claim, the Indemnified Party will provide an Indemnification Notice to the Indemnifying Party with respect thereto within fifteen (15) days following such Indemnified Party's receipt of written notice of such Third Party Claim. Any delay in delivering an Indemnification Notice will not affect the indemnification provided hereunder except to the extent the Indemnifying Party will have been materially prejudiced as a result of such delay. An Indemnification Notice will contain a brief summary of the facts underlying or related to such claim to the extent then known by the Indemnified Party and true, correct and complete copies of any correspondence, notices or pleadings (if a Third Party Claim); provided, that an Indemnification Notice need not state the amount of Losses that the Indemnified Party believes it has incurred or suffered relating to such claim. The Indemnified Party will use, and will cause each of its Affiliates to use, commercially reasonable efforts to mitigate any Losses upon and after becoming aware of any facts, matters, failures or circumstances that would reasonably be expected to result in any Losses that are indemnifiable hereunder. Notwithstanding anything contained herein to the contrary in no event will any Party be liable to the other Party for consequential or punitive damages arising under this Agreement.

(b)At any time after an Indemnified Party has delivered an Indemnification Notice, such Indemnified Party in his, her or its discretion may supplement or amend such Indemnification Notice by delivery of any correspondence, notice or other information relating to the claim covered by the original Indemnification Notice. In addition, at any time after an Indemnified Party has delivered a Indemnification Notice with respect to a claim other than a Third Party Claim, such Indemnified Party in its discretion may deliver a notice which attaches the original Indemnification Notice, sets forth a summary in reasonable detail of the facts underlying or relating to such claim to the extent then known by the Indemnified Party, includes a statement demanding indemnification from the Indemnified Party and includes a statement of the amount of Losses for which the Indemnified Party seeks indemnification at that time (a “Demand Notice”). The Indemnifying Party will have fifteen (15) Business Days from the date on which the Indemnified Party delivers a Demand Notice during which to notify the Indemnified Party in writing of any objections it has to the Indemnified Party's notice or claims for indemnification. If the Indemnifying Party does not deliver such written notice of objection to such Demand Notice within such fifteen (15) Business Day period, the Indemnifying Party will be deemed to have accepted the claim as set forth in the Demand Notice. If the Indemnifying Party accepts the claim as set forth in the Demand Notice, it will have fifteen (15) Business Days from the date of acceptance to pay such claim and if the Indemnifying Party rejects the claim, the Indemnified Party will be entitled to initiate an Action to seek enforcement of its rights to indemnification under this Agreement. The Indemnifying Party will have no right to participate in or control any claim that is not a Third Party Claim.

SECTION 7.3 Third Party Claims.

(a)The Indemnified Party agrees to give the Indemnifying Party notice in writing of the assertion of any claim or demand made by, or any other Action instituted by, any Person not a Party to this Agreement (a “Third Party Claim”) in respect of which indemnity may be sought under Section 7.1 in accordance with the notice procedures set forth in Section 7.2; provided, however, that any delay in delivering any Indemnification Notice will not affect the indemnification provided hereunder, except to the extent the Indemnifying Party will have been materially prejudiced as a result of such delay. From and after the delivery of a Indemnification Notice with respect to a Third Party Claim, the Indemnified Party will deliver to the Indemnifying Party, within ten (10) Business Days after the Indemnified Party's receipt thereof, true, correct and complete copies of all material notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. Any CIE Claim shall be considered a Third Party Claim for purposes of the procedures set forth in this Section 7.3, it being the intent of the parties that Seller will assume the defense and settlement of any CIE Claim; provided that in such event, Seller will use reasonable best efforts not to create any bad faith exposure for Buyer, and, for the avoidance of doubt, if any such exposure is created that results in Losses to any of the Buyer Indemnified Parties, Seller will indemnify Buyer Indemnified Parties for such Losses pursuant to Section 7.1(a)(ii).

(b)(i)With respect to a Third Party Claim, the Indemnifying Party will be entitled to participate in the defense thereof and, if it so elects, to assume the defense thereof, unless such Third Party Claim is reasonably likely to materially and adversely affect the Indemnified Party and/or the Indemnified Party's Affiliates other than as a result of monetary damages. Unless the Indemnified Party will have notified the Indemnifying Party of the existence of the condition set forth in the preceding sentence, the Indemnifying Party will have thirty (30) days (or such lesser number of days set forth in the Indemnification Notice as may be required by any Governmental Entity, any court or arbitration proceedings, or any regulatory inquiry or investigation) from receipt of the Indemnification Notice with respect to a Third Party Claim (the “Defense Notice Period”) to notify the Indemnified Party of its election to assume the defense of such Third Party Claim. All Losses incurred by the Indemnified Party prior to any assumption by the Indemnifying Party of the defense of a Third Party Claim will be reimbursed by the Indemnifying Party to the extent the Indemnifying Party is required to indemnify and hold harmless the Indemnified Party from, against and in respect of Losses incurred or suffered by the Indemnified Party to the extent arising from such Third Party Claim. If the Indemnifying Party notifies the Indemnified Party within the Defense Notice Period that it elects to defend such Third Party Claim, it will have the right to so defend at its expense, with counsel selected by the Indemnifying Party that is reasonably acceptable to the Indemnified Party. Once the Indemnifying Party has duly assumed the defense of a Third Party Claim, the Indemnified Party will have the right, but not the obligation, to participate in the defense thereof, including the opportunity to participate in any discussions or correspondence with any Governmental Entity, and to employ counsel separate from the counsel employed by the

Indemnifying Party. The Indemnified Party will participate in any such defense at its own expense unless (A) the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and a Governmental Entity, arbitrator or arbitration panel, as applicable, with jurisdiction over the proceedings at issue will have determined that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or the availability to the Indemnified Party of one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the Indemnifying Party in respect thereof or (B) the Indemnified Party assumes the defense of a Third Party Claim after the Indemnifying Party has failed to diligently pursue a Third Party Claim it has assumed, and in the case of (A) or (B), all such expenses incurred by the Indemnified Party in connection with such participation will be borne by the Indemnifying Party. Each Party will reasonably cooperate in the defense or prosecution of a Third Party Claim. Such cooperation will include the retention and, upon the Indemnifying Party's request, the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(ii)In the event the Indemnifying Party (x) elects not to defend the Indemnified Party against a Third Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend or otherwise; (y) is not entitled to defend the Third Party Claim as a result of the Indemnified Party's election to defend the Third Party Claim as provided in Section 7.3(b)(i); or (z) after assuming the defense of a Third Party Claim, fails to conduct the defense of such Third Party Claim in a reasonably diligent manner within twenty (20) days after receiving written notice from the Indemnified Party to the effect that the Indemnifying Party has so failed, the Indemnified Party will have the right but not the obligation to assume its own defense; it being understood that the Indemnified Party's right to indemnification for such Third Party Claim will not be adversely affected by assuming the defense of such Third Party Claim.

(iii)Whether or not the Indemnifying Party will have assumed the defense of a Third Party Claim, the Indemnifying Party will have no liability with respect to any compromise or settlement of such claims effected without its written consent (which consent may not be unreasonably withheld or delayed), and the Indemnifying Party may not consent to the entry of judgment, admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnified Party's prior written consent unless (A) there is no finding or admission of any violation of applicable Requirements of Law and no effect on any other claims that may be made against the Indemnified Party or any of its Affiliates; (B) there is no imposition of an Order that could restrict the future activity of the Indemnified Party or its Affiliates; and (C) the sole relief provided is monetary damages that are concurrently paid in full by the Indemnifying Party and a full and complete release is provided to the Indemnified Party and its Affiliates.

SECTION 7.4 Survival. The indemnities provided in this Agreement will survive the Closing; provided, however, that the indemnities provided under Section 7.1(a)(i) and Section 7.1(b)(i) will terminate when the applicable representation or warranty terminates pursuant to Article VI, except as to any item as to which the Indemnified Party will have, before the expiration of the applicable period, previously delivered an Indemnification Notice satisfying the content requirements of Section 7.2(a). For the avoidance of doubt, the delivery by the Indemnified Party of one or more supplements or amendments to an Indemnification Notice or of a Demand Notice as contemplated by Section 7.2(b) will not be (a) deemed the delivery of a new Indemnification Notice or the revocation of the original Indemnification Notice for purposes of this Section 7.4; and (b) will not alter or undermine the timeliness of the original Indemnification Notice for purposes of Section 7.2(a).

SECTION 7.5 Indemnification Payments; Characterization. All payments made by an Indemnifying Party to an Indemnified Party in respect of any claim pursuant to this Article VII or Article VIII will be (a) made by wire transfer of immediately available funds to an account designated in writing by the relevant indemnified party and (b) treated as adjustments to the Purchase Price for Tax purposes to the extent such characterization is proper and permissible under applicable Requirements of Law.

ARTICLE VIII

TAX MATTERS

SECTION 8.1 Tax Indemnity.

(a)Seller will indemnify and hold harmless the Buyer Indemnified Parties from and against any and all Taxes imposed on the Transferred Companies for any Pre Closing Tax Years, except to the extent such Taxes have been properly reserved for on the books of the appropriate Transferred Company(ies) as of the Closing Date or the liability for such Taxes is otherwise disclosed on the Disclosure Schedule hereto; provided, however, that Seller will have no liability to Buyer hereunder until such Taxes impose Tax liability on the Transferred Companies in excess of DTAs less DTLs. Notwithstanding the foregoing, if any such Tax-related liability requires Buyer to make a cash payment in respect thereof, the forgoing indemnification by Seller in this Section will apply in full force, provided, however, that if such Tax-related liability generates a Tax credit for use with respect to the same year with respect to which the cash payment is due or any prior year, then the foregoing indemnification by Seller in this Section will apply in full force only to the extent that such Tax-related liability exceeded any such Tax credit; provided, further, without duplication of any effect of the treatment of DTAs and DTLs under Section 2.3(b) hereof, that if such Tax-related liability generates a Tax credit that is used in any future year, the Buyer will make a cash payment to Seller in respect thereof when it is used. With respect to any Tax liability that did not give rise to indemnity solely because it did not exceed the total DTAs less total DTLs, the DTAs thereafter will be deemed reduced in the amount of such liability, and no amount shall be due or payable with respect to the amount of DTAs reduced at such time or any time thereafter under Section 2.3(b)(viii) hereof. Buyer will be liable for and will indemnify and hold harmless Seller from and against (A) any and all Taxes imposed on the Transferred Companies for any Post Closing Tax Years and (B) any Taxes imposed on the Transferred Companies for any Pre-Closing Tax Years to the extent such Taxes are reserved on the books of the appropriate Transferred Company(ies) as of the Closing Date or are otherwise disclosed on the Disclosure Schedule hereto.

(b)For purposes of determining the liability of Seller and Buyer pursuant to Section 8.1(a) with respect to Taxes (other than Transfer Taxes) that are payable for a taxable period that begins before the Closing Date and ends after the Closing Date (a “Straddle Period”), the portion of any such Tax that is allocable to the Pre Closing Tax Years will be in the case of (i) Taxes imposed on a periodic basis or otherwise measured by the level of any item deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a fraction the numerator of which is the number of calendar days in the period ending on the Closing Date and the denominator of which is the number of calendar days in the entire period irrespective of the lien or assessment date of such Taxes; (ii) Taxes imposed on or measured by income, gross receipts, wages, expenses or other similar periodic measures or imposed on sales, assignments or any other transfers of any property deemed equal to the amount which would be payable if the taxable year ended with the Closing Date (based on an interim closing of the books as of the Closing); and (iii) Taxes imposed on the basis of premium deemed equal to the amount which would be payable on the basis of the amount of the premium written as of the Closing. The portion of any Tax not allocable to the Pre Closing Tax Years in accordance with the foregoing will be allocable to the post Closing tax years.

(c)Notwithstanding any other provision in this Agreement to the contrary, (i) to the extent Seller or any Affiliate of Seller (other than the Transferred Companies) has paid estimated Taxes that are attributable to the income, gain, business or activities of the Transferred Companies and prior to the Closing Date Seller has not been reimbursed for such expenses and such estimated Taxes are actually applied to the Tax account of the Transferred Companies, Seller's liability for Taxes pursuant to this Agreement will be reduced by the amount of such payments, and (ii) Seller will not be liable for any Tax to the extent such Tax is reflected on the Closing SAP Balance Sheet.

SECTION 8.2 Preparation and Filing of Tax Returns.

(a)Seller will cause the Transferred Companies (at the expense of Seller) to prepare or cause to be prepared in a manner consistent with past practice and file or cause to be filed on a timely basis all Tax Returns for taxable years that end on or before the Closing Date. With respect to any Tax Return for 2011 required to be filed or caused to be filed by Seller with respect to the Transferred Companies pursuant to this Section 8.2(a), Seller will (regardless of whether such Tax Return is required to be provided to Buyer pursuant to Section 8.2(c)) provide Buyer and its authorized representatives with a copy of such completed Tax Return and a statement certifying and

setting forth the calculation of the amount of Tax shown on such Tax Return, together with appropriate supporting information and schedules at least twenty (20) Business Days prior to the due date (including any extension thereof) for the filing of such Tax Return, and Buyer and its authorized representatives will have the right to review and comment on such Tax Return in accordance with the provisions of Section 8.2(c) below.

(b)Buyer will prepare or cause to be prepared, and file or cause to be filed on a timely basis (i) all Tax Returns for the Transferred Companies for all Straddle Periods, and (ii) all Tax Returns for the Transferred Companies for all post Closing tax years. Tax Returns for a Straddle Period will be prepared in a manner consistent with the Transferred Companies' past practices, except to the extent otherwise required by applicable Law. The liability for any Taxes set forth on a Straddle Period Tax Return will be determined in accordance with the provisions of Section 8.1 above.

(c)With respect to any Tax Return required to be filed or caused to be filed by Seller, on the one hand, or Buyer, on the other hand, pursuant to Section 8.2(a) and Section 8.2(b) with respect to the Transferred Companies (such Party, the “Filing Party”) and as to which an amount of Tax is allocable to the Party that is not the Filing Party (the “Tax Indemnifying Party”) pursuant to Section 8.2(a) or Section 8.2(b), the Filing Party will provide the Tax Indemnifying Party and its authorized representatives with a copy of such completed Tax Return and a statement certifying and setting forth the calculation of the amount of Tax shown on such Tax Return that is allocable to such Tax Indemnifying Party, together with appropriate supporting information and schedules at least thirty (30) Business Days prior to the due date (including any extension thereof) for the filing of such Tax Return, and such Tax Indemnifying Party and its authorized representatives will have the right to review and comment on such Tax Return, prior to the filing of such Tax Return and will provide to the Filing Party written notice of any objections it has with respect to such Tax Returns (a “Tax Dispute”) no later than ten (10) Business Days prior to the date when such Tax Return must be filed. In the event of any such objections the relevant Parties will in good faith attempt to resolve such dispute for a period of five (5) Business Days following the date on which the Filing Party was notified of the Tax Dispute; provided, that if such dispute is not settled by such date (the “Tax Dispute Date”) the Parties will submit all such disputed matters to an independent and mutually selected nationally recognized accounting firm or law firm (the “Tax Referee”), within five (5) Business Days after the Tax Dispute Date. The decision by the Tax Referee will be final and binding on the Parties with respect to how any such Tax Return should be filed. Notwithstanding anything in this Agreement to the contrary, the fees and expenses relating to the Tax Referee will be paid equally by each Party to such Tax Dispute. If the Tax Referee has failed to render a decision by the date that is three (3) days prior to the date on which the disputed Tax Return must be filed then such Tax Return will be filed in the manner consistent with the Tax Indemnifying Party's position; provided, however, that if the Tax Referee renders a final decision that differs from the position advocated by the Tax Indemnifying Party, such Tax Returns will be amended within a period not to exceed ninety (90) days after the Tax Referee's final decision to reflect the final determination reached by the Tax Referee and the Tax Indemnifying Party will reimburse the Filing Party for any additional Taxes that the Tax Indemnifying Party is required to pay pursuant to Section 8.1.

(d)Payment of any amounts due under this Article VIII in respect of Taxes will be made: (i) except to the extent that there is a Tax Dispute or that a matter relating to Taxes is being contested with a Taxing Authority, at least five (5) Business Days before the due date of the applicable estimated or final Tax Return required to be filed by the Filing Party that reports a Tax liability for which a Tax Indemnifying Party is liable pursuant to this Agreement; and (ii) with respect to a Tax Dispute or any matter relating to Taxes which are being contested with a Taxing Authority, within three (3) Business Days after the following: (A) an agreement between Seller, on the one hand, and Buyer, on the other hand, that an indemnity amount is payable; (B) a Final Determination having been made by a Taxing Authority; or (C) in the event of a Tax Dispute, a final determination by the Tax Referee. If liability under this Article VIII is in respect of an expense relating to the contest of a Tax matter, payment of any amounts due under this Article VIII will be made as of the time when the payment of the corresponding Tax is due pursuant to the immediately preceding sentence.

SECTION 8.3 Tax Refunds. Rights and benefits relating to all credits or refunds of Tax liabilities of the Transferred Companies no matter how secured (including credits for overpayment of estimated Taxes) arising from or relating to any Pre Closing Tax Years or a liability for Tax for which Seller has provided an indemnity under

Section 7.1(b) will remain with and be for the benefit of Seller, and Buyer will pay to Seller the amount of any such Tax refund or credit against Taxes received by Buyer or by the Transferred Companies plus any overpayment interest accruing from the date the corresponding Tax liability was paid. However, to the extent that a credit or a Tax refund of a Tax arising from or relating to any Pre Closing Tax Years is attributable to the carryback of a Post Closing Tax Year Tax attribute, such Tax Refund or credit will be the property of Buyer.

SECTION 8.4 Tax Notice; Tax Controversies. Seller, on the one hand, and Buyer, on the other hand, will provide to each other notice within five (5) Business Days of receipt of any notice of deficiency, proposed adjustment, assessment, audit, examination or other administrative or court proceeding, suit, dispute or other claim (a “Tax Claim”) in which a Taxing Authority makes or proposes to make a Tax adjustment to any Tax period which includes any period up to and including the Closing Date. Seller will control the conduct of any Tax Claim that: (i) could adversely affect the Taxes of Seller or any Affiliate thereof or (ii) could result in Seller being liable for any amount of Taxes or losses related thereto, either under the Law or pursuant to this Agreement (a “Seller Tax Claim”), but only to the extent that such Seller Tax Claim is severable from other Tax Claims which are not Seller Tax Claims. Buyer will control all other proceedings. With respect to any Tax Claim, the Party not controlling the proceeding of such Tax Claim or its representative will (to the extent permitted by Law) have the right, at its expense, to participate in any such Tax Claim. The Parties agree that they will not settle, compromise or agree to any Tax adjustment which affects or could affect any other Party's Tax liability without the prior written consent of such other Party, which consent may not be unreasonably withheld; provided, that Seller will have the right to settle or compromise any such proceedings without the consent of Buyer to the extent such settlement or compromise will not adversely affect the Tax liability of Buyer or any Affiliate thereof (including the Transferred Companies) after the Closing Date, and Buyer will have the right to settle or compromise any such proceedings without the consent of Seller to the extent such settlement or compromise will not adversely affect the Tax liability of Seller or any Affiliate thereof prior to the Closing Date.

SECTION 8.5 Cooperation and Controversies.

(a)Seller, on the one hand, and Buyer, on the other hand, will reasonably cooperate, and will cause their respective Affiliates, agents, auditors, representatives, officers and employees reasonably to cooperate, in preparing and filing all Tax Returns (including amended returns and claims for refund), including maintaining and making available to each other all records necessary in connection with Taxes and with respect to any Tax Claim, which cooperation will include but not be limited to (i) providing all relevant information that is available to Buyer, Seller and/or the Transferred Companies, as the case may be, with respect to such Tax Claim; (ii) making personnel available at reasonable times; and (iii) preparation of responses to requests for information; provided, that the foregoing will be done in a manner so as to not unreasonably interfere with the conduct of business by Buyer, Seller or the Transferred Companies, as the case may be. None of Seller or Buyer or the Transferred Companies will dispose of any Tax Returns, Tax schedules, Tax work papers or any books or records unless it first offers in writing to the other Parties the right to take possession of such materials at the sole expense of such Party or Parties that accept that offer, and if any other such Party fails to accept such offer within fifteen (15) Business Days of the offer being made or if an offer is accepted and the offeree fails to take possession within thirty (30) Business Days of the date on which the offer is made. Any information obtained under this Section 8.5 will be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or with respect to any Tax Claim.

(b)Within 180 days after the Closing Date, Buyer will cause the Transferred Companies to prepare and provide to Seller a package of Tax information materials, including, without limitation, schedules and work papers (the “Tax Package”) required by Seller to enable Seller to prepare and file all Tax Returns required to be prepared and filed by Seller pursuant to Section 8.2(a) and upon Seller's reasonable request, Buyer will provide to Seller any additional information that may be requested by Seller. The Tax Package will be prepared in good faith in a manner consistent with past practice.

SECTION 8.6 Transfer Taxes. Seller, on the one hand, and Buyer, on the other hand, will each be liable for and will hold the other harmless against one half of any Real Property transfer, sales, use, transfer, stock transfer, and stamp taxes, any transfer, recording, registration and other fees, and any similar Taxes which become payable as a

result of the transactions contemplated by the Transaction Agreements (collectively, “Transfer Taxes”). Buyer or Seller, as appropriate, will execute and deliver all instruments and certificates necessary to enable the other Party to comply with any filing requirements relating to any such Transfer Taxes.

SECTION 8.7 Code Section 338(h)(10) Election.

Neither party hereto will make an election under Section 338(h)(10) of the Code and the Treasury Regulations promulgated thereunder and any corresponding elections under applicable foreign, state or local tax law (individually and collectively a “Section 338(h)(10) Election”) with respect to the purchase and sale of the Shares pursuant to this Agreement.

ARTICLE IX

TERMINATION PRIOR TO THE CLOSING

SECTION 9.1 Termination of Agreement. This Agreement may be terminated at any time prior to the Closing:

(a)by Seller or Buyer in writing, if any Order will have been issued and will have become final and nonappealable, or if any statute will have been enacted, or if any rule or regulation will have been promulgated by any Governmental Entity, that prohibits or restrains such Parties or Party from consummating the transactions contemplated by this Agreement, and the Parties or Party seeking to terminate this Agreement pursuant to this Section 9.1(a) will have used commercially reasonable best efforts to cure such condition;

(b)by Seller or Buyer in writing, if the Closing has not occurred on or prior to March 31, 2013 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this Section 9.1(b) will not be available to a Party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; provided further, that if the Closing has not occurred prior to the Termination Date because the conditions provided for in Section 5.1(e) and Section 5.2(d) have not been satisfied because the WC Reinsurer has not obtained the necessary licenses and authorizations but applications for such licenses and authorizations have been filed and are then pending, then the Termination Date will be extended until May 1, 2013, so long as the reinsurance related to the WC Reinsurance Agreement can be made effective as of the Effective Date without being considered retroactive under SAP, unless otherwise agreed to by the Parties.

(c)by Seller or Buyer, if there will have been a breach by Buyer or Seller, respectively, of any of their respective representations, warranties, covenants or obligations contained herein, which breach would result in the failure to satisfy any condition set forth in Section 5.1 or Section 5.2, and in any such case such breach will be incapable of being cured or, if capable of being cured, will not have been cured on or prior to the earlier of (x) the Termination Date and (y) the thirtieth (30th) calendar day following receipt of written notice thereof by the Party alleged to be in breach; provided, however, that the right to terminate this Agreement under this Section 9.1(c) will not be available to a Party whose will then be in breach of this Agreement, which breach would result in the failure to satisfy any condition set forth in Section 5.1 or Section 5.2; or

(d)at any time prior to the Closing, by mutual written consent of Seller and Buyer.

SECTION 9.2 Effect of Termination; Survival. In the event of termination of this Agreement as provided in Article IX:

(a)this Agreement will forthwith become void and there will be no liability on the part of any Party except (i) under the provisions of Sections 4.4, 4.11(a) and 9.2, and Article X, and any other Section of this Agreement which, by its express provisions, survives the termination of this Agreement, or the survival of which is necessary to fulfill the intended effect of any other Section which, by its express provisions, survive the termination of this Agreement

and (ii) that nothing herein will relieve any Party from liability for any breach of this Agreement prior to its termination; and

(b)all filings, applications and other submissions made pursuant to the transactions contemplated by this Agreement will, to the extent practicable, be withdrawn from the Governmental Entity or other Person to which made.

ARTICLE X

GENERAL PROVISIONS

SECTION 10.1 Fees and Expenses. Whether or not the Closing may occur, except as provided herein, each Party will pay such Party's own fees and expenses incident to preparing for, entering into and carrying out this Agreement and the transactions contemplated hereby.

SECTION 10.2 Notices. All notices and other communications given or made pursuant hereto will be in writing and will be deemed to have been duly given or made as of (a) in the case of personal delivery, when actually delivered; (b) in the case of delivery by prepaid overnight courier with guaranteed next day delivery, the day designated for delivery by such courier; (c) in the case of delivery by registered or certified mail, postage prepaid, return receipt requested, five (5) days after deposit in the mails; (d) in the case of transmittal by facsimile, upon receipt by the sender of a printed confirmation of transmittal; or (e) in the case of transmittal by electronic mail, upon receipt by the sender of electronic confirmation of such transmittal, and in each case will be addressed as follows (or at such other address, facsimile number or e mail address for a Party as will be specified by like notice):

(a)If to Buyer, to:

Atlas Financial Holdings, Inc.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

Attn: Scott Wollney

with a copy, which will not constitute notice to Buyer, to:

DLA Piper LLP (US)

203 N. LaSalle Street, Suite 1900

Chicago, Illinois 60601

Attn: David Mendelsohn

(b)If to Seller, to:

Hendricks Holding Company, Inc.

690 Third Street, Suite 300

Beloit, WI 53511

Attn. Jeffrey W. Stentz

And to

Karl Leo, VP and CLO

Hendricks Holding Company, Inc.

200 Randolph Ave, Ste 200

Huntsville, AL 53803

with a copy, which will not constitute notice to Hendricks, to:

Mark R. Goodman

Freeborn & Peters LLP

311 S. Wacker Drive, Suite 3000

Chicago, IL 60606

No party hereto may refuse service of any notice delivered hereunder. Notwithstanding anything to the contrary set forth herein, if the addressee/recipient rejects or otherwise refuses to accept the notice, or if the notice cannot be delivered because of a change in address for which no notice was given, then the notice will be effective upon the rejection, refusal, or inability to deliver.

SECTION 10.3 Interpretation. This Agreement will be governed by the following rules of interpretation: (a) when a reference is made in this Agreement to an Article, Section, Schedule, or Disclosure Schedule, such reference will be to an Article of, a Section of, or a Schedule or Disclosure Schedule to, this Agreement unless otherwise indicated; (b) any fact or item disclosed in any section of the Disclosure Schedule will be deemed disclosed in all other sections of the Disclosure Schedule to which such fact or item may apply only if the relevance of such disclosure is readily apparent from the text, document, or information disclosed; provided, that the mere listing of a document or other item will not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty pertains to the existence of the document or other item itself); (c) the table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement; (d) whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation;” (e) whenever the singular is used herein, the same will include the plural, and whenever the plural is used herein, the same will include the singular, where appropriate; and (f) references to “$” mean United States dollars.

SECTION 10.4 Entire Agreement; Third Party Beneficiaries.

(a)This Agreement (including all exhibits and schedules hereto, and the Disclosure Schedule), together with the other Transaction Agreements, constitutes the entire agreement of the Parties with respect to the subject matter contained herein and therein, and supersedes all prior agreements, understandings, representations and warranties, both written and oral, between the Parties with respect to such subject matter.

(b)Except as otherwise provided in Article VII or VIII as respects Indemnified Parties, the terms and provisions of this Agreement are intended solely for the benefit of the Parties, and their respective successors and assigns, and nothing in this Agreement is intended or will be construed to give any other Person any legal or equitable right, remedy or claim under, or in respect of, this Agreement or any provision contained herein.

SECTION 10.5 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This Agreement will be interpreted and construed in accordance with the Laws of the State of Illinois, without regard to its conflict of laws principles that would require application of the Laws of a jurisdiction other than the State of Illinois. Except as provided in Section 2.2(d), 2.3 and 8.2(c), the Parties hereby irrevocably and unconditionally (a) submit to the exclusive jurisdiction of any State or Federal Court sitting in the City of Chicago (any such court, a “Chicago Court”), over any Action arising out of or relating to this Agreement; (b) agree that service of any process, summons, notice or document by the means specified herein will be effective service of process for any Action brought against such Party in a Chicago Court; (c) waive any objection to the laying of venue of any such Action brought in a Chicago Court has been brought in an inconvenient forum; and (d) agree that final judgment in any such Action in a Chicago Court will be conclusive and binding upon the Parties and may be enforced in any other courts to whose jurisdiction the Party against whom enforcement is sought may be subject, by suit upon such judgment. IN ADDITION TO THE FOREGOING, EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH PARTY HEREBY ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL UNDERSTATING AND KNOWLEDGE OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY.

SECTION 10.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations of any Party will be assigned, in whole or in part, by operation of law or otherwise by such Party without the prior written consent of the other Party, and any such assignment that is not consented to will be null and void; provided, however, that Buyer may (a) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (b) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases Buyer nonetheless will remain responsible for the performance of all of its obligations hereunder). Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.

SECTION 10.7 Specific Performance. The Parties agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with the terms hereof, including, without limitation, the breach of any covenant under Section 4.11, and that, prior to the termination of this Agreement pursuant to Section 9.1, the Parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement by the other Party or to specific performance of the terms hereof in addition to any other remedies at Law or in equity.

SECTION 10.8 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable Requirements of Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Requirements of Law, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

SECTION 10.9 Amendment; Modification and Waiver. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by each of the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any Party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

SECTION 10.10 Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same instrument and will become effective when one or more counterparts have been signed by each Party and delivered to the other Party. Each counterpart may be delivered by facsimile transmission or e mail (as a .pdf, .tif or similar uneditable attachment), which transmission will be deemed delivery of an originally executed counterpart hereof.

SECTION 10.11 Attorney's Fees. The prevailing Party in any litigation or arbitration relating to this Agreement will be entitled to recover its reasonable attorneys' fees and costs from the other Party; provided, however, that nothing herein will require the adjudicator to determine that either Party is the prevailing Party.

SECTION 10.12 Interest. If either Party owes a payment to the other Party under the terms of this Agreement and such payment is not paid within thirty (30) days of the date the payment is due, then such payment shall accrue interest at the rate of eight and one-half percent (8.5%) per annum, compounding monthly.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the Date of this Agreement.

SELLER:

HENDRICKS HOLDING COMPANY, INC.

By:

Name:

Title:

BUYER:

ATLAS FINANCIAL HOLDINGS, INC.

By:

Name:

Title:

Exhibit A - Holdback Note Terms

Interest Rate4.5% per annum; rate increases to 8.5% per annum in the event of a default

Principal AmountInitially equal to the Redemption Payment. To be adjusted annually based on future Loss & LAE development. Principal will be reduced $1.00 for every $1.00 of Loss Development Increase. Principal will be increased $1.00 for each dollar of such Loss Development Decrease to the extent of any prior Loss Development Increase and thereafter will be increased $0.75 for every $1.00 of Loss Development Decrease.

Maturity DateThe earlier of (a) December 31, 2017 and (b) thirty days after written notice from Buyer

Final AdjustmentUpon the Maturity Date, to settle remaining loss development exposure, based on the most recent Holdback Reserve Estimate determined by an Independent Expert

Exhibit B

Form of WC Reinsurance Agreement

Exhibit C

Purchase Price Calculation and Payment Methodology

Exhibit D

Buyer Note Terms

Interest Rate4.5% per annum; rate increases to 10% per annum after the first year, paid quarterly.

Principal AmountAs set forth in Section 2.3(c) of the Agreement

Maturity Date

Due and payable by Buyer eighteen (18) months after the issuance of the Buyer Note.

Mandatory Pre-Payments

If, on a quarterly basis, it is determined that cash and cash equivalents held of the Buyer exceed $2,000,000, Buyer will make a principal payment equal to the difference between (a) the cash and cash equivalents of the Buyer as of such date, and (b) $2,000,000.

Optional Pre-Payments

Buyer may elect to make a principal payment in any amount at any time prior to the Maturity Date.

Exhibit E

Proposed Final DTAs and DTLs

EX-3.1

EXHIBIT 3.1b

RESTATED AND AMENDED ARTICLES OF INCORPORATION

The undersigned corporation, for the purpose of amending and restating its Articles of Incorporation and pursuant to the provisions of 215 ILCS 5/29 of the Illinois Insurance Code, hereby executes the following Articles of Amendment:

ARTICLE ONE

The name of the Company shall be AMERICAN COUNTRY INSURANCE COMPANY.

ARTICLE TWO

The principal offices of the Company shall be located in Cook County, Illinois.

ARTICLE THREE

The duration of the Company shall be perpetual.

ARTICLE FOUR

The Company shall engage in the writing of insurance policies and reinsurance business as defined in Class 2 and Class 3 of Section 4 of the Illinois Insurance Code, as follows:

Class 2. Casualty, Fidelity and Surety.

(a) Accident and Health. Insurance against bodily injury, disablement or death by accident and against disablement resulting from sickness or old age and every insurance appertaining thereto.

(b) Vehicle. Insurance against any loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft. Any policy insuring against any loss or liability on account of the bodily injury or death of any person may contain a provision for payment of disability benefits to injured persons and death benefits to dependents, beneficiaries or personal representatives of persons who are killed, including the named insured, irrespective of legal liability of the insured, if the injury or death for which benefits are provided is caused by accident and sustained while in or upon or while entering or alighting from or through being struck by a vehicle (motor or otherwise), draft animal or aircraft, and such provision shall not be deemed to be accident insurance.

(c) Liability. Insurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person's property.

(d) Workmen's Compensation. Insurance of the obligations accepted by or imposed upon employers under laws for workmen's compensation.

(e) Burglary and Forgery. Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud or otherwise; including all householders' personal property floater risks.

(f) Glass. Insurance against loss or damage to glass, including lettering, ornamentation and fittings from any cause.

(g) Fidelity and Surety. Become surety or guarantor for any person. co-partnership or corporation in any position or place of trust or as custodian of money or property, public or private; or, becoming a surety or guarantor for the performance of any person, co-partnership or corporation of any lawful obligation, undertaking, agreement or contract of any kind, except contracts or policies of insurance; and underwriting blanket bonds. Such obligations shall be known and treated as suretyship obligations and such business shall be known as surety business.

(h) Miscellaneous. Insurance against loss or damage 1:0 property and any liability of the insured caused by accidents to boilers, pipes, pressure containers, machinery and apparatus of any kind and any apparatus connected thereto, or used for creating, transmitting or applying power, light, heat, steam or refrigeration. making inspection of and issuing certificates of inspection upon elevators, boilers, machinery and apparatus

of any kind and all mechanical apparatus and appliances appertaining thereto; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes) plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or tor its storage or utilization therein. or caused by the falling of a tank, tank platform or supports; or against loss or damage from any cause (other than causes specifically enumerated under Class 3 of this section) to such sprinkler, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance against loss or damage which may result from the failure of debtors to' pay their obligations to the insured; and insurance of the payment of money for personal services under contracts of hiring.

(i) Other Casualty Risks. Insurance against any other casualty risk not otherwise specified under Classes 1 or 3, which may lawfully be the subject of insurance and may properly he classified under Class 2. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(j) Contingent Losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to anyone of the causes enumerated under Class 2. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(k) Livestock and Domestic Animals. Insurance against mortality, accident and health of livestock and domestic animals.

Class 3. Fire and Marine, etc.

(a) Fire. Insurance against loss or damage by fire, smoke and smudge, lightning or other electrical disturbances.

(b) Elements. Insurance against loss or damage by earthquake, windstorms, cyclone, tornado, tempests, hail, frost, snow, ice, sleet, flood, rain, drought or other weather or climatic conditions including excess or deficiency of moisture, rising of the waters of the ocean or its tributaries.

(c) War, Riot and Explosion. Insurance against loss or damage by bombardment, invasion, insurrection, riot, strikes, civil war or commotion, military or usurped power, or explosion (other than explosion of steam boilers and the breaking of wheels on premises owned, controlled, managed, or maintained by the insured).

(d) Marine and Transportation. Insurance against loss or damage to vessels, craft, aircraft, vehicles of every kind (excluding vehicles operating under their own power or while in storage not incidental to transportation), as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any or all risks or perils of navigation, transit, or transportation, including war risks. on or under any seas or other waters, on land or in the air. or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same, or during any delays, storage, transshipment, or reshipment, incident thereto, including marine builder's risks and all personal property floater risks; and for loss or damage to persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either arising out of or in connection with the construction, repair, operation, maintenance. or use of the subject matter of such insurance, (but not including life insurance or surety bonds); but, except as herein specified, shall not mean insurance against loss by reason of bodily injury to the person; and insurance against loss or damage to precious stones, jewels, jewelry, gold, silver and other precious metals whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise. which shall include jewelers block insurance; and insurance against loss or damage to bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion are the only hazards to be covered; and to piers, wharves, docks and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion; and to other aids to navigation and transportation, including dry docks and marine railways, against all risk.

(e) Vehicle. Insurance against loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft, excluding the liability of the insured for the death, injury or disability of another person.

(f) Property Damage, Sprinkler Leakage and Crop. Insurance against the liability of the insured for loss or damage to another person's property or property interests from any cause enumerated in this class; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water, into buildings or for its storage Or utilization therein, or caused by the falling of a tank, tank platform or supports or against loss or damage from any cause to such sprinklers, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance against loss or damage from insects, diseases or other causes to trees, crops or other products of the soil.

(g) Other Fire and Marine Risks. Insurance against any other property risk not otherwise specified under Classes 1 or 2, which may lawfully be the subject of insurance and may properly be classified under Class 3.

(h) Contingent Losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any of the causes enumerated under Class 3. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

ARTICLE FIVE

1. The corporate powers of the Company shall be exercised by, and its business and affairs shall be under the control of a Board of Directors composed of not less than three nor more than twenty-one (21) natural persons and who are at least twenty-one (21) years of age and at least three of whom are residents and citizens of this State.

2. The first Board of Directors shall be elected at the first meeting of shareholders and all Directors shall be elected annually thereafter at the annual meeting of shareholders.

3. In all elections for Directors every shareholder has the right to vote, in person or by proxy, for the number of shares owned by him for as many persons as there are Directors to be elected, or to accumulate his shares, and give one candidate as many votes as the number of Directors multiplied by the number of his shares equals, or to distribute them on the same principle among as many candidates as he thinks fair, and the Directors so elected shall hold office until the next annual meeting of the shareholders or until their successors shall have been elected and qualified. The stockholders at any regular or special meeting may fill any vacancy in the board of directors for the unexpired term.

ARTICLE SIX

1. The amount of the authorized capital of the corporation shall be $5,000,000; the aggregate number of common shares which the company shall have authority to issue shall be 5,000,000; and the par value of each common share shall be $1.00. The minimum paid in surplus shall be $1,000,000.

2. The corporate powers of the corporation shall be vested in the board of directors who shall have power to do any and all acts the corporation may do under the law and not otherwise to be performed by the shareholders, and shall have power to adopt by-laws not inconsistent with law for the government and regulation of the business. The company may issue both participating and nonparticipating policies. The board of directors shall have power to determine the amount and manner of payment of dividends to the holders of participating policies. Such dividends shall be in accordance with such rates and rules and applicable to such kind or kinds of insurance as may be determined by the board of directors, which shall have power to adopt any by-laws pertaining to such declaration and payment which in the Judgment of the said board of directors seem necessary or desirable.

3. The common shares issued and outstanding may be increased from time to time within the limits of the capital authorized by this Article, in accordance with the provisions of the Illinois insurance Code which relate thereto.

4. The Board of Directors shall have the power, by appropriate resolution, to authorize the issuance or sale at any time or from time to time of the whole or any part of said 5,000,000 authorized but unissued common shares as additions to paid up capital pursuant to one or more permits issued at any time or from time to time by the Director of Insurance of the State of Illinois.

ARTICLE SEVENTH

1. The designation of the general officers shall be a President, a Vice-President, a Treasurer and a Secretary and such other officers as may be designated by the board of Directors.

2. The fiscal year shall commence on the first day of January and terminate on the 31st of December of each year.

IN WITNESS WHEREOF, we the President and Secretary, respectively, of American Country Insurance Company, have set our hands and seals this 13th day of February, 2004.

By:    /s/ Roger T. Beck            

ROGER T. BECK, PRESIDENT

Attest:    /s/ Ronald Jay Gold        

RONALD JAY GOLD, SECRETARY

EX-3.1

EXHIBIT 3.1c

EIGHTH AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AMERICAN SERVICE INSURANCE COMPANY, INC.

ARTICLE ONE

The name of the Company shall be AMERICAN SERVICE INSURANCE COMPANY, INC.

ARTICLE TWO

The principal offices of the Company shall be located in Cook County, Illinois.

ARTICLE THREE

The duration of the company shall be perpetual.

ARTICLE FOUR

The Company shall engage in the writing of insurance policies under Article I, Section 4, Classes 2(b), 2(c), led), 2(e), 2(f), 2(g), 2(h), 2(1), 20), 2(k) and 3(a), 3(b), 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) of the Illinois Insurance Code, as follows:

Class 2 - Casualty, Fidelity, Surety

2(b) Vehicle. Insurance against any loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft. Any policy insuring against any loss or liability on account of the bodily injury or death of any person may contain a provision for payment of disability benefits to injured persons and death benefits to dependents, beneficiaries or personal representatives of persons who are killed, including the named insured, irrespective of legal liability of the insured, if the injury or death for which benefits are provided is caused by accident and sustained while in or upon or while entering into or alighting from or through being struck by a vehicle (motor or otherwise), draft animal or aircraft, and such provision shall not be deemed to be accident insurance.

2(c) Liability. Insurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person's property.

2(d) Workers' compensation. Insurance of the obligations accepted by or imposed upon employers under laws for workers' compensation.

2(e) Burglary and forgery. Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud or otherwise, including all householders' personal property floater risks.

2(f) Glass. Insurance against loss or damage to glass including lettering, ornamentation and fittings from any cause.

2(g) Fidelity and surety. Become surety or guarantor for any person, copartnership or corporation in any position or place of trust or as custodian of money or property, public or private; or, becoming a surety or guarantor for the performance of any person, copartnership or corporation of any lawful obligation, undertaking, agreement or contract of any kind, except contracts or policies of insurance; and underwriting blanket bonds. Such obligations shall be known and treated as suretyship obligations and such business shall be known as surety business.

2(h) Miscellaneous. Insurance against loss or damage to property and any liability of the insured caused by accidents to boilers, pipes, pressure containers, machinery and apparatus of any kind and any apparatus connected thereto, or used for creating, transmitting or applying power, light, heat, steam or refrigeration, making inspection of and issuing certificates of inspection upon elevators, boilers, machinery and apparatus of any kind and all mechanical apparatus and appliances appertaining thereto, insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or for its storage or utilization therein, or caused by the falling of a tank, tank platform or supports, or against loss or damage from any cause (other than causes specifically enumerated under Class 3 of this section) to such sprinkler, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance

against loss or damage which may result from the failure of debtors to pay their obligations to the insured; and insurance of the payment of money for personal services under contracts of hiring.

2(i) Other casualty risks. Insurance against any other casualty risk not otherwise specified under Classes 1 or 3, which may lawfully be the subject of insurance and may properly be classified under Class 2.

2(j) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to anyone of the causes enumerated under Class 2. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

2(k) Livestock and domestic animals. Insurance against mortality, accident and health of livestock and domestic animals.

Class 3 - Fire and Marine, etc.

3(a) Fire. Insurance against loss or damage by fire, smoke and smudge, lightning or other electrical disturbances.

3(b) Elements. Insurance against loss or damage by earthquake, windstorms, cyclone, tornado, tempests, hail, frost, snow, ice, sleet, flood, rain, drought or other weather or climatic conditions including excess or deficiency of moisture, rising of the waters of the ocean or its tributaries.

3(c) War, riot and explosion. Insurance against loss or damage by bombardment, invasion, insurrection, riot, strikes, civil war or commotion, military or usurped power, or explosion (other than explosion of steam boilers and the breaking of fly wheels on premises owned, controlled, managed, or maintained by the insured.)

3(d) Marine and transportation. Insurance against loss or damage to vessels, craft, aircraft, vehicles of every kind, (excluding vehicles operating under their own power or while in storage not incidental to transportation) as well as all gods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, chooses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any or all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks; and for loss or damage to persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of such insurance, (but not including life insurance or surety bonds); but, except as herein specified, shall not mean insurances against loss by reason of bodily injury to the person; and insurance against loss or damage to precious stones, jewels, jewelry, gold, silver and other precious metals whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise, which shall include jewelers block insurance; and insurance against loss or damage to bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion are the only hazards to be covered; and to piers, wharves, docks and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion; and to other aids to navigation and transportation, including dry docks and marine railways, against all risk.

3(e) Vehicle. Insurance against loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft, excluding the liability of the insured for the death, injury or disability of another person.

3(f) Property damage, sprinkler leakage and crop. Insurance against the liability of the insured for loss or damage to another person's property or property interests from any cause enumerated in this class; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or for its storage or utilization therein, or caused by the falling of a tank, tank platform or supports or against loss or damage from any cause to such sprinklers, pumps, water pipes, plumbing,

tanks, apparatus, conduits or containers; insurance against loss or damage from insects, diseases or other caused to trees, crops or other products of the soil.

3(g) Other fire and marine risks. Insurance against any other property risk not otherwise specified under Classes 1 or 2, which may lawfully be the subject of insurance and may properly be classified under Class 3.

3(h) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any of the causes enumerated under Class 3. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

ARTICLE FIVE

(1) The corporate powers of the Company shall be exercised by, and its business and affairs shall be under the control of a Board of Directors composed of not less than three (3) nor more than twenty-one (21) natural persons. At least three (3) of such Directors shall be residents and citizens of the State of Illinois.

(2) The first Board of Directors shall be elected at the first meeting of Shareholders and all Directors shall be elected annually thereafter at the annual meeting of the Shareholders.

(3) In all elections for Directors, every Shareholder has the right to vote, in person or by proxy, for the number of shares owned by him for as many persons as there are Directors to be elected, and the Directors so elected shall hold office until the next annual meeting of the Shareholders or until their successors have been elected and qualified.

(4) The Board of Directors shall have the sale power to make, alter, amend or repeal the By-Laws for the government and regulation of the Company's affairs.

ARTICLE SIX

(1) The amount of the authorized capital of the company shall be $13,650,000 ($3,650,000 for common stock and $10,000,000 for preferred stock); the aggregate number of shares which the Company shall have authority to issue shall be 1,000,000 shares of common stock and 100,000 shares of preferred stock. The number of common shares issued and sold as paid-up capital shall be 273,973, and the par value of each common share shall be $3.65. The number of shares of preferred stock issued and sold as paid-Up capital shall be 20,000 and the par value of each such share of preferred stock shall be $100.

(2) The Board of Directors shall have the power, by appropriate resolution, to authorize the issuance or sale at any time or from time to time of the whole or any part of said 100,000 shares authorized but unissued $100 par value preferred stock as additions to paid-up capital and to authorize the issuance or sale at any time or from time to time of the whole or any part of said 1,000,000 authorized but unissued common shares as additions to paid-up capital pursuant to one or more permits issued at any time or from time to time by the Director of Insurance of the State of Illinois. Subject to any necessary prior approval required by the Director of Insurance of the State of Illinois, the Board of Directors may, at any time or from time to time:

(a) Divide any or all of the preferred stock into classes;

(b) Determine for any class established by the Board, its designation, number of shares, and relative rights, preferences, and limitations;

(c) Increase the number of shares of any class established by the Board, as long as the number together with the number of shares of all classes of preferred stock, does not exceed the number of those shares authorized pursuant to these Articles of Incorporation;

(d) Decrease the number of shares of any class established by the Board to a number not less than the number of shares of that class then outstanding;

(e) Change the designation, number of shares, relative rights, preferences, or limitations of the shares of any class established by the Board, no shares of which have been issued;

(f) Cause to be executed and filed without further approval of the shareholders of this Company, any amendment or amendments to these Articles of Incorporation as may be required to accomplish any of these amendments.

ARTICLE SEVEN

(1) The 20,000 shares of preferred stock issued and sold shall be designated as "Class A $7 Non-Voting Cumulative Convertible Preferred Stock" and are hereinafter referred to as "Class A Preferred Stock".

(2) The holders of the Class A Preferred Stock shall be entitled to receive, and the Company shall pay on those shares, fixed cumulative cash dividends at an annual rate of $7 for each share and no more. This right to receive and obligation to pay shall arise as, if, and when declared by the Board of Directors from the funds of the Company properly available for the payment of dividends in any fiscal year. Unless otherwise provided by the Board of Directors, these dividends shall be payable quarterly on the first business day in the months of January, April, July, and October. Dividends on the Class A Preferred Stock shall be cumulative from the original issue of each share of the Class A Preferred Stock to the extent not paid, whether earned or not earned. No dividends or other distributions shall be declared or paid on, nor shall there be a redemption of, the common shares or any shares of the Company that rank lower in priority to the Class A Preferred Stock with respect to payment of dividends unless and until all accrued and unpaid dividends on the Class A Preferred Stock shall have been paid or have been declared and funds set aside for the payment of them.

(3) In the event of the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of shares of the Class A Preferred Stock shall be entitled to be paid the amount of $100 for each share, together with all accrued and unpaid dividends on the shares, and no more, before any distribution to the holders of the common shares or any other shares of the Company ranking lower in priority to the Class A Preferred Stock with respect to distribution on liquidation.

(4) The Company shall have the right, at its option and on notice as provided in this Paragraph 4, to redeem at any time all or any portion of the Class A Preferred Stock at a price of $100 for each share, together with all accrued and unpaid dividends on those shares. In all cases of redemption of the Class A Preferred Stock, thirty days' advance written notice of the redemption shall be given by the Company through registered mail addressed to the shareholders whose shares are to be redeemed at their respective addresses appearing on the books of the Company. If notice is given and if on or before the date set for redemption that Company shall have set aside all funds necessary for the redemption, then on and after the dates set for redemption all of these shares shall no longer be outstanding, all dividends on these shares shall cease to accrue, and all rights of the holders of these shares shall terminate, except the right to receive the amount payable on redemption of the shares, without interest, on due surrender of the certificate representing the shares. Funds necessary for redemption shall be considered to be set aside only if they are held separate and apart from other corporate funds in trust for the benefit of the holders of the shares with respect to which the notice of redemption is given. If only a portion of the Class A Preferred Stock is redeemed, the shares to be redeemed shall be selected by lot.

(5) Except as otherwise required by law, the holders of the shares of the Class A Preferred Stock shall not be entitled to vote.

(6) No sooner than one year after issuance, shares of the Class A Preferred Stock may, at the option of the holder, be converted into fully paid and nonassessable common shares of the Company, calculated to the nearest 1/100th of a share, at the rate of 2.7778 common shares for each share of the Class A Preferred Stock. If the shares are called for redemption and if payment of the redemption price has been duly provided for by the date fixed for redemption, then the holder may exercise this conversion option until and including the close of business on the date fixed for redemption but not after that date. Exercise of a conversion option shall be subject to the procedure set forth below.

(7) The holder of each share of the Class A Preferred stock may exercise the conversion privilege by delivering to the Company the share to be converted accompanied by written notice that the holder elects to convert the share. Conversion shall be deemed to have been effected immediately before the close of business on the date when delivery is made, which is the conversion date. On the conversion date, or as soon as practicable after that date, the Company shall issue and deliver to the holder of shares of the Class A Preferred Stock surrendered for conversion a certificate for the number of common shares issuable on the conversion of the shares of the Class A Preferred Stock. The person in whose name the stock certificate is to be issued shall be deemed to have become a holder of record of the common shares represented in the certificate on the conversion date. No adjustment shall be made for any dividends on the converted shares of the Class A Preferred Stock or for dividends on the common shares issued on conversion.

(8) The number of common shares and the number of shares of any other classes of the Company's shares into which each share of the Class A Preferred Stock is convertible shall be subject to adjustment from time to time only as follows:

(a) If the Company declares a dividend payable in common shares and subsequently pays that dividend, subdivides or splits the outstanding common shares, combines the outstanding common shares into a smaller number of shares, or issues or permits to be issued by reclassification of common shares of any shares of the Company, then each holder of a share of the Class A Preferred Stock shall be entitled on the conversion of each of these shares to receive for each share the number and kind of shares that he or she would have been entitled to receive if he or she had exercised the conversion rights immediately before any of these corporate actions. The adjustment shall become effective immediately at the opening of business on the day nest following the record date for purposes of paying a dividend or on the day on which the subdivision, split, combination or reclassification shall become effective.

(b) If the Company at any time or times shall distribute to the holders of common shares evidences of indebtedness, stock or other securities, or assets, or shall issue rights or warrants to subscribe to any common shares, the number of common shares onto which each share of the Class A Preferred Stock shall subsequently be convertible shall be determined by multiplying the number of common shares into which the share of the Class A Preferred Stock was previously convertible by a fraction. The numerator of this fraction shall be the current market price for each common share, ad defined in Subparagraph (d) below, at the record date. The denominator of the fraction shall be the current market price for each common share less the fair market value of that portion of the evidence of indebtedness, stock or other securities, or assets distributed or subscription rights or warrants issues that is applicable to one common share. The fair market value shall be determined by the Board of Directors and the determination shall be conclusive. This Subparagraph (b) shall not apply to cash dividends payable from earnings or earned surplus, the distribution specified in Subparagraph (a) above, except for those related to combinations, and shall not apply to the rights or warrants referred to in Subparagraph (c) below. This adjustment shall be made whenever the distribution is made or the rights or warrants are issued. On distribution or issuance this adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution or the rights or warrants. For purposes of this Subparagraph (b), earnings or earned surplus shall be computed by adding to it all charges against earned surplus on account of dividends paid in common shares in respect of which an adjustment has been made pursuant to Subparagraph (a) above. This computation shall be determined by the independent public accountants then regularly auditing the accounts of the Company and the determination shall be conclusive.

(c) If the Company at any time shall issue rights or warrants to all holders of common shares entitling them to subscribe for or purchase common shares for a period expiring within sixty days after the record date for determining the shareholders entitled to receive the rights or warrants and at a price for each share that is less than the current market price for each common share; as defined in Subparagraph (d) below, at the record date, the number of common shares into which each share of the Class A Preferred Stock shall subsequently be convertible shall be determined by multiplying the number of common shares into which each share of the Class A Preferred Stock was previously convertible by a fraction. The numerator of this fraction shall be the number of common shares outstanding on the record date for issuance of the rights or warrants plus the number of additional common shares offered for subscription or purchase. The denominator of this fraction shall be the number of common shares outstanding on the record date for issuance of the rights or warrants plus the number of common shares that the aggregate offering price of the total number of shares offered would purchase at the current market price. This adjustment shall be made whenever the rights or warrants are issued, and on issuance it shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights or warrants.

(d) For the purpose of any computation under Subparagraph (b) or (c) above, the current market price for each common share at any date shall be the amount determined on that date by an independent appraiser selected by the Company. If the Company contemplates an event requiring an adjustment of the conversion rate based on the current market price of the common shares, the Company shall retain an independent appraiser who shall render his or her report on the current market price on or as soon as practicable after the event requiring the adjustment. All conversions of shares of the Class A Preferred Stock that occur after the date on which an adjustment under this Paragraph is to occur but before any required appraisal is completed shall be at the rate prior to the adjustment, but any additional shares that would have been issued if the appraisal had

been completed shall be issued after the appraisal is completed.

(e) No adjustment in the number of common shares into which each share of the Class A Preferred Stock is convertible shall be required unless the adjustment would require an increase or decrease of at least 1/1000th of a share in the number of common shares into which the share of the Class A Preferred Stock is then convertible. However, any adjustments that by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

(f) Whenever any adjustment is required in the shares into which each share of the Class A Preferred Stock is convertible, the Company shall keep available at its principal office a statement describing in reasonable detail the adjustment and the method of calculation used.

(g) The Company shall not be required to issue fractional common shares on conversion of shares of the Class A Preferred Stock. If more than one share of the Class A Preferred Stock shall be surrendered for conversion at one time by the same holder; the number of full common shares issuable on conversion shall be computed on the basis of the aggregate number of shares surrendered. If any fractional interests in a common share would be deliverable on the conversion of any shares of the Class A Preferred Stock, the Company shall, instead of delivering the fractional share for it, make an adjustment for it in the cash at its redemption value.

(9) The Company shall at all times reserve and keep available out of the authorized but unissued common shares or common shares held in the treasury of the Company, the outstanding number of common shares into which the shares of the Class A Preferred Stock are convertible. If an adjustment requires an appraisal that is not completed at the time the adjustment is to be effective, the Company shall reserve and keep available out of the authorized but unissued common shares or common shares held in the treasury of the Company, the full number of common shares into which the shares of the Class A Preferred Stock then outstanding are convertible plus the full number of additional shares into which those shares would be convertible on the basis of the estimated market value of these shares determined in good faith by the Board of Directors. After the appraisal is completed, the number of shares to be reserved and kept available by the Company shall be the number determined pursuant to the first sentence of this Paragraph.

(10) The provisions of this Article Seven shall be subject to any necessary prior approval required by the Director of Insurance of the State of Illinois.

CERTIFICATE OF CORPORATE SECRETARY

I, Mary Ann Callaghan, Secretary of American Service Insurance Company Inc., an Illinois corporation, do hereby certify that the attached is a true, correct and complete copy of the Eighth Amended and Restated Articles of Incorporation of American Service Insurance Company, Inc., adopted by unanimous written consent of the Board of Directors on June 1, 2009, and that the same is in full force and effect and has not been rescinded, canceled or amended.

IN WITNESS WHEREOF, I have hereunto subscribed my name this fifteenth day of June, 2009.

/s/ Mary Ann Callaghan

Mary Ann Callaghan

Secretary

EX-3.1

EXHIBIT 3.1d

CERTIFICATE OF MERGER OF

ATLAS ACQUISITION CORP. (a Delaware corporation)

INTO AMERICAN INSURANCE ACQUISITION INC.

(a Delaware corporation)

Pursuant to Section 251 of the Delaware General Corporation Law, for the purposes of merging (the "Merger") Atlas Acquisition Corp., a Delaware corporation ("Atlas"), into American Insurance Acquisition Inc., a Delaware corporation which is the surviving corporation in such Merger (the "Surviving Corporation''), the undersigned Corporation hereby certifies the following:

1.     An Agreement and Plan of Merger (the "Merger Agreement") dated as of December 14, 2010 by and among the Surviving Corporation, JJR VI Acquisition Corp., Atlas and Kingsway Financial Services Inc. has been approved, adopted, executed and acknowledged by each of Atlas Acquisition Corp. and American Insurance Acquisition Inc.

2.     The name of the surviving corporation is American Insurance Acquisition Inc.

(the "Surviving Corporation'').

3.     The Certificate of Incorporation of the Surviving Corporation, as in effect immediately prior to the effective time of the Merger, shall be amended and restated as set forth in the Second Amended and Restated Certificate of Incorporation attached hereto as Exhibit A, which shall be the Certificate of Incorporation of the Surviving Corporation at the effective time of theMerger.

4.     The executed Agreement and Plan of Merger is on file at the principal place of business of the Surviving Corporation. The address of the principal place of business of the Surviving Corporation is 150 Northwest Point Boulevard, Elk Grove, Illinois 60007.

5.     A copy of the agreement and Plan of Merger will be furnished by the surviving corporation upon request without cost to any stockholder of the constituent corporations.

6.     The effective date and time of the Merger shall be 11:59pm on December 31, 2010.

[signature page follows)

In witness whereof, American Insurance Acquisition Inc. has caused its duly authorized officer to execute and deliver this Certificate of Merger as of December 31, 2010.

AMERICAN INSURANCE ACQUISITION INC.

By:    /s/ Scott D. Wollney

Name:    Scott D. Wollney

Title:    President

EXHIBIT A

SECOND AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

AMERICAN INSURANCE ACQUISITION INC.

FIRST:         The name of the Corporation is American Insurance Acquisition Inc.

SECOND:    The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the city of Wilmington, County of New Castle. The name of the registered agent at such address is the Corporation Trust Company.

THIRD:        The purposes of the Corporation are to engage in any lawful act or activities for which Corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH:    The total number of shares of all classes of stock which the Corporation shall have authority to issue is 3,000 shares with a par value of $0.01 per share, all of which shall be common stock.

FIFTH:        The board of directors of the Corporation shall consist of a minimum of one (1) director and a maximum of twelve (12) directors, as determined from time to time by the board of directors.

SIXTH:        In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to adopt, amend or repeal the by-laws of the Corporation.

SEVENTH:    Election of directors need not be by written ballot unless the by-laws of the Corporation shall so provide.

EIGHTH:    Shares of stock of the Corporation may not be transferred without the prior written consent of the board of directors of the Corporation.

NINTH:        The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

TENTH:        To the fullest extent permitted by Section 145 of the General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify any persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he or she is or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or because he or she was serving the Corporation or any other legal entity in any Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract, or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

ELEVENTH:    A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article ELEVENTH as one class, shall be prospective only and shall not adversely affect any right or protection of any director of the Corporation existing at the time of such repeal or modification.

EX-3.1

EXHIBIT 3.1a

APPENDIX I    

THE COMPANIES LAW (2010 REVISION)

COMPANY LIMITED BY SHARES

MEMORANDUM OF ASSOCIATION

ATLAS FINANCIAL HOLDINGS, INC.

I.     The name of the Company is Atlas Financial Holdings, Inc. (the "Company").

2. The registered office of the Company will be situated at the offices of Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KYI-1111, Cayman Islands, or at such other location as the Directors may from time to time determine.

3. The objects for which the Company is established are unrestricted and, except as prohibited or limited by the laws of the Cayman Islands (the "Law"), the Company shall have full power and authority to carry out any object and shall have and be capable of from time to time and at all times exercising any and all of the powers of a natural person or body corporate in any part of the world whether principal, agent, contractor or otherwise.

4. The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands. The Company will not have any substantial business activities in the Cayman Islands.

5. The liability of the members of the Company is limited to the amount, if any, unpaid on the shares respectively held by them.

6. The capital of the Company is US$!,000,000 divided into 800,000,000 ordinary shares of par value US$0.001 each, 100,000,000 preferred shares of par value US$0.001 each, and 100,000,000 restricted voting common shares of par value US$0.00 I each provided always that subject to the Law and the Articles of Association the Company shall have power to redeem or purchase any of its shares and to sub­ divide or consolidate the said shares or any of them and to issue all or any part of its capital whether original, increased or reduced with or without any preference, priority, special privilege or other rights or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide every issue of shares whether stated to be ordinary, preference or otherwise shall be subject to the powers on the part of the Company herein before provided.

7. The Company may exercise the power contained in Section 206 of the Law to deregister in the Cayman Islands and be registered by way of continuation in some other jurisdiction.

APPENDIX II

THE COMPANIES LAW (2010 REVISION) COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION OF

ATLAS FINANCIAL HOLDINGS, INC.

TABLE A

The Regulations contained or incorporated in Table 'A' in the First Schedule of the Law shall not apply to Atlas Financial Holdings, Inc. (the "Company") and the following Articles shall comprise the Articles of Association of the Company.

INTERPRETATION

I. In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with the subject or context:

"Aggregate Votes" means the aggregate of the votes eligible to be voted at a general meeting of the

Company;

"Articles" means these articles of association of the Company, as amended or substituted from time to time and any reference to a numbered Article shall be to such article as so numbered in these Articles;

"Auditors" means the auditors of the Company appointed from time to time by Ordinary Resolution in accordance with these Articles;

"business day" means any day other than a Saturday, Sunday or statutory holiday in the State of Delaware and City of Toronto or such other day as the Directors may determine from time to time;

"Cdn$" means a dollar in the lawful currency of Canada;

"Class" or "Classes" means any class or classes of Shares as may from time to time be issued by the

Company;

"Directors" means the directors of the Company for the time being, or as the case may be, the directors assembled as a board or as a committee thereof;

"Law" means the Companies Law of the Cayman Islands (as amended);

"Memorandum of Association" means the memorandum of association of the company, as amended or substituted from time to time;

“Office” means the registered office of the Company as required by the Law;

"Ordinary Resolution” means a resolution:

(a) passed by a simple majority of such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Shareholder is entitled; or

(b) approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Shareholders and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed;

"Ordinary Share" means an ordinary share of a par value of US$0.001 in the capital of the Company and having the rights provided for in these Articles;

"paid up" means paid up as to the par value in respect of the issue of any Shares and includes credited as paid up;

“Person” means any natural person, firm, company, joint venture, partnership, corporation, association or other entity (whether or not having a separate legal personality) or any of them as the context so requires;

"Preferred Share" means a redeemable preferred share of a par value of US$0.001 in the capital of the

Company and having the rights provided for in these Articles;

"Register" means the register of Members of the Company required to be kept pursuant to the Law;

"Restricted Voting Common Share" means a restricted voting common share of a par value of US$0.001

in the capital of the Company and having the rights provided for in these Articles;

"Seal" means the common seal of the Company (if adopted) including any facsimile thereof;

"Secretary" means any Person appointed by the Directors to perform any of the duties of the secretary of the Company;

"Share" means any share in the capital of the Company including an Ordinary Share, a Preferred Share or a Restricted Voting Common Share. All references to "Shares" herein shall be deemed to be Shares of any or all Classes as the context may require;

"Shareholder" or "Member" means a Person who is registered as the holder of Shares in the Register and includes each subscriber to the Memorandum of Association pending the issue to such subscriber of the subscriber Share or Shares;

"Share Premium Account" means the share premium account established in accordance with these Articles and the Law;

“Signed” means bearing a signature or representation of a signature affixed by mechanical means.

"Special Resolution" means a special resolution of the Company passed in accordance with the Law, being a resolution:

(a) passed by a majority of not less than two-thirds of such Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of the Company of which notice specifying the intention to propose the resolution as a special resolution has been duly given and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Shareholder is entitled; or

(b) approved in writing by all of the Shareholders entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Shareholders and the effective date of the special resolution so adopted shall be the date on which the instrument or the last of such instruments, if more than one is executed.

"Transfer Agent" means the transfer agent and registrar of the Shares; and

"Voting Shares" means Ordinary Shares and Restricted Voting Common Shares.

2.     In these Articles, save where the context requires otherwise:

(a) Words importing the singular number shall include the plural number and vice versa;

(b) Words importing the masculine gender only shall include the feminine gender and any Person as the context may require;

(c) The word “may” shall be construed as permissive and the word “shall” shall be construed as imperative;

(d) Reference to a dollar or dollars (or $) and to a cent or cents is reference to dollars and cents of the United States of America.

(e) Reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force;

(f) Reference to any determination by the Directors shall be construed as a determination by the Directors in their absolute discretion and shall be applicable either generally or in any particular case.; and

(g) Reference to “in writing” shall be construed as written or represented by any means reproducible in writing, including any form of print, lithograph, email, facsimile, photograph or telex or represented by any other substitute or format for storage or transmission for writing or partly one and partly another.

3. Subject to the two preceding Articles, any words defined in the Law shall, if not inconsistent with the subject or context bear the same meaning in these Articles.

PRELIMINARY

4.     The business of the Company may be commenced at any time after incorporation.

5. The Office shall be at such address in the Cayman Islands as the Directors may from time to time determine. The Company may in addition establish and maintain such other offices and places of business and agencies in such places as the Directors may from time to time determine.

6. The preliminary expenses incurred in the formation of the Company and in connection with the issue of Shares shall be paid by the Company. Such expenses may be amortised over such period as the Directors may determine and the amount so paid shall be charged against income and/or capital in the accounts of the Company as the Directors shall determine.

7. The Directors shall keep, or cause to be kept, the Register at such place as the Directors may from time to time determine and, in the absence of any such determination, the Register shall be kept at the Office.

SHARES

8. Subject to these Articles, all Shares for the time being unissued shall be under the control of the Directors who may:

(a) issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as they may from time to time determine; and

(b) grant options with respect to such Shares and issue warrants or similar instruments with respect thereto;

and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being

unissued.

9. The Directors may, from time to time, create and constitute (or re-designate, as the case may be) such further class or classes of Shares (and designate series within any class of Shares) with such name or names, and with such preferred, deferred, or other rights, powers, preferences, qualifications, limitations orsuch restrictions, whether in regard to dividends, voting or return of capital or otherwise, as the Directors may determine.

SHARE RIGHTS

10. Share Rights. The Preferred Shares, Ordinary Shares and Restricted Voting Common Shares of the Company shall have the following rights, preferences, privileges and be subject to the following restrictions:

10.1 Dividend Rights. Dividends on Preferred Shares shall begin to accrue on a daily basis at the prorated annual rate of US$0.045 per share of Preferred Shares (as such dollar amount is adjusted for stock splits, combinations, reclassifications and the like) from the date on which the Company issues its first Preferred Share and shall be cumulative. The holders of Preferred Shares shall be entitled to receive annual dividends or distributions, when and as declared by the Board of Directors of the Company, out of any assets of the Company legally available therefor. Notwithstanding the foregoing, the Company may elect to pay dividends on the Preferred Shares to each holder of Preferred Shares pro rata in additional Preferred Shares with a value equal to the amount of the dividends, provided to the extent the Company does not pay a dividend on the Preferred Shares in cash or in additional shares, the dividend shall accrue and accumulate compounded yearly whether or not such dividend was declared. No dividends shall be paid on any Ordinary Shares or Restricted Voting Common Shares during any fiscal year of the Company until dividends in the amount as specified herein on the Preferred Shares shall have been paid or declared and set apart during that fiscal year and any prior year in which dividends accumulated but remain unpaid. The holders of the Preferred Shares will be entitled to the greater of the dividend on the Ordinary Shares and the Preferred Shares in that fiscal year. The Restricted Voting Common Shares shall rank equally with the Ordinary Shares as to dividends on a share-for-share basis and all dividends shall be declared in equal or equivalent amounts per share on all Ordinary Shares and Restricted Voting Common Shares without preference or distinction.

10.2    Liquidation Rights.

(a) Liquidation Preference. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (collectively, a "Liquidation"), before any distribution or payment shall be made to any of the holders of the Restricted Voting Common Shares or the Ordinary Shares, the holders of the Preferred Shares shall be entitled to receive out of the assets of the Company, whether such assets are capital, surplus or earnings, an amount in cash or kind for each Preferred Share held by them (the "Liquidation Amount") equal to the greater of: (i) US$1.00 per Preferred Share (as such amount shall be appropriately adjusted to take into account stock splits, stock dividends and similar events) plus all declared and unpaid dividends thereon and (ii) the amount payable to the holder thereof upon a Liquidation if the Preferred Share had been converted to Restricted Voting Common Shares or Ordinary Shares, as applicable in accordance with the terms hereof immediately

prior to the Liquidation.

(b) Pro Rata Distribution. If, upon any Liquidation, the assets of the Company shall be insufficient to pay the Liquidation Amount, including without limitation all declared and unpaid dividends on Preferred Shares, in full to all holders of Preferred Shares, then the net assets of the Company shall be distributed among the holders of the Preferred Shares ratably in proportion to the full amounts to which they would otherwise be respectively entitled and such distributions may be made in cash or in property taken at its fair value (as determined in good faith by the Board of Directors), or both, at the election of the Board of Directors.

(c) Distributions in Excess of Liquidation Amount. After payment in full of the Liquidation Amount, including without limitation all declared and unpaid dividends on the Preferred Shares, the assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of the Ordinary Shares and the Restricted Voting Common Shares. The holders of the Restricted Voting Common Shares and the Ordinary Shares shall rank pari passu.

10.3 Voting Rights. Except as otherwise required under the Law, the holders of the Preferred Shares shall not be entitled to receive notice of, attend and vote at any general meeting of the Company, but (for the avoidance of doubt) may vote at a separate class meeting convened in accordance with these Articles. The holders of the Ordinary Shares shall have the right to receive notice of, attend at and vote at any general meeting of the Company. The holders of the Restricted Voting Common Shares have the right to receive notice of, attend at and vote as a Shareholder at any general meeting of the Company, PROVIDED THAT if the number of outstanding Restricted Voting Common Shares exceeds 30% of the total number of all issued and outstanding Voting Shares of the Company, the votes attached to each Restricted Voting Common Share will decrease automatically without further act or formality to equal the maximum permitted vote per Restricted Voting Common Share such that the Restricted Voting Common Shares as a class shall not carry more than 30% of the Aggregate Votes.

10.4     Redemption Rights.

(a) Optional Redemption. The Company may redeem all or any of the outstanding Preferred Shares at any time or times at a redemption price equal to US$1.00 per share, payable in cash plus all accrued and unpaid dividends calculated to the redemption date, whether or not such dividends have been declared, commencing on the earlier of (i) two years after their date of issuance and (ii) the date the Preferred Share is transferred to a party such that the Preferred Share ceases to be beneficially owned or controlled directly or indirectly by Kingsway Financial Services Inc. or Kingsway America Inc. (and, for this purpose, such Preferred Share is also not held directly or indirectly by a partnership, corporation or other entity in which Kingsway Financial Services Inc. or Kingsway America Inc. holds, directly or indirectly, ten percent (10%) or more of the capital, profits, value or voting interests). The Company shall give at least sixty (60) days prior written notice to each holder whose Preferred Shares are to be so redeemed. In the event that less than all of the outstanding Preferred Shares are to be redeemed, unless otherwise agreed to by the holders of I 00% of the then outstanding Preferred Shares in writing, the Company shall select those shares to be redeemed from each holder of Preferred Shares pro rata, in proportion to the number of Preferred Shares held by such holders.

(b) Status of Reacquired Stock. Preferred Shares that have been issued and purchased or redeemed in any manner shall (upon compliance with any applicable provisions of the laws of the Cayman Islands) have the status of authorized and unissued Preferred Shares undesignated as to series and, subject to the other provisions of these Articles, may be redesignated and reissued.

10.5     Conversion Rights. The holders of Shares shall have conversion rights as follows:

(a) Each Preferred Share shall be convertible, at the option of the holder thereof, at any time or from time to time after the date that is the fifth (5th) anniversary of the first issuance date of any Preferred Share, at the office of the Company or the Transfer Agent, into such number of fully paid and non-assessable Restricted Voting Common Shares as is determined by multiplying the number of the Preferred Shares by the "Conversion Factor" at the time in effect for such share. The initial Conversion Factor per share for Preferred Shares shall be equal to 0.3808; provided, however, that such Conversion Factor shall be subject to adjustment as provided herein. Notwithstanding the foregoing, upon the disposition of a Preferred Share such that the Preferred Share ceases to be beneficially owned or controlled directly or indirectly by Kingsway Financial Services Inc. or Kingsway America Inc. (and, for this purpose, such Preferred Share is also not held directly or indirectly by a partnership, corporation or other entity in which Kingsway Financial Services Inc. or Kingsway America Inc. holds, directly or indirectly, ten percent (I0%) or more of the capital, profits, value or voting interests) such Preferred Share shall be convertible into Ordinary Shares rather than Restricted Voting Common Shares pursuant to the terms of this Article I 0.5.

(b)     Adjustments. The Conversion Factor of the Preferred Shares as described in Article

10.5(a) above shall be adjusted from time to time as follows:

(i) In the event of (i) the issuance of Ordinary Shares or Restricted Voting Common Shares as a dividend or distribution on the Ordinary Shares or Restricted Voting Common Shares; (ii) the subdivision or combination of the Ordinary Shares or Restricted Voting Common Shares; (iii) the issuance to holders of Ordinary Shares or Restricted Voting Common Shares of rights or warrants entitling them to subscribe for or purchase Ordinary Shares or Restricted Voting Common Shares; or (iv) the distribution to holders of Ordinary Shares or Restricted Voting Common Shares of Shares (other than Ordinary Shares or Restricted Voting Common Shares, respectively), evidences of indebtedness of the Company or assets or rights or warrants to subscribe for or purchase any of its securities, then, as a condition of such dividend, distribution, subdivision, combination or issuance, the Conversion Factor shall be equitably adjusted to provide for the issuance (upon subsequent conversion) of an equal amount of additional Ordinary Shares or Restricted Voting Common Shares or other assets, rights, warrants or other securities as if the Preferred Shares had been converted at that time.

(ii) Subject to Article 10.5(b)(i) above, if any capital reorganization or reclassification of the capital stock of the Company or any Sale or Merger (as hereinafter defined) of the Company shall be effected in such a way that holders of Ordinary Shares or Restricted Voting Common Shares shall be entitled to receive capital stock, securities or assets with respect to or in exchange forOrdinary Shares or Restricted Voting Common Shares, then, as a condition of such reorganization, reclassification, Sale or Merger, lawful and adequate provisions shall be made whereby each holder of a share or Preferred Shares shall thereafter, upon conversion, have the right to receive such shares of capital stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding Ordinary Shares or Restricted Voting Common Shares, as applicable into which the Preferred Shares held at the time of such capital reorganization, reclassification, Sale or Merger is convertible.

For purposes hereof, a "Sale or Merger" of the Company shall mean (i) the sale, lease or other disposition of all or substantially all of the Company's assets or (ii) the acquisition of the Company by another entity by way of merger or consolidation resulting in the exchange of the outstanding shares of the Company for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its parent or subsidiary. Subject to Article 10.5(b)(i) above, in the event of any such reorganization, reclassification, Sale or Merger, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Preferred Shares, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares, other securities, or property thereafter receivable upon conversion of the Preferred Shares. An adjustment made pursuant to this subparagraph (ii) shall become effective at the time at which such reclassification, recapitalization, Sale or Merger becomes effective.

(iii) In the event the Company shall declare a distribution payable in securities of other entities or persons, evidences of indebtedness issued by the Company or other entities or persons, assets (excluding cash dividends) or options or rights not referred to in Article 10.5(b)(i) or (ii) above, the holders of the Preferred Shares shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of Ordinary Shares or Restricted Voting Common Shares into which their Preferred Shares are convertible as of the record date fixed for the determination of the holders of Ordinary Shares or Restricted Voting Common Shares entitled to receive such distribution or if no such record date is fixed, as of the date such distribution is made.

(iv) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Factor pursuant to this Article 10.5, the Company at its expense shall promptly compute such adjustment or readjustment of the Conversion Factor in accordance with the terms hereof and furnish to each holder of Preferred Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.

(c)    Procedures for Conversion.

(i) In order to exercise conversion rights pursuant to Article 10.5(a) above, the holder of the Preferred Shares to be converted shall deliver an irrevocable written notice of such exercise to the Company, at the office of the Transfer Agent. The holder of any Preferred Shares shall, upon any conversion of such Preferred Shares in accordance with this Article 10.5, surrender certificates representing the Preferred Shares to the Company, at the office of the Transfer Agent, and specify the name or names in which such holder wishes the certificate or certificates for shares of Ordinary Shares or Restricted Voting Common Shares to be issued. As promptly as practicable, the Company shall deliver or cause to be delivered certificates representing the number of validly issued, fully paid and non-assessable Ordinary Shares or Restricted Voting Common Shares to which the holder of the Preferred Shares so converted shall be entitled. Such conversion, to the extent permitted by law, shall be deemed to have been effected as of the date of receipt by the Company of any notice of conversion pursuant to this Article I 0.5(c) (the "Conversion Date"). Conversion of the Preferred Shares into Ordinary Shares shall be effected by the redemption of the Preferred Shares on the Conversion Date for the appropriate number of Ordinary Shares or Restricted Voting Common Shares (through the application of the redemption proceeds of the Preferred Shares and the capitalization of an appropriate amount of share premium account), and the Company is hereby authorised to apply, on behalf of the relevant Member, the proceeds of redemption

of any such Preferred Shares in paying for the Ordinary Shares or Restricted Voting Common Shares to be issued thereby. The Ordinary Shares or Restricted Voting Common Shares resulting from the conversion shall, as from the Conversion Date, rank pari passu in all respects with the remaining Ordinary Shares or Restricted Voting Common Shares, as applicable and the Preferred Shares so converted shall be available for reissue and until reissue shall form part of the authorised but unissued share capital of the Company.

(ii) In connection with the conversion of any Preferred Shares, no fractions of shares of Ordinary Shares or Restricted Voting Common Shares shall be issued, but the Company shall pay cash in lieu of such fractional interest in an amount equal to the product of the Conversion Factor and such fractional interest.

(iii) The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares or Restricted Voting Common Shares the full number of Ordinary Shares or Restricted Voting Common Shares of the Company issuable upon the conversion of all outstanding Preferred Shares.

(d) Notices of Record Date. In the event that the Company shall propose at any time: (A) to declare any dividend or distribution upon any class or series of capital stock, whether in cash, property, stock or other securities; (B) to effect any reorganization or reclassification of its Shares outstanding involving a change in the Ordinary Shares or Restricted Voting Common Shares; or (C) to merge or consolidate with or into any other corporation, or to sell, lease or convey all or substantially all of its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, subject to receipt of a waiver in writing by the holders of the Preferred Shares, the Company shall mail to each holder of Preferred Shares:

(i) at least twenty (20) days' prior written notice of the date on which a record shall be taken for such dividend or distribution (and specifying the date on which the holders of the affected class or series of capital stock shall be entitled thereto) or for determining the rights to vote, if any, in respect of the matters referred to in clauses (b) and (c) in Article 10.5(d) above; and

(ii) in the case of the matters referred to in Article I 0.5(d) (B) and (C) above, written notice of such impending transaction not later than twenty (20) days prior to the shareholders' meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier. The notice shall describe the material terms and conditions of the impending transaction (and specify the date on which the holders of shares of Ordinary Shares or Restricted Voting Common Shares shall be entitled to exchange their Ordinary Shares or Restricted Voting Common Shares for securities or other property deliverable upon the occurrence of such event) and the Company shall thereafter give such holders prompt notice of any material changes. Subject to receipt of a waiver in writing by the holders of the Preferred Shares, the transaction shall in no event take place sooner than twenty (20) days after the Company has given the notice provided for herein or sooner than ten (10) days after the Company has given notice of any material changes provided for herein.

(e) Conversion Rights of Ordinary Shares. In the event that an offer is made to purchase the Restricted Voting Common Shares and the offer is one which is required, pursuant to applicable securities legislation or the rules of a stock exchange on which the Restricted Voting Common Shares are then listed, to be made to all or substantially all of the holders of the Restricted Voting Common Shares, each Ordinary Share shall become convertible at the option of the holder into one Restricted Voting Common Share, at any time while the offer is in effect until one day after the time prescribed by applicable securities legislation for the offeror to take up and pay for such shares as are to be acquired pursuant to the offer. The conversion right may only be exercised in respect of Ordinary Shares for the purpose of depositing the resulting Restricted Voting Common Shares pursuant to the offer and for no other reason, including with respect to voting rights attached thereto, which are deemed to remain subject to the provisions concerning the voting rights for Ordinary Shares notwithstanding their conversion. The Transfer Agent shall deposit the resulting Restricted Voting Common Shares on behalf of the holder.

To exercise such conversion right, the holder or his attorney duly authorized in writing shall:

(i) give written notice to the Transfer Agent of the exercise of such right and of the number of Ordinary Shares, in respect of which the right is being exercised;

(ii) deliver to the Transfer Agent the share certificate or certificates, if any, representing the Ordinary Shares, in respect of which the right is being exercised.

(iii) pay any applicable stamp tax or similar duty on or in respect of such conversion.

No share certificates representing the Restricted Voting Common Shares, resulting from the conversion of the Ordinary Shares will be delivered to the holders on whose behalf such deposit is being made.

If Restricted Voting Common Shares, resulting from the conversion and deposited pursuant to the offer are withdrawn by the holder or are not taken up by the offeror, or the offer is abandoned or withdrawn by the offeror or the offer otherwise expires without such Restricted Voting Common Shares being taken up and paid for, the Restricted Voting Common Shares resulting from the conversion will be re-converted into Ordinary Shares, without further act on the part of the Company, and the share certificate representing the Ordinary Shares, if any, will be sent to the holder by the Transfer Agent.

In the event that the offeror takes up and pays for the Restricted Voting Common Shares, resulting from conversion, the Transfer Agent shall deliver to the holders thereof the consideration paid for such shares by the offeror.

There will be no right to convert the Ordinary Shares into Restricted Voting Common

Shares under this Article 10.5(e), in the following cases:

(i) the offer to purchase Restricted Voting Common Shares is not required under applicable securities legislation to be made to all or substantially all of the holders of Restricted Voting Common Shares, that is, the offer is an "exempt take-over bid" within the meaning of the applicable securities legislation; or

(ii) an offer to purchase Ordinary Shares is made concurrently with the offer to purchase Restricted Voting Common Shares, and the two offers are identical in respect of price per share, percentage of outstanding Shares for which the offer is made, and in all other material respects, including in respect of the conditions attaching thereto. The offer to purchase the Ordinary Shares must be unconditional, subject to the exception that the offer for the Ordinary Shares may contain a condition to the effect that the offeror is not required to take up and pay for Ordinary Shares deposited to the offer if no Shares are purchased pursuant to the contemporaneous offer for the Restricted Voting Common Shares.

(f) Conversion Rights of Restricted Voting Common Shares upon Disposition. Upon the disposition of any Restricted Voting Common Share such that the Restricted Voting Common Shares ceases to be beneficially owned or controlled directly or indirectly by Kingsway Financial Services Inc. or Kingsway America Inc. (and, for this purpose, such Restricted Voting Common Share is also not held directly or indirectly by a partnership, corporation or other entity in which Kingsway Financial Services Inc. or Kingsway America Inc. holds, directly or indirectly, ten percent (I0%) or more of the capital, profits, value or voting interests), such Restricted Voting Common Shares shall be mandatorily converted into fully paid and non-assessable Ordinary Shares with each Restricted Voting Common Share converting into one Ordinary Share, subject to adjustment in accordance with the terms hereof. The holder of

such Restricted Voting Common Shares shall, upon any disposition of such Restricted Voting Common Shares in accordance with this Article I 0.5(f), surrender certificates representing the Restricted Voting Common Shares to the Company, at the office of the Transfer Agent, and specify the name or names in which such holder wishes the certificate or certificates for shares of Ordinary Shares to be issued. Conversion of the Restricted Voting Common Shares into Ordinary Shares shall be deemed to have been effected as of the date of receipt by the Company of written notice of such disposition pursuant to this Article I 0.5(f) (the "Date of Conversion"). Conversion of the Restricted Voting Common Shares into Ordinary Shares shall be effected by the redemption of the Restricted Voting Common Shares on the Date of Conversion at their nominal value (through the application of share capital), the issue of the appropriate number of Ordinary Shares at their nominal value (through the application of the redemption proceeds of the Restricted Voting Common Shares and the capitalisation of an appropriate amount of the share premium account), and the Company is hereby authorised to apply, on behalf of the relevant holder, the proceeds of redemption of any such Restricted Voting Common Shares in paying for the Ordinary Shares to be issued thereby. The Ordinary Shares resulting from the conversion shall, as from the Date of Conversion, rank pari passu in all respects with the remaining Ordinary Shares and the Restricted Voting Common Shares so converted shall be available for reissue and until reissue shall form part of the authorised but unissued share capital of the Company.     The Company shall at all times reserve and keep available out of its authorized but unissued share capital Ordinary Shares of the Company issuable upon the conversion of the Restricted Voting Common Shares.

(g) Conversion Rights of Restricted Voting Common Shares upon Offer. In the event that an offer is made to purchase Ordinary Shares and the offer is one which is required, pursuant to applicable securities legislation or the rules of a stock exchange on which the Ordinary Shares are then listed, to be made to all or substantially all of the holders of Ordinary Shares, each Restricted Voting Common Share shall become convertible at the option of the holder into one Ordinary Share at any time while the offer is in effect until one day after the time prescribed by applicable securities legislation for the offeror to take up and pay for such shares as are to be acquired pursuant to the offer. The conversion right may only be exercised in respect of Restricted Voting Common Shares for the purpose of depositing the resulting Ordinary Shares pursuant to the offer and for no other reason, including notably with respect to voting rights attached thereto, which are deemed to remain subject to the provisions concerning the voting rights for Restricted Voting Common Shares notwithstanding their conversion. The Transfer Agent shall deposit the resulting Ordinary Shares on behalf of the holder.

To exercise such conversion right, the holder or his attorney duly authorized in writing shall:

(i) give written notice to the Transfer Agent of the exercise of such right and of the number of Restricted Voting Common Shares in respect of which the right is being exercised;

(ii) deliver to the Transfer Agent the share certificate or certificates, if any, representing the Restricted Voting Common Shares in respect of which the right is being exercised; and

(iii) pay any applicable stamp tax or similar duty on or in respect of such conversion.

No share certificates representing the Ordinary Shares resulting from the conversion of the Restricted Voting Common Shares shall be delivered to the holders on whose behalf such deposit is being made.

If Ordinary Shares resulting from the conversion and deposited pursuant to the offer are withdrawn by the holder or are not taken up by the offeror; or the offer is abandoned or withdrawn by the offeror or the offer otherwise expires without such Ordinary Shares being taken up and paid for, the Ordinary Shares resulting from the conversion will be re­ converted into Restricted Voting Common Shares without further act on the part of the Company and the share certificate representing the Restricted Voting Common Shares, if any, will be sent to the holder by the Transfer Agent.

In the event that the offeror takes up and pays for the Ordinary Shares resulting from conversion, the Transfer Agent shall deliver to the holders thereof the consideration paid for such shares by the offeror.

There will be no right to convert the Restricted Voting Common Shares into Ordinary

Shares under this Article 10.5(g) in the following cases:

(i) the offer to purchase Ordinary Shares is not required under applicable securities legislation or the rules of a stock exchange on which the Ordinary Shares are then listed to be made to all or substantially all of the holders of Ordinary Shares in a province of Canada to which the requirement applies, that is, the offer is an "exempt take-over bid" within the meaning of the applicable securities legislation; or

(ii) an offer to purchase Restricted Voting Common Shares is made concurrently with the offer to purchase Ordinary Shares and the two offers are identical in respect of price per share, percentage of outstanding Shares for which the offer is made, and in all other material respects, including in respect of the conditions attaching thereto. The offer to purchase the Restricted Voting Common Shares must be unconditional, subject to the exception that the offer for the Restricted Voting Common Shares may contain a condition to the effect that the offeror is not required to take up and pay for Restricted Voting Common Shares deposited to the offer if no shares are purchased pursuant to the contemporaneous offer for the Ordinary Shares.

(h) Subdivision or Consolidation. No subdivision or consolidation of the Ordinary Shares or Restricted Voting Common Shares shall occur unless, simultaneously, the Ordinary Shares and the Restricted Voting Common Shares are subdivided or consolidated in the same manner, so as to maintain and preserve the respective rights of the holders of the shares of each of the said classes.

11. The Company may insofar as may be permitted by law, pay a commission to any Person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares. Such commissions may be satisfied by the payment of cash or the lodgement of fully paid-up Shares or partly in one way and partly in the other. The Company may also on any issue of Shares pay such brokerage as may be lawful.

12. The Directors may refuse to accept any application for Shares, and may accept any application in whole or in part, for any reason or for no reason.

13. For the purposes of enabling directors, officers, employees of, and consultants to, the Company and its affiliates to participate in the growth of the Company and of providing effective incentives to such directors, officers, employees and consultants, the Board may establish such plans (including stock option plans and stock purchase plans) and make such rules and regulations with respect thereto, and such changes in such plans, rules and regulations, as the Board may deem advisable from time to time. From time to time the Board may designate the directors, officers, employees and consultants entitled to participate in any such plan. For the purposes of any such plan, the Company may provide such financial assistance by means of loan, guarantee or otherwise to directors, officers, employees and consultants as is permitted by the Law or by any other applicable laws.

MODIFICATION OF RIGHTS

14. Whenever the capital of the Company is divided into different Classes the rights attached to any such Class may (unless otherwise provided by the terms of issue of the Shares of that Class) only be materially adversely varied or abrogated with the consent of the holders of that Class by Special Resolution but not otherwise. To every such separate meeting all the provisions of these Articles relating to general meetings of the Company or to the proceedings thereat shall, mutatis mutandis, apply, except that the necessary quorum shall be one or more Shareholders of the relevant Class present in person or by proxy representing not less than 5% of the outstanding Shares of that Class and that, subject to the terms of issue of the Shares of that Class, every Shareholder of the Class shall on a poll have one vote for each Share of the Class held by him. For the purposes of convening and holding a meeting pursuant to this Article the Directors may treat all the Classes or any two or more Classes as forming one Class if they consider that all such Classes would be affected in the same way by the proposals under consideration but in any other case shall treat them as separate Classes.

15. The rights conferred upon the holders of the Shares of any Class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the Shares of that Class, be deemed to be materially adversely varied or abrogated by, inter alia, the creation, allotment or issue of further Shares ranking in any respect pari passu with or prior to them, or the redemption or purchase of Shares of any Class by the Company.

CERTIFICATES

16.     No Person shall be entitled to a certificate for any or all of his Shares.

17.     Share certificates, if any, shall be in such form as the Board by resolution shall approve from time to time.

18. The Secretary or any other officer of the Company may prescribe either generally or in a particular case reasonable conditions (including the provision of an indemnity in favour of the Company) upon which a new share certificate may be issued in place of any share certificate which is claimed to have been lost, destroyed or wrongfully taken, or which has become defaced.

CONSIDERATION

19. A Share shall not be issued until the consideration for the Share is fully paid in money or in property or in past services that are not less in value than the fair equivalent of the money that the Company would have received if the Share had been issued for money. The Directors of the Company who vote for or consent to a resolution authorizing the issue of a Share for a consideration other than money are jointly and severally, or solidarily, liable to the Company to make good any amount by which the consideration received is less

than the fair equivalent of money that the Company would have received if the Share had been issued for money on the date of the resolution. A Director who proves that the Director did not know or could not have reasonably known that the Share was issued for a consideration less than the fair equivalent of the money that the Company would have received if the Share had been issued for money is not liable under this Article. A Director is not liable under this Article if the Director exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on: (a) financial statements of the Company represented to the Director by an officer of the Company or in a written report of the auditor of the Company fairly to reflect the financial condition of the Company; or (b) a report of a person whose profession lends credibility to a statement made by the professional person. An action to enforce a liability imposed by this Article may not be commenced after two years from the date of the resolution authorizing the action complained of.

TRANSFER OF SHARES

20. No transfer of Shares need be recorded in the Register (and any register of transfers of the Company) except upon presentation of the original certificate representing such Shares, if any, executed by the Company (or an indemnity in favour of the Company in such form as the Secretary or any other officer of the Company may reasonably determine in the event of any share certificate which is claimed to have been lost, destroyed or wrongfully taken, or which has become defaced). The transferor shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register in respect of the relevant Shares.

TRANSMISSION OF SHARES

21. The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by the Company as having any title to the Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only Person recognised by the Company as having any title to the Share.

22. Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall upon such evidence being produced as may from time to time be required by the Directors, have the right either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt Person before the death or bankruptcy.

23. A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered Shareholder, except that he shall not, before being registered as a Shareholder in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.

ALTERATION OF SHARE CAPITAL

24.     The Company may by Special Resolution:

(a) consolidate and divide all or any of its share capital into Shares of a larger amount than its existing

Shares;

(b) subdivide its existing Shares, or any of them, into Shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived;

(c) reduce its share capital and any capital redemption reserve in any manner authorised by law; and

(d) increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe.

25. The Company may by Ordinary Resolution cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish the amount of its share capital by the amount of the Shares so cancelled.

26. The holders of a Class or a series of Shares are entitled to vote separately as a Class or series (provided the series is affected by the amendment in a manner different from the other Shares of the same Class) on a proposal to amend the Company's Memorandum and Articles to:

(a) add, change or remove the rights, privileges, restrictions or conditions attached to the Shares of such Class and, without limiting the generality of the foregoing,

(i) remove or change prejudicially rights to accrued dividends or rights to cumulative dividends,

(ii)     add, remove or change prejudicially redemption rights,

(iii)     reduce or remove a dividend preference or a liquidation preference, or

(iv) add, remove or change prejudicially conversion privileges, options, voting, transfer or pre-emptive rights, or rights to acquire securities of a corporation, or sinking fund provisions;

(b) increase the rights or privileges of any Class of Shares having rights or privileges equal or superior to the Shares of such Class;

(c) make any Class of Shares having rights or privileges inferior to the Shares of such Class equal or superior to the Shares of such Class;

(d) effect an exchange or create a right of exchange of all or part of the Shares of another Class into the Shares of such Class; or

(e)     constrain the issue, transfer or ownership of the Shares of such Class or change or remove such

constraint.

REDEMPTION AND PURCHASE OF SHARES

27.     Subject to the Law and to the provisions of Article 10.4, the Company may:

(a) issue Shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Shareholder on such terms and in such manner as the Directors may, before the issue of such Shares, determine;

(b) purchase for cancellation its own Shares (including any redeemable Shares) on such terms and in such manner as the Directors may determine and agree with the Shareholder; and

(c) make a payment in respect of the redemption or purchase of its own Shares in any manner authorised by the Law, including out of its capital, profits or the proceeds of a fresh issue of Shares.

28. Any Share in respect of which notice of redemption has been given shall not be entitled to participate in the profits of the Company in respect of the period after the date specified as the date of redemption in the notice of redemption.

29. The redemption or purchase of any Share shall not be deemed to give rise to the redemption or purchase of any other Share.

30. The Directors may when making payments in respect of redemption or purchase of Shares, if authorised by the terms of issue of the Shares being redeemed or purchased or with the agreement of the holder of such Shares, make such payment either in cash or in specie.

GENERAL MEETINGS

31. The Directors may, whenever they think fit, convene a general meeting of the Company provided that the Company shall within one year of its incorporation or continuance and in each year of its existence thereafter hold a general meeting as its annual general meeting and shall specify the meeting as such in notices calling it. The annual general meeting shall be held at such time and place as the Directors shall appoint.

32. General meetings shall also be convened on the requisition in writing of any Shareholder or Shareholders entitled to attend and vote at general meetings of the Company holding at least five percent of the Aggregate Votes deposited at the Office specifying the objects of the meeting for a date no later than 120 days from the date of deposit of the requisition signed by the requisitionists, and if the Directors do not call such meeting within 2 I days from the date of such deposit, the requisitionists themselves may convene the general meeting in the same manner, as nearly as possible, as that in which general meetings may be convened by the Directors, and all reasonable expenses incurred by the requisitionists as a result of the failure of the Directors to convene the general meeting shall be reimbursed to them by the Company.

NOTICE OF GENERAL MEETINGS

33. At least 21 days' notice in writing counting from the date service is deemed to take place as provided in these Articles specifying the place, the day and the hour of the meeting and, in case of special business, the general nature of that business, shall be given in the manner hereinafter provided or in such other manner (if any) as may be prescribed by the Company by Ordinary Resolution to such Persons as are, under these Articles, entitled to receive such notices from the Company, but with the consent of all the Shareholders entitled to receive notice of some particular meeting and attend and vote thereat, that meeting may be convened by such shorter notice or without notice and in such manner as those Shareholders may think fit.

34.     The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any

Shareholder shall not invalidate the proceedings at any meeting.

PROCEEDINGS AT GENERAL MEETINGS

35. All business carried out at a general meeting shall be deemed special with the exception of the consideration of the accounts, balance sheets and any report of the Directors or of the Auditors thereon, the appointment and removal of Directors, the appointment of the Auditors and the fixing of the remuneration of the Auditors. No special business shall be transacted at any general meeting without the consent of all Shareholders entitled to receive notice of that meeting unless notice of such special business has been given in the notice convening that meeting.

36. No business shall be transacted at any general meeting unless a "quorum" of Shareholders is present at the time when the meeting proceeds to business. Save as otherwise provided by these Articles, two or more Shareholders holding at least five percent of the Aggregate Votes present in person or by proxy and entitled to vote at that meeting, shall form a quorum.

37. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Shareholders, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week, at the same time and place, or if such a day is not a business day, the next business day and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Shareholder or Shareholders present and entitled to vote shall form a quorum.

38. If the Directors wish to make this facility available to Shareholders for a specific general meeting or all general meetings of the Company, a Shareholder may participate in any general meeting of the Company, by means of a telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.

39. The chairman, if any, of the Directors (or such other person being an officer or Director of the Company designated by the Board) shall preside as chairman at every general meeting of the Company. The Secretary or Assistant Secretary (if any) or any other officer in attendance and so nominated, shall act as secretary of the meeting and if no such persons are present or willing to act, the chairman shall appoint another person, who need not be a Shareholder, to act as secretary of the meeting. One or more scrutineers, who need not be Shareholders, may be appointed by the chairman or by an Ordinary Resolution.

40. If there is no such chairman, or if at any general meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the Shareholders present shall choose one of their number to be chairman of that meeting.

41. The chairman may with the consent of any general meeting at which a quorum is present (and shall if so directed by the meeting) adjourn a meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting, or adjourned meeting, is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

42. The Directors may cancel or postpone any duly convened general meeting, except for general meetings requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason upon notice in writing to Shareholders. A postponement may be for a stated period of any length or indefinitely as the Directors may determine.

43. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman or one or more Shareholders present in person or by proxy entitled to vote, and unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the Company, shall be prima facie evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution.

44. If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

45. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote.

46. A poll demanded on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs.

VOTES OF SHAREHOLDERS

47. Subject to any rights and restrictions described in Article 10.3 or for the time being attached to any Share, on a show of hands every Shareholder present in person and every Person representing a Shareholder by proxy shall, at a general meeting of the Company, each have one vote and on a poll every Shareholder and every Person representing a Shareholder by proxy shall have one vote for each Share of which he or the Person represented by proxy is the holder.

48. In the case of joint holders, where two or more persons hold Shares jointly, one of those holders present at a meeting of Shareholders may in the absence of the others vote the Shares, but if two or more of those persons are present, in person or by proxy, they shall vote as one on the Shares jointly held by them.

49. A Shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, or other Person in the nature of a committee appointed by that court, and any such committee or other Person, may vote by proxy.

50.     On a poll votes may be given either personally or by proxy.

51. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or attorney duly authorised. A proxy need not be a Shareholder.

52. An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve. The chairman of the general meeting shall determine the authenticity of all signatures.

53. The chairman of any meeting of shareholders may also in his or her discretion, unless otherwise determined by resolution of the Board, accept (i) instruments of proxy which have been transmitted by facsimile, telegraphed, telexed, cabled or otherwise electronically transmitted to the Company or such agent as the Board may from time to time determine prior to such meeting and (ii) facsimile, telegraphic, telex, cable or electronic communication as to the authority of anyone claiming to vote on b.ehalf of or to represent a shareholder, in each case whether or not an instrument of proxy conferring such authority has been lodged with the Company, and any votes cast in accordance with such facsimile, telegraphic, telex, cable or electronic proxy or communication accepted by the chairman shall be valid and any votes cast in accordance therewith shall be counted.

54. A proxy may be signed and delivered in blank and filled in afterwards by the chairman of the Board, the Secretary or any Assistant Secretary.

55.     It shall not be necessary to insert in the proxy the number of shares owned by the appointor.

56. The Board may, at the Company's expense, send out forms of proxy in which certain directors or officers are named, which may be accompanied by stamped envelopes for the return of the forms, even if the Directors so named vote the proxies in favour of their own election as Directors.

57. A proxy shall be acted upon only if it shall have been deposited with the Company or an agent thereof specified in the notice calling the meeting of shareholders prior to the time specified in the notice or such later time before the time of voting as the chairman of the meeting may determine, or, where no such time is specified in such notice, if it has been received by the Company or an agent thereof or the chairman of the meeting or any adjournment thereof before the time of voting.

58.     A proxy is valid only at the meeting in respect of which it is give or any adjournment thereof.

59. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll.

60. A resolution in writing signed by all the Shareholders for the time being entitled to receive notice of and to attend and vote at general meetings of the Company (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held.

CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS

61. Any corporation which is a Shareholder may by resolution of its directors or other governing body authorise such Person as it thinks fit to act as its representative at any meeting of the Company or at any meeting of holders of a Class and the Person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Shareholder.

AUDITORS

62.      The Auditors may only be appointed by Ordinary Resolution, whether or not recommended by the

directors.

DIRECTORS

63. The name(s) of the first Director(s) shall either be determined in writing by a majority (or in the case of a sole subscriber that subscriber) of, or elected at a meeting of, the subscribers of the Memorandum of Association.

64.      The Company may by Ordinary Resolution appoint any natural person (not a corporation) to be a Director.

65. Subject to these Articles, a Director shall hold office until the next occurring annual general meeting of the Company. Each of the Directors may submit himself for re-election at the next occurring annual general meeting of the Company at which the Members shall by a majority of the votes cast either re-elect or replace him. Upon re-election or replacement, as appropriate, each Director or his replacement shall serve as a Director until the next occurring annual general meeting of the Company at which time he may offer himself for re-election. If a Director resigns prior to such annual general meeting, the remaining Directors may appoint a replacement to serve until such annual general meeting.

66. The Company may by Ordinary Resolution from time to time fix the maximum and minimum number of Directors to be appointed, but unless such numbers are fixed as aforesaid the minimum number of Directors shall be three and the maximum number of Directors shall be fifteen.

67. The remuneration of the Directors and their entitlement to out of pocket expenses incurred in performing their duties, may be determined by the Directors.

68. There shall be no shareholding qualification for Directors unless determined otherwise by Ordinary Resolution.

69. The Directors shall have power at any time and from time to time to appoint a natural person (not a corporation) as a Director, either as a result of a casual vacancy or as an additional Director, subject to the maximum number (if any) imposed by Ordinary Resolution.

POWERS AND DUTIES OF DIRECTORS

70. Subject to the Law, these Articles and to any resolutions passed in a general meeting, the business of the Company shall be managed by the Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all powers of the Company. The Directors will have the power to commence in the name of the Company a winding up or any other insolvency proceedings in accordance with the Law. No resolution passed by the Company in general meeting shall invalidate any prior act of the Directors that would have been valid if that resolution had not been passed.

71. The Directors may from time to time appoint any Person, whether or not a Director, to hold such office in the Company as the Directors may think necessary for the administration of the Company, including but not limited to, the office of president, one or more vice-presidents, treasurer, assistant treasurer, manager or controller, and for such term and at such remuneration (whether by way of salary or commission or participation in profits or partly in one way and partly in another), and with such powers and duties as the Directors may think fit. Any Person so appointed by the Directors may be removed by the Directors. The Directors may also appoint one or more of their number to the office of managing director upon like terms, but any such appointment shall ipso facto determine if any managing director ceases from any cause to be a Director.

72. The Directors may appoint a Secretary (and if need be an assistant Secretary or assistant Secretaries) who shall hold office for such term, at such remuneration and upon such conditions and with such powers as they think fit. Any Secretary or assistant Secretary so appointed by the Directors may be removed by the Directors.

73. The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors.

74. The Directors may from time to time and at any time by power of attorney (whether under Seal or under hand) or otherwise appoint any company, firm or Person or body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys or authorised signatory (any such person being an "Attorney" or "Authorised Signatory", respectively) of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of Persons dealing with any such Attorney or Authorised Signatory as the Directors may think fit, and may also authorise any such Attorney or Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him.

75. The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the three next following Articles shall not limit the general powers conferred by this Article.

76. The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the Company and may appoint any Persons to be members of such committees or local boards and may appoint any managers or agents of the Company and may fix the remuneration of any such Persons.

77. The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities and discretions for the time being vested in the Directors and may authorise the members for the time being of any such local board, or any of them to fill any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject to such conditions as the Directors may think fit and the Directors may at any time remove any Person so appointed and may annul or vary any such delegation, but no Person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

78. Any such delegates as aforesaid may be authorised by the Directors to sub-delegate all or any of the powers, authorities, and discretion for the time being vested in them.

BORROWING POWERS OF DIRECTORS

79. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.

THE SEAL

80.     The Company may, if the Directors so determine, have a Seal.

81. The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixings of the Seal. The Seal shall be affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the purpose and every Person as aforesaid shall sign every instrument to which the Seal is so affixed in their presence.

82. The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors provided always that such authority may be given prior to or after the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal. The facsimile Seal shall be affixed in the presence of such Person or Persons as the Directors shall for this purpose appoint and such Person or Persons as aforesaid shall sign every instrument to which the facsimile Seal is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid shall have the same meaning and effect as if the Seal had been' affixed in the presence of and the instrument signed by a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the purpose.

83. Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the Company.

DISQUALIFICATION OF DIRECTORS

84.     The office of Director shall be vacated, if the Director:

(a)     becomes bankrupt or makes any arrangement or composition with his creditors; (b)     dies or is found to be or becomes of unsound mind;

(c)     resigns his office by notice in writing to the Company; or

(d)     is removed from office by Ordinary Resolution.

PROCEEDINGS OF DIRECTORS

85. The Directors may meet together (either within or without the Cayman Islands) for the dispatch of business, adjourn, and otherwise regulate their meetings and proceedings in such manner as the chairman or any two Directors or any other officer designated by the Board may determine. Notice of the time and place or manner of participation for every Board meeting shall be sent to each Director not less than 48 hours before the time of the meeting. A director may at his discretion waive notice of any such meeting. Questions arising at any meeting shall be decided by a majority of votes. Where there are at least three Directors present and there is an equality of votes, the chairman shall be entitled to a second or casting vote. A Director may, and a Secretary or assistant Secretary on the requisition of a Director shall, at any time summon a meeting of the Directors.

86. A Director may participate in any meeting of the Directors, or of any committee appointed by the Directors of which such Director is a member, by means of telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.

87. The quorum necessary for the transaction of the business of the Directors at a meeting of the Board shall be fifty percent of the number of Directors so fixed or determined at that time (or, if that is a fraction, the next largest whole number of Directors).

88. A Director who is a party, or who, in any way, whether directly or indirectly has an interest in a party to a material contract or proposed material contract with the Company shall declare the nature of his interest at a meeting of the Directors. A general notice given to the Directors by any Director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made. A Director may not vote, but may be counted in the quorum, in respect of any contract or proposed contract or arrangement in which he may be interested.

89. A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established.

90. Any Director may act by himself or his firm in a professional capacity for the Company, and he or his firm shall be entitled to remuneration for professional services as if he were not a Director; provided that nothing herein contained shall authorise a Director or his firm to act as auditor to the Company.

91. The Directors shall cause minutes to be made in books or loose-leaf folders provided for the purpose of recording:

(a)     all appointments of officers made by the Directors;

(b) the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and

(c) all resolutions and proceedings at all meetings of the Company, and of the Directors and of committees of Directors.

92. When the chairman of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings.

93. A resolution signed by all the Directors entitled to receive notice of a meeting of Directors shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and constituted. When signed a resolution may consist of several documents each signed by one or more of the Directors.

94. The continuing Directors may act notwithstanding any vacancy in their body but if and for so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number, or of summoning a general meeting of the Company, but for no other purpose.

95. The Directors may elect a chairman of their meetings and determine the period for which he is to hold office but if no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be chairman of the meeting.

96. Subject to any regulations imposed on it by the Directors, a committee appointed by the Directors may elect a chairman of its meetings. If no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the committee members present may choose one of their number to be chairman of the meeting.

97. A committee appointed by the Directors may meet and adjourn as it thinks proper. Subject to any regulations imposed on it by the Directors, questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the chairman shall not have a second or casting vote.

98. All acts done by any meeting of the Directors or of a committee of Directors shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director, or that they or any of them were disqualified, be as valid as if every such Person had been duly appointed and was qualified to be a Director.

DIVIDENDS

99. Subject always to Article 10.1 and any rights and restrictions for the time being attached to any Shares and the Law, the Directors (and only the Directors) may from time to time declare dividends (including interim dividends) and other distributions on Shares in issue and authorise payment of the same out of the funds of the Company lawfully available therefor.

100. The Directors may, before declaring any dividend or distribution, set aside out of the funds legally available for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute discretion of the Directors be applicable for meeting contingencies, or for equalising dividends or distribution or for any other purpose to which those funds may be properly applied and pending such application may in the absolute discretion of the Directors, either be employed in the business of the Company or be invested in such investments as the Directors may from time to time think fit.

101. Any dividend or distribution may be paid in any manner as the Directors may determine (including in the form of cash or non cash assets of the Company, or shares in the capital of the Company). If paid by cheque it will be sent through the post to the registered address of the Shareholder or Person entitled thereto, or in the case of joint holders, to any one of such joint holders at his registered address or to such Person and such address as the Shareholder or Person entitled, or such joint holders as the case may be, may direct. Every such cheque shall be made payable to the order of the Person to whom it is sent or to the order of such other Person as the Shareholder or Person entitled, or such joint holders as the case may be, may direct.

102. The Directors when paying dividends or distributions to the Shareholders in accordance with the foregoing provisions of these Articles may make such payment either in cash or in specie.

103. Subject to any rights and restrictions for the time being attached to any Shares, all dividends or distributions shall be declared and paid according to the amounts paid up on the Shares.

104. If several Persons are registered as joint holders of any Share, any of them may give effectual receipts for any dividend, distributions, or other moneys payable on or in respect of the Share.

105. No dividend or distribution shall bear interest against the Company. Any dividend or distribution unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Company.

ACCOUNTS, AUDIT AND ANNUAL RETURN AND DECLARATION

106. The books of account relating to the Company's affairs shall be kept in such manner as may be determined from time to time by the Directors.

107. The books of account shall be kept at the Office, or at such other place or places as the Directors think fit, and shall always be open to the inspection of the Directors.

108. The Directors shall from time to time .determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors, and no Shareholder (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by law or authorised by the Directors.

109. The Company shall prepare and maintain, at its registered office or at any other place designated by the directors, records containing a securities register. Shareholders and their personal representatives may examine the securities register during the usual business hours of the Company, and may take extracts from the records, free of charge. A Shareholder who wishes to examine the securities register must first make a request to the Company or its agent, accompanied by an affidavit stating: (a) the name and address of the applicant; (b) the name and address for service of the corporation, if the applicant is a corporation; and (c) that the basic list and any supplemental lists (as defined in Article 110) obtained or the information contained in the securities register obtained as the case may be, will not be used except as permitted hereunder.    On receipt of the affidavit, the Company or its agent shall allow the applicant access to the securities register during the Company's usual business hours, and, on payment of a reasonable fee, provide the applicant with an extract from the securities register.

110. Shareholders of the Company and their personal representatives, on payment of a reasonable fee and on sending to the Company or its agent the affidavit referred to Article I 09 above, may on application require the Company or its agent to furnish within ten days after the receipt of the affidavit a list (herein referred to as the "basic list") made up to a date not more than ten days before the date of receipt of the affidavit setting out the names of the Shareholders of the Company, the number of Shares owned by each Shareholder and the address of each Shareholder as shown on the records of the Company. The person requiring the Company to furnish a basic list may, by stating in the affidavit that they require supplemental lists, require the Company or its agent on payment of a reasonable fee to furnish a supplemental list setting out any changes from the basic list in the names or addresses of the Shareholders and the number of Shares owned by each Shareholder for each business day following the date the basic list is made up to (herein referred to as the "supplemental list"). The Company or its agent shall furnish the supplemental list: (a) on the date the basic list is furnished, where the information relates to changes that took place prior to that date; and (b) on the business day following the day to which the supplemental list relates, where the information relates to changes that take place on or after the date the basic list is furnished.

Ill. A list of Shareholders or information from a securities register obtained under Article I 09 or II 0 shall not be used by any person except in connection with: (a) an effort to influence the voting of Shareholders of the Company; (b) an offer to acquire securities of the Company; or (c) any other matter relating to the affairs of the Company.

112.    The accounts relating to the Company's affairs for a completed financial year shall be audited.

113. The Directors in each year shall prepare, or cause to be prepared, an annual return and declaration setting forth the particulars required by the Law and deliver a copy thereof to the Registrar of Companies in the Cayman Islands.

CAPITALISATION OF RESERVES

114.     Subject to the Law, the Directors may, with the authority of an Ordinary Resolution:

(a) resolve to capitalise an amount standing to the credit of reserves (including a Share Premium Account, capital redemption reserve and profit and loss account), whether or not available for distribution;

(b) appropriate the sum resolved to be capitalised to the Shareholders in proportion to the nominal amount of Shares held by them respectively and apply that sum on their behalf in or towards paying up in full unissued Shares or debentures of a nominal amount equal to that sum, and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as they may direct) in those proportions, or partly in one way and partly in the other, but the Share Premium Account, the capital redemption reserve and profits which are not available for distribution may, for the purposes of this Article, only be applied in paying up unissued Shares to be allotted to Shareholders credited as fully paid;

(c) make any arrangements they think fit to resolve a difficulty arising in the distribution of a capitalised reserve and in particular, without limitation, where Shares or debentures become distributable in fractions the Directors may deal with the fractions as they think fit, without the issue of any fractional Shares;

(d) authorise a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the Company providing for the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures to which they may be entitled on the capitalisation, and any such agreement made under this authority being effective and binding on all those Shareholders; and

(e)     generally do all acts and things required to give effect to the resolution.

SHARE PREMIUM ACCOUNT

115. The Directors shall in accordance with the Law establish a Share Premium Account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any Share.

116. There shall be debited from any Share Premium Account on the redemption or purchase of a Share the difference between the nominal value of such Share and the redemption or purchase price provided always that at the discretion of the Directors such sum may be paid out of the profits of the Company or, if permitted by the Law, out of capital.

INVESTMENT ACCOUNTS

117. The Directors may establish separate accounts on the books and records of the Company (each an "Investment Account") for each Class or series, or for more than one Class or series of Shares, as the case may be, and the following provision shall apply to each Investment Account:

(a) the proceeds from the allotment and issue of Shares of any Class or series may be applied in the books of the Company to the Investment Account established for the Shares of such Class or series;

(b) the assets and liabilities and income and expenditures attributable to the Shares of any Class or series may be applied or allocated for accounting purposes to the relevant Investment Account established for such Shares subject to these Articles;

(c) where any asset is derived from another asset (whether cash or otherwise), such derivative asset may be applied in the books of the Company to the Investment Account from which the related asset was derived and on each revaluation of an investment the increase or diminution in the value thereof (or the relevant portion of such increase or diminution in value) may be applied to the relevant Investment Account;

(d) in the case of any asset of the Company which the Directors do not consider is attributable to a particular Investment Account, the Directors shall have the discretion to determine the basis upon which any such asset shall be allocated among Investment Accounts and the Directors shall have power at any time and from time to time to vary such allocation;

(e) where the assets of the Company not attributable to any Investment Accounts give rise to any net profits, the Directors may allocate the assets representing such net profits to the Investment Accounts as they may determine;

(f) the Directors may determine the basis upon which any liability including expenses shall be allocated among Investment Accounts (including conditions as to subsequent reallocation thereof if circumstances so permit or require) and shall have power at any time and from time to time to vary such basis and charge expenses of the Company against either revenue or the capital of the Investment Accounts; and

(g) the Directors may in the books of the Company transfer any assets to and from Investment Accounts if, as a result of a creditor proceeding against certain of the assets of the Company or otherwise, a liability would be borne in a different manner from that in which it would have been borne under paragraph (f) above, or in any similar circumstances.

118. Subject to any applicable law and except as otherwise provided in these Articles the assets held in each Investment Account shall be applied solely in respect of Shares of the Class or series to which such Investment Account relates and no holder of Shares of a Class or series shall have any claim or right to any asset allocated to any other Class or series.

NOTICES

119. Any notice or document may be served by the Company or by the Person entitled to give notice to any Shareholder either personally, or by posting it by ordinary mail or courier service in a prepaid letter addressed to such Shareholder at his address as appearing in the Register, or by electronic mail to any electronic mail address such Shareholder may have specified in writing for the purpose of such service of notices, or by cable, telex or facsimile should the Directors deem it appropriate. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first in the Register in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders.

120. Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened.

121.     Any notice or other document, if served by:

(a) post, shall be deemed to have been served five days after the time when the letter containing the same is posted;

(b) facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission of the facsimile in full to the facsimile number of the recipient;

(c)     recognized courier service, shall be deemed to have been served at the time of delivery; or

(d) electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail. In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier service.

122. Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his name shall at the time of the service of the notice or document, have been removed from the Register as the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under him) in the Share.

123. Notice of every general meeting of the Company shall be given to all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices to them. No other Person shall be entitled to receive notices of general meetings.

INDEMNITY

124. Every Director, Secretary, assistant Secretary, or other officer for the time being and from time to time of the Company (but not including the Auditors) and the personal representatives of the same (each an "Indemnified Person") shall be indemnified and secured harmless out of the assets and funds of the Company against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such Indemnified Person, other than by reason of such Indemnified Person's own dishonesty, willful default, fraud, breach of trust or breach of duty, in or about the conduct of the Company's business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such Indemnified Person in defending (whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court whether in the Cayman Islands or elsewhere.

125.     No Indemnified Person shall be liable:

(a)     for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the

Company; or

(b)     for any loss on account of defect of title to any property of the Company; or

(c)     on account of the insufficiency of any security in or upon which any money of the Company shall

be invested; or

(d)     for any loss incurred through any bank, broker or other similar Person; or

(e) for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of the duties, powers, authorities, or discretions of such Indemnified Person's office or in relation thereto; unless the same shall happen through such Indemnified Person's own dishonesty, willful default fraud, breach of duty or breach of trust.

126. To the fullest extent permitted by law, the Company shall be entitled to advance moneys to every director, officer and other individual for the costs, charges and expenses of a proceeding referred to in Article 125, however, the individual shall repay the moneys if the individual is not entitled to the indemnity as aforesaid as determined by the court or other competent authority.

127. From time to time the Board may determine that Indemnified Persons shall also include the employees of the Company who are not directors or officers of the Company or any particular one or more or class of such employees, either generally or in respect of a particular occurrence or class of occurrences. From time to time thereafter the Board may also revoke, limit or vary such application of this Article.

128. The provisions of Articles 124 to 127 inclusive, shall be in addition to and not in substitution for or operate by way of limitation of, any rights, immunities and protections to which a person is otherwise entitled.

NON-RECOGNITION OF TRUSTS

129. Subject to the proviso hereto, no Person shall be recognised by the Company as holding any Share upon any trust and the Company shall not, unless required by law, be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Share or (except only as otherwise provided by these Articles or as the Law requires) any other right in respect of any Share except an absolute right to the entirety thereof in each Shareholder registered in the Register, provided that, notwithstanding the foregoing, the Company shall be entitled to recognise any such interests as shall be determined by the Directors in their absolute discretion.

WINDING-UP

130. If the Company shall be wound up, the liquidator may, with the sanction of an Ordinary Resolution divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different Classes subject always to Article I 0.2 above. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Shareholders as the liquidator, with the like sanction shall think fit, but so that no Shareholder shall be compelled to accept any asset whereon there is any liability.

AMENDMENT OF ARTICLES OF ASSOCIATION

131. Subject to the Law and the rights attaching to the various Classes, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part.

CLOSING OF REGISTER OR FIXING RECORD DATE

132. For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any meeting of Shareholders or any adjournment thereof, or those Shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who is a Shareholder for any other purpose, the Directors may provide that the Register shall be closed for transfers for a stated period which shall not exceed in any case 60 days. If the Register shall be so closed for the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders the Register shall be so closed for at least ten days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the Register.

133. In lieu of or apart from closing the Register, the Directors may fix in advance a date as the record date for any such determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of the Shareholders and for the purpose of determining those Shareholders that are entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such dividend, fix a subsequent date as the record date for such determination.

134. If the Register is not so closed and no record date is fixed for the determination of those Shareholders entitled to receive notice of, attend or vote at a meeting of Shareholders or those Shareholders that are entitled to receive payment of a dividend, the date on which notice of the meeting is posted or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such

determination of Shareholders. When a determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof.

REGISTRATION BY WAY OF CONTINUATION

135. The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the Company.

DISCLOSURE

136. The Directors, or any authorised service providers (including the officers, the Secretary and the registered office agent of the Company) shall be entitled to disclose to any regulatory or judicial authority any information regarding the affairs of the Company including without limitation information contained in the Register and books of the Company.

RIGHTS OF DISSENT

137.     A holder of Shares of any class of the Company may dissent if the Company resolves to:

(a) amend its Memorandum and Articles to add, change or remove any provisions restricting or constraining the issue, transfer or ownership of shares of that class;

(b) amend its Memorandum and Articles to add, change or remove any restriction on the business or businesses that the Company may carry on;

(c) amalgamate, including a merger or consolidation pursuant to Section 233(7) of the Companies

Law;

(d) be continued into another jurisdiction;

(e) sell, lease or exchange all or substantially all its property; or

(f) carry out going private scheme or contract being the subject of Section 88 of the Companies Law.

138. In addition, a Member holding Shares of any Class or series of Shares entitled to vote may dissent if the Company resolves to amend its Memorandum and Articles as contemplated by Article 26. The right to dissent applies even if there is only one Class of Shares.

139. In addition to any other right the Member may have, but subject to limitations in Article !51, a Member who complies with the Articles on dissent is entitled, when the action approved by the resolution from which the Member dissents becomes effective, to be paid by the Company the fair value of the Shares in respect of which the Member dissents, determined as of the close of business on the day before the resolution was adopted or the order was made.

140. A dissenting Member may only claim a right of dissent with respect to all the Shares of a Class held on behalf of any one beneficial owner and registered in the name of the dissenting Member. The dissenting Member shall send to the Company, at or before any meeting of Members at which a resolution referred to in Articles 137 or 138 is to be voted on, a written objection to the resolution, unless the Company did not give notice to the Member of the purpose of the meeting and of their right to dissent.

141. The Company shall, within ten days after the Members adopt the resolution, send to each Member who has filed the objection referred to in Article 140, notice that the resolution has been adopted, but such notice is not required to be sent to any Member who voted for the resolution or who has withdrawn their objection.

142. A dissenting Member shall, within twenty days after receiving a notice under Article 141 or, if the Member does not receive such notice, within twenty days after learning that the resolution has been adopted, send to the Company a written notice containing the Member's name and address; the number and class of shares in respect of which the Member dissents; and a demand for payment of the fair value of such shares.

143. A dissenting Member shall, within thirty days after sending a notice under Article 142 send the certificates representing the Shares in respect of which the Member dissents, if any, to the Company or the Transfer Agent. A dissenting Member who fails to comply has no right to make a claim under these Articles on dissent. The Company or the Transfer Agent shall endorse on any share certificate received, a notice that the holder is a dissenting Member under these Articles on dissent and shall forthwith return the share certificates to the dissenting Member.

144. On sending a notice under Article 142, a dissenting Member ceases to have any rights as a Member other than to be paid the fair value of their shares as determined under these Articles on dissent except where the Member withdraws that notice before the Company makes an offer under Article 145, the Company fails to make an offer in accordance with Article 145 and the Member withdraws the notice, or the Directors revoke a resolution to amend the Memorandum and Articles, terminate an amalgamation agreement or an application for continuance, or abandon a sale, lease or exchange, in which case the Member's rights are reinstated as of the date the notice was sent.

145. The Company shall, not later than seven days after the later of the day on which the action approved by the resolution is effective or the day the Company received the notice referred to in Article 142, send to each dissenting Member who has sent such notice a written offer to pay for their Shares in an amount considered by the Directors of the Company to be the fair value, accompanied by a statement showing how the fair value was determined; or if a limitations under Article 151 applies, a notification that it is unable lawfully to pay dissenting Member for their Shares. Every offer made for Shares of the same class or series shall be on the same terms.

146. Subject to limitations under Article 151 the Company shall pay for the shares of a dissenting Member within ten days after an offer made under Article 145 has been accepted, but any such offer lapses if the Company does not receive an acceptance thereof within thirty days after the offer has been made.

147. Where the Company fails to make an offer under Article 145 or if a dissenting Member fails to accept an offer, the Company may, within fifty days after the action approved by the resolution is effective or within such further period as a court may allow, apply to a court to fix a fair value for the shares of any dissenting Member. If the Company fails to apply to a court, a dissenting Member may apply to a court for the same purpose within a further period of twenty days or within such further period as a court may allow. An application of the company or the dissenting Member must be made to a court having jurisdiction in the place where the Company has its registered office. A dissenting Member is not required to give security for costs in an application made.

148. On an application to a court under Article 147 all dissenting Member whose shares have not been purchased by the Company shall be joined as parties and are bound by the decision of the court; and the Company shall notify each affected dissenting Member of the date, place and consequences of the application and of their right to appear and be heard in person or by counsel. The court may determine whether any other person is a dissenting Member who should be joined as a party, and the court shall then fix a fair value for the shares of all dissenting Member.

149. The final order of a court shall be rendered against the Company in favour of each dissenting Member and for the amount of the shares as fixed by the court.

150. A court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting Member from the date the action approved by the resolution is effective until the date of payment.

151. The Company shall not make a payment to a dissenting Member if there are reasonable grounds for believing that the Company is or would after the payment be unable to pay its liabilities as they become due; or the realizable value of the Company's assets would thereby be less than the aggregate of its liabilities. If this provision applies, the Company shall, within ten days after the pronouncement of a final order under Article 149 notify each dissenting Member that it is unable lawfully to pay dissenting Members for their shares. If this provision applies, a dissenting Member, by written notice delivered to the Company within thirty days after receiving such a notice may withdraw their notice of dissent, in which case the Company is deemed to consent to the withdrawal and the Member is reinstated to their full rights as a shareholder; or retain a status as a claimant against the Company, to be paid as soon as the Company is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the Company but in priority to its Members.

EX-4.1

Exhibit 4.1b

AMENDED BY-LAWS OF AMERICAN COUNTRY INSURANCE COMPANY

ARTICLE I - OFFICES

The principal office of the company in the State of Illinois shall be located in Cook County, Illinois. The company may have such other offices, either within or without the State of Illinois, as the business of the company may require from time to time.

ARTICLE II -SHAREHOLDERS

Section 1 - First Meeting. The first meeting of shareholders shall be held within one hundred twenty (120) days after the issuance of a Certificate of Authority to the Company by the Director of Insurance of the State of Illinois.

Section 2· Annual Meeting. The Annual Meeting of the shareholders shall be held either within or without the State of Illinois at a place and time to be determined by the Directors. An annual meeting shall be convened within 18 months of the previous meeting. In the event that such annual meeting is omitted by oversight or otherwise on the date herein above provided, the Directors shall cause a meeting .in lieu thereof to be held as soon thereafter as may be convenient, and any business transacted or elections held at such meeting shall be valid as if transacted or held at the annual meeting.

Section 3 - Special meetings. Special meetings of the shareholders may be called by the president, by the board of directors or by the holders of not less than one-fifth of all the outstanding shares of the company.

Section 4 - Place of Meeting. The board of directors may designate any place, within the State of Illinois, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. A waiver of notice signed by all shareholders may designate any place within the State of Illinois, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the registered office of the corporation in the State of Illinois except as otherwise provided in Section 6 of this article.

Section 5 - Notice of Meetings. Written or printed notice stating the place, day and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than forty days before the date of the meeting to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the corporation, with postage thereon prepaid.

Section 6 - Meeting of All Shareholders. If all of the shareholders shall meet at any time and place, either within or without the State of Illinois, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken.

Section 7 - Closing of Transfer Books Of Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, forty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days, or in the case of a merger or consolidation at least twenty days, immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than forty days a.id, for a meeting of shareholders, not less than ten days, or in the case of a merger or consolidation not less than twenty days, immediately preceding such meeting. If the stock transfer books are not closed and no record date is fixed for the determination or .shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to-receive payment of a dividend, the date on which notice, of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders

entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.

Section 8 - Voting Lists. The officer or agent having charge of the transfer books for shares of the: company shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting. arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shalt be kept on file at the registered office of the company and shall be kept on file at the registered office of the company and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders.

Section 9 - Quorum. A majority of the outstanding shares of the company, represented in person or by proxy shall constitute a quorum at any meeting of shareholders; provided, that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Illinois Insurance Code, the articles of incorporation or these by-laws.

Section 10 - Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the company before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

Section 11 - Voting of Shares. Subject to the provisions of Section 13 of this article, each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders.

Section 12 - Voting of Shares by Certain Holders. Shares standing in the name of another corporation, domestic or foreign may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.

A. Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator; executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy.

B. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.

C. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

D. Shares of its own stock-belonging to this company shall not be voted, directly or indirectly at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time:

Section 13 - Cumulative Voting. In all elections for directors every shareholder shall have the right to vote, in person or by proxy, the number of shares owned by him, for as many persons as there are directors to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied. by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall see fit, and directors shall not be elected in any other manner.

Section 14 - Informal Action by Shareholder. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if

a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders .entitled to vote with respect to the subject matter thereof.

Section 15 - Voting by Ballot. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.

Section 16 -Inspectors. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders.

Each report of an inspector shall be in writing and signed by him or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

ARTICLE III - DIRECTORS

Section I - General Powers. The business and affairs of the company shall be managed by its board of directors.

A. After the date of incorporation and until the rust meeting of shareholders, the incorporators shall have the powers and perform the duties ordinarily possessed and exercised by the Board of Directors.

B. Upon the issuance of a Certificate of Authority to the Company, and after the first meeting of the shareholders, the corporate powers shall be exercised by and the business and affairs shall be under the control of a Board of Directors.

C. At the first meeting of the Board of Directors after the annual meeting of shareholders the Board shall elect its Chairman, a President, one or more Vice-Presidents, a Treasurer and one or more Secretaries, and may elect an Executive Committee. The Board of Directors at any time may appoint a General Manager and such other officers and Committees as it may deem advisable, and determine the powers and duties of such officers and employees. Officers and members of the Committee of the Board shall serve at the pleasure of the Board, except that with respect to officers of the Company the Board shall be empowered to enter into any contract with any such officer with respect to the term or condition of services as the Board may authorize. One person may hold two or more of such offices except that the offices of President and Secretary shall not be held by the same person.

D. The Chairman of the Board shall be the principal presiding officer, presiding at all meetings of the Board of Directors, and shall conduct and supervise the Board of Directors' meetings. He shall also preside at all meetings of the shareholders, and he may sign, together with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, deeds, mortgages, bonds, contracts or other instruments which the Board may authorize, and, in general, he shall assume the burden of helping the Board shape and determine policy and do the necessary work in connection with investigating industry trends, market conditions and otherwise serve as the basic source of information in helping the Board determine policy for the corporation, and such other duties as may be prescribed for him from time to time by the Board of Directors.

Section 2 - Number, Tenure, and Qualifications. The Board of Directors shall consist of between five (5) and ten (10) natural persons, who are at least twenty-one (21) years of age, who shall be chosen annually by the Shareholders, at least three (3) of whom are residents and citizens of the State of Illinois. This number may be increased or decreased from time to time by amendment to the By-Laws, but in no event shall be less than three (3) nor more than twenty-one (21).

Section 3 - Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after, and at the same place as, the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, either within or without the State of Illinois, for the holding of additional regular meetings without other notice than such resolution.

Section 4 - Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the State of Illinois, as the place for holding any special meeting of the board of directors called by them.

Section 5 - Notice. Notice of any special meeting shall be given at least 7 days previous thereto by written notice delivered personally or mailed to each director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver or notice of such meeting unless expressly otherwise provided by the laws of the State of Illinois.

Section 6 - Quorum. A majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the board of directors, provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

Section 7 - Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

Section 8 - Vacancies. Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors, may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose.

Section 9 - Informal Action by Directors. Unless specifically prohibited by the articles of incorporation Of by-laws, any action required to be taken at a meeting of the board of directors, or the executive committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Any such consent signed by all the directors or all the members of the executive committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Department of Insurance. All action without a meeting of the Board shall be limited to those situations where time is of the essence and not in lieu of a regularly scheduled meeting.

Section 10 - Compensation. The board of directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its, members, shall have authority to establish reasonable compensation of all directors for services to, the company as directors, officers or otherwise. By resolution of the board of directors the directors may be paid their expenses, if any, of attendance at each meeting of the board.

Section 11 - Presumption of Assent. A director of the company who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 12 - Participation by Conference Telephone. Members of the board of directors or any committee of the board of directors may participate in and act at any meeting of such board or committee through' the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating.

Section 13 - Nomination of Directors. All nominations for the office of Director shall be filed in writing with the Secretary of the Company at least sixty (60) days prior to the meeting at which the Directors are to be

elected. The nomination must be signed by at least two (2) shareholders of the Company. The written nomination shall be marked by the Secretary with the day of its filing and entered of record in the books of the Company. Any such nomination may nominate one or more shareholders for the office of Director. No such nomination shall be valid, except for the next annual meeting of shareholders immediately following or at any adjourned session thereof. No person shall be voted upon or elected a Director unless nominated as provided in Sections 12 and 13 herein.

Section 14 - Nominating Committee. Thirty (30) days prior to each meeting at which Directors are to be elected, the President shall appoint a Nominating Committee which shall consist of three (3) shareholders of the Company. The Nominating Committee shall nominate one Director for each position to which a Director is to be elected. The Nominating Committee shall make its report in writing to the President three (3) days prior to the said meeting and shall present its nominations in writing to the shareholders at said meeting.

Section 15 - Committee on Proxies. It shall be the duty of the President to appoint a Committee on Proxies which Committee shall meet prior to the time of election, examine all proxies which have been duly filed in accordance with these By-Laws, and report to the Chairman of the meeting the number of valid proxies entitled to vote, the names of the persons presently designated as proxy thereon, and the number of proxy votes which may be voted by' such persons respectively. The said Committee shall approve the form of ballot and no person nominated for election as a Director shall be listed on said ballot, unless the said Committee shall find that the nominee is a shareholder of the Company on the date of election.

ARTICLE IV - OFFICERS

Section 1 - Number. The officers of the company shall be a president, one or more vice- presidents (the number thereof to be determined by the board of directors), a treasurer; and a secretary, and such assistant treasurers, assistant secretaries or other officers as may be elected or appointed by the board of directors or appointed by the President. Any two or more offices may be held by the same person, except the office of president and secretary.

Section 2 - Election And Term of Office. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders. Vacancies may be filled or new offices filled at any meeting of the board of directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 3 - Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4 - Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term.

Section 5 - President. The president shall be the principal executive officer of the company and shall in general supervise and control all of the business and affairs of the corporation. He shall preside at all meetings of the shareholders and of the board of directors, He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.

Section 6. - The Vice-President. In the absence of the president or in the event of his inability or refusal to act, the vice-president, (or in the event there be more than one vice-president, the vice-presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. Any vice-president may sign, with the secretary or an assistant secretary, certificates for shares: of the corporation; and shall perform such other duties as from time to time may be assigned to him by the

president or by the board of directors.

Section 7 - The Treasurer. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these by-laws; (b) ingeneral perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the board of directors.

Section 8 - The Secretary. The secretary shall: (a) keep the minutes of the shareholders and of the board of directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all certificates for shares prior to the issue thereof and to all documents, the execution of which on behalf of the company under its seal is duly authorized in accordance with the provisions of these by-laws; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the president, or a Vice-president, certificates for shares of the corporation, the issue of which shall have been authorized by resolution of the board of directors; (f) have general charge of the stock transfer books of the corporation; (g) in general perform all duties as from time to time may be assigned to him by the president or by the board of directors.

Section 9 - Assistant Treasurers and Assistant Secretaries. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine, The assistant secretaries, as thereunto authorized by the board of directors may sign with the president or a vice-president certificates for shares of the corporation, the issue of which shall have been authorized by a resolution of the board of directors. The assistant treasurers and assistant secretaries in general, shall perform such duties as shall be assigned to them by: the treasurer or the secretary, respectively, or by the president or the board of directors.

Section 10 - Salaries. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation.

Section 11 - Executive Committee. An Executive Committee may be chosen by the Board from among its number consisting of three regular members and one or more alternate members. An alternate member shall serve on the Executive Committee at any time during the absence or disability of any regular member. It shall be the duty of the Executive Committee, subject to any limitations imposed by the Board of Directors, to perform any functions of the Board of Directors when the Board is not in session. The Executive Committee shall keep minutes of the committee meetings and said minutes shall be subject to review by the Board of Directors at the next regular or special meeting of the Board. The Executive Committee shall have charge of the financial affairs of the Company, and the making of loans and investments of the funds of the Company, and may take any action with respect to the liquidation, sale, or exchange of, or the exercise of any right pertaining to, any security or asset belonging to the Company. The Executive Committee shall have the power to adopt resolutions governing the deposit of funds of the Company and the or distribution of such funds, and to authorize the leasing of safe deposit boxes and to provide rules and regulations for access to any safe deposit box, including the right to repeal or amend any resolution with respect to banking accounts or safe deposit boxes previously adopted by the Board of Directors, except where such resolution of the Board of Directors shall have specifically reserved to the Board the exclusive privileges to amend or repeal such resolution.

Section 12 - Bonds. The Company shall procure and maintain in force surety bonds on employees, officers or positions in amounts, and in the manner and covering the perils provided in the Rules and Regulations of the Illinois Insurance Department.

ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1 - Contracts. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 2 - Loans. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances.

Section 3 - Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the company shall be signed by such officer or officers, agent or agents of the company and in such manner as shall from time to time be determined by resolution of the board of directors, pursuant to Rules and Regulations of the Illinois Insurance Department.

Section 4 - Deposits. All funds of the company shall be deposited from time to time to the credit of the company in such banks, trust companies or other depositaries as the board of directors may select pursuant to the requirements of the Illinois Insurance Code.

ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1 - Certificates for Shares. Certificates representing shares of the company shall be in such form as may be determined by the board of directors. Such certificates shall be signed by the president or a vice-president and by the secretary or an assistant secretary and shall be sealed with the seal of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.

Section 2 -Transfers of Shares. Transfers of shares of the company shall be made only on the books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly execute and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation.

Section 3 - Lost, Stolen, Destroyed, or Mutilated Certificates. No certificate for shares of stock in the company shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the corporation, if the Board of Directors shall so require of a bond or indemnity in such amount (not exceeding twice the value of the shares represented by such certificate), upon such terms and secured by such surety as the Board of Directors may in its discretion require.

ARTICLE VII - FISCAL YEAR

The fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year.

ARTICLE VIII - DIVIDENDS

The board of directors may from time to time, declare, and the company may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by the Illinois Insurance Code and its Articles of Incorporation.

ARTICLE IX - SEAL

The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the company and the words, "Corporate Seal, Illinois."

ARTICLE X - WAIVER OF NOTICE

Whenever any notice whatever is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of the Illinois Insurance Code, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE XI - AMENDMENTS

A. These by-laws may be altered, amended or repealed and new by-laws may be adopted at any meeting of

the board of directors of the company by a majority vote of the directors present at the meeting and thereafter submitted to the Department of Insurance for approval and filing.

B. Amendments to the Articles of Incorporation after the Certificate of Authority has been issued to the Company shall be by resolution of the Board of Directors setting forth the proposed amendment and directing that the proposed amendment be submitted to a vote of shareholders at either an annual or a special meeting.

C. Written or printed notice setting forth the proposed amendment or a summary of the changes to be effected thereby andstating the time and place of the meeting at which the same will be considered shall be mailed, postage prepaid and properly addressed, to each shareholder at least ten (10) days before the time fixed for such meeting. A written waiver of notice signed by the shareholders whether before or after the date of the meeting mentioned therein, shall be deemed equivalent notice.

D. At such meeting a vote of the shareholders shall be taken on the proposed amendment The proposed amendment shall be adopted upon receiving the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares.

E. Amendments to the Articles of Incorporation prior to the issuance of a Certificate of Authority to the Company shall be made by the submission of the proposed amendment by the incorporators to the vote of the subscribers in the same manner as provided above. The proposed amendment in such case shall be adopted by the written consent of all the incorporators.

ARTICLE XlI - POLICIES OF INSURANCE

Section 1: The form, term and conditions of all policies or contracts of insurance issued by the Company shall be determined by the President with the advice and approval of the Board of Directors and the form or forms so determined shall be employed by the Company.

Section 2. No condition or provision of any insurance policy of the Company shall be waived DT altered, except by endorsement attached thereto, signed by the President, a Vice-President, Secretary or other duly authorized officer representative of the Company, acting under written authority not shall notice to or knowledge of any person be held to effect a waiver of or change in any provision of such policy.

ARTICLE XIII - INTERESTED DIRECTORS AND OFFICERS

Section 1: No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation; partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or a committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:

(a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors be less than a quorum; or

(b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or

(c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the shareholders, Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

ARTICLE XIV - INDEMNIFICATION OF DIRECTORS AND OFFICERS

(a) The corporation shall indemnify each director and each officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation

as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contenders or its equivalent, shall not, of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding had reasonable cause to believe that his conduct was unlawful.

(b) The corporation shall indemnify each director and each officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such director or officer shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite that adjudication of liability but in view of all the circumstances of the case, such director or officer is fairly and reasonably entitled 10 indemnity for such expenses which such court shall deem proper.

(c) The corporation shall indemnify each director and each officer or employee who is held to be a fiduciary under any employee pension, profit sharing or welfare plan or trust of the corporation or any of its divisions and who wasor is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was such a fiduciary and was serving as such at the request of the corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding for any breach of any of the responsibilities. obligations or duties imposed upon fiduciaries by the Employee Retirement Income Security Act of 1974 and any amendments thereto, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of such plan or trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction; or upon a plea of nolo contenders or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of such plan or trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The provisions of all the following paragraphs of this Article relating to directors, officers, employees or agents shall apply alsoto directors, officers or employees held to be fiduciaries under this paragraph (c), specifically including the power of the corporation (under paragraph (g)) to purchase and maintain insurance on behalf of such fiduciaries.

(d) To the extent that a person who is or was a director, officer, employee or agent of the corporation, or of any other corporation, partnership, joint venture, trust or other enterprise with which he is or was serving in such capacity at the request of the corporation, has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

(e) Any indemnification under paragraphs (a) and (b) of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable but a quorum of disinterested directors so directs; by independent legal counsel in a written opinion, or (3) by the shareholders.

(f) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification may be entitled under any statute, provision in the corporation's articles of incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall, inure to the benefit of the heirs, executors and administrators of such a person.

(g) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee Of agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his Status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article.

(h) For purposes of this Article, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers; and employees or agents, so that any person who is or was a director, officer, employee of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

(i) The invalidity or unenforceability of any provision in this Article shall not affect the validity or enforceability of the remaining provisions of this Article.

ARTICLE XV - COMPLIANCE WITH RULES AND REGULATIONS

All acts of the Officers and Directors of the Company shall be done in accordance with Rule 904 of the Rules and Regulations of the Department of Insurance of the State of Illinois. These Amended By-Laws have been approved and presented for filing to the State of Illinois Department of Insurance

CERTIFICATE

The undersigned, being the duly elected Secretary of American Country Insurance Company, and Illinois domiciled property and casualty company, hereby certifies that the attached is a true and complete copy of the Amended By-Laws of American Country Insurance Company in effect as of the date hereof.

Executed in Chicago, Illinois, this 22 day of August 2005

AMERICAN COUNTRY INSURANCE COMPANY

BY:      /s/ Ronald Jay Gold

Ronald Jay Gold

Secretary

EX-4.1

Exhibit 4.1c

FOURTH AMENDED AND RESTATED BYLAWS OF AMERICAN SERVICE INSURANCE COMPANY, INC.

ARTICLE I OFFICES

The principal office of the Company shall be located in the County of Cook, State of Illinois.

ARTICLE II SHAREHOLDERS

SECTION 1. ANNUAL MEETINGS.

The Annual Meeting of the shareholders shall be held either within or without the State of Illinois at a place and time to be determined by the Directors. An annual meeting shall be convened within 18 months of the previous meeting. In the event that such annual meeting is omitted by oversight or otherwise on the date hereinabove provided, the Directors shall cause a meeting in lieu thereof to be held as soon thereafter as may be convenient, and any business transacted or elections held at such meeting shall be valid as if transacted or held at the annual meeting.

SECTION 2 SPECIAL MEETINGS.

Special meetings of the shareholders may be called by the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, President, by the Board of Directors, or by the holders of not less than one-fifth of all the outstanding shares of the company.

SECTION 3. PLACE OF MEETING.

The Board of Directors may designate any place, within the State of Illinois, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors.

SECTION 4. NOTICE OF MEETINGS.

Written or printed notice stating the place, day and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than forty days before the date of the meeting to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the corporation, with postage thereon prepaid.

SECTION 5. MEETING OF ALL SHAREHOLDERS.

If all of the shareholders shall meet at any time and place, either within or without the State of Illinois, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken.

SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period, but not to exceed, in any case, forty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days, or in the case of a merger or consolidation, at least twenty days, immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than forty days and, for a meeting of shareholders, not less than ten days, or in the case of a merger or consolidation not less than twenty days, immediately preceding such meeting. If the stock transfer books are not closed and no record date is fixed for the determination or shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors

declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders.

SECTION 7. VOTING LISTS.

The officer or agent having charge of the transfer books for shares of the company shall make, at least ten days before each meeting of shareholder, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the company and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders.

SECTION 8 QUORUM.

A majority of the outstanding shares of the company, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders; provided, that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Illinois Insurance Code, the articles of incorporation or these By-Laws.

SECTION 9. PROXIES.

At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the company before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

SECTION 10. VOTING OF SHARES.

Each Shareholder may vote at any meeting of the Shareholders either in person or by proxy filed with the Secretary at or before such meeting. Each Shareholder shall be entitled to one vote for each share of stock outstanding in his name on the records of the Company, thirty days preceding the election, exclusive of the day of such election. All questions, unless otherwise provided by law, shall be decided by a majority of the votes thus cast.

SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS.

Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the By-Laws of such corporation, may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine.

A. Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him either in person or by proxy.

B. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.

C. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

D. Shares of its own stock belonging to this company shall not be voted, directly or indirectly, at any meeting

and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time.

SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the actions so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

SECTION 13. VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.

ARTICLE III DIRECTORS

SECTION 1. GENERAL POWERS.

The business and affairs of the company shall be managed by its Board of Directors.

A. After the date of incorporation and until the first meeting of shareholders, the incorporators shall have the powers and perform the duties ordinarily possessed and exercised by the Board of Directors.

B. Upon the issuance of a Certificate of Authority to the Company, and after the first meeting of the shareholders, the corporate powers shall be exercised by and the business and affairs shall be under the control of a Board of Directors.

C. At the first meeting of the Board of Directors after the annual meeting of members the Board shall elect its Chairman, a President, one or more Vice-Presidents, a Treasurer and one or more Secretaries. The Board of Directors at any time may appoint a General Manager and such other officers and Committees as it may deem advisable, and determine the powers and duties of such officers and employees. Officers and members of the committee of the Board shall serve at the pleasure of the Board, except that with respect to officers of the Company the Board shall be empowered to enter into any contract with any such officer with respect to the term or condition of services as the Board may authorize. One person may hold two or more of such offices except that the offices of Chairman of the Board, Chief Executive Officer or President and Secretary shall not be held by the same person.

D. The Chairman of the Board shall be the principal presiding officer, presiding at all meetings of the Board of Directors, and shall conduct and supervise the Board of Directors' meetings.

SECTION 2. DUTIES.

(a) The business of the Company shall be managed and controlled by a Board of Directors consisting of between five (5) and ten (10) natural persons who shall be chosen annually by the Shareholders, and three (3) of whom shall be residents and citizens of the State of Illinois. This number may be increased or decreased from time to time by amendment to the By-Laws, but in no event shall be less than three (3) nor more than twenty-one (21).

(b) Not less than one-third of the Directors shall be persons who are not officers or employees of the Company or of any entity controlling, controlled by, or under common control with the Company and who are not beneficial owners of a controlling interest in the voting stock of the Company or any such entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the Board of Directors or any committee thereof. This sub-section (b) shall not apply if (i) any entity controlling the Company, whether directly or through an intermediate subsidiary, has a Board of Directors composed in accordance with this provision, (ii) the ultimate controlling party of the Company is a corporation whose equity securities or equivalent instruments are listed on the New York Stock Exchange, or (iii) it is otherwise not required under the Illinois Insurance Code.

SECTION 3. REGULAR MEETINGS.

A regular meeting of the Board of Directors shall be held without other notice than this By-Law, immediately

after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Illinois, for the holding of additional regular meetings without other notice than such resolution.

SECTION 4. SPECIAL MEETINGS.

Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, President or any two Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Illinois, as the place for holding any special meeting of the Board of Directors called by them.

SECTION 5. NOTICE.

Notice of any special meeting shall be given at least 5 days previous thereto by written notice delivered personally or mailed to each Director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice shall be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any Director may waive notice of any meeting. The attendance of a Director at any meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver or notice of such meeting.

SECTION 6. QUORUM.

A majority of the number of Directors fixed by these By-Laws shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided, that if less than a majority of such number of Directors are present may adjourn the meeting form time to time without further notice.

SECTION 7. MANNER OF ACTING.

The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

SECTION 8. VACANCIES.

Any vacancy occurring in the Board of Directors and any Directorship to be filed by reason of an increase in the number of Directors, may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose.

SECTION 9. INFORMAL ACTION BY DIRECTORS.

Unless specifically prohibited by the articles of incorporation or ByLaws, any action required to be taken at a meeting of the Board of Directors, or the executive committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the Directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Any such consent signed by all the Directors or all the members of the executive committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Department of Insurance.

SECTION 10. TELEPHONE MEETINGS.

The Board of Directors or any committee of the Board of Directors may participate in and act at any meeting of the Board of Directors or committee thereof through the use of a conference telephone or other communication equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating.

SECTION 11. COMPENSATION.

The Board of Directors, by the affirmative vote of a majority of Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the Company as Directors, officers or otherwise. By resolution of the Board of Directors the Directors may be paid their expenses, if any, of attendance at each meeting of the Board.

SECTION 12. PRESUMPTION OF ASSENT.

A Director of the company who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action.

SECTION 13. COMMITTEES.

The Board of Directors shall have the authority to form committees for the furtherance of its work and regulatory compliance. It shall have the power to appoint by resolution of a majority of the whole Board of Directors, standing committees consisting of three (3) or more members: an Audit Committee, Investment Committee and a Reinsurance Committee who shall have and exercise during the interim between the meeting of the Board of Directors all of the authority of the Board of Directors in the management of the Company, except such authority denied any such committee by the Articles of Incorporation, any statute or any ByLaw.

SECTION 14. RESIGNATION AND REMOVAL OF DIRECTORS.

A Director may resign at any time upon written notice to the Board of Directors. A Director may be removed with or without cause, by a majority of shareholders if the notice of the meeting names the Director or Directors to be removed at said meeting.

ARTICLE IV OFFICERS

SECTION 1. NUMBER.

The officers of the corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer, and a Secretary, and such Assistant Treasurers, Assistant Secretaries or other officers as may be elected or appointed by the Board of Directors.

SECTION 2. ELECTION AND TERM OF OFFICE.

The officers of the corporation shall be elected by the Board of Directors and shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Vacancies may be filled or new offices filled at any meeting of the Board of Directors.

SECTION 3. REMOVAL.

Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

SECTION 4. VACANCIES.

A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

SECTION 5. CHAIRMAN OF THE BOARD.

The Chairman of the Board shall, when present, preside at all meetings of the shareholders and the Board of Directors. Subject to the direction and control of the Board of Directors, he/she shall generally oversee the business and affairs of the Corporation. He/she shall concurrently with the President, see that the resolutions and directive of the Board of Directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the Board of Directors; and, in general, he/she shall perform all duties incident to the office of Chairman of the Board and such other duties as may be prescribed by the Board of Directors from time to time.

SECTION 6. CHIEF EXECUTIVE OFFICER.

The Chief Executive Officer shall be the principal executive officer of the corporation. Subject to the direction and control of the Board of Directors, he/she shall generally oversee and provide supervision over all business and affairs of the Corporation, including, but not limited to, the general oversight of the operations of the Corporation and the functioning of all other officers, agents and employees of the Corporation. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-Laws, the Chief Executive Officer may execute, on behalf of and in the name of the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. The Chief Executive Officer may vote all securities which the corporation is entitled to vote except to the extent such authority shall be vested in a different officer or agent of the corporation by the Board of Directors. He/she shall concurrently with the President, see that the resolutions and directive of the Board of Directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the Board of Directors; and, in general, he/she shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time.

SECTION 7. PRESIDENT.

The President shall be the principal operating officer of the Corporation. Subject to the direction and control of the Board of Directors and the Chief Executive Officer, he/she shall have general charge and direction of the day to day business of the corporation. He/she shall from time to time, as requested, report his/her actions to the Chief Executive Officer and shall keep the Chief Executive Officer and the Board of Directors fully informed as to all matters in his/her charge. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these ByLaws, the President may execute, on behalf of and in the name of the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. He/she shall, concurrently with the Chief Executive Officer see that the resolutions and directives of the Board of Directors are carried into effect except in those instances in which that responsibility is assigned to some other person by the Board of Directors; and, in general, he/she shall discharge all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. In the absence of the Chairman of the Board, the President shall, when present, preside at all meetings of the shareholders and the Board of Directors.

SECTION 8. THE VICE PRESIDENT.

In the absence of the Chairman, or the President or in the event of his inability or refusal to act, the Vice President, (or in the event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform duties ofthe President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties as from time to time may be assigned to him by the Chairman of the Board, Chief Executive Officer, the President or by the Board of Directors.

SECTION 9. THE TREASURER.

If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these ByLaws; (b) in general perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Board, Chief Executive Officer, President or by the Board of Directors.

SECTION 10. THE SECRETARY. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these ByLaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all certificates for shares prior to the issue thereof and to all documents, the execution of which on behalf of the company under its seal is duly authorized in accordance with the provisions of these ByLaws; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the Chief Executive Officer, the President, or a Vice President, certificates for shares of the corporation, the issue of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; (g) in general perform all duties as from time to time may be assigned to him by the Chairman of the Board, Chief Executive Officer, President or by the Board of Directors.

SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries as thereunto authorized by the Board of Directors may sign with the Chief Executive Officer, President or a Vice President certificates for shares of the corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the Chief Executive Officer, President or the Board of Directors.

SECTION 12. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the corporation.

ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS

SECTION 1. CONTRACTS.

The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

SECTION 2. LOANS.

No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.

SECTION 3. CHECKS, DRAFTS, ETC.

All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the company, shall be signed by such officer or officers, agent or agents of the company and in such manner as shall from time to time be determined by resolution of the Board of Directors.

SECTION 4. DEPOSITS.

All funds of the company shall be deposited from time to time to the credit of the company in such banks,

trust companies or other depositaries as the Board of Directors may select.

ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER

SECTION 1. CERTIFICATES FOR SHARES.

Certificates representing shares of the company shall be in such form as may be determined by the Board of Directors. Such certificates shall be signed by the Chief Executive Officer, the President or a Vice President and by the Secretary or an Assistant Secretary and shall e sealed with the seal of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issue until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe.

SECTION 2. TRANSFERS OF SHARES.

Transfers of shares of the company shall be made only on the books of the corporation by the holder of record thereof or by his legal representative who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly execute and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall e deemed the owner thereof for all purposes as regards the corporation.

SECTION 3. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES.

No certificate for shares of stock in the company shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen, except on production of such evidence of such loss, destruction or theft and on deli very to the corporation, if the Board of Directors shall so require, of a bond or indemnity in such amount (not exceeding twice the value of the shares represented by such certificate), upon such terms and secured by such surety as the Board of Directors may in its discretion require.

ARTICLE VII FISCAL YEAR

The fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year.

ARTICLE VIII DIVIDENDS

The Board of Directors may from time to time, declare, and the company may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by the Illinois Insurance Code.

ARTICLE IX SEAL

The Board of Directors shall provide a corporate seal which shall be in form of a circle and shall have inscribed thereon the name of the company and the words, "Corporate Seal, Illinois."

ARTICLE X WAIVER OF NOTICE

Whenever any notice whatever is required to be given under the provisions of these Bylaws or under the provisions of the articles of incorporation or under the provisions of the Illinois Insurance Code, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE XI AMENDMENTS

A. These ByLaws may be altered, amended or repealed and new ByLaws may be adopted at any meeting of the Board of Directors of the company by a majority vote of the Directors present at the meeting and thereafter submitted to the Department of Insurance for approval and filing.

B. Amendments to the Articles of Incorporation after the Certificate of Authority has been issued to the Company shall be by resolution of the Board of Directors setting forth the proposed amendment and directing that the proposed amendment be submitted to a vote of shareholders at either an annual or a special meeting.

C. Written or printed notice setting forth the proposed amendment or a summary of the changes to be effected thereby and stating the time and place of the meeting at which the same will be considered, shall be mailed, postage prepaid and properly addressed to each shareholder at least ten (10) days before the time fixed for such meeting. A written waiver of notice signed by the shareholders, whether before or after the date of the meeting mentioned therein, shall be deemed equivalent notice.

D. At such meeting a vote of the shareholders shall e taken on the proposed amendment. The proposed amendment shall be adopted upon receiving the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares.

E. Amendments to the Articles of Incorporation prior to the issuance of a Certificate of Authority to the Company, shall be made by the submission of the proposed amendment by the incorporators to the vote of the subscribers in the same manner as provided above. The proposed amendment in such case shall be adopted by the written consent of all the incorporators.

ARTICLE XII POLICIES

SECTION 1. The form, term and conditions of all policies or contracts of insurance issued by the Company shall be determined by the President with the advice and approval of the Board of Directors and the form or forms so determined shall be employed by the Company.

SECTION 2. No condition or provisions of any insurance policy of the Company shall be waived or altered, except by endorsement attached thereto, signed by the Chief Executive Officer, the President, a Vice President, Secretary or other duly authorized officer representative of the Company, acting under written authority nor shall notice to or knowledge of any person be held to effect a waiver of or change in any provision of such policy.

ARTICLE XIII INDEMNIFICATION OF OFFICERS AND DIRECTORS

Each Director and officer of the Company shall be indemnified by the Company against all costs and expenses actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which he is made a party by reason of his being or having been a Director of officer at the time of incurring such cost or expense. Such indemnification shall be made pursuant to the terms of a separate agreement by and between the Company, its officers and Directors which conforms to applicable statutes.

ARTICLE XIV COMPLIANCE WITH RULES AND REGULATIONS

All acts of the Officers and Directors of the Company shall be done in accordance with applicable statutes and regulations and the Rules and Regulations of the Department of Insurance of the State of Illinois.

CERTIFICATE OF CORPORATE SECRETARY

I, Mary Ann Callaghan, Secretary of American Service Insurance Company, Inc., an Illinois corporation, do hereby certify that the attached is a true, correct and complete copy of the Fourth Amended and Restated Bylaws of American Service Insurance Company, Inc., adopted by unanimous consent of the Board of Directors on October 20, 2005, and that the same is in full force and effect and has not been rescinded, cancelled or amended.

IN WITNESS THEREOF, I have hereunto subscribed my name this 20th day of October, 2005

/s/ Mary Ann Callaghan    

Mary Ann Callaghan, Secretary

EX-4.1

EXHIBIT 4.1D

BY-LAWS OF

AMERICAN INSURANCE ACQUISITION INC.

ARTICLE I OFFICES

Section 1.1 REGISTERED OFFICE AND AGENT. The registered office of the Corporation shall be at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The Corporation Trust Company is the registered agent of the Corporation.

Section 1.2 OTHER OFFICES. The Corporation may also have offices at such other place or places both within and without the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE II MEETINGS OF STOCKHOLDERS

Section 2.1 PLACE OF MEETINGS. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2.2 ANNUAL MEETINGS. The Annual Meeting of the stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. The first annual meeting shall be held on a date within thirteen (13) months after the organization of the Corporation, and each successive annual meeting shall be held on a date within thirteen (13) months after the date of the preceding annual meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.

Section 2.3 SPECIAL MEETINGS. Unless otherwise prescribed by law or by the Certificate of Incorporation, special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board, the President, or any Vice President, to be held on the date, at the time and place within or without the State

of Delaware as the Board of Directors, the Chairman of the Board, the President or Vice President, whichever has called the meeting, shall direct. A special meeting of the stockholders shall be called by the Chairman of the Board, the President, any Vice President or the Secretary whenever stockholders owning not less than 30% of the outstanding shares of Common Stock of the Corporation then issued and outstanding and entitled to vote on all of the matters to be submitted to stockholders of the Corporation at such special meeting shall make written application to the Chairman of the Board, the President, any Vice President or the Secretary. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to the Chairman of the Board, the President, any Vice President or the Secretary.

Section 2.4. NOTICE OF MEETING. Notice, signed by the Chairman of the Board, the President, any Vice President, the Secretary or an Assistant Secretary, of every annual or special meeting of stockholders stating the purpose or purposes for which the meeting is called, and the date and time when, and the place where it is to be held, shall be prepared in writing and personally delivered or mailed, postage prepaid, to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting, except as otherwise provided by statute. If mailed, such notice shall be directed to a stockholder at his address as it shall appear on the stock record book of the Corporation, unless the stockholder shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice shall be deemed given when personally delivered or deposited to the United States mail, as the case may be; provided, however, that such notice may also be given by telegram, cablegram, or radiogram and in such case shall be deemed given when ordered or, if a delayed delivery is ordered, as of such delayed delivery time.

Section 2.5. LIST OF STOCKHOLDERS. A complete list of the stockholders entitled to vote at each meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder, shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held which place shall be specified in the notice of such meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting and during the whole time thereof, and may be inspected by any stockholder who is present.

Section 2.6 QUORUM. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute.

Section 2.7 ADJOURNMENTS. In the absence of a quorum, stockholders representing a majority of the shares then issued and outstanding and entitled to vote, present in person or

by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 2.8. VOTING. Each share of stock shall entitle the holders thereof to one vote. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation and these By-laws. In the election of directors, and for any other action, voting need not be by ballot.

Section 2.9. PROXIES. Any stockholder entitled to vote may vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing, cabling, or other means of electronically transmitted written copy) by the stockholder himself or herself or by his or her duly authorized attorney-in-fact. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

Section 2.10. JUDGES OF ELECTION. The Board of Directors may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer of the meeting at the meeting.

Section 2.11. WRITTEN CONSENT. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Whenever any such action is taken without a meeting by less than unanimous consent, all stockholders who have not consented in writing must be promptly informed in writing of such action.

Section 2.12. STOCK LEDGER. Except as otherwise provided by law, the stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 2.5 of this Article II or the books of the Corporation, or to vote in person or by proxy at the meeting of stockholders.

Section 2.13. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the Corporation, or in his or her absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting.

Section 2.14 PRESENCE AT MEETINGS BY MEANS OF COMMUNICATIONS EQUIPMENT. Subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communications: (a) participate in a meeting of stockholders; and (b) be deemed present in person and vote at a meeting of stockholders, provided that: (1) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder; (2) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and (3) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

ARTICLE III BOARD OF DIRECTORS

Section 3.1. NUMBER. The Board of Directors shall consist of not less than one (1) nor more than ten (10) directors. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by action of the Board of Directors or stockholders at the annual meeting or any special meeting called for that purpose. The Board of Directors shall consist initially of three (3) directors.

Section 3.2. NOMINATION, ELECTION AND TERM OF OFFICE. Directors shall be nominated each year by the then existing Board of Directors and shall be elected by a plurality of the shares of Common Stock voting at the annual meeting of the stockholders, except as provided in Section 3.3 of this Article. Each Director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office for a term of one year until the next annual meeting or until his or her death, resignation or removal in the manner hereinafter provided, whichever shall first occur.

Section 3.3 VACANCIES AND ADDITIONAL DIRECTORSHIPS. If any vacancy shall occur among the directors by reason of death, resignation, or removal, or as the result of an increase in the number of directorships, the directors then in office shall continue to act and may fill any such vacancy by a vote of the majority of directors then in office, though less

than a quorum, and each director so chosen shall hold office until the next annual election of directors and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal.

Section 3.4. POWERS. The business of the Corporation shall be managed by its Board of

Directors, which may exercise all powers of the Corporation and do all lawful acts and things as are not by law or by the Certificate of Incorporation or these By-Laws reserved to the stockholders.

Section 3.5. RESIGNATION OF DIRECTORS. Any director may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 3.6. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

Section 3.7. COMPENSATION OF DIRECTORS. Directors shall receive such reasonable compensation for their services, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore.

SECTION IV

MEETINGS OF THE BOARD OF DIRECTORS

Section 4.1. PLACE. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.

Section 4.2. REGULAR MEETINGS. The Board of Directors by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given, provide that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each Director who shall not have been present at the meeting at which such action was taken, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request.

Section 4.3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be

called by the Chairman of the Board or the President, and shall be called by the President or Secretary at the written request of any two directors. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, on ten (10) days' notice, or shall be sent to him or her at such place by telegram, radiogram or cablegram, or telephone or other electronic means, or delivered to him or her personally, not later than three (3) days before the day on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by law, the Certificate of Incorporation of the Corporation or these By­ Laws.

Section 4.4 QUORUM. At any meeting of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business, and the act of the majority of those present at any meeting at which a quorum is present shall be sufficient for the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation.

Section 4.5. ADJOURNED MEETINGS. If a quorum shall not be present at a meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Three (3) days' notice of any such adjournment shall be given personally to each director who was not present at the meeting at which such adjournment was taken and, unless announced at the meeting, to the other directors; provided, that ten (10) days' notice shall be given if notice is given by mail.

Section 4.6. WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all of the members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors.

Section 4.7. COMMUNICATIONS EQUIPMENT. Any one or more members of the Board of Directors may participate in any meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be deemed to constitute presence in person at such meeting.

Section 4.8. WAIVER OF NOTICE. Notice of any meeting need not be given to any director who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, radiogram or cablegram or other means of electronically transmitted written copy.

Section 4.9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside.

ARTICLE V COMMITTEES OF THE BOARD

Section 5.1. DESIGNATION, POWER, ALTERNATE MEMBERS AND TERM OF OFFICE. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one (1) or more committees. Each such committee shall consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution, shall have and may exercise the power of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board of Directors may designate one (1) or more directors as alternate members of any committee who, in the order specified by the Board of Directors, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one (1) or more of the members thereof should be absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these By­ Laws; provided, however, that any committee member who ceases to be a member of the Board of Directors shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation.

Section 5.2. MEETINGS, NOTICES AND RECORDS. Each committee may provide for the holding of regular meetings, with or without notice, and a majority of the members of any such committee may fix the time, place and procedure for any such meeting. Special meetings of each committee shall be held upon call by or at the direction of its chairman, or, if there be no chairman, by or at the direction of any two (2) of its members, at the time and place specified in the respective notices or waivers of notice thereof.

Section 5.3. QUORUM AND MANNER OF ACTING. At each meeting of any committee the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these By-Laws and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business.

Section 5.4. RESIGNATIONS. Any member of a committee may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President, any Vice President or the Secretary of the Corporation. Unless

otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer.

Section 5.5. REMOVAL. Any member of any committee may be removed at any time by the affirmative vote of a majority of the whole Board of Directors with or without cause.

Section 5.6. VACANCIES. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board of Directors.

Section 5.7. COMPENSATION. Committee members shall receive such reasonable compensation for their services, whether in the form of salary or a fixed fee for attendance at meetings, with reasonable expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any committee member from serving the Corporation in any other capacity and receiving compensation therefore.

ARTICLE VI OFFICERS

Section 6.1. OFFICERS. The Corporation shall have such officers as the Board of Directors shall determine from time to time, but in any event will have a President and Chief Executive Officer, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (the "Chairman") (who must be a director), Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. If there be a President, he or she shall have the duties described in Section 6.7 below or, to the extent not so provided, as provided by resolution of the Board of Directors. In the absence of a President, one or more Vice Presidents shall have such duties. The officers chosen by the Board of Directors shall hold office until his or her successor is duly chosen and qualified or until his or her resignation or removal. Any number of offices may be held by the same person; provided, that a Chairman, President, or Vice President may not hold the additional office of Secretary, Assistant Secretary, Treasurer or Assistant Treasurer unless another person holds such an office, with such title and duties, as may be necessary to enable the Corporation to sign instruments and stock certificates which comply with Sections

103(a)(2) and 158, respectively, of the General Corporation law of the State of Delaware.

Section 6.2. DUTIES. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-Laws, or, to the extent not so provided, as may be provided by resolution of the Board of Directors or, as to all other officers except the Chairman, by the President.

Section 6.3. RESIGNATIONS. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman, the President, a Vice President or the Secretary. Unless otherwise specified in such written notice, such resignation shall

take effect upon receipt thereof by the Board of Directors or any such officer.

Section 6.4. REMOVAL. Any officer may be removed at any time, either with or without cause, by the vote of a majority of all the directors then in office. Such power of removal from office shall not be abridged by any employment contract or other agreement.

Section 6.5. VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these By-Laws for regular election or appointment to such office.

Section 6.6. CHAIRMAN. The Chairman, if there be one, shall perform such duties as from time to time may be assigned to him by the Board of Directors.

Section 6.7. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall be the chief executive officer of the Corporation. Subject to the direction of the Board of Directors, he or she shall supervise and direct the daily management of the business, affairs and property of the Corporation. In the absence or disability of the Chairman of the Board, or if there be none, the President shall preside at all meetings of the stockholders. The Chairman of the Board, if any, and the President shall each be charged with overseeing that all orders and resolutions of the Board of Directors are carried into effect. The President may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements, and other instruments duly authorized by the Board of Directors. From time to time, the President shall report to the Board of Directors all matters within his or her knowledge which the interests of the Corporation may require to be brought to its attention. The President shall also perform such other duties as are assigned by these By-Laws or as from time to time may be assigned to him or her by the Board of Directors.

Section 6.8. VICE PRESIDENT. In the absence or disability of the President, the Vice President, or if there be more than one, the Vice Presidents in the order or priority determined by the Board of Directors, shall perform all duties of the President and, when so acting, shall have all the powers of and be subject to all restrictions upon the President. Any Vice President may also sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the Corporation deeds, mortgages, bonds and other instruments duly authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent. Each Vice President shall perform such other duties as are assigned by these By-Laws or as from time to time may be assigned by the Board of Directors, the Chairman of the Board or the President.

Section 6.9. SECRETARY. The Secretary shall: (i) record all the proceedings of the

meetings of the stockholders, the Board of Directors, and all committees of the Board of Directors in a book or books to be kept for that purpose; (ii) cause all notices to be duly given in accordance with the provisions of these By-Laws or as required by law; (iii) whenever any committee shall be appointed in pursuance of a resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; (iv) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing capital stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (v) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (vi) have charge of the stock record and stock transfer books of the Corporation, and exhibit such books at all reasonable time to such persons as are entitled by law and by these By-Laws to have access thereto; (vii) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing capital stock of the Corporation the issuance of which shall have been duly authorized (the signature of which may be a facsimile signature); and (viii) in general, perform all duties incident to the office of Secretary and such other duties as are given to him or her by these By-Laws or as from time to time may be assigned to him or her by the Board of Directors, the Chairman of the Board or the President.

Section 6.10. ASSISTANT SECRETARIES. At the request of the Secretary or in his or her absence or disability, the Assistant Secretary designated by him or her (or in the absence of such designation, the Assistant Secretary designated by the Board of Directors or the President) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretary shall perform such other duties as from time to time may be assigned to him or her by the Board of Directors, the Chairman of the Board, the President or the Secretary.

Section 6.11. TREASURER. The Treasurer shall: (i) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (ii) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected in accordance with Section 8.2 of these By-Laws or to be otherwise dealt with in such manner as the Board of Directors may direct; (iii) cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositaries of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (iv) render to the Board of Directors or the President, whenever requested, a statement of the financial condition of the Corporation and of all of his or her transactions as Treasurer; (v) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions, and such duplicate books of account, as he or she shall determine and upon application cause such books, or duplicates thereof, to be exhibited to any Director; (vi) be empowered to require from the officers or agents of the Corporation reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation; (vii) sign (unless the Secretary or an Assistant Secretary or Assistant Treasurer shall sign) certificates representing stock of the Corporation

the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (viii) in general, perform all duties as are given to him or her by these By-Laws or as from time to time may be assigned to him or her by the Board of Directors, the Chairman of the Board or the President.

Section 6.12. ASSISTANT TREASURERS. At the request of the Treasurer or in his or her absence or disability, the Assistant Treasurer designated by him or her (or in the absence of such designation, the Assistant Treasurer designated by the Board of Directors or the President) shall perform all the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all restrictions upon the Treasurer. The Assistant Treasurer shall perform such other duties as from time to time may be assigned by the Board of Directors, the Chairman of the Board, the President or the Treasurer.

Section 6.13. SALARIES. The salaries of the officers of the Corporation shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the Corporation.

ARTICLE VII CERTIFICATES OF STOCK

Section 7.1. STOCK CERTIFICATES. Every holder of capital stock ofthe Corporation shall be entitled to have a certificate or certificates in such form as shall be approve by the Board of Directors, certifying the number of shares of capital stock of the Corporation owned by him or her. The certificates representing shares of capital stock shall be signed in the name of the Corporation by the Chairman of the Board or the President, and by the Secretary, as Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures may be facsimiles) and sealed with the seal of the Corporation (which seal may be a facsimile). In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificates are issued, they may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still such at the date of their issue.

Section 7.2. BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. The books and records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board of Directors may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or by the transfer agent or registrar, if any designated by the Board of Directors. There shall be entered on the stock books of the Corporation the number of each certificate issued, the number of shares represented thereby, the name of the person to whom such certificate was issued and the date of issuance thereof.

Section 7.3. TRANSFERS OF SHARES. Transfers of shares of capital stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with the transfer agent, and on surrender of the

certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon, if any. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof.

Section 7.4. REGULATIONS. The Board of Directors may make such additional rules and regulations, not inconsistent with these By-Laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation.

It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more registrars and may further provide that no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Nothing herein shall be construed to prohibit the Corporation from acting as its own transfer agent or registrar.

Section 7.5. LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any certificate or certificates representing any share or shares of the capital stock of the Corporation shall immediately notify the Corporation of any loss, theft, or destruction of such certificate or certificates. The Board of Directors may direct that a new certificate or certificates by issued in the place of any certificate or certificates theretofore issued by it which the owner thereof shall allege to have been lost, stolen or destroyed upon the furnishing to the Corporation of an affidavit to that effect by the person claiming that the certificate or certificates has been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion, require such owner or his or her legal representatives to give to the Corporation and its transfer agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board of Directors in its absolute discretion shall determine, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or certificates, or the issuance of a new certificate or certificates.

Section 7.6. STOCKHOLDER'S RIGHT OF INSPECTION. Any stockholder of record of the Corporation, in person or by attorney or other agent, shall upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right of inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its

principal place of business.

ARTICLE VIII

DEPOSIT OF CORPORATE FUNDS

Section 8.1. BORROWING. No loans or advances shall be obtained or contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board of Directors. Such authorization may be general or confined to specific instances.

Section 8.2. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositaries as the Board of Directors may select, or as may be selected by any officer or officers or agent or agents authorized to do so by the Board of Directors.

Section 8.3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, and all negotiable and non-negotiable notes or other negotiable or non-negotiable evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers or agent or agents of the Corporation, and in such manner, as from time to time shall be determined by the Board of Directors.

ARTICLE IX INDEMNIFICATION

Section 9.1. INDEMNIFICATION. The personal liability of the directors and officers of the corporation is hereby eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same may be amended and supplemented.

The corporation shall, to the fullest extent permitted by the General Corporation law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify including those who were or are a party or are threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she or his or her testator or intestate is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation (or any such constituent or predecessor corporation) as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

ARTICLE X RECORD DATES

Section 10.1. RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any evident or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors.

ARTICLE XI DIVIDENDS

Section 11.1 DIVIDENDS. Subject to any agreement to which the Corporation is a party or by which it is bound, the Board of Directors may declare to be payable, in cash, in other property or in shares of the Corporation's capital stock, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board of Directors may at any time deem to be advisable. Before declaring any such dividend, the Board of Directors may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends.

ARTICLE XII FISCAL YEAR

Section 12.1. FISCAL YEAR. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

ARTICLE XIII CORPORATE SEAL

Section 13.1. CORPORATE SEAL. The Corporate Seal shall be circular in form and shall be the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors.

ARTICLE XIV

AMENDMENTS

Section 14.1. AMENDMENTS. Subject to the provisions of the Certificate of Incorporation and the provisions of the General Corporation Law, the power to amend, alter, or repeal these By-laws and to adopt new By-laws may be exercised by the Board of Directors or by the stockholders.

Section 14.2. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the Corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the Certificate of Incorporation, except as any provision of law may otherwise require.

EX-4.2

EXHIBIT 4.2 SPECIMEN COMMON STOCK CERTIFICATE

EX-4.3

EXHIBIT 4.3

WARRANT CERTIFICATE

THESE SECURITIES AND THE SECURITIES DELIVERABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON OR PERSON IN THE UNITED STATES UNLESS THE WARRANTS AND THE COMMON SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECUR.'TIES ACT AND THE APPLICABLE SECURITIES LAWS OF ANY STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATIONS UNDER THE U.S. SECURITIES ACT.

THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE UNLESS EXERCISED WITHIN THE TIME LIMITS HEREIN PROVIDED.

ATLAS FINANCIAL HOLDINGS, INC.

(A corporation governed by the laws of the Cayman Islands)

Dated: December 31, 2010
	Warrant Certificate No: ________________
THIS IS TO CERTIFY THAT, for value received,
Mr. and Mrs. SAMPLE

(The "Holder") is the registered holder of _____ common share purchase warrants (the "Warrants") of Atlas Financial Holdings, Inc. (the "Company"). Each Warrant entitles the Holder to subscribe for and purchase, subject to the terms hereof including, without limitation, certain adjustment provisions as detailed below in this Warrant Certificate, one fully paid ordinary share ("Ordinary Share") in the capital of the Company at a price of TWO DOLLARS (C$2.00) per Ordinary Share in lawful money of Canada, (the price at which one Ordinary Share may be purchased hereunder from time to time being hereinafter referred to as the "Exercise Price") at any time after the date hereof and until 5:00 p.m. (Toronto time) on the first Business Day that is three (3) years after the date hereof (the "Expiry Time"), after which time the Warrants represented hereby shall expire and be of no value or effect.

The right to acquire Ordinary Shares under the Warrants may only be exercised by the Holder at any time and from time to time up to and including but not after the Expiry Time by surrendering this Warrant Certificate along with (i) the duly completed and executed Exercise Form attached hereto as Appendix A, and (ii) a certified cheque or bank draft payable to or to the order of the Company inan amount equal to the Exercise Price multiplied by the number of Ordinary Shares to be acquired, subject to adjustment in accordance with the terms hereof, to the Company at the address shown on the Exercise Form or such other office as may be specified by the Company, in a written notice to the Holder, from time to time.

This Warrant Certificate shall effectively be surrendered only upon personal delivery to the Company or, if sent by mail or other means of transmission, upon actual receipt thereof by the Company at its offices shown on the Exercise Form or such other address as the Company may notify the Holder of in writing.

Upon the exercise of the Warrants in the manner described above, the Holder shall be deemed for all purposes to be the holder or holders of record of such Ordinary Shares and the Company covenants that it will cause certificates representing such Ordinary Shares to be delivered or mailed to the Holder at the address or addresses specified in the Exercise Form within three (3) Business Days of the surrender of this Warrant Certificate.

The Holder of this Warrant Certificate may acquire any lesser number of Ordinary Shares than the aggregate number of all Ordinary Shares which may be acquired as a consequence of exercising the Warrants. In such event, the Holder shall be entitled to receive a new Warrant Certificate exercisable to acquire up tothe balance of the Ordinary Shares which may be acquired. No fractional Ordinary Shares shall be issuable on exercise of the Warrants.

The Holder of this Warrant Certificate may, at any time prior to the Expiry Time, upon surrender of this Warrant Certificate to the Company, exchange this Warrant Certificate for other Warrant Certificates in such amounts as the Holder may request entitling the Holder to acquire, in the aggregate, the same number of Ordinary Shares as may be acquired under this Warrant Certificate.

The ownership of the Warrants in and of itself shall not constitute the Holder hereof a shareholder of the Company or entitle the Holder to any right or interest as a shareholder in respect thereof except as expressly provided for herein.

From and after the date hereof, the Exercise Price and the number of Ordinary Shares deliverable upon the exercise of the Warrants will be subject to adjustment in the events and in the following manner:

(a) In case of any reclassification of the Ordinary Shares or change of the Ordinary Shares into other shares, or in case of the consolidation, merger, reorganization or amalgamation of the Company with or into any other corporation or entity which results in any reclassification of the outstanding Ordinary Shares or a change of the Ordinary Shares into other securities, or in case of any transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another person (any such event being hereinafter referred to as a "Reclassification of Ordinary Shares"), at any time prior to the Expiry Time, the Holder shall, after the effective date of such Reclassification of Ordinary Shares and upon exercise of the right to purchase Ordinary Shares hereunder, be entitled to receive, and shall accept, in lieu of the number of Ordinary Shares to which the Holder was theretofore entitled upon such exercise, the kind and amount of shares and other securities or property which the Holder would have been entitled to receive as a result of such Reclassification of Ordinary Shares if, on the effective date thereof, the Holder had been the registered holder of the number of Ordinary Shares to which the Holder was theretofore entitled to acquire upon such exercise. No such reclassification of Ordinary Shares will be carried out unless, in the opinion of the Board of Directors of the Company, all appropriate adjustments shall be made in the application of the provisions set forth in this section with respect to the rights and interests thereafter of the Holder of this Warrant Certificate to the end that the provisions set forth in this section shall thereafter correspondingly be made applicable as nearly as may be reasonable in relation to any shares or other securities or property thereafter deliverable upon the exercise of the Warrants. Any such adjustment must be made by and set forth in an amendment to this Warrant Certificate.

(b)     If and whenever at any time prior the Expiry Time the Company shall:

'

(i) subdivide, redivide or change its then outstanding Ordinary Shares into a greater nun1ber of shares;

(ii) reduce, combine or consolidate its then outstanding Ordinary Shares into a lesser number of shares; or

(iii) issue Ordinary Shares, Participating Shares or Convertible Securities (both such terms as defined below in paragraph (g)) to all or substantially all of the holders of Ordinary Shares by way of distribution on the Ordinary Shares payable in Ordinary Shares, Participating Shares or Convertible Securities;

(any such event being hereinafter referred to as "Capital Reorganization") and any such event results in an adjustment or readjustment in the Exercise Price pursuant to paragraph (c), the number of

Ordinary Shares purchasable pursuant to the Warrants shall be adjusted or readjusted contemporaneously with the adjustment or readjustment of the Exercise Price by multiplying the number of Ordinary Shares purchasable on the exercise of the Warrants immediately prior to such adjustment by a fraction, the numerator of which shall be the Exercise Price in effect immediately prior to such adjustment or readjustment, and the denominator of which shall be the Exercise Price resulting from such adjustment or readjustment.

(c) If and whenever any time prior to the Expiry Time, the Company shall engage in a Capital Reorganization, the Exercise Price shall, effective immediately after the effective date, in the case of a subdivision or consolidation, or effective immediately after the record date, in the case of a distribution, be adjusted by multiplying the Exercise Price in effect immediately prior to such effective date or record date by a fraction: (A) the numerator of which shall be the number of Ordinary Shares and Participating Shares outstanding on such effective date or record date before giving effect to such Capital Reorganization; and (B) the denominator of which shall be the number of Ordinary Shares and Participating Shares outstanding immediately after giving effect to such Capital Reorganization. The number of Ordinary Shares and Participating Shares outstanding shall include the deemed conversion into or exchange for Ordinary Shares or Participating Shares of any Convertible Securities distributed pursuant to such Capital Reorganization. Such adjustment shall be made successively whenever any event referred to in this paragraph shall occur.

(d) Any issue of Ordinary Shares, Participating Shares or Convertible Securities pursuant to the Capital Reorganization shall be deemed to have been made on the record date thereof for the purpose of calculating the number of outstanding Ordinary Shares under paragraphs (e) and (f).

(e) If and whenever at any time prior to the Expiry Time, the Company shall fix a record date for the issuance of rights, options or warrants (other than the Warrants evidenced hereby) to all or substantially all the holders of Ordinary Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Ordinary Shares, Participating Shares or Convertible Securities at a price per share (or in the case of a Convertible Security the conversion or exchange price per share plus the issue price of such Convertible Security) that is less than 95% of the Current Value (as defined below) of an Ordinary Share on such record date (any such event being hereinafter referred to as a "Rights Offering"), the Exercise Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction:

(i) the numerator of which shall be the aggregate of: (A) the number of Ordinary Shares outstanding on such record date; and (B) a number determined by dividing whichever of the following is applicable by the Current Value (as hereinafter defined) of the Ordinary Shares on the record date: (1) the amount obtained by multiplying the number of Ordinary Shares or Participating Shares which the holders of Ordinary Shares are entitled to subscribe for or purchase by the subscription or purchase price; or (2) the amount obtained by multiplying the maximum number of Ordinary Shares or Participating Shares which the holders of Ordinary Shares are entitled to receive on the conversion or exchange of the Convertible Securities by the conversion or exchange price per share; and

(ii) the denominator of which shall be the aggregate of: (A) the number of Ordinary Shares outstanding on such record date; and (B) whichever of the following is applicable: (1) the total number of Ordinary Shares or Participating Shares which the holders of Ordinary Shares are entitled to subscribe for or purchase; or (2) the total number of Ordinary Shares or Participating Shares which the holders of Ordinary Shares are entitled to receive on the conversion or exchange of the Convertible Securities.

If by terms of the rights, options or warrants referred to in this paragraph (e), there is more than one purchase, conversion or exchange price per Ordinary Share, the aggregate price of the total number of additional Ordinary Shares offered for subscription or purchase, or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered, will be calculated for purposes of the adjustment on the basis of the lowest purchase, conversion or exchange price per Ordinary Share, as the case may be.

Any Ordinary Shares owned by or held for the account of the Company or subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed.

To the extent that such Rights Offering is not so made or any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price shall then be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or to the Exercise Price which would then be in effect based if such expired rights, options or warrants had not been included in the original calculation.

(f) If and whenever at any time prior to the Expiry Time, the Company shall fix a record date for the·distribution to all or substantially all the holders of Ordinary Shares of:

(i)     shares of any class, whether of the Company or any other corporation;

(ii)     rights, options or warrants;

(iii) evidences of indebtedness; or

(iv) other assets or property;

and if such distribution does not constitute a Capital Reorganization or a Rights Offering or does not consist of rights, options or warrants entitling the holders of Ordinary Shares to subscribe for or purchase Ordinary Shares, Participating Shares or Convertible Securities for a period expiring not more than 45 days after such record date and at a price per share (or having a conversion or exchange price per share) of at least 95% of the Current Value of the Ordinary Shares on such record date (any such non-excluded event being hereinafter referred to as a "Special Distribution") the Exercise Price shall be adjusted effective immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction: (I) the numerator of which shall be the amount by which (A) the amount obtained by multiplying the number of Ordinary Shares outstanding on such record date by the Current Value of the Ordinary Shares on such record date, exceeds (B) the fair market value (as determined by the external auditors of the Company, which determination shall be conclusive) to the holders of such Ordinary Shares of such Special Distribution; and (II) the denominator of which shall be the total number of Ordinary Shares outstanding on such record date multiplied by such Current Value of the Ordinary Shares on such record date.

Any Ordinary Shares owned by or held for the account of the Company or subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed.

To the extent that such Special Distribution is not so made or any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price shall then be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or if such expired rights, options or warrants had not been issued for the purposes of determining the fair market value as referred to in subparagraph (f)(B) above.

(g) For the purpose of this Warrant Certificate: (i) "Participating Share" means a share (other than an Ordinary Share) that carries the right to participate in earnings to an unlimited degree; and (ii) "Convertible Security" means a security convertible into or exchangeable for an Ordinary Share or a Participating Share or both.

(h) On any adjustment of the Exercise Price pursuant to paragraph (e) or (f), the number of Ordinary Shares purchasable on the exercise of the Warrants will be adjusted contemporaneously with the adjustment of the Exercise Price by multiplying the number of Ordinary Shares theretofore purchasable immediately before the adjustment by a fraction which is the reciprocal of the fraction used in the adjustment of the Exercise Price.

(i) In any case in which this Warrant Certificate shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Company may defer, until the occurrence of such event, issuing to the Holder, upon the exercise of the Warrants after such record date and before the occurrence of such event, the additional Ordinary Shares issuable upon such exercise by reason of the adjustment required by such event; provided, however, that the Company shall deliver to the Holder an appropriate instrument evidencing the Holder's right to receive such additional Ordinary Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Ordinary Shares on and after such exercise.

(j) The adjustments provided for in this Warrant Certificate are cumulative, shall, in the case of adjustments to the Exercise Price, be computed to the nearest one-tenth of one cent and shall apply (without duplication) to successive Reclassifications of Ordinary Shares, Capital Reorganizations, Rights Offerings and Special Distributions; provided that, notwithstanding any other provision of this section, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least I% of the Exercise Price then in effect (except upon a consolidation of the outstanding Ordinary Shares) (provided, however, that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account n any subsequent adjustment).

(k) No adjustment in the number of Ordinary Shares which may be purchased upon exercise of the Warrants or in the Exercise Price shall be made pursuant to this Warrant Certificate if the Holder is entitled to participate in such event (other than the events referred to in paragraph (b)(i) or (b)(ii)) on the same terms mutatis mutandi as if the Holder had exercised the Warrants evidenced hereby for Ordinary Shares prior to the effective date or record date of such event.

(l) Subject to the prior written consent of the TSXV, in the event of any question arising with respect to the adjustments provided in this Warrant Certificate, such question shall conclusively be determined (as between the Company, the Holder, all shareholders of the Company and any transfer agent of the Ordinary Shares) by a firm of chartered accountants appointed by the Company and acceptable to the Holder (who may be the Company's auditors). Such accountants shall have access to all necessary records of the Company and such determination shall be binding upon the Company, the Holder, the shareholders of the Company and any transfer agent of the Ordinary Shares.

(m) As a condition precedent to the taking of any action which would require an adjustment in the subscription rights pursuant to this Warrant Certificate, including the Exercise Price and the number of such classes of shares or other securities or property which are to be received upon the exercise of the Warrants, the Company shall take all corporate action which may, in the opinion of external counsel, be necessary in order that the Company has reserved and there will remain unissued a sufficient number of Ordinary Shares for issuance upon the exercise of the Warrants, and that the Company may validly and legally issue as fully paid and non-assessable all the shares of such classes or other securities or may validly and legally distribute the property which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof.

(n) In the case of an event which requires an adjustment in the subscription rights pursuant to this Warrant Certificate, including the Exercise Price and the number and classes of shares or other securities or property which are to be received upon the exercise thereof, the Company shall give notice to the Holder of the particulars of such event and the required adjustment and the computation of such adjustment as soon as reasonably practicable and, in any event, within 30 days of making any adjustment.

(o) This Warrant Certificate and all the rights hereunder (including the Warrants) shall enure to the benefit of the Holder and its successors and permitted assigns and shall be binding upon the Company and its successors.

(p) The Warrants represented by this Warrant Certificate may not be transferred, sold, assigned or pledged, in whole or in part, to any person by the Holder.

(q) The Holder acknowledges and agrees that any transfer, sale, assignment or pledging by it of the Warrants represented by this Warrant Certificate, in whole or in part, shall comply with the provisions of Securities Laws or such other regulatory authority having jurisdiction.

For the purpose of any computation under this Warrant Certificate, the "Current Value" of the Ordinary Shares at any date shall be determined as the volume weighted average trading price per Ordinary Share of the Ordinary Shares (the "VWAP") on the TSXV calculated by dividing the total value by the total volume of Ordinary Shares traded for the twenty trading days ending three trading days prior to that date and if the Ordinary Shares are not so listed on the TSXV, the Current Value shall be the VWAPon such exchange on which the Ordinary Shares are listed, and if the Ordinary Shares are not listed on any exchange, the VWAP will be such value as is determined by the directors of the Company acting in good faith. If the Ordinary Shares are listed on more than one stock exchange the VWAPon the stock exchange on which the largest volume of the Ordinary Shares has traded in the preceding six (6) months shall be used.

In case the Company after the date of issuance of the Warrants takes any action affecting the Ordinary Shares, other than any action described above, which in the opinion of the board of directors of the Company would materially affect the rights of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by action by the directors of the Company but subject in all cases to the prior written consent of the stock exchange on which the Ordinary shares are then listed, where required and any necessary regulatory approval.

The Company shall not enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other corporation (herein called a "successor corporation") whether by way of reorganization, reconstruction, consolidation, amalgamation, merger, transfer, sale, disposition or otherwise, unless prior to or contemporaneously with the consummation of such transaction, the Company and the successor corporation shall have executed such instruments and done such things as are necessary or advisable to establish that upon the consummation of such transaction:

(i)    the successor corporation will have assumed all the covenants and obligations of the

Company under this Warrant Certificate, and

(ii) the Warrant Certificate will be a valid and binding obligation of the successor corporation entitling the Holder, as against the successor corporation, to all the rights of the Holder under this Warrant Certificate.

If any one or more of the provisions contained in this Warrant Certificate should be invalid, illegal or unenforceable in any respect under the laws of any jurisdiction, the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby under the laws of any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

This Warrant Certificate shall be governed and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.

Time shall be of the essence hereof.

All dollar amounts shall be Canadian dollars.

[Remainder of this page intentionally left blank]

•

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be executed by its duly authorized officer this 31 day of December 2010.

SIGNED for and on behalf of

ATLAS FINANCIAL HOLDINGS, INC.

Per: _________________________________

•

EX-10.1

EXHIBIT 10.1

Final Version

ATLAS F1NANCIAL HOLDINGS, INC.

STOCK OPTION PLAN

ARTICLE I PURPOSE

1.1     Purpose

The purpose of this stock option plan (as amended from time to time, the "Plan") is to advance the interests of the Corporation by: (i) providing Eligible Persons with financial incentives; (ii) encouraging stock ownership by Eligible Persons; (iii) increasing the proprietary interest of Eligible Persons in the success of the Corporation; (iv) encouraging Eligible Persons to remain with the Corporation or its Affiliates; and (v) attracting new Employees, Officers, Directors and Consultants to the Corporation or its Affiliates.

ARTICLE II INTERPRETATION

2.1     Definitions

When used herein, the following terms have the following meanings, respectively:

(a) "Act" means the Securities Act (Ontario);

(b) "Affiliate" means any corporation that is an affiliate of the Corporation as defined in the Act;

(c) "Blackout Period" means a period of time when, pursuant to any policies of the Corporation, securities of the Corporation may not be traded by certain persons as designated by the Corporation, including an Optionee;

(d)     "Board" means the board of directors of the Corporation;

(e) "Change of Control" means the occurrence of any one or more of the following events:

(i) a consolidation, merger, amalgamation, arrangement or other reorganization, takeover bid or acquisition involving the Corporation or any of its Affiliates and another corporation or other entity, as a result of which the holders of Shares immediately prior to the completion of the transaction hold less than 50% of the outstanding rights to vote in respect of the shares of the successor corporation after completion of the transaction;

(ii) the sale, lease, exchange or other disposition, in a single transaction or a series of related transactions, of assets, rights or properties of the Corporation and/or any of its Subsidiaries which have an aggregate book value greater than 50% of the book value of the assets, rights and properties of the Corporation and its Subsidiaries on a consolidated basis to any other person or entity, other than a disposition to an Affiliate of the assets, rights and properties of the Corporation in the course of a reorganization of the assets of the Corporation and its Affiliates;

(iii)     a resolution is adopted to wind-up, dissolve or liquidate the Corporation; or

(iv) the Board adopts a resolution to the effect that a Change of Control as defined herein has occurred or is imminent.

(f) "Commitment Form" means the notice of grant of an Option delivered by the Corporation hereunder to an Optionee in the form of Schedule "A" attached hereto, or in such other form as the Compensation Committee may approve for any one or more Optionees or for a group of Optionees, as same may be amended from time to time;

(g)     "Compensation Committee" means the compensation committee of the Board;

(h)    "Consultant" means any individual or Consulting Company, other than an Employee or Director:

(i) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or to an Affiliate, other than services provided in relation to a Distribution (as such term is defined in the Act);

(ii) provides the services under a written contract between the Corporation or the Affiliate and the individual or the Consultant Company;

(iii) in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or an Affiliate; and

(iv) has a relationship with the Corporation or an Affiliate that enables the individual to be knowledgeable about the business and affairs of the Corporation.

(i) "Consulting Company" means a company or partnership providing consulting services to the Corporation or an Affiliate and, if applicable, for whom an individual consultant providing consulting services to the Corporation or an Affiliate may be an employee, shareholder or partner;

(j)     "Control" means:

(i) when applied the relationship between a person and a corporation, the beneficial ownership by the person, at the relevant time, of shares of the corporation carrying either (A) more than 50% of the voting rights ordinarily exercisable at meetings of shareholders of the corporation or (B) the percentage of voting rights ordinarily exercisable at meetings of shareholders of the corporation sufficient in fact to elect a majority of the directors of the corporation; and

(ii) when applied to the relationship between a person and a partnership or joint venture, the beneficial ownership by the person, at the relevant time, of more than 50% of the ownership interests of the partnership or joint venture in circumstances where it can reasonably be expected that the person directs the affairs of the partnership or joint venture;

(k) "Corporation" means Atlas Financial Holdings, Inc., and includes any successor corporation thereto;

(I)     "Director" means a director of the Corporation or of an Affiliate;

(m)     "Effective Date" for an Option means the date on which the Option is granted;

(n) "Eligible Person" means, subject to the administrative guidelines and other rules and regulations relating to the Plan and to all applicable law, any Employee, Officer, Director, or Consultant who is approved for participation in the Plan by the Compensation Committee;

(o)     "Employee" means:

(i) an individual who would be considered an employee of the Corporation or its Subsidiary under the Income Tax Act (Canada) (i.e. for whom income tax, employment insurance and Canada Pension Plan deductions must be made at source);

(ii) an individual who works full-time for the Corporation or its Subsidiary providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source; or

(iii) an individual who works for the Corporation or its Subsidiary on a continuing and regular basis for a minimum amount of time per week providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source;

(p) "Exchange" means the TSX Venture Exchange Inc. or any other stock exchange on which the Shares are then listed for trading;

(q) "Exercise Form" means the notice of exercise of option in the form of Schedule "B" attached hereto;

(r) "Exercise Period" means the period of time during which an Option granted under the Plan may be exercised (provided, however, that the Exercise Period may not exceed ten (10) years from the relevant Effective Date unless permitted under Section 4.4(b));

(s)     "Exercise Price" has the meaning ascribed thereto in Section 4.2;

(t) "Incapacity" of an Optionee means his total or substantially total mental, physical, natural or legal inability to perform regularly his day-to-day functions for a period of six (6) months, the whole as evidenced and determined by an independent medical expert chosen by the Compensation Committee or as determined by a final and definitive judgment rendered by a court of competent jurisdiction thereto;

(u)     "Insider" has the meaning given to such term in the Act;

(v) "Merger and Acquisition Transaction" means (i) any merger; (ii) any acquisition; (iii) any amalgamation; (iv) any offer for Shares which if successful would entitle the offeror to acquire more than 50% of all Shares; (v) any arrangement or other scheme of reorganization; or (vi) any consolidation, that results in a Change of Control;

(w)     "Officer" means an officer of the Corporation or of an Affiliate;

(x) "Option" means the right to purchase Shares granted to an Eligible Person in accordance with the terms of the Plan;

(y)     "Optioned Shares" means Shares subject to an Option;

(z) "Optionee" means an Eligible Person to whom an Option is granted by the Corporation under the Plan, whether a Director, Officer, Employee, or Consultant (including, for greater certainty, an individual or a Consulting Company);

(aa) "person" or ''persons" means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted;

(bb)    "Plan" has the meaning ascribed thereto in Section 1.1;

(cc) "Regulatory Approval" means the approval of any securities or other applicable regulatory agency (including the Exchange) which may have jurisdiction in the circumstances;

(dd)     "Shares" means the ordinary shares in the capital of the Corporation;

(ee) "Subsidiary" means a corporation which is a subsidiary of the Corporation as defined in the Act;

(ff)    "Termination Date" means:

(i) in the case of an Optionee whose employment or term of office with the Corporation or an Affiliate terminates in the circumstances set out in Section 4.10(b) or 4.10(c)(i), the date that is designated by the Corporation or the Affiliate, as the case may be, as the last day of such person's employment or term of office with the Corporation or the Affiliate, as the case maybe;

(ii) in the case of an Optionee whose employment or term of office with the Corporation or an Affiliate terminates in the circumstances set out in Section 4.10(c)(ii), _the date of the notice of termination of employment or term of office given by the Corporation or the Affiliate, as the case may be;

(iii) in the case of an Optionee whose employment or term of office with the Corporation or an Affiliate terminates in the circumstances set out in Section 4.10(c)(iii), the date of retirement;

(iv) in the case of an Optionee whose consulting arrangements (or, if applicable, those of its Consulting Company if the Optionee is an individual) are terminated by the Corporation or an Affiliate in the circumstances set out in Section 4.10(d), the date that is designated by the Corporation or the Affiliate, as the case may be, as the last day of the Optionee's consulting arrangements (or those of its Consulting Company) with the Corporation or the Affiliate, as the case may be;

(v) in the case of an Optionee whose consulting arrangements (or, if applicable, those of its Consulting Company if the Optionee is an individual) are terminated in the circumstances set out in Section 4.10(e), the date of the notice of termination given to the Optionee (or, if applicable, those of its Consulting Company if the Optionee is an individual) or the expiry of the original term or any subsequent renewal term of the consulting arrangements,

as the case may be;

and in each such case, "Termination Date" specifically does not mean the date on which any period of reasonable notice that the Corporation or the Affiliate, as the case may be, may be required at law to provide to the Optionee would expire.

2.2    Interpretation

(a) A reference to a statute includes all regulations made thereunder, all amendments to the statute or regulations in force from time to time, and any statute or regulation that supplements or supersedes such statute or regulations.

(b) Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine.

ARTICLE 3 ADMINISTRATION

3.1     Administration of Plan

(a) The Compensation Committee will, subject to any terms and conditions the Board may prescribe from time to time, in accordance with the Plan, be responsible for the general administration of the Plan and the proper execution of its provisions, the interpretation of the Plan and the determination of all questions arising hereunder.

(b) Subject to the limitations of the Plan, the Compensation Committee has the authority to: (i) grant Options to purchase Shares to Eligible Persons; (ii) determine the terms, including the limitations, restrictions and conditions, if any, upon such .grants; (iii) interpret the Plan and to adopt, amend and rescind such administrative guidelines and other rules and regulations relating to the Plan as it may from time to time deem advisable, subject to required Regulatory Approval; and (iv) make all other determinations and to take all other actions in connection with the implementation and administration of the Plan as it may deem necessary or advisable.

(c) Any decision, interpretation or other action made or taken in good faith by or at the direction of the Corporation, the Board or the Compensation Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Corporation and Optionees and their respective heirs, executors, administrators, successors and assigns and all other persons.

(d) The day-to-day administration of the Plan may be delegated to such officers and employees of the Corporation or of an Affiliate as the Board or the Compensation Committee determines.

(e)     The Corporation is responsible for all costs of administration of the Plan.

3.2     Eligibility

Eligible Persons are eligible to participate in the Plan, provided that eligibility to participate does not confer upon any Eligible Person any right to be granted Options pursuant to the Plan. The extent to which any Eligible Person is entitled to be granted Options pursuant to the Plan will be determined in the sole and absolute discretion of the Compensation Committee.

3.3     Shares Reserved Under the Plan

(a) The maximum number of Shares reserved for issuance under tile Plan and all of the Corporation's other security based compensation arrangements at any given time is equal to 10% of the issued and outstanding Shares as at the date of grant of an Option under the Plan, subject to adjustment or increase of such number pursuant to Section 4.13. The Plan is an "evergreen" plan. Any Shares subject to an Option which has been granted under the Plan, and which has been canceled, expired or terminated in accordance with the terms of the Plan, without having been exercised, will again be available under the Plan. Any increase in the issued and outstanding Shares will result in an increase in the available number of Shares issuable under the Plan, and any exercises of Options will make new grants available under the Plan, effectively resulting in a re-loading of the number of Options available to grant under the Plan.

(b) The aggregate number of Shares reserved for issuance pursuant to Options granted to any one person within any twelve-month period shall not exceed 5% of the issued and outstanding Shares at the time of the grant of the Option. The aggregate number of Shares issued to Insiders of the Corporation within any twelve-month month period, or issuable to Insiders of the Corporation at any time, under the Plan and any other security based compensation arrangements of the Corporation may not exceed 10% of the total number of issued and outstanding Shares at such time.

(c) Notwithstanding the foregoing, (i) no more than 2% of the issued and outstanding Shares may be granted to any one Consultant in any 12 month period; and (ii) no more than an aggregate of 2% of the issued and outstanding Shares may be granted to all Employees conducting investor relations activities in any 12 month period.

3.4     Incorporation of Terms of Plan

Subject to specific variations approved by the Compensation Committee, all terms and conditions set out in the Plan will be deemed to be incorporated into and form part of each Option granted under the Plan.

ARTICLE IV GRANT OF OPTIONS

4.1     Grant of Options

The Compensation Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Board or Compensation Committee may prescribe, grant Options to any Eligible Person.

4.2     Exercise Price

The Compensation Committee will establish the exercise price of an Option (the "Exercise Price") at the time each Option is granted. The Exercise Price shall not be less than the market price of the Shares which will be equal to the volume weighted average trading price of the Shares on the Exchange for the five trading days immediately preceding the Effective Date.

4.3     Number of Shares Subject to Option

The number of Shares subject to each Option shall be determined by the Compensation Committee, and such number shall be set out in the Commitment Form evidencing the grant of such Option.

4.4     Expiration of Options

(a) Subject to any accelerated termination as set forth in the Plan, all Options granted pursuant to the Plan will expire on the date (the "Expiry Date") as determined by the Compensation Committee at the date of grant provided that no Option may be exercised beyond ten (10) years from the Effective Date.

(b) Notwithstanding the above, if the Expiry Date for any Option falls within a Blackout Period or within 10 business days from the expiration of a Blackout Period (such Options to be referred to as "Restricted Options"), the Expiry Date of such Restricted Options shall be automatically extended to the date that is the 10th business day following the end of the Blackout Period, such 10th Business Day to be considered the Expiry Date for such Restricted Options for all purposes under the Plan.

4.5     Non-Assignable and Non-Transferable

Options are non-assignable and non-transferable although they are assignable to and may be exercisable by an Optionee's legal heirs, personal representatives or guardians as provided in Section 4.9. Upon written notice from an Eligible Person under the Plan, any Option that might otherwise be granted to that Eligible Person will be granted, in whole or in part, to a registered retirement savings plan ("RRSP") or a holding company established by, and for the sole benefit of, the Eligible Person.

4.6    Vesting of Option Rights

(a) Subject to Subsection (b) below, the Compensation Committee may determine when any Option will become exercisable and may determine that the Option will be exercisable in installments or pursuant to a vesting schedule. Such terms shall be set out in the Commitment Form evidencing the grant of such Option. Subject to the other provisions of the Plan, Options issued will be subject to a vesting schedule as provided for in the Commitment Form attached herewith as Schedule "A".

(b) Options issued to Consultants performing investor relations activities must vest in stages over 12 months with no more than one-quarter of the Options vesting in any three month period.

4.7     Amendment of Option

The Compensation Committee may amend the terms of an Option in accordance with the Plan provided that any amendment that extends the term or reduces the Exercise Price of an Option held by an Insider at the time of the proposed amendment shall be subject to disinterested shareholder approval.

4.8     Acceleration of Vesting Period

Subject to the Board or the Compensation Committee determining otherwise, in the event of a Change of Control, all Options outstanding shall be immediately exercisable, notwithstanding any determination of the Board pursuant to Section 4.6, if applicable. Notwithstanding the vesting schedule for an Option, the Compensation Committee shall have the right with respect to any one or more Optionees in the Plan to accelerate the time at which an Option may be exercised.

4.9     Death or Incapacity of Optionee

In the event of the death or Incapacity of an Optionee:

(a) the executor or administrator of the Optionee's estate or the Optionee, as the case may be, may exercise any Options of the Optionee to the extent that the Options were exercisable at the date of such death or Incapacity and the right to exercise the Options terminates on the earlier of: (i) the date that is twelve months from the date of the Optionee's death, if the Optionee has died, or 30 days after the six month period referred to in the definition of "Incapacity", in the event of Incapacity; and (ii) the date on which the Exercise Period of the particular Option expires. Any Options held by the Optionee that were not exercisable at the date of death or Incapacity immediately expire and are cancelled on such date; and

(b) such Optionee's eligibility to receive further grants of Options under the Plan ceases as of the date of the Optionee's death or Incapacity, as the case may be.

4.10    Termination of Employment or Cease to HoldOffice

(a) In the event an Optionee's employment or consulting arrangements (or, if applicable, those of its Consulting Company if the Consultant who is an Optionee is an individual) or term of office with the Corporation or an Affiliate ceases by reason of the Optionee's death or Incapacity, then the provisions of Section 4.9 will apply.

(b) In the event an Optionee's employment or term of office with the Corporation or an Affiliate is terminated by the Corporation or an Affiliate for lawful cause, then any Options held by such Optionee, whether or not such Options are exercisable at the applicable Termination Date, immediately expire and are cancelled on the Termination Date at a time determined by the Compensation Committee, at its discretion.

(c) In the event an Optionee's employment or term of office terminates by reason of: (i) voluntary resignation by such Optionee; (ii) termination by the Corporation or an Affiliate without cause (whether such termination occurs with or without any or adequate reasonable notice or with or without any or adequate compensation in lieu of such reasonable notice); or (iii) the retirement of such Optionee in accordance with the then customary policies and practices of the Corporation in relation to retirement, then any Options held by such Optionee that are exercisable at the Termination Date continue to be exercisable by such Optionee until the earlier of (A) the date that is 90 days from the Termination Date; and (B) the date on which the Exercise Period of the particular Option expires. Any Options held by such Optionee that are not exercisable at the Termination Date immediately expire and are cancelled on the Termination Date.

(d) In the event an Optionee's consulting arrangements (or, if applicable, those of its Consulting Company if the Optionee is an individual) with the Corporation or an Affiliate are terminated by the Corporation or an Affiliate for breach of agreement prior to the expiry of the original term or any subsequent renewal term of such arrangements, then any Options held by the Optionee (or, if applicable, those of its Consulting Company if the Optionee is an individual), whether or not such Options are exercisable at the applicable Termination Date, immediately expire and are cancelled on the Termination Date at a time determined by the Compensation Committee, at its discretion.

(e) In the event an Optionee's consulting arrangements (or, if applicable, those of its Consulting Company, if the Optionee is an individual) with the Corporation or an Affiliate are terminated in circumstances other than those referred to in Section 4.10(d), any Options held by the Optionee that are exercisable at the Termination Date continue to be exercisable by the Optionee until the earlier of: (i) the date that is 90 days from the Termination Date; and (ii) the date on which the Exercise Period of the particular Option expires. Any Options held by the Optionee that are not exercisable at the Termination Date immediately expire and are cancelled upon the Termination Date.

(f) An Optionee's eligibility to receive further grants of Options under the Plan ceases as of the applicable Termination Date.

4.11    Discretion to Permit Exercise

Notwithstanding the provisions of Sections 4.9 and 4.10, the Board may, in its discretion, at any time prior to or following the events contemplated in such sections and in any Commitment Form, permit the exercise of any or all Options held by the Optionee in the manner and on terms authorized by the Board, provided that, subject to an extension pursuant to Section 4.4(b), the Board will not, in any case, authorize the exercise of an Option pursuant to this section beyond the Expiry Date of the particular Option.

4.12    General

The existence of any Options does not affect in any way the right or power of the Corporation or its shareholders to make, authorize or determine any adjustment, recapitalization, reorganization or any other change in the Corporation's capital structure or its business, or any amalgamation, merger or consolidation involving the Corporation, to create or issue any bonds, debentures, shares or other securities of the Corporation or to determine the rights and conditions attaching thereto, to effect the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business, or to effect any other corporate act or proceeding, whether of a similar character or otherwise, whether or not any such action referred to in this section would have an adverse effect on the Plan or any Option granted hereunder, subject to Sections 4.13(a) and 4.13(b).

4.13    Adjustment

(a) In the event of a subdivision, consolidation or reclassification of Shares or any similar capital reorganization, or any other change to be made in the capitalization of the Corporation including an exchange of Shares for another security of the Corporation that, in the opinion of the Compensation Committee, acting reasonably and in good faith, would warrant the replacement or amendment of any existing Options in order to adjust:

(i) the number of Shares or other securities that may be acquired on the exercise of any outstanding Options; or

(ii) the Exercise Price of any outstanding Options,

in order to preserve proportionately the rights and obligations of the Optionees, the Compensation Committee will authorize such steps, subject to Regulatory Approval, if required, to be taken as are equitable and appropriate to that end.

(b) In the event of an amalgamation, combination, merger or other reorganization involving the Corporation, by exchange of shares, by sale or lease of assets, or otherwise, that, in the opinion of the Compensation Committee, acting reasonably and in good faith, warrants the replacement or amendment of any existing Options in order to adjust:

(i) the number of Shares or other securities that may be acquired on the exercise of any outstanding Options; or

(ii) the Exercise Price of any outstanding Options,

in order to preserve proportionately the rights and obligations of the Optionees, the Compensation Committee will authorize such steps, subject to Regulatory Approval, if required, to be taken as are equitable and appropriate to that end.

(c) Except as expressly provided in Sections 4.13(a) and 4.13(b), neither the issue by the Corporation of shares of any class or securities convertible into or exchangeable for shares of any class, nor the conversion or exchange of such shares or securities, affects, and no adjustment by reason thereof is to be made with respect to: (i) the number of Shares that may be acquired on the exercise of any outstanding Options; or (ii) the Exercise Price of any outstanding Options.

(d) The Corporation will not be required to issue fractional Shares in satisfaction of its obligations hereunder and any fractional interest in a Share that would, except for the provisions of this Section

4.13(d), be deliverable upon the exercise of an Option will be canceled and not be deliverable by the Corporation.

4.14     Disputes

If any questions arise at any time with respect to the Exercise Price or number of Optioned Shares or other securities deliverable upon exercise of an Option in any of the events set out in Section 4.13(a) and 4.13(b), such questions will be conclusively determined by the Corporation's auditors, or, if they decline to so act, any other firm of chartered accountants that the Corporation may designate and who will have access to all appropriate records and such determination will be binding upon the Corporation and all Optionees.

4.15     Compliance with Law and Tax Withholding

(a) The Corporation is not obligated to grant any Options, issue any Shares or other securities, make any payments or take any other action, if in the opinion of the Compensation Committee, in its sole discretion, such action would constitute a violation by an Optionee or the Corporation of any provision of any applicable law, including any statutory or regulatory enactment of any government or government agency. Optioned Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Optioned Shares shall comply with all relevant provisions of law, including, without limitation, any applicable provincial, state or federal securities laws, and the requirements of the Exchange, and such issuance shall be further subject to the approval of counsel for the Corporation with respect to such compliance. The inability of the Corporation to obtain from any regulatory body the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any Optioned Shares under the Plan, or the inability of the Corporation to lawfully issue, sell, or deliver any Optioned Shares, shall relieve the Corporation of any liability with respect to the non-issuance, sale or delivery of such Optioned Shares.

(b) Delivery of the Shares, upon exercise of Options, is subject to the satisfaction of all applicable federal, state, provincial, local and foreign tax obligations, including obligations to make withholdings or deductions in respect of the benefits arising hereunder. The Corporation will have the power and right to require the Optionee to remit to the Corporation an amount sufficient to satisfy any applicable tax or withholding obligations required by law. Further, the Corporation may require the Optionee to satisfy, in whole or in part, such tax or withholding obligations by instructing the Corporation to withhold Shares that would otherwise be received by the Optionee upon exercise, sell such Shares on behalf of the Optionee and remit the proceeds of such sale to the relevant taxing authority in satisfaction of the tax or withholding obligations.

4.16    Sale of Corporation, etc.

If the Board at any time by resolution declares it advisable to do so in connection with a Merger and Acquisition Transaction, the Board has the right to provide for the conversion, exchange, replacement or substitution of any outstanding Options into or for options, rights or other securities of similar value of, or the assumption of outstanding Options by any entity or affiliate participating in or resulting from a Merger and Acquisition Transaction. Any such conversion, exchange, replacement, substitution or assumption shall be on such terms as the Board in good faith may consider fair and appropriate in the circumstances. In addition, and notwithstanding this Section 4.16, the Board has the right to determine, at its sole discretion, that (i) any or all Options shall thereupon terminate; provided that only such outstanding Options that have vested shall remain exercisable until consummation of the Merger and Acquisition Transaction; or (ii) Options not exercisable may be exercisable in full.

ARTICLE V PROCEDURE

5.1     Option Commitment

(a) Upon grant of an Option hereunder to an Optionee, a senior officer of the Corporation designated by the Compensation Committee will deliver to the Optionee a Commitment Form detailing the terms of the Option.

(b) Upon the occurrence of an event to which Section 4.13(a) or 4.13(b) applies, a senior officer of the Corporation designated by the Compensation Committee may deliver to any Optionee with respect to any Option, a revised Commitment Form identified as such, with respect to Shares as to which the Option has not been exercised, reflecting the application of Section 4.13(a) or 4.13(b), as applicable, by reason of that event.

5.2     Manner of Exercise

(a) Subject to the provisions of the Plan and the provisions of the Commitment Form issued to an Optionee, Options which are exercisable may be exercised by means of a fully completed Exercise Form delivered to the Corporation. The Exercise Form must be accompanied by the payment in full of the Exercise Price for the Shares to be purchased. The Exercise Price must be fully paid in cash, by wire transfer or by certified cheque or bank draft payable to the Corporation or by such other means as might be specified from time to time by the Compensation Committee. No Shares will be issued until full payment therefor has been received by the Corporation. As soon as practicable after receipt of any Exercise Form and full payment, the Corporation will forthwith cause the transfer agent and registrar of the Shares to deliver to the Optionee a certificate or certificates or a statement of account, representing in the aggregate the acquired Shares.

(b) Notwithstanding any other provision of the Plan, the Corporation will not be obligated to issue Optioned Shares on the exercise of an Option granted under the Plan until the Corporation has received the deliveries specified in Section 5.2(a).

5.3     Use of an Administrative Agent and Trustee

(a) The Compensation Committee may in its sole discretion appoint from time to time one or more entities to act as administrative agent to administer the Options granted under the Plan and to act as trustee to hold and administer the assets that may be held in respect of Options granted under the Plan, the whole in accordance with the terms and conditions determined by the Compensation Committee in its sole discretion. In such case, the Corporation and the administrative agent will maintain records showing the number of Options granted to each Optionee under the Plan.

ARTICLE VI GENERAL

6.1     Optionee has no Rights as a Shareholder

An Optionee has no rights whatsoever as a shareholder in respect of any of the Optioned Shares (including, without limitation, any right to receive dividends or other distributions therefrom or thereon) other than in respect of Optioned Shares purchased by and fully paid for and issued to the Optionee on exercise of the Option.

6.2     Accounts and Statements

The Corporation will maintain, or cause to be maintained, records indicating the number of Options granted to each Optionee and the number of Optioned Shares issued under the Plan.

6.3     Employment andServices

Nothing contained in the Plan will confer upon any Optionee (or his Consulting Company) any right with respect to employment, term of office or consulting with the Corporation or an Affiliate, or interfere in any way with the right of the Corporation to terminate the Optionee's employment, term of office or consulting arrangements (or those of his Consulting Company) at any time. If an Optionee's employment, term of office or consulting arrangements (or those of his Consulting Company) with the Corporation or an Affiliate is terminated for any reason, no value will be ascribed to any unvested Options for the purposes of any severance entitlement. Participation in the Plan by an Optionee will be voluntary.

6.4     Notice

Each notice, demand or communication required or permitted to be given under the Plan (each, a "Notice") will be in writing and shall be given by personal delivery or by registered mail, postage prepaid, if to the Corporation, at the Corporation's address set out in the Commitment Form, to the attention of the Corporate Secretary, or at such other address as the Corporation may advise an Optionee of, in writing, as being the address for delivery of a Notice to the Corporation, and if to an Optionee, at the most recent residential address for the Optionee shown in the records of the Corporation. All such Notices given as aforesaid shall be deemed to have been received by the recipient when delivered or, if mailed, five days after 12:01 a.m. on the day following the day of the mailing thereof. If any Notice shall have been mailed and if regular mail service shall be interrupted by strikes or other irregularities, such Notice shall be deemed to have been received ten days after 12:01 a.m. on the day following the resumption of normal mail service, provided that during the period that regular mail service shall be interrupted all Notices shall be given by personal delivery.

6.5     Amendment or Termination of Plan

(a) The Board reserves the right, in its absolute discretion, to amend, suspend or terminate the Plan, or any portion thereof, at any time without obtaining the approval of shareholders of the Corporation, subject to those provisions of applicable law and regulatory requirements (including the rules, regulations and policies of the Exchange), if any, that require the approval of shareholders. Such amendments may include, without limitation:

(i) minor changes of a ''house-keeping nature", including, without limitation, any amendment for the purpose of curing any ambiguity, error or omission in the Plan, or to correct or supplement any provision of the Plan that is inconsistent with any other provision of the Plan;

(ii) amending Options under the Plan, including with respect to the Exercise Period (provided, however, that the Exercise Period may not exceed ten (10) years from the relevant Effective Date unless permitted under Section 4.4(b)), vesting period, exercise method and frequency, exercise price and method of determining the Exercise Price, assignability and the effect of termination of an Optionee's employment or consulting arrangements (or, if applicable, those of its Consulting Company if the Optionee is an individual), or cessation of an Optionee's directorship, as applicable; provided that such amendment does not adversely alter or impair any Option previously granted to an Optionee without the consent of such Optionee;

(iii) advancing the date on which any Option may be exercised or extending the Expiry Date of any Option (provided, however, that the Exercise Period may not exceed ten (10) years from the relevant Effective Date unless permitted under Section 4.4(b));

(iv) adding or changing the terms and conditions of any financial assistance which may be

provided by the Corporation to Optionees to facilitate the purchase of Shares under the Plan;

(v) amendments necessary to comply with the provisions of applicable law or the applicable rules of the Exchange, including with respect to the treatment of Options granted under the Plan;

(vi)     amendments respecting the administration of the Plan;

(vii)     amendments necessary to suspend or terminate the Plan;

(viii)      a change relating to the eligibility of any Optionee or Eligible Person in the Plan; and

(ix) any other amendment, fundamental or otherwise, not requiring shareholder approval under applicable laws or the applicable rules of the Exchange.

(b) Notwithstanding the foregoing, the Corporation will be required to obtain the approval of the shareholders of the Corporation, and where required by the Exchange, approval of the disinterested shareholders of the Corporation, for any amendment related to:

(i) amending the provisions relating to the transferability of an Option, other than for transfers by will or the law of succession or to corporations controlled by the individual or family trusts;

(ii)      reducing the Exercise Price of an Option held by an Insider;

(iii)         extending the term of an Option held by an Insider;

(iv)     amending to remove or exceed the limits on participation in the Plan under Section 3.3(b);

(v)     increasing the maximum number of Shares which may be issued under the Plan; and

(vi) granting additional powers to the Board to amend the Plan without shareholder approval.

(c) Any amendment to any provision of the Plan will be subject to any required regulatory or governmental approvals.

(d) The Board may terminate the Plan at any time in its absolute discretion. If the Plan is so terminated, no further Options shall be granted, but the Options then outstanding shall continue in full force and effect in accordance with the provisions of the Plan.

6.6     Governing Law

The Plan will be governed and construed in accordance with the laws of the Province of Ontario.

6.7     Effective Date

The Plan shall be effective on January 3, 2011.

6.8     Subject to Approval

(a) To the extent a provision of the Plan requires regulatory approval which is not received, such

provision shall be severed from the remainder of the Plan until the approval is received and the remainder of the Plan shall remain in full force and effect.

(b)     The Plan must be approved periodically pursuant to the requirements of the Exchange.

EX-10.2

EXHIBIT 10.2

ATLAS FINANCIAL HOLDINGS, INC.

This Agreement (the “Agreement”) constitutes the terms of employment between [NAME] (the “Executive”) and Atlas Financial Holdings, Inc. and/or one of its subsidiaries (“Company”). This Agreement applies to the period of employment from January 1, 2011 through December 31, 2012 (the “Initial Period”) and to the period commencing on January 1, 2013 (the “Subsequent Period”).

EMPLOYMENT

Duties As assigned by the [CEO/BOARD OF DIRECTORS] from time to time, and commensurate with such duties as might be assigned to any officer or exempt employee of Company. Executive’s performance objectives “Goals” for the current year will be set forth on or before February 15^th of such year. Beginning in 2012, the level at which Executive achieved the Goals set forth for the prior fiscal year “Goal Achievement Ratio” will be determined by the CEO, and confirmed by the Board of Directors, as a percentage of the Goals established for the prior year. For clarity, if by the end of 2001, Executive accomplished 95% of the Goals established for 2011, Executives Goal Achievement Ratio would be 95%.

Reporting Executive will report directly to the [CEO/BOARD OF DIRECTORS].

Commencement Date The first date of the Initial Period.

Term There is no specified term associated with the Executive’s employment with Company, and the parties hereto understand that the Executive’s employment is “at-will.” The Executive’s employment may be terminated by either party at any time, and, other than the severance and post-termination obligations described herein, this Agreement shall terminate along with the Executive’s employment.

This Agreement shall terminate (i) immediately and automatically upon the Executive’s death or (ii) thirty (30) days after the Board of Directors’ good faith determination that the Executive has become disabled to such an extent that the Board believes he no longer can carry out his duties; in either case, no severance, COBRA, or other payments are due under this Agreement.

COMPENSATION AND

BENEFITS    

Annual Base Salary $[X] (the “Base Salary”).

Initial Period Fiscal years 2011 and 2012 constitute the “Year 1” and “Year 2”, respectively, of the “Initial Bonus Period”. During each of these first two fiscal years, provided that after taking the expense related to all executive

bonuses into consideration Company generates a positive GAAP pre-tax profit, the Executive shall be eligible for an annual bonus equal to 50% “Bonus Factor” multiplied by the sum of ([Executive’s Base Salary for the year under review] multiplied by [Executive’s Goal Achievement Ratio for the year under review]). If during the year under review, after taking the expense related to all executive bonuses into consideration Company’s GAAP pre-tax profit exceeds by more than 15% the target set forth on page 19 of the final Offering Memorandum as provided to the TSX in connection with Company’s Q4 2010 Filing Statement, the Bonus Factor for that year will be increased to 75%. If Company does not generate a positive GAAP pre-tax profit in a given year, any bonus for that year would be at the sole discretion of the Company Board of Directors.

As soon as practicable after the 2012 budget has been set (but in any case before January 31, 2012), Company will set forth a bonus plan for 2012 that will depend on two criteria: (a) actual performance compared to performance objectives for the Executive and (b) growth in book value or achieved return on average shareholders’ equity.

Annual

Subsequent Periods For fiscal years beginning after December 31, 2012 “Annual Subsequent Periods”, Company will (a) complete a budget before the beginning of such fiscal year, (b) establish performance objectives for the executive, (c) evaluate growth in book value or achieved returns on average equity financial goals for appropriateness, and (d) set an Annual Bonus plan for such fiscal year based on these criteria.

Bonus Determination

and Payment The final determination of the Executive’s bonus for any fiscal year will be made by the Board of Directors based on the criteria set forth herein and taking into account the recommendations of Company’s Chief Executive Officer and of its Compensation Committee, and will consider all aspects of the Executive’s and Company’s performance. Such bonus shall be paid in cash not later than 30 days following the filing of Company’s public GAAP financial statements for the calendar year for which the Executive is eligible for a Bonus.

Stock-Based

Compensation Company believes that companies of the size and nature of Company should consider instituting Stock-Based Compensation for senior executives. During the Subsequent Term, the Board of Directors shall consider, at least once each fiscal year, if a Stock-Based Compensation plan should be implemented (or if such a plan exists, if it should be modified). There is no assurance, however, that Company will institute a Stock-Based Compensation plan nor any assurance that an award will be made to the Executive.

Employee Benefits The Executive shall be entitled to participate in such employee benefit plans as the Company Board of Directors shall approve. Such plans may include defined-contribution retirement plans, paid vacation and sick days/paid time off, short-term disability plans, or such other plans as may be offered from time to time.

Expenses and

Indemnification Company will reimburse the Executive for out-of-pocket expenses incurred in the furtherance of Company’s business according to Company’s established employee business expense policies and practices.

Company will maintain directors and officers’ liability insurance in amounts as determined by the Board of Directors, and the Executive shall be covered under such insurance to the same extent as any Company Director or other Company senior executive.

Severance Subject to the last paragraph in this Section, in the event the Executive is terminated by Company without Cause, the Executive shall be entitled to the following severance payments:

During Year 1 of the Initial Period:First, a continuation of Base Salary for 24 months, paid according to Company’s then-current practices for periodic payment of its other employees’ salaries,

Second, an amount equal to 100% of annual Base Salary, paid as a lump-sum, such amount hereby acknowledged by the Executive to be “bonus amounts”, and

Third, a continuation of employee health benefits that are covered under COBRA (“COBRA Benefits”) for the duration of the period during which Executive receives continued Base Salary (or the maximum period of time allowed by law, whichever is shorter), with the cost of such continuation of COBRA Benefits paid 100% by Company.

During Year 2 of the Initial Period:First, a continuation of Base Salary for 24 months, paid according to Company’s then-current practices for periodic payment of its other employees’ salaries,

Second, an amount equal to 50% of annual Base Salary, paid as a lump-sum, such amount hereby acknowledged by the Executive to be “bonus amounts”, and

Third, a continuation of employee health benefits that are covered under COBRA (“COBRA Benefits”) for the duration of the period during which Executive receives continued Base Salary (or the maximum period of time allowed by law, whichever is shorter), with the cost of such continuation of COBRA Benefits paid 100% by Company.

During the Subsequent Term:First, a continuation of Base Salary for 12 months, paid according to Company’s then-current practices for periodic payment of its other employees’ salaries,

Second, an amount equal to the Executive’s most recently awarded

Bonus, paid as a lump-sum, such amount hereby acknowledged by the Executive to be “bonus amounts”, and

Third, a continuation of employee health benefits that are covered under COBRA (“COBRA Benefits”) for the duration of the period during which Executive receives continued Base Salary (or the maximum period of time allowed by law, whichever is shorter), with the cost of such continuation of COBRA Benefits paid 100% by Company.

During either the Initial or Subsequent Periods after a Change of Control: Should (i) Company undergo a Change of Control as defined below and (ii) the Executive continue in employment with Company (or its successor) for at least 180 calendar days, the Executive may terminate his employment at will and will be entitled to the severance benefits that would be in effect had Company terminated the Executive without Cause.

“Change of Control” means (i) the acquisition by any individual, entity, or group of beneficial ownership of more than 50% of the combined voting power of the then outstanding common stock of Company or (ii) the closing of a sale or other conveyance of all or substantially all of the assets of Company, or (iii) the effective time of any merger, consolidation, or other business combination of Company which has the effect of that a person or group (who are not persons who immediately prior to such transaction held Company’s voting common stock) obtain, directly or indirectly, voting power or beneficial ownership of more than 50% of the combined voting power of Company’s common stock.

In all instances, the foregoing continuation of Base Salary and COBRA benefits shall cease on the first of the month immediately following the date on which the Executive becomes employed (including as a consultant performing substantially the same duties as an employee) at a new annual rate of pay of (or greater than) the Executive’s Base Salary at the time of termination, or, if the new annual rate of pay is less, the Base Salary benefit shall be reduced such that the Base Salary continuation benefit equals (on an annual basis) the difference between the new annual rate of pay and the Executive’s Base Salary.

Definition of Cause For purposes of this Agreement, “Cause” shall mean (1) the Executive’s continued failure, neglect or refusal to perform his duties and responsibilities as established by the CEOafter having received notice of such failure, neglect or refusal by Company; (ii) any act of the Executive that has the intended effect of injuring the reputation or business of Company or its affiliates in any material respect; (iii) the Executive is indicted for, pleads nolo contendere to, or is convicted of a felony, or other crime involving theft,

fraud, dishonesty or moral turpitude, (iv) the Executive commits any material breach of Company’s code of ethics or other rule, policy or regulation; or (v) the Executive breaches any other material term of this Agreement which breach has not been cured by the Executive within 20 days following written notice delivered by Company.

RESTRICTIVE

COVENANTS

Confidentiality During the period of the Executive’s employment with Company and at all times thereafter, the Executive agrees that he will not divulge to anyone (other than Company or its affiliates or any persons employed or designated by Company or its affiliates or to the extent applicable, the Executive’s financial or legal advisors) any confidential information, knowledge, information and materials that constitute trade secrets or other intellectual property or proprietary material of Company or any of its affiliates, as well as any information of a confidential nature obtained from customers, clients or other third parties, including, without limitation, all types of trade secrets and confidential commercial information (the “Confidential Information”). Upon his termination, the Executive further agrees not to disclose, publish or make use of any Confidential Information without the prior written consent of Company; provided, however, that the Executive may disclose any such information if required by a court order or other similar request. Nothing herein shall preclude the Executive from consulting with tax advisors or disclosing the tax treatment or tax structure of this Agreement to the extent necessary or as required by the Internal Revenue Service or its agents. Confidential Information does not include any information that becomes public by any means other than a breach by the Executive of this Agreement or is rightfully disclosed to the Executive by a third party without restriction and not in violation of any duty of confidentiality owed to Company or any affiliate.

Non-Solicitation By and in consideration of the substantial compensation and benefits to be provided by Company hereunder and further in consideration of the Executive’s exposure to the proprietary and confidential information of Company and its affiliates, the Executive agrees, (a) in the event he is terminated by Company without Cause and receives the severance benefits described in this Agreement, for two years after such termination; or (b) in the event (i) he terminates his service or (ii) he is terminated by Company for Cause, for one year after such termination, that he shall not without the express prior written approval of Company (i) directly or indirectly, in one or a series of transactions, recruit, solicit or otherwise induce or influence any director, officer, employee, agent, customer or policyholder that has a business relationship with Company (or had a business relationship with Company within the six-month period preceding the date of the Executive’s termination) to discontinue, reduce or modify such employment, agency or business relationship with Company, or (ii) employ or seek to employ, or cause any other person to employ or seek to employ, any person or agent who is then (or was at any time within the six-month period prior to the date of

Executive’s termination) employed or retained by Company, provided that employing or seeking to employ a director, officer, or employee of Company who has been terminated by Company shall not constitute a violation of this Non-Solicitation provision.

If a court of competent jurisdiction finds this provision concerning Nonsolicitation, or any of its restrictions, to be ambiguous, unenforceable and/or invalid, the Executive and Company agree that such court shall (i) in the case of ambiguity, read such provision as a whole and interpret the restriction(s) at issue to be enforceable and valid to the maximum extent allowed by law for the protection of Company’s business interests; and (ii) in the case of unenforceability or invalidity, eliminate such enforceable or invalid provisions from this Agreement to the extent necessary to permit the remaining provisions to be enforced to the maximum extent permitted for the protection of Company’s business interests.

The Executive acknowledges that it may be impossible to assess the monetary damages incurred by his violation of the Nonsolicitation provision, or any of its terms, and that any threatened or actual violation or breach of the Nonsolicitation provision, or any of its terms, will constitute immediate and irreparable injury to Company. The Executive expressly agrees that in addition to any and all other damages and remedies available to Company as a result of the Executive’s breach of the Non-solicitation provision, Company shall be entitled to seek an injunction restraining the Executive from violating or breaching this Nonsolicitation provision or any of its terms.

OTHER

PROVISIONS

Complete Agreement This Agreement shall be effective from and after January 1, 2010 and sets forth the entire and final agreement and understanding of Company and the Executive and contains all of the agreements made between them with respect to the subject matter hereof. As of January 1, 2010, this Agreement shall constitute the entire agreement with respect to the Executive’s employment, superseding all prior oral or written understandings, negotiations, representations or agreements relating thereto. No change or modification of this Agreement shall be valid unless in writing and executed by Company and the Executive.

Governing Law and    

Venue This Agreement shall at all times be governed by and construed,

interpreted and enforced in accordance with the laws of the State of Illinois without giving effect to its choice of law rules. The parties agree that the courts of the State of Illinois shall have jurisdiction over all disputes that arise under this Agreement or otherwise relate to the employment or termination of employment of the Executive by Company.

Survival Upon any termination of the Executive’s employment, this Agreement shall likewise terminate, however, the relevant provisions of this Agreement shall

survive to the extent necessary to give effect to such provisions.

IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the date first set forth above.

ATLAS FINANCIAL HOLDINGS, INC.

By:

EXECUTIVE

EX-10.3

EXHIBIT 10.3

EMPLOYEE SHARE PURCHASE PLAN

ATLAS FINANCIAL HOLDINGS, INC.

1. PURPOSE

1.1 The Atlas Employee Share Purchase Plan has been established to enable eligible employees of the Company to acquire Common Shares in Atlas Financial Holdings, Inc. in a convenient and systematic manner, so as to encourage continued employee interest in the operation, growth and development of the Company, as well as to provide an additional investment opportunity to employees.

2. DEFINITIONS AND INTERPRETATION

2.1"Account" means the account maintained by the Administrator in respect of eachParticipant as described in Section 7.1.

2.2 "Adjusted Salary" means the regular salary or wages of a Participant received or to be received from the Company for the Participant's service with respect to a particular Fiscal Year, excluding any overtime, bonuses or other compensation with respect to such Fiscal Year and, in the case of a Participant who receives commission payments, the regular salary or wages of a Participant received or to be received from the Company for the Participant's service with respect to the Fiscal Year, and any commission payments payable or paid to such Participant in respect of the immediately preceding Fiscal Year, and does not include any Company Contributions or other benefits received by the Participant under this Plan.

2.3 "Administration Agreement" means the agreement referred to in section 10.1.

2.4 "Administrator" means the person, company or firm which has been appointed by the Company under Section 10.1 to maintain account and to hold shares as Administrator for participants, and with whom the Company enters into a Services Agreement with respect thereto.

2.5 "Board" means the Board of Directors of Atlas.

2.6 "Company" means Atlas Financial Holdings, Inc. and each of its Subsidiaries (unless such Subsidiary has been designated by the Board as ineligible to participate in the Plan) and their respective successors and assigns, so long as they remain Subsidiaries on a consolidated basis, or each of them, as applicable.

2.7 "Company Contribution" means the amount of money paid by the Company under the Plan in respect of a Participant as described in Section 5.

2.8 "Contribution" means Company Contributions and Participant Contributions.

2.9 "Employee'' means a full-time employee of the Company and a permanent part time employee of the Company working more than 30 hours per week, but for greater certainty, does not include employees who have received notice of termination of employment, contract, part-time, or retired employees of the Company, employees receiving long-term disability payments and employees on unpaid leaves of absence.

2.10 "Fiscal Year" means the fiscal year of the employer of the Participant.

2.11 "Atlas" means Atlas Financial Holdings, Inc.

2.12 "Non-Active Participant" means a Participant who ceases to contribute to the Plan, but who maintains an account balance within the Plan.

2.13 Participant" means an Employee who has applied and agreed to participate in the Plan on such terms as the Company may specify and whose application has been accepted by the Company.

2.14 "Participant Contribution" means the amount of money contributed by aParticipant to the Plan as described in Section 4.

2.15 "Plan" means this Atlas Employee Share Purchase Plan described herein and includes all amendments thereto.

2.16 "Release" means a release of certificates representing Shares under the Plan as described in Sections 8 and 9.

2.17 "Shares" means the Common Shares in the capital of Atlas, and includes any shares of Atlas into which such shares may be converted, reclassified, redesignated, subdivided, consolidated, exchanged or otherwise changed pursuant to a reorganization.

2.18 "Subsidiary" means a subsidiary of Atlas as defined in the Canada Business Corporations Act.

2.19 Unless the context requires otherwise, references to the male gender include the female gender, words importing the singular number may be construed to extend to and include the plural number, and words importing the plural number may be construed to extend to and include the singular number.

2.20 This Plan is established under the laws of the Province of Ontario and the rights of all parties and the interpretation of each and every provision of the Plan shall be governed and construed in accordance with the laws of Ontario and the laws of Canada applicable therein.

3. ELIGIBILITY AND PARTICIPATION

3.1 An Employee who has been employed by the Company for greater than one (1)month is eligible for participation in the Plan.

3.2 An Employee who is an employee of a corporation which has become a Subsidiary of Atlas is eligible for participation in the Plan provided that such Employee has been employed by such Subsidiary for not less than one (1) month.

3.3 To become a Participant, an eligible Employee must complete and sign an application in the form prescribed by the Company from time to time and file it with the Manager, Human Resources, or such other officer or employee of the Company designated by the Company from time to time, and authorize the Company in writing to deduct the Participant's Contribution from the Participant's Adjusted Salary. Upon acceptance of

such application by the Company, such Employee shall become a Participant under the Plan.

3.4 The Company will provide each Participant with the following:

(a) a written explanation of the pertinent provisions of the Plan (including amendments thereto applicable to the Participant, together with a written explanation of the rights and duties of a Participant; and

(b) any other information regarding the Plan required to be provided, and in a manner prescribed, under any applicable laws.

4. PARTICIPANT CONTRIBUTIONS

4.1 A Participant may elect to contribute as the Participant Contribution under the Plan an amount for each regular payroll period, representing on an annual basis no more than 5.0% of Adjusted Salary. Such election shall initially be made by the Participant by completing, signing and filing with the Company the application form in the form prescribed by the Company as contemplated by Section 3.4.

4.2 Subject to Section 4.1, a Participant may increase, decrease, suspend, or resume payroll deductions under the Plan at any time by completing, signing and filing an authorization in the form prescribed by the Company from time to time. Such a change may be made only twice in each Fiscal Year.

4.3 Subject to the foregoing, the effective date of any initial election, change, suspension or resumption of Participant Contributions under this Section 4 shall be governed by regular payroll input deadlines of the Company.

4.4 All Participant Contributions shall be deducted by the Company out of each regular payroll payment and shall be paid to the Administrator and applied in accordance with Section 6.1.

4.5 A Participant may elect, as authorized and approved by the Board, to transfer into the Plan New Issue and Secondary Offering Shares. Such Shares shall be delivered to the Plan Administrator with all required documentation by the Board approved deadline. Such transfers into the Plan shall not affect a Participant's maximum contribution level for that year.

5. COMPANY CONTRIBUTIONS

5.1 Company Contributions as described herein shall be made on the date of each Participant Contribution only in respect of those Participants who have made a Participant Contribution in respect of such date. Company Contributions vest on the date made by the Company. Company Contributions shall not be made on New Issue and Secondary Offering Shares transferred into the Plan by Participants.

5.2 The amount of Company Contribution in respect of each Participant shall be equal to fifty percent (50%) of the Participant Contribution provided, however, that Company Contributions in respect of any particular Fiscal Year shall not exceed 2.5% of such Participant's Adjusted Salary for such Fiscal Year. Company Contributions shall commence following the completion of six (6) months of full time service.

5.3 Company Contributions in respect of a Participant shall be paid by the Company of which the Participant is the Employee on behalf of the Participant to the Administrator at the time of the payments made pursuant to Section 4.6 and applied in accordance with Section 6.1.

5.4 Company Contributions shall be additional remuneration to the Participant which the Participant directs to be paid to the Administrator and applied in accordance with Section 6.1. By participating in the Plan, the Participant acknowledges that the full amount of Company Contribution shall be paid and applied on behalf of the Participant in accordance with the Plan and that any income tax or other statutory or other payroll deductions in respect of Company Contributions shall be deducted from regular payroll payments to the Participant.

5.5 The Company shall also pay administrative costs related to the Plan, but shall not pay brokerage or related fees or expenses related to the sale of the Shares by the Participant. There shall be deducted from any remittances otherwise due to a Participant all brokerage fees and other expenses related to the sale of the shares by the Participant.

6. PURCHASE AND ALLOCATION OF SHARES

6.1 Participant and Company Contributions shall be paid in full on behalf of the Participants to purchase, on the date of such Contributions, or as soon as practicable thereafter, such number of Shares of Atlas as are required to give effect to the terms of the Plan. The purchase price for such Shares shall be the market price on the TSX Venture Exchange at the time of acquisition.

6.2 Such Shares will be acquired by the Administrator on behalf of the Participants as fully paid and nonassessableShares of Atlas through the services of a duly registered stockbroker.

6.3 The shares purchased by Participant Contributions and Company Contributions respectively in accordance with Section 6.1 shall, in each case, be allocated to the Participants in accordance with the respective Contributions made by, or by the Company in respect of, each such Participant. Such allocation shall be expressed in terms of whole numbers and fractional parts of Shares.

6.4 In the event that dividends paid on shares of Shares held in the participant's account will be credited to the participant's Account. Dividend funds, if applicable, will be reinvested and used to purchase additional Shares as soon as is reasonable practical after receipt of the funds. The purchase price for such shares shall be the prevailing market price at the time of such purchase.

7. ACCOUNTING

7.1 The Administrator shall maintain an account for each Participant in such a way that the interests of each Participant in the Plan in respect of Participant and Company Contributions may be ascertained. Such individual accounts shall be posted periodically. The Account will reflect Shares purchased by Participant and Company Contributions which have been allocated to such account as well as any New Issue and Secondary Offering Shares transferred into the Plan.

8. RELEASE OF CERTIFICATES

8.1 A Participant may, subject to this Section and section 12.5, elect to receive certificates representing Shares in the Participant's Account (a "Release"). Such Release shall require prior written notice to the Administrator of at least fourteen (14) days. Except as set out in Section 9 or unless otherwise determined by the Company, a Participant may not make such election more than once in any four month period.

8.2 Subject to Section 8.1, a Participant who has notified the Administrator that the Participant wishes to withdraw the whole or a part of the Shares in the Participant's Account shall be entitled to receive such Shares (provided the Release is in respect of at least 10 Shares), computed to the date the notice is received by the Administrator. A share certificate representing the appropriate number of Shares, registered in the name of such Participant or to an account for which the Participant is the beneficial holder, will be provided to the Participant. If such Participant is withdrawing the entire Account and is entitled to a fraction of a Share upon such Release, an amount equal to the value of such fraction shall be paid to the Participant. At the Participant's option, the Administrator:

(a) may sell Shares in the Participant's Account, in which case a Release will be comprised of the proceeds of such sale less all applicable taxes and the expenses which are chargeable to the Participant pursuant to Section 11.1;or

(b) may transfer Shares to a brokerage account in the Participant's name.

8.3 The Company shall arrange to provide statements to Participants describing the particulars of each Release.

9. DISTRIBUTION ON TERMINATION OF EMPLOYMENT

9.1 Upon the termination of employment of any Participant with the Company by reason of death, retirement or long-term disability, a Release shall be made in respect of all Shares held in the Participant's Account.

9.2 Upon the termination of employment of any Participant with the Company for any reason other than those specified in Section 9.1and except as may be determined by the Company, in its discretion, as contemplated by Section 9.4, a Release shall be made in respect of all Shares held in the Participant's Account at that time.

9.3 A certificate for such Shares, registered in the name of such Participant, or in such name as the Participant may direct, shall be mailed to the Participant. If the Participant shall be entitled to a fraction of a Share upon such termination, an amount equal to the value of such fraction shall be paid to such Participant.

9.4 Upon the termination of employment of any Participant with the Company for any reason, the Release of the Shares held in the Participant's Account shall be made in such manner as the Company determines, unless the Participant makes an election in accordance with Section 8.2 within 30 days of the date of determination.

10. THE ADMINISTRATOR

10.1 The Company shall appoint a person, firm or company to serve as the administrator under the Plan. The Company and the Administrator shall enter into an agreement (the Administration Agreement"), which shall provide for the application of amounts received to purchase Shares. The Administration Agreement shall

provide that the Administrator holds such Shares as agent for the Participants in accordance with the Plan. The Administration Agreement shall contain such other terms and provisions, not inconsistent with the Plan, as the Company shall approve. The Company shall have the right, at any time and from time to time, to remove from office the Administrator under the Plan and to appoint another Administrator in its stead in accordance with the terms of the Administration Agreement.

11. ADMINISTRATION

11.1 The Plan shall be administered by the Company in accordance with its provisions. All costs and expenses of administering the Plan, except as otherwise set out in the Plan, will be paid by the Company. Commissions, if any, on the purchase of Shares shall be paid by the Plan. All brokerage fees and other expenses related to the sale of a Participant's Shares shall be charged by the Company to such Participant. The Company may, from time to time, establish administrative rules and regulations relating to the operation of the Plan as it may deem necessary to further the purpose of the Plan and amend or repeal such rules and regulations. The Company, in its discretion, may appoint a committee for the purpose of interpreting, administering, and implementing the Plan. The Company may also delegate to any director, officer or employee of the Company such administrative duties and powers as it may see fit.

12. GENERAL PROVISIONS

12.1 The Company shall arrange for the distribution to each Participant of a statement of the Participant's account balances in the Participant's Account quarterly during each Fiscal Year or such other periodic basis as the Company decides from time to time.

12.2 The interest of any Participant in the Plan shall not be assignable, either by voluntary assignment or by operation of law, except upon death or upon mental incompetency, or as otherwise specifically permitted herein.

12.3 Participation in the Plan shall be entirely voluntary and any decision not to participate shall not affect any Employee's employment with the Company. No Employee, Participant or other person shall have any claim or right to participate under the Plan. Participation in this Plan shall not affect the right of the Company to terminate the employment of a Participant. Neither any period of notice, if any, nor any payment in lieu thereof, or combination thereof, upon termination of employment shall be considered as extending the period of employment for the purposes of the Plan.

12.4 The Plan and the implementation thereof is subject to such governmental and stock exchange approvals or consents that now or in the future are applicable. As a condition of participating in the Plan, each Participant agrees to comply with all laws, rules and regulations which may apply in connection with the Plan and agrees to furnish to the Company all information and undertakings as may be required to permit compliance with such laws, rules and regulations.

12.5 The Company may adopt and apply rules that, in its opinion, will ensure that the Company will be able to comply with applicable provisions of any federal, provincial, state or local law relating to withholding of tax, including on the amount, if any, includable in income of a Participant. The Company shall have the right in its discretion to satisfy withholding tax liability by retaining or purchasing Shares acquired by a Participant under the Plan.

13. VOTING OF SHARES IN THE PLAN

13.1 The Company shall furnish each Participant with a copy of a notice of each meeting of shareholders of Atlas and other material sent to holders of Shares.

13.2 A Participant may provide instruction as to the voting of Shares at any meeting at which the holders of Shares are entitled to vote in respect of the number of whole shares standing to the Participant's credit in the Participant's Account. Such instruction must be given on a proxy form provided by the Administrator or the Company.

14. AMENDMENT OR TERMINATION OF THE PLAN

14.1 The Company reserves the right at any time to terminate the Plan. The Company may amend or suspend, in whole or in part, the Plan, including such amendments to the Plan as may be necessary or desirable, in the opinion of the Company, to comply with the rules or regulations of any governmental authority or stock exchange that apply to the Plan, provided, however, that:

(a) any approvals required under any applicable law are obtained; and

(b) no such amendment or suspension, unless required by law, shall be made at any time which has the effect of adversely affecting the existing rights of a Participant in respect of Contributions which have been made, or Shares which have been acquired under the Plan, prior to the date of such amendment or suspension.

EX-10.4

Exhibit 10.4

ADOPTION AGREEMENT

PROFIT SHARING/401(K) PLAN

ARTICLE 1

1 PLAN INFORMATION

(a) Name of Plan:

This is the ATLAS Financial Holdings, Inc. 401{k) Plan (the "Plan")

(b) Type of Plan:

(1) þ 401(k) Only

(2) o 401(k) and Profit Sharing

(3) o Profit Sharing Only

(c) AdministratorName (if not the Employer):

(d) Plan Year End (month/day): 12/31

(e) Three Digit Plan Number: 001

(f) Limitation Year

(1) o    Calendar Year

(2) þ    Plan Year

(3) o    Other:

(g) Plan Status (check appropriate box(es)):

(1) Adoption Agreement Effective Date: 07/11/2011

Note: The effective date specified above must be after the last day of the 2001 Plan Year.

(2) The Adoption Agreement Effective Date is:

(A)     o A new Plan Effective Date

(B) þ An amendment Effective Date (check one):

(i) þ an amendment and restatement of this Basic Plan Document No. 14 and its Adoption Agreement previously executed by the Employer;

(ii) o a conversion from Fidelity Basic Plan Document No. 10 and its Adoption Agreement to Basic Plan Document No. 14 and its Adoption Agreement; or

(iii)o a conversion to Basic Plan Document No. 14 and its Adoption Agreement.

(3)     o Special Effective Dates. Certain provisions of the Plan shall be effective as of a date other than the date specified in Subsection 1.01(g)(1) above. Please complete the Special Effective Dates Addendum to the Adoption Agreement indicating the affected provisions and their effective dates.

(4)     o Plan Merger Effective Dates. Certain plan(s) were merged into the Plan on or after the date specified in

Subsection 1.01(g)(l) above. The merged plans are listed in the Plan Mergers Addendum. Please complete the appropriate subsection(s) of the Plan Mergers Addendum to the Adoption Agreement indicating the planes) that have merged into the Plan and the effective date(s) of such merger(s).

(5)     o Frozen Plan. The Plan is currently frozen. Unless the Plan is amended in the future to provide otherwise, no further contributions shall be made to the Plan. Plan assets will continue to be held on behalf of Participants and their Beneficiaries until distributed in accordance with the Plan terms. (If this provision is selected, it will override any conflicting provision selected in the Adoption Agreement.)

Note: While the Plan is frozen, no further contributions, including Deferral Contributions, Employee Contributions, and Rollover Contributions, may be made to the Plan and no employee who is not already a Participant in the Plan may become a Participant.

1.02 EMPLOYER

(a) Employer Name: American Service Insurance Company, Inc. dba Atlas Financial Holdings, Inc.

(1) Employer's Tax Identification Number: 36-3223936

(2) Employer's fiscal year end: 12/31

(b) The term "Employer" includes the following participating employers (choose one):

(1)     þ No other employers participate in the Plan.

(2)     o Certain other employers participate in the Plan. Please complete the Participating Employers Addendum.

1.03 TRUSTEE

(a) Trustee Name: Fidelity Management Trust Company. Address: 82 Devonshire Street, Boston, MA 02109

1.04 COVERAGE

All Employees who meet the conditions specified below shall be eligible to participate in the Plan:

(a) Age Requirement (check one):

(1)þ no age requirement.

(2)     o must have attained age: __ (not to exceed 21).

b) Eligibility Service Requirement(s) - There shall be no eligibility service requirements for contributions to the Plan unless selected below (check one):

(1)o __ (not to exceed 365) days of Eligibility Service requirement (no minimum Hours of Service can be required)

(2)o __ (not to exceed 12) months of Eligibility Service requirement (no minimum Hours of Service can be required)

(3)o one year of Eligibility Service requirement (at least __ (not to exceed 1,000) Hours of Service are required during the Eligibility Computation Period

(4) o two years of Eligibility Service requirement (at least __ (not to exceed 1,000) Hours of Service are required during each Eligibility Computation Period) (If Option 1.07(a) is elected, only one year of Eligibility Service is required for Deferral Contributions.)

Note: If the Employer selects the two year Eligibility Service requirement, then contributions subject to such Eligibility Service requirement must be 100% vested when made.

(5) þ see Additional Provisions Addendum.

(6) o Hours of Service Crediting. Hours of Service will be credited in accordance with the equivalency selected in the Hours of Service Equivalencies Addendum rather than in accordance with the equivalency described in Subsection 2.01(dd) of the Basic Plan Document. Please complete the Hours of Service Equivalencies Addendum.

(c) Eligibility Computation Period - The Eligibility Computation Period is the 12-consecutive-month period beginning on an Employee's Employment Commencement Date and each 12-consecutive-month period beginning on an anniversary of his Employment Commencement Date.

(d) Eligible Class of Employees:

(1)     Generally, the Employees eligible to participate in the Plan are (choose one):

(A) þ all Employees of the Employer.

(B) o only Employees of the Employer who are covered by (choose one):

(i) o any collective bargaining agreement with the Employer, provided that the agreement requires the employees to be included under the Plan.

(ii) o the following collective bargaining agreement(s) with the Employer: _____

(2)    þ Notwithstanding the selection in Subsection 1.04(d)(I) above, certain Employees of the Employer are excluded from participation in the Plan (check the appropriate box(es)):

Note: Certain employees (e.g., residents of Puerto Rico) are excluded automatically pursuant to Subsection 2.01(s) of the Basic Plan Document, regardless of the Employer's selection under this Subsection 1.04( d)(2).

(A) þ employees covered by a collective bargaining agreement, unless the agreement requires the employees to be included under the Plan. (Do not choose if Option 1.04(d)(I)(B) is selected above.)

(B) o Highly Compensated Employees as defined in Subsection 2.01(cc) of the Basic Plan Document.

(C) o Leased Employees as defined in Subsection 2.01(ff) of the Basic Plan Document

(D) þ nonresident aliens who do not receive any earned income from the Employer which constitutes United States source income.

(E) o other: ____

Note: The eligible group defined above must be a definitely determinable group and cannot be subject to the discretion of the Employer. In addition, the design of the classifications cannot be such that the only Non-Highly Compensated Employees benefiting under the Plan are those with the lowest compensation and/or the shortest periods of service and who may represent the minimum number of such employees necessary to satisfy coverage under Code Section 41 O(b).

(i) o Notwithstanding this exclusion, any Employee who is excluded from participation because of an exclusion that directly or indirectly imposes an age and/or service requirement for participation (for example by excluding part-time or temporary employees) shall become an Eligible Employee eligible to participate in the Plan on the Entry Date coinciding with or immediately following the date on which he first satisfies the following requirements: (I) he attains age 21 and (II) he completes at least 1,000 Hours of Service during an Eligibility Computation Period.

Note: The Employer should exercise caution when excluding employees from participation in the Plan. Exclusion of employees may adversely affect the Plan's satisfaction of the minimum coverage requirements, as provided in Code Section 41 O(b).

(e) Entry Date(s) - The Entry Date(s) shall be (check one):

(1)o the first day of each Plan Year and the first day of the seventh month of each Plan Year

(2) o the first day of each Plan Year and the first day of the fourth, seventh, and tenth months of each Plan Year

(3) þ the first day of each month

(4) o immediate upon meeting the eligibility requirements specified in Subsections 1.04(a) and l.04(b)

(5) o the first day of each Plan Year (Do not select if there is an Eligibility Service requirement of more than six months in Subsection 1.04(b) for the type(s) of contribution or if there is an age requirement of more than 20112 in Subsection 1.04(a) for the type(s) of contribution.)

Note: If another plan is merged into the Plan, the Plan may provide on the Plan Mergers Addendum that the effective date of the merger is also an Entry Date with respect to certain Employees.

(f) Date of Initial Participation - An Employee shall become a Participant unless excluded by Subsection 1.04(d) above on the Entry Date coinciding with or immediately following the date the Employee completes the service and age requirement(s) in Subsections 1.04(a) and (b), if any, except (check one):

(1) o no exceptions.

(2) o Employees employed on (insert date) shall become Participants on that date

(3) þ    Employees who meet the age and service requirement(s) of Subsections 1.04(a) and (b) on 03/01/2011 (insert date) shall become Participants on that date.

1.05 COMPENSATION

Compensation for purposes of determining contributions shall be as defined in Subsection 2.01 (k) of the Basic Plan Document, modified as provided below.

(a) Compensation Exclusions - Compensation shall exclude the item(s) selected below.

(1) þ    No exclusions.

(2) o Overtime pay.

(3) o Bonuses.

(4) o Commissions.

(5) o The value of restricted stock or of a qualified or a non-qualified stock option granted to an Employee by the Employer to the extent such value is includable in the Employee's taxable income.

(6) o Severance pay received prior to termination of employment. (Severance pay receivedfollowing termination of employment is always excluded for purposes of contributions.)

Note: If the Employer selects an option, other than (1) above, with respect to Nonelective Employer Contributions, Compensation must be tested to show that it meets the requirements of Code Section 414(s) or the allocations must be tested to show that they meet the general test under regulations issued under Code Section 401(a)(4). These exclusions shall not apply for purposes of the "Top Heavy" requirements in Section 15.03, for allocating safe harbor Matching Employer Contributions if Subsection 1.11(a)(3) is selected, for allocating safe harbor Nonelective Employer Contributions if Subsection 1.12(a)(3) is selected, or for allocating non-safe harbor Nonelective Employer Contributions if the Integrated Formula is elected in Subsection l.l2(b)(2).

(b) Compensation for the First Year of Participation - Contributions for the Plan Year in which an Employee first becomes a Participant shall be determined based on the Employee's Compensation as provided below. (Complete by checking the appropriate box.)

(1) o Compensation for the entire Plan Year.

(2) þ    Only Compensation for the portion of the Plan Year in which the Employee is eligible to participate in the Plan.

1.06 TESTING RULES

(a) ADP/ACP Present Testing Method - The testing method for purposes of applying the "ADP" and "ACP" tests described in Sections 6.03 and 6.06 of the Basic Plan Document shall be the (check one):

(1) þCurrent Year Testing Method - The "ADP" or "ACP" of Highly Compensated Employees for the Plan Year

shall be compared to the "ADP" or "ACP" of Non-Highly Compensated Employees for the same Plan Year. (Must choose if Option 1.11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)

(2) o Prior Year Testing Method - The "ADP" or "ACP" of Highly Compensated Employees for the Plan Year shall be compared to the "ADP" or "ACP" of Non-Highly Compensated Employees for the immediately preceding Plan Year. (Do not choose if Option 1.10(a)(1), alternative allocation formula for Qualified Nonelective Con tributions.)

(3) o Not applicable. (Only if Option 1.01(b)(3), Profit Sharing Only, is checked or Option 1.04(d)(2)(B), excluding all Highly Compensated Employees from the eligible class of Employees, is checked.)

Note: Restrictions apply on elections to change testing methods.

(b) First Year Testing Method - If the first Plan Year that the Plan, other than a successor plan, permits Deferral Contributions or provides for Matching Employer Contributions, occurs on or after the Effective Date specified in Subsection 1.01(g), the "ADP" and/or "ACP" test for such first Plan Year shall be applied using the actual "ADP" and/or "ACP" of Non-Highly Compensated Employees for such first Plan Year, unless otherwise provided below.

(1)o The "ADP" and/or "ACP" test for the first Plan Year that the Plan permits Deferral Contributions or provides for Matching Employer Contributions shall be applied assuming a 3% "ADP" and/or "ACP" for Non-Highly Compensated Employees. (Do not choose unless Plan uses prior year testing method described in Subsection 1.06(a)(2).)

(c) HCE Determinations: Look Back Year - The look back year for purposes of determining which Employees are Highly Compensated Employees shall be the l2-consecutive-month period preceding the Plan Year unless otherwise provided below.

(1)o Calendar Year Determination - The look back year shall be the calendar year beginning within the preceding Plan Year. (Do not choose if the Plan Year is the calendar year.)

(d) RCE Determinations: Top Paid Group Election - All Employees with Compensation exceeding the dollar amount specified in Code Section 414(q)(l)(B)(i) adjusted pursuant to Code Section 415(d) (e.g., $95,000 for "determination years" beginning in 2005 and "look-back years" beginning in 2004) shall be considered Highly Compensated Employees, unless Top Paid Group Election below is checked.

(1) o Top Paid Group Election - Employees with Compensation exceeding the dollar amount specified in Code Section 414(q)(l)(B)(i) adjusted pursuant to Code Section 415(d) (e.g., $95,000 for "determination years" beginning in 2005 and "look-back years" beginning in 2004 shall be considered Highly Compensated Employees only if they are in the top paid group (the top 20% of Employees ranked by Compensation).

Note: Plan provisions for Sections 1.06(c) and L06(d) must apply consistently to all retirement plans of the Employer for determination years that begin with or within the same calendar year (except that Option 1.06(c)(1), Calendar Year Determination, shall not apply to calendar year plans).

1.07 DEFERRAL CONTRIBUTIONS

(a) þ Deferral Contributions - Participants may elect to have a portion of their Compensation contributed to the Plan on a before-tax basis pursuant to Code Section 401(k). Pursuant to Subsection 5.03(a) of the Basic Plan Document, if Catch-Up Contributions are selected below, the Plan's deferral limit is 75%, unless the Employer elects an alternative deferral limit in Subsection 1.07(a)(l)(A) below. If Catch-Up Contributions are selected below, and the Employer has specified a percentage in Subsection 1.07(a)(l)(A) that is less than 75%, a Participant eligible to make Catch-Up Contributions shall (subject to the statutory limits in Treasury Regulation Section lA14-1(b)(l)(i» in any event be permitted to contribute in excess of the specified deferral limit up to 100% of the Participant's "effectively available Compensation" (i.e., Compensation available after other withholding), as required by Treasury Regulation Section 1.414(v)-1(e)(1)(ii)(B).

(1) Regular Contributions - The Employer shall make a Deferral Contribution in accordance with Section 5.03 of the Basic Plan Document on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the payroll period in question. Such Deferral Contribution shall not exceed the deferral limit specified in Subsection 5.03(a) of the Basic Plan Document or in Subsection 1.07(aXl)(A) below, as applicable. Check and complete the appropriate box(es), if any.

(A) þ    The deferral limit is 60 % (must be a whole number multiple of one percent) of Compensation. (Unless a different deferral limit is specified, the deferral limit shall be 75%. If Option 1.07(a)(4), Catch-Up Contributions, is selected

below, complete only if deferral limit is other than 75%.)

(B)o Instead of specifying a percentage of Compensation, a Participant's salary reduction agreement may specify a dollar amount to be contributed each payroll period, provided such dollar amount does not exceed the maximum percentage of Compensation specified in Subsection 5.03(a) of the Basic Plan Document or in Subsection 1.07(a)(1)(A) above, as applicable.

(C) A Participant may increase or decrease, on a prospective basis, his salary reduction agreement percentage or, if Roth 401(k) Contributions are selected in Subsection 1.07(aX5) below, the portion of his Deferral Contributions designated as Roth 401(k) Contributions (check one):

(i) þ     as of the beginning of each payroll period.

(ii) o as of the first day of each month.

(iii)o as of each Entry Date. (Do not select if immediate entry is elected with respect to Deferral Contributions in Subsection 1.04(e).)

Note: Notwithstanding the Employer's election hereunder, if Option 1.l1(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked, the Plan provides that an Active Participant may change his salary reduction agreement percentage for the Plan Year within a reasonable period (not fewer than 30 days) of receiving the notice described in Section 6.09 of the Basic Plan Document.

(D) A Participant may revoke, on a prospective basis, a salary reduction agreement at any time upon proper notice to the Administrator but in such case may not file a new

(i) o the beginning of the next payroll period.

(ii) o the first day of the next month

(iii) þ    the next Entry Date. (Do not select if immediate entry is elected with respect to Deferral Contributions in Subsection 1.04(e).)

(2) o Additional Deferral Contributions - The Employer shall allow a Participant upon proper notice and approval to enter into a special salary reduction agreement to make additional Deferral Contributions in an amount up to 100% of their effectively available Compensation for the payroll period(s) designated by the Employer.

(3) þBonus Contributions - The Employer shall allow a Participant upon proper notice and approval to enter into a special salary reduction agreement to make Deferral Contributions in an amount up to 100% of any Employer paid cash bonuses designated by the Employer on a uniform and nondiscriminatory basis that are made for such Participants during the Plan Year. The Compensation definition elected by the Employer in Subsection l.05(a) must include bonuses if bonus contributions are permitted. Unless a Participant has entered into a special salary reduction agreement with respect to bonuses, the percentage deferred from any Employer paid cash bonus shall be (check (A) or (B) below):

(A) o Zero.

(B) þ    The same percentage elected by the Participant for his regular contributions in accordance with Subsection 1.07(a)(I) above or deemed to have been elected by the Participant in accordance with Option 1.07(a)(6) below.

Note: A Participant's contributions under Subsection 1.07(aX2) and/or (3) may not cause the Participant to exceed the percentage limit specified by the Employer in Subsection l.07(a)(1)(A) for the full Plan Year. If the Administrator anticipates that the Plan will not satisfy the "ADP" and/or "ACP" test for the year, the Administrator may reduce the rate of Deferral Contributions of Participants who are Highly Compensated Employees to an amount objectively determined by the Administrator to be necessary to satisfy the "ADP" and/or "ACP" test.

(4) Catch-Up Contributions - The following Participants who have attained or are expected to attain age 50 before the close of the calendar year will be permitted to make Catch-Up Contributions to the Plan, as described in Subsection 5.03(a) of the Basic Plan Document:

(A) þ All such Participants.

(B) o All such Participants except those covered by a collective-bargaining agreement under which retirement benefits were a subject of good faith bargaining unless the bargaining agreement specifically provides for Catch-Up Contributions to be made on behalf of such Participants.

Note: The Employer must not select Option 1.07(a)(4) above unless all "applicable plans" (except any plan that is qualified under Puerto Rican law or that covers only employees who are covered by a collective bargaining agreement under which retirement benefits were a subject of good faith bargaining) maintained by the Employer and by any other employer that is treated as a single employer with the Employer under Code Section 414(b), (c), (m), or (0) also permit Catch-Up Contributions in the same dollar amount. An "applicable plan" is any 401(k) plan or any SIMPLE IRA plan, SEP, plan or contract that meets the requirements of Code Section 403(b), or Code Section 457 eligible governmental plan that provides for elective deferrals.

(5) o Roth 401(k) Contributions. Participants shall be permitted to irrevocably designate pursuant to Subsection 5.03(b) of the Basic Plan Document that a portion or all of the Deferral Contributions made under this Subsection 1.07(a) are Roth 401(k) Contributions that are includable in the Participant's gross income at the time deferred.

(6) þAutomatic Enrollment Contributions. Beginning on the effective date of this paragraph (6) (the "Automatic Enrollment Effective Date") and subject to the remainder of this paragraph unless an Eligible Employee affirmatively elects otherwise, his Compensation will be reduced by .3.% (the "Automatic Enrollment Rate"), such percentage to be increased in accordance with Option 1.07(b) (if applicable), for each payroll period in which he is an Active Participant, beginning as indicated in Subsection 1.07(a)(6)(A) below, and the Employer will make a pre-tax Deferral Contribution in such amount on the Participant's behalf in accordance with the provisions of Subsection S.03(c) of the Basic Plan Document (an "Automatic Enrollment Contribution").

(A) With respect to an affected Participant, Automatic Enrollment Contributions will begin as soon as administratively feasible on or after ( check one):

(i) þ    The Participant's Entry Date.

(ii) o __ (minimum of 30) days following the Participant's date of hire, but no sooner than the Participant's Entry Date.

Within a reasonable period ending no later than the day prior to the date Compensation subject to the reduction would otherwise become available to the Participant, an Eligible Employee may make an affirmative election not to have Automatic Enrollment Contributions made on his behalf. If an Eligible Employee makes no such affirmative election, his Compensation shall be reduced and Automatic Enrollment Contributions will be made on his behalf in accordance with the provisions of this paragraph (6), and Option 1.07(b) if applicable, until such Active Participant elects to change or revoke such Deferral Contributions as provided in Subsection 1.07(a)(J)(C) or (D). Automatic Enrollment Contributions shall be made only on behalf of Active Participants who are first hired by the Employer on or after the Automatic Enrollment Effective Date and do not have a Reemployment Commencement Date, unless otherwise provided below.

(B) þ    Additionally, unless such affected Participant affirmatively elects otherwise within the reasonable period established by the Plan Administrator, Automatic Enrollment Contributions will be made with respect to the Employees described below. (Check all that apply.)

(i) o Inclusion of Previously Hired Employees. On the later of the date specified in Subsection 1.07(a)(6)(A) with regard to such Eligible Employee or as soon as administratively feasible on or after the 30th day following the Notification Date specified in Subsection 1.07(a)(6)(B)(i)(I) below, Automatic Enrollment Contributions will begin for the following Eligible Employees who were hired before the Automatic Enrollment Effective Date and have not had a Reemployment Commencement Date. (Complete (I), check (II) or (Ill), and complete (IV), if applicable.)

(I) Notification Date: ____. (Date must be on or after the Automatic Enrollment Effective Date.)

(II) o Unless otherwise elected in Subsection 1.07(a)(6)(B)(i)(IV) below, all such Employees who have never had a Deferral Contribution election in place.

(III) o Unless otherwise elected in Subsection 1.07(a)(6)(B)(i)(IV) below, all such Employees who have never had a Deferral Contribution election in place and were hired by the Employer before the Automatic Enrollment Effective Date, but on or after the following date: __ .

(IV) o In addition to the group of Employees elected in Subsection 1.07(a)(6)(B)(i)(II) or (Ill) above, any Employee described in Subsection 1.07(a)(6)(B)(i)(II) or (III) above, as applicable, even if he has had a Deferral

Contribution election in place previously, provided he is not suspended from making Deferral Contributions pursuant to the Plan and has a deferral rate of zero on the Notification Date.

(ii) þInclusion of Rehired Employees. Unless otherwise stated herein, each Eligible Employee having a Reemployment Commencement Date on the date indicated in Subsection l.07(a)(6)(A) above. If Subsection 1.07(a)(6)(B)(i)(III) is selected, only such Employees with a Reemployment Commencement on or after the date specified in Subsection 1.07(a)(6)(B)(i)(III) will be automatically enrolled. If Subsection 1.07(a)(6)(B)(i) is not selected, only such Employees with a Reemployment Commencement on or after the Automatic Enrollment Effective Date will be automatically enrolled. If Subsection l.07(a)(6)(A)(ii) has been elected above, for purposes of Subsection 1.07(a)(6)(A) only, such Employee's Reemployment Commencement Date will be treated as his date of hire.

(b) Automatic Deferral Increase: (Choose only if Automatic Enrollment Contributions are selected in Option J.07(a)(6) above) - Unless an Eligible Employee affirmatively elects otherwise after receiving appropriate notice, Deferral Contributions for each Active Participant having Automatic Enrollment Contributions made on his behalf shall be increased annually by the whole percentage of Compensation stated in Subsection l.07(b)(1) below until the deferral percentage stated in Subsection 1.07(a)(1) is reached (except that the increase will be limited to only the percentage needed to reach the limit stated in Subsection 1.07(a)(1), if applying the percentage in Subsection 1.07(bXl) would exceed the limit stated in Subsection 1.07(a)(I», unless the Employer has elected a lower percentage limit in Subsection 1.07(b)(2) below.

(1) Increase by __ % (not to exceed 10%) of Compensation. Such increased Deferral Contributions shall be pre-tax Deferral Contributions.

(2) o Limited to % of Compensation (not to exceed the percentage indicated in Subsection 1.07(a)(I».

(3) Notwithstanding the above, the automatic deferral increase shall not apply to a Participant within the first six months following the date upon which Automatic Enrollment Contributions begin for such Participant.

1.08 EMPLOYEE CONTRIBUTIONS (AFTER TAX CONTRIBUTIONS)

(a) o Frozen Employee Contributions - Participants may not currently make after-tax Employee Contributions to the Plan, but the Employer does maintain frozen Employee Contributions Accounts.

1.09 ROLLOVER CONTRIBUTIONS

(a) þRollover Contributions - Employees may roll over eligible amounts from other qualified plans to the Plan subject to the additional following requirements:

(1) o The Plan will not accept rollovers of after-tax employee contributions.

(2) þ    The Plan will not accept rollovers of designated Roth contributions. (Must be selected if Roth 401(k) Contributions are not elected in Subsection 1.07(a)(5).)

1.10 QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTIONS

(a) Qualified Nonelective Employer Contributions - If any of the following Options is checked: 1.07(a), Deferral Contributions, or 1.11(a), Matching Employer Contributions, the Employer may contribute an amount which it designates as a Qualified Nonelective Employer Contribution to be included in the "ADP" or "ACP" test. Unless otherwise provided below, Qualified Nonelective Employer Contributions shall be allocated to all Participants who were eligible to participate in the Plan at any time during the Plan Year and are Non-Highly Compensated Employees in the ratio which each such Participant's "testing compensation", as defined in Subsection 6.01(r) of the Basic Plan Document, for the Plan Year bears to the total of all such Participants' "testing compensation" for the Plan Year.

(1) o Qualified Nonelective Employer Contributions shall be allocated only among those Participants who are Non-Highly Compensated Employees and are designated by the Employer as eligible to receive a Qualified Nonelective Employer Contribution for the Plan Year. The amount of the Qualified Nonelective Employer Contribution allocated to each such Participant shall be as designated by the Employer, but not in excess of the "regulatory maximum." The "regulatory maximum" means 5% (10% for Qualified Nonelective Contributions made in connection with the Employer's obligation to pay prevailing wages under the Davis-Bacon Act) of the "testing compensation" for such Participant for the Plan Year. The "regulatory maximum" shall apply separately with respect to Qualified Nonelective Contributions to be included in the "ADP" test and Qualified Nonelective Contributions to be included in the "ACP" test. (Cannot be selected if the Employer has elected prior year testing in Subsection 1.06(a)(2).)

1.11 MATCHING EMPLOYER CONTRIBUTIONS

(a) þMatching Employer Contributions - The Employer shall make Matching Employer Contributions on behalf of each of its "eligible" Participants as provided in this Section 1.11. For purposes of this Section 1.11, an "eligible" Participant means any Participant who is an Active Participant during the Contribution Period and who satisfies the requirements of Subsection 1.11 ( e) or Section 1.13. (Check one):

(1)þ Non-Discretionary Matching Employer Contributions - The Employer shall make a Matching Employer Contribution on behalf of each "eligible" Participant in an amount equal to the following percentage of the eligible contributions made by the "eligible" Participant during the Contribution Period (complete all that apply):

(A) þ    Flat Percentage Match:

(i) 50% to all "eligible" Participants

(B) o Tiered Match: __ % of the first % of the "eligible" Participant's Compensation contributed to the Plan,

__ % of the next % of the "eligible" Participant's Compensation contributed to the Plan,

__ % of the next % of the "eligible" Participant's Compensation contributed to the Plan.

Note: The group of "eligible" Participants benefiting under each match rate must satisfy the nondiscriminatory coverage requirements of Code Section 410(b).

(C) þ    Limit on Non-Discretionary Matching Employer Contributions (check the appropriate Box(es)):

(i) þ    Contributions in excess of 5% of the "eligible" Participant's Compensation for the Contribution Period shall not be considered for non-discretionary Matching Employer Contributions.

Note: If the Employer elected a percentage limit in (i) above and requested the Trustee to account separately for matched and unmatched Deferral and/or Employee Contributions made to the Plan, the non-discretionary Matching Employer Contributions allocated to each "eligible" Participant must be computed, and the percentage limit applied, based upon each payroll period.

    (ii) o Matching Employer Contributions for each "eligible" Participant for each Plan Year shall be limited to $__ .

(2) o Discretionary Matching Employer Contributions - The Employer may make a discretionary Matching Employer Contribution on behalf of each "eligible" Participant in accordance with Section 5.08 of the Basic Plan Document in an amount equal to a percentage of the eligible contributions made by each "eligible" Participant during the Contribution Period. Discretionary Matching Employer Contributions may be limited to match only contributions up to a specified percentage of Compensation or limit the amount of the match to a specified dollar amount.

Note: If the Matching Employer Contribution made in accordance with this Subsection 1.11(a)(2) matches different percentages of contributions for different groups of "eligible" Participants, it may need to be tested to show that it meets the requirements of Code Section 401 (a)(4), nondiscrimination in benefits, rights, and features.

(A) o 4% Limitation on Discretionary Matching Employer Contributions for Deemed Satisfaction of "ACP" Test - In no event may the dollar amount of the discretionary Matching Employer Contribution made on an "eligible" Participant's behalf for the Plan Year exceed 4% of the "eligible" Participant's Compensation for the Plan Year. (Only if Option 1.12(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)

(3) o 401(k) Safe Harbor Matching Employer Contributions - If the Employer elects one of the safe harbor formula Options provided in the 401(k) Safe Harbor Matching Employer Contributions Addendum to the Adoption Agreement and provides written notice each Plan Year to all Active Participants of their rights and obligations under the Plan, the Plan shall be deemed to satisfy the "ADP" test and, under certain circumstances, the "ACP" test. (Only if Option 1.07(a), Deferral Contributions is checked.)

(b) o Additional Matching Employer Contributions - The Employer may at Plan Year end make an additional Matching Employer Contribution on behalf of each "eligible" Participant in an amount equal to a percentage of the eligible contributions made by each "eligible" Participant during the Plan Year. (Only if Option 1.11(a)(1) or (3) is checked.) The additional Matching Employer Contribution may be limited to match only contributions up to a specified percentage of Compensation or limit the

amount of the match to a specified dollar amount.

Note: If the additional Matching Employer Contribution made in accordance with this Subsection 1.11(b) matches different percentages of contributions for different groups of "eligible" Participants, it may need to be tested to show that it meets the requirements of Code Section 401(a)(4), nondiscrimination in benefits, rights, and features.

(1) o 4% Limitation on additional Matching Employer Contributions for Deemed Satisfaction of "ACP" Test - In no event may the dollar amount of the additional Matching Employer Contribution made on an "eligible" Participant's behalf for the Plan Year exceed 4% of the "eligible" Participant's Compensation for the Plan Year. (Only if Option 1.11(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)

Note: If the Employer elected Option 1. 11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, above and wants to be deemed to have satisfied the "ADP" test, the additional Matching Employer Contribution must meet the requirements of Section 6.09 of the Basic Plan Document. In addition to the foregoing requirements, if the Employer elected Option 1.11(a)(3), 40l(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions, and wants to be deemed to have satisfied the "ACP" test with respect to Matching Employer Contributions for the Plan Year, the eligible contributions matched may not exceed the limitations in Section 6.10 of the Basic Plan Document.

(c) Contributions Matched - The Employer matches the following contributions (check appropriate box/esj):

(1) Deferral Contributions - Deferral Contributions made to the Plan are matched at the rate specified in this Section 1.11. Catch-Up Contributions are not matched unless the Employer elects Option 1.11(c)(1)(A) below.

(A) o Catch-Up Contributions made to the Plan pursuant to Subsection l.07(a)(4) are matched at the rates specified in this Section 1.11.

Note: Notwithstanding the above, if the Employer elected Option 1.11(a)(3), 40l(k) Safe Harbor Matching Employer Contributions, Deferral Contributions shall be matched at the rate specified in the 40l(k) Safe Harbor Matching Employer Contributions Addendum to the Adoption Agreement without regard to whether they are Catch-Up Contributions.

(d) Contribution Period for Matching Employer Contributions - The Contribution Period for purposes of calculating the amount of Matching Employer Contributions is:

(1) o each calendar month.

(2) o each Plan Year quarter.

(3) o each Plan Year.

(4) þ    each payroll period.

The Contribution Period for additional Matching Employer Contributions described in Subsection 1.11(b) is the Plan Year.

Note: If Matching Employer Contributions are made more frequently than for the Contribution Period selected above, the Employer must calculate the Matching Employer Contribution required with respect to the full Contribution Period, taking into account the "eligible" Participant's contributions and Compensation for the full Contribution Period, and contribute any additional Matching Employer Contributions necessary to "true up" the Matching Employer Contribution so that the full Matching Employer Contribution is made for the Contribution Period.

(e) Continuing Eligibility Requirement(s) - A Participant who is an Active Participant during a Contribution Period and makes eligible contributions during the Contribution Period shall only be entitled to receive Matching Employer Contributions under Section 1.11 for that Contribution Period if the Participant satisfies the following requirement(s) (Check the appropriate box(es). Options (3) and (4) may not be elected together; Option (5) may not be elected with Option (2), (3), or (4); Options (2), (3), (4), (5), and (7) may not be elected with respect to Matching Employer Contributions if Option 1.11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, is checked or if Option 1.12(a)(3), 40l(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked and the Employer intends to satisfy the Code Section 401(m)(11) safe harbor with respect to Matching Employer Contributions):

(1) þ    No requirements

(2) o Is employed by the Employer or a Related Employer on the last day of the Contribution Period

(3) o Earns at least 501 Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)

4) o Earns at least (not to exceed 1,000) Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)

(5) o Either earns at least 501 Hours of Service during the Plan Year or is employed by the Employer or a Related Employer on the last day of the Plan Year. (Only if the Contribution Period is the Plan Year.)

(6) o Is not a Highly Compensated Employee for the Plan Year.

(7) o Is not a partner or a member of the Employer, if the Employer is a partnership or an entity taxed as a partnership.

Note: If Option (2), (3), (4), or (5) is adopted during a Contribution Period, such Option shall not become effective until the first day of the next Contribution Period. Matching Employer Contributions attributable to the Contribution Period that are funded during the Contribution Period shall not be subject to the eligibility requirements of Option (2), (3), (4), or (5). If Option (2), (3), (4), (5), or (7) is elected with respect to any Matching Employer Contributions and if Option 1.12(a)(3), 401(k) Safe Harbor Formula, is also elected, the Plan will not be deemed to satisfy the "ACP" test in accordance with Section 6.10 of the Basic Plan Document and will have to pass the "ACP" test each year.

(f) o QualifiedMatching Employer Contributions - Prior to making any Matching Employer Contribution hereunder (other than a 40l(k) Safe Harbor Matching Employer Contribution), the Employer may designate all or a portion of such Matching Employer Contribution as a Qualified Matching Employer Contribution that may be used to satisfy the "ADP" test on Deferral Contributions and excluded in applying the "ACP" test on Employee and Matching Employer Contributions. Unless the additional eligibility requirement is selected below, Qualified Matching Employer Contributions shall be allocated to all Participants who were Active Participants during the Contribution Period and who meet the continuing eligibility requirement(s) described in Subsection 1.11(e) above for the type of Matching Employer Contribution being characterized as a Qualified Matching Employer Contribution.

(1) o To receive an allocation of Qualified Matching Employer Contributions a Participant must also be a Non-Highly Compensated Employee for the Plan Year.

Note: Qualified Matching Employer Contributions may not be excluded in applying the "ACP" test for a Plan Year if the Employer elected Option 1.11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, with respect to Nonelective Employer Contributions, and the "ADP" test is deemed satisfied under Section 6.09 of the Basic Plan Document for such Plan Year.

1.12 NONELECTIVE EMPLOYER CONTRIBUTIONS

If (a) or (b) is elected below, the Employer may make Nonelective Employer Contributions on behalf of each of its "eligible" Participants in accordance with the provisions of this Section l.12. For purposes of this Section 1.12, an "eligible" Participant means a Participant who is an Active Participant during the Contribution Period and who satisfies the requirements of Subsection 1.12(d) or Section 1.13.

Note: An Employer may elect both a fixed formula and a discretionary formula. If both are selected, the discretionary formula shall be treated as an additional Nonelective Employer Contribution and allocated separately in accordance with the allocation formula selected by the Employer.

(a) o Fixed Formula (check one or more):

(1) o Fixed Percentage Employer Contribution - For each Contribution Period, the Employer shall contribute for each "eligible" Participant a percentage of such "eligible" Participant's Compensation equal to):

(A) __ % (not to exceed 25%) to all "eligible" Participants.

Note: The allocation formula in Option 1.12(a)(1)(A) above generally satisfies a design-based safe harbor pursuant to the regulations under Code Section 401(a)(4).

(2) o Fixed Flat Dollar Employer Contribution - The Employer shall contribute for each "eligible" Participant an

amount equal to:

(A) $__ to all "eligible" Participants. (Complete (i) below).

(i) The contribution amount is based on an "eligible" Participant's service for the following period (check one of the following):

(I) o Each paid hour.

(II) o Each Plan Year.

(III) o Other: (must be a period within the Plan Year that does not exceed one week and is uniform with respect to all "eligible" Participants).

Note: The allocation formula in Option 1.12(a)(2)(A) above generally satisfies a design-based safe harbor pursuant to the regulations under Code Section 401(a)(4).

(3) o 401(k) Safe Harbor Formula - The Nonelective Employer Contribution specified in the 401(k) Safe Harbor Nonelective Employer Contributions Addendum is intended to satisfy the safe harbor contribution requirements under Sections 401(k) and 401(m) of the Code such that the "ADP" test (and, under certain circumstances, the "ACP" test) is deemed satisfied. Please complete the 401(k) Safe Harbor Nonelective Employer Contributions Addendum to the Adoption Agreement. (Choose only if Option 1.07(a), Deferral Contributions is checked.)

(a) o Discretionary Formula - The Employer may decide each Contribution Period whether to make a discretionary Nonelective Employer Contribution on behalf of "eligible" Participants in accordance with Section 5.10 of the Basic Plan Document.

(1) o Non-Integrated Allocation Formula - In the ratio that each "eligible" Participant's Compensation bears to the total Compensation paid to all "eligible" Participants for the Contribution Period.

(2) o Integrated Allocation Formula - As (1) a percentage of each "eligible" Participant's Compensation plus (2) a percentage of each "eligible" Participant's Compensation in excess of the "integration level" as defined below. The percentage of Compensation in excess of the "integration level" shall be equal to the lesser of the percentage of the "eligible" Participant's Compensation allocated under (1) above or the "permitted disparity limit" as defined below.

Note: An Employer that has elected Option 1.12(a)(3), 401(k) Safe Harbor Formula, may not take Nonelective Employer Contributions made to satisfy the 401(k) safe harbor into account in applying the integrated allocation formula described above.

(A) "Integration level" means the Social Security taxable wage base for the Plan Year, unless the Employer elects a lesser amount in (i) or (ii) below.

(i) _% (not to exceed 100%) of the Social Security taxable wage base for the Plan Year, or

(ii) $_ (not to exceed the Social Security taxable wage base).

"Permitted disparity limit" means the percentage provided by the following table:

The “Integration Level” is ___% of the Taxable Wage Base	The “Permitted Disparity Limit” is:
20% or less	5.7%
More than 20% but not more than 80%	4.3%
More than 80%, but less than 100%	5.4%
100%	5.7%

Note: An Employer who maintains any other plan that provides for Social Security Integration (permitted disparity) may not elect Option 1.l2(b)(2).

(c) Contribution Period for Nonelective Employer Contributions - The Contribution Period for purposes of calculating the amount of Nonelective Employer Contributions is the Plan Year.

(d) Continuing Eligibility Requirements) - A Participant shall only be entitled to receive Nonelective Employer Contributions for a Plan Year under this Section 1.12 if the Participant is an Active Participant during the Plan Year and satisfies the following requirement(s) (Check the appropriate box(es) - Options (3) and (4) may not be elected together; Option (5) may not be elected with Option (2), (3), or (4); Options (2), (3), (4), (5), and (7) may not be elected with respect to Nonelective Employer Contributions under the fixed formula if Option 1.12(a)(3), 401(k) Safe Harbor Formula, is checked):

(1) o No requirements.

(2) o Is employed by the Employer or a Related Employer on the last day of the Contribution Period.

(3) o Earns at least 501 Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)

(4) o Earns at least (not to exceed 1,000) Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)

(5) o Either earns at least 501 Hours of Service during the Plan Year or is employed by the Employer or a Related Employer on the last day of the Plan Year. (Only if the Contribution Period is the Plan Year.)

(6) o Is not a Highly Compensated Employee for the Plan Year.

(7) o Is not a partner or a member of the Employer, if the Employer is a partnership or an entity taxed as a partnership.

Note: If Option (2) (3), (4), or (5) is adopted during a Contribution Period, such Option shall not become effective until the first day of the next Contribution Period. Nonelective Employer Contributions attributable to the Contribution Period that are funded during the Contribution Period shall not be subject to the eligibility requirements of Option (2), (3), (4), or (5).

1.13 EXCEPTIONS TO CONTINUING ELIGIBILITY REQUIREMENTS

Death, Disability, and Retirement Exceptions - All Participants who become disabled, as defined in Section 1.15, retire, as provided in Subsection 1.14(a), (b), or (c), or die are exempted from any last day or Hours of Service requirement.

1.14 RETIREMENT

(a) The Normal Retirement Age under the Plan is (check one);

(1)þ     age 65

(2) o age __ (specify between 55 and 64).

(3) o later of age (not to exceed 65) or the (not to exceed 5th) anniversary of the Participant's Employment Commencement Date.

(b) þThe Early Retirement Age is the date the Participant attains age 55.0 (specify 55 or greater) and completes 0 years of Vesting Service.

Note: If this Option is elected, Participants who are employed by the Employer or a Related Employer on the date they reach Early Retirement Age shall be 100% vested in their Accounts under the Plan.

(c) þA Participant who becomes disabled, as defined in Section 1.15, is eligible for disability retirement.

Note: If this Option is elected, Participants who are employed by the Employer or a Related Employer on the date they become disabled shall be 100% vested in their Accounts under the Plan. Pursuant to Section 11.03 of the Basic Plan Document, a Participant is not considered to be disabled until he terminates his employment with the Employer.

1.15 DEFINITION OF DISABLED

A Participant is disabled if he/she meets any of the requirements selected below (check the appropriate box(esj):

(a) o The Participant satisfies the requirements for benefits under the Employer's long-term disability plan.

(b) þ    The Participant satisfies the requirements for Social Security disability benefits.

(c) þ    Thec Participant is determined to be disabled by a physician approved by the Employer.

1.16 VESTING

A Participant's vested interest in Matching Employer Contributions and/or Nonelective Employer Contributions, other than 401(k) Safe Harbor Matching Employer and/or 401(k) Safe Harbor Nonelective Employer Contributions elected in Subsection 1.11(a)(3) or 1.12(a)(3), shall be based upon his years of Vesting Service and the schedule selected in Subsection 1.16(c) below, except as provided in Subsection 1.16(d) or (e) below and the Vesting Schedule Addendum to the Adoption Agreement or as provided in Subsection 1.22c.

(a) o When years of Vesting Service are determined, the elapsed time method shall be used

(b) þ Years of Vesting Service shall exclude service prior to the Plan's original Effective Date as listed in Subsection 1.01(g)(1) or Subsection 1.01(g)(2), as applicable.

(c) þ Vesting Schedule(s)

(1) o Nonelective Employer Contributions (check one)

(A) þ N/A - No Nonelective Employer Contributions other than 401(k) Safe Harbor Nonelective Employer Contributions

(B) o 100% Vesting immediately

(C) o 3 year cliff (see C below)

(D) o 6 year graduated

(E) o Other vesting (complete E1 below)

(2) Matching Employer Contributions (check one):

(A) o N/A - No Nonelective Employer Contributions other than 401(k) Safe Harbor Matching Employer Employer Contributions

(B) o 100% Vesting immediately

(C) o 3 year cliff (see C below)

(D) o 6 year graduated (see D below)

(E) þ Other vesting (complete E2 below)

Years of Vesting Service	C	D	E1	E2
—	—%	—%	____%	—%
1	—%	—%	____%	20%
2	—%	20%	____%	40%
3	100%	40%	____%	60%
4	100%	60%	____%	80%
5	100%	80%	____%	100%
6	100%	100%	____%	100%

Note: A schedule elected under El or E2 above must be at least as favorable as one of the schedules in C or D above.

Note: If the vesting schedule is amended and a Participant's vested interest calculated using the amended vesting schedule is less in any year than the Participant's vested interest calculated under the Plan's vesting schedule in effect immediately before the amendment, the amended vesting schedule shall apply only to Employees hired on or after the effective date of the amendment. Please select paragraph (e) below and complete Section (b) of the Vesting Schedule Addendum to the Adoption Agreement describing the vesting schedule in effect for Employees hired before the effective date of the amendment.

Note: If the vesting schedule is amended, the amended vesting schedule shall apply only to Participants who are Active Participants on or after the effective date of the amendment not subject to the prior vesting schedule as provided in the preceding Note. Participants who are not Active Participants on or after that date shall be subject to the prior vesting schedule. Please select paragraph (e) below and complete Section (b) of the Vesting Schedule Addendum to the Adoption Agreement describing the prior vesting schedule.

(d) o A less favorable vesting schedule than the vesting schedule selected in 1.16(c)(2) above applies to Matching Employer Contributions made for Plan Years beginning before the EGTRRA effective date. Please complete Section (a) of the Vesting Schedule Addendum to the Adoption Agreement. A vesting schedule or schedules different from the vesting schedulers) selected above applies to certain Participants. Please complete Section (b) of the Vesting Schedule Addendum to the Adoption Agreement.

1.17 PREDECESSOR EMPLOYER SERVICE

(a) þ    Service for purposes of eligibility in Subsection 1.04(b) and vesting in Subsection 1.16 of this Plan shall include service with the following predecessor employer(s):

Zephyr Insurance Company, Inc.

Traveler's Indemnity Co. (on behalf of Mendota Insurance)

American Service Investment

Walshire Insurance

Southern United

Hamilton Risk

UCC Corporation

Avalon Risk Management

ARM Insurance Agency of Mass.

American Country Holding

American Country Insurance Inc.

Universal Casualty Company

Auto Body Tech Inc.

American Service Insurance Co.

Consolidated Insurance Management Co.

Lincoln General Insurance Co.

Southern United Fire Insurance Company

RPC Insurance Agency, LLC

Assigned Risk Solutions, LID

Kingsway America, Inc.

1.18 PARTICIPANT LOANS

a) þ Participant loans are allowed in accordance with Article 9 and Joan procedures outlined in the Service Agreement

1.19 IN-SERVICE WITHDRAWALS

Participants may make withdrawals prior to termination of employment under the following circumstances (check the appropriate box(es)):

(a) þ Hardship Withdrawals - Hardship withdrawals shall be allowed in accordance with Section 10.05 of the Basic Plan Document, subject to a $500 minimum amount.

(1) Hardship withdrawals will be permitted from:

(A) þ A Participant's Deferral Contributions Account only.

(B) o The Accounts specified in the In-Service Withdrawals Addendum. Please complete Section (a) in In-Service Withdrawals Addendum.

(b) þ Age 59 1/2 - Participants shall be entitled to receive a distribution of all or any portion of the following Accounts upon attainment of age 59112 (check one):

(1) o Deferral Contributions Account.

(2) þ All vested Account balances.

(c) Withdrawal of Employee Contributions and Rollover Contributions

(1) Employee Contributions may be withdrawn in accordance with Section 10.02 of the Basic Plan Document at any time.

(2) Rollover Contributions may be withdrawn in accordance with Section 10.03 of the Basic Plan Document at any time.

(d) o Protected In-Service Withdrawal Provisions - Check if the Plan was converted by plan amendment or received transfer contributions from another defined contribution plan, and benefits under the other defined contribution plan were payable as (check the appropriate box(es)):

(1) o an in-service withdrawal of vested amounts attributable to Employer Contributions maintained in a Participant's Account (check (A) and/or (B)):

(A) o for at least __ (24 or more) months.

(B) o after the Participant has at least 60 months of participation.

(2) o another in-service withdrawal option that is a "protected benefit" under Code Section 411(d)(6). Please complete the In-Service Withdrawals Addendum to the Adoption Agreement identifying the in-service withdrawal option(s).

1.20 FORM OF DISTRIBUTIONS

Subject to Section 13.01,13.02 and Article 14 of the Basic Plan Document, distributions under the Plan shall be paid as provided below. (Check the appropriate box(es).)

(a) Lump Sum Payments - Lump sum payments are always available under the Plan.

(b) þ Installment Payments - Participants may elect distribution under a systematic withdrawal plan (installments).

(c) o Annuities (Check if the Plan is retaining any annuity form(s) of payment.)

(1) An annuity form of payment is available under the Plan for the following reason(s) (check (A) and/or (B), as applicable):

(A) o As a result of the Plan's receipt of a transfer of assets from another defined contribution plan or pursuant to the Plan terms prior to the Adoption Agreement Effective Date specified in Subsection 1.01(g)(1), benefits were previously payable in the form of an annuity that the Employer elects to continue to be offered as a form of payment under the Plan.

(B) o The Plan received a transfer of assets from a plan that was subject to the minimum funding requirements of Code Section 412 and therefore an annuity form of payment is a protected benefit under the Plan in accordance with Code Section 411(d)( 6).

(2) The normal form of payment under the Plan is (check (A) or (B):

(A) o A lump sum payment.

(i) Optional annuity forms of payment (check (I) and/or (II), as applicable). (Must check and complete (I) if a life annuity is one of the optional annuity forms of payment under the Plan.)

(I) o A married Participant who elects an annuity form of payment shall receive a qualified joint and __ % (at least 50% but not more than 100%) survivor annuity. An unmarried Participant shall receive a single life annuity.

The qualified preretirement survivor annuity provided to the spouse of a married Participant who elects an annuity form of payment is purchased with __ % (at least 50%) of the Participant's Account.

(II) o Other annuity form(s) of payment. Please complete Section (a) of the Forms of Payment Addendum describing the other annuity form(s) of payment available under the Plan.

(B) o A life annuity (complete (i) and (ii) and check (iii) if applicable.)

(i) The normal form for married Participants is a qualified joint and __ % (at least 50% but not more than 100%) survivor annuity. The normal form for unmarried Participants is a single life annuity.

(ii) The qualified preretirement survivor annuity provided to a Participant's spouse is purchased with __ % (at least 50%) of the Participant's Account.

(iii) o Other annuity form(s) of payment. Please complete Subsection (a) of the Forms of Payment Addendum describing the other annuity form(s) of payment available under the Plan.

(d) o Eliminated Forms of Payment Not Protected Under Code Section 4Il(d)(6). Check if benefits were payable in a form of payment that is no longer being offered after either the Adoption Agreement Effective Date specified in Subsection 1.01(g)(1) or, if forms of payment are being eliminated by a separate amendment, the amendment effective date indicated on the Amendment Execution Page.

Note: A life annuity option will continue to be an available form of payment for any Participant who elected such life annuity payment before the effective date of its elimination.

(e) Cash Outs and Implementation of Required Rollover Rate

1) þ    If the vested Account balance payable to an individual is less than or equal to the cash out limit utilized for such individual under Section l3.02 of the Basic Plan Document, such Account will be distributed in accordance with the provisions of Section 13.02 or 18.04 of the Basic Plan Document. Unless otherwise elected below, the cash out limit is $1,000.

(A) þ    The cash out limit utilized for Participants is the maximum cash out limit permitted under Code Section 411(a)(11)(A) ($5,000 as of January 1, 2005). Any distribution greater than $1,000 that is made to a Participant without the Participant's consent before the Participant's Normal Retirement Age (or age 62, if later) will be rolled over to an individual retirement plan designated by the Plan Administrator.

1.21 TIMING OF DISTRIBUTIONS

Except as provided in Subsection 1.21(a) or (b) distribution shall be made to an eligible Participant from his vested interest in his Account as soon as reasonably practicable following the Participant's request for distribution pursuant to Article 12 of the Basic Plan Document

(a) Distribution shall be made to an eligible Participant from his vested interest in his Account as soon as reasonably practicable following the date the Participant's application for distribution is received by the Administrator, but in no event later than his Required Beginning Date, as defined in Subsection 2.01(tt).

(b) Preservation of Same Desk Rule - Check if the Employer wants to continue application of the same desk rule described in Subsection 12.01(b) of the Basic Plan Document regarding distribution of Deferral Contributions, Qualified Nonelective Employer Contributions, Qualified Matching Employer Contributions, 401(k) Safe Harbor Matching Employer Contributions, and 401(k) Safe Harbor Nonelective Employer Contributions. (If any of the above-listed contribution types were previously distributable upon severance from employment, this Option may not be selected.)

1.22 TOP HEAVY STATUS

(a) The Plan shall be subject to the Top-Heavy Plan requirements of Article 15(check one):

(1) o for each Plan Year, whether or not the Plan is a "top-heavy plan" as defined in Subsection IS.OI(g) of the Basic Plan Document

(2) þ    for each Plan Year, if any, for which the Plan is a "top-heavy plan" as defined in Subsection IS.Ol(g) of the Basic Plan Document.

(3) o Not applicable. (Choose only if (A) Plan covers only employees subject to a collective bargaining agreement, or (B) Option 1. 11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(0)(3), 401(k) Safe Harbor Formula, is selected, and the Plan does not provide for Employee Contributions or any other type of Employer ontributions.)

(b) If the Plan is or is treated as a "top-heavy plan" for a Plan Year, each non-key Employee shall receive an Employer Contribution of at least 3.0 (3 or 5)% of Compensation for the Plan Year in accordance with Section 15.03 of the Basic Plan Document The minimum Employer Contribution provided in this Subsection 1.22(b) shall be made under this Plan only if the Participant is not entitled to such contribution under another qualified plan of the Employer, unless the Employer elects otherwise below:

(1) o The minimum Employer Contribution shall be paid under this Plan in any event.

(2) o Another method of satisfying the requirements of Code Section 416. Please complete the 416 Contributions Addendum to the Adoption Agreement describing the way in which the minimum contribution requirements will be satisfied in the event the Plan is or is treated as a "top-heavy plan".

(3) o Not applicable. (Choose only if (A) Plan covers only employees subject to a collective bargaining agreement, or (B) Option 1. 11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, is selected and the Plan does not provide for Employee Contributions or any other type of Employer Contributions.)

Note: The minimum Employer contribution may be less than the percentage indicated in Subsection 1.22(b) above to the extent provided in Section 15.03 of the Basic Plan Document.

(c) If the Plan is or is treated as a "top-heavy plan" for a Plan Year, the following vesting schedule shall apply instead of the schedulers) elected in Subsection 1.16(c) for such Plan Year and each Plan Year thereafter (check one):

(1) o Not applicable. (Choose only if one of the following applies: (A) Plan provides for Nonelective Employer Contributions and the schedule elected in Subsection 1.16(c)(l) is at least as favorable in all cases as the schedules available below, (B) Option 1.11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, or Option 1.12(a)(3), 401(k) Safe Harbor Formula, is selected, and the Plan does not provide for Employee Contributions or any other type of Employer Contributions, or (C) the Plan covers only employees subject to a collective bargaining agreement.)

(2) o 100% vested after __ (not in excess of 3) years of Vesting Service.

(3) þ    Graded vesting:

Years of Vesting Service	Vesting Percentage	Must be at least
—	—%	—%
1	20%	—%
2	40%	20%
3	60%	40%
4	80%	60%
5	100%	80%
6	100%	100%

Note: If the Plan provides for Nonelective Employer Contributions and the schedule elected inSubsection 1.16(c)(1) is more favorable in all cases than the schedule elected in Subsection 1.22(c) above, then the schedule in Subsection 1.16(c)(1) shall continue to apply even in Plan Years in which the Plan is a "top-heavy plan".

1.23 CORRECTION TO MEET 415 REOUIREMENTS UNDER MULTIPLE DEFINED CONTRIBUTION PLANS

o Other Order for Limiting Annual Additions - If the Employer maintains other defined contribution plans, annual additions to a Participant's Account shall be limited as provided in Section 6.12 of the Basic Plan Document to meet the requirements of Code Section 415, unless the Employer elects this Option and completes the 415 Correction Addendum describing the order in which annual additions shall be limited among the plans.

1.24 INVESTMENT DIRECTION

Investment Directions - Subject to Section 8.03 of the Basic Plan Document, Participant Accounts shall be invested in accordance with the investment directions provided to the Trustee by each Participant for allocating his entire Account among the Options listed in the Service Agreement.

1.25 ADDITIONAL PROVISIONS

The Employer may elect Option (a) below and complete the Additional Provisions Addendum to describe provisions which cannot be shown by making the elections provided in this Adoption Agreement.

(a) þ    The Employer has completed Additional Provisions Addendum to show the provisions of the Plan which supplement and/or alter provisions of this Adoption Agreement.

1.26 SUPERSEDING PROVISIONS

The Employer may elect Option (a) below and complete the Superseding Provisions Addendum to describe overriding provisions which cannot be shown by making the elections provided in this Adoption Agreement.

(a) o The Employer has completed Superseding Provisions Addendum to show the provisions of the Plan which supersede provisions of this Adoption Agreement and/or the Basic Plan Document.

Note: If the Employer elects superseding provisions in Option (a) above, the Employer may not be permitted to rely on the Volume Submitter Sponsor's advisory letter for qualification of its Plan and may be required to apply for a determination letter as described in Section 1.27 below. In addition, such superseding provisions may in certain circumstances affect the Plan's status as a pre-approved volume submitter plan eligible for the 6-year remedial amendment cycle.

1.27 RELIANCE ON ADVISORY LETTER

An adopting Employer may rely on an advisory letter issued by the Internal Revenue Service as evidence that this Plan is qualified under Code Section 401 only to the extent provided in Section 19.02 of Revenue Procedure 2005- 16. The Employer may not rely on the advisory letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the advisory letter issued with respect to this Plan and in Section 19.03 of Revenue Procedure 2005-16. In order to have reliance in such circumstances or with respect to such qualification requirements, application for a determination letter must be made to Employee Plans Determinations of the Internal Revenue Service.

Failure to properly complete the Adoption Agreement and failure to operate the Plan in accordance with the terms of the Plan document may result in disqualification of the Plan.

This Adoption Agreement may be used only in conjunction with Fidelity Basic Plan Document No. 14. The Volume Submitter Sponsor shall inform the adopting Employer of any amendments made to the Plan or of the discontinuance or abandonment of the volume submitter plan document.

1.28 ELECTRONIC SIGNATURE AND RECORDS

This Adoption Agreement, and any amendment thereto, may be executed or affirmed by an electronic signature or electronic record permitted under applicable law or regulation, provided the type or method of electronic signature or electronic record is acceptable to the Trustee.

1.29 VOLUME SUBMITTER INFORMATION

Name of Volume Submitter Sponsor: Fidelity Management & Research Company

Address of Volume Submitter Sponsor: 82 Devonshire Street Boston, MA 02109

EXECUTION PAGE (Employer's Copy)

The Fidelity Basic Plan Document No. 14 and the accompanying Adoption Agreement together comprise the Volume Submitter Defined Contribution Plan. It is the responsibility of the adopting Employer to review this volume submitter plan document with its legal counsel to ensure that the volume submitter plan is suitable for the Employer and that Adoption Agreement has been properly completed prior to signing.

IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 7^th day of June 2011.

Employer:    American Service Insurance Co; dba Atlas Financial Holdings, Inc

By:        /s/ Zenovia Love

Zenovia Love

Title        HR Manager

Note: Only one authorized signature is required to exe ute this Adoption Agreement unless the Employer's corporate policy mandates two authorized signatures.

Employer:    American Service Insurance Co; dba Atlas Financial Holdings, Inc

By:        /s/ Scott D. Wollney

Scott D. Wollney

Title:        President

Accepted by: Fidelity Management Trust Company, as Trustee

ADDITIONAL PROVISIONS ADDENDUM

For Plan Name: ATLAS Financial Holdings. Inc. 401(k) Plan

(a) Additional Provision(s) - The following provisions supplement and/or, to the degree described herein, supersede other provisions of this Adoption Agreement in the following manner:

(1) The following replaces Subsection 1.04(b):

(b) Eligibility Service Requirements) - There shall be no eligibility service requirements for contributions to the Plan, except as indicated below.

(1) For Deferral Contributions, Employee Contributions, and Qualified Nonelective Employer Contributions, Employees must have:

1 (not to exceed 12) months of Eligibility Service requirement (no minimum Hours of Service can be required).

(2) For Matching Employer Contributions, Employees must have:

6 (not to exceed 24) months of Eligibility Service requirement (no minimum Hours of Service can be required).

Note: If the Employer selects an Eligibility Service requirement of more than 365 days or 12 months or the two year Eligibility Service requirement, then contributions subject to such Eligibility Service requirement must be 100% vested when made.

Note: If different eligibility requirements are selected for Deferral Contributions in Subsection 1.04(a) or 1.04(b) than for Employer Contributions and a more stringent eligibility requirement is elected in Subsection 1.04(a) or (b) either (1) with respect to Matching Employer Contributions and Option 1.11(a)(3), 401(k) Safe Harbor Matching Employer Contributions, is selected or (2) with respect to Nonelective Employer Contributions and Option 1.12(a)(3), 401(k) Safe Harbor Formula, is selected, then the Plan may be disaggregated for testing purposes as described in Section 6.09 of the Basic Plan Document. If a more stringent eligibility requirement is elected in Subsection 1.04(a) or (b) for Nonelective Employer Contributions than for Matching Employer Contributions and Option 1.12(a)(3), 401(k) Safe Harbor Formula, is selected for Nonelective Employer Contributions, then Matching Employer Contributions may be similarly disaggregated.

Note: If different eligibility requirements are selected for Deferral Contributions in Subsection 1.04(a) or 1.04(b) than for Employer Contributions and the Plan becomes a "top-heavy pian," the Employer may need to make a minimum Employer Contribution on behalf of non-key Employees who have satisfied the eligibility requirements for Deferral Contributions and are employed on the last day of the Plan Year, but have not satisfied the eligibility requirements for Employer Contributions.

ADDENDUM TO ADOPTION AGREEMENT

Fidelity Basic Plan Document No. 14

RE: Pension Protection Act of 2006,

The Heroes Earnings Assistance and Relief Act of2008,

The Worker, Retiree and Employee Recovery Act of2008

And Code Sections 401(k) and 401(m) 2009 Proposed Regulations

Plan Name: ATLAS Financial Holdings. Inc. 401(k) Plan

Fidelity 5-digit Plan Number: 27903

PREAMBLE

Adoption and Effective Date of Amendment. This amendment of the Plan is adopted to reflect certain provisions of the Pension Protection Act of 2006 (the "PPA"). This amendment is intended as good faith compliance with the PPA and is to be construed in accordance with applicable guidance. Except as otherwise provided below, this amendment shall be effective with respect to Fidelity's Volume Submitter plan for Plan Years beginning after December 31, 2006.

Supersession of Inconsistent Provisions. This amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment. (Execution of this PPA Addendum is not required unless one of (a) through (h) is being selected below and no provision of this PPA Addendum will be interpreted to supersede the provisions of the Plan unless selected below.)

(a) o In-service, Age 62 Distribution of Money Purchase Benefits. A Participant who has attained at least age 62 shall be eligible to elect to receive a distribution of benefit amounts accrued as a result of the Participant's participation in a money purchase pension plan (either due to a merger into this Plan of money purchase pension plan assets and liabilities or because this Plan is a money purchase pension plan), if any. This subsection (a) shall be effective to permit such distributions on and after the following effective date: ______ (can be no earlier than the first day of the first plan year beginning after December 31, 2006).

(b) o Automatic Enrollment Contributions. (Choose only if selecting (d) or (e) below.)

(1) Adoption of Automatic Enrollment Contributions. Beginning on the effective date of this paragraph (1), as provided in paragraph (A) below (the "Automatic Enrollment Effective Date") and subject to the remainder of this Subsection (b), unless an Eligible Employee affirmatively elects otherwise, his Compensation will be reduced by __ % (except as such percentage may be modified for certain Eligible Employees through the Additional Provisions Addendum to the Adoption Agreement, the "Automatic Enrollment Rate"), such percentage to be increased in accordance with Subsection (c) (if applicable), for each payroll period in which he is an Active Participant, beginning as indicated in (2) below, and the Employer will make a pre-tax Deferral Contribution in such amount on the Participant's behalf in accordance with the provisions of Section 5.03 of the Basic Plan Document (an "Automatic Enrollment Contribution").

(A) Automatic Enrollment Effective Date: __________________

(B) If the Plan had an automatic contribution arrangement before the Automatic Enrollment Effective Date provided in (A) above (the "Pre-existing Arrangement"), the effective date of the Pre existing Arrangement was: ______

Please also check (i) and/or (ii) below if applicable:

(i) o The Pre-existing Arrangement was a Qualified Automatic Contribution Arrangement described in Code section 401(k)(13)(B).

(ii) o The Pre-existing Arrangement was an Eligible Automatic Contribution Arrangement described in Code section 414(w)(3).

(2) With respect to an affected Participant, Automatic Enrollment Contributions will begin as soon as administratively feasible on or after (check one):

(A) o The Participant's Entry Date.

(B) o ___ (minimum of 30) days following the Participant's date of hire, but no sooner than the Participant's Entry Date.

Within a reasonable period ending no later than the day prior to the date Compensation subject to the reduction would otherwise become available to the Participant, an Eligible Employee may make an affirmative election not to have Automatic Enrollment Contributions made on his behalf. If an Eligible Employee makes no such affirmative election, his Compensation shall be reduced and Automatic Enrollment Contributions will be made on his behalf in accordance with the provisions of this Subsection (b), and Subsection (c), if applicable, until such Active Participant elects to change or revoke such Deferral Contributions as provided in Subsection 1.07(a)(1). Automatic Enrollment Contributions shall be made only on behalf of Active Participants who are first hired by the Employer on or after the Automatic Enrollment Effective Date and do not have a Reemployment Commencement Date, unless otherwise provided below.

(3) o Additionally, subject to the Note below, unless such affected Participant affirmatively elects otherwise within the reasonable period established by the Plan Administrator, Automatic Enrollment Contributions will be made with respect to the Employees described below. (Check all that apply).

(A) o Inclusion of Previously Hired Employees. On the later of the date specified in Subsection (b)(2) with regard to such Eligible Employee or as soon as administratively feasible on or after the 30th day following the Notification Date specified in (iii) below, Automatic Enrollment Contributions will begin for the following Eligible Employees who were hired before the Automatic Enrollment Effective Date and have not had a Reemployment Commencement Date. (Check (i) or (ii), complete (iii), and complete (iv), if applicable).

(i) o Unless otherwise elected in (iv) below, all such Employees who have never had a Deferral Contribution election in place. If the Employer has elected a QACA in Subsection (d) below, then for the effective date of this election, all Participants for whom contributions are being made pursuant to an automatic contribution arrangement at a percentage not at least equal to the rate specified above (or the limit of automatic increase(s) as specified in Subsection (c)(2) below, if greater) will be automatically enrolled on the 30lh day following the Notification Date at the rate given in Subsection (b)(l) above.

(ii) o Unless otherwise elected in (iv) below, all such Employees who have never had a Deferral Contribution election in place and were hired by the Employer before the Automatic Enrollment Effective Date, but after the following date:

(iii) Notification Date: _____

(iv) o In addition to the group of Employees elected in (i) or (ii) above, any Employee described in (i) or (ii) above, as applicable, even if he has had a Deferral Contribution election in place previously, provided he is not suspended from making Deferral Contributions pursuant to the Plan and has a deferral rate of zero on the Notification Date. If the Employer has elected a QACA in Subsection (d) below, then for the effective date of this election, all Participants not deferring a percentage at least equal to the rate specified above (or the limit of automatic increase(s) as specified in Subsection (c)(2) below, if greater) will be automatically enrolled on the 30th day following the Notification Date at the rate given in Subsection (b)(I) above.

(B) o Inclusion of Rehired Employees. Unless otherwise stated herein, each Eligible Employee having a Reemployment Commencement Date on the Automatic Enrollment Effective Date. If Subsection (b)(3)(A)(ii) is selected, only such Employees with a Reemployment Commencement on or after the date specified in Subsection (b)(3)(A)(ii) will be automatically enrolled. If Subsection (b)(3)(A) is not selected, only such Employees with a Reemployment Commencement on or after the Automatic Enrollment Effective Date will be automatically enrolled. If Subsection (b)(2)(B) has been elected above, for purposes of Subsection (b)(2) only, such Employee's

Reemployment Commencement Date will be treated as his date of hire.

(c) o Automatic Deferral Increase (Choose only if Automatic Enrollment Contributions are elected in Subsection (b) above) - Unless an Eligible Employee affirmatively elects otherwise after receiving appropriate notice, Deferral Contributions for each Active Participant having Automatic Enrollment Contributions made on his behalf shall be increased annually by the (whole number) percentage of Compensation stated in (I) below until the deferral percentage stated in Section 1.07(a)(1) is reached (except that the increase will be limited to only the percentage needed to reach the limit stated in Section 1.07(a)(1), if applying the percentage in (1) would exceed the limit stated in Section 1.07(a)( 1), unless the Employer has elected a lower percentage limit in Subsection (c)(2) below.

(1) Increase by ____% (except as such percentage may be modified for certain Eligible Employees through the Additional Provisions Addendum to the Adoption Agreement, but not to exceed 10%) of Compensation. Such increased Deferral Contributions shall be pre-tax Deferral Contributions regardless of any election made by the Participant to have any portion of his Deferral Contributions treated as a Roth 401(k) Contribution.

(2) o Limited to % of Compensation (not to exceed the percentage indicated in Subsection 1.07(a)(1)

(3) The Automatic Deferral Increase for each Participant still subject to it pursuant to Section 5.03(c) of the Basic Plan Document shall occur:

(A) o On each anniversary of such Participant's automatic enrollment date pursuant to (b)(2) or (b)(3) above, as applicable.

(B) o Except if selected below with regard to the first such annual increase, each year on the following date: _______

(i) o The automatic deferral increase shall not apply to a Participant within the first six months following the automatic enrollment date pursuant to (b)(2) or (b)(3) above, as applicable.

(d) o Qualified Automatic Contribution Arrangement. The automatic contribution arrangement described in Sections (b) and (c) (if applicable) of this Addendum shall constitute a qualified automatic contribution arrangement described in Code Section 401(k)(13) ("QACA"), initially effective as of the following date: _________ (can be no earlier than the first day of the first plan year beginning after December 31, 2007).

(1) o QACA Matching Employer Contribution Formula. Matching Employer Contributions used to satisfy the QACA must vest at least as rapidly as 100% once the Participant is credited with two Years of Service.

(A) o 100% of the first 1% of the Active Participant's Compensation contributed to the Plan and 50% of the next 5% of the Active Participant's Compensation contributed to the Plan.

Note: If the Employer selects this formula and does not elect Subsection 1.11(b) (or Subsection 1.11(t) through the Additional Provisions Addendum, as appropriate), Additional Matching Employer Contributions, Matching Employer Contributions will automatically meet the safe harbor contribution requirements for deemed satisfaction of the "ACP" test. (Employee Contributions must still be tested for "ACP" test purposes.)

(B) (i) o Other Enhanced Match: _% of the first _% of the Active Participant's Compensation contributed to the Plan,

_% of the next _% of the Active Participant's Compensation contributed to the Plan,

_% of the next _% of the Active Participant's Compensation contributed to the Plan.

Note: To satisfy the safe harbor contribution requirement for the "ADP" test, the percentages specified above for Matching Employer Contributions may not increase as the percentage of Compensation contributed increases, and the aggregate amount of Matching employer contributions at such rates must at least equal the aggregate amount of Matching Employer Contributions that would be made under the percentages described in (d)(l)(A) of this Addendum.

(ii) o The formula in (i) of this paragraph (B) is also intended to satisfy the safe harbor contribution

requirement for deemed satisfaction of the "ACP" test with respect to Matching Employer Contributions. (Employee Contributions must still be tested for "ACP" test purposes.)

(C) o Safe harbor Matching Employer Contributions shall not be made on behalf of Highly Compensated Employees.

(2) o QACA Nonelective Employer Contribution. Nonelective Employer Contributions used to satisfy the QACA must vest at least as rapidly as 100% once the Participant is credited with two Years of Service.

(A) o For each Plan Year, the Employer shall contribute for each eligible Active Participant an amount equal to __ % (not less than 3% nor more than 25%) of such Active Participant's Compensation.

(B) o The Employer may decide each Plan Year whether to amend the Plan by electing and completing (i) below to provide for a contribution on behalf of each eligible Active Participant in an amount equal to at least 3% of such Active Participant's Compensation.

Note: An employer that has selected paragraph (B) above must amend the Plan by electing (i) below no later than 30 days prior to the end of each Plan Year for which the QACA Nonelective Employer Contributions are being made.

(i) o For the Plan Year beginning ~ the Employer shall contribute for each eligible Active Participant an amount equal to __ % (not less than 3% nor more than 25%) of such Active Participant's Compensation.

(C) o QACA Nonelective Employer Contributions shall not be made on behalf of Highly Compensated Employees.

(D) o The employer has elected to make Matching Employer Contributions under Subsection 1.10 of the Adoption Agreement, if any, that are intended to meet the requirements for deemed satisfaction of the "ACP" test with respect to Matching Employer Contributions.

(3) o The Plan previously had a QACA, but the Plan was amended to remove the QACA effective: ______

(e) o Eligible Automatic Contribution Arrangement. The automatic contribution arrangement described in Sections (b) and (c) (if applicable) of this Addendum shall constitute an eligible automatic enrollment arrangement described in Code Section 414(w) ("EACA"), effective as of the following date: _________ (can be no earlier than the first day of the first plan year beginning after December 31, 2007).

(1) o Permissible Withdrawal. A Participant who has made an Automatic Enrollment Contribution pursuant to the EACA (an "EACA Participant") shall be eligible to elect to withdraw the amount attributable to such Automatic Enrollment Contribution pursuant to the following rules:

(A) The EACA Participant must make any such election within ninety days of his automatic enrollment date pursuant to (b)(2) or (b)(3) above, as applicable. Upon making such an election, the EACA Participant's Deferral Contribution election will be set to zero until such time as the EACA Participant's Deferral Contribution rate has changed pursuant to Section 1.07(a)(I) or this Addendum.

(B) The amount of such withdrawal shall be equal to the amount of the EACA Deferrals through the end of the fifteen day period beginning on the date the Participant makes the election described in (A) above, adjusted for allocable gains and losses to the date of such withdrawal.

(C) Any amounts attributable to Employer Matching Contributions allocated to the Account of an EACA Participant with respect to EACA Deferrals that have been withdrawn pursuant to this Section (e)(l) shall be forfeited. In the event that Employer Matching Contributions would otherwise be allocated to the EACA Participant's Account with respect to EACA Deferrals that have been so withdrawn, the Employer shall not contribute such Employer Matching Contributions to the Plan.

(2) An Active Participant who is otherwise covered by the EACA but who makes an affirmative election regarding the amount of Deferral Contributions shall remain covered by the EACA solely for purposes of receiving any required notice from the Plan Administrator in connection with the EACA and for purposes of determining the

period applicable to the distribution of certain excess contributions pursuant to Sections 6.04 and 6.07 of the Basic Plan Document.

(3) o The Plan previously allowed the Permissible Withdrawal described in (e)(1) above, but the Plan was amended to remove the Permissible Withdrawal effective for Participants automatically enrolled on or after the following date: _______.

(f) o Coverage under the QACA and/or EACA. The QACA and/or EACA described in the previous sections of this PPA Addendum shall cover only those Active Participants eligible to affirmatively elect to make Deferral Contributions described below (Check all that apply. If Option (e)(l), Permissible Withdrawal, has been selected by the Employer, then all Employees subject to an automatic enrollment arrangement through the Plan must be covered by the EACA.):

(1) o Those who are not employees of an unrelated employer listed in Section (c) of the Participating Employers Addendum and are not collectively bargained employees, as defined in Treasury Regulation section 1.41 O(b)-6( d)(2).

(2) o Those who are not employees of an unrelated employer listed in Section (c) of the Participating Employers Addendum and are collectively bargained employees, as defined in Treasury Regulation section 1.41O(b)-6(d)(2), except for those covered under the following collective bargaining agreement (s): _________

(3) o Those who are employees of an unrelated employer listed in Section (c) of the Participating Employers Addendum, except as provided in (A) below if selected.

(A) o Employees of the following unrelated employer(s) listed in Section (c) of the Participating Employers Addendum shall not be covered by the QACA and/or EACA: ________

Note: In the event the Plan's automatic contribution arrangement is both an EACA and a QACA, the Employer's elections in this subsection (f) apply to both the EACA and the QACA.

(g) o Qualified Reservist Distribution. A Participant called to active duty after September 11,2001 for a period that is either indefinite or to exceed 179 days and the Participant takes the distribution between the date of the call to active duty and the close of the active duty period. The distribution may be made only from amounts attributable to 401(k) deferrals and is exempt from the 10% income tax penalty that would otherwise apply if the Participant has not yet attained age 59-112. The PPA would further permit the Participant to repay the distribution to an IRA only (not to the plan) within two years after the end of the active duty period. This subsection (g) shall be effective to permit such distributions after the following date:__________________ (can be no earlier than September 11,2001).

(h) o Change to Addendum Provisions. The Employer has amended the provisions of Subsection (a), (b), (c), (d), (e), (f) and/or (g) to be as indicated above.

Amendment Execution

IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this 7^th day of June 2011.

Employer: American Service Insurance Company, Inc., dba Atlas Financial Holdings, Inc.

By:     /s/ Zenovia Love

Zenovia Love    

HR Manager

By:    /s/ Scott D. Wollney

Scott D. Wollney

President

EX-10.5

EXHIBIT 10.5

TRANSITION SERVICES AGREEMENT

KINGSWAY FINANCIAL SERVICES INC. and AMERICAN INSURANCE ACQUISITION INC.

December 31, 2010

THIS Transition Services Agreement dated December 31, 2010 and effective as of the Closing Date (as defined herein below).

BETWEEN:

KINGSWAY FINANCIAL SERVICES INC., a corporation existing under the laws of the State of Delaware

(the “KFS”)

‑ and ‑

AMERICAN INSURANCE ACQUISITION INC., a corporation existing under the laws of the State of Delaware

("AIAI")

(each a “Party” and collectively, the “Parties”)

RECITALS:

A. JJR VI Acquisition Corp., Atlas Acquisition Corp., KFS and AIAI have entered into an agreement and plan of merger dated December 14, 2010 (the “Merger Agreement”), upon the completion of which AIAI, American Country Insurance Company ("ACIC") and American Service Insurance Company, Inc. ("ASI" and collectively with ACIC and AIAI, the "Companies") will become wholly-owned subsidiaries of the Atlas, on and subject to the terms and conditions set out in the Merger Agreement.

B. As a condition to Closing (as defined in the Merger Agreement), KFS and AIAI have agreed to enter into this Agreement, pursuant to which KFS and its Affiliates (as defined in the Merger Agreement) shall provide certain transition services to AIAI and its Affiliates and/or AIAI and its Affiliates shall provide certain transition services to KFS and its Affiliates, after Closing.

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are acknowledged), the Parties agree as follows:

ARTICLE I INTERPRETATION

1. Definitions.

In this Agreement, the following terms have the following meanings:

“Agreement” means this Transition Services Agreement and all Schedules attached hereto.

“AIAI Information Systems” shall mean all AIAI Software, domain names, hardware, telecommunications, network connections, peripherals and other communication and technology infrastructure of the Companies used by Kingsway, or on behalf of Kingsway, in the Ordinary Course prior to Closing.

“AIAI Intellectual Property” means all Intellectual Property rights used by, or on behalf of Kingsway, in the Ordinary Course prior to Closing, that is owned or licensed by any of the Companies.

“AIAI Services” has the meaning specified in Section 4.2.

“AIAI Software” means all software owned or used by the Companies in the Ordinary Course, including all computer programs, operating systems, applications, websites, website content, interfaces, applets, scripts, macros, firmware, middleware, development tools and other software code, whether in object code, source code or other format or in SQL, HyperText Markup Language, XML or other language.

“Business” means the property and casualty insurance business carried on by the Companies as of the date hereof.

“Claims” has the meaning specified in Section 13.2.

“Closing” has the meaning specified in the Merger Agreement.

“Closing Date” has the meaning specified in the Merger Agreement.

“Change Request” has the meaning specified in Section 5.1(a).

“Confidential Information” has the meaning specified in Section 10.1(a).

“Consent Fee” has the meaning specified in Section 7.2(b).

“Developed Company IP” has the meaning specified in Section 11.2(b).

“Developed Kingway IP” has the meaning specified in Section 11.2(b).

“Force Majeure Event” has the meaning specified in Section 7.3.

“Kingsway” shall mean KFS and its Affiliates, excluding the Companies.

“Kingsway Insurance Information Systems” shall mean all Kingsway Software, domain names, hardware, telecommunications, network connections, peripherals and other communication and technology infrastructure of Kingsway used by the Companies, or on behalf of the Companies, in the Ordinary Course prior to Closing.

“Kingsway Intellectual Property” means all Intellectual Property rights used by, or on behalf of the Companies, in the Ordinary Course prior to Closing, that is owned or licensed by Kingsway.

“Kingsway Services” has the meaning specified in Section 3.2.

“Kingsway Software” means all software owned or used by Kingsway in the Ordinary Course, including all computer programs, operating systems, applications, websites, website content, interfaces, applets, scripts, macros, firmware, middleware, development tools and other software code, whether in object code, source code or other format or in SQL, HyperText Markup Language, XML or other language.

“Merger Agreement” has the meaning specified in the Recitals to this Agreement.

“Ordinary Course” means, with respect to an action taken by a Person, that such action is consistent with the past practices of the Person or its business, as the case may be, and is taken in the ordinary course of the normal day-to-day operations of the Person or its business, as the case may be.

“Performing Party” has the meaning specified in Section 5.1(a).

“Performing Party Systems” has the meaning specified in Section 9.3(a).

“Recipient Party” has the meaning specified in Section 5.1(a).

“Recipient Party Personnel” has the meaning specified in Section 9.3(a).

“Representatives” has the meaning specified in Section 10.1(b).

“Service Fees” has the meaning specified in Section 8.1(a).

“Services” means the AIAI Services or the Kingsway Services, as applicable.

“Term” has the meaning specified in Section 2.1.

“Termination Fee” has the meaning specified in Section 5.2(c).

“Termination Fee Approval” has the meaning specified in Section 5.2(c).

“Third Party Consent” means a license, consent, approval or waiver from a third party (including the Department of Insurance for the State of Illinois) that is required in order to perform a Service.

Defined terms used but not otherwise defined in this Agreement have the meanings ascribed to such terms in the Merger Agreement.

2. Gender and Number.

Any reference in this Agreement to gender includes all genders and words importing the singular include the plural and vice versa.

3. Certain Phrases and Calculation of Time.

In this Agreement: (i) the words “including” and “includes” mean “including (or includes) without limitation”; and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and if the last day of any such period is not a Business Day, such period will end on the next Business Day.

When calculating the period of time “within” which or “following” which any act or event is required or permitted to be done, notice given or steps taken, the date which is the reference date in calculating such period is excluded from the calculation. If the last day of any such period is not a Business Day, such period will end on the next Business Day.

4. Headings, etc.

The division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect or be used in the construction or interpretation of this Agreement.

5. References to the Schedules and Exhibits.

The Schedules and the Exhibits set out below form an integral part of this Agreement:

Schedule 3.2        -    Kingsway Services

Schedule 4.2        -    AIAI Services

Schedule 11.1        -    Personal Information

6. Currency.

All monetary amounts in this Agreement, unless otherwise specifically indicated, are stated in United States currency.

7. Statutory References.

Unless otherwise specifically indicated, any reference to a statute in this Agreement refers to that statute and to the regulations made under that statute.

8. No Presumption.

The Parties and their counsel have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement is to be construed as if drafted jointly by the

Parties. No presumption or burden of proof will arise in favour of any Party by virtue of the authorship of any provision of this Agreement.

9. Governing Law.

(a) This Agreement is governed by and is to be interpreted, construed and enforced in accordance with the laws of the State of Illinois, without regard to conflict of law principles.

(b) Each of the Parties irrevocably attorns and submits to the non‑exclusive jurisdiction of the courts of the State of Illinois and waives objection to the venue of any proceeding in such court.

ARTICLE II TERM

1.    Term

This Agreement shall commence on the Closing Date and shall continue until December 31, 2013 (the “Term”), unless extended or terminated earlier in accordance with the terms of this Agreement.

2.    Extension of Term

Prior to the expiration of the Term any Party may, on written notice to other Parties, elect to extend the Term on the same terms and conditions for further twelve (12) month periods,provided that unless otherwise agreed to in writing by the Parties the Term may not be renewed more than three (3) times in total.

ARTICLE III SERVICES TO BE PROVIDED BY KFS

1.     Provision of Services.

KFS agrees to provide certain transition services to AIAI to: (i) enable the uninterrupted operation of the Business following Closing; (ii) assist in an orderly transfer of the Companies as a result of the change of their ownership; and (iii) permit the Companies to obtain alternate sources of supply of services within a reasonable time after Closing. AIAI acknowledges that certain Kingsway Services are provided for a limited period of time, notwithstanding Section 2.1 or Section 2.2, as more particularly set forth and described in the Schedules hereto.

2.    Services to be Provided by KFS to AIAI.

Subject to the terms and conditions of this Agreement, KFS shall provide or shall an Affiliate to provide AIAI with the following transition services (collectively, the “Kingsway Services”):

(a)    accounting support services, as more particularly described in Schedule 3.2 (the “Kingsway Accounting Support Services”);

(b)     auto claims handling services and private passenger auto policy administration and underwriting support services as more particularly described in Schedule 3.2 (the “Kingsway Auto Policy Administration and Underwriting Support Services”);

(c)     those services and the use of Kingsway Insurance Information Systems in support of the Business as set forth on Schedule 3.2 attached hereto (the “Kingsway IT Services”);

(d)     tax return services as more particularly described in Schedule 3.2 (the "Kingsway Tax Return Services").

The Parties acknowledge that Schedule 3.2 contemplates that certain of the Kingsway Services will be set out and described in certain additional agreements or amendments to this Agreement (collectively the “Kingsway Service Amendments”). The Parties agree to use commercially reasonable efforts in good faith to expeditiously negotiate and enter into all Kingsway Service Amendments, subject to the terms of Section 7.2.

3.    License of Kingsway Intellectual Property.

(a)     Kingsway hereby grants to AIAI, until such time as all personal lines business written by the Companies prior to Closing has expired and not been renewed and any retention period for records relating to such business has expired under applicable law, a royalty-free, non-transferable and non-exclusive licence to use in the operation of the Business any Kingsway Intellectual Property that is, and Kingsway Insurance Information Systems that are: (i) used by the Companies prior to Closing; and (ii) necessary to the receive the Kingsway Services; provided, however, that AIAI hereby agrees to be bound and to cause the Companies to be bound by all existing restrictions, obligations and conditions that currently exist or relate to the Kingsway Intellectual Property and Kingsway Insurance Information Systems and such restrictions, obligations and conditions will apply to AIAI and/or the Companies, mutatis mutandis.

until such time as the minimum retention period for such records has expired under applicable law

(b)     For greater certainty, but subject to its obligations to provide the Kingsway Services hereunder, such license of Kingsway Intellectual Property and/or Kingsway Insurance Information Systems shall not, and shall not be deemed to: (i) prohibit KFS or its Affiliates from freely using or licensing (on a non-exclusive basis) any of the Kingsway Intellectual Property or Kingsway Insurance Information Systems; or (ii) prohibit KFS or its Affiliates from transferring any of the Kingsway Intellectual Property or Kingsway Insurance Information Systems provided that the transferee assumes KFS's obligations under this Agreement in respect of the transferred asset.

ARTICLE IV SERVICES TO BE PROVIDED BY AIAI TO KFS

1.    Provision of Services.

AIAI agrees to provide certain transition services to KFS to: (i) enable the uninterrupted operation of KFS' business following Closing; and (ii) permit KFS to obtain alternate sources of supply of services within a reasonable time after Closing.

2.    Services to be Provided by AIAI to KFS.

Subject to the terms and conditions of this Agreement, AIAI shall provide or shall cause an Affiliate to provide KFS with the following transition services (collectively, the “AIAI Services”):

(a)     accounting support services, as more particularly described in Schedule 4.2 (the “AIAI Accounting Support Services”);

(b)    auto claims handling services and commercial auto policy administration and underwriting support services as more particularly described in Schedule 4.2 (the “AIAI Claims Handling Services”);

(c)    personnel and payroll records support services as more particularly described in Schedule 4.2 (the “AIAI Personnel and Payroll Support Services”);

(d)     information technology services, as more particularly described in Schedule 4.2 (the “AIAI IT Services”);

(e)    tax return services as more particularly described in Schedule 4.2 (the "AIAI Tax Return Services"); and

(f)    additional tax services as more particularly described in Schedule 4.2 (the "AIAI Additional Tax Services").

The Parties acknowledge that Schedule 4.2 contemplates that certain of the AIAI Services will be set out and described in certain additional agreements or amendments to this Agreement (collectively the “AIAI Service Amendments”). The Parties agree to use commercially reasonable efforts in good faith to expeditiously negotiate and enter into all of the AIAI Service Amendments, subject to the terms of Section 7.2.

3.    License of AIAI Intellectual Property.

(a)    AIAI hereby grants and agrees to cause the Companies to grant to KFS, during the Term, a royalty-free, non-transferable and non-exclusive licence to use in the operations of KFS' business any AIAI Intellectual Property that is, and AIAI Information Systems that are: (i) used by Kingsway prior to Closing; and (ii) necessary to receive the AIAI Services; provided, however, KFS, hereby agrees to be bound by all existing restrictions, obligations and conditions that currently exist or relate to the AIAI Intellectual Property and AIAI Information Systems and such restrictions, obligations and conditions will apply to KFS, mutatis mutandis.

(b)    For greater certainty, but subject to its obligations to provide or cause the provision of the AIAI Services hereunder, such license of AIAI Intellectual Property and AIAI Information Systems shall not, and shall not be deemed to: (i) prohibit AIAI and its Affiliates from freely using, or licensing (on a non-exclusive basis) any of the AIAI Intellectual Property or AIAI Information Systems; or (ii) prohibit AIAI and/or the Companies and their Affiliates from transferring any of the AIAI Intellectual Property or AIAI Information Systems provided that the transferee assumes AIAI's and/or the Companies' obligations under this Agreement in respect of the transferred asset.

ARTICLE V SERVICE CHANGES

1.    Service Change Requests.

(a)     During the Term,any Party, in its capacity as a recipient of Services (a “Recipient Party”) may

provide written notice (a “Change Request”) to any other Party, in its capacity as a provider of Services (a “Performing Party”) to request a modification to the nature or scope of the Services (including the addition of new services that are not already part of the Services to be performed by the Performing Party).

(b)    The applicable Parties agree to co‑operate and to use commercially reasonable efforts to negotiate an agreement on a Change Request (including any incidental changes to the Service Fees), on terms and conditions that are acceptable to such Parties, acting reasonably. However, such Parties acknowledge and agree that they may not reach an acceptable agreement with respect to a given Change Request and in such event, the Performing Party shall have no liability or obligation to the Recipient Party in respect of such Change Request.

(c)    The applicable Schedules shall be amended accordingly to reflect any Change Request agreed upon by such Parties. For greater certainty, it is acknowledged that the Recipient Party bears the costs of preparing any Change Request and any additional costs incurred by a Performing Party to make or implement changes to the Services in response to a Change Request shall be the sole responsibility of the Recipient Party and such additional costs shall be payable in addition to the Service Fees provided for herein.

2.    Termination of Particular Services.

(a)    A Recipient Party may terminate its receipt of Services prior to the expiration of the Term subject to and in accordance with the terms of this Section 5.2.

(b)    A Recipient Party shall provide not less than thirty (30) days prior written notice to a Performing Party of its intent to terminate a particular Service during the Term of this Agreement. Any partial termination notice delivered shall specify in detail: (i) the Service or Services to be terminated; and (ii) the effective date(s) of such termination.

(c)    Unless the applicable Parties agree in writing to the contrary, a particular Service may only be terminated in whole, not in part or subcomponent. Any termination of a particular Service shall be final, and the Service Fees payable by the Recipient Party with respect to such terminated Service shall be appropriately pro‑rated to the effective date of termination. If the termination of a Service prior to the expiration of the Term requires the payment of any fee, cost or expense of a similar nature to a third party (a “Termination Fee”), the Performing Party shall have no obligation to terminate such Service, unless the Recipient Party approves in advance such Termination Fee in writing (a “Termination Fee Approval”). If the Termination Fee Approval is granted and the Termination Fee is paid by the Performing Party, the Termination Fee shall be invoiced (without markup) to and payable by the Recipient Party pursuant to Article VIII of this Agreement.

ARTICLE VI SERVICE STANDARDS

1.    Service Standards and Level of Service for the Services.

(a)    Subject to Section 6.1(b), each of the Parties, in its capacity as a Performing Party, shall:

(i) provide the Services in a workmanlike manner and at a level of quality that is reasonable under the circumstances;

(ii) provide the Services to a Recipient Party on substantially the same basis as was provided to such Recipient Party prior to Closing, including substantially similar levels of service; and

(iii) provide the Services at a level of responsiveness and diligence substantially similar to that provided to a Recipient Party prior to Closing.

(b)     Each of the Parties, in its capacity as a Recipient Party, acknowledges and agrees that a Performing Party is not a professional service provider of the Services to third parties (in particular with respect to the Kingsway Insurance Information Systems or the AIAI Information Systems, as the case may be) and as a result, such Performing Party may not be able to meet normal industry service levels or standards associated with such Services. Accordingly, each of the Parties, in its capacity as a Performing Party, shall use commercially reasonable efforts to provide such Services to a Recipient Party and allow each of the Parties the right to audit such Services.

(c)    The obligations of a Performing Party to provide the Services in accordance with the standards set forth in this Article shall be subject to:

(i) a Recipient Party ensuring that the physical and technical environments at the facilities of such Recipient Party, to the extent such physical and technical environments are within the control of such Recipient Party and related to the Performing Party's provision, or such Receiving Party's receipt of the Services, are at least equivalent to those present at such Party's premises on the Closing Date; and

(ii) a Recipient Party ensuring that nothing within its reasonable control prevents the Performing Party from providing the Services set out herein.

2.    Subcontracting.

A Performing Party may, in its sole discretion and without any written notice to a Recipient Party, engage its Affiliates and/or one or more third parties to provide some or all of the Services which such Performing Party is obligated to provide under this Agreement. In the event a Performing Party, so engages its Affiliates, or any such third parties, such Performing Party shall remain responsible for ensuring the performance of the subcontracted Services by the subcontractor in accordance with the applicable standards set forth in this Agreement and for the indemnification obligations of such Performing Party set forth in Article XIII. No subcontracting of any Services shall relieve a Performing Party of its obligations under this Agreement with respect to such Services.

3.    Co‑operation.

(a)     Each Party shall, and shall cause its Affiliates and third party subcontractors to, co‑operate to the extent necessary or appropriate to facilitate the performance of the Services in accordance with the terms of this Agreement. Without limiting the foregoing, to the extent that an employee of a Performing Party who was transferred to a Recipient Party in connection with the transactions contemplated by the Merger Agreement and who was engaged, prior to Closing, in providing, co‑ordinating or assisting with the Services to such Recipient Party, such Recipient Party shall cause such transferred employee (or reasonably qualified substitutes) to continue to provide, co‑ordinate or assist with the Services throughout the Term at a level and in a manner at least equivalent in all material respects with such transferred employee's engagement prior to Closing.

(b)     Each Party shall, at all reasonable times under the circumstances, make available to the other Parties properly authorized personnel for the purpose of consultation and decision, and as may otherwise be reasonably necessary in the performance and receipt of the Services.

(c)Each Party shall provide access to their respective facilities, information systems and equipment as appropriate in connection with the provision of the Services subject to their respective physical security procedures and subject to any obligations or limitations imposed by Articles IX and X of this Agreement.

(d)Each Party may change at any time: (i) its physical security procedures; or (ii) the location from which it provides any Service; provided that the Parties shall remain responsible for the performance of the Services in accordance with the terms of this Agreement.

4.    Books and Records.

Each Party shall maintain or cause to be maintained, in accordance with applicable Laws and its document retention policies (including policies relating to backup computer files and maintaining facilities and procedures for safekeeping and retaining documents), books and records of all transactions pertaining to the performance or receipt (as applicable) of the Services. Access to such books and records by any Party shall, to the extent not prohibited by applicable Laws, be made available for audit or other purposes: (a) upon reasonable prior written notice and during regular business hours, through its employees and representatives; (b) at the requesting Party's sole cost and expense and may not unreasonably interfere with the other Party's or any of its Affiliates' business operations and; (c) subject to the physical security procedures of the Party and its Affiliates who are the subject of such request. Notwithstanding the foregoing, the Parties and any third party subcontractor providing Services under this Agreement shall have access to such books and records as necessary or reasonably required to provide the Services in accordance with the terms of this Agreement.

ARTICLE VII    LIMITATIONS

1.    General Limitations.

(a)    KFS shall have no obligation under this Agreement to provide services or support in support of any business or operations of the Companies other than in support of the Business as set forth on Schedule 3.2. In no event, shall KFS be obligated to provide any Services to the Companies if they cease to be wholly owned subsidiaries of Atlas.

(b)    In no event shall any Party be obligated hereunder to maintain the employment of any specific employee during the Term; provided that each Party shall remain responsible for the performance of the Services in accordance with the terms of this Agreement.

2.    Third Party Consents and Terms; Compliance with applicable law.

(a)    Each Party warrants that it has as of the Closing Date obtained, or reasonably expects to receive promptly thereafter, all Third Party Consents that are necessary in order for it to provide the Services to the other Parties.

(b)     In the event that any third party vendor requires the payment of a fee or other charge to permit a Performing Party to provide Services to a Recipient Party (“Consent Fee”), then the Recipient Party agrees it shall pay or reimburse the Performing Party all such Consent Fees in full upon receipt of an invoice for same.

(c)     Notwithstanding Section (a), if any Third Party Consent has not or is not obtained, on or before the

Closing Date, KFS and AIAI will use commercially reasonable efforts to identify, and shall cooperate with each other in achieving, a reasonable alternative arrangement with a view to continue to operate their respective businesses with as minimal interference to their respective business operations as is reasonable until such Third Party Consent is obtained or until such other reasonable alternative arrangement is concluded; provided that no Party shall be responsible or liable to the other Parties hereunder to the extent that any failure or inability to obtain any Third Party Consent restricts, limits, impedes or otherwise prevents the performance by a Party of its obligations hereunder.

(d)    Each Party acknowledges and agrees that any Services provided by a Performing Party and its Affiliates through third parties or by using third party intellectual property are subject to the terms and conditions of any applicable agreements between such Performing Party or its Affiliates and such third parties, as well as compliance with applicable Laws. Each Party agrees to comply, and to cause its Affiliates to comply, with the terms and conditions of any such applicable third party agreements in connection with the provision or receipt (as applicable) of the Services.

3.    Force Majeure.

In the event that a Party or its Affiliates or any third party subcontractor is wholly or partially prevented from, or delayed in, providing one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control (including acts of God, acts of nature, acts, decrees or orders of governmental, regulatory or military authorities, fire, explosion, accident, embargoes, epidemics, war, acts of terrorism, nuclear disaster, civil unrest and/or riots or disruption of Internet access as a result of any virus, worm, Trojan horse, etc.) (any of the foregoing or similar type of event, a “Force Majeure Event”), (a) such Party shall not be obligated to deliver the affected Services during such period, (b) a Recipient Party shall not be obligated to pay for any Services not delivered during such period except for any Consent Fees or Termination Fees (as defined herein), and (c) the applicable Term shall not be tolled during or extended for all or part of such period; provided that nothing in this Section 7.3 shall alter, suspend or limit the payment obligations of any Party under this Agreement for Services previously provided.

ARTICLE VIII PAYMENT

1.    Fees Payable by the Parties.

(a)    The fee, rate or amount to be charged for the Services (the “Service Fees”) shall be:

(i) in the case of the Kingsway Services, as set forth in the applicable Schedules attached hereto; and;

(ii) in the case of the AIAI Services, as set forth in the applicable Schedules attached hereto.

(b)    For greater certainty, in no event shall KFS be responsible for, and AIAI or the Companies shall be solely responsible for, any costs or expenses relating to any hardware, software or technical devices and related accessories thereto required to be purchased to complete the orderly transfer of the Companies as a result of the change of ownership and to enable the uninterrupted operation of the Business following Closing.

2.    Billing and Payment Terms.

(a)    Each Party shall invoice the other Parties following the end of a given calendar month for: (i) the Service Fees; (ii) the Termination Fees; and (iii) the Consent Fees, as applicable, incurred during such calendar month. Each Party shall pay all such invoices within thirty (30) Business Days after receipt thereof by wire transfer of immediately available funds, unless otherwise prescribed in a service agreement referenced in the schedules. Payments not made in accordance with the preceding sentence shall bear simple interest from and including the date such payment is due until, but excluding, the date of payment, at a monthly rate of 1.5% (18% per annum). All Service Fees, Termination Fees, Consent Fees and late payments shall be payable and remitted in United States dollars.

(b)    The amount of any Service Fees shall be prorated to the extent necessary on an invoice to reflect the portion of the specified time period for which the Services were actually rendered vis a vis the applicable month, unless otherwise prescribed in a service agreement referenced in the schedules.

(c)    If all or a component of a Service is provided by a third party and the invoice in respect thereof is bundled with items unrelated to the subject matter of this Agreement, the Service Fee in respect of such Service shall only reflect the dollar amount appropriately allocated to such Service.

3.     Taxes.

Each Party shall reimburse the other Parties for any sales, use, gross income, gross receipts or other similar taxes imposed by or withheld on behalf of any provincial or local taxing authority with respect to any payment made by a Party to the other Parties pursuant to this Agreement, except for taxes based or imposed on or measured in whole or in part by net income or net worth, or a tax imposed in lieu thereof, including any provincial business and occupational tax liability imposed on the Party or its Affiliates providing Services. Amounts to be reimbursed in respect of such taxes shall be separately reflected on the relevant invoice.

ARTICLE IX ACCESS AND SECURITY

1.    Security Level; Additional Security Measures.

Each of the Parties and its Affiliates may take physical or information security measures: (a) that affect the manner in

which the Services are provided to maintain such Party's or its Affiliates' current level (or, if greater, an industry‑standard level) of physical and electronic security (including data security and data privacy) during the Term; and (b) that address any new security‑related issues, including compliance with applicable Laws related to security and issues related to new technologies or threats. Each of the Parties shall provide the other Parties reasonable, prior written notice of any such physical or information security measures that are material to such Party's delivery of the Services. Each of the Parties shall, at a requesting Party's cost and expense, provide all assistance reasonably requested by such Party or its Affiliates in connection with such security measures.

2.    Security Breaches.

In the event of a security breach that relates to the Services, each of the Parties providing such Services shall, subject to any applicable Laws, co-operate with the Parties receiving such Services regarding the timing and manner of: (a) notifications to their respective customers, potential customers, employees and/or agents concerning a breach or threatened breach of security; and (b) disclosures to appropriate Governmental Authorities.

3.    Systems Security.

(a)    If a Recipient Party, its Affiliates, any of their respective personnel or any personnel of any third party retained by such Party or its Affiliates and any authorized agent, auditor or Governmental Authority (collectively, the “Recipient Party Personnel”) is given access by a Performing Party or its Affiliates to: (i) information systems, including any computer systems or software and data stored therein, of the Performing Party or its Affiliates or (collectively, the “Performing Party Systems”), the Recipient Party Personnel shall comply with all of such Performing Party's and its Affiliates' information system security policies, procedures and requirements applicable in accessing and using the Performing Party Systems, and shall not tamper with, compromise or circumvent any security or audit measures employed by such Performing Party or its Affiliates.

(b)    Information pertaining to AIAI and its Affiliates and to KFS and its Affiliates will be logically segregated throughout the Term of this Agreement. AIAI and KFS will bear equally any and all labour costs associated with such segregation of information. However, all other costs related to the segregation of information, including, but not limited to, costs for any new hardware, software or technical devices and accessories related thereto such as a storage area network required to achieve such separation of information, will be for the account of the applicable Recipient Party.

(c)    Each of the Parties shall ensure that only those of their respective personnel who are specifically authorized by another Party to have access to its information systems, obtain such access and shall prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including: (i) notifying their respective personnel regarding the restrictions set forth in this Agreement and any changes in such Party's information security policies; and (ii) establishing appropriate policies designed to monitor compliance with and effectively enforce such restrictions.

(d)    The personnel of a Party shall access and use only those information systems of another Party, and only such data and information within those information systems to which such given personnel has been granted the right to access and use under this Agreement. Each of the Parties shall have the right to deny access to its information systems to personnel of the other Parties, after prior written notice, in the event a Party reasonably believes that such personnel pose a demonstrable security concern. If, at any time, a Party determines: (i) that any personnel of another Party has sought to circumvent, or has circumvented, such Party's information security policies; or (ii) that any unauthorized personnel of another Party has accessed such Party's information systems or (iii) that any personnel of another Party has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software, such Party shall be permitted to immediately terminate access to its information systems by any such personnel and shall promptly notify in writing the applicable Party of the name of such personnel and the circumstances surrounding such breach.

(e)    All user identification numbers and passwords of a Party disclosed to the other Parties, and any information obtained by a Party from access to and use of the other Parties' information systems, shall be deemed Confidential Information (as defined herein) of the disclosing Party.

(f)    Each of the Parties shall co-operate with the other Parties in investigating any apparent unauthorized access to another Party's information systems or any apparent unauthorized release of Confidential Information. Each of the Parties shall promptly notify the other Parties in writing: (i) if such Party has revoked access by any personnel to its own information systems if such personnel also has access to another Party's information systems; and (ii) once any personnel of such Party no longer has a need to access the information systems of another Party so that the applicable Parties can revoke such personnel's access to their information systems.

ARTICLE X    CONFIDENTIALITY

1.    Confidential Information.

As used in this Agreement, Confidential Information is defined as follows:

(a)    “Confidential Information” means information owned by or concerning a disclosing Party or its Affiliates (including information disclosed in the course of performance or negotiation of this Agreement and the terms of this Agreement) that is not generally known to the public, except for:

(i) information that is or becomes publicly available (other than through disclosure by a receiving Party, its Affiliates or any third party retained by a receiving Party), from and after the date of public availability; or

(ii) information disclosed to a receiving Party by a third party not known to be bound by any confidentiality agreement with a disclosing party or its Affiliates; provided that (A) under the circumstances of disclosure, the receiving Party does not owe a duty of non‑disclosure to such third party and (B) the disclosure by such third party is not otherwise unlawful.

(b)    Each Party shall not, and shall cause their respective Affiliates and each of their and their Affiliates' directors, officers, employees, vendors, representatives and agents (“Representatives”) not to, disclose to any other Person or use, except for purposes of this Agreement (and only in accordance with applicable Laws), any information that is Confidential Information of another Party respectively, provided that each Party may disclose Confidential Information: (i) to its Representatives on a need‑to‑know basis in connection with the performance of such Party's obligations under this Agreement; (ii) in a regulatory filing if required to be included therein under applicable Laws or, subject to Section 10.1(c) hereof, in response to any summons, subpoena or other legal process or formal or informal investigative demand issued by a Governmental Authority to such Party or its Representatives in the course of any litigation, investigation or administrative proceeding; or (iii) to as reasonably necessary enforce its rights and remedies under this Agreement.

(c)    In the event that a Party or any of their respective Representatives becomes legally compelled by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process to disclose any Confidential Information of another Party, such Party shall provide such other Party with prompt prior written notice of such requirement and shall use its reasonable best efforts to co-operate with such other Party (at such other Party's expense) to obtain a protective order or similar remedy to cause Confidential Information not to be disclosed, including interposing all available objections thereto, such as objections based on settlement privilege. In the event that such protective order or other similar remedy is not obtained or the other Party waives compliance with the provisions of this Section 10.1(c) and Section 10.1(e) of this Agreement, such Person shall furnish only that portion of Confidential Information of the other Party that has been legally compelled, and shall exercise commercially reasonable efforts to obtain assurance that confidential treatment shall be accorded such disclosed Confidential Information.

(d)    Each Party shall comply with any and all applicable Laws including, without limitation, all laws relating to privacy.

(e)    Each Party shall, and shall cause its Representatives to, protect Confidential Information of the other Parties by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized disclosure of such Confidential Information as the Party uses to protect its own Confidential Information of a similar nature.

(f)    Each Party shall cause its Representatives to be bound by the same restrictions on use and disclosure of Confidential Information as set forth in this Article X.

ARTICLE XI DATA AND INTELLECTUAL PROPERTY

1.    Ownership of Data.

(a)    As between the Parties, AIAI and its Affiliates shall own all right, title and interest in and to all data generated for AIAI and its Affiliates by KFS, its Affiliates and/or KFS' subcontractors in performing the Kingsway Services, as applicable.    

(b)    As between the Parties, KFS shall own all right, title and interest in and to all data generated for KFS, its Affiliates and/or the KFS' subcontractors by AIAI and its Affiliates in performing the AIAI Services.

(c)    Each Party shall be permitted access to its data at all times, which access shall not be unavailable or restricted or delayed (including in the case of any dispute) except as is expressly provided for in this Agreement. No Party shall (even in the event of a dispute between the Parties or upon the termination of the Agreement):

(i) possess or assert any ownership right, encumbrance or similar right in or over another Party's data; or

(ii) sell, disclose, copy, assign, lease, license or otherwise dispose of, or commercially exploit, any of another Party's data.

(d)    All data of a Recipient Party shall at all times be stored, processed and maintained by a Performing Party such that it is logically separated from the data and information of the other Parties and any other Person.

(e)    Each Recipient Party hereby grants to a Performing Party, during the Term, a limited, revocable, royalty-free, non-transferable and non-exclusive licence to use and process such Recipient Party's data solely as permitted by this Agreement and for the purposes of, and only to the extent necessary for, the provision of the Service to a Recipient Party.

(f)    Each Party shall comply with terms of Schedule 11.1(f).

2.    Ownership of Intellectual Property.

(a)    Except as otherwise expressly set forth herein, each of the Parties and their respective Affiliates shall retain all right, title and interest in and to their respective Intellectual Property.

(b)    Except as otherwise expressly agreed to in writing for any given Service, KFS shall solely and exclusively own all right, title and interest, including all Intellectual Property rights and any other intellectual or proprietary rights therein or thereto, throughout the world in and to all deliverables and materials created by KFS or its Affiliates or jointly with AIAI and its Affiliates (other than KFS) in any connection with the performance of the Services (collectively, “Developed Kingsway IP”), and AIAI and its Affiliates hereby irrevocably assign any and all right, title or interest they may have in Developed Kingsway IP to KFS and its Affiliates. AIAI and its Affiliates shall, without further consideration, execute any documents and take any other actions reasonably requested by KFS or its Affiliates to effectuate the purposes of this Section 11.2(b).

3.    Reservation of Rights.

Except as otherwise expressly set forth herein, no Party or any of its Affiliates shall have any rights or licenses, express or implied, with respect to any intellectual property, hardware or facility of another Party or any of its Affiliates. All rights and licenses not expressly granted in this Agreement are expressly reserved by the Parties and their Affiliates.

ARTICLE XII DISCLAIMER OF REPRESENTATIONS AND WARRANTIES

1.    Disclaimer of Representations and Warranties.

EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY ACKNOWLEDGES THAT THE OTHER PARTIES DISCLAIM AND ACCEPT NO RESPONSIBILITY FOR ANY OTHER REPRESENTATIONS OR WARRANTIES OR CONDITIONS WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON‑INFRINGEMENT OF ANY SOFTWARE OR HARDWARE OR OTHER INTELLECTUAL PROPERTY PROVIDED HEREUNDER, AND ANY REPRESENTATIONS OR WARRANTIES OR CONDITIONS ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE.

ARTICLE XIII INDEMNIFICATION; LIMITATION ON LIABILITY

1.    General.

(a)    Each of the Parties agrees that the other Party shall have no liability (whether direct or indirect and regardless of the legal theory advanced) to it or any Person asserting claims on behalf of or in right of it in connection with, relating to, or arising out of, this Agreement, except solely for indemnifiable claims under Section 13.2 and Section 13.3 of this Agreement, as applicable.

(b)    For purposes of this Article XIII, “material breach” shall mean in the case of a breach by: (A) a Performing Party and its Affiliates, resulting primarily from their gross negligence, bad faith or wilful misconduct in connection with the provision of the Services; (B) a Recipient Party, resulting primarily from its gross negligence, bad faith or wilful misconduct in connection with the receipt of the Services and fulfillment of the obligations hereunder, and including any failure to make a required payment obligation set out herein; and (C) a third party subcontractor providing Services on behalf of a Performing Party or its Affiliates resulting primarily from the third party subcontractor's gross negligence, bad faith or wilful misconduct in connection with the provision of any such Services; provided that nothing in this Article XIII shall alter, suspend or limit the obligations of the Parties for payment of the Service Fees in accordance with the terms of this Agreement.

2.    Indemnification of the Recipient Party.

Subject to the limitations set forth in the Merger Agreement, a Performing Party shall indemnify a Recipient Party against, any and all liabilities, losses, judgments, settlements, damages, costs, fees and expenses, including reasonable legal fees and expenses (collectively, “Claims”), that arise as a result of or in connection with or are otherwise attributable to a material breach by the Performing Party or any of its Affiliates, personnel or representatives of any provision of

this Agreement . A Performing Party shall not be liable for any indirect or consequential changes that may be incurred by a Recipient Party.

3.    Indemnification of the Performing Party and its Affiliates.

Subject to the limitations set forth in the Merger Agreement, a Recipient Party shall indemnify a Performing Party and its Affiliates against any and all Claims that arise as a result of or in connection with or are otherwise attributable to: (a) a material breach by the Recipient Party or its Affiliates, personnel or representatives of any provision of this Agreement; or (b) any breach or non-compliance by the Recipient Party or its Affiliates of any third party license or agreement between a Performing Party (or its Affiliates) and a third party licensor or supplier of which the Recipient Party or its Affiliate is a beneficiary hereunder in its receipt of the Services.

4.    Indemnification Procedures.

In the event a Party has a Claim for indemnity against another Party under the terms of this Agreement, such Parties shall follow the procedures set forth in Article 13 of the Merger Agreement, except to the extent modified herein.

ARTICLE XIV TERMINATION

1.    Termination.

This Agreement may be terminated as follows:

(a)    by a Recipient Party pursuant to Section 5.2;

(b)    by KFS on ten (10) days notice to the AIAI Companies, in the event ACIC or ASI cease to be a wholly owned subsidiary of Atlas;

(c)    by any Party immediately in the event that any other Party has been adjudicated bankrupt, has failed to vacate an involuntary bankruptcy or reorganization petition within sixty (60) days of the date of such filing, files such a petition on a voluntary basis, fails to vacate the appointment of a receiver or trustee for it or for a substantial portion of its assets, makes an assignment for the benefit of such Party's creditors or ceases to do business as a going concern;

(d)    by any Party, upon written notice to the other Parties, in the event that KFS or AIAI is in material breach hereof or is in default of any of its material obligations hereunder or breaches any material provision of this Agreement and fails to remedy such default or breach within thirty (30) days of its receipt of such written notice.

2.    Effect of Termination.

Upon any termination or expiration of this Agreement:

(a)    upon request, each Party shall promptly return to the other Parties all tangible personal property and books, records or files owned by such other Parties and used in connection with the provision of each terminated Service that are in its or its Affiliates' possession or control as of the effective date of such termination, except a Party may retain one (1) copy set in order to comply with its regulatory obligations, which copy set shall be deemed Confidential Information of the Party who made such information available;

(b)    except for the license to use the Kingsway Insurance Information Systems and any related Kingsway Intellectual Property granted hereunder, all licenses granted hereunder shall terminate (inclusive of any rights and licenses to use any intellectual property or information systems of any other Party) as of the effective date of termination, other than the license to use the Kingsway Intellectual Property and Kingsway Insurance Information Systems granted hereunder, and each Party shall promptly (and in any event within thirty (30) days of the effective date of termination) return to the other Parties all technology and software of the other Parties made available to such Party hereunder or in connection herewith;

(c)    each Party shall promptly pay to the other Parties all undisputed amounts due and payable hereunder by such Party up to and including the effective date of termination;

(d)    each Party shall within thirty (30) days of the effective date of termination return to the other Parties all data of the other Parties in its possession or under its control. Following such return and at the other Parties' written direction, the returning Party shall erase or destroy any data of the other Parties remaining in its possession, or such portion of such data as the other Parties may direct and shall thereafter provide the other Parties with a written certificate confirming such erasure or destruction; and

(e)    Nothing in this Article XIV shall relieve the Parties from their liability for any breach or threatened breach of this Agreement. The provisions of Article VII, Article X, Article XI, Article XII, Article XIII, Section 3.3, this Section 14.2, Article XV and Article XVI, and the obligations of each Party under Article VIII to pay the Service Fees for Services furnished on and prior to the effective date of such termination and any Consent Fees, Termination

Fees or late payments, shall survive any termination hereunder.

ARTICLE XV DISPUTE RESOLUTION

1.     Disputes.

Any disputes, disagreements, controversies, questions or claims between the Parties, other than Excluded Disputes, relating to this Agreement or the Services provided hereunder or the Services Fees (a “Dispute”), shall be escalated in accordance with the following procedure. (a) If a Dispute cannot be resolved in the normal course, then the Dispute may be referred, at any time, by any party on written notice to the other Parties as follows: (i) for KFS to the President of KFS; and (ii) for AIAI to the President of AIAI. (b) The individuals identified in paragraph (a) shall mutually agree on the methods by which they shall attempt to resolve any Dispute, such as, for example, telephone and/or video conferences, email and fax communications and/or face to face meetings. No Dispute shall be considered resolved until the parties have agreed to the resolution in writing. (c) If the individuals identified in paragraph (b) cannot resolve a Dispute within a period of thirty (30) calendar days from the date on which it was referred as provided in paragraph (b), then any Party may upon notice to the others refer the Dispute to non-binding mediation for a one (1) day maximum session, to be held no later than sixty (60) calendar days after the date of the notice as provided above. Any such mediation shall: (i) be non-binding on the Parties; (ii) be conducted by a single mediator agreeable to each Party. Any mediator selected must be a suitably qualified, impartial Person who is experienced in commercial and contractual disputes involving services reasonably similar to the Services provided hereunder. If the Parties are unable to mutually agree upon a mediator, KFS and AIAI shall, within ten (10) Business Days following the referral of the matter to mediation, appoint a mediator selector with substantially the same expertise as required for the mediator, and the two mediator selectors so appointed shall appoint a third mediator who shall be the mediator; provided, however, that if only one of KFS or AIAI has chosen a mediator selector within such ten (10) Business Day period, that mediator selector shall be entitled to appoint the mediator. In the event that the mediator selectors are unable to mutually agree upon a mediator within ten (10) Business Days, any Party shall be entitled to apply to an Illinois court judge to select a mediator; (iii) be conducted in the English language in the city of Chicago, Illinois (unless otherwise agreed by the Parties) at such time and venue as the mediator may fix; (iv) be limited to no more than one (1) day unless the parties otherwise agree in writing; and (v) be held with each Party sharing equally the costs of the mediator and expenses relative to the mediation process. (d) No Dispute shall be considered resolved by mediation until the Parties have agreed to the resolution in writing. If the Dispute is not resolved within five (5) Business Days of the completion of the mediation described in paragraph (c), each Party shall be free to pursue its remedies in a court of competent jurisdiction as provided in Section 1.9. (e) Each Party shall pay its own costs, if any, associated with the process contemplated under paragraph (b) and the mediation contemplated under paragraph (c). All Disputes (and mediation) will be kept confidential to the full extent permitted by applicable Law. For the purposes of this Agreement “Excluded Disputes” are any disputes, disagreements, controversies, questions or Claims between the Parties relating to: (i) actual or alleged breaches or actual or alleged non-compliance by a Recipient Party of any third party licenses or service agreements between a Performing Party and a third party of which the Recipient Party or its Affiliates is a beneficiary (directly or indirectly) of receipt of the Services hereunder; (ii) any Party's data, Confidential Information or Intellectual Property; or (iii) actual or alleged infringement of any third party's intellectual property rights as a result of the performance of the Services.

ARTICLE XVI    MISCELLANEOUS

1.    Undertakings of the Parties; Breaches.

Each of the Parties agrees to perform, or cause to be performed, when due all obligations of its Affiliates under this Agreement. Each of the Parties agrees to be responsible for any breach or threatened breach of Article IX by any of its respective personnel or Article X by any of its respective representatives.

2.    Authority.

Each Party represents and warrants to the other Party hereto:

(a)    that it has the requisite power and authority to enter into and deliver this Agreement and to perform its obligations hereunder;

(b)    that the execution, delivery and performance of this Agreement have been duly and validly authorized by the requisite corporate action on the part of such Party and that no other corporate proceedings on the part of such Party are necessary to authorize the execution, delivery and performance of this Agreement; and

(c)    that this Agreement has been duly executed and delivered by such Party and, assuming the due authorization, execution and delivery of this Agreement by the other Parties hereto, constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms and conditions.

3.    Relationship of the Parties.

(a)    The Parties and their respective representatives shall be deemed independent contractors for all purposes under this Agreement.

(b)    This Agreement shall not be deemed or construed to create the relationship of employer or employee, partnership or any type of joint venture relationship, between the Parties.

(c)    The Parties acknowledge and agree that the Parties are not providing legal, accounting or tax advice under this Agreement. Neither party shall be responsible for any action or failure to take any action relating to any Services provided hereunder. The Parties further acknowledge and agree that no fiduciary or other similar relationship is being created between the Parties relating to the Services provided under this Agreement.

(d)    Except as expressly set forth herein, no Party or representative of a Party shall have the authority to contract for or assume obligations of any nature in the name of another Party without that Party's prior written consent.

4.    No Offset.

None of the Parties shall have the right to offset or withhold any sums they may owe to the other Parties under this Agreement against any sums they may be entitled to receive under any provision of this Agreement, the Merger Agreement or otherwise.

5.    Sole Remedy.

The provisions of Articles XIII, XIV and XV hereof shall be the sole and exclusive remedies with respect to any breach or threatened breach of this Agreement.

6.    Amendment, Modification and Waiver.

(a)    Neither this Agreement nor any provision hereunder may be amended, modified or waived except by an instrument or instruments in writing signed and delivered on behalf of each of the Parties.

(b)    No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided under applicable Laws.

7.    Entire Agreement.

This Agreement (together with the Schedules and Exhibits attached hereto) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and verbal, between the Parties with respect to the subject matter hereof.

8.    Severability.

Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as would be enforceable.

9.    Counterparts.

This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

10. Third Party Beneficiaries.

Except as set forth in Article XIII, nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Parties any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

11. Binding Effect; Assignment.

Except as otherwise expressly set forth herein, neither this Agreement, nor any rights, interests or obligations hereunder, may be directly or indirectly assigned, delegated, sublicensed or transferred by any Party, in whole or in part, to any other Person by operation of law or otherwise, whether voluntarily or involuntarily, without the prior written consent of the other Parties hereto, and any attempt at same shall be null and void ab initio. Subject to the foregoing, this Agreement shall enure to the benefit of and be binding upon the Parties and the respective successors and permitted assigns.

12. Descriptive Headings

The descriptive article and section headings contained herein and in the Schedules and Exhibits attached hereto are

inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

13. Expenses.

Except as otherwise expressly set forth herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.

14. Notices.

All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile (delivery of which is confirmed), by courier (delivery of which is confirmed), or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties as follows:

(a) to KFS at:

Kingsway Financial Services Inc.

150 Northwest Point Boulevard

Elk Grove Village, Illinois

60007

Attention:     President and CEO

Facsimile:     (847) 952-7079

(b) to AIAI at:

American Insurance Acquisition Inc.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

Attention: Scott Wollney

Facsimile: (847) 228-2580

or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. In no event shall the provision of notice pursuant to this Section 16.14 constitute notice for service of any writ, process or summons in any suit, action or other proceeding.

15. Notice of Breach.

Each Party shall promptly notify in writing the other Parties of any breach or threatened breach of this Agreement or of any third party license agreement of which it becomes aware.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed on its behalf as of the day and year first above written.

KINGSWAY FINANCIAL SERVICES INC.
Per:	/s/ Larry G. Swets, Jr.
	Name: Larry G. Swets, Jr.
	Title: President & CEO
Per:	/s/ William A. Hickey, Jr.
	Name: William A. Hickey Jr.
	Title: Chief Operating Officer

AMERICAN INSURANCE ACQUISITION INC.
Per:	/s/ Scott D. Wollney
	Name: Scott D. Wollney
	Title: President & CEO

SCHEDULE 3.2

KINGSWAY SERVICES

(I) Kingsway Accounting Support Services: KFS will provide under an Accounting Shared Services Agreement, support for GAAP and IFRS accounting for AIAI and certain U.S. Affiliates or subsidiaries on an ongoing basis until such time as it is mutually determined by both parties to be unnecessary. As consideration for this Service, AIAI or its U.S. Affiliate for whom Service is rendered will reimburse KFS or its subsidiary or Affiliate who performed the Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service.

(II) Kingsway Auto Policy Administration and Underwriting Support Services: KFS, or its U.S. Affiliates or subsidiaries, will provide under a Program Management Agreement to be incorporated in the future as Schedule 3.2(II), private passenger auto policy administration and underwriting support for ASI relating to business written prior to and after the Closing until such time as all private passenger auto policies are transitioned away from ASI either through renewal by Kingsway or an Affiliate or non-renewal. As consideration for this Service, KFS or its subsidiary or Affiliate who performed the Service will be entitled to renewal rights relative to ASI's private passenger auto book of business plus payment equal to the difference between .95 X earned premium for the period during which this Service is rendered and the fully developed Loss & ALAE amount as recorded on ASI's books for that same period plus 100% of Unallocated Loss Adjustment Expense (“ULAE”) for personal auto lines business as reserved on ASI's books at the close of the Transaction.

(III) Kingsway IT Services: To the extent that Kingsway remains the bill to party for services required to support both Kingsway's and the Companies' information technology and related business functions (e.g., Verizon), actual expenses based on invoices will be split proportionately based on actual use.

(I) Kingsway Tax Return Services: KFS shall be required to prepare the 2009 federal income tax returns of AIAI, ASI, ACIC, Southern United Fire Insurance Company (“SUFI”), and Southern United General Agency of Texas, Inc. (“SUGAT”) for inclusion in the 2009 Kingsway consolidated federal income tax return. KFS shall also be required to prepare the 2009 state income tax returns of AIAI, ASI, ACIC, SUFI and SUGAT that are to be included in any combined or unitary state income tax returns whereby KFS or one of its Affiliates is the parent. AIAI shall (or shall cause ASI, ACIC or other AIAI Affiliates to) be responsible for the preparation and filing of all other income tax and other types of tax or information returns of AIAI, ASI, ACIC, SUFI and SUGAT not mentioned in the first two sentences. The foregoing services shall be performed without charge to either party.

SCHEDULE 4.2

AIAI SERVICES

(I) AIAI Accounting Services: AIAI and its Affiliates will provide under an Accounting Shared Services Agreement, support for Statutory accounting for KFS and certain U.S. Affiliates or subsidiaries, including the delivery of related data in agreed formats, on an ongoing basis until such time as it is mutually determined by both parties to be unnecessary. During the first ninety (90) days immediately following the Closing, AIAI will provide limited support for the transition of certain U.S. Affiliates or subsidiaries' actuarial processes. As consideration for this Service, KFS or its U.S. Affiliate for whom Service is rendered will reimburse AIAI or its subsidiary or Affiliate who performed by Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service.

(II) AIAI Claims Handling Services: AIAI, or its U.S. Affiliates or subsidiaries, will provide under an Underwriting & Claims Management Agreement to be incorporated in the future as Schedule 4.2(II), commercial auto policy administration, underwriting and claims handling support for Universal Casualty Company (“UCC”) relating to business written prior to and after the Closing until such time as all commercial auto policies are transitioned away from UCC either through renewal by an AIAI subsidiary, or non-renewal. As consideration for this Service, AIAI or its subsidiary or Affiliate who performed the Service will be entitled to renewal rights relative to UCC's commercial auto book of business plus 100% of ULAE for commercial auto lines business as reserved on UCC's books at the close of the Transaction.

(III) AIAI Personnel and Payroll Support Services: The Companies will provide under a Personnel and Payroll Records Storage Agreement, personnel and payroll records support for records of former employees of KFS that worked at the Companies, including storage of such records, until such time as the minimum retention period for such records has expired under applicable law. As consideration for this Service, KFS will pay to the Companies a one-time fee of $100.00 at the close of the Transaction.

(IV) AIAI IT Services: AIAI will provide to KFS and certain of its U.S. Subsidiaries or Affiliates limited IT Services to be mutually agreed, relating in particular to the ongoing use of, or transition from, IT infrastructure located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007. As consideration for this Service, KFS or its U.S. Affiliate for whom Service is rendered will reimburse AIAI or its subsidiary or Affiliate who performed the Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service. Non-personnel costs (i.e., hardware, software, off-site storage) associated with these services will either be direct expense to KFS or a pass-through of actual expenses based on invoices (to the extent that any of these items are shared between AIAI and KFS, costs will be split proportionately based on actual use). Any special projects that would be above and beyond ordinary services (i.e., reconstructing servers, reconfiguring cubicles) will be billed hourly, based on actual personnel expense.

(V) AIAI Tax Return Services: See KFS Tax Return Services in Schedule 3.2 to the Agreement.

(VI) AIAI Additional Tax Services: After the Closing, AIAI shall (and shall cause its respective Affiliates, including AIAI, ASI, ACIC, Southern United Fire Insurance Company (“SUFI”), and Southern United General Agency of Texas, Inc. (“SUGAT”), to):

a. Assist KFS in preparing (including, but not limited to, the preparation of work papers and schedules needed to prepare the 2009 income tax returns and assist KFS in accumulating the information necessary to calculate the tax basis in the stock of AIAI, ASI, ACIC, SUFI and SUGAT ) any federal or state income tax return for which KFS is responsible to prepare and file under this agreement and any amended returns or refund claims relating to federal or state income taxes for taxable periods ending on or before the Closing Date;

b. Cooperate fully in preparing for any audits of, or disputes with tax authorities regarding any taxes of AIAI, ASI, ACIC,SUFI and SUGAT relating to any taxable period ending on or before the Closing Date or any taxable year or period beginning before and ending after the Closing Date (a “Straddle Period”);

c. Make available to KFS as reasonably requested all information, records, and documents relating to taxes of AIAI, ASI, ACIC, SUFI and SUGAT for any taxable period ending on or before the Closing Date and any Straddle Period; and

d. Retain or cause to be retained all books and records pertinent to AIAI, ASI, ACIC, SUFI and SUGAT for each taxable period ending on or before the Closing Date or any Straddle Period until the expiration of the applicable statute of limitations (giving effect to any and all extensions and waivers thereof) and to abide by or cause compliance with all record retention agreements entered into by or on behalf of AIAI, ASI, ACIC, SUFI or SUGAT with any tax authority.

The foregoing services shall be performed without charge to either party, however, to the extent AIAI or an Affiliate incurs direct external cost in support of these AIAI Additional Tax Services, and provided that (i) AIAI has informed KFS prior to incurring such external cost, and (ii) AIAI or an Affiliate clearly did not have the ability to provide such service without incurring such external cost, KFS will reimburse AIAI for these costs.

SCHEDULE 11.1(f)

PERSONAL INFORMATION

1. In this Agreement, “Personal Information” means information about an identifiable individual, but does not include the name, title or business address or telephone number of an employee of an organization.

2. In performing the Services, each Party will treat any and all Personal Information that it receives from any other Party, including concerning any of such other Party's employees, as confidential and:

(a) it will use or reproduce such Personal Information only to the extent necessary to fulfill its obligations under this Agreement;

(b) it will limit access to such Personal Information to those of its employees and its subcontractors' employees who have a need to be familiar with it or have access to it;

(c) it will advise its employees and its subcontractors' employees receiving such Personal Information of the confidentiality obligations assumed in this Agreement;

(d) except in the circumstances described in Article 10 of the Agreement or as may be otherwise expressly provided for in this Schedule, it will not disclose such Personal Information to any third party without the prior written consent of such other Party;

(e) it will take and reasonable precautions, and in any event not less than the precautions used to protect its own confidential information of like nature, to keep such Personal Information in the strictest confidence and to protect it from unauthorized access, collection, use, disclosure or disposal;

(f) it will cease all use of such Personal Information and will return or destroy all such Personal Information, including any copies, at the direction of such other Party, upon the termination of this Agreement or upon request by such other Party. In the case of Personal Information in electronic form “destroy” means to use reasonable efforts to permanently delete such Personal Information from its information systems such that the Personal Information is not accessible in the ordinary course, however each Party recognizes that such electronic representations of Personal Information may continue to exist, subject to the terms hereof, in the other Parties' data system backup tapes, or similar storage media;

(g) it will permit representatives of such other Party to review its processes in place for the handling of such Personal Information and to request that it make any changes (at such other Party's cost and expense) that such other Party, acting reasonably, considers necessary in order to protect the confidentiality of such Personal Information and that it will not unreasonably refuse any such requests by such other Party;

(h) upon request, it will reasonably cooperate with such other Party in responding to any requests by individuals to allow access to, correct, block, suppress or delete any such Personal Information that it holds on behalf of such other Party;

(i) if it becomes aware of a breach of any of the provisions of this Schedule, it will notify such other Party promptly in writing and take all reasonable measures to prevent further breaches;

(j) it will not transfer such Personal Information outside of Canada, either physically or electronically without such other Party's prior written consent (provided that each Party acknowledges and approves such transfer to the extent such transfer is contemplated as part of the Services as such Services were provided immediately prior to Closing); and

(k) it will reasonably cooperate with, and assist in, any investigation by such other Party or by any Governmental Authority, including the Office of the Privacy Commissioner of Canada, of a complaint that any such Personal Information has been collected, used or disclosed contrary to this Agreement or applicable Law.

3. Each Party warrants that with respect to any and all Personal Information that it may disclose to another Party under this Agreement, it has, where required by applicable Law, obtained informed consent to such disclosure from the individual(s) whose Personal Information is being disclosed.

4. Each Party's obligations concerning Personal Information under this Schedule are in addition to, and not in substitution for, any other obligations respecting confidentiality that may be contained in this Agreement.

EX-10.6

EXHIBIT 10.6

LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is made and entered into this 31st day of December, 2010, between AMERICAN SERVICE INSURANCE COMPANY, INC. (“Landlord”) and UNIVERSAL CASUALTY COMPANY (“Tenant”).

WITNESSETH:

1. Premises and Term

In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions, and covenants hereof, Landlord hereby demises and Leases to Tenant, and Tenant hereby accepts and Leases from Landlord, the following described space, to wit: approximately 14,100 square feet as shown and outlined on the plan attached hereto as Exhibit A (the “Leased Premises”) on thesecondfloor, located in the building commonly known as the Kingsway building (the “Building”), situated on the real property described in Exhibit B attached hereto (the “Property”) which is part of a development in the Park at Northwest Point, Elk Grove Village, Illinois (the “Development”). The Leased Premises shall be occupied and used exclusively for general office purposes and for legal purposes incidental thereto and shall not be used for any other purpose. Tenant shall have shared access to conference rooms, training rooms, meeting facilities and other common areas of the Building without charge and upon reasonable notice to Landlord, but only to the extent Landlord owns the conference rooms, training rooms, meeting facilities and/or other common areas of the Building.

TO HAVE AND TO HOLD the same for a term of thirty-six (36) months commencing on January 1, 2011, and ending December 31, 2013 (“Term”) unless terminated or extended pursuant to any provision hereof. Tenant acknowledges that no representations as to the repair of the Leased Premises, nor promises to alter, remodel or improve the Leased Premises have been made by Landlord, unless such are expressly set forth in this Lease.

The taking of possession by Tenant shall be deemed conclusively to establish that the Building, other improvements, and the Leased Premises are in good and satisfactory condition as of when possession was so taken (except for such items as Landlord is permitted to complete at a later date, which items shall be specified by Landlord to Tenant in writing).

2. Rent

A.    Rent and Security Deposit.

i.     Tenant agrees to pay to Landlord for the Leased Premises in lawful money of the United States rent for the first twelve (12) months of the term hereof at the rate of Fifteen Dollars ($15.00) per square foot ofoccupied space, in advance, except that the monthly installment which otherwise shall be due on the commencement date recited above, shall be due and payable on the date hereof. Thereafter one such monthly installment shall be due and payable without demand on or before the first day of each calendar month succeeding the commencement date; further provided, that the rental payment for any fractional calendar month at the commencement or end of the Lease term shall be prorated. The rate charged for rent shall increase by $0.50 (Fifty Cents) per year for each such succeeding twelve (12) month period.

ii.     In addition, Tenant agrees to deposit with Landlord on the date hereof the sum of One Thousand Dollars ($1,000.00), which sum shall be held by Landlord, without obligation for interest, as security for the full, timely and faithful performance of Tenant's covenants and obligations under this Lease, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by any event of Tenant's default; and Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to its original amount. Although the security deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this Lease when Landlord shall have determined that all Tenant's obligations under this Lease have been fulfilled. Subject to the other terms and conditions contained in this Lease, if the Building is conveyed by Landlord, said deposit may be turned over to Landlord's grantee, and if so, Tenant hereby releases Landlord from any and all liability with respect to said deposit and its applicationor return.

B.-intentionally deleted -

3. Electric Service

To the extent Tenant is not billed directly by a public utility, Tenant shall pay, upon demand, as additional rent, for all electricity used by Tenant in the Leased Premises for lighting, convenience outlets, and other direct uses. The charge shall be based upon allocation of total building use and shall be at the rates charged for such services by the local public authority or utility but shall not exceed the greater of the trailing twelve (12) month average of electricity charges paid by Tenant or Tenant's proportionate share as defined in Section 21 hereof. In the first year of this lease, the trailing twelve (12) month average shall be considered the monthly average beginning with January 1, 2011 through the end of the month for which billing is being calculated. Tenant shall furnish, at its own expense, all electric light bulbs, tubes and ballasts. Tenant will not without the written consent of Landlord use any apparatus or device in the Leased Premises which will in anyway increase its usage beyond the amount of electricity which Landlord determines to be commercially reasonable for use of the Leased Premises as general office space, nor connect with electric current (except through existing electrical outlets in the Leased Premises) any apparatus or device for the purpose of using electric current. If Tenant shall require electric current in excess of that which is reasonably obtainable from existing electric outlets and normal for use of the Leased Premises as general office space, then Tenant shall first procure the consent of Landlord (which consent will not be unreasonably withheld). Tenant shall pay all costs of installation of all facilities necessary to furnishing such excess capacity and for such increased electricity usage.

Interruptions of any service shall not be deemed an eviction or disturbance of Tenants use and possession of the Leased Premises or any part thereof, or render Landlord liable for damages by abatement of rent or otherwise or relieve Tenant from performance of Tenant's obligations under this Lease.

4. Alterations

All improvements and alterations to the Leased Premises to be made by Tenant shall be installed at the cost and expense of Tenant (which cost shall be payable on demand by Landlord as additional rent), but only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, and only by Landlord or by contractors and subcontractors approved in writing by Landlord (which approval shall not be unreasonably withheld). In connection with any request for an approval of alterations by Tenant, Landlord may retain the services of an architect and/or engineer and Tenant shall reimburse Landlord for the reasonable fees of such architect and/or engineer. All alterations, additions, improvements and partitions erected by Tenant shall be and remain the property of Tenant during the term of this Lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, improvements and partitions erected by Tenant and restore the Leased Premises to its original condition by the date of termination of this Lease or upon earlier vacating of the Leased Premises; provided, however, that, if at such time Landlord so elects, such alterations, additions, improvements and partitions shall become the property of Landlord as of the date of termination of this Lease or upon earlier vacating of the Leased Premises and title shall pass to Landlord under this Lease as by a bill of sale. All such removals and restoration shall be accomplished in a good workmanlike manner by contractors approved in writing by Landlord so as not to damage the primary structure or structural qualities of the Building. All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all governmental laws, ordinances, rules and regulations and Tenant shall, prior to construction, provide such assurances to Landlord, including but not limited to, waivers of lien, surety company performance bonds and personal guaranties of individuals of substance, as Landlord shall require to assure payment of the costs thereof and to protect Landlord against any loss from any mechanics', laborers', materialmen's or other liens.

5. Service

A. In buildings of two or more stories Landlord agrees to furnish Tenant, while occupying the Leased Premises, water, hot, cold and refrigerated at those points of supply provided for general use of tenants; heated and refrigerated air conditioning in season at such times as Landlord normally furnishes these services to all tenants of the Building, and at such temperatures and in such amounts as are in accordance with any applicable statutes, rules or regulations and are considered by Landlord to be standard, such service at other times and on Saturday, Sunday, and holidays to be optional on the part of Landlord (Landlord hereby reserves the right to charge Tenant for any such optional service requested by Tenant on such basis as Landlord, in its sole discretion, determines); janitor service to the Leased Premises on weekdays other than holidays and such window washing as may from time to time in the Landlord's judgment be reasonably required; operatorless passenger elevators for ingress and egress to the floor on which the Leased Premises are located, provided Landlord may reasonably limit the number of elevators to be in operation on Saturdays, Sundays, and holidays; but failure to any extent to furnish or any stoppage or interruption of these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to any person, property, or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement

hereof. Should any equipment or machinery furnished by Landlord cease to function properly, Landlord shall use reasonable diligence to repair the same promptly, but Tenant shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. Whenever heat generating machines or equipment are used by Tenant in the Leased Premises which affect the temperature otherwise maintained by the air conditioning equipment, Landlord reserves the right to install supplementary air conditioning units in the Leased Premises (or for the use of the Leased Premises) and the expense of such purchase, installation, maintenance, and repair shall be paid by Tenant upon demand as additional rent.

B. In buildings of one story without interior common public areas, Landlord agrees to provide, at its cost, water, electricity and telephone service connections into the Leased Premises; but Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges and other utilities and services used on or from the Leased Premises, including without limitation, Tenant's proportionate share as determined by Landlord of any central station signaling system installed in the premises or the building of which the premises are a part, together with any taxes, penalties and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all charges jointly metered with other premises as determined by Landlord, in its sole discretion, to be reasonable. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be additional rent hereunder. Landlord shall in no event be liable for any interruption or failure of utility services on or to the Leased Premises. These costs, paid by Tenant, shall be excluded from amounts billed to Tenant pursuant to Paragraph 2.

C. In single story buildings with heat, ventilating and air conditioning systems servicing individual tenants, Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor approved by Landlord, for servicing all heating and air conditioning systems and equipment servicing the Leased Premises. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective within thirty (30) days of the date Tenant takes possession of the Leased Premises. If there is a common interior public area with its own HVAC system, the costs to operate and maintain that system plus general maintenance of the common area will be included as part of the cost covered by Paragraph 2.

D. Tenants in single and multi-story buildings shall not provide any janitorial services without Landlords written consent and then only subject to supervision of Landlord and by a janitorial contractor or employees at all times satisfactory to Landlord. Any such services provided by Tenant shall be Tenant's sole risk and responsibility.

6. Use of Premises

A. Tenant will not occupy or use, nor permit any portion of Leased Premises to be occupied or used, for any business or purpose other than that described above or for any use or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will render void or in any way increase the rate of fire insurance on the Building or its contents, and Tenant, shall immediately cease and desist from such use, paying all costs and expenses resulting therefrom.

B. Tenant shall at its own cost and expense promptly obtain any and all licenses and permits necessary for any permitted use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use and its occupancy of the Leased Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Leased Premises, all at Tenant's sole expense. If, as a result of any change in the governmental laws, ordinances, and regulations, the Leased Premises must be altered to lawfully accommodate Tenant's use and occupancy, such alterations shall be made only with the consent of Landlord, but the entire cost shall be borne by Tenant; provided, that, the necessity of Landlord's consent shall in no way create any liability against Landlord for failure of Tenant to comply with such laws, ordinances and regulations.

C. Tenant will maintain the Leased Premises (including all fixtures installed by Tenant, water heaters within the Leased Premises and plate glass) in good repair, reasonable wear and tear excepted, and in a clean and healthful condition, and comply with all laws, ordinances, orders, rules, and regulations (state, federal, municipal, and other agencies or bodies having any jurisdiction thereof) with reference to condition, or occupancy of the Leased Premises. Any repairs or replacements shall be with materials and workmanship of the same character, kind and quality as the original. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or door lettering or advertising media of any type on or about the Leased Premises.

D. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy, or disturb other tenants or Landlord in the management of the Building.

E. Tenant shall pay upon demand as additional rent the full cost of repairing any damage to the Leased Premises, Building or related facilities resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, servants, employees, patrons, customers, or any other person entering upon the Development as a result of Tenant's business activities or resulting from Tenant's default hereunder.

F. Tenant and Tenant's agents, employees, and invitees will comply fully with all rules and regulations of the Development, the Building, parking area and related facilities which Landlord may establish from time to time. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for the safety, care, and cleanliness of the Building or the Development and for the preservation of good order therein. Copies of all rules and regulations, changes, and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by Tenant's employees, servants, agents and visitors.

G. At termination of this Lease, upon its expiration or otherwise, Tenant shall deliver up the Leased Premises with all improvements located thereon (except as herein provided) in good repair and condition, reasonable wear and tear excepted, broom clean and free of all debris.

7. Inspections

Landlord shall have the right to enter the Leased Premises at any reasonable time, for the following purposes: (i) to ascertain the condition of the Leased Premises; (ii) to determine whether Tenant is diligently fulfilling Tenant's responsibilities under this Lease; (iii) to clean and to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease; or (iv) to do any other act or thing which Landlord deems reasonable to preserve the Leased Premises and the Building. During the six (6) months prior to the end of the term hereof and at any time Tenant is in default hereunder, Landlord shall have the right to enter the Leased Premises at any reasonable time during business hours for the purpose of showing the premises. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating and shall arrange to meet with Landlord for a joint inspection of the Leased Premises. In the event of Tenant's failure to give such notice or arrange such joint inspection, Landlord's inspection at or after Tenant's vacating the Leased Premises shall be conclusively deemed correct for purposes of determining Tenant's responsibility for repairs and restoration.

8. Assignment and Subletting

A. Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Leased Premises, whether voluntarily or by operation of law, or permit the use or occupancy of the Leased Premises by anyone other than Tenant, without the prior written consent of Landlord, and such restrictions shall be binding upon any assignee or subtenant to which Landlord has consented (which consent shall not be unreasonably withheld). In the event Tenant desires to sublet the Leased Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord within a reasonable time prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease and copies of financial reports and other relevant financial information of the proposed subtenant or assignee. In no event may Tenant sublet, nor will Landlord consent to any sublease of, all or any portion of the Leased Premises if the rent is determined in whole or in part based upon the income or profits derived by the sub-lessee (other than a rent based on a fixed percentage or percentages of receipts or sales). Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of his Lease. Upon the occurrence of an “event of default” (as hereinafter defined), if the Leased Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder. Tenant shall pay to Landlord, on demand, a reasonable service charge for the processing of the application for the consent and for the preparation of the consent. Such service charge shall be collectible by Landlord only where consent is granted by Landlord.

B. In addition to, but not in limitation of, Landlord's right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Leased Premises, to recapture the portion of the Leased Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice thereof within sixty (60)days following Landlord's receipt of Tenant's written notice as required above. If this Lease shall be terminated with respect to the entire Leased Premises pursuant to this paragraph, the term of this Lease shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease

for the expiration of the term hereof. If Landlord recaptures under this paragraph only a portion of the Leased Premises, the rent during the unexpired term shall abate proportionately based on the rent contained in this Lease as of the date immediately prior to such recapture. Tenant shall, at Tenant's own cost and expense, discharge in full any outstanding commission obligation on the part of Landlord with respect to this Lease, and any commissions which may be due and owing as a result of any proposed assignment or subletting, whether or not the Leased Premises are recaptured pursuant hereto and rented by Landlord to the proposed tenant or any other tenant. In the event of the recapture of a portion of the Leased Premises by Landlord pursuant to the terms of this paragraph, Tenant shall pay all costs associated with the separation of the recaptured premises from the portion not recaptured, including, but without limitation, the cost of all demising partitions, changes in lighting and HVAC distribution systems and all reasonable architectural and/or engineering fees.

C. Any assignment or subletting by Tenant pursuant to subparagraph 8A of all or any portion of the Leased Premises, or termination of the Lease for a portion of the Leased Premises pursuant to subparagraph 8B, shall automatically operate to terminate each and every right, option, or election, if any exist, belonging to Tenant, including by way of illustration, but not limitation, any option to expand its premises or to extend or renew the term of Tenant's Lease for all or any portion of the Leased Premises - i.e. such rights and options shall cease as to both space sublet or assigned and as to any portion of the original Leased Premises retained by Tenant.

9. Fire and Casualty Damage

A. If the Building, improvements, or Leased Premises are rendered partially or wholly untenantable by fire or other casualty, and if such damage cannot, in Landlord's reasonable estimation, be materially restored within ninety (90) days of such damage, then Landlord may, at its sole option, terminate this Lease as of the date of such fire or casualty. Landlord shall exercise its option provided herein by written notice within sixty (60)days of such fire or other casualty. For purposes hereof, the Building or Leased Premises shall be deemed “materially restored” if they are in such condition as would not prevent or materially interfere with Tenant's use of the Leased Premises for the purpose for which it was then being used.

B. If this Lease is not terminated pursuant to Paragraph 9A, then Landlord shall proceed with all due diligence to repair and restore the Building, improvements or Leased Premises, as the case may be (except that Landlord may elect not to rebuild if such damage occurs during the last year of the term exclusive of any option which is unexercised at the date of such damage).

C. If this Lease shall be terminated pursuant to this Paragraph 9, the term of this Lease shall end on the date of such damage as if that date had been originally fixed in this Lease for the expiration of the term hereof. If this Lease shall not be terminated by Landlord pursuant to this Paragraph 9 and if the Leased Premises is untenantable in whole or in part following such damage, the rent payable during the period in which the Leased Premises is untenantable shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and material restoration within one hundred fifty (150) days after the date of such damage, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, whereupon the Lease shall end on the date of such notice as if the date of such notice were the date originally fixed in this Lease for the expiration of the term hereof; provided however, that if construction is delayed because of changes, deletions, or additions in construction requested by Tenant, strikes, lockouts, casualties, acts of God, war, material or labor shortages, governmental regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

In no event shall Landlord be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in or about the Leased Premises by Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Leased Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

D. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Leased Premises, Building or Property requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon the Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the term hereof.

E. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire, extended coverage perils, vandalism or malicious mischief, sprinkler leakage or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, including any other tenants or occupants of the remainder of the Building in which the Leased Premises is located; provided, however, that this release shall be applicable and in force and effect only to the extent that such

release shall be lawful at that time and in any event only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each Landlord and Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so. If such other party fails to pay such extra cost, the release provisions of this paragraph shall be inoperative against such other party to the extent necessary to avoid invalidation of such releasor's insurance.

F. In the event of any damage or destruction to the Building or the Leased Premises by any peril covered by the provisions of this Paragraph 9, Tenant shall, upon notice from Landlord, remove forthwith, at its sole cost and expense, such portion or all of the property belonging to Tenant or his licensees from such portion or all of the Building or the Leased Premises as Landlord shall request and Tenant hereby indemnifies and holds Landlord harmless from any loss, liability, costs, and expenses, including attorney's fees, arising out of any claim of damage or injury as a result of any alleged failure to properly secure the Leased Premises prior to such removal and/or such removal.

10. Liability

Landlord shall not be liable for and Tenant will indemnify and hold Landlord harmless from any loss, liability, costs and expenses, including attorney's fees, arising out of any claim of injury or damage on or about the Leased Premises caused by the negligence or misconduct or breach of this Lease by Tenant, its employees, subtenants, invitees or by any other person entering the Leased Premises or the Building or Development under express or implied invitation of Tenant or arising out of Tenant's use of the Leased Premises. Landlord shall not be liable to Tenant or Tenant's agents, employees, invitees or any person entering upon the Development in whole or in part because of Tenant's use of the Leased Premises for any damage to persons or property due to condition, design, or defect in the Building or its mechanical systems which may exist or occur, and Tenant assumes all risks of damage to such persons or property. Landlord shall not be liable or responsible for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, or other matter beyond control of Landlord, or for any injury or damage or inconvenience, which may arise through repair or alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's willful acts or gross negligence. Tenant shall procure and maintain throughout the term of this Lease a policy of insurance, in form and substance satisfactory to Landlord, at Tenant's sole cost and expense, insuring both Landlord and Tenant against all claims, demands or actions arising out of or in connection with: (i) the Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant's operations in and maintenance and use of the Leased Premises; and (iv) Tenant's liability assumed under this Lease; the limits of such policy to be in the amount of not less than $1,000,000 per occurrence in respect of injury to persons (including death) and in the amount of not less than $500,000 per occurrence in respect of property damage or destruction, including loss of use thereof. Such policy shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. A certified copy of such policy, together with receipt evidencing payment of the premium, shall be delivered to Landlord prior to the commencement date of this Lease. Not less than thirty (30) days prior to the expiration date of such policy, a certified copy of a renewal thereof (bearing notations evidencing the payment of the renewal premium) shall be delivered to Landlord. Such policy shall further provide that not less than thirty (30) days' written notice shall be given to Landlord before such policy may be canceled or changed to reduce the insurance coverage provided thereby.

11. Condemnation

A. If any substantial part of the Building, improvements, or Leased Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the Building or Leased Premises for the purpose for which it is then being used, this Lease shall terminate effective when the physical taking shall occur in the same manner as if the date of such taking were the date originally fixed in this Lease for the expiration of the term hereof.

B. If part of the Building, improvements, or Leased Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this Lease is not terminated as provided in the subparagraph above, this Lease shall not terminate but the rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances and Landlord shall undertake to restore the Building, improvements, and Leased Premises to a condition suitable for Tenant's use, as near to the condition thereof immediately prior to such taking as is reasonably feasible under all the circumstances.

C. In the event of any such taking or private purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any

condemnation proceedings; provided that Tenant shall not be entitled to receive any award for Tenant's loss of its leasehold interest, the right to such award being hereby assigned by Tenant to Landlord.

12. Holding Over

Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Tenant retains possession of the Leased Premises or any part thereof after such termination, then Landlord may, at its option, serve written notice upon Tenant that such holding over constitutes any one of (i) renewal of this Lease for one year, and from year to year thereafter, or (ii) creation of a month to month tenancy, upon the terms and conditions set forth in this Lease, or (iii) creation of a tenancy at sufferance, in any case upon the terms and conditions set forth in this Lease; provided, however, that the monthly rental (or daily rental under (iii)) shall, in addition to all other sums which are to be paid by Tenant hereunder, whether or not as additional rent, be equal to double the rental being paid monthly to Landlord under this Lease immediately prior to such termination (prorated in the case of (iii) on the basis of a 365 day year for each day Tenant remains in possession). If no such notice is served, then a tenancy at sufferance shall be deemed to be created at the rent in the preceding sentence. Tenant shall also pay to Landlord all damages sustained by Landlord resulting from retention of possession by Tenant, including the loss of any proposed subsequent tenant for any portion of the Leased Premises. The provisions of this paragraph shall not constitute a waiver by Landlord of any right of re-entry as herein set forth; nor shall receipt of any rent or any other act in apparent affirmance of the tenancy operate as a waiver of the right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant's part to be performed.

13. Quiet Enjoyment

Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the Leased Premises for the term hereof without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. In the event this Lease is a sublease, then Tenant agrees to take the Leased Premises subject to the provisions of the prior Leases. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

In the event of change of ownership of the Landlord or sale of the building, or the leasing of additional space to other tenants, which results in loss of square footage to the Leased Premises, Landlord shall use its best efforts to accommodate Tenant and provide additional square footage to restore to Tenant square footage lost as a result of change of ownership of the Landlord or sale of the building, or the leasing of additional space to other tenants, or adjust the Rent to reflect the diminished square footage.

14. Default

A. Tenant's Default. Tenant shall be in default under this Lease if:

i.     Tenant shall fail to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, whether such sum be any installment of the rent herein reserved, any other amount treated as additional rent hereunder, or any other payment or reimbursement to Landlord required herein, whether or not treated as additional rent hereunder, and such failure shall continue for a period of five (5) days from the date such payment was due; or

ii.     Tenant shall fail to comply with any term, provision or covenant of this Lease other than by failing to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, and shall not cure such failure within twenty (20) days (forthwith, if the default involves a hazardous condition) after written notice thereof to Tenant; or

iii.     Tenant shall abandon or vacate any substantial portion of the Leased Premises; or

iv.     Tenant shall fail to vacate the Leased Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant's right to possession only; or

v.     The leasehold interest of Tenant shall be levied upon under execution or be attached by process of law or Tenant shall fail to contest diligently the validity of any lien or claimed lien and give sufficient security to Landlord to insure payment thereof or shall fail to satisfy any judgment rendered thereon and have the same released, and such default shall continue for ten (10) days after written notice thereof to Tenant; or

vi.     Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the

benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof; or

vii.     A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant a bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof.

viii.     Sale of Shares. If Tenant is a corporation and if the ownership thereof shall materially change at any time or from time to time during the term of this Lease from the present composition of same as it may exist at any time, or if a substantial portion of the assets of Tenant shall be sold, assigned or transferred with or without a specific assignment of this Lease, or if Tenant shall merge or consolidate withany firm or corporation, Landlord at its option may, by giving sixty (60) days' prior written notice to Tenant, declare such change a breach of this Lease subject to the remedies provided for breach in Section 16 hereof.

Ownership of a corporation shall be deemed to have materially changed if a number of its voting shares which constitute fifty percent (50%) of the number thereof outstanding from time to time shall be transferred by either the owners thereof or by the corporation, and such transfer of shares shall not first have been approved in advance in writing by Landlord.

B.    Landlord's remedies. Upon the occurrence of any of such events of default described in Paragraph 14 hereof or elsewhere in this Lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever:

i.     Landlord may, at its election, terminate this Lease or terminate Tenant's right to possession only, without terminating the Lease;

ii.     Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant's right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Leased Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Leased Premises in such event with or without process of law and to repossess Landlord of the Leased Premises as of Landlord's former estate and to expel or remove Tenant and any others who may be occupying or within the Leased Premises and to remove any and all property therefrom, without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant hereby waving any right to claim damage for such reentry and expulsion, and without relinquishing Landlord's right to rent or any other right given to Landlord hereunder or by operation of law;

iii.     Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent hereunder, and other sums due and payable by Tenant on the date of termination, plus the sum of (i) an amount equal to the then present value of the rent, including any amounts treated as additional rent hereunder, and other sums provided herein to be paid by Tenant for the residue of the stated term hereof, less the fair rental value of the Leased Premises for such residue (taking into account the time and expense necessary to obtain a replacement tenant or tenants, including expenses hereinafter described in subparagraph (d) relating to recovery of the Leased Premises, preparation for reletting and for reletting itself), and (ii) the cost of performing any other covenants which would have otherwise been performed by Tenant;

iv. (1)     Upon any termination of Tenant's right to possession only without termination of the Lease, Landlord may, at Landlord's option, enter into the Leased Premises, remove Tenant's signs and other evidences of tenancy, and take and hold possession thereof as provided in subparagraph (b) above, without such entry and possession terminating the Lease or releasing Tenant, in whole or in part, from any obligation, including Tenant's obligation to pay the rent, including any amounts treated as additional rent, hereunder for the full term. In any such case Tenant shall pay forthwith to Landlord, if Landlord so elects, a sum equal to the entire amount of the rent, including any amounts treated as additional rent hereunder, for the residue of the stated term hereof plus any other sums provided herein to be paid by Tenant for the remainder of the Lease term;

(2)     Landlord may, but need not, relet the Leased Premises or any part thereof for such rent and

upon such terms as Landlord, in its sole discretion, shall determine (including the right to relet the Leased Premises for a greater or lesser term than that remaining under this Lease, the right to relet the Leased Premises as a part of a larger area, and the right to change the character or use made of the Leased Premises). If Landlord decides to relet the Leased Premises or a duty to relet is imposed upon Landlord by law, Landlord and Tenant agree that Landlord shall only be required to use the same efforts Landlord then uses to Lease other properties Landlord owns or manages (or if the Leased Premises is then managed for Landlord, then Landlord will instruct such manager to use the same efforts such manager then uses to Lease other space or properties which it owns or manages); provided, however that Landlord (or its manager) shall not be required to give any preference or priority to the showing or teasing of the Leased Premises over any other space that Landlord (or its manager) may be leasing or have available and may place a suitable prospective tenant in any such available space regardless of when such alternative space becomes available; provided, further that Landlord shall not be required to observe any instruction given by Tenant about such reletting or accept any tenant offered by Tenant unless such offered tenant has a creditworthiness acceptable to Landlord, Leases the entire Leased Premises, agrees to use the leased premises in a manner consistent with the Lease and Leases the Leased Premises at the same rent, for no more than the current term and on the same other terms and conditions as in this Lease without the expenditure by Landlord for tenant improvements or broker's commissions. In any such case, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Leased Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall, upon demand, pay the cost thereof, together with Landlord's expenses of reletting, including, without limitation, any broker's commission incurred by Landlord. If the consideration collected by Landlord upon any such reletting plus any sums previously collected from Tenant are not sufficient to pay the full amount of all rent, including any amounts treated as additional rent hereunder and other sums reserved in this Lease for the remaining term hereof, together with the costs of repairs, alterations, additions, redecorating, and Landlord's expenses of reletting and the collection of the rent accruing therefrom (including attorney's fees and broker's commissions), Tenant shall pay to Landlord the amount of such deficiency upon demand and Tenant agrees that Landlord may file suit to recover sums failing due under this section from time to time;

v.     Landlord may, at Landlord's option, enter into and upon the Leased Premises, with or without process of law, if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible hereunder and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage resulting therefrom and Tenant agrees to reimburse Landlord, on demand, as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease;

vi.     Any and all property which may be removed from the Leased Premises by Landlord pursuant to the authority of the Lease or of law, to which Tenant is or may be entitled, may be handled, removed and stored, as the case may be, by or at the direction of Landlord at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Leased Premises shall, at Landlord's option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

In the event Tenant fails to pay any installment of rent, including any amount treated as additional rent hereunder, or other sums hereunder as and when such installment or other charge is due, Tenant shall pay to Landlord on demand a late charge in an amount equal to five percent (5%) of such installment or other charge overdue in any month and five percent (5%) each month thereafter until paid in full to help defray the additional cost to Landlord for processing such late payments, and such late charge shall be additional rent hereunder and the failure to pay such late charge within ten (10) days after demand therefor shall be an additional event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Leased Premises, and no

agreement to terminate this Lease or accept a surrender of said premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Landlord's acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or any subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney concerning or to enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any attorney's fees so incurred.

Without limiting the foregoing, Tenant hereby: (i) expressly waives any right to trial by jury; and (ii) expressly waives the service of any notice under any existing or future law of the State of Illinois applicable to landlords and tenants.

Tenant hereby constitutes and irrevocably appoints any attorney of any court to be the true and lawful attorney of Tenant, and, in the name, place and stead of Tenant, to appear for and on behalf of Tenant in any court of record at any time in any suit or suits brought against Tenant for the enforcement of any right hereunder by Landlord, to waive the issuance and service of process and trial by jury, and, from time to time, to confess judgment or judgments in favor of Landlord and against Tenant for any rent, including any amounts treated as additional rent hereunder, other charges, and interest thereon due hereunder by Tenant to Landlord and not paid and for costs of suit and for a reasonable attorney's fee in favor of Landlord to be fixed by the court, and to release all errors that may occur or intervene in such proceedings, including the issuance of execution upon any such judgment, and to stipulate that no appeal shall be prosecuted from such judgment or judgments, or that no proceedings in chancery or otherwise shall be filed or prosecuted to interfere in any way with the operation of such judgment or judgments, or of any execution issued thereon or with any supplemental proceedings taken by Landlord to collect the amount of any such judgment or judgments, and to consent that execution on any judgment or decree in favor of Landlord and against Tenant may issue forthwith.

15. Termination by Landlord

Landlord may terminate the Lease prior to the end of the Term by giving one hundred twenty (120) days prior written notice to Tenant. In addition, Landlord shall pay an early termination fee to Tenant according to the following schedule (which fee shall be payable within thirty (30) days of termination of the lease):

When Notice Provided	Termination Fee payable to Tenant
If provided in months 1 - 3 of the Term	$100,000
If provided in months 4 - 12 of the Term	$80,000
If provided in months 13 - 24 of the Term	$60,000
If provided in months 25 - 30 of the Term	$50,000

16. Landlord's Lien

In addition to any statutory lien for rent in Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a continuing security interest for all rentals and other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Leased Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged. In the event of a default under this Lease, Landlord shall have, in addition to any other remedies provided herein or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Paragraph 16 at public or private sale upon five (5) days' notice to Tenant. Tenant hereby agrees to execute such financing statements and other instruments necessary or desirable in Landlord's discretion to perfect the security interest hereby created. Any statutory lien for rent is not hereby waived, the express contractual lien herein granted being in addition and supplementary thereto.

17. Mortgages

Tenant accepts this Lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a first lien or charge upon the Property, or the improvements situated thereon, provided, however, that if the mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant's interest in this Lease superior to any such instrument,

then by notice to Tenant from such mortgagee, trustee or holder, this Lease shall be deemed superior to such lien whether this Lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage or for the purpose of evidencing the superiority of this Lease to the lien of any such mortgage, as may be the case.

18. Landlord's Liability

In no event shall Landlord's liability for any breach of this Lease exceed the amount of rental then remaining unpaid for the then current term (exclusive of any renewal periods which have not then actually commenced). This provision is not intended to be a measure or agreed amount of Landlord's liability with respect to any particular breach, and shall not be utilized by any court or otherwise for the purpose of determining any liability of Landlord hereunder, except only as a maximum amount not to be exceeded in any event.

19. Mechanics and Other Liens

Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Leased Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this Lease. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Leased Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Leased Premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, liability, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of the Landlord in the Leased Premises or under the terms of this Lease. Tenant will not permit any mechanic's lien or liens or any other liens which may be imposed by law affecting Landlord's or its mortgagees' interest in the Leased Premises or the Building to be placed upon the Leased Premises or the Building arising out of any action or claimed action by Tenant, and in case of the filing of any such lien Tenant will promptly pay same. If any such lien shall remain in force and effect for twenty (20)days after written notice thereof from Landlord to Tenant, Landlord shall have the right and privilege of paying and discharging the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be so much additional rent hereunder due from Tenant to Landlord and shall be paid to Landlord immediately on rendition of bill therefor. Notwithstanding the foregoing, Tenant shall have the right to contest any such lien in good faith and with all due diligence so long as any such contest, or action taken in connection therewith, protects the interest of Landlord and Landlord's mortgagee in the Leased Premises, and Landlord and any such mortgagee are, by the expiration of said twenty (20)day period, furnished such protection, and indemnification against any loss, liability, cost or expense related to any such lien and the contest thereof as are satisfactory to Landlord and any such mortgagee.

20. Notices

Each provision of this Lease or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice or the making of any payment shall be deemed to be complied with when and if the following steps are taken:

(a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable toAmerican Service Insurance Company, Inc., or to such other entity at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith.

(b) Any notice or other document required or permitted to be delivered hereunder shall be deemed to be delivered whether actually received or not when deposited in the continental United States Mail, postage prepaid, certified or registered mail, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith:

LANDLORD:            

American Service Insurance Company, Inc.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

TENANT:

Universal Casualty Company

150 Northwest Point Blvd.

Elk Grove Village, IL 60007

All parties included within the terms “Landlord” and “Tenant,” respectively, shall be bound by notices given in accordance with the provisions of this paragraph to the same effect as if each had received such notice.

21. Miscellaneous

A. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

B. The terms, provisions and covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns, except as otherwise expressly provided herein. Landlord shall have the right to assign any of its rights and obligations under this Lease and Landlord's grantee or Landlord's successor shall upon such assignment, become “Landlord” hereunder, thereby freeing and relieving the grantor or assignor of all covenants and obligations of “Landlord” hereunder; provided, however, that no successor Landlord shall be responsible for the return of any security deposit provided for pursuant to Paragraph 2ii unless such successor receives the deposit. Tenant agrees to furnish promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of Tenant to enter into this Lease. Nothing herein contained shall give any other Tenant in the Building of which the Leased Premises is a part any enforceable rights either against Landlord or Tenant as a result of the covenants and obligations of either party set forth herein.

C. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof.

D. Tenant shall at anytime and from time to time within ten (10) days after written request from Landlord execute and deliver to Landlord or any prospective Landlord or mortgagee or prospective mortgagee a sworn and acknowledged estoppel certificate, in form reasonably satisfactory to Landlord and/or Landlord's mortgagee or prospective mortgagee certifying and stating as follows: (i) this Lease has not been modified or amended (or if modified or amended, setting forth such modifications or amendments); (ii) this Lease (as so modified or amended) is in full force and effect (or if not in full force and effect, the reasons therefor); (iii) the Tenant has no offsets or defenses to its performance of the terms and provisions of this Lease, including the payment of rent (or if there are any such defenses or offsets, specifying the same); (iv) Tenant is in possession of the Leased Premises if such be the case; (v) if an assignment of rents or Leases has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has received such assignment and agrees to be bound by the provisions thereof; and (vi) any other accurate statements reasonably required by Landlord or its mortgagee or prospective mortgagee. It is intended that any such statement delivered pursuant to this subsection may be relied upon by any prospective purchaser or mortgagee and their respective successors and assigns and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant hereby irrevocably appoints Landlord or if Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for the Tenant with full power and authority to execute and deliver in the name of Tenant such estoppel certificate if Tenant fails to deliver the same within such ten (10) day period and such certificate as signed by Landlord or Landlord's beneficiary, as the case may be, shall be fully binding on Tenant, if Tenant fails to deliver a contrary certificate within five (5) days after receipt by Tenant of a copy of the certificate executed by Landlord or Landlord's beneficiary, as the case may be, on behalf of Tenant. In addition to any other remedy Landlord may have hereunder, Landlord may, at its option, if Tenant does not deliver to Landlord an estoppel certificate as set forth above within fifteen (15) days after Tenant is requested to do so, cancel this Lease effective the last day of the then current month, without incurring any liability on account thereof, and the term hereby granted is expressly limited accordingly.

E. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

F. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Lease shall survive the expiration or earlier termination of the term hereof, including without limitation, all payment obligations with respect to taxes and Operating Costs and all obligations concerning the condition of the premises. Upon the expiration or earlier termination of the term hereof, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary: (i) to repair and restore the Leased Premises as provided herein; and (ii) to discharge Tenant's obligation for unpaid taxes, Operating Costs or other amounts due Landlord, if any. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any security deposit held by Landlord shall be credited against the

amount payable by Tenant under this subparagraph 21F.

G. If any clause, phrase, provision or portion of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable under applicable law, such event shall not affect, impair or render invalid or unenforceable the remainder of this Lease nor any other clause, phrase, provision or portion hereof, nor shall it affect the application of any clause, phrase, provision or portion hereof to other persons or circumstances, and it is also the intention of the parties to this Lease that in lieu of each such clause, phrase, provision or portion of this Lease that is invalid or unenforceable, there be added as a part of this Lease contract a clause, phrase, provision or portion as similar in terms to such invalid or unenforceable clause, phrase, provision or portion as may be possible and be valid and enforceable.

H. Submission of this Lease shall not be deemed to be a reservation of the Leased Premises. Landlord shall not be bound hereby until its delivery to Tenant of an executed copy hereof signed by Landlord, already having been signed by Tenant, and until such delivery Landlord reserves the right to exhibit and Lease the Leased Premises to other prospective tenants. Notwithstanding anything contained herein to the contrary, Landlord may withhold delivery of possession of the Leased Premises from Tenant until such time as Tenant has paid to Landlord the security deposit required by subparagraph 2B hereof, the first month's rent as set forth in subparagraph 2A hereof, and any sum owed pursuant to Paragraph 5 hereof.

I. Whenever a period of time is herein prescribed for action to be taken by Landlord, the Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to causes of any kind whatsoever which are beyond the control of Landlord.

J. Tenant's “proportionate share” as used in this Lease shall mean a fraction, the numerator of which is the gross leasable area of the Leased Premises and the denominator of which is the gross leasable area contained in the Building, in each case as reasonably determined by Landlord. For purposes hereof the numerator is 14,100 and the denominator is 174,000 and Tenant's proportionate share is 8.1%.

K. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. Any indemnification of, insurance of, or option granted to Landlord shall also include or be exercisable by Landlord's trustee, beneficiary, agents and employees, as the case may be.

L. Each of the parties (i) represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease; and (ii) indemnifies and holds the other harmless from any and all losses, liability, costs or expenses (including attorneys' fees) incurred as a result of an alleged breach of the foregoing warranty.

22. Substitution of Premises

At any time after date of execution of this Lease, Landlord may substitute for the Leased Premises, other premises in the Development (the “new premises”), in which event the new premises shall be deemed to be the Leased Premises for all purposes under this Lease, provided: (i) the new premises shall be located in the Building or a comparable building and shall be similar to the Leased Premises in square footage and appropriateness for the use of Tenant's purposes; (ii) if Tenant is then occupying the Leased Premises, Landlord shall pay the expense of moving Tenant, its property and equipment to the new premises and such moving shall be done at such time and in such manner so as to cause the least inconvenience to Tenant; (iii) Landlord shall give to Tenant not less than thirty (30) days' prior written notice of such substitution; (iv) Landlord shall, at its sole cost, improve the new premises with improvements substantially similar to those located in the Leased Premises, and (v) Landlord shall reimburse Tenant for all costs ancillary to such move including but not limited to stationery, business card, changes in websites and other public materials referencing Tenant's address, filing fees for notice to regulatory bodies of the change of address, transition and service fees incurred to ensure a smooth transition of computer hardware and software applications.

23. Certain Rights Reserved To The Landlord

The Landlord reserves and may exercise the following rights without affecting Tenant's obligations hereunder:

A. to change the name or street address of the Building;

B. to install and maintain a sign or signs on the exterior of the Building;

C. to have access for the Landlord and the other tenants of the Building to any mail chutes located on the Leased Premises according to the rules of the United States Post Office;

D. to designate all sources furnishing sign painting and lettering, ice, drinking water, towels, coffee cart service and toilet supplies, lamps and bulbs used on the Leased Premises;

E. to retain at all times pass keys to the Leased Premises;

F. to grant to anyone the exclusive right to conduct any particular business or undertaking in the Building;

G. to close the Building after regular working hours and on the legal holidays subject, however, to Tenant's right to admittance, under such reasonable regulations as Landlord may prescribe from time to time, which may include by way of example but not of limitation, that persons entering or leaving the Building identify themselves to a watchman by registration or otherwise and that said persons establish their right to enter or leave the Building;

H. to take any and all measures, including inspections, repairs, alterations, decorations, additions and improvements to the Leased Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Leased Premises or the Building or the Landlord's interests, or as may be necessary or desirable in the operation of the Building; and

I. to add, remove or modify buildings, roadways, walkways, landscaping, lakes, grading and other improvements in or to the Development.

The Landlord may enter upon the Leased Premises and may exercise any or all of the foregoing rights hereby reserved without being deemed guilty of an eviction or disturbance of the Tenant's use or possession and without being liable in any manner to the Tenant and without abatement of rent or affecting any of the Tenant's obligations hereunder.

24. Land Trustee's Exculpation

It is expressly understood and agreed that nothing in this Lease contained shall be construed as creating any liability whatsoever against the Landlord, or its successors and assigns, personally, and in particular without limiting the generality of the foregoing, there shall be no personal liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained, and that all personal liability of Landlord, or its successors and assigns, of every sort, if any, is hereby expressly waived by Tenant, and every person now or hereafter claiming any right or security hereunder, and that so far as Landlord, or its successors and assigns, is concerned the owner of any indebtedness or liability accruing hereunder shall look solely to the premises hereby Leased for the payment thereof.

25. Exhibits.

The Exhibits attached hereto shall form part of this Lease as if the same were embodied herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Signature Page to UCC Lease Agreement

EXECUTED the 31st day of December, 2010

LANDLORD:

AMERICAN SERVICE INSURANCE COMPANY, INC.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

By:      /s/    Scott D. Wollney            

Title:         President            

TENANT:

UNIVERSAL CASUALTY COMPANY

150 Northwest Point Blvd.

Elk Grove Village, IL 60007

By:    /s/     Roger Beck            

Title:         COO                

EXHIBIT A

Floor Plan

EXHIBIT B

Legal Description

EX-10.7

EXHIBIT 10.7

PROGRAM MANAGER AGREEMENT

This Program Manager Agreement, based upon good and valuable consideration, dated the first day of January, 2011, and all Endorsements attached hereto and incorporated herein (the "Agreement") is between Kingsway America Inc. and its wholly owned subsidiary· Universal Casualty Company, located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007 ("Manager"), and American Service Insurance Company, Inc. (hereafter "Company"), located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007.

NOW, THEREFORE, Manager and Company agree as follows:

ARTICLE I. Term of Agreement

This Agreement is effective on January 1, 2011 and will continue until such time as no private passenger auto business remains in-force with the Company and all claims related to private passenger auto business written by the Company have been adjudicated, or until terminated under the provisions of Article XIV.

ARTICLE II.Appointment of Manager

Within the scope of the authority granted to the Manager, the Company appoints Manager as a non-exclusive manager for the Company as follows:

A. Lines of Authority. Manager's appointment and authority extends to the classes of business, policies of insurance, including all endorsements and certificates (the "Policies"); and lines and limits of insurance described in this Agreement for which Manager holds all appropriate licenses or authority, as may be required (the "Business").

B. Territory. Manager's appointment and authority extends to insureds and prospective insureds with their principal place of business or a portion of the risks located in all states as set forth in this Agreement for which it holds appropriate licenses and for which the Company properly appoints the Manager.

C. Restrictions. Manager's appointment and authority is subject to any restrictions set forth in this Agreement.

D. Reinsurance Availability. Manager's appointment and authority for Business written under this

Agreement is subject to the following:

1. Company is able to obtain and maintain in force at all times reinsurance satisfactory to Company for the Business. The Company's efforts in this regard will at all times be diligent and undertaken in good faith with the intent to maintain reinsurance during the term of this Agreement, however Company cannot guarantee that its efforts will be successful.

2. Obtaining reinsurance is the sole responsibility of Company. When Company obtains satisfactory reinsurance for all or some of the Business, Company will give Manager written notice that Manager may write and bind those classes of business, policies and lines and limits of insurance for which reinsurance has been obtained.

ARTICLE III. Manager's Duties and Responsibilities

Manager will faithfully perform all of its duties in a commercially reasonable manner, to the best of its professional knowledge, skill and judgment The Manager's duties include the following:

A. Solicitation. To solicit, to the extent allowed by applicable law and regulation, risks and classes of risks at limits and for lines of insurance authorized in this Agreement, that, in their pricing and insurability, meet or exceed the underwriting and pricing standards from time to time established by Company in writing. It is understood that the Manager will endeavor to transition private passenger auto policies in-force with the Company, or one of its duly licensed subsidiaries or affiliates, at renewal of such policies beginning on a mutually agreed date that allows sufficient time to meet all contractual and regulatory requirements.

C. Servicing Business. To direct and implement the production, underwriting, premium collection, accounting, statistical, and other work necessary or incidental to the insurance business Written under this Agreement. To provide for all usual and customary services to sub-producers, insureds and policyholders including, without limitation, delivery of Policies, return of premiums due insureds or policyholders in Manager's possession, premium audits on Policies, and timely, appropriate responses to inquiries or complaints, and comply with any service standards as may be set forth in writing by the Company.

D. Competent Staff. To maintain sufficient supplies and equipment and a staff of competent, trained and licensed (as required) personnel, to produce, develop, underwrite, handle claims and loss control (if allowed by this Agreement), and supervise the Business covered by this Agreement.

E. Premium Rates. To quote and charge accurate premiums, rates, surcharges, taxes and fees for Policies bound or written under this Agreement, as described in and in compliance with the approved and applicable rating manuals or written rating plans of Company provided by the Company to Manager.

F. Compliance with Manuals. To comply fully, timely and promptly with all manuals, rules, regulations, guidelines, instructions and directions issued by Company relating to the Business covered by this Agreement.

G. Binding of Risks. To bind and report all risks in accordance with this Agreement, and any other underwriting and pricing standards established by Company in writing and provided to Manager. Manager is to forward all other risks to Company, for review.

H. Policy Issuance. To timely and properly issue, deliver and execute or countersign Policies, certificates, endorsements, binders and related documents on forms approved by Company and appropriate regulatory authorities, and as required by law, for the Business described in this Agreement. Manager shall ensure Policies will bear any notice requirements of any applicable law.

I. Policy Cancellation. To cancel or non-renew policies and/or certificates for cause as set forth in such policies, or at the direction of the Company, subject to the requirements imposed by law and. in compliance with the applicable provisions contained in this Agreement and the Policies, and file the required reports with the appropriate Insurance Department. This does not preclude the Company from taking such action on its own. At the sole discretion of the Company, the Company has the right to cancel or non-renew any policy and/or certificates issued by the Manager under this Agreement, subject to the relevant state laws, rules, regulations or bulletins.

J. Producers.

1. The Manager shall be responsible to accept Business on behalf of the Company by professional insurance agents, solicitors and brokers, who are properly licensed and appointed ("producers"). The Manager's and/or Company's contracts or agreements with the producers shall reflect their agreement to the return of the producers' commissions on canceled policies, the forwarding of premium funds consistent to this Agreement and to otherwise comply with all applicable laws and regulations involving business generated or serviced under this Agreement.

2. The Manager's and Company's contracts or agreements with the producers shall reflect they are independent contractors. If applicable state laws require the sub producers to be determined to be agents or sub-agents of the Manager, then the Manager is responsible for the supervision, direction and coordination of the efforts of the sub producer.

3. Whether the sub producers are determined to be independent contractors, or agents or sub­ agents of the Manager, the Manager is responsible for all of the appointment fees, license fees and costs of background checks of the producers.

4. Manager shall be solely responsible for payment of all commissions earned by producers and the return of sub producers' commissions oh canceled policies.

5. Manager may accept business only from producers who have agreed in advance, and in writing, to the return of unearned commissions on canceled Policies, forward all premium funds, and to comply with the applicable laws and regulations involving business generated or serviced under this Agreement.

6. Manager has no authority, whether actual or implied, to appoint agents for Company or to place such volume of business with any sub producer that would cause such sub producer to qualify as a "managing general agent" with respect to the Company under the insurance laws of any jurisdiction.

7. Manager shall not accept business on behalf of Company from any producer that has been convicted of any criminal felony involving dishonesty or a breach of trust, or convicted of a crime under 18 U.S. Code Section 1033.

K. Producers Errors and Omissions. Unless the Company already has this information on file or waives this requirement, Manager will maintain valid evidence of any active producers' professional errors and omissions coverage (a policy copy or certificate of insurance) that specifically covers all activities and entities contemplated herein, to specifically include coverage for violations of Unfair Trade Practices Acts and Bad Faith, in an amount not less than $100,000 with a deductible not greater than $10,000. The evidence of coverage is to be provided to the Company within five (5) business days of Company's request to the Manager

L. Premiums. To charge, collect, and receive all premiums, including but not limited to premium surcharges, fire district and other taxes or assessments levied by any jurisdiction and required to be collected in addition to stated premiums, due on all Policies bound or written under this Agreement.    Premium payment will be made directly by policyholders to the Company in accordance with this Agreement and the incorporated Endorsements

M. Uncollected Premium.

1. Manager to assume the obligation for collection activities relating to any Uncollected Premium from insureds, policyholders and producers.    ·

2. Manager shall provide Company with a policy-level listing of all Policies with uncollectible amounts due the Company, on a monthly basis, in a format acceptable to the Company.

N. Accounting. To timely account for the Business as follows:

1. All business will be managed on the Company's IT systems, to which Manager will be granted access for the purpose of fulfilling the responsibility under this Agreement. Manager and the Company will ensure that all books and record are maintained in accordance with statutory accounting principles and insurance practices, and the insurance laws and regulations of Illinois, in the state(s) where the Business is located and Manager's state of domicile. All such books, records, and accounts shall be the property of the Company, and Company shall have access to and the right to copy all such books, records and accounts at any time. Upon an order of liquidation of the Company, Manager shall have reasonable access to and the right to copy the files on a timely basis.

2. Collect, compile and transmit to the Company to allow for the timely transmission to the appropriate reporting and regulatory agencies, of any and all of !he requested statistical, underwriting and claims data and information, including but not limited to, premium and loss information in a format or formats and at such frequency as may be determined by the respective reporting and regulatory agencies, and the Company. This data and information shall be furnished to the Company in an electronically transmittable format determined by the Company at no extra charge to the Company. ·

3. To the extent records exist outside of the Company's systems, Manager will furnish, render and provide the Company with an accounting detailing all transactions and insurance written pursuant to this Agreement, including put not limited to all Policies and/or certificates issued (by policy/certificate), changes and cancellations and premium statements on not less than a monthly basis and not later than eight (8) working days after the end of the month in which the transaction occurs and/or the premium is written.

This information shall be furnished to the Company in an electronically transmittable format determined by the Company at no extra charge to the Company beginning at the end of the month in which this Agreement becomes effective, shall encompass, but is not limited to, the following:

(a.) Gross written premium;

(b.) Net written premium;

(c.) Unearned premium;

(d.) Collected premium;

(e.) Gross fees;

(f.) Collected fees;

(g.) Policies issued or bound by insured including location, limits, and effective date;

(h.) Policies canceled;

(i.) Premium adjustments due to endorsements, audits or otherwise;

(j.) Commissions payable to or retained by Manager;

(k.) Net balance due;

(l.) Premium surcharges, fire district and other taxes or assessments levied by any jurisdiction, separated by type of charge or levy;

(m.) Deposits by policy;

(n.) Agency fees; and

(o.) Additional information Company may request in writing.

O. Fiduciary Capacity. Premium payments will be paid directly to the Company, as such Manager will not act in a fiduciary capacity.

P. Confidentiality. The materials or information furnished by the Parties may contain proprietary or confidential information (collectively "Confidential Information"). The Parties agree not to directly or indirectly use or disclose such Confidential Information to any other parties without express written permission. The Parties shall use the same care and discretion to protect the Confidential Information as they use to protect their own Confidential Information, but not less than a commercially reasonable standard of care. The Parties shall use the Confidential Information and shall restrict disclosure of the Confidential Information only to those employees of the Parties who have a need to know the particular Confidential Information disclosed only for purposes strictly limited to the performance under this Agreement.

Q. Manager Expenses.

1. Manager is to assume the obligation for and to be fully responsible for all costs and expenses associated with the Manager's performance under this Agreement. These costs and expenses include, but are not limited to, processing of assigned risk policies, sub­ producer commissions, loss control reports, premium audits, regulatory exams of the Manager and related fees, fines and settlement costs caused by the Manager, policy and policy jacket printing, motor vehicle reports ("MVRs") and OFAC costs, travel expense, employee salaries, benefits, fees, countersignature fees and expense, postage, advertising, exchanges, appointment and renewal fees, license fees and background checks.

2. Company shall be responsible only for its own costs and expenses unless otherwise agreed by Company. In the event Company is required to pay any costs or expenses that are the responsibility of the Manager, the Manager shall promptly reimburse Company for its payments thirty (30) days from invoice. The Company shall have the right to offset any costs or expenses that it has to pay on behalf of Manager with commissions due under this Agreement.

R. Licenses. To obtain and provide Company with copies of all licenses anti permits required by Manager for the proper conduct of its duties under this Agreement, and to immediately provide copies of such licenses and permits upon request of the Company Manager agrees that it will not transact any business in any jurisdiction covered under this Agreement until Manager has obtained all required licenses and permits, and is properly appointed to represent the Company in such jurisdiction.

S. Legal Compliance. To keep fully informed of and comply fully with all applicable laws and regulations. This includes, but is not limited to compliance with all laws and regulations applicable to insurance producers in the state(s) where the Business is located and where Business is transacted. Manager shall not solicit or bind any risks in any state until all applicable laws, regulations and 180/NCCI or other bureau rules are in full compliance by the Manager.

T. Governmental Contacts. To promptly notify Company of all contacts and correspondence received from insurance regulatory or other governmental authorities relating to the insurance and activities which are the subject of this Agreement, to forward promptly upon receipt all summonses, complaints, subpoenas or other court documents relating to the insurance and activities which are the subject of this Agreement, and to cooperate fully with Company in making any responses. Manager has no authority to represent Company in regulatory matters and shall not respond to any governmental action except as Company may direct in writing or as required by law. All complaints from regulatory agencies shall be forwarded to Compliance Shared Services in the Company's Elk Grove Village, Illinois office, along

with Manager' proposed response specifically addressing the complaint.

U. Premium Financing.

1. Manager will not use any premium ·finance company that is owned to any degree, or affiliated with the Manager, or any of its employees, on Policies issued under this Agreement. The entire premium financed must be forwarded to the Company in a time frame as directed by this Agreement, and will not be sent in installment or partial payments to the Company.

2. Manager will provide all services arising from premium financing including, but not limited to, promptly and appropriately responding to all correspondence and notices related to such premium financing, ensuring compliance with all Consumer Protection laws, rules or regulations, such as Truth in Lending and any relevant Premium Finance statutes in each state where the Manager writes business pursuant to this Agreement.

3. Manager shall ensure that all appropriate refunds of premium due to premium finance companies shall be timely made, and Manager shall be liable for, hold harmless, and indemnify Company against any such amounts improperly paid to the insured, or for refunds not made to the insured or to the premium finance company in accordance with the appropriate governing law.

V. Company Interface. To interface at all times with Company through electronic data processing hardWare and software, networks and communication lines and other means as specified in writing and in advance by Company.

W. Copies of Policies. To maintain in each insured's file all Policies, endorsements, rating worksheets and related documents and correspondence, Policy cancellations, non-renewals and other terminations processed by the Manager. Company is entitled to review files upon five (5) business days prior notice.

X. Records.

1. Manager shall provide to Company any and all records and/or reports relating to the Business covered under this Agreement including but not limited to policy information and claims information, if any, as may be reasonably requested by Company, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

2. In addition to the specific reports requested under this Agreement, Manager shall furnish such reports related to the Business covered by this Agreement as required by applicable laws or regulations, orders or directives or as may be reasonably requested by Company, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

3. Unless a longer period is required by law, to keep and maintain for a period of seven (7) years from the termination of this Agreement, separate, identifiable, orderly, accurate, complete and timely records and accounts of all business and transactions pertaining to Policies bound or written under this Agreement including complete underwriting and rate files. Such records and files shall be the property of Company, however, a copy of said records and files may at all times be maintained by Manager. Upon request by Company or the insurance regulator or Commissioner of any state having jurisdiction over Company ("Commissioner''), all records and reports maintained pursuant to this Article Ill., shall be provided as hard copies or in an electronic/computer format usable by Company and the Commissioner, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

4. Manager shall maintain paid, closed, and outstanding claims files for all claims handled by Manager on behalf of Company, which files shall be the joint property of Company and Manager. However, upon an order of liquidation of Company such files shall become the sole property of the Company or its estate. These files shall remain in the physical possession of Manager for the period of time that Manager continues to administer such claims and for a period of seven (7) years after each claim closed. If Company desires Manager to retain such records beyond that period, Manager shall do so at Company's request and expense. Company shall have the right, but not the obligation, to direct the Manager in the administration of, or assume administration of any claim or all claims at any time. In such case, Manager shall fully cooperate with Company and Company shall have access to all claim files, electronic data, systems and Manager's facilities for purposes of administering the claims, and Manager shall deliver any or all original and electronic claims files to Company promptly upon request.

Manager shall have the right to copy all original files requested by Company and Company and Manager shall share, on a 50-50 basis, the costs of making such copies.

5. Notwithstanding any other provision of this subsection, Manager must receive approval from Company prior to the destruction of any documents or records, electronic or otherwise, generated by Manager under this Agreement.

X. Audit

1. To permit Company or their designated representative, during the term of this Agreement and for a period of ten (10) years from the termination of this Agreement, to visit, inspect examine, audit and verify, at Manager's offices, during Manager's normal business hours and as often as Company may deem appropriate, with five (5) business days prior notice. The Company will conduct an on-site review of underwriting and claims processing operations of the Manager at least semiannually.

2. The activities of Article X (1) above includes, but is not limited to, any of the properties, accounts, premium trust funds, files, documents, books, reports, work papers, internal controls and other records belonging to or in the possession or control of Manager or of any other person relating to the Business covered by this Agreement.

3. Company may conduct any audit through any person or persons it may designate. The Insurance Department of any state having jurisdiction over this Agreement shall have the right to exercise Company's rights of audit, after consultation with the Company, and the Manager agrees that it may be examined as if it were the Company. Manager agrees to respond to any audit deficiencies within thirty (30) days after notice from the Company.

Y. Financial Statements.

1. To furnish the Company with an audited financial statement prepared in accordance with Generally Accepted Accounting Practices (GAAP), for the most current year ended December 31st no later than one hundred and eighty (180) days after the execution of this Agreement, or the Company may, at its option, immediately terminate this Agreement.

2. Thereafter, the Manager shall furnish the Company, on an annual basis, an audited financial statement prepared by an independent certified public accountant in accordance with GAAP, as of December 31 of each calendar year, in a form acceptable to the Company, to be received by the Company no later than July 1 of the following year. In addition, quarterly estimates will be supplied to the Company by the Manager within forty-five (45) days of each quarter end.

3. The Company shall notify the Director if the opinion on those statements is other than an unqualified opinion. The notice shall be given to the Director within 10 days of receiving the audited financial statement or becoming aware that such opinion has been given.

Z. Company Property. To promote and safeguard at all times as a fiduciary the best interests and good name of Company and to safeguard, maintain and account for all Policies, forms, manuals, equipment, supplies or anything else furnished by Company or Manager, all of which shall remain the property of Company. Manager will return all such property to Company promptly upon demand. The materials or information furnished to Manager may contain proprietary or confidential information of Company.    Manager agrees to treat any such proprietary or confidential information in accordance with the provisions of Article XVIII.

AA. Prohibited Actions. The Manager shall have no authority to:

1. Bind any reinsurance or retro-cessions, including, but not limited to, facultative or treaty, on behalf of Company, or commit Company to participate in insurance or reinsurance syndicates. This responsibility shall remain with the Company.

2. Appoint any producer or sub-producer that is not lawfully licensed to transact the insurance business for which it has been appointed. ·

3. Collect any payment from a reinsurer or commit the Company to any claim settlement with a reinsurer.

4. Jointly employ an individual who is employed with Company.

5. Appoint a sub-manager or Program Administrator.

BB. Ethical Conduct.

1. Manager shall not exploit its relationship with Company or use Company's name in connection with any fraudulent, unethical or dishonest transactions.

2. Manager shall not knowingly use producers, consultants, independent contractors or other representatives that Company could not deal with directly under its Code of Conduct as attached hereto and·incorporated by reference as Exhibit A, and as it may be changed from time to time, or applicable laws or regulations.

3. Manager may use assets of Company for legitimate business purposes only.

4. Manager shall avoid any knowing conflict of interest with the Company relating to the

Business.

5. Manager shall abide by the Company's Privacy Policy as attached hereto and incorporated by reference as Exhibit B, and as it may be changed from time to time, when handling customer information.

CC. Notice of Change in Ownership. Manager must promptly provide Company with written notice of a material change in ownership of Manager.

ARTICLE IV. General Duties of Company

The Company. shall:

A. Make all statistical filings and receive all statistical and underwriting data applying to the Program written pursuant to this Agreement, provided that the Manager furnishes all required information and data in a timely manner so as to enable the Company to meet all time requirements.

B. Develop, formulate and file policy forms, rates and rules and all other reports and filings, as may be required by the regulatory authorities in the various states where business under this agreement is to be conducted.

C. Remit to the Manager the Compensation to which it is entitled upon Manager's monthly rendering of the reports due under this Agreement to the Company, beginning at the end of the month in which this Agreement becomes effective.

D. Conduct, at least semi-annually and as often as Company deems prudent, solely at Company's discretion, upon reasonable notice and during normal working hours, an on-site audit of the books, records and accounts of the Manager, including but not limited to those in the underwriting, claims, accounting, IT, marketing, finance and policyholder operations, using either its own employees or independent outside auditors.

E. Observe and comply with all applicable laws, regulations and rulings by any governmental authority, agency} bureau or commission having jurisdiction over the conduct of business under this Agreement.

F. The Company shall have the right to: (i) cancel or non-.renew any policy of insurance subject to applicable laws and regulations concerning those actions; and (ii} require cancellation of any sub producer's contract or agreement after appropriate notice.

G. If Manager qualifies as a "managing general agent" of Company under any applicable state statute;

1. Company shall not permit any of Manager's producers to serve on Company's Board of Directors; nor shall the Company appoint to its board of directors an officer, director, employee, producer or controlling shareholder of Manager unless otherwise permitted by law.     ·

2. Manager shall not permit its producers to serve on Manager's board of directors.

ARTICLE V.Representations and Warranties

A. Company warrants and represents that the transactions contemplated hereby:

1. Are within the corporate powers of the Company and have been duly authorized by all necessary corporate action of the Company.

2. Constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms.

3. Do not and will not conflict with, result in a breach in any of the provisions of, or constitute a default under the provisions of any law, regulation, licensing requirement, charter provision, by-law or other instrument applicable to the Company or its employees or to which the company is a party or may be bound.

B. Manager warrants and represents that the transactions contemplated hereby:

1. Are within the corporate powers o! the Manager and have been duly authorized by all necessary corporate action of the Manager; and Manager is duly authorized to execute this Agreement on behalf of, and to bind, all entities identified as Manager in this Agreement.

2. Constitute the legal, valid and binding obligations of the Manager, enforceable against it in accordance with their terms.

3. Do not and will not conflict with, result in a breach in any of the provisions of, or constitute a default under the provisions of any law, regulation, licensing requirement, charter provision, by-law or other instrument applicable to the Manager or its employees or to which the Manager is a part or may be bound. ·

C. Manager warrants and represents that:

1. It currently holds all necessary licenses or authority necessary to carry out its duties and obligations under this Agreement.

2. Neither Manager, its officers: directors or other principals, nor any of its employees has been convicted of any criminal felony involving dishonesty or a breach of trust, or convicted of a crime under 18 U.S. Code Section 1033 and gives Company the authority to verify same.

3. Manager hereby gives Company the right to verify information about Manager, its officers, directors or other principals by obtaining and using consumer reports, investigative reports, credit reports, D&B reports, criminal background checks or any other similar type of report or check.

D. Manager warrants and represents that:

1. It has the proper right and interest in the business contemplated herein in order to place the business under this Agreement.

2. The business placed under this. Agreement and the incorporated Endorsements is not subject to another entity's claim of interest, including but not limited to, a claim by contract, equity or common law right.

3. In placing business under this Agreement, it is not in violation of any duty or obligation owed to another entity.

4. In the event Manager breaches any of the preceding terms, Manager agrees to indemnify and hold harmless the Company, its directors, officer, employees and agents from any loss or expense arising out of such breach.

E. Manager warrants and represents that the software it employs is designed to fulfill all necessary obligations under this Agreement.

F. Manager warrants and represents that the underwriting guidelines to be used by it will continue for the life of this Agreement to be in conformity with the applicable statutes, regulations, rules, bulletins and opinions

in the various states where business under this agreement is to be conducted.

. .

ARTICLE VI. Program Manager's Compensation

A. Company will pay the Manager as full compensation for all of its duties and responsibilities under this Agreement the amounts set forth in Endorsement E attached hereto.

B. No fees will be allowed to be charged or collected, unless allowed by the Insurance Department of the state in which the risk is located. Any fees collected as installment fees, cancellation, reinstatement, or any other fee related to administration of policies, shall be retained by the Manager. Such fees shall be disclosed to the Company in the manner provided for in this Agreement and the incorporated Endorsements.

ARTICLE VII. Advertising

Manager will not refer to Company or use the Company's logo (or any division, subsidiary or affiliate of Company, or that of its parent company), in any advertisement, letter, circular, pamphlet or other publication or statement without the prior written consent of Company. The Company will not be responsible, under any circumstances, for any advertising expense of Manager. The Manager will insure that any reference to Company pursuant to this Article shall comply with the laws and regulations of the jurisdiction in which such advertising occurs or to which it is directed by Manager.

ARTICLE VIII. Representation With Respect to Policies

A. Manager will not make or permit their employees, agents, producers or any other person to make any representation to applicants, insureds, policyholders or claimants as to the existence or extent of coverage under a Policy or available from the Company that is not consistent with the terms and conditions of coverages available under a Policy or available from the Company.

B. Manager shall establish procedures designed to ensure that Manager and Manager's employees, agents, producers or any other person will make known to any applicant, insured or policyholder the full scope and effect of all exclusions and limitations upon or under coverage provided under the Policy and advise their agents and sub producers of their existing statutory obligations, and Manager's and the Company's expectations in this regard.

ARTICLE IX. Annual Standards for Volume

Manager will comply with any annual maximum and minimum standards of production for premium volume that are made a part of the Endorsements attached to and incorporated into this Agreement.

ARTICLE X. Insurance and Guaranty of Manager

Manager will maintain from the inception of this Agreement until all run off business resulting from this Agreement terminates, policies with unaffiliated insurers for the insurance and security requirements of this Article, and on forms acceptable to the Company:

A. General Liability. Comprehensive general liability or umbrella liability insurance policy in an amount of $1,000,000 per occurrence. The General Liability policy shall list Company as an additional insured.

B. Manager's Guaranties: Manager shall be required to abide by all terms and conditions in Endorsement E to encourage the Manager's prompt and faithful compliance with any and all obligations under this Agreement, to include the Manager's responsibility to comply with Premium Finance statutes in making refunds to insureds or to policyholders. The Company shall also require that· it be named as a beneficiary to the Letter of Credit specified in Endorsement E of this agreement, and in an amount to be determined at the sole discretion of the Company up to the maximum aggregate amount set forth in Endorsement F attached hereto, in order to collateralize the Guaranty.

ARTICLE XI.    Indemnification

A. Manager. Manager shall be responsible to Company and shall indemnify, save, defend and hold Company, (or its rehabilitator or liquidator) its affiliates, and all officers, directors and employees of Company and its affiliates,

harmless against any and all claims, suits, hearings, actions, damages of any kind, liability, fines,penalties, loss or expense, including attorneys' fees caused by or resulting from any allegation of any misconduct, error, omission or other act or material breach of this Agreement or material misrepresentation hereunder by Manager, Manager's employees, Third Party Administrator, Adjuster, or any other type of independent contractor employed by Manager or Manager's affiliates unless the conduct giving rise to the allegation was performed at the specific direction of Company provided the Manager has not contributed to or compounded the act alleged.

B. Company. Company or independent contractor employed by the Company shall be responsible to Manager and shall indemnify, save, defend and hold Manager, including its affiliates, and all shareholders, officers, directors and employees harmless against any and all claims, suits, hearings, actions, damages of any kind, liability, fines, penalties, loss or expense, including attorneys' fees caused by or resulting from any allegation of any willful misconduct, gross negligence, or other material breach of this Agreement or material misrepresentation hereunder by Company, provided Manager has not contributed to or compounded the act alleged.

C. Procedures. The party seeking indemnification (the "Indemnified Party") from the other Party (the "Indemnifying Party") shall promptly notify the Indemnifying Party in writing of a claim that it believes gives rise to a claim from indemnification ("Claim"). Failure to ·so give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it is prejudiced thereby. The Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Claim with counsel of its choice; provided, however, that the. Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Claim without the prior written consent of the Indemnified Party unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party. Any Indemnified Party will have the right to employ separate counsel in any action and participate in the defense thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless (i) the employment of such counsel will have been specifically authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party will have failed to assume the defense of such action or employ counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnified Party shall have reasonably concluded that there may be defenses available to the Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iv) the Indemnified Party's counsel shall have advised the Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is a conflict of interest that could make it inappropriate under applicable standards of professional conduct to have common counsel, in any which event the Indemnifying Party shall pay the cost of the Indemnified Party's counsel. In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Claim without the prior written consent of the Indemnifying Party.

ARTICLE XII. Special Investigative Unit (SIU) and Claims Department

The Manager must cooperate fully with the Company's SIU and/or the Claims Department in any review, investigation, requests for documentation or any other activity undertaken, including but not limited to audits, discovery sweeps, fraud investigations or defense of claims and suits. Failure to cooperate fully will be considered a breach of this Agreement, allowing for termination of the Agreement by the Company.

ARTICLE XIII.Suspension of Manager's Authority

A. Notice of Suspension. The Company may suspend the underwriting authority of the Manager to bind the Company only for the reasons and in accordance with the procedures described below. The Company shall give immediate written notice of the suspension of authority and the Manager shall then immediately cease to exercise its authority until the reason for the suspension is resolved. Once resolved, the Company shall reinstate the authority of the Manager. Notwithstanding any action taken pursuant to this Article, the parties may exercise whatever rights they may have to terminate this Agreement.

B. Legal Prohibition. The Company may suspend binding authority for the Program if the Company is legally prohibited from writing insurance for the Program. In such event, the suspension shall remain in effect until the prohibition has been lifted. The suspension shall only apply to the jurisdiction in which the Company is unable to continue writing business.

C. Loss of Reinsurance.

1. The Company may suspend binding authority, if in its sole discretion there has occurred any of the following:

(a.) Impairment of the reinsurance coverage with respect to the Program business.

(b.) Reduction in AM Best's rating of any reinsurer.

(c.) Cancellation or suspension of the reinsurance with respect to all or any material portion of the Program business.

(d.) The failure of a reinsurer to discharge obligations under all or any portion of any reinsurance contract relating to business subject to this Agreement.

(e.)The ceasing of any reinsurer to carry on the particular classes of business subject to this Agreement or having the performance of such reinsurance rendered illegal by any subsequent law or regulation.

(f.) Insolvency of a reinsurer reinsuring all or a material part of the Business.

(g.)Any instance where a reinsurer suspends payment of debts, convenes a meeting of creditors, has a receiver appointed or petition presented for its compulsory liquidation, or has a resolution passed for its voluntary liquidation.

2. The Manager agrees that upon notification from the Company, it shall· immediately cease the binding of any Policies under this Agreement. If reinsurance is terminated or no longer in full force and effect for all or any part of the Business, Manager's authority for the Business affected shall be suspended, or limited immediately upon written notice to Manager from Company, until further notice, said suspension or limitation not affecting in-force policies of insurance except with regard to renewal thereof.

D. Loss of License. The Company may suspend binding authority if a regulatory authority cancels, restricts, suspends or declines to renew either the Company's or the Manager's license or certificate of authority, provided said license or certificate of authority is required to solicit and bind Business pursuant to the terms of this Agreement. In such event, the suspension shall remain in effect until such license or certificate of authority has been granted or reinstated by the regulatory authority and satisfactory evidence of such action has been provided to all parties.

E. Indictment. The Company may suspend binding authority if the Manager or any of the Manager's principals or executive officers is indicted for a criminal offense the conviction of which would permit termination of the Manager under this Agreement.

F. Grounds for Termination. The Company may suspend binding authority for any reason that would permit termination of the Manager under this Agreement pursuant Article XV.

G. Default and Delinquency. The Company may suspend binding authority for failure of the Manager to perform its duties and responsibilities under this Agreement including without limitation, the timely remitting of accounts and monies to Company, insureds or policyholders and timely and full compliance with applicable laws and regulations and Company directives, rules, regulations or manuals.

H. Termination by Manager. The Company ma:y suspend binding authority if the Manager gives notice of termination under Article XIV.

I. Dispute over Termination. The Company may suspend binding authority in the event of a dispute over the reason for termination of the Agreement.

J. Termination of Key Employees. The Company may suspend the binding authority if the employment of the individuals identified in the attached and incorporated Endorsements, is terminated

ARTICLE XIV.Commencement and Termination

This Agreement shall commence as of the date of .execution of the Agreement, and shall remain in full force until terminated in accordance with the provisions outlined below.

A. Basis for Termination

1. This Agreement may be terminated at any time upon the mutual written agreement of the

Company and the Manager.

2. This Agreement may be terminated at any time by either party, upon one hundred and eighty (180) days prior written notice, to the other party.

3. This Agreement may be terminated at any time by the Company, upon thirty (30) days written notice to Manager in the event of:

(a.) Default. The failure of the Manager to perform its duties and responsibilities under this Agreement including, without limitation, the timely remittance of accounts and monies to the Company, insureds or policyholders and timely and full compliance with applicable laws and regulations and the Company's directives, rules, regulations or manuals;

(b.) Insufficient or Inaccurate Data. The failure of the Manager to properly compute and report all required account data as required by this Agreement and incorporated Endorsements; and

(c.) Ownership Change. A change in the ownership or management of, or in the event of the execution of an agreement of sale, transfer or merger of the Manager, without the prior written notice and consent of the Company.

4. This Agreement may be terminated immediately at any time by either party by written notice

(a.)Act of bankruptcy. If the other party commits any act of bankruptcy, becomes insolvent or assigns all or part of its assets for the benefit of creditors upon or after the filing of a petition for bankruptcy, whether voluntary or involuntary.

(b.) Misconduct. In the event of fraud, abandonment, gross or willful misconduct, material breach of contract, insolvency, or lack of legal capacity to act, including cancellation, suspension or non-renewal of its license or certificate of authority, on the part of either party. Gross or willful misconduct shall include, but shall not be limited to:

(i.) Failure to pay any funds owing to the other party for any reason within ten (10) days after the time set forth in this Agreement other than as provided above regarding minor accounting differences.

(ii.) The delegation of any of Manager's obligations and/or assignment of any rights hereunder without the prior written consent of the Company.

(iii.)Either party being delinquent two (2) times in any consecutive twelv (12) month period in either the accounting for or the payment of any and all monies due the other party for any reason.

(c.) Legal. If the Company determines that, any law or regulation of a federal, state or local government has rendered illegal the performance of any material terms of this Agreement.

(d.) Material breach. If Manager or Company is in material breach of Agreement, provided the other party seeking to terminate this Agreement has given the other party thirty (30) days prior written notice of the nature of the claimed breach and its intent to terminate if the material breach is not cured within the thirty (30) days period.

(e.) Financial Statements. lf Manager fails to furnish the Company with an audited financial statement for the most current year no later than one hundred and eighty (180) days after .the execution of this Agreement, the Company may, at its option, immediately terminate this Agreement.

(f.) Special Investigative Unit ISIUl/Ciaims Department. Manager's failure to fully cooperate with the Company's SIU and/or the Claims Department per Article XII.

(g.) Loss of insurance. If Manager loses, does not renew, or does not have any of their insurance coverages cited in Article X.

B. Business after Termination. In the event of termination of this Agreement, at the election of the Manager, the Company shall continue Policies and binders in force until their stated expiration dates, subject to the following provisions:

1. The Company reserves all its rights to cancel Policies arid binders for nonpayment of premium and to cancel Policies and binders issued in violation of the underwriting guidelines then applicable to this Agreement provided said cancellation comports with applicable state law.

2. The Manager shall continue to be the agent of the Company for the purpose of servicing Policies and binders in force on or before the date of termination of this Agreement. The Manager shall not without prior written approval of the Company, increase or extend the Company's liability or extend the term or change any conditions of any such Policies under this Agreement.

3. Upon termination, the Manager shall cease to have any authority to solicit, underwrite, bind or issue business for the Company under this Agreement.

4. Upon termination of the Agreement, the Company shall have no obligation to pay the Manager for services in settlement of accounts or concluding of affairs between the Company and the Manager.

5. If this Agreement is terminated as provided for herein, neither party shall have any claim against the other for loss of prospective profits or fees or damage to business arising solely as a result of said termination.

6. In the event of termination of the Agreement, any business written hereunder and remaining with the Company shall be permitted to continue to normal eXpiration, provided, however, that if the renewal date of any annual policy shall occur within a period of thirty (30) days after the date of termination of the Agreement, and such renewal shall have had renewal terms already committed, such policy shall be renewed and permitted to continue in force until its next annual renewal date.

7. Should any Policy be extended, continued or renewed due to regulatory or other legal restrictions, the terms of this Agreement shall continue to apply to such policies until such Policies are terminated or expire.

8. Regardless of any dispute, the Company and Manager will fulfill any obligations on Policies.

9. Claims after termination:

(a.)The Company will have the right to determine who will handle claim servicing in the event of termination. This may include reinsurance and/or loss portfolio transfer arrangements.

(b.) In the event this Agreement terminates and the Manager refuses or is unable to administer servicing of business produced under this agreement, then in that event the Manager shall immediately:

(i.) Provide the Company wit.h on-line access to all records necessary to administer business produced hereunder.

(ii.) Provide the Company with a tape back-up of all programs and data libraries, including updated source code, object code, data files, and all related manuals used in the production and administration of business hereunder.

(c.) The Company's obligation to pay the applicable fee. to Manager as set forth in Endorsement C which is attached and incorporated into this Agreement, ceases when this Endorsement or the Agreement terminates, with the last payment of the fee due in the month following termination.

(d.) The Manager agrees to provide for an orderly and timely transition of claim files and support documents to Company. This will be done prior to the termination date, unless

immediate termination was used in which case it will be done within ten (10) days of the termination date.    ·    ·

(e.) Any claims settlement authority granted to Manager. The Company may suspend Manager's settlement authority upon 3 days written notice during the pendency of any dispute or arbitration proceeding regarding the cause for termination.

(f.) Upon such termination or suspension, the Company shall within i 20 days of the effective date thereof, offer to assume by commutation, for losses it reinsures for American Service Insurance Company, Inc. on policies subject to this Agreement.

C. Records Ownership Upon Termination.

1. In the event of termination of this Agreement, all records, including electronic records, for the Business written under this Agreement (which shall not include work processes, work applications, workflows and actuarial pricing models of Manager, which shall remain the confidential and proprietary information of Manager) shall be co-owned by Company and Manager as provided for in this Agreement.

2. Upon termination of this Agreement, the Manager agrees:

(a.) to promptly return to the Company, or destroy with the Company's consent, any and all materials belonging to the Company;

(b.) to immediately discontinue the dissemination or use of any materials, marketing or otherwise, bearing the Company's name or logo; and

(c.) promptly return to Company all original records and all electronic records relating to the

Business.

3. Upon termination of this Agreement, the Company agrees, for a period of seven (7) years from the date of termination, that:

(a.) Following reasonable advance written notice to Company, Manager shall have the right to access and review all records related to the Business generated by Manager.

(b.) Company will provide:

(i.) Quarterly reports of written and earned premium by state and program.

(ii.) Quarterly reports of . claim activity by coverage including paid losses, reserve transactions, salvage/subrogation recoveries, claim counts (pending, opened, closed).

ARTICLE XV.Ownership of Expirations

A. Use and control. The use and control of all expirations, and all records pertaining to insurance written pursuant to this Agreement shall become the Manager's property and remain in the Managers undisputed possession, provided that Manager fulfills their responsibilities in accordance with this Agreement.

ARTICLE XVI.Offset

All amounts due Manager or Company under this or any other agreement between the parties shall be subject to the right of offset, whether or not subject entities are presently listed in this Agreement. For the protection of the Company, the Company shall have the right of offset with respect to any premium not timely refunded to premium finance companies or to insureds in the time allotted by the appropriate state law, or within thirty (30) days after policy cancellation, whichever is greater so long as the premium in question arises from business generated pursuant to this Agreement. For the purposes of this Article, Manager shall include all subsidiaries and affiliates. The Manager may not use the right of offset to remove funds the Manager believes it is owed from the Premium Account without the prior written consent of the Company.

ARTICLE XVII. Arbitration

A. Submission to Arbitration. In the event of any dispute between the Company and the Manager with reference to the interpretation, application, formation, enforcement or validity of this Agreement, or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Agreement, such dispute, upon written request of either party, shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire meeting at the Company's offices unless otherwise mutually agreed. Notwithstanding the generality

of the foregoing, the Company's right to exercise any of the options or rights contained in this Agreement and the incorporated Endorsements or to obtain any other legally available injunctive remedies shall not be limited by the submission of any dispute to arbitration. The board of arbitration will have complete jurisdiction over the entire matter in dispute, including any question as to its arbitrability.

B. Notice. The notice requesting arbitration shall state in particulars all principal issues to be resolved, name the requesting party's arbitrator and shall set a date for the hearing, which date shall be no sooner than ninety (90) days and no later than one hundred twenty (120) days from the date that the notice requesting arbitration is mailed.

C. Discovery. Each party may obtain discovery from the other through written interrogatories and through requests for documentation, and may depose witnesses upon notice to the other. Any objections to production of documents or to the scope of discovery. shall be submitted to the umpire for·resolution. The umpire may schedule a conference at which the parties may present oral arguments and submit written briefs with respect to the production of documents or the scope of discovery. The umpire shall render a decision within two business days of the conference. The decision shall be binding on the parties.

D. Arbitration Board Membership. The members of the board of arbitration shall be active or retired and disinterested officials of insurance companies or lawyers. Each party shall appoint its own arbitrator and the two arbitrators shall choose a third arbitrator as umpire before the date set for the hearing. The umpire shall be a lawyer. If the party receiving the notice of arbitration fails to appoint its arbitrator within thirty (30) days after having received the written notice of arbitration, the party giving notice shall appoint the second arbitrator. If the two arbitrators fail to agree upon the appointment of the umpire within thirty (30) days after their appointments, each of them shall name three, of whom the other shall decline two and the selection of the umpire from the remaining two nominees shall be made by drawing lots. The umpire shall promptly notify all parties to the arbitration of his selection.

E. Submission of Briefs. The parties shall submit their initial briefs within twenty (20) days from appointment of the umpire. Each may submit reply briefs within ten (10) days after filing theinitial briefs.

F. Arbitration Award. The board shall make an award with regard to the custom and usage of the insurance business which shall be in writing and shall state the factual and legal basis for the award. The board may award compensatory money damages and interest thereupon but may not award punitive, exemplary or similar damages arising out of or in connection with a breach of this Agreement. The award shall be based . upon a hearing in which evidence may be introduced without following strict rules of evidence but in which cross-examination and rebuttal shall be allowed. At its own election or at the request of the board, either party may submit a post-hearing brief for consideration of the board within twenty (20) days of the close of the hearing. The board shall make its award within thirty (30) days following the close of the hearing or the submission of post-hearing briefs, whichever is later, unless the parties consent to an extension. A decision by the majority of the members of the board shall become the award of the board and shall be final and binding upon all parties to the proceeding.

G. Confirming Court Order. Either party may apply to the United States District Court for the Northern District of Illinois or to the Circuit Court of Cook County, Illinois for an order confirming the award or to enforce any decision by the umpire with respect to discovery. The parties consent to the jurisdiction of any such court. A judgment of such Court shall thereupon be entered. If such an order is issued, the attorney's fees of the party so applying and court costs will be paid by the party against whom confirmation is sought.

H. Arbitration Expense. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the umpire. The remaining costs of the arbitration proceedings or any other costs relating to the arbitration may be allocated by the board.

I. Survival. This Article shall survive the termination of this Agreement.

J. Procedural Law. Illinois law shall govern the conduct of arbitrations pursuant to this Agreement.

ARTICLE XVIII. Contract Terms

A. Applicable Law. The rights of the parties to this Agreement shall be governed by and construed in accordance with the law(s) of the state. of Illinois without regard to Illinois rules on conflict of laws.

B. Strict Compliance. The failure of the Company or Manager to insist on strict compliance with this Agreement and the incorporated Endorsements, or to exercise any right or remedy shall not constitute a waiver of any rights provided under this Agreement, or stop the parties from thereafter demanding full and complete compliance, or prevent the parties from exercising such a remedy in the future.

C. No Assignment. This contract may not be assigned in whole or part by the Manager.

D. Notices and Service of Process. Any notices given with regard to this Agreement (other than the Company's notices or invoices with respect to amounts due hereunder) shall be sent to the following addresses by U.S. mail or any other means calculated to provide notice:

To Company:

American ServiceInsurance Company, Inc.

150 Northwest Point Blvd

Elk Grove Village, IL 60007

Attn: Scott Wollney

To Manager:

Universal Casualty Company

150 Northwest Point Boulevard

Elk Grove Village, Illinois 600007

Attn: Roger Beck

For purposes of service of process related to disputes governed by this Agreement only, the parties agree to accept service of process by personal delivery, registered or certified U.S. mail or overnight courier/delivery service to the addresses specified above. Notices and Service of Process is deemed to be given on the date it is received.

E. Jurisdiction. The parties hereby consent to the exclusive jurisdiction of either the United States District Court for the Northern District of Illinois, or to the Circuit Court of Cook County, Illinois, regarding any disputes relating to or arising out of this Agreement.

F. Severability. If any provision hereof is or shall at any time be deemed invalid and unenforceable then, to the fullest extent permitted by law, the other provisions hereof shall remain in full force and effect and shall be liberally construed in favor bf the Company in order to carry out the intentions of the parties hereto subject to subsection XIV. A. 4. (d) as nearly, as may be possible.

G. Entire Agreement; Modifications. This Agreement and the incorporated Endorsements, constitutes the entire agreement of the parties with respect to the subject matter herein and supersedes any other previous agreements or quotations, whether written or oral, between the Company and the Manager, unless specifically referred to within this Agreement. Except where otherwise provided by the terms of this Agreement, this Agreement may not be released, discharged, amended or modified except in writing signed by both parties. Notwithstanding the foregoing, manuals, rules, regulations, guidelines, instructions arid directions issued in writing by the Company from time to time as provided in this Agreement, shall bind the Manager as though a part of this Agreement.

H. Negotiated Agreement. This Agreement has been negotiated by the parties and the fact that the initial and final draft shall have been prepared by Company shall not be used in any forum in the construction or interpretation of this Agreement or any of its provisions.

I. Headings. The headings preceding the text of the articles and paragraphs of this Agreement are intended and inserted solely for the convenience of reference and shall not affect the meaning, construction or effect of this Agreement.

J. lndependent Contractor. This Agreement is not a contract of employment and nothing contained in this Agreement and the incorporated Endorsements shall be construed to create the relationship of joint venture, partnership, or employer and employee between Company and Manager or between Manager and any independent producers, agents or sub-producers. Manager is an independent contractor and shall be free, subject to the terms and conditions of this Agreement, to exercise judgment and discretion with regard to the conduct of business of this Agreement.

K. Honorable Undertaking. This Agreement shall be considered an honorable undertaking made in good faith and shall be subject to a liberal construction for giving effect to the good faith and honorable intentions of Manager and Company.

L. Counterparts. This Agreement may be executed in duplicate counterparts and via facsimile with an original signature to follow promptly via U.S. Mail, each of which shall be deemed an original but both of which when taken together shall be deemed one and the same document.

M. Survival. Articles Ill (0) (W) (X) (Z) (AA), XI, XII, XIII, XIV, XV, XVI, XVII, and XVIII, and any other provision related to the parties rights post termination shall survive the termination of this Agreement.

N. Promptly. Unless the context and circumstances require action sooner, "promptly" in this

Agreement and incorporated Endorsements shall mean "within five (5) business days".

O. Timely. Unless the context and circumstances require action sooner, 'timely" in this Agreement and incorporated Endorsements shall mean "within three (3) business days".

P. Bordereaux. A listing of accounts and/or transactions from an agent for a specific period of time. At a specified time, the agent will send the Company a check for monies due per the bordereaux.

Q. Account current. Is a listing of the same data as contained within a bordereaux, but at the specified time, the Company will send a check to the agent for monies due per the account current.

R. Loss Pick. A measurement of normal loss expectancy for the risk in question.

S. Confidentiality. Manager and Company (each a "Receiving Party") agree, on behalf of themselves and their respective Affiliates, employees and agents, that during the term of this Agreement and for a period of five (5) years after the termination hereof, they shall not, without the prior written consent of the other party, disclose to any third person, corporation, firm or other party or use for any purpose other than as specifically permitted by this Agreement, any Confidential Information disclosed by the other party (the "Disclosing Party"), except where an order of court of competent jurisdiction, a governmental agency, state or federal law, the Company's Privacy Policy, or a third party's rights or interest in such Confidential Information otherwise requires such disclosure.

For purposes of this section, "Confidential Information" means all information relating to a Disclosing Party, its Affiliates or third parties to whom a Disclosing Party owes an obligation of confidentiality that is furnished to a Receiving Party now or in the future by or on behalf of a Disclosing Party or to which a Receiving Party obtains access, in either case whether such information is furnished or made accessible in writing, orally, visually, electronically or by any other means:

For purposes of this section, an "Affiliate" of a person or entity means any person or entity (including any entity acquired or created after the date of this Agreement) that directly or indirectly controls, is controlled by or is under common control with such company.

Notwithstanding the foregoing, the following will not constitute Confidential Information for purposes of this Agreement:

1. information which is or becomes generally available to the public, other than as a result of a disclosure or other act by the Receiving Party or its Affiliates, employees or agents;

2. information which can be shown by the Receiving Party to have been already known to it on a non-confidential basis prior to being furnished to it by or on behalf of the Disclosing Party; and

3. Information which becomes available to a Receiving Party on a non-confidential basis from a third party that is not subject to any prohibition against disclosing the information to the Receiving Party.

4. Notwithstanding anything to the contrary set forth herein, upan any notice of non-renewal or termination under Article XIV, the parties may share such information as may be necessary to secure a replacement insurance carrier or replacement agent, provided that no information will be shared with any party that has not executed a confidentiality agreement no less stringent than the provisions of this Article.

5. A Receiving Party will not be in breach of its obligations under this Paragraph if it discloses Confidential Information as required by an order of court of competent jurisdiction, a governmental agency, state or federal law; provided, however, that the Receiving Party:

a. notifies the Disclosing Party sufficiently prior to disclosure to enable the Disclosing Party to seek to

oppose or restrict the disclosure;

b. cooperates with any attempt by the Disclosing Party to oppose or restrict the disclosure;

c. uses its best efforts, at the expense of the Disclosing Party, to obtain any protective

order reasonably requested by the Disclosing Party; and

d. only discloses such Confidential Information that is required to be disclosed.

IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused their authorized representatives to execute this Agreement and the incorporated Endorsements.

Manager:	Company:
Universal Casualty Company	American Service Insurance Company
/s/ Roger Beck	/s/ Scott D. Wollney
President & COO	President & CEO
1/11/2011	1/11/2011

EXHIBIT A

Code of Business Conduct and Ethics

INTRODUCTION

The Company's goal is to achieve the highest business and personal ethical standards as well as to comply with all the laws and regulations that apply to our business. Adherence to the standards contained in this Code will help to ensure decisions that reflect care for all of our stakeholders. The Code of Business Conduct and Ethics (the "Code") is intended as an overview of the Company's guiding principles and not as a restatement of Company policies and procedures.

Ethical business behavior is the responsibility of every member of the Company's team and is reflected not only in our relations with each other but also with our policyholders, other organizations, suppliers, competitors, government and the public. Whatever the area of activity and whatever the degree of responsibility, the Company expects each employee and agent to act in a manner that will enhance its reputation for honesty, integrity and the faithful performance of its undertakings and obligations.

This Code cannot and is not intended to cover every applicable law or provide answers to all questions that might arise; for that we must ultimately rely on each person's good sense of what is right, including a sense of when it is proper to see guidance from others on the appropriate course of conduct. Because our business depends upon the reputation of the Company and its directors, officers, employees, and agents for integrity and principled business conduct, in many instances this Code goes beyond the requirements of the law.

CONFLICTS OF INTEREST

In exercising our responsibilities, it is vital that we be guided by what is in the best interests of the Company and those clients with whom we have fiduciary relationships. All of our employees are required to conduct their personal and business affairs in such a way so as to avoid conflicts or even the appearance of conflicts with the interests of the Company, its shareholders, brokers, policyholders and its customers.

USE OF INFORMATION .

The insurance business, like other service industries, is based on the collection, organization, evaluation and preservation of information about individuals, organizations and the world at large. To provide the highest quality services to our policyholders and customers, we must be efficient in gathering and storing information, be thorough in our analysis of information collected, and be creative in generating new information. Our ability to remain competitive requires both our willingness and ability to share information within our organization and our awareness that certain types of information need to be. protected from disclosure. . It is especially important to maintain our reputation by safeguarding information entrusted to us by our policyholders, customers and fellow employees; it is also legally required to many cases.

CONFIDENTIALITY OF PERSONAL INFORMATION

Our policyholders and customers entrust us with confidential information about their personal and business operations. The Company will only collect and maintain information for legal and business reasons. This means that only those employees and outside governmental authorities and regulators with legitimate reasons to know should have access to such information.

CONFIDENTIALITY OF BUSINESS INFORMATION

Confidential business information and practices can be defined as information used in trade or business which gives the owner a competitive advantage and which is not generally known to the public. If the owner fails to adequately protect the information or matter, it may lose its confidential status. Such business information and practices could include software code, customer lists, or a new invention that is yet to be patented.

Sometimes you may encounter such business information and/or practices in the course of evaluating a service provided to, or a service or product received from policy holder, customer or vendor. You may be responsible for the loss of such information and/or practice if you reveal it to others, even fellow Company employees, who do not need to know this proprietary information. Both the Company, the employee, and the agent may be held liable for financial losses to the owner of the business information or practice.

USE OF INSIDE INFORMATION

It is the Company's goal to protect shareholder investments through strict enforcement of the prohibition against insider trading set forth in provincial securities laws and regulations. No director, officer or employee may buy or sell securities of Kingsway at a time when in possession of "material non-public information.") There is, however, an exception for trades made pursuant to certain stock plans such as the Kingsway Employee Stock Purchase Plan established in compliance with applicable law.) Passing such information to someone who may buy or sell securities is also prohibited. The prohibition on insider trading applies to Kingsway's securities and to securities of other companies if the director, officer or employee learns of material non-public information about those other companies in the course of his or her duties for Kingsway. This prohibition also extends to certain non-employees who may learn about the "material non-public information" about the Company such as spouses, relatives, and close friends of directors, officers or employees. Insider trading is both unethical and illegal and will be dealt with firmly. If you have any questions in connection with whether or not a trade in the company shares is permitted at any particular time, please contact the Executive Vice-President of Kingsway.

FAIR DEALING

Each director, officer and employee shall endeavor to deal fairly and in good faith with Kingsway customers, shareholders, employees, suppliers, regulators, business partners, competitors and others. No director, officer or employee shall take unfair advantage of anyone through manipulation, concealment, abuse of privileged or confidential information, misrepresentation, fraudulent behavior or any other unfair dealing practice.

PROTECTION AND USE OF COMPANY ASSETS

Company assets, such. as information. materials, supplies, time, intellectual property, software, hardware, and facilities, among other property, are valuable resources owned, licensed, other otherwise belonging to the Company. Safeguarding Company assets is the responsibility of all directors, officers and employees. All Company assets should be used for legitimate business purposes. The personal use of Company assets without permission is prohibited.

Employees are expected to use Company equipment and materials (e.g. telephones, computers, software and photocopiers) or Company business only. All Company equipment and materials are dedicated for business use only and the Company reserves the right to monitor and investigate usage of company equipment and materials at its discretion.

Employees should not use Company resources for personal benefit or to benefit persons or entities outside the Company. In certain circumstances, the Company may approve of the use of particular corporate resources for charitable or community purposes.

Employees must maintain accurate records and abide by corporate policies concerning reimbursable expenses, and eligibility for all Company benefits, including sick leave, education and disability payments.

Employees may not make payments or give gifts (other than gifts of nominal value that are generally considered as common business or social courtesies) to government workers or outside suppliers in order to influence regulatory or business decisions.

The Company has established internal control procedures to ensure that assets are protected and properly used, and that financial records and reports are accurate and reliable. Employees and supervisors share the responsibility for maintaining and complying with required internal controls.

The Company's success depends upon the integrity of all of its employees. The Company has instituted a comprehensive set of procedures, rules and controls to prevent fraud and dishonesty and it will take all action necessary arid appropriate to enforce these policies and procedure.

ACCOUNTING PRACTICES

It is the policy of Kingsway to fully and fairly disclose the financial condition of the Company in compliance with applicable accounting principles, laws, rules and regulations. All books and records of Kingsway shall be kept in such a way, as to fully and fairly reflect all company transactions.

RECORDS RETENTION

Officers, employees and agents are expected to become familiar with the Company's policies regarding records retention

applicable to them and to strictly adhere to those procedures. Records may not be destroyed except in accordance with the applicable records retention policy. If you.have any questions in this regard, do not hesitate to contact your supervisor.

COMPLIANCE WITH LAWS, RULES REGULATIONS

As an insurance provider, the Company. is subject to a myriad of laws and regulations on how we conduct our business. Many of these laws are designed to protect consumers in situations where it is perceived that a business because of size, resources or expertise is able to unfairly control or influence customer decisions. It is critically important that both the Company, its employees and agents with the letter and spirit of the laws, which regulate the conduct of our business.

All aspects of Company business are impacted by compliance requirements; for example, sales, underwriting, claims, actuarial, accounting and financial reporting, financial services, investments, and governmental relations.

Kingsway takes a proactive stance on compliance with ail applicable laws, rules and regulations, including insider-trading laws and applicable anti-trust laws.

DUTY TO REPORT AND CONSEQUENCES

Every director, officer and employee has a duty to adhere to this Code of Business conduct and Ethics and all existing company policies and to report to the Company and suspected violations in accordance with applicable procedures.

Employees shall report suspected violations of Company policies contained in the Employee Handbook by following the reporting procedures tor that specific policy in the Employee handbook. All other suspected violations of the code must be reported to that party or, if no specific procedures are stated, the Executive Vice-President at (905-206-2651). The Company will investigate any matter so reported and may take appropriate disciplinary and corrective action, up to and including termination. The Company forbids retaliation against employees who report violations of this Code of Business Conduct and Ethics in good faith.

EXHIBIT B

Privacy Notice To Our Customers

This Privacy Policy is provided to you and other customers of the Company (or "we") to explain our policy relating to maintaining the confidentiality of non-public personal information. We are committed to giving your non-public personal information all the protection required by law. This Privacy Policy outlines the types of non-public personal information that we collect, why we collect it, how we use it, and with whom we share it.

Categories of Non-public Personal Information We Collect: Non-public personal information is personally identifiable financial information about you obtained by the Company in connection with providing products and services to you. It includes information provided by you, obtained by us, or resulting from your transactions with us or others. It does not include information available to the general public. We collect non-public personal information from the following sources:

Information we receive from you on applications or other forms. This information may include your name, address, social security number, health and financial .information, and may be received in person, by mail, by phone, by facsimile, or via the internet.

Information about your transactions with us, our affiliates or others. This could include, among other things, information to adjust, investigate or settle your insurance claims, your claims history, billing and payment information and coverage selections.

Information we receive from consumer reporting agencies. This information is generally used in connection with the application process. It may include motor vehicle reports, claims reports, credit histories and information we receive from a customer report or investigative consumer report.

Categories of Parties to Whom We May Disclose Non-public Personal Information: We will disclose your non-public personal information as permitted or required by law. We do not currently disclose non-public personal information about you to our affiliates, except as permitted by law. If we disclose non-public personal information about you to our affiliates, the information will be disclosed to respond to your needs and to provide information about products or services offered by our affiliates. Non-public personal information is treated with the same standards of confidentially among all Kingsway affiliates. We may share information among our affiliates about your accounts or our experiences or transactions with you. This includes identification information, account balance information and payment histories. To underwrite your insurance, we may share your consumer report or investigative consumer report among our affiliated underwriting. companies. By applying for insurance with us, you consent to our sharing of this information among our affiliated insurance underwriting companies. We will not otherwise share your consumer report or investigative consumer report among our affiliates.

We do not disclose non-public personal information about you to nonaffiliated third parties, except as permitted or required by law. We may disclose non-public personal information in connection with the servicing or processing of an insurance product or service that you request or authorize. These services may include check processing, data processing and claims handling functions. We may also disclose non-public personal information with nonaffiliated third parties that perform marketing services on our behalf, with other financial institutions with whom we have joint marketing agreements, or as permitted by law.

We restrict access to your non-public personal information to those employees and other parties necessary to provide products or services to you. We maintain physical electronic and procedural safeguards to guard your non-public personal information.

Further Information: If you have any additional questions about this privacy policy or concerns regarding your personal information, you may write us at:

American Service Insurance Company, Inc.,

150 Northwest Point Boulevard

Elk Grove Village, Illinois 60007.

ENDORSEMENT A

PROGRAM MANAGER AGREEMENT

ENTITIES AND LINES OF BUSINESS GOVERNED BY THIS AGREEMENT

ARTICLE I. Entities and lines of business.

This Endorsement identifies those entities under common ownership or control that are authorized to conduct business under this Agreement. The Company may apply any provision of this Agreement, including termination and suspension of authority, to one entity, line of business, or territory without necessarily affecting other subject entities, lines of business or territories.

Entity Name	Lines of Business	Effective Date	Governing Endorsements
Universal Casualty Company as Program Manager for American Service Insurance Company, Inc.	Private Passenger Automobile Insurance	January 1, 2011 (including claims for policies written prior to this date)	A, B, C, D, E

ENDORSEMENT B

PROGRAM MANAGER AGREEMENT

CLASSES 01= BUSINESS AND AUTHORITY

ARTICLE I.     Classes of business.

Manager's authority and responsibility extends to the following classes of business, policies of insurance (including endorsements), lines of business and limits of insurance. Wherever reference is made to Company's Standard Underwriting Guidelines, please note that it is the Manager's responsibility to access and base relevant decisions on the Company's most current (on-line) version of the Standard Underwriting Guidelines. The Manager must follow appropriate Underwriting Guidelines.

A. Authorized classes of business. Manager's authority includes only the following classes of business:

Private Passenger Automobile Insurance

B. Prohibited classes of business. Manager has no authority for all types of business cited as "prohibited" or "risks not written" in the Company's Standard Underwriting Guidelines with the following exceptions and additions:

1. EXCEPTIONS (i.e., Manager's authority is further broadened to include these items): None.

2. ADDITIONS: None.

ARTICLE II.

The Program Manager authority may be terminated at any time by the Company for any breach of the

Restrictive Conditions.

A. Referral classes of business. Manager shall refer to the Company for prior approval for all types of business cited as ."submit" or "conditionally acceptable" in the Company's Standard Underwriting Guidelines with the following exceptions and additions:

1. EXCEPTIONS (i.e., Manager's authority is further broadened to include these items):

(a.) None.

2. ADDITIONS

(a.)None.

ARTICLE Ill. Account Clearance Process. N/A ARTICLE IV. Broker of Record Guidelines.

A. Company does not honor any "broker-oHecord" letters from any of its Program Managers.

B. Company will honor broker-of-record letters against Manager from those Company retail agents duly authorized to represent Company (lor the subject class of business, size of account, territory, etc.) under the following circumstances:

1. If the quote has not yet been released by Manager; OR

2. If the quote has been released by Manager, but more than ten (10) days remain before the proposed effective date.

C. Company will not honor broker-of-record letters against its Program Managers from those Company retail agents duly authorized to represent Company (for the subject class of business, size of account, territory, etc.) if the quote has been released by the Program Manager and less than ten (10) days remain before the proposed effective date.

D. Company reserves the right to modify the broker-of-record process at its sole discretion.

ARTICLE V. Authority to Bind Risks. Manager's authority to bind qualifying accounts is specified below.

A. Once authorized (as above), your binding authority is limited to accounts within your authority as otherwise stated in this contract and subject to the filed rates, rules and forms of the Company.

B. Binding authority will be suspended immediately if the above individual terminates employment with Manager.

ARTICLE VI. Territory. Manager's authority . and responsibility extends to qualifying accounts headquartered only in the following territories.

A. All states (not territories or possessions) of the United States where the Company has a valid

Certificate of Authority and Filed Forms and Rates.

B. All other Risks outside these territories require prior written Company approval.

C. Company reserves the right to modify the list of approved territories at its sole discretion.

ARTICLE VII. Underwriting Information.

A. Prior to quoting any qualifying account, Manager must obtain at least the requisite underwriting information cited in any applicable Underwriting Guidelines provided by Company with the following exceptions and additions:

1. EXCEPTIONS (i.e., Manager need not secure the following information prior to quoting an authorized account):

None.

2. ADDITIONS (i.e., Manager must secure the following information prior to quoting an

authorized account):

None.

B. At the minimum, Manager will obtain the following information prior to binding any qualifying account:

None

ARTICLE VIII. Renewal Processing

A. Renewal processing must begin a sufficient number of days prior to expiration of policy to satisfy minimum statutory

renewal requirements.

B. For those policies being non-renewed, non-renewal notices on policies must. be issued within state guidelines.

C. For those accounts facing an increase on renewal and with the intent to renew, a letter must be mailed within the time mandated by the state indicating that an increase in premium may occur.

D. Renewal quote must be issued and released to the insured within the state mandated guidelines.

E. Premium audits will be ordered at the sole discretion of the Company.

ARTICLE IX. Policy Processing and Reports to Company.

A. Reports to Company: Manager shall report the following to the Company:

1. Monthly service level reports, as agreed between the Company and Manager

2. Monthly non renewal notice summary demonstrating compliance with applicable statutes.

3. Monthly claim compliance reports.

B. Additional Responsibilities of Manager:

1. Manager will comply with all written terms and conditions of Company's "General Rules" provided to Manager by the Company whether expressed in this Endorsement or not.

2. Manager will maintain all correspondence necessary to underwrite, rate and manage risks subject to this Agreement and shall make risk files available to Company for its review at anytime.

3. Account files will contain at least the following information:

(a.) All items fisted in Article V ("Underwriting Information") above.

(b.) All correspondence

(c.) Completed underwriting checklist (if external to Company's system)

(d.) Rating Worksheets (if external to Company's system)

4. Manager is knowledgeable of and agrees to be fully responsible for compliance with all applicable national security and privacy laws and regulations. This includes, but is not limited to, the Office of Foreign Assets Control requirements, the Gramm-Leach-Billey Act, the Fair Credit Reporting Act, the Insurance Information and Privacy Protection Act and those regulations promulgated to support implementation thereof. The Manager shall make all compliance measures and documents available to the Company.

ENDORSEMENT C

PROGRAM MANAGER AGREEMENT

CLAIMS SERVICE AGREEMENT

Manager claim settlement procedures:

A. In addition to ascertaining that all claims reports are forwarded immediately to Company, the Manager has authority to handle, settle, and resolve all Private Passenger Automobile insurance claims in accordance with any applicable contracts of insurance and reinsurance agreement(s). ·

B. All claims information, whether electronic or otherwise, shall be maintained on the Company's systems or reported to Company in a timely manner.

C. A copy of the claim file must be sent to the Company at its request or as soon as it becomes know that the claim: (1) has the potential to exceed an amount determined by the Company; (ii) involves a coverage dispute; (iii) may exceed the Managers claims settlement authority; (iv) is open for more than 6 months; (v) if a consumer complaint or Insurance Department inquiry is received, or (vi) is closed by payment of an amount set by the company.

D. All claim files will be the joint property of the Company and the Manager. However, upon an order of liquidation of the Company, the files shall become the sole property of the Company or its estate; the Manager shall have reasonable access to and the right to copy the files on a timely basis.

E. Any settlement authority granted to the Manager may be terminated for cause upon the Company's written notice to the Manager or upon the termination of the contract. The Company may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.

F. Manager shall not without prior approval of the Company, pay or commit the Company to pay a claim over $50,000, net of reinsurance.

G. Company will assume responsibility to annually obtain an actuary's opinion attesting to the adequacy of its loss reserves which shall include a review and analysis of loss reserves established for losses incurred and outstanding on business that is produced by the Manager.

H. Managers authority to adjudicate claims on behalf of Company is restricted to the following programs:

a. Private Passenger Automobile Insurance

1. All claims for programs not listed above will be adjusted directly by the Company or its designated Third Party Administrator.

J. Manager may not collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer without prior approval of the Company. If prior approval is given, a report must be promptly forwarded to the Company.

ENDORSEMENT D

PROGRAM MANAGER AGREEMENT

COMMISSION PAYMENTS

As used in this Endorsement D, the following terms shall have the described meanings:

A. "Allocated Loss Adjustment Expense shall include expenses of litigation, interest upon judgments which doesn't reduce the Company's limit of liability under the Insured Exposure involved, allocated investigation, adjustment and legal expenses. However, salaries of the Company's personnel and office expenses of the .Company shall not be included.

B.

C. "Net Written Premium" shall mean the gross premiums (excluding policy fees) charged on all original and renewal Policies written on behalf of the Company, less return premiums.

D. "Net Premium Collected" shall mean gross premiums (excluding policy fees) collected on behalf of the Company, less return premiums and Manager's commission.

E. "Earned Net Premiums" shall mean unearned net premiums at the beginning of the year; Plus Net Written Premiums, less return premiums (GWP) during the year; less unearned net premiums at the end of the year. ·

F. "Net Policy Fees" shall mean gross policy fees, if any, charged on all original and renewal Policies written on behalf of the Company, less return policy fees.

G. "Accident Year Net Losses Incurred" shall mean: losses outstanding at the end of the year, plus losses paid for the accident year, less accident year recoveries, plus accident year loss adjustment expense and legal fees, plus fee paid under any Claims Service Agreement, plus IBNR reserve at the end of the year, plus all assessments and regulatory required contributions.

ARTICLE II. Compensation

A. The Manager or its subsidiary or affiliate who performed the Service will be entitled to renewal rights relative to ASI's private passenger auto book of business plus payment equal to the difference between .95 X earned premium for the period during which this agreement is in force and the fully developed Accident Year Loss & ALAE amount as recorded on ASI's books for that same period plus 100% of ULAE for personal auto lines business as reserved on the Company's books at the original effective date of this agreement. ·

B. Manager's compensation under this Endorsement, or any other amounts or monies due Manager hereunder, shall be subject to offset by Company, or by any of Company's affiliates ("Affiliates"), with any amounts due from Manager to Company or its Affiliates.

ARTICLE Ill. Miscellaneous Provisions

c. Manager's compensation and any other. monies due Manager shall be subject to offset by Company, or any of its affiliates for any money due from Manager to Company or its affiliates. This provision shall not be affected by the insolvency of the Manager.

D. Upon an uncured breach by the Manager of claim related obligations to Company resulting in the termination of this agreement, Company shall have the right to collect from Manager the amount of money necessary to hire an alternative third party administrator to adjudicate the balance of claims that would have otherwise been handled by the Manager, up to the amount initially paid to the Manager by the Company for the claim handling portion of this agreement

ENDORSEMENT E

PROGRAM MANAGER

AGREEMENT FINANCIAL PROTOCOLS

ARTICLE I. Payment terms

A. Claim related compensation based on ULAE reserved on the effective date of this agreement will be paid by the Company to the Manager on a monthly basis where each monthly amount is based on actuarial work established at year end 2010 projecting the claim payment triangles for business in force on December 31, 2010, totaling the amount provided for in Endorsement D. A schedule of these payments will be incorporated into this agreement upon completion of 2010 year end actuarial work.

B. Renewal rights are granted to Manager immediately upon execution of this agreement by both parties.

C. Other compensation will be paid by the Company on a Monthly basis no later than the 20th calendar day of each month for premium earned in the preceding month.

ARTICLE II.Pass Through Fees

A. Manager shall be responsible for all regulatory fees collected on a per policy basis as mandated by any regulatory agency in assigned territories.

B. All fees shall be accounted for on a monthly report to the Company.

C. All such fees shall be sent to the appropriate regulatory agency in the time frame mandated by statute or regulation.

EX-10.8

EXHIBIT 10.8

SALE AGREEMENT

By and Between

American Service Insurance Company, Inc., an Illinois corporation

(Seller)

and

150 Northwest Point LLC,

a Delaware limited liability company

(Purchaser)

TABLE OF CONTENTS

ARTICLE I	PURCHASE AND SALE	1
1.1	Agreement of Purchase and Sale	1
1.2	Payment of Purchase Price	2
1.3	Deposit	2
1.4	Earnest Money Provisions	2
1.5	Independent Contract Consideration	3
ARTICLE II	TITLE AND SURVEY: ASIC LEASE	3
2.1	Title Commitment	3
2.2	Title Examination	4
2.3	Pre Closing "Gap" Title Defects	5
2.4	Permitted Exceptions	5
2.5	ASIC Lease	6
ARTICLE III	REVIEW OF PROPERTY	6
3.1	Right of Inspection	6
3.2	Right of Termination	7
ARTICLE IV	CLOSING	8
4.1	Time and Place	8
4.2	Seller's Obligations at Closing	8
4.3	Purchaser's Obligations at Closing	9
4.4	Credits and Prorations	10
4.5	Transaction Taxes and Closing Costs	14
4.6	Conditions Precedent to Obligation of Purchaser	14
4.7	Conditions Precedent to Obligation of Seller	15
ARTICLE V	REPRESENTATIONS, WARRANTIES AND COVENANTS	16
5.1	Representations and Warranties of Seller	16
5.2	Knowledge Defined	18
5.3	Covenants of Seller	19
5.4	Representations and Warranties of Purchaser	21
5.5	Purchaser's Knowledge Defined	22
5.6	Survival of Purchaser's Representations and Warranties	22
ARTICLE VI	DEFAULT	23
6.1	Default by Purchaser	23
6.2	Default by Seller	23
6.3	Recoverable Damages	23
ARTICLE VII	RISK OF LOSS	24
7.1	Minor Damage	24
7.2	Major Damage	24
7.3	Definition of "Major" Loss or Damage	24

ARTICLE VIII	BROKERAGE AND INDEMNIFICATION	25
8.1	Brokerage Commissions	25
ARTICLE IX	DISCLAIMERS AND WAIVERS	25
9.1	No Reliance on Documents	25
9.2	AS IS SALE; DISCLAIMERS	25
9.3	Survival of Disclaimers	27
ARTICLE X	MISCELLANEOUS	27
10.1	Confidentiality	27
10.2	Public Disclosure	27
10.3	Assignment	27
10.4	Notices	28
10.5	Modifications	29
10.6	Entire Agreement	29
10.7	Further Assurances	29
10.8	Counterparts	29
10.9	Facsimile Signatures	29
10.10	Severability	29
10.11	Applicable Law	29
10.12	No Third Party Beneficiary	30
10.13	Captions	30
10.14	Construction	30
10.15	Recordation	30
10.16	Attorneys' Fees and Costs	30
10.17	Governmental Approvals	30
10.18	Limitation of Liability	30
10.19	Saturdays, Sundays, Holidays	31

SALE AGREEMENT

THIS SALE AGREEMENT (this "Agreement") is made as of April 5, 2012 (the "Effective Date") by and between American Service Insurance Company, Inc., an Illinois corporation (the "Seller") and 150 Northwest Point LLC, a Delaware limited liability company (the "Purchaser").

Seller desires to sell, and Purchaser desires to purchase, the following (collectively, the "Property"): (i) fee simple title to certain improved real property located in Elk Grove Village, Illinois, commonly known as 150 Northwest Point Boulevard and legally described on Exhibit A attached hereto together with all of Seller's right, title and interest, if any, in and to the appurtenances pertaining thereto, including but not limited to Seller's right, title and interest in and to the streets, alleys and right-of-ways which abut such real property, and any easement rights, air rights, subsurface rights, development rights and water rights appurtenant to such real property (the "Land"); (ii) all of Seller's right, title and interest in and to the buildings, structures, fixtures, systems and other improvements affixed to or located on the Land, excluding fixtures owned by tenants (collectively the "Improvements") (the Land and the Improvements are referred to together hereinafter as the "Real Property"); (iii) all of Seller's right, title and interest in and to tangible personal property located upon the Land or within the Improvements, excluding those items of personal property owned by Seller listed on Exhibit J attached hereto and excluding cash, computers, software, and all items of personal property owned by the property manager and located in the management office for the Property and all items of personal property owned by tenants or other occupants of the Real Property, located on and used exclusively in connection with the operation of the Land and the Improvements (collectively, the "Personal Property"); (iv) all of Seller's right, title and interest in and to all leases, licenses and occupancy agreements covering all or any portion of the Real Property, to the extent they are in effect on the date of the Closing (as defined in Section 4.1), including all rents, security deposits and all related guaranties (collectively, the "Leases"); (v) all of Seller's right, title and interest in and to all Assumed Operating Agreements (as defined in Section 5.4(d)); and (vi) all of Seller's right, title, and interest in and to all assignable existing permits, licenses, approvals, warranties, and authorizations issued by any governmental authority in connection with the Property, in each case to the extent they are in effect as of the date of the Closing and transferrable (the "Licenses and Permits"), and all of Seller's right, title, and interest in and to the right to use the name "150 Northwest Point" (collectively, the "Intangibles"). No later than five (5) days prior to the expiration of the Inspection Period (as hereinafter defined), Seller shall provide Purchaser a written inventory listing the Personal Property located at the Real Property.

NOW, THEREFORE, in consideration of and in reliance upon the above recitals, the terms, covenants and conditions contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

ARTICLE I PURCHASE AND SALE

1.1 Agreement of Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agrees to sell the Property to Purchaser, and Purchaser agrees to purchase the Property, for a purchase price equal to Thirteen Million Nine Hundred Seventy-Five Thousand and No/100 Dollars ($13,975,000.00), subject to such prorations and adjustments as provided in this Agreement (the "Purchase Price").

1.2 Payment of Purchase Price. The Purchase Price shall be payable in full at Closing (as defined below) by wire transfer of immediately available funds to a bank account designated by Seller in writing to the Escrow Agent (as defined in Section 1.3 hereof) prior to the Closing.

1.3 Deposit. Within (2) business days after the Effective Date, Purchaser shall deposit with First American Title Insurance Company (the "Escrow Agent" or "Title Company"), having its office at 30 North LaSalle Street, Chicago, Illinois 60602, Attention: Dick Seidel, the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the "Initial Deposit") in good funds, by federal wire transfer pursuant to the wiring

instructions attached hereto as Exhibit H. Within two (2) business day after the expiration of the Inspection Period (as defined in Section 3.1), Purchaser shall deposit the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the "Additional Deposit"; the Initial Deposit and the Additional Deposit together with all interest earned thereon, are referred to as the "Deposit") in good funds, by federal wire transfer pursuant to the wiring instructions attached hereto as Exhibit H. The Escrow Agent shall hold the Deposit in an interest-bearing account reasonably acceptable to Seller and Purchaser, in accordance with the terms and conditions of this Agreement. All interest on such sum shall be deemed income of Purchaser. The Deposit shall be distributed in accordance with the terms of this Agreement. The failure of Purchaser to timely deliver the Initial Deposit or the Additional Deposit hereunder shall be a material default, and shall entitle Seller, at Seller's sole option, to terminate this Agreement immediately, and in the event Seller so elects to terminate this Agreement, the Deposit, if any, shall be promptly returned to Purchaser.

1.4 Earnest Money Provisions.

(a) Investment and Use of Funds. The Escrow Agent shall invest the Deposit in interest-bearing accounts satisfactory to Purchaser and Seller, shall not commingle the Deposit with any funds of the Escrow Agent and shall promptly provide Purchaser and Seller with confirmation of the investments made. Notwithstanding the foregoing, the Escrow Agent may commingle the Deposit with other funds prior to the Escrow Agent's receipt of any required investment instructions. If the Closing under this Agreement occurs, the Escrow Agent shall apply the Deposit against the Purchase Price due Seller at Closing.

(b) In the event Purchaser's terminates this Agreement on or before the last day of the Inspection Period in accordance with Section 3.2 hereof and Purchaser delivers a copy of such notice of termination to the Escrow Agent, Escrow Agent shall be irrevocably obligated to release the Deposit to Purchaser without the need for any joint order or other direction of the parties.

(c) Strict Joint Order. In the event Purchaser elects not to terminate this Agreement, then after the expiration of the Inspection Period, except as may be required by a court order, other than the application of the Deposit against the Purchase Price due Seller at Closing, the Deposit shall be released solely upon the joint instruction of Purchaser and Seller.

(d) Interpleader. Subject to Section 1.4(b) hereof, Seller and Purchaser agree that in the event of any controversy regarding the Deposit arises after the expiration of the Inspection Period, unless written instructions from Seller and Purchaser are received by the Escrow Agent directing the Deposit's disposition, the Escrow Agent shall not take any action, but instead shall await the disposition of any proceeding relating to the Deposit or, at the Escrow Agent's option, the Escrow Agent may interplead all parties and deposit the Deposit with a court of competent jurisdiction in which event the Escrow Agent may recover all of its court costs and reasonable attorneys' fees. Seller or Purchaser, whichever loses in any such interpleader action, shall be solely obligated to pay such costs and fees of the Escrow Agent, as well as the costs of the interpleader, and the reasonable attorneys' fees of the prevailing party in accordance with the other provisions of this Agreement.

(e) Liability of Escrow Agent. The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any loss, cost or expense incurred by Seller or Purchaser resulting from the Escrow Agent's mistake of law respecting the Escrow Agent's scope or nature of its duties. Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent hannless from and against all costs, claims and expenses, including reasonable attorneys' fees, incurred in connection with the performance of the Escrow Agent's duties hereunder, except with respect to actions or omissions taken or made by the Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of the Escrow Agent.

Escrow Agent shall execute this Agreement solely for the purpose of being bound by the provisions of Sections 1.3 and 1.4 hereof.

1.5 Independent Contract Consideration. Immediately prior to the execution of this Agreement, Purchaser paid one (1) dollar ($1.00) (the "Independent Contract Consideration") to Seller, which amount Seller and Purchaser hereby bargained for and agreed to as consideration for Seller's execution and delivery of this Agreement. The Independent Contract Consideration is non-refundable and in addition to any other payment or deposit required by this Agreement, and Seller shall retain the Independent Contract Consideration notwithstanding any other provision of this Agreement to the contrary.

ARTICLE II

TITLE AND SURVEY; ASIC LEASE

2.1 Title Commitment and Survey. Within two (2) business days following the Effective Date, Seller shall deliver to Purchaser a title insurance commitment issued by the Title Company for the issuance of a 2006 ALTA Owner's Title Policy covering the Real Property (the "Title Commitment") together with copies of each of the Schedule A and Schedule B underlying title documents and/or exceptions set forth therein and a survey of the Real Property (the "Existing Survey"). Within ten (10) business days following the Effective Date, Seller shall deliver to Purchaser an update of the Existing Survey made in accordance with the current Minimum Standard Detail Requirements for ALTA/ACSM Title Land Surveys, jointly established and adopted by ALTA and NSPS and includes Items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11(a), 14, 16, 17, 18 and 21 of Table A (the "Survey"). In the event the Survey is not delivered within such ten (10) business day period, the Title Exam Deadline (as hereinafter defined) shall be extended for one day for each day of such delay until such date that the Survey is delivered to Purchaser. Costs of the Title Commitment and Survey shall be paid as provided in Section 4.5 below.

2.2 Title Examination. Purchaser shall have until April 27, 2012 (the "Title Exam Deadline") to notify Seller in writing (the "Title Notice") which exceptions to title (including matters disclosed by the Existing Survey or the Survey), if any, will not be accepted by Purchaser. Any exception to title or matter disclosed in the Title Commitment, the Existing Survey, or the Survey to which Purchaser does not object by the Title Exam Deadline shall be deemed Permitted Exceptions (as defined in Section 2.4 hereof). If Purchaser gives Seller a Title Notice on or prior to the Title Exam Deadline, Seller shall have the right, but not the obligation, to attempt to remove, satisfy or otherwise cure any such exceptions or matters identified in such Title Notice, except for the Must Removes (as hereinafter defined). Within two (2) business days after receipt of Purchaser's Title Notice ("Seller's Notice Period"), Seller shall give written notice to Purchaser stating either (a) that Seller will remove such objectionable exceptions or matters from title on or before the Closing (as defined in Section 4.1 hereof); provided that Seller may extend the Closing Date (as defined in Section 4.1 hereof) for such period as shall be required to effect such cure, but not beyond thirty (30) days; or (b) that Seller elects not to cause such objectionable exceptions or matters to be removed. If Seller fails to give written notice of its election within Seller's Notice Period, Seller shall be deemed to have elected not to attempt to cure the exceptions or matters objected to in such Title Notice. The procurement by Seller of a commitment for the issuance of the Title Policy (as defined in Section 4.6(e) hereof) or an endorsement thereto (in a form reasonably acceptable to Purchaser) insuring Purchaser against any title exception or matter which was properly objected to by Purchaser in a Title Notice pursuant to this Section 2.2 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (b) above, then Purchaser shall have the right to terminate this Agreement upon written notice to Seller given within five (5) business days after the expiration of the Seller's Notice Period, and in such event the Deposit shall be promptly returned to Purchaser. If Seller gives Purchaser notice under clause (b) above or fails to give Purchaser such a notice, and Purchaser fails to terminate this Agreement on or prior to the expiration of the Inspection Period, then such objectionable exceptions or matters will be deemed to constitute Permitted Exceptions, except for any Must Removes. If this Agreement is terminated pursuant to the foregoing provisions of this Section 2.2, then neither party shall have any further rights or obligations hereunder (except for those obligations of a party that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. Notwithstanding the foregoing or anything in Sections 2.3 or 2.4 to the contrary, (a) any "Must Removes" (as defined below) shall not be Permitted Exceptions hereunder (and Purchaser shall not be required to notify Seller of its

objection thereto) and (b) at Closing, Seller shall cause the Must Removes to be released of record, deleted from the Title Policy or insured over by the Title Company pursuant to an endorsement reasonably satisfactory to Purchaser. For the purposes of this Section 2.2, the term "Must Removes" shall mean (i) the mortgage and other instruments securing Seller's mortgage loan which encumbers the Property, (ii) any judgment liens against Seller in the amount of $100,000 or less, and (iii) any tax or mechanic's lien which encumbers the Property and was created by or results from the acts or omissions of Seller except for (x) the lien of real estate taxes and assessments not due and payable and (y) mechanic's liens arising out of tenant improvement work (i) being performed by a tenant under such tenant's Lease so long as such tenant has an obligation to remove said lien or indemnify the landlord with respect to such lien pursuant to its Lease, and (ii) being performed by Seller as landlord under the Leases, for which Purchaser is responsible or shall receive a credit against the Purchase Price pursuant to Section 4.4(b)(v) hereof. In no event shall Must Removes be considered Permitted Exceptions.

2.3 Pre Closing "Gap" Title Defects. Purchaser shall have the right to object to any Material Exceptions (as defined below) by giving written notice (the "Gap Notice") of the Material Exceptions to which Purchaser is objecting within three (3) business days after receiving written notice of such new matter. If Purchaser does not object to any such Material Exception by giving a timely Gap Notice as herein provided, such Material Exception shall be a Permitted Exception except for any Must Removes. If Purchaser sends a Gap Notice to Seller, Seller shall have three (3) business days after receipt of the Gap Notice to notify Purchaser (i) that Seller will remove such objectionable exceptions from title on or before the Closing; provided that Seller may extend the Closing Date for such period as shall be required to effect such cure, but not beyond thirty (30) days; or (ii) that Seller elects not to cause such exceptions to be removed. If Seller fails to give written notice of its election within such three (3) business day period, Seller shall be deemed to have elected not to attempt to cure the exception or matter objected to in a Gap Notice. The procurement by Seller of a commitment for the issuance of the Title Policy, or an endorsement thereto (in a form reasonably acceptable to Purchaser) insuring Purchaser against any title exception or matter which was properly objected to by Purchaser in a Gap Notice pursuant to this Section 2.3 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (ii) above or fails to give Purchaser such a notice, Purchaser shall have five (5) business days in which to notify Seller that (x) Purchaser will nevertheless proceed with the purchase of the Property, in which case title to the Property shall be subject to such exceptions (i.e., such exceptions will be deemed to constitute Permitted Exceptions), or (y) Purchaser will terminate this Agreement. If Purchaser fails to give written notice of its election within such five (5) business day period, then Purchaser shall be deemed to have elected clause (x) above. If this Agreement is terminated pursuant to the provisions of this Section 2.3, then neither party shall have any further rights or obligations hereunder (except for those obligations of a party that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. As used herein, "Material Exception" shall mean any exception to title or matter shown on any amendment to the Title Commitment or revisions to the Survey issued after the expiration of the Inspection Period (a) that was not disclosed on the latest version of the Title Commitment received by Purchaser at least five (5) business days prior to the expiration of the Inspection Period, the Existing Survey, or the latest version of the Survey received by Purchaser at least five (5) business days prior to the expiration of the Inspection Period or that did not exist prior to the expiration of the Inspection Period, and (b) is not a Permitted Exception hereunder.

2.4 Permitted Exceptions. For purposes of this Agreement, the "Permitted Exceptions" are and mean: (i) those matters that are or have become Permitted Exceptions pursuant to Section 2.2 or 2.3 hereof; (ii) the rights of tenants under the Leases, as tenants only, with no options to purchase or rights of first offer or refusal to purchase the Property; (iii) the lien of all ad valorem real estate taxes and assessments not due and payable as of the Closing Date, subject to adjustment as herein provided; (iv) local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property, except for any violation of the foregoing; and (v) matters that have arisen as a result of acts done or suffered by or through Purchaser.

2.5 ASIC Lease. Prior to the expiration of the Inspection Period, Purchaser, as landlord, and Seller, as tenant, shall finalize the form of that certain lease for 30,552 rentable square feet located on the 3rd floor of the Property which shall be in form and substance reasonably acceptable to Purchaser and Seller and shall

provide for the following: (i) commencement on the date of the Closing ("Commencement"); (ii) a term of five (5) years; (iii) annual rent of $21.00 gross per rentable square foot with a 2012 base year and three percent (3%) annual increases plus electricity usage to be billed to tenant on a pro rata basis; (iv) no tenant improvement allowance or commissions; (v) notwithstanding clause (iii) above, rent abatement for five (5) months upon Commencement, provided, tenant shall be responsible for payment of all utilities during such abatement period, (vi) that for so long as Purchaser maintains training rooms on the first (1st) floor of the Property, Purchaser shall provide access to such training rooms as requested by Seller, subject to any conditions set forth in the lease, (vii) a guaranty from Atlas Financial Holdings, Inc. ("Atlas"), an affiliate of Seller, unconditionally and irrevocably guaranteeing the payment and performance of Seller's obligations under the lease, and (viii) an unconditional, standby and irrevocable, self-renewing letter of credit in the amount of Three Hundred Twenty Thousand Seven Hundred Ninety Six and No/100 Dollars ($320,796.00), in form and substance reasonably approved by Purchaser, as security for the full and faithful performance of every provision of the lease to be performed by Seller throughout the term of the lease (the "ASIC Lease"). The ASIC Lease shall replace any existing lease with Atlas (the "Existing Lease") in effect as of the Effective Date and the Existing Lease shall be terminated and of no further force or effect as of the Closing. At the Closing, Purchaser shall pay to Seller $7,670 as a lump sum as consideration for any costs associated with relocating Seller at the Property pursuant to the ASIC Lease. Purchaser and Seller shall execute the ASIC Lease as of the date of Closing.

ARTICLE III REVIEW OF PROPERTY

3.1 Right of Inspection. During the period (the "Inspection Period") beginning on the Effective Date and ending at 5:00p.m. Chicago, Illinois time on May 7, 2012. Purchaser shall have the right to make a physical inspection of the Real Property, including an inspection of the environmental condition thereof pursuant to the terms and conditions of this Agreement, and to examine documents and files located at the Real Property or delivered by Seller to Purchaser in connection with this Agreement concerning the leasing, maintenance and operation of the Property (collectively, the "Property Information"), but excluding internal memoranda, financial projections, appraisals and similar proprietary, confidential or privileged information (collectively, the "Confidential Documents").

Purchaser understands and agrees that any on site inspections of the Real Property shall occur at reasonable times agreed upon by Seller and Purchaser after not less than 24 hours' prior notice to Seller which notice shall include the dates of such entries, the work to be performed, and the names of the parties entering the Property. Such inspections shall be conducted so as not to interfere unreasonably with the use of the Property by Seller or their tenants or other occupants of the Property. Seller reserves the right to have a representative present during any such inspections. If Purchaser desires to do any invasive testing at the Real Property, Purchaser shall do so only after notifying Seller and obtaining Seller's prior written consent thereto, which consent may be withheld by Seller in its sole discretion and may be subject to any terms and conditions imposed by Seller in its sole discretion. Purchaser shall promptly restore the Property to its condition prior to any such inspections or tests, at Purchaser's sole cost and expense. Purchaser shall keep the Property free and clear of all mechanics', materialmen's and other liens resulting from its or its agents' or independent contractors' activities with respect to the Property. Purchaser agrees to protect, indemnify, defend and hold Seller, and Seller's partners, members, and their respective agents, independent contractors and employees harmless from and against any and all claims for liabilities, liens, losses, costs, expenses (including reasonable attorneys' fees), damages or injuries arising out of or resulting from the inspection of the Property by Purchaser or its agents or independent contractors (excluding any damages arising from the mere discovery of an adverse condition affecting the Property), and notwithstanding anything to the contrary in this Agreement, such obligation to indemnify and hold harmless Seller, and Seller's partners, members, and their respective agents, independent contractors and employees shall survive Closing or any termination of this Agreement. Purchaser shall not have the right to contact any tenant, occupant, vendor, contractor, property manager or asset manager of the Property without in each case first obtaining the prior consent of Seller thereto. In addition, Seller, at Seller's election, shall be entitled to have a representative on any telephone call or other such contact made by Purchaser and to be present at any meeting between Purchaser and any of said parties. Purchaser shall keep in force during the term hereof, and shall cause all agents and consultants retained by Purchaser in connection with any investigation of the Property to have during the performance of their

work, at no expense to Seller, commercial liability insurance, including public liability and property damage insurance, in the amount of at least $1,000,000, combined single limit for personal injuries or death of persons or property damage occurring in or about the Property, as well as workers' compensation insurance with limits in accordance with applicable laws. All such insurance shall: (a) name Seller as an additional insured; (b) specifically cover the liability assumed by Purchaser under this Agreement; (c) be issued by an insurance company reasonably acceptable to Seller; and (d) be primary and noncontributory with any insurance which may be carried by Seller. Purchaser shall deliver said policy or policies or certificates thereof to Seller prior to commencing any entry upon the Property, and renewals thereof at least thirty (30) days before the expiration date thereof. Purchaser's compliance with the provisions of this Section shall not limit Purchaser's liability under any of the other provisions of this Agreement.

In the event that the Closing hereunder shall not occur for any reason whatsoever (other than Seller's default), Purchaser shall, upon Seller's request, deliver to Seller, at no cost to Seller, and without representation or warranty, the copies of all tests, reports and inspections of the Property (provided the same do not restrict such delivery to a third party), made and conducted by or for the benefit of Purchaser.

3.2 Right of Termination. If for any reason or no reason Purchaser determines that the Property, or any aspect thereof, is unsuitable for Purchaser's acquisition, Purchaser shall have the right to terminate this Agreement by giving written notice thereof to Seller prior to the expiration of the Inspection Period. If Purchaser gives such notice of termination on or prior to the expiration of the Inspection Period, then this Agreement shall terminate and neither party shall have any further rights or obligations hereunder (except for those obligations that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. If Purchaser fails to give Seller a notice of termination prior to the expiration of the Inspection Period, Purchaser shall be deemed to have waived its right to terminate this Agreement under this Section 3.2.

ARTICLE IV CLOSING

4.1 Time and Place. The consummation of the transaction contemplated hereby (the "Closing") shall be held on May 22, 2012, or sooner upon the mutual agreement of Purchaser and Seller (the "Closing Date"), through an escrow administered by Escrow Agent. At the Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3 hereof, the performance of which obligations shall be concurrent conditions. The Purchase Price and all documents shall be deposited with the Escrow Agent as escrowee.

4.2 Seller's Obligations at Closing. On the Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:

(a) a duly executed and acknowledged special warranty deed in the form attached hereto as Exhibit B (the "Deed") subject only to the Permitted Exceptions;

(b) a duly executed bill of sale and assignment in the form attached hereto as

Exhibit C (the "Bill of Sale and Assignment");

(c) a notice (the "Tenant Notice"), which Purchaser shall send to the tenant under each of the Leases promptly after the Closing, informing such tenant of the transactions contemplated herein in a form reasonably acceptable to Seller and Purchaser;

(d) A certificate certifying that all of the representations, warranties and covenants made by Seller in this Agreement continue to be true and correct in all materials respects as of the Closing Date;

(e) duly completed and signed real estate transfer tax declarations and other state, county or municipal law, code or ordinance disclosures;

(f) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Seller;

(g) a certificate in the form attached hereto as Exhibit D duly executed by Seller stating that Seller is not a "foreign person" as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 (the "FIRPTA");

(h) such affidavits or documents as may be customarily and reasonably required by the Title Company in order to issue the Title Policy, in a form reasonably acceptable to Seller;

(i) a closing and proration statement (the "Closing Statement");

(j) notices to vendors under the Assumed Operating Agreements, if required by the terms of such Assumed Operating Agreements;

(k) either (x) a certificate issued by the Illinois Department of Revenue stating that the withholding obligations under Section 9.02(d) do not apply, (y) or an indemnification in form as satisfactory to Purchaser that indemnifies, defends and holds harmless Purchaser with respect to all liabilities which may be imposed upon Purchaser as a result of Section 9.02(d), any Seller's state sales and use tax and unemployment insurance tax liability (the "Tax Indemnity");

(1) the ASIC Lease executed by Seller and the guaranty of the ASIC Lease executed by Atlas;

(m) such additional documents as shall be reasonably required to consummate the transactions contemplated by this Agreement;

(n) originals of all estoppel certificates from each tenant on the Property, substantially in the form attached as Exhibit E;

(o) a current rent roll as of Closing of all Leases, certified to Purchaser to be true and correct in all material respects to the best of Seller's knowledge; and

(p) evidence of termination of all Operating Agreements, except for the

Assumed Operating Agreements.

Seller shall leave the following (but in all cases excluding any Confidential Documents) at the management office for the Property (collectively, the "Property Records"): (i) the original (or, if unavailable, copies of) Leases and the Assumed Operating Agreements; (ii) to the extent in the possession or control of Seller or the property manager at Closing, copies or originals of all books and records of account, contracts, copies of correspondence with tenants and suppliers, receipts for deposits, unpaid bills and other papers or documents which pertain to the Property; (iii) all available licenses, permits, warranties, and guarantees then in effect; (iv) to the extent any of such items are in the possession or control of Seller or the property manager, at Closing, all keys, access cards to, and combinations to locks and other security devices located at the Property excepting those that will continue to be used by tenants of the Property; and (v) all available plans and specifications and all operation manuals. Seller shall cooperate with Purchaser after Closing to transfer to Purchaser any Property Records stored electronically. Seller shall have the right to make copies of Property Records and retain such copies after the Closing. Each of Seller's and Purchaser's obligation under this Section 4.2 shall survive the Closing.

4.3 Purchaser's Obligations at Closing. On the Closing Date (and prior to 12:00 PM Chicago, Illinois time with respect to Section 4.3(a) below), Purchaser shall deliver in escrow with the Escrow Agent the following:

(a) the Purchase Price, less the amount of the Deposit that is applied to the Purchase Price, as increased or decreased by prorations and adjustments as herein provided (including, without limitation, pursuant to Section 4.4 hereof), in immediately available wire transferred funds;

(b) counterparts of the Bill of Sale and Assignment, the Tenant Notice, the real estate transfer tax declarations, the Closing Statement and the ASIC Lease;

(c) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser or Purchaser's affiliates;

(d) such affidavits as may be customarily and reasonably required by the Title

Company to issue the Title Policy, in a form reasonably acceptable to Purchaser; and

(e) such additional documents as shall be reasonably required to consummate the transactions contemplated by this Agreement.

4.4 Credits and Prorations.

(a) All income and expenses of the Property shall be apportioned as of 12:01 a.m., on the Closing Date, as if Purchaser was vested with title to the Property during the entire day upon which Closing occurs. Such prorated items shall include without limitation, the following:

(i) all rents, electricity charges and other sums due under the Leases

(collectively, the "Rents"), if any, as and when collected;

(ii) all real estate taxes and assessments (including personal property taxes, if any, on the Personal Property) affecting the Property as provided in Section 4.4(b)(ii) below;

(iii) all utility charges for which Seller is liable, if any, such charges to be apportioned at Closing on the basis of the most recent meter reading occurring prior to Closing (dated not more than thirty (30) days prior to Closing) or, if unmetered, on the basis of a current bill for each such utility; and

(iv) all amounts payable under the Assumed Operating Agreements;

(v) any other operating expenses or other items pertaining to the Property which are customarily prorated between a purchaser and a seller in the county in which the Property is located.

(b) In addition to and notwithstanding anything contained in Section 4.4(a) hereof

(i) At Closing, (A) Seller shall, at Seller's option, either deliver to Purchaser all security deposits together with interest required to be paid thereon (collectively, the "Security Deposits") actually held by Seller pursuant to the Leases or credit to the account of Purchaser the amount of such Security Deposits and (B) Seller shall be entitled to receive and retain refundable cash or other deposits posted with utility companies. At Closing, Seller shall, to the extent assignable, assign (at Seller's cost, unless the Tenant is responsible for the cost thereof under its Lease) to Purchaser any letters of credit or other non-cash Security Deposits (to the extent such Security Deposits have not been properly applied against delinquent Rents as provided in the Leases) or, if such letters of credit or other non-cash security deposits are not assignable, Seller shall reasonably cooperate with Purchaser to have them re-issued in the name of Purchaser at Seller's cost. In the event that post-Closing, such letters of credit or other non-cash Security Deposits have not been transferred to Purchaser and Purchaser is entitled to draw thereon pursuant to the terms of the applicable Lease, then at Purchaser's request, Seller shall draw on such letters of credit or other non-cash Security Deposits and immediately upon receipt transfer such funds to Purchaser, or take such other actions post-Closing as are reasonably necessary to

realize on such letters of credit pursuant to the terms of the Lease. The obligations of Seller and Purchaser under this Section 4.4(b)(i) shall survive the Closing until all Security Deposits have been assigned and transferred to Purchaser.

(ii) Seller shall be responsible for real estate taxes assessed during calendar year 2011 which are payable in calendar year 2012, real estate taxes for all years prior to 2011 and real estate taxes for the portion of 2012 in which Seller owned the Property. Purchaser shall be responsible for real estate taxes for the portion of 2012 in which Purchaser owned the Property and real estate taxes for all subsequent years. At Closing, Seller shall deposit with the Escrow Agent the following funds to be held by Escrow Agent in an interest bearing account: (x) $420,265 which is 45% of the actual 2010 real estate taxes ($951,265) ("Seller's 2011 Tax Funds") for payment of the 2011 second installment real estate tax bill, (y) funds equal to the amount of Seller's share of 2012 real estate taxes determined by multiplying the amount of the actual 2010 real estate taxes ($951,265) by a fraction, the numerator of which is the number of days in the calendar year for the period commencing on January 1, 2012 and ending on the day before the Closing Date, and the denominator of which is 365 ("Seller's 2012 Tax Funds") for payment of the 2012 real estate taxes (payable in 2013), and (z)

funds equal to the amount of $40,000, which is Seller's approximate portion of the real estate taxes due under that certain Declaration of Covenants, Easements and Restrictions dated June 25, 2001, as amended (the "Parking Garage Agreement"), with the owner (the "Garage Owner") of the parking garage adjacent to the Property and located at 50 Northwest Point (the "Parking Garage") plus the amount of Seller's portion of the operating costs due under said agreement and determined by the Garage Owner and Seller in accordance with the Parking Garage Agreement ("Seller's Garage Funds"). All interest earned on such funds shall be for the benefit of Seller. Upon receipt of the 2011 second installment real estate tax bill, Purchaser shall promptly deliver the original bill to the Escrow Agent with a copy to Seller. Escrow Agent shall disburse Seller's 2011 Tax Funds for timely payment of the 2011 second installment real estate tax bill and any excess Seller's 2011 Tax Funds shall be refunded to Seller and any deficiency in Seller's 2011 Tax Funds shall be promptly paid to Escrow Agent by Seller. Upon receipt of the 2012 first installment real estate tax bill, Purchaser shall promptly deliver the original bill to the Escrow Agent, with a copy to Seller, together with funds sufficient to pay Purchaser's portion of the bill. Escrow Agent shall disburse Seller's 2012 Tax Funds, together with said Purchaser's funds, for timely payment of the 2012 first installment real estate tax bill. Seller and Purchaser agree to re-prorate 2012 real estate taxes upon receipt of the 2012 second installment real estate tax bill. Purchaser shall promptly deliver the original 2012 second installment real estate tax bill to the Escrow Agent, with a copy to Seller, together with funds sufficient to pay Purchaser's portion of the bill. Escrow Agent shall disburse Seller's 2012 Tax Funds, if any such funds are remaining, together with said Purchaser's funds, for timely payment of the 2012 second installment real estate tax bill and any excess Seller's 2012 Tax Funds shall be refunded to Seller and any deficiency in Seller's 2012 Tax Funds shall be promptly paid to Escrow Agent by Seller. Upon receipt of a statement of amounts due from the owner of the Property for its portion of 2012 real estate taxes and operating costs for the Parking Garage from the Garage Owner, Seller and Purchaser shall prorate said amounts between Seller and Purchaser with respect to their respective periods of ownership. Seller shall promptly deliver the statement to the Escrow Agent, together with a statement of proration of such amounts prepared by Seller and Purchaser. Purchaser shall deposit with Escrow Agent its share of said proration. Escrow Agent shall disburse Seller's Garage Funds in the amount set forth on the statement of proration, together with said Purchaser's funds, to the Garage Owner, and any excess Seller's Garage Funds shall be refunded to Seller and any deficiency in Seller's Garage Funds shall be promptly paid to Escrow Agent by Seller. Any credit or refund paid to Seller by the Garage Owner related to real estate taxes for 2011 and prior years for the Parking Garage shall be retained by Seller. Seller shall pay the portion of any special assessments due and payable prior to the Closing Date, and Purchaser shall pay the

portion of any special assessments due and payable on and after the Closing Date;

(iii) charges referred to in Section 4.4(a) hereof which are payable by any tenant to a third party, shall not be apportioned hereunder (except as provided in Section 4.4(b)(vii)), and Purchaser shall look solely to the tenant responsible therefor for the payment of the same;

(iv) as to utility charges referred to in Section 4.4(a)(iii) hereof, Seller may on notice to Purchaser elect to pay one or more or all of said items accrued to the date hereinabove fixed for apportionment directly to the person or entity entitled thereto, and to the extent Seller so elects, such item shall not be apportioned hereunder, and Seller's obligation to pay such item directly in such case shall survive the Closing; and

(v) unpaid and delinquent Rent (including, without limitation, Reimbursable Tenant Expenses) shall not be prorated at Closing. Unpaid and delinquent Rent collected by Seller and Purchaser after the Closing Date shall be delivered as follows: (a) if Seller collects any unpaid or delinquent Rent for the Property, Seller shall, within fifteen (15) days after Seller's receipt thereof, deliver to Purchaser any such Rent which Purchaser is entitled to hereunder relating to the period from and after Closing Date, and (b) if Purchaser collects any unpaid or delinquent Rent from the Property, Purchaser shall, within fifteen (15) days after the receipt thereof, deliver to Seller any such Rent which Seller is entitled to hereunder relating to the period prior to the Closing Date. Seller and Purchaser agree that all Rent received after the Closing Date shall be applied first to costs of collection, next to current Rent, then to rent payable during the month in which the Closing occurs and finally to delinquent Rent due prior to the Closing Date, if any, in the inverse order of maturity. Purchaser will make a good faith commercially reasonable effort after Closing to collect all delinquent Rents in the usual course of the operation of the Property, but Purchaser will not be obligated to institute any lawsuit or other collection procedures to collect delinquent Rents. Seller may attempt to collect any delinquent Rents owed Seller and may institute any lawsuit or collection procedures but may not evict any tenant or terminate any Lease.

(c) Seller and Purchaser shall each have the right to file and prosecute an appeal of the real property tax assessment for calendar year 2012 (payable in 2013) and for the tax years prior to Closing, and may take related actions which Seller or Purchaser, as applicable, deems appropriate in connection therewith. The parties shall cooperate with each other in connection with such appeal and collection of a refund of real property taxes paid. Purchaser owns and holds all right, title and interest in and to such appeal and refund, and all amounts payable in connection therewith shall be paid directly to Purchaser by the applicable authorities. If such refund or any part thereof is received by Seller, Seller shall promptly pay such amount to Purchaser. Any refund received by Purchaser, or paid to Purchaser by Seller per the immediately preceding sentence, shall be distributed as follows: first, to reimburse the applicable party for all costs incurred in connection with the appeal; second, with respect to refunds payable to tenants of the Real Property pursuant to the Leases, to such tenants in accordance with the terms of such Leases (if any); and third, to Seller and Purchaser in proportion to the period of time each owned the Real Property, with Purchaser being deemed to have owned the Real Property on the Closing Date. Each party shall have the right to participate in an appeal of the other party.

(d) Except as otherwise provided herein, any revenue or expense amount which cannot be ascertained with certainty as of Closing shall be prorated on the basis of the parties' reasonable estimates of such amount, and shall be the subject of a final proration thirty (30) days after Closing, or as soon thereafter as the precise amounts can be ascertained; but in no event shall (i) any reproration under this Agreement, other than with respect to real estate taxes and assessments pursuant to Section 4.4(b)(ii) above and Reimbursable Tenant Expenses pursuant to Section 4.4(b)(vi) above, occur more than one hundred eighty (180) days after the Closing; and (ii) any reproration of real estate taxes and assessments pursuant to Section 4.4(b)(ii) occur any later than forty-five (45) days after the issuance of the final real estate tax bill for calendar year 2012 (payable in 2013). Each party shall promptly notify the other when it becomes

aware that any such estimated amount has been ascertained. Once all revenue and expense amounts have been ascertained, Purchaser shall prepare, and certify as correct, a final proration statement which shall be subject to Seller's approval. Upon Seller's acceptance and approval of any final proration statement submitted by Purchaser, such statement shall be conclusively deemed to be accurate and final.

(e) Any amounts due Seller or Purchaser under this Section 4.4 from the other party, which are not paid within ten (10) business days following written demand, shall bear interest from and after the date of demand at the annual rate of interest equal to the Prime Rate (as hereinafter defined) plus 5%. "Prime Rate" shall mean annual rate of interest the highest prime rate (or base rate) reported, from time to time, in the Money Rates column or section of The Wall Street Journal as having been the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank). Subject to Section 4.4(d) hereof, the provisions of this Section 4.4 shall survive Closing.

4.5 Transaction Taxes and Closing Costs.

(a) Seller and Purchaser shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance;

(b) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses: (i) one-half (112) of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; (ii) State and County transfer taxes; (iii) the premium charged by the Title Company for Title Policy, including the costs of any extended coverage endorsement and those endorsements required to cure title exceptions that Seller is obligated to remove pursuant to Sections 2.2 or 2.3, but excluding the costs of any other endorsement to the Title Policy; (iv) the cost of the Survey; and (v) the fees and expenses of the Broker (as hereinafter defined).

(c) Purchaser shall pay the fees of any counsel representing Purchaser in connection with this transaction. Purchaser shall also pay the following costs and expenses: (i) one-half (112) of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; (ii) the Village of Elk Grove transfer tax; (iii) the premium for all endorsements to the Title Policy (other than an extended coverage endorsement and those endorsements required to cure title exceptions that Seller is obligated to remove pursuant to Sections 2.2 and 2.3); and (iv) all costs and expenses incurred in connection with the transfer of any transferable warranties, permits or licenses in connection with the ownership or operation of the Property;

(d) All costs and expenses incident to this transaction and the closing thereof, and not specifically described above, shall be paid by the party incurring same; and

(e) The provisions of this Section 4.5 shall survive the Closing.

4.6 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

(a) Seller shall have delivered to Purchaser all of the items required to be delivered by Seller pursuant to the terms of Section 4.2 hereof;

(b)     All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the Closing Date.

(c) Seller shall have satisfied the Estoppel Condition (defined below);

(d) Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing;

(e)     The Title Company, and/or another national title company approved by Purchaser in its reasonable discretion shall be irrevocably prepared to issue its 2006 ALTA Owner's Policy of Title Insurance (with an extended coverage endorsement, those endorsements required to cure title exceptions that Seller is obligated to cure pursuant to Section 2.2 or Section 2.3 and the endorsements requested by Purchaser to the extent customarily available) covering the Real Property, in the aggregate amount of the Purchase Price, subject only to the Permitted Exceptions (the "Title Policy");and

(f) Seller shall not have been adjudged bankrupt nor filed a voluntary petition or had a petition filed against it by its creditors or made any assignment for the benefit of creditors.

If any of the conditions to Purchaser's obligations under Section 4.6 shall fail to occur, and such failure is not otherwise a default by Seller under this Agreement (in which event Purchaser would be afforded the rights under Section 5.2 hereof), then Purchaser may, as its exclusive remedies, either (i) elect to waive such failure and proceed to Closing, or (ii) as long as Purchaser is not in default hereunder, and as its sole and exclusive remedy, terminate this Agreement by written notice to Seller, in which event the Deposit shall be promptly returned to Purchaser and neither party shall have any further rights or obligations hereunder (except for those obligations of either party that expressly survive the termination of this Agreement pursuant to the other provisions of this Agreement). Notwithstanding the foregoing, in the event any condition to Purchaser's obligations hereunder described in this Section 4.6 shall not have been satisfied, Seller shall have the right (but not the obligation) to attempt to cure or satisfy such condition and the Seller shall be entitled to a reasonable adjournment of the Closing Date not to exceed five (5) business days in order to do so.

4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Seller in its sole discretion:

(a) Purchaser shall have delivered to Escrow Agent the Purchase Price as adjusted as provided herein, pursuant to and payable in the manner provided for in this Agreement;

(b) Purchaser shall have delivered to Escrow Agent all of the items required to be delivered to Escrow Agent pursuant to Section 4.3 hereof;

(c) All of the representations and warranties of Purchaser contained in this

Agreement shall be true and correct in all material respects as of the Closing Date; and

(d) Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the date of Closing.

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Representations and Warranties of Seller. Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date and as of the Closing Date:

(a) Organization. Seller has been duly formed and organized, and is validly existing in the State of Illinois and is qualified to do business and in good standing under the laws of the State of Illinois.

(b) Operating Agreements. The list of all service agreements, management contracts, maintenance contracts, equipment leases and like contracts and agreements that will be binding upon Purchaser after Closing (subject to Purchaser's right to require termination of certain such agreements

pursuant to Section 5.4(d) below) (collectively, the "Operating Agreements") attached hereto as Exhibit F is true, correct, and complete in all material respects and includes all of the Operating Agreements in effect on the Effective Date. The documents constituting the Operating Agreements that are delivered or made available to Purchaser pursuant to Section 3.1 are, to Seller's knowledge, true, correct and complete copies of all of the Operating Agreements affecting the Property as of the date of their delivery, including any and all amendments. To Seller's knowledge, neither Seller nor any other party to any Operating Agreement is in default thereunder. Seller has no knowledge of any event which with notice or the passage of time or both would constitute a default by Seller or any party under any Operating Agreement.

(c) Condemnation. Seller has received no written notice from any governmental authority of any condemnation proceedings relating to the Property and to Seller's knowledge, no such proceeding is pending or threatened against the Property.

(d) Litigation. Seller has not received notice of any litigation which has been filed against the Property or Seller that arises out of the ownership of the Property and affects the Property or use thereof, or Seller's ability to perform hereunder. Seller has not received any written notice and has no knowledge of any pending or threatened liens, government investigations, special assessments or impositions to be made against the Property, other than real estate taxes imposed on the Real Property for 2012 and subsequent years.

(e) Violations. Seller has not received written notice nor has any knowledge of any uncured violation of any federal, state or local law, code, ordinance or regulation relating to the ownership, use or operation of the Property which would materially adversely affect the Property or use thereof.

(f) Leases. The list of leases attached hereto as Exhibit G is accurate in all material respects, and includes all of the existing leases in effect as of the Effective Date (the "Existing Leases"). The documents constituting the Existing Leases that are delivered to or made available to Purchaser pursuant to Section 3.1 are, to Seller's knowledge, true, correct and complete copies of all of the Leases affecting the Property as of the date of their delivery, including any and all amendments and guarantees. Seller has neither sent nor received any currently effective notice of default under any of the Leases. Seller has no knowledge of any event which with notice or the passage of time or both would constitute a default by Seller or any party under any of the Existing Leases.

(g) Authority to Enter/Noncontravention. Seller has full right, authority, power and capacity: (i) to enter into this Agreement and each closing document to be executed and delivered by or on behalf of it pursuant to this Agreement; and (ii) to carry out the transactions contemplated hereby and thereby. This Agreement and the closing documents executed and delivered by or on behalf of Seller constitute, or when executed and delivered will constitute, the legal, valid and binding obligation of said Seller, each enforceable against said Seller in accordance with their respective terms, except as the same may be limited or affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors' rights and remedies generally, or by equitable principles, including principles of commercial reasonableness, good faith and fair dealing (whether applied in a proceeding at law or in equity). The execution, delivery and performance of this Agreement and the closing documents does not and will not violate any term, conditions or provisions of, or constitute a default under, any of Seller's organizational documents or any bond, note, or other evidence of indebtedness or any contract, lease or other instrument, to which Seller is a party or affecting the Property, or require Seller to obtain any approval, consent or waiver of, or make any filing with, any person or authority (governmental or otherwise) that will not be obtained or made prior to Closing.

(h) ERISA. Seller is not (i) an "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title 1 of ERISA, (ii) a "plan" that is subject to the prohibited transaction provisions of Section 4975 of the Internal Revenue Code of 1986 (the "Code") or (iii) an entity whose assets are treated as "plan assets" under ERISA by reason of an employee benefit plan's or plan's investment in such entity. Seller

has no knowledge of any liens against the Property which are attributable to Employee Benefit Plans (as hereinafter defined). For the purposes of this Section 5.1(h), "Employee Benefit Plans" means, collectively, any "employee benefit plan" as defined in Section 3(3) of ERISA, including any Employee Pension Benefit Plan (within the meaning of Section 3(2) of ERISA), Employee Welfare Benefit Plan (within the meaning of Section 3(1) of ERISA), or any other benefit program or arrangement whether or not subject to ERISA and whether written or oral, any written bonus, deferred compensation, pension, retirement, profit-sharing, stock bonus, restricted stock, stock option, stock purchase, employment, severance, compensation, vacation plan, education or tuition program, medical, post-retirement medical, disability, fringe benefit, unemployment, welfare or other plan, agreement, policy or arrangement, that covers employees, consultants, directors or officers of Seller or any of its affiliates, or pursuant to which former employees, consultants, directors or officers of Seller or any of its affiliates are or may be entitled to current or future benefits.

(i) Patriot Act. Seller is not, and to Seller's knowledge, no party holding a direct interest in Seller is, named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, "Specially Designated National and Blocked Person," or another banned or blocked person, entity, or nation pursuant to any Law that is enforced or administered by the Office of Foreign Assets Control.

(j) Non-Foreign Entity. Seller is not a "foreign person" or "foreign corporation" as those terms are defined in the Internal Revenue Code (and the regulations promulgated thereunder).

(k) Insurance. Seller has not received any written notice from any insurance company or board of fire underwriters of any defects or inadequacies in or on the Improvements or any part or component thereof that would adversely affect the insurability of the Improvements or cause any increase in the premiums for insurance for the Improvements.

(1) Environmental Matters. Seller has not received written notice of any violation of any law relating to environmental conditions, hazardous waste or toxic materials with respect to the Property. To Seller's knowledge, except as disclosed in the Property Information or any other environmental report obtained by Purchaser, there is no hazardous substance located on the Property in violation of any federal, state or local environmental or human health or safety laws, codes, ordinances or regulations.

(m) Licenses and Permits. To Seller's knowledge, Exhibit I identifies all existing Licenses and Permits and true, correct and complete copies of all Licenses and Permits in Seller's possession will be delivered as provided in Section 3.1. Seller has not received written notice of any violation, revocation or termination of any such Licenses or Permit.

(n) Commissions. Except for any commissions that may become due as the result of any extension or renewal right exercised after the Effective Date by a Tenant, there are no commissions or referral fees that are or may become due relating to the Existing Leases.

(o) Special Assessments. Seller has no knowledge of any proposed or pending special assessments, affecting all or any portion of the Property.

(p) Property Documents. The Property Information delivered or made available to Purchaser pursuant to Section 3.1 comprises, to Seller's knowledge, true, correct and complete copies of all such documents and information affecting the Property which are utilized by Seller in the normal course of its ownership and operation of the Property.

5.2 Knowledge Defined. Any and all uses of the phrase, "to Seller's actual knowledge" or other references to Seller's knowledge in this Agreement, shall mean the actual, present, conscious knowledge of Scott Wollney, Paul Romano and Leslie DiMaggio (collectively, the "Seller Knowledge Individuals") as to

a fact at the time given without any investigation or inquiry. Without limiting the foregoing, Purchaser acknowledges that the Seller Knowledge Individuals have not performed and are not obligated to perform any investigation or review of any files or other information in the possession of Seller or to make any inquiry of any persons, or to take any other actions in connection with the representations and warranties of Seller set forth in this Agreement. Neither the actual, present, conscious knowledge of any other individual or entity, nor the constructive knowledge of any other individual or entity, shall be imputed to the Seller Knowledge Individuals. Furthermore, Seller's representations and warranties shall be deemed to be modified to reflect any facts or circumstances disclosed in the tenant estoppels received by Purchaser.

5.3 Survival of Seller's Representations, Warranties and Other Obligations. The representations and warranties of Seller set forth in Section 5.1 hereof as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period of one (1) year (the "Survival Period"). No claim for a breach of any representation, warranty, covenant or agreement of Seller under or pursuant to this Agreement including any instrument delivered to Purchaser under or pursuant to this Agreement shall be actionable or payable if Purchaser had actual knowledge of the breach in question prior to the Closing. Seller shall have no liability to Purchaser for a breach of any representation, warranty, covenant or agreement under or pursuant to this Agreement, (but excluding the Deed, the Bill of Sale and Assignment, the FIRPTA and the Tax Indemnity (collectively, the "Closing Instruments")) (a) unless the valid claims for all such breaches collectively aggregate more than Ten Thousand Dollars ($10,000.00), in which event the full amount of such valid claims shall be actionable up to, but not in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00), plus reimbursement of any fees due pursuant to Section 10.16 hereof (the "Cap"), and (b) unless written notice containing a description of the specific nature of such breach and the amount claimed to be due from Seller (a "Post-Closing Claim") shall have been given by Purchaser to Seller prior to the expiration of the Survival Period and an action shall have been commenced by Purchaser against Seller with respect to such Post-Closing Claim within 30 days after the expiration of the Survival Period. In no event shall Seller be liable for any consequential or punitive damages or for any damages in excess of the Cap. Seller hereby covenants that, from the Closing Date through, and including, the date which is the later of (i) the last day of the Survival Period and (ii) the date on which any Post-Closing Claim timely commenced by Purchaser within the aforementioned 30 day period is resolved by a court of competent jurisdiction, it shall have and maintain a net worth of no less than $750,000.00 ("Minimum Net Worth Requirement"). "Net worth" shall mean Seller's assets minus its liabilities as determined in accordance with generally accepted accounting principles. Furthermore, in order to ensure performance by Seller of any liabilities resulting from a Post-Closing Claim or any payments due from Seller because of any reproration of taxes or other costs in accordance with Section 4.4 hereof or any post-closing liability resulting from any indemnity by Seller or a breach by Seller of representation or warranty in the Closing Instruments (collectively, "Seller's Post Closing Obligations"), Atlas Financial Holdings, Inc. joins this Agreement for the purposes of being jointly and severally liable with Seller for any and all of Seller's Post Closing Obligations.

5.4 Covenants of Seller.

Seller hereby covenants with Purchaser as follows:

(a) From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall operate and maintain the Property, including, without limitation, performing repairs and maintenance and performing its obligations under the Leases, in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof;

(b) Except as provided in this Section 5.4(b), a copy of any amendment, renewal, termination or expansion of an Existing Lease or of any new Lease which Seller desires to execute between the Effective Date and the Closing Date will be submitted to Purchaser prior to execution by Seller, which shall include all Tenant Inducement Costs and leasing commissions to be incurred in connection therewith. Seller shall not enter into any new Lease or amend any existing Lease without the approval of Purchaser, which approval (i) may be withheld or denied in Purchaser's sole and absolute discretion after the expiration of the Inspection Period and (ii) shall not be unreasonably withheld, delayed or conditioned during the Inspection Period. Purchaser agrees to notify Seller in writing within five (5) business days after its receipt

thereof of either its approval or disapproval thereof. In the event Purchaser fails to notify Seller of its approval or disapproval within the five (5) business day period set forth above, Purchaser shall be deemed to have approved such new Lease, amendment, renewal or expansion. Notwithstanding the foregoing, Purchaser shall have no right to approve any amendment to an existing Lease entered into by Seller pursuant to evidence the exercise by a tenant of a right or option granted to such tenant in its Lease.

(c) A copy of any amendment or renewal of an existing Operating Agreement or of any new operating agreement which Seller desires to execute between the Effective Date and the Closing Date will be submitted to Purchaser prior to execution by Seller. Except as it relates to Operating Agreements that may be terminated without penalty upon no more than thirty (30) days' notice, Seller shall not enter into any new operating agreement, service contract or other agreement that would affect the Property or amend any existing Operating Agreement without the approval of Purchaser, which approval (i) may be withheld or denied in Purchaser's sole and absolute discretion after the expiration of the Inspection Period and (ii) shall not be unreasonably withheld, delayed or conditioned during the Inspection Period. Purchaser agrees to notify Seller in writing within five (5) business days after its receipt thereof of either its approval or disapproval thereof. In the event Purchaser fails to notify Seller in writing of its approval or disapproval within the five (5) business day period set forth above, Purchaser shall be deemed to have approved such new operating agreement, amendment, or renewal. Any operating agreement or amendment or renewal of an existing Operating Agreement entered into pursuant to this Section 5.4(c) shall be deemed to be an "Assumed Operating Agreement" (as defined below).

(d) Upon written notice from Purchaser on or before the expiration of the Inspection Period, Seller shall give appropriate notices of termination of those Operating Agreements designated by Purchaser by a written notice given to Seller prior to the expiration of the Inspection Period (but only to the extent termination is permitted thereunder without penalty); provided, however, that (i) those Operating Agreements designated with an "asterisk" on Exhibit F are not terminable and shall be deemed Assumed Operating Agreements, which Purchaser shall assume at Closing; and (ii) if the notice period required to terminate such Operating Agreements shall not have expired prior to Closing, at Closing, the Property will be subject to the terms of such Operating Agreements and such Operating Agreements shall be deemed to be Assumed Operating Agreements. The Operating Agreements which Purchaser has not required be terminated or which otherwise are not required to be terminated as aforesaid are herein collectively referred to as the "Assumed Operating Agreements".

(e) Seller shall maintain in existence and comply with all of the terms and conditions of the Licenses and Permits in a manner generally consistent with the manner that Seller has done so as of the Effective Date. Seller shall maintain insurance coverages substantially the same as those currently in effect with respect to the Property, so long as such coverages remain available at commercially reasonable rates, and shall maintain such coverages as Seller would be maintaining if Seller did not intend to sell the Property.

(f) Seller shall use commercially reasonable efforts to deliver to Purchaser on or prior to the Closing Date an estoppel letter substantially in the form attached as Exhibit E (or, with respect to any tenant, in such other form as may be provided for in such tenant's Lease), from each tenant at the Improvements (the "Estoppel Condition"). Seller's failure to satisfy the Estoppel Condition shall in no instance constitute a default by Seller under this Agreement and in the event of such failure, Purchaser's sole right shall be either to terminate this Agreement in which case the Deposit, and all interest earned thereon, shall be returned to Purchaser, or to waive the Estoppel Condition (to the extent not satisfied) and proceed with the Closing. Notwithstanding the foregoing, the parties agree that Seller shall have a right, from time to time, to extend the Closing Date for up to a total of thirty (30) days in order to attempt to satisfy the Estoppel Condition upon the giving of notice of such election to Purchaser at least two (2) business days prior to the then existing Closing Date.

(g) Personal Property. From the Effective Date until Closing, not transfer or remove any of the

Personal Property from the Improvements except for the purpose or repair or replacement (except as it relates to any artwork) thereof. Any item of Personal Property replaced after the Effective Date will be installed prior to Closing and be of substantially the same quality of the item of Personal Property being replaced.

(h) Notices. From the Effective Date until Closing, promptly deliver to Purchaser copies of written default notices, notices of lawsuits and notices of violations affecting the Property.

(i) No Mortgages, Purchase Agreements or Options. Seller shall not grant any mortgages or security interests in or to the Property or sell or enter into any agreement to sell or grant an option to purchase the Property.

(j) Environmental Questionnaire. Seller shall complete, execute and deliver any environmental questionnaire that may be reasonably requested by Purchaser's environmental consultant in connection with its preparation of an environmental survey of the Property; provided, however, completion of the same shall not include or be construed to include any representation or warranty by Seller as to the environmental conditions of the Property.

(k) Removal of Signage. Prior to the Closing Date, unless otherwise mutually agreed, Seller shall remove, at Seller's sole cost and expense, any and all exterior signage located upon the Real Property which identifies Seller or any affiliate of Seller, including, without limitation, the signage mounted to the exterior of the building identifying Atlas, and Seller shall repair any damage caused by such removal.

5.5 Representations and Warranties of Purchaser. Purchaser hereby makes the following representations and warranties to Seller as of the Effective Date and as of the Closing Date:

(a) Organization and Authority. Purchaser has been duly organized and is validly existing under the laws of the State of Delaware.

(b) Pending Actions. To Purchaser's actual knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement.

(c) Authority to Enter/Noncontravention. Purchaser has full right, authority, power and capacity: (i) to enter into this Agreement and each closing document to be executed and delivered by or on behalf of Purchaser pursuant to this Agreement; and (ii) to carry out the transactions contemplated hereby and thereby. This Agreement and the closing documents executed and delivered by or on behalf of Purchaser constitute, or when executed and delivered will constitute, the legal, valid and binding obligation of Purchaser, each enforceable against Purchaser in accordance with their respective terms, except as the same may be limited or affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditor's rights and remedies generally, or by equitable principles, including principles of commercial reasonableness, good faith and fair dealing (whether applied in a proceeding at law or in equity). To Purchaser's actual knowledge, the execution, delivery and performance of this Agreement and the closing documents does not and will not violate any term, conditions or provisions of or constitute a default under any bond, note or other evidence of indebtedness or any contract, lease or other instrument, to which Purchaser is a party or requires Purchaser to obtain any approval, consent or waiver of, or make any filing with, any person or authority (governmental or otherwise) that will not be obtained or made prior to the Closing.

(d) Patriot Act. Purchaser is not, and to Purchaser's knowledge, no party holding a direct membership interest in Purchaser is, named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to

Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, "Specially Designated National and Blocked Person," or another banned or blocked person, entity, or nation pursuant to any Law that is enforced or administered by the Office of Foreign Assets Control.

5.6 Purchaser's Knowledge Defined. Any and all uses of the phrase, "to Purchaser's actual knowledge" or other references to Purchaser's knowledge in this Agreement, shall mean the actual, present, conscious knowledge of Thomas Frey (the "Purchaser Knowledge Individual") as to a fact at the time given without any investigation or inquiry. Without limiting the foregoing, Seller acknowledges that the Purchaser Knowledge Individual have not performed and are not obligated to perform any investigation or review of any files or other information in the possession of Purchaser or to make any inquiry of any persons, or to take any other actions in connection with the representations and warranties of Purchaser set forth in this Agreement. Neither the actual, present, conscious knowledge of any other individual or entity, nor the constructive knowledge of any other individual or entity, shall be imputed to the Purchaser Knowledge Individuals.

5.7 Survival of Purchaser's Representations and Warranties. The representations and warranties of Purchaser set forth in Section 5.5 hereof as updated as of the Closing Date in accordance with the terms of this Agreement, shall survive Closing for the Survival Period. No claim for a breach of any representation, warranty, covenant or agreement of Purchaser under or pursuant to this Agreement including any instrument delivered to Seller under or pursuant to this Agreement shall be actionable or payable if Seller had actual knowledge of the breach in question prior to the Closing. Purchaser shall have no liability to Seller for a breach of any representation or warranty set forth in Section 5.5 (a) unless the valid claims for all such breaches collectively aggregate more than Ten Thousand and Noll 00 Dollars ($10,000.00), in which event the full amount of such valid claims shall be actionable up to, but not in excess of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00), plus reimbursement of any fees due pursuant to Section 10.16 hereof(the "Cap"), and (b) unless written notice containing a description of the specific nature of such breach and the amount claimed to be due from Seller (a "Post-Closing Claim") shall have been given by Purchaser to Seller prior to the expiration of the Survival Period and an action shall have been commenced by Purchaser against Seller with respect to such Post-Closing Claim within 30 days after the expiration of the Survival Period.

ARTICLE VI DEFAULT

6.1 Default by Purchaser. In the event that the transaction contemplated by this Agreement fails to close due to Purchaser's default, then Seller shall be entitled, as its sole and exclusive remedy, to terminate this Agreement and receive the Deposit as liquidated damages for the breach of this Agreement, it being agreed between the parties hereto that the actual damages to Seller in the event of such breach are impractical to ascertain and the amount of the Deposit is a reasonable estimate thereof.

6.2 Default by Seller. In the event that the transaction contemplated by this Agreement fails to close due to Seller's default, Purchaser shall be entitled, as its sole remedy, either: (a) to receive the return of the Deposit, which return shall operate to terminate this Agreement and release Seller from any and all liability hereunder, provided that Seller shall reimburse Purchaser for all reasonable out-of-pocket costs incurred by Purchaser in connection with the negotiation of this Agreement and its inspection of the Property, not to exceed $75,000, plus reimbursement of any fees due pursuant to Section 10.16 hereof or (b) to enforce specific performance of Seller's obligations under this Agreement, it being acknowledged that the Property is unique and that monetary damages would not be an adequate remedy of specific performance shall not be available to enforce any other obligation of Seller hereunder. Purchaser shall be deemed to have elected to terminate this Agreement and receive back the Deposit if Purchaser fails to file suit for specific performance against Seller in a court having jurisdiction in the county and state in which the Property is located, on or before ninety (90) days following the date upon which Closing was to have occurred. If Purchaser timely elects to seek specific performance of this Agreement, then as a condition precedent to any suit for specific performance, Purchaser shall, on or before the Closing Date, time being of the essence, fully perform all of its obligations hereunder which arc capable of being performed (other than the payment of the Purchase Price, which shall be paid as and when required by the court in the suit for specific performance). In

addition, notwithstanding any provision to the contrary contained in this Agreement, the parties hereto hereby agree that Seller's aggregate liability for any actual or alleged default or breach of this Agreement (including, without limitation, any breach of a representation or warranty made by Seller hereunder, but excluding any claim based upon Seller failure to close the sale of the Property when legally required to do so as to which Purchaser's sole remedies are set forth in the first sentence of this Section 6.2), or any other claim arising under or relating to this Agreement and/or the Property, shall not exceed the Cap (as defined in Section 5.3 hereof). The foregoing limitation of remedies and liability was separately bargained for and constitutes material consideration for Seller entering into this Agreement.

6.3 Recoverable Damages. Notwithstanding Sections 6.1 and 6.2 hereof, in no event shall the provisions of Sections 6.1 and 6.2 limit the damages recoverable by (i) either party against the other party due to the other party's obligation to indemnify such party in accordance with Article VIII of this Agreement and (ii) by either party against the other party due to a breach of a party's obligations under Section 4.4 hereof.

ARTICLE VII RISK OF LOSS

7.1 Minor Damage. In the event of loss or damage to the Property or any portion thereof which is not "Major" (as hereinafter defined), Seller shall promptly deliver written notice thereof to Purchaser and this Agreement shall remain in full force and effect provided that Seller shall, at Seller's option, either (a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's right, title and interest in and to any claims and proceeds Seller may have with respect to any insurance policies (including any rent loss insurance aiJplicable to any period on and after the Closing Date) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time, not to exceed thirty (30) days, in order to allow for the completion of such repairs. If Seller elects to assign a casualty claim to Purchaser, the Purchase Price shall be reduced by an amount equal to the lesser of the deductible amount under Seller's insurance policy and the cost to complete the repairs. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser.

7.2 Major Damage. In the event of a "Major" loss or damage, Seller shall promptly deliver written notice thereof to Purchaser and Purchaser may elect to either (i) terminate this Agreement by written notice to Seller, in which event the Deposit shall be returned to Purchaser and neither party shall have any further rights or obligations hereunder (except those obligations of a party that expressly survive the termination of this Agreement), or (ii) waive such termination right and proceed with Closing. If Purchaser elects to terminate this Agreement within ten (10) business days after Seller sends Purchaser written notice of the occurrence of such Major loss or damage (which notice shall state the cost of repair or restoration thereof as opined by an architect, construction company, or estimator in accordance with Section 7.3 hereof), then Purchaser shall be deemed to have elected to terminate this Agreement. In the event that Purchaser elects to proceed with Closing, Seller shall, at Seller's option, either (a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's right, title and interest in and to any claims and proceeds Seller may have with respect to any insurance policies (including any rent loss insurance applicable to any period on and after the Closing Date) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time, not to exceed thirty (30) days, in order to allow for the completion of such repairs. If Seller elects to assign a casualty claim to Purchaser, the Purchase Price shall be reduced by an amount equal to the deductible amount under Seller's insurance policy. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser.

7.3 Definition of "Major" Loss or Damage. For purposes of Sections 7.1 and 7.2, "Major" loss or damage refers to the following: (a) loss or damage to the Property hereof such that the cost of repairing or restoring the premises in question to substantially the same condition which existed prior to the event of damage would be, in the opinion of an architect, construction company or estimator selected by Seller and reasonably approved by Purchaser, equal to or greater than One Million and No/100 Dollars ($1,000,000.00), (b) any loss due to a condemnation which permanently and materially impairs the current use of the Property, or (c) any uninsured loss for which Seller has not agreed to provide Purchaser with a credit to the Purchase Price at Closing. If Purchaser

does not give written notice to Seller of Purchaser's reasons for disapproving an architect, construction company or estimator within five (5) business days after receipt of notice of the proposed architect, Purchaser shall be deemed to have approved the party selected by Seller.

ARTICLE VIII BROKERAGE AND INDEMNIFICATION

8.1 Brokerage Commissions. Seller represents to Purchaser that Seller has not retained any broker in connection with the transaction contemplated in this Agreement, other than CBRE (the "Seller's Broker"), whose commission shall be paid by Seller. Purchaser represents to Seller that Purchaser has not retained any broker, other than Bob Reaumond with CBRE ("Purchaser's Broker", together with the Seller's Broker, the "Broker") connection with the transaction contemplated in this Agreement. Each party hereto agrees that if any person or entity other than Broker, makes a claim for brokerage commissions or other fees related to the sale of the Property by Seller to Purchaser, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives, said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including reasonable attorneys' fees) in connection therewith. The provisions of this Section shall survive Closing or any termination of this Agreement.

ARTICLE IX DISCLAIMERS AND WAIVERS

9.1 No Reliance on Documents. Except as expressly set forth in the representations and warranties made in Sections 5.1 and 8.1 of this Agreement or contained in any Closing Instrument delivered in connection with the Closing (the "Reps and Warranties"), Seller make no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller or its agent to Purchaser in connection with the transaction contemplated hereby, including without limitation, any information contained in any offering memorandum delivered to Purchaser. Purchaser acknowledges and agrees that all materials, data and information delivered by Seller or any other party to Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein. Except in connection with the Reps and Warranties, neither Seller, nor any Affiliate (as defined in Section 10.3 hereof) of Seller, nor the person or entity which prepared any report or reports delivered by Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from any such reports.

9.2 AS IS SALE; DISCLAIMERS. EXCEPT FOR THE REPS AND WARRANTIES, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT OF THE REPS AND WARRANTIES. OTHER THAN THE REPS AND WARRANTIES, PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY PARTY REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING. PURCHASER ALSO ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS AND TAKES INTO ACCOUNT THAT THE PROPERTY IS BEING SOLD "AS IS", SUBJECT TO THE REPS AND WARRANTIES.

PURSUANT TO THIS TERMS OF THIS AGREEMENT SELLER HAS GIVEN PURCHASER THE

OPPORTUNITY TO CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS OF THE PROPERTY, AS PURCHASER MAY DEEM NECESSARY OR DESIRABLE TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND PURCHASER WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN THE REPS AND WARRANTIES AND COVENANTS OF SELLER. SUBJECT TO THE REPS AND WARRANTIES, UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS, AND OTHER THAN WITH RESPECT TO THE REPS AND WARRANTIES, PURCHASER, UPON CLOSING, DOES HEREBY WAIVE, RELINQUISH AND RELEASE SELLER AND SELLER'S AFFILIATES FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING, BUT NOT LIMITED TO, CAUSES OF ACTION IN TORT), LOSSES, DAMAGESLIABILITIES, COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS' FEES) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S AFFILIATES) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, ENVIRONMENTAL CONDITIONS (INCLUDING PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC SUBSTANCES ON OR ABOUT THE PROPERTY) VIOLATIONS OF ANY APPLICABLE LAWS AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY.

9.3 Survival of Disclaimers. The provisions of this Article IX shall survive Closing or any termination of this Agreement.

ARTICLE X MISCELLANEOUS

10.1 Confidentiality. Purchaser and its representatives shall hold in strictest confidence all Confidential Documents, whether obtained before or after the execution and delivery of this Agreement, and shall not disclose the same to others; provided, however, that it is understood and agreed that Purchaser may disclose such data and information to the directors, investors, employees, lenders, consultants, accountants, co-venturers, advisors and attorneys of Purchaser provided that such persons are told of the confidential nature of such materials and that Purchaser shall be liable for any breach by them of this Section 10.1; provided, further, however, that Purchaser may disclose such data and information (a) to comply with law, regulation or judicial order, or (b) to enforce the terms of this Agreement. In the event this Agreement is terminated or Purchaser fails to perform hereunder, Purchaser shall promptly destroy any Confidential Documents obtained from Seller in connection with this Agreement or the transaction contemplated herein. In the event of a breach or threatened breach by Purchaser or its agents or representatives of this Section 10.1, Seller shall be entitled to an injunction restraining Purchaser or its agents or representatives from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Seller from pursuing any other available remedy at law or in equity for such breach or threatened breach. The provisions of this Section 10.1 shall terminate at Closing but shall survive any termination of this Agreement.

10.2 Public Disclosure. Prior to and after the Closing, any release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in the form and content approved by Purchaser and Seller. As a public company, Seller may be required to publicly disclose this Agreement and/or the sale contemplated herein as a material event, and any such disclosure shall not be considered a breach of Article X of this Agreement. The provisions of this Section 10.2 shall survive the Closing or any termination of this Agreement.

10.3 Assignment. Subject to the provisions of this Section 10.3, the terms and provisions of this Agreement are to apply to and bind the successors and permitted assigns of the parties hereto. Seller shall have no right to assign its rights under this Agreement. Purchaser may not assign its rights under this Agreement without first obtaining Seller's written approval, which approval shall not be unreasonably withheld, provided that Seller consent shall not be required so long as the proposed assignee is an Affiliate (as defined in this Section) of Purchaser. In the event Purchaser intends to assign its rights hereunder, (a) Purchaser and the proposed assignee shall execute an assignment and assumption of this Agreement in form and substance reasonably satisfactory to Seller, and (b) in no event shall any assignment of this Agreement release or discharge Purchaser from any liability or obligation hereunder. "Affiliate" shall mean, with respect to any specified entity, an entity that controls, is controlled by, or is under common control with such specified entity, with control meaning the power through the ownership of voting securities, by contract or otherwise to direct the management and policies of such entity. The provisions of this Section 10.3 shall survive the Closing or any termination of this Agreement.

10.4 Notices. Any notice pursuant to this Agreement shall be given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, (d) legible facsimile transmission or (e) email transmission, in each case sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile or email transmission, as of the date of the transmission provided that such transmission is received by the intended addressee prior to 5:00p.m. Chicago, Illinois time (and any transmission received from and after 5:00p.m., Chicago, Illinois time, shall be deemed received on the next business day). Notices given by Seller's or Purchaser's attorneys identified below shall be deemed to have been given by Seller or Purchaser, as the case may be. Unless changed in accordance with this Section 10.4, the addresses for notices given pursuant to this Agreement shall be as follows:

If to Seller: c/o Atlas Financial Holdings, Inc.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

Attention: Scott Wollney

Telephone No.: (847) 700-8600

Fax No.: (847) 228-2580

Emai1: swollney@atlas-fin.com

with a copy to: DLA Piper LLP (US)

203 North LaSalle Street, Suite 1900

Chicago, Illinois 60601

Attention: Kimberlie Pearlman, Esq.

Telephone No.: (312) 368-7061

Fax No.: (312) 251-2162

Email: kimberlie.pearlman@dlapiper.com

If to Purchaser:             150 Northwest Point LLC

c/o Topco Associates LLC

7711 Grosse Point Road

Skokie, IL 60077

Attn: Thomas Frey

Fax No.: (847) 676-5634

Email: tfrey@topco.com

with a copy to:            K&L Gates LLP

70 West Madison, Suite 3100

Chicago, Illinois 60602

Attn: Lawrence A. Eiben

(312)827-1268

E-mail: larry.eiben@klgates.com

10.5 Modifications. This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought.

10.6 Entire Agreement. This Agreement, including the exhibits and schedules hereto (all of which are incorporated in this Agreement), contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter, other than any confidentiality or access agreement executed by Purchaser and Seller in connection with the Property.

10.7 Further Assurances. Each party agrees that it will execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by another party to consummate the transaction contemplated by this Agreement so long as the same imposes no additional liability on such party. The provisions of this Section 10.7 shall survive Closing.

10.8 Counterparts. This Agreement may be executed in counterparts, all such executed counterparts shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

10.9 Facsimile Signatures. In order to expedite the transaction contemplated herein, telecopied, facsimile, or .pdf (exchanged via e-mail) signatures may be used in place of original signatures on this Agreement. Seller and Purchaser intend to be bound by the signatures on the telecopied, facsimile or pdf document, are aware that the other party will rely on the telecopied, facsimile or .pdf signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature.

10.10 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect; provided that the invalidity or unenforceability of such provision does not materially adversely affect the benefits accruing to any party hereunder.

10.11 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without regard to its conflicts of laws principles. Purchaser and Seller agree that the provisions of this Section 10.11 shall survive the Closing or any termination of this Agreement.

10.12 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party. Accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

10.13 Captions. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof.

10.14 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

10.15 Recordation. This Agreement may not be recorded by any party hereto without the prior written consent of the other parties hereto. The provisions of this Section 10.15 shall survive the Closing or any termination of this Agreement.

10.16 Attorneys' Fees and Costs. In the event suit or action is instituted to interpret or enforce the terms of this Agreement, or in connection with any arbitration or mediation of any dispute, the prevailing party (as hereinafter defined) shall be entitled to recover from the other party such sum as the court, arbitrator or mediator may adjudge reasonable as such party's costs and attorney's fees, including such costs and fees as are incurred in any trial, on any appeal, in any bankruptcy proceeding (including the adjudication of issues peculiar to bankruptcy law) and in any petition for review. In addition a prevailing party shall also have the right to recover its reasonable costs and attorneys' fees incurred in collecting any sum or debt owed to it by the other party, with or without litigation, if such sum or debt is not paid within fifteen (15) days following written demand therefor. A "prevailing party" shall mean the party that obtains a final unappealable judgment in its favor.

10.17 Governmental Approvals. Nothing contained in this Agreement shall be construed as authorizing Purchaser to apply for a zoning change, variance, subdivision maps, lot line adjustment, or other discretionary governmental act, approval or permit with respect to the Property prior to the Closing, and Purchaser agrees not to do so. Purchaser agrees not to submit any reports, studies or other documents, including, without limitation, plans and specifications, impact statements for water, sewage, drainage or traffic, environmental review forms, or energy conservation checklists to any governmental agency, or any amendment or modification to any such instruments or documents prior to the Closing. Purchaser's obligation to purchase the Property shall not be subject to or conditioned upon Purchaser's obtaining any variances, zoning amendments, subdivision maps, lot line adjustment or other discretionary governmental act, approval or permit.

10.18 Limitation of Liability. Purchaser and Seller agree that neither Purchaser nor Seller has, and will not have any claims or causes of action against any disclosed or undisclosed officer, director, employee, trustee, shareholder, member, partner, principal, parent, subsidiary or affiliate of the other party, or the director, employee, trustee, shareholder, member, partner or principal of any such parent, subsidiary or other affiliate (collectively, the "Protected Affiliates"), arising out of or in connection with this Agreement or the transactions contemplated hereby. Without limiting the foregoing, the Protected Affiliates are expressly excluded from any obligation to indemnify or hold harmless any party or any similar obligations or Purchaser or Seller, as the case may be, under this Agreement. Each of Purchaser and Seller agrees to look solely to the other party to this Agreement and its assets for the satisfaction of any liability or obligation arising under this Agreement or the transactions contemplated hereby, or for the performance of any of the covenants, warranties or other agreements contained herein, and further agrees not to sue or otherwise seek to enforce any personal obligation against any of the Protected Affiliates with respect to any matters arising out of or in connection with this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing provisions of this Section 10.18, Purchaser and Seller hereby unconditionally and irrevocably waive any and all claims and causes of action of any nature whatsoever it may now or hereafter have against the Protected Affiliates, and hereby unconditionally and irrevocably release and discharge the Protected Affiliates from any and all liability whatsoever which may now or hereafter accrue in favor of Purchaser and Seller against the Protected Affiliates, in connection with or arising out of this Agreement or the transactions contemplated hereby. The provisions of this Section 10.18 shall survive the termination of this Agreement and the Closing. Nothing contained in this Section 10.18 shall release, prohibit or limit the obligations of Atlas pursuant to Section 5.3 and the Joinder to the Agreement.

10.19 Saturdays, Sundays, Holidays. If, under the terms of this Agreement and the calculation of the time periods provided for herein, the Closing Date or any other date to be determined under this Agreement should fall on a Saturday, a Sunday, a legal holiday or other day on which banks located in Chicago, Illinois are not open for business, then such date shall be extended to fall on the next business day. The term "business day" shall mean any day other than Saturday or Sunday or such other day that banks located in Chicago, Illinois are authorized or required to close.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.

Seller:

American Service Insurance Company

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

[Signature Page to Sale Agreement made by and between American Service Insurance Company, Inc. and 150 Northwest Point LLC]

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company

By:         /s/ Thomas Frey

Name:        Thomas Frey

Title:        Senior Vice President & CFO

[Signature Page to Sale Agreement made by and between American Service Insurance Company, Inc. and 150 Northwest Point LLC]

Escrow Agent executes this Agreement below solely for the purpose of acknowledging that it agrees to be bound by the provisions of Sections 1.3 and 1.4 hereof.

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:             /s/ Paula Podvin

Name:             Paula Podvin

Title:             Senior National Escrow Officer

JOINDER

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, Atlas Financial Holdings, Inc., an affiliate of Seller, hereby joins this Agreement for the purposes of being jointly and severally liable with Seller for any and all of Seller's Post Closing Obligations as defined in Section 5.3 of the Agreement.

ATLAS FINANCIAL HOLDINGS, INC.

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

EXHIBIT A

LEGAL DESCRIPTION

PARCEL 1:

LOT 1 IN THE FINAL PLAT OF RESUBDIVISION OF LOT 7 IN THE PARK AT NORTHWEST POINT, BEING A SUBDIVISION OF PART OF THE NORTHEAST 1/4 OF SECTION 21, TOWNSHIP 41 NORTH, RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 6, 2001 AS DOCUMENT 0010828531, IN COOK COUNTY, ILLINOIS.

PARCEL 2:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS RECORDED ON OCTOBER 15, 2001 AS DOCUMENT NUMBER 0010957201, AS AMENDED FROM TIME TO TIME, MADE BY PNWP, LLC, A COLORADO LIMITED LIABILITY COMPANY, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

(i) FOR VEHICULAR AND PEDESTRIAN ACCESS, INGRESS AND EGRESS ON, OVER AND ACROSS THOSE PORTIONS OF ANY PRIVATE ROADS OR DRIVES AND WALKWAYS:

(ii) FOR ACCESS, INGRESS AND EGRESS BY EMERGENCY VEHICLES AND PERSONNEL ON, OVER AND ACROSS PRIVATE ROADS OR DRIVES OVER THE REAL PROPERTY, SUBJECT TO ANY RELOCATION RIGHTS DESCRIBED HEREIN;

(iii) FOR UTILITIES ON, OVER AND THROUGH THE REAL PROPERTY, FOR THE USE, MAINTENANCE, REPAIR AND REPLACEMENT OF SUCH UTILITIES, AND EACH OWNER AGREES FOR THE BENEFIT OF EACH OTHER OWNER TO GRANT SUCH UTILITY EASEMENTS

(iv) FOR VEHICULAR PARKING ON, OVER AND ACROSS 213 PARKING SPACES IN THE COMMON GARAGE AND 55 SPACES OF SURFACE PARKING ON THE BUILDING 50 PROPERTY

(v) WITH RESPECT TO THE BUILDING 50 PROPERTY GENERALLY ON AND OVER THE AREA ON THE SITE PLAN AS THE COMMON GARAGE TO CONSTRUCT, USE, OPERATE, MAINTAIN, REBUILD, AND REPLACE THE COMMON GARAGE IN ACCORDANCE WITH THE TERMS OF THE DECLARATION;

(vi) FOR THE PURPOSE OF PASSING STORM WATER DRAINAGE FROM THE BUILDING 150 PROPERTY ON SURFACE OR OVER AND THROUGH THE STORM DRAINAGE PIPES AND SYSTEM NOW OR HEREAFTER CONSTRUCTED ON THE BUILDING 50 PROPERTY AND THE RIGHT TO ENTER ONTO THE BUILDING 50 PROPERTY TO CONSTRUCT AND REPLACE THE NECESSARY STORM DRAINAGE PIPES AND SYSTEM TO CARRY SUCH WATER;

(vii) TO USE AND MAINTAIN TRASH DUMPSTERS AND RELATED EQUIPMENT ON THE BUILDING 50 PROPERTY.

PARCEL 3:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS DATED DECEMBER 30, 1982 RECORDED ON FEBRUARY 3, 1983 AS DOCUMENT NUMBER 26495247, AS AMENDED FROM TIME TO TIME, BY LASALLE NATIONAL BANK, NOT PERSONALLY OR INDIVIDUALLY, BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 5, 1980 AND KNOWN AS TRUST NO. 102000, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

FOR INGRESS AND EGRESS OVER, UNDER, ACROSS, IN AND UPON THE PROPERTY AND PROVIDE REASONABLE AND NECESSARY ACCESS TO COMMON PROPERTIES AND FOR THE PURPOSE OF PERFORMING THE CONSTRUCTION, INSTALLATION, MAINTENANCE, OR REPAIR OF SUCH COMMON PROPERTIES.

EXHIBIT B

SPECIAL WARRANTY DEED

This Deed, made this ___ day of ____, 2012, between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation (" Grantor"), and 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Grantee"), WITNESSETH, that Grantor, for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration in hand paid, by Grantee, the receipt of which is hereby acknowledged, by these presents does REMISE, RELEASE, ALIENATE AND CONVEY unto the Grantee, FOREVER, all the following described real estate, situated in the County of Cook and State of Illinois, known and described as follows, to wit:

See Schedule 1 attached hereto and made a part hereof.

Together with all and singular hereditaments and appurtenances belonging there, or in anyway appertaining, and the reversion or reversions, remainder or remainders, rents, issues and profits thereof, and all the estate, right, title, interest, claim or demand whatsoever, of the Grantor, either at law or in equity of, in and to the above-described premises, with the hereditaments and appurtenances:

TO HAVE AND TO HOLD the said premises as described above, with the appurtenances, unto the Grantee, forever.

And Grantor, for itself and its successors, does covenant, promise and agree to and with Grantee and its successors and assigns that it has not done or suffered to be done, anything whereby the said premises hereby granted are, or may be, in any manner encumbered or charged, except as herein recited; and that it WILL WARRANT AND DEFEND, FOREVER, said premises against all persons lawfully claiming, or to claim the same, by, through or under it, subject only to those matters listed on Schedule 2 attached hereto and made a part hereof.

IN WITNESS WHEREOF, Grantor executed this Deed the day and year first above written.

AMERICAN SERVICE INSURANCE COMPANY, INC., an

Illinois corporation

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

STATE OF ILLINOIS     )

)

COUNTY OF _________        )

This instrument was acknowledged before me on the ________day of ________ 2012, by _______ of American Service Insurance Company, Inc., an Illinois corporation, on behalf of said corporation.

______________________    

Notary Public in and for

the State____________

Printed Name: _______

My commission expires:

______________________

SCHEDULE 1 TO SPECIAL WARRANTY DEED

DESCRIPTION OF LAND

PINs:

Address:

SCHEDULE 2 TO SPECIAL WARRANTY DEED PERMITTED EXCEPTIONS

[INSERT all items listed on Schedule B of the Title Policy]

EXHIBIT C

FORM OF BILL OF SALE AND ASSIGNMENT

This Bill of Sale and Assignment is executed and delivered as of the ______ day of , 2012 pursuant to that certain Sale Agreement (the "Agreement"), dated ____, 2012, by and between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Seller"), and 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), covering the real property described in Schedule 1 attached hereto ("Real Property").

1. Sale of Personal Property, Intangibles. For good and valuable consideration, Seller hereby sells, transfers, sets over and conveys to Purchaser all of Seller's right, title and interest in and to: (a) the Personal Property (as defined in that certain Sale Agreement dated as of April , 2012 made by Seller and Purchaser (the "Agreement")) and (b) the Intangibles (as defined in the Agreement). Seller does hereby represent and warrant to Purchaser and its successors and assigns that the Personal Property and Intangibles are free and clear from any encumbrances and that Seller is the true and lawful owner of the Personal Property and Intangibles and has good right and lawful authority to bargain and sell the Personal Property and Intangibles to Purchaser. Except as otherwise expressly set forth herein or in the Agreement, the Personal Property and Intangibles are being transferred by Seller to Purchaser without any representation or warranty of any kind or nature, express, implied, statutory or otherwise.

2. Assignment of Leases. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts such assignment of, all of Seller's right, title and interest in and to the leases described in Schedule 2 attached hereto (the "Leases").

3. Assignment of Assumed Operating Agreements. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts such assignment of, all of the Seller's right, title and interest in and to the contracts described in Schedule 3 attached hereto (the "Assumed Operating Agreements").

4. Assumption. Purchaser hereby assumes the obligations of Seller under the Leases and Assumed Operating Agreements first arising from and after the date hereof.

5. Indemnification. Seller shall defend, indemnify and hold Purchaser harmless from and against any claims, losses, or liability (including but without limitation, reasonable attorneys fees and disbursements) in any way related to the Leases or the Assumed Operating Agreements and arising or accruing prior to the date hereof. Purchaser shall defend, indemnify and hold Seller harmless from and against any claims, losses or liability (including but without limitation, reasonable attorneys fees and disbursements) in any way related to the Leases or the Assumed Operating Agreements and first arising or accruing on or after the date hereof.

6. Execution in Counterparts. This instrument may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one instrument. To facilitate execution of this instrument, the parties may execute and exchange by facsimile counterparts of the signature pages. This instrument shall benefit and bind Seller and Purchaser and the heirs, legal representatives, successors, and assigns of each of them.

[Signatures Follow]

IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and

Assignment to be executed as of the date written above.

SELLER:

AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation

By:    

Name:

Title:

150 NORTHWEST POINT LLC, a

Delaware limited liability company

By:    

Name:

Title:

Schedule 1 to Bill of Sale and Assignment

Description of Real Property

Schedule 2 to Bill of Sale and Assignment

List of Leases

Schedule 3 to Bill of Sale and Assignment

List of Assumed Operating Agreements

EXHIBIT D

FORM OF FIRPTA CERTIFICATE

Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code") provides that a transferee (purchaser) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee (purchaser) that withholding of tax is not required upon the disposition of an ownership interest in U.S. real property by ("Transferor"), Transferor hereby certifies, under the penalty of perjury that:

Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and in Income Tax Regulations provided thereunder).

Transferor/seller is not a disregarded entity as defined in Section 1.1445 2(b)(2)(iii);

Transferor's Federal Employer Identification Number is

Transferor's office address is:

____________________

____________________

____________________

Attention

Telephone

Fax

The address or description of the property which is the subject matter of the indirect disposition is 150 Northwest Point Boulevard, Elk Grove Village, Illinois.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Transferor declares that it has examined this certification and to the best of its knowledge and belief, it is true, correct and complete, and further declares that the individual executing this certification on behalf of Transferor has full authority to do so.

[SIGNATURE PAGE FOLLOWS]

This FIRPTA Certificate is executed as of the _______ day of ________ 2012

AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation

By:    

Name:

Title:

EXHIBIT E

TENANT ESTOPPEL FORM

Re: 150 Northwest Point Boulevard, Suite , Elk Grove Village, Illinois

Ladies and Gentlemen:

Reference is made to that certain Lease, dated as of ______20__, between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Landlord"), and the undersigned (herein referred to as the "Lease"). A list of the documents comprising the Lease is attached hereto as Exhibit A. The undersigned understands that (a) Landlord has entered into an agreement with 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), for the sale and purchase of the building commonly known as 150

Northwest Point Boulevard, Elk Grove Village, Illinois (the "Building"), (b) Landlord has requested that the undersigned execute and deliver this Tenant Estoppel Certificate to Purchaser and present and future lenders providing financing with respect to the Building and related property (each, a "Lender"), and (c) Purchaser, Lender and their respective successors and assigns will rely upon the certifications by the undersigned in this Tenant Estoppel Certificate in connection with the purchase and financing of the Building. The undersigned hereby certifies as follows:

1. The undersigned is the current tenant under the Lease and [has/has not yet] taken possession of the leased premises.

2. The Lease is in full force and effect and has not been amended, modified, supplemented or superseded except as indicated in Exhibit A. The Lease is the entire agreement between Landlord and the undersigned Tenant, and, without limiting the generality of the foregoing, Landlord is not obligated to provide any services to Tenant other than those expressly set forth in the Lease.

3. There is no defense, offset, claim or counterclaim by or in favor of the undersigned against Landlord under the Lease or against the obligations of the undersigned under the Lease. The undersigned has no renewal, extension or expansion option, no right of first offer or right of first refusal and no other similar right to renew or extend the term of the Lease or expand the property demised thereunder except as may be expressly set forth in the Lease.

4. The undersigned is not aware of any default now existing of the undersigned or of Landlord under the Lease, nor of any event which with notice or the passage of time or both would constitute a default ofthe undersigned or of Landlord under the Lease except: .

5. The undersigned has not received notice of a prior transfer, assignment, hypothecation or pledge by Landlord of any of Landlord's interest in the Lease.

6. The current monthly base rent is $, and the current monthly additional rent is $ Base rent and additional rent have been paid through ____. Tenant's Proportionate Share is ___%. Tenant has fully paid all base rent, additional rent and other sums due and payable under the Lease on or before the date of hereof and Tenant has not paid any rent more than one month in advance.

7.     There is no remaining rent abatement under the Lease except for:

8.     The term of the Lease commenced on [or shall commence on]     and expires on ____, 20___, unless sooner terminated pursuant to the provisions of the Lease.

9. The undersigned has deposited the sum of$ with Landlord as security for the performance of its obligations as tenant under the Lease, and no portion of such deposit has been applied by Landlord to any obligation under the Lease.

10. All tenant improvement allowances to be paid under the Lease have been paid or credited in full except as follows: _

11. Tenant is occupying the Premises and has not assigned the Lease or sublet any portion of the Premises or granted any licenses or occupancy agreements, except as follows-

Very truly yours,

[TENANT NAME]

By:

Name:

Title:

EXHIBIT A TO TENANT ESTOPPEL CERTIFICATE LIST OF DOCUMENTS COMPRISING LEASE

EXHIBIT F OPERATING AGREEMENTS

See attached.

ContractedVendors

VendorService Provided

Affiliated Customer ServiceFire Alarm Monitoring

AramarkDeli

MidcoSecurity System & Badging

SebertLandscape and Snow Removal

B & B MaintenanceJanitorial

C & C             Pest Control

ComEdElectric

Constellation New EnergyElectric

Diamond Detective AgencyGuard Service

FujitecElevators

Waste ManagementGarbage Service

Westside MechanicalHVAC

CintasLobby Floor Mat Cleaning

EquipmentLeases(Contracted)

VendorService Provided

QuenchWater Coolers

SweetbushPlant Rental and Service (lobby plants only)

Absolute VendingCoffee Machines & Vending Machines

EXHIBIT G

LIST OF LEASES

1. Lease Agreement dated December 31, 2010 made by American Service Insurance

Company, Inc. and Universal Casualty Company; and

2.Lease Agreement dated August 15, 2010 made by American Service Insurance Company, Inc. and Avalon Risk Management Insurance Agency LLC.

EXHIBIT H

ESCROW AGENT'S WIRING INSTRUCTIONS

See attached.

EXHIBIT I

LICENSES AND PERMITS

None.

EXHIBIT J

EXCLUDED PERSONAL PROPERTY OF SELLER

General

-All telephones, conference phones, switches, software and related equipment

- All leased furniture, fixtures and equipment, included but not limited to:

o Coffee Machines

o Water Coolers

o Lobby Plants

o Vending Machines

o Mail Center Furniture and Equipment

o Scanning Center Equipment

o Copy machines

1st Floor

Deli all inventory, service equipment and/or other property owned by the deli operator

Fitness Center- all fitness center equipment

-Lobby

-     All company signs

- Mail Center

- all furniture, fixtures and equipment located in the mail center at the time of inspection

-     Scanning Center - all furniture, fixtures and equipment located in the scanning center at the time of inspection

- Training Room #1- all computer equipment, excluding A/V equipment, located in Training Room #1 at the time of inspection-- Note: we are open to leaving this equipment in the training room for shared use by all building users should this be of interest to Purchaser

-    Unfinished Storage Area - all storage boxes , located in the storage area at the time of inspection -- Note: unless otherwise agreed with Purchaser, these boxes will be moved prior to the close date

2nd Floor

Tenant Space- all artwork and tenant owned furniture, fixtures and equipment.

-­ Note: cubicles and cubicle chairs, as located on the 2nd floor at the time of inspection, are not tenant owned and would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term

3rd Floor

- All artwork and furniture, fixtures and equipment, excluding cubicles and attached desks, located on the 3rd floor at the time of inspection. This includes, but is not limited to, furniture in enclosed

offices, filing cabinets and other business equipment.

Note: cubicles and cubicle chairs, as located on the 3rd floor at the time of inspection, would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term

4th Floor

Tenant Space all artwork and tenant owned furniture, fixtures and equipment, excluding cubicles and cubicle chairs, located on the 4th floor at the time of inspection

--Note: cubicles and cubicle chairs, as located on the 4111 floor at the time of inspection, are not tenant owned and would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term

Data Center- Nortel Phone System, all equipment tagged with an Atlas asset tag, all server racks tagged with an Atlas asset tag (including all equipment contained within designated servers) at the time of inspection

5th Floor

Nothing excluded as of the time of inspection

6th Floor

Nothing excluded as of the time of inspection

For the purposes of this Exhibit J , "the time of inspection" shall mean the time of Purchaser's inspection during the Inspection Period.

EX-10.9

EXHIBIT 10.9

FIRST AMENDMENT TO SALE AGREEMENT

This First Amendment to Sale Agreement (this “Amendment") is made as of the 7th day of May, 2012, between 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), and AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation (''Seller'').

A. Purchaser and Seller are parties to that certain Sale Agreement dated as of April 5, 2012 (the "'Sale Agreement"), regarding real property commonly known as 150 Northwest Point Boulevard, Elk Grove Village, Illinois, as more particularly described in the Sale Agreement. All initially capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Sale Agreement.

B. The parties desire to amend the Sale Agreement to extend the Inspection Period as provided herein.

AGREEMENTS

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Extension of Inspection Period. The Inspection Period is hereby extended to expire at 5:00 p.m Chicago, Illinois time on May 11, 2012. All references in the Sale Agreement to the expiration of the Inspection Period shall mean 5:00p.m Chicago, Illinois time on May 11,2012.

2. Sale Agreement in Full Force and Effect. Except as expressly set forth above, all of the terms and conditions of the Sale Agreement remain in full force and effect.

3. Delivery: Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together will constitute one agreement binding on all the parties. This Amendment may be delivered by facsimile or electronic (e-mail) transmission of signed original counterparts.

[Signatures on Following Pages]

IN WITNESS WHEREOF, intending to be legally bound, the parties have caused this Amendment to be duly executed as of the day and year first written above.

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company

By:         /s/ Thomas Frey

Name:        Thomas Frey

Title:        Senior Vice President & CFO

[Signatures Continue on Following Page]

[Signature Page to First Amendment to Sale Agreement made by and between American Service

Insurance Company, Inc. and 150 Northwest Point LLC]

SELLER:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

Atlas Financial Holdings, Inc., which executed a Joinder to the Sale Agreement for the purposes therein stated, hereby consents to this Amendment.

ATLAS FINANCIAL HOLDINGS, INC.

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

EX-10.10

EXHIBIT 10.10

SECOND AMENDMENT TO SALE AGREEMENT

This Second Amendment to Sale Agreement (this "Amendment") is made as of the 11th day of May, 2012, by and between 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), and AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Seller").

A.Purchaser and Seller are parties to that certain Sale Agreement dated as of April 5, 2012 (the "Initial Sale Agreement"), as amended by the certain First Amendment to Sale Agreement dated as of May 7, 2012 (the "First Amendment"), together with the Initial Sale Agreement, the "Sale Agreement") regarding real property commonly known as 150 Northwest Point Boulevard, Elk Grove Village, Illinois, as more particularly described in the Sale Agreement. All initially capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Sale Agreement.

B. The parties desire to amend the Sale Agreement on the terms and conditions as provided herein.

AGREEMENTS

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Post Closing Repair Work. The parties acknowledge and agree that Klein and Hoffman, Inc. (the "Engineer") has recommended that certain repairs be made to the exterior concrete panels and their anchor and support systems and the windows on the Improvements at the Property as detailed in the Engineer's Executive Summary Report attached hereto as Exhibit A and made a part hereof (the "Work"). The parties have agreed that Seller shall pay the following portions of the total cost of Work ("Seller's Share"):

a. Seller shall pay Sixty-Six and 67/100 percent (66.67%) ofthe total cost of the portion of the Work related to the repairs of the three dislocated concrete panels, which the Engineers have estimated to cost $50,000.

b. Seller shall pay Fifty percent (50%) of the total cost of the portion of the Work related to the replacement of the concrete panel shims throughout the building, which the Engineers have estimated to cost $60,000.

c. Seller shall pay Sixty-Six and 67/100 percent (66.67%) ofthe total cost of the portion of the Work related to the repairs to the window systems, which the Engineers have estimated to cost $100,000.

d. Seller shall pay fifty percent (50%) of the costs of the engineering and inspection reports, which costs shall not exceed $30,000 for such reports.

2. Holdback Escrow. At Closing, Seller shall deposit $145,000 into a strict joint escrow with the Title Company by and among Seller, Purchaser and the Title Company (the"Holdback Escrow"), which shall be separate from the escrows described in Section 4.4 of the Sale Agreement. The cost of the Holdback Escrow, if any, shall be split equally by the parties.

3. Payment for the Work. Purchaser shall obtain quotes from three contractors to perform the Work or any portion thereof (excluding subcontractors) within a reasonable period after the Closing. The selection of the contractor(s) that will perform the Work or any portion thereof shall be by mutual agreement, provided that Seller must approve at least one of the contractors for each portion of the Work from whom Purchaser obtained a quote. Upon the completion of the Work, each party shall execute and deliver a direction to the Title Company authorizing it to pay to Purchaser all or the portion of the funds held in the Holdback Escrow as necessary to cover Seller's Share of the actual costs of the Work as set forth on a statement of the final costs of the Work which shall include final invoices from each contractor (the "Final Costs"). If Seller's Share of the Final Costs exceeds

the amount paid to Purchaser from the Holdback Escrow, Seller shall, within 10 days after receiving the notice of the Final Costs, pay to Purchaser the amount of funds necessary to have fully paid Seller's Share of the Final Costs.

If Seller's Share of the Final Costs is less than the amount of funds in Holdback Escrow, then after the payment of Seller's Share of the Final Costs to Purchaser, all remaining funds shall be promptly released to Seller by the Title Company and in such event Seller and Purchaser agree to execute and deliver a joint direction to direct the Title Company to pay such remaining funds to Seller.

4. Survival. Paragraphs 1, 2 and 3 of this Amendment shall survive the Closing.

5. Sale Agreement in Full Force and Effect. Except as expressly set forth above, all of the terms and conditions of the Sale Agreement remain in full force and effect.

6. Delivery; Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together will constitute one agreement binding on all the parties. This Amendment may be delivered by facsimile or electronic (e-mail) transmission of signed original counterparts.

IN WITNESS WHEREOF, intending to be legally bound, the patiies have caused this

Amendment to be duly executed as of the day and year first written above.

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company

By:         /s/ Thomas Frey

Name:        Thomas Frey

Title:        Senior Vice President & CFO

[Signatures Continue on Following Page]

[Signature Page to Second Amendment to Sale Agreement made by and between American

Service Insurance Company, Inc. and 150 Northwest Point LLC]

SELLER:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

Atlas Financial Holdings, Inc., which executed a Joinder to the Sale Agreement for the purposes therein stated, hereby consents to this Amendment.

ATLAS FINANCIAL HOLDINGS, INC.

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

EXHIBIT A

ENGINEER REPORT

[Attachment]

EX-10.11

EXHIBIT 10.11

LEASE AGREEMENT

THIS LEASE AGREEMENT (the "Lease") is made and entered into this 22nd of May, 2012 (the "Effective Date"), between 150 Northwest Point LLC, a Delaware limited liability company ("Landlord"), and American Service Insurance Company, Inc., an Illinois corporation ("Tenant").

WITNESSETH:

1. Leased Premises, Shared Areas and Term

A. Leased Premises.

In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions, and covenants hereof, Landlord hereby demises and Leases to Tenant, and Tenant hereby accepts and Leases from Landlord, the following described space, to wit: approximately 30,552 rentable square feet as shown and outlined on the plan attached hereto as Exhibit A (the "Leased Premises") on the third floor, located in the building commonly known as 150 Northwest Point Boulevard (the "Building"), situated on the real property described in Exhibit B attached hereto (the "Property") which is part of a development in the Park at Northwest Point, Elk Grove Village, Illinois (the "Development"). The Leased Premises shall be occupied and used exclusively for general office purposes and for legal purposes incidental thereto and shall not be used for any other purpose.

B. Shared Areas.

Tenant shall have the right to use certain Shared Areas (as hereinafter defined) upon reasonable notice to Landlord, but only to the extent Landlord keeps in place said Shared Areas in the Building and subject to terms and conditions contained herein. "Shared Areas" shall mean those certain areas on the first floor of the Building as may be designated from time to time by Landlord for Tenant's shared use, which as of the Effective Date shall include one conference room, a training room, two smaller training areas, the deli area, a mailroom, and a restroom/shower/locker areas, all as located on the first floor of Building. Landlord may remove any areas from the Shared Areas upon written notice to Tenant, provided that Tenant shall be entitled to use the deli area to satisfy its obligations under the Deli Contract (as hereinafter defined) until the Contract Assumption Date. Furthermore, Tenant's right to use the conference room, training room and training areas or any similar areas as may be designated by Landlord, shall be subject to the following conditions: (i) Tenant shall have requested use of such area by delivering written notice to Landlord within a reasonable period in advance of the date Tenant requested to use such area, (ii) such requested area shall not be reserved by Landlord or another tenant at such time or otherwise needed by Landlord at such time, and (iii) Tenant shall clean such area after its use and repair any damage to the area, furnishing or other personal property located therein to a condition that existed prior to Tenant's use of such area.

Tenant agrees to continue maintain the Food Services Management Agreement dated January 1, 2012 by and between Tenant and Aramark Corporation for the operation of the deli on the first floor of the Building (the "Aramark Contract") at Tenant's sole cost and expense from the Effective Date until such date (the "Contract Assumption Date") which is the earlier to occur of (a) the date Landlord moves a substantial portion of its business operations to the Building, or (b) December 31,2012. Upon the Contract Assumption Date, Tenant shall assign and Landlord agrees to assume the Aramark Contract, provided that Tenant is not in default under any of the terms of the Aramark Contract. Notwithstanding the foregoing, Landlord shall have the right to terminate Aramark Contract at anytime after the Contract Assumption Date. For the purposes of this paragraph a "substantial portion" shall mean more than 200 employees. During the term of the Aramark Contract or any replacement contract for deli services at the Building (collectively, the "Deli Contract"), Landlord, Tenant and any other tenants in the Building that utilize the food services provided under the Deli Contract (the "Participating Tenants") shall share in the monthly costs of the Deli Contract (the "Shared Deli Contract Costs") incurred by (y) Tenant up and until and Contract Assumption Date and (z) Landlord from and after the Contract Assumption Date in accordance with the terms of this paragraph, unless such costs are a result of a default by Landlord or Tenant, which costs shall paid solely by the party that caused

any such default thereunder. Landlord's share of the Shared Deli Contract Costs shall be equal to the percentage calculated by dividing number of employees of Landlord in occupancy of the Building on the first day of the month for which the Shared Deli Contract Costs are incurred by the total number of employees of Landlord, Tenant and Participating Tenants that are in occupancy on the first day of the same month. Tenant's share of the Shared Deli Contract Costs shall be equal to the percentage calculated by dividing number of employees of Tenant in occupancy of the Building on the first day of the month for which the Shared Deli Contract Costs are incurred by the total number of employees of Landlord, Tenant and the Participating Tenants that are in occupancy of the Building on the first day of the same month. The party that is then responsible for the payment of the Share Deli Contract Costs shall timely pay the same and shall send a copy of the invoice to the other party, which shall pay its percentage share of the Shared Deli Contract Costs within fifteen (15) days after receipt of the invoice for the same. Landlord or Tenant within five (5) days after the request of the other shall advise the requesting party of the total number of its employees that are in occupancy of the Building on the first day of the month in question. The party responsible for paying the Shared Deli Contract Costs shall also make arrangements to obtain headcount information from the Participating Tenants.

C. Term.

TO HAVE AND TO HOLD the same for a term of sixty (60) months commencing on the Effective Date, and ending on the date five (5) years after the Effective Date ("Term") unless terminated or extended pursuant to any provision hereof. Tenant acknowledges that no representations as to the repair of the Leased Premises, nor promises to alter, remodel or improve the Leased Premises have been made by Landlord, unless such are expressly set forth in this Lease.

D. Moving Allowance.

On the Effective Date, Landlord shall pay Tenant $7,670 as a cash moving allowance. Within fifteen (15) days after Tenant's receipt of Landlord's written notice, Tenant agrees to move all equipment, furnishing and other personal property from the first floor mail and copy center to the Leased Premises. Tenant shall repair any damage to the Building caused by moving such equipment.

E. Condition of Leased Premises.

The taking of possession by Tenant shall be deemed conclusively to establish that the Building, other improvements, and the Leased Premises are in good and satisfactory condition as of when possession was so taken (except for such items as Landlord is permitted to complete at a later date, which items shall be specified by Landlord to Tenant in writing).

2. Rent

A. Annual Rent and Security Deposit.

i. Tenant agrees to pay to Landlord for the Leased Premises in lawful money of the United States rent for the first twelve (12) months of the Term equal annual rent equal to $641,592 ("Annual Rent"), (which is equal to $21.00 per rentable square feet) payable in equal monthly installments, in advance, on the first day of the month of each month of the Term, except that the monthly installment which otherwise shall be due on the commencement date recited above, shall be due and payable on the date hereof. Provided that Tenant's is not in default of its obligations hereunder, the monthly rent for the first five (5) months of the Term shall abate. Notwithstanding the foregoing, during such abatement period, Tenant will be responsible for its share of electricity pursuant to Paragraph 3 below and any Additional Rent (as hereinafter defined) as may be due during such period. Beginning with the sixth (6th) month of the Term, each monthly installment shall be due and payable without demand on or before the first day of each calendar month succeeding the commencement date; further provided, that the rental payment for any fractional calendar month at the commencement or end of the Lease term shall be prorated. The Annual Rent shall increase by three percent (3%) per year on the first anniversary of the Effective Date and on each such succeeding anniversary of the Effective Date during the Term.

ii. In addition, Tenant agrees to deposit with Landlord on the date hereof a standby, irrevocable, transferable letter of credit in favor of Landlord, in form and substance substantially similar to the form attached hereto as Exhibit C and otherwise acceptable to Landlord, in the amount of $485,000 (the "Letter of Credit"), issued by a U.S. financial institution reasonably acceptable to Landlord, which shall be maintained for the duration of the lease or until such earlier time as determined by Landlord in its sole discretion, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. The term of the Letter of Credit should extend to the date which is 60 days of the expiration of Term. Notwithstanding the foregoing, if for any reason the Letter of Credit shall terminate prior to such time, Tenant shall deliver to Landlord a replacement Letter of Credit at least thirty (30) days prior to the expiration of the current Letter of Credit. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by any event of Tenant's default; and Tenant shall deliver to Landlord on demand a new or re-issued Letter of Credit in the full amount required hereby. In addition, if Tenant fails to deliver to Landlord a replacement Letter of Credit at least thirty (30) days prior to the expiration of the current Letter of Credit as required hereunder, then Landlord shall be entitled to draw down the entire Letter of Credit as a cash security deposit, held to secure Tenant's obligations under this Lease.

In the event of a default resulting in Landlord drawing down on this letter of credit, any remaining balance not required to remedy said default shall be returned by Landlord to Tenant at such time after termination of this Lease when Landlord shall have determined that all Tenant's obligations under this Lease have been fulfilled.

Within thirty (30) days after Tenant's delivery of the Letter of Credit and an invoice evidencing full payment of the cost of the same, Landlord shall pay to Tenant an amount equal to the lesser of (i) one-half of the service fee charge by the issuing bank for the issuance the Letter of Credit, or (i) six thousand dollars ($6,000). Notwithstanding the foregoing, Landlord shall have the right at any time by delivering written notice to Tenant, to permit Tenant to reduce the total amount of the Letter of Credit to $320,796 and in such event, Landlord's obligation to pay Tenant shall be reduced to an amount equal to the lesser of (i) one-quarter of the service fee charge by the issuing bank for the issuance the Letter of Credit, or (i) one thousand six hundred dollars ($1,600).

B. Additional Rent. "Additional Rent" shall mean any other amounts due by Tenant to Landlord hereunder, including without limitation charges for Taxes, Operating Costs, and Data Center Costs, payable pursuant to Sections 23, 24 and 25 hereof. "Rent" shall mean Annual Rent and Additional Rent.

3. Electric Service

To the extent Tenant is not billed directly by a public utility, Tenant shall pay, upon demand, as Additional Rent, for all electricity used by Tenant in the Leased Premises for lighting, convenience outlets, and other direct uses, an amount, as reasonably estimated by Landlord from time to time, which Tenant would pay for such electricity if the same were separately metered to the Leased Premises by the local electric utility provider(s) and billed to Tenant at such utility provider(s)' then current rates. Initially, Tenant shall pay Tenant's proportionate share (as defined in Section 21 hereof) of the total electrical charges for the Building, provided that Landlord may (but shall have no obligation to) (i) install a separate electric meter for all or any portion of the Leased Premises and in such event Tenant shall pay metered amount directly to the electric utility provider(s), or (ii) engage an MEP engineer or electrical contractor ("Electrical Contractor") to determine Tenant's usage of electricity and allocate Tenant's usage as a percentage of the total usage for the portions of the Property on the same meter as Tenant, and Tenant shall pay the percentage of total electricity charges as determined by the Electrical Contractor. Tenant shall furnish, at its own expense, all electric light bulbs, tubes and ballasts. Tenant will not without the written consent of Landlord use any apparatus or device in the Leased Premises which will in anyway increase its usage beyond the amount of electricity which Landlord determines to be commercially reasonable for use of the Leased Premises as general office space, nor connect with electric current (except through existing electrical outlets in the Leased Premises) any apparatus or device for the purpose of using electric current. If Tenant shall require electric current in excess of that which is reasonably obtainable from existing electric outlets and normal for use of the Leased Premises as general

office space, then Tenant shall first procure the consent of Landlord (which consent will not be unreasonably withheld). Tenant shall pay all costs of installation of all facilities necessary to furnishing such excess capacity and for such increased electricity usage. As used herein, "local utility provider" shall include any and all public utility companies and/or private utility providers (including resellers) that charge for providing electrical service to the Building.

Interruptions of any service shall not be deemed an eviction or disturbance of Tenants use and possession of the Leased Premises or any part thereof, or render Landlord liable for damages by abatement of rent or otherwise or relieve Tenant from performance of Tenant's obligations under this Lease.

4. Alterations

All improvements and alterations to the Leased Premises to be made by Tenant shall be installed at the cost and expense of Tenant (which cost shall be payable on demand by Landlord as additional rent), but only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, and only by Landlord or by contractors and subcontractors approved in writing by Landlord (which approval shall not be unreasonably withheld). In connection with any request for an approval of alterations by Tenant, Landlord may retain the services of an architect and/or engineer and Tenant shall reimburse Landlord for the reasonable fees of such architect and/or engineer. All alterations, additions, improvements and partitions erected by Tenant shall be and remain the property of Tenant during the term of this Lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, improvements and partitions erected by Tenant made after Lease Commencement and restore the Leased Premises to its original condition by the date of termination of this Lease or upon earlier vacating of the Leased Premises; provided, however, that, if at such time Landlord so elects, such alterations, additions, improvements and partitions shall become the property of Landlord as of the date of termination of this Lease or upon earlier vacating of the Leased Premises and title shall pass to Landlord under this Lease as by a bill of sale. All such removals and restoration shall be accomplished in a good workmanlike manner by contractors approved in writing by Landlord so as not to damage the primary structure or structural qualities of the Building. All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all governmental laws, ordinances, rules and regulations and Tenant shall, prior to construction, provide such assurances to Landlord, including but not limited to, waivers of lien, surety company performance bonds and personal guaranties of individuals of substance, as Landlord shall require to assure payment of the costs thereof and to protect Landlord against any loss from any mechanics', laborers', materialmen's or other liens.

As of the Effective Date, Tenant shall be allowed to maintain its signage located on the North side of the exterior of the building as well as interior signs in the first and third floor lobbies, provided that (i) any and all costs to maintain said signs will be paid solely by Tenant, and (ii) upon not less than thirty (30) days notice, Tenant shall at its sole cost and expense remove the exterior sign from the Building and repair any and all damage to the Building caused by such removal. In the event Landlord is installing exterior signage at the time it delivers notice to Tenant to remove its sign, Landlord agrees to pay one-half of the cost of the lift required for the removal of Tenant's sign. Upon the expiration of this Lease, any remaining signs will be removed by Tenant at Tenant's sole expense and shall remain the property of Tenant. Except as expressly set forth herein, Tenant shall have no right to install any signage on the Property or the interior or exterior of the Building.

5. Service

A. Landlord agrees to furnish Tenant, while occupying the Leased Premises, water, hot, cold and refrigerated, at those points of supply provided for general use of tenants; heated and refrigerated air conditioning in season at such times as Landlord normally furnishes these services to all tenants of the Building (including 9 AM to 1 PM on Saturday), and at such temperatures and in such amounts as are in accordance with any applicable statutes, rules or regulations and are considered by Landlord to be standard, such service at other times and on Saturday (except for 9 AM to 1 PM), Sunday, and holidays to be optional on the part of Landlord (Landlord hereby reserves the right to charge Tenant for any such optional service requested by Tenant on such basis as Landlord, in its sole discretion, determines); janitor service to the Leased Premises on weekdays other than holidays and such window washing as may from time to time in Landlord's judgment be reasonably required; operatorless passenger elevators for ingress and

egress to the floor on which the Leased Premises are located, provided Landlord may reasonably limit the number of elevators to be in operation on Saturdays, Sundays, and holidays; but failure to any extent to furnish or any stoppage or interruption of these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to any person, property, or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord cease to function properly, Landlord shall use reasonable diligence to repair the same promptly, but Tenant shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. Whenever heat generating machines or equipment are used by Tenant in the Leased Premises which affect the temperature otherwise maintained by the air conditioning equipment, Landlord reserves the right to install supplementary air conditioning units in the Leased Premises (or for the use of the Leased Premises) and the expense of such purchase, installation, maintenance, and repair shall be paid by Tenant upon demand as additional rent. Tenant shall have access to the Building and Premises seven (7) days a week, twenty four (24) hours a day, three hundred sixty five (365) days a year, subject to the terms and conditions hereof.

6. Use of Premises

A. Tenant will not occupy or use, nor permit any portion of Leased Premises to be occupied or used, for any business or purpose other than that described above or for any use or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will render void or in any way increase the rate of fire insurance on the Building or its contents, and Tenant, shall immediately cease and desist from such use, paying all costs and expenses resulting therefrom.

B. Tenant shall at its own cost and expense promptly obtain any and all licenses and permits necessary for any permitted use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use and its occupancy of the Leased Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Leased Premises, all at Tenant's sole expense. If, as a result of any change in the governmental laws, ordinances, and regulations, the Leased Premises must be altered to lawfully accommodate Tenant's use and occupancy, such alterations shall be made only with the consent of Landlord, but the entire cost shall be borne by Tenant; provided, that, the necessity of Landlord's consent shall in no way create any liability against Landlord for failure of Tenant to comply with such laws, ordinances and regulations.

C. Tenant will maintain the Leased Premises (including all fixtures installed by Tenant, water heaters within the Leased Premises and plate glass) in good repair, reasonable wear and tear excepted, and in a clean and healthful condition, and comply with all laws, ordinances, orders, rules, and regulations (state, federal, municipal, and other agencies or bodies having any jurisdiction thereof) with reference to condition, or occupancy of the Leased Premises. Any repairs or replacements shall be with materials and workmanship of the same character, kind and quality as the original. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or door lettering or advertising media of any type on or about the Leased Premises.

D. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy, or disturb other tenants or Landlord in the management of the Building.

E. Tenant shall pay upon demand as additional rent the full cost of repairing any damage to the Leased Premises, Building or related facilities resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, servants, employees, patrons, customers, or any other person entering upon the Development as a result of Tenant's business activities or resulting from Tenant's default hereunder.

F. Tenant and Tenant's agents, employees, and invitees will comply fully with all rules and regulations of the Development, the Building, parking area and related facilities which Landlord may establish from time to time. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for the safety, care, and cleanliness of the

Building or the Development and for the preservation of good order therein. Copies of all rules and regulations, changes, and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by Tenant's employees, servants, agents and visitors.

G. Tenant shall have access to any parking spaces designated for the Building on a first come, first service for its employees and invitees, provided that it shall not be entitled to use more parking spots than Tenant's parking share (as hereinafter defined). "Tenant's parking share" is the total number of parking spots determined by dividing the square footage of the Leased Premises by 250 (which as of the date of the Lease equals 122 parking spots). Notwithstanding the foregoing, Landlord shall have the right to designate certain parking spaces for the exclusive use by Landlord, its employees and invitees, provided that if Landlord designates more than twenty-five (25) parking spaces for its exclusive use then Tenant shall be entitled to a number of reserved parking spaces equal to Tenant's Share of Excess Reserved Spaces. "Tenant's Share of Excess Reserved Space" shall mean a number of reserved parking spaces on the Property equal to Tenant's proportionate share of the amount that Landlord's total number of reserved parking spaces exceeds twenty-five (25).

H. At termination of this Lease, upon its expiration or otherwise, Tenant shall deliver up the Leased Premises with all improvements located thereon (except as herein provided) in good repair and condition, reasonable wear and tear excepted, broom clean and free of all debris.

7. Inspections

Landlord shall have the right to enter the Leased Premises at any reasonable time upon prior notice to Tenant (which may be oral notice), for the following purposes: (i) to ascertain the condition of the Leased Premises; (ii) to determine whether Tenant is diligently fulfilling Tenant's responsibilities under this Lease; (iii) to clean and to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease; or (iv) to do any other act or thing which Landlord deems reasonable to preserve the Leased Premises and the Building. During the six (6) months prior to the end of the term hereof and at any time Tenant is in default hereunder, Landlord shall have the right to enter the Leased Premises at any reasonable time during business hours for the purpose of showing the premises. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating and shall arrange to meet with Landlord for a joint inspection of the Leased Premises. In the event of Tenant's failure to give such notice or arrange such joint inspection, Landlord's inspection at or after Tenant's vacating the Leased Premises shall be conclusively deemed correct for purposes of determining Tenant's responsibility for repairs and restoration.

8. Assignment and Subletting

A. Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Leased Premises, whether voluntarily or by operation of law, or permit the use or occupancy of the Leased Premises by anyone other than Tenant, without the prior written consent of Landlord, and such restrictions shall be binding upon any assignee or subtenant to which Landlord has consented (which consent shall not be unreasonably withheld). In the event Tenant desires to sublet the Leased Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord within a reasonable time prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease and copies of financial reports and other relevant financial information of the proposed subtenant or assignee. In no event may Tenant sublet, nor will Landlord consent to any sublease of, all or any portion of the Leased Premises if the rent is determined in whole or in part based upon the income or profits derived by the sub-lessee (other than a rent based on a fixed percentage or percentages of receipts or sales). Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of his Lease. Upon the occurrence of an "event of default" (as hereinafter defined), if the Leased Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and

apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder. Tenant shall pay to Landlord, on demand, a reasonable service charge for the processing of the application for the consent and for the preparation of the consent. Such service charge shall be collectible by Landlord only where consent is granted by Landlord.

B. In addition to, but not in limitation of, Landlord's right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Leased Premises, to recapture the portion of the Leased Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice thereof within thirty (30) days following Landlord's receipt of Tenant's written notice as required above. If this Lease shall be terminated with respect to the entire Leased Premises pursuant to this paragraph, the term of this Lease shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the term hereof. If Landlord recaptures under this paragraph only a portion of the Leased Premises, the rent during the unexpired term shall abate proportionately based on the rent contained in this Lease as of the date immediately prior to such recapture. Tenant shall, at Tenant's own cost and expense, discharge in full any outstanding commission obligation on the part of Landlord with respect to this Lease, and any commissions which may be due and owing as a result of any proposed assignment or subletting, whether or not the Leased Premises are recaptured pursuant hereto and rented by Landlord to the proposed tenant or any other tenant. In the event of the recapture of a portion of the Leased Premises by Landlord pursuant to the terms of this paragraph, Tenant shall pay all costs associated with the separation of the recaptured premises from the portion not recaptured, including, but without limitation, the cost of all demising partitions, changes in lighting and HVAC distribution systems and all reasonable architectural and/or engineering fees.

C. Any assignment or subletting by Tenant pursuant to subparagraph 8A of all or any portion of the Leased Premises, or termination of the Lease for a portion of the Leased Premises pursuant to subparagraph 8B, shall automatically operate to terminate each and every right, option, or election, if any exist, belonging to Tenant, including by way of illustration, but not limitation, any option to expand its premises or to extend or renew the term of Tenant's Lease for all or any portion of the Leased Premises -i.e. such rights and options shall cease as to both space sublet or assigned and as to any portion of the original Leased Premises retained by Tenant.

D. For the purposes of this Section 8 an assignment shall be deemed to include (without limitation) (i) the sale or transfer of more than thirty-three percent (33%) of the direct ownership interest of Tenant, (ii) the sale, assignment or transfer of a substantial portion of the assets of Tenant, or (iii) any merger or consolidation of Tenant with any entity, and shall require Landlord's consent in accordance with subparagraph 8A hereof.

9. Fire and Casualty Damage

A. If the Building, improvements, or Leased Premises are rendered partially or wholly untenantable by fire or other casualty, and if such damage cannot, in Landlord's reasonable estimation, be materially restored within ninety (90) days of such damage, then Landlord may, at its sole option, terminate this Lease as of the date of such fire or casualty. Landlord shall exercise its option provided herein by written notice within sixty (60) days of such fire or other casualty. For purposes hereof, the Building or Leased Premises shall be deemed "materially restored" if they are in such condition as would not prevent or materially interfere with Tenant's use of the Leased Premises for the purpose for which it was then being used.

B. If this Lease is not terminated pursuant to Paragraph 9A, then Landlord shall proceed with all due diligence to repair and restore the Building, improvements or Leased Premises, as the case may be (except that Landlord may elect not to rebuild if such damage occurs during the last year of the term exclusive of any option which is unexercised at the date of such damage).

C. If this Lease shall be terminated pursuant to this Paragraph 9, the term of this Lease shall end on the date of such damage as if that date had been originally fixed in this Lease for the expiration of the term hereof. If this Lease shall

not be terminated by Landlord pursuant to this Paragraph 9 and if the Leased Premises is untenantable in whole or in part following such damage, the rent payable during the period in which the Leased Premises is untenantable shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and material restoration within one hundred fifty (150) days after the date of such damage, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, whereupon the Lease shall end on the date of such notice as if the date of such notice were the date originally fixed in this Lease for the expiration of the term hereof; provided however, that if construction is delayed because of changes, deletions, or additions in construction requested by Tenant, strikes, lockouts, casualties, acts of God, war, material or labor shortages, governmental regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

In no event shall Landlord be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in or about the Leased Premises by Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Leased Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

D. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Leased Premises, Building or Property requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon the Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the term hereof.

E. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire, extended coverage perils, vandalism or malicious mischief, sprinkler leakage or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, including any other tenants or occupants of the remainder of the Building in which the Leased Premises is located; provided, however, that this release shall be applicable and in force and effect only to the extent that such release shall be lawful at that time and in any event only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each Landlord and Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so. If such other party fails to pay such extra cost, the release provisions of this paragraph shall be inoperative against such other party to the extent necessary to avoid invalidation of such releasor's insurance.

F. In the event of any damage or destruction to the Building or the Leased Premises by any peril covered by the provisions of this Paragraph 9, Tenant shall, upon notice from Landlord, remove forthwith, at its sole cost and expense, such portion or all of the property belonging to Tenant or his licensees from such portion or all of the Building or the Leased Premises as Landlord shall request and Tenant hereby indemnifies and holds Landlord harmless from any loss, liability, costs, and expenses, including attorney's fees, arising out of any claim of damage or injury as a result of any alleged failure to properly secure the Leased Premises prior to such removal and/or such removal.

10. Liability

Landlord shall not be liable for and Tenant will indemnify and hold Landlord harmless from any loss, liability, costs and expenses, including attorney's fees, arising out of any claim of injury or damage on or about the Leased Premises caused by the negligence or misconduct or breach of this Lease by Tenant, its employees, subtenants, invitees or by any other person entering the Leased Premises or the Building or Development under express or implied invitation of Tenant or arising out of Tenant's use of the Leased Premises. Landlord shall not be liable to Tenant or

Tenant's agents, employees, invitees or any person entering upon the Development in whole or in part because of Tenant's use of the Leased Premises for any damage to persons or property due to condition, design, or defect in the Building or its mechanical systems which may exist or occur, and Tenant assumes all risks of damage to such persons or property. Landlord shall not be liable or responsible for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, or other matter beyond control of Landlord, or for any injury or damage or inconvenience, which may arise through repair or alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's willful acts or gross negligence. Tenant shall procure and maintain throughout the term of this Lease a commercial general liability policy of insurance and a property policy of insurance, each in form and substance satisfactory to Landlord, at Tenant's sole cost and expense, insuring both Landlord and Tenant against all claims, demands or actions arising out of or in connection with: (i) the Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant's operations in and maintenance and use of the Leased Premises; and (iv) Tenant's liability assumed under this Lease; the limits of such policies to be in the amount of not less than $1,000,000 per occurrence and $2,000,000 aggregate liability in respect of injury to persons (including death) and in the amount of not less than $1,000,000 per occurrence and $2,000,000 aggregate in respect of property damage or destruction, including loss of use thereof. Such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. A certified copy of such policies (including additional insured endorsements naming Landlord and any other designee of Landlord as an additional insured), together with receipt evidencing payment of the premium, shall be delivered to Landlord prior to the commencement date of this Lease. Not less than thirty (30) days prior to the expiration date of such policy, a certified copy of a renewal thereof (bearing notations evidencing the payment of the renewal premium) shall be delivered to Landlord. Such policy shall further provide that not less than thirty (30) days' written notice shall be given to Landlord before such policy may be canceled or changed to reduce the insurance coverage provided thereby.

11. Condemnation

A. If any substantial part of the Building, improvements, or Leased Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the Building or Leased Premises for the purpose for which it is then being used, this Lease shall terminate effective when the physical taking shall occur in the same manner as if the date of such taking were the date originally fixed in this Lease for the expiration of the term hereof.

B. If part of the Building, improvements, or Leased Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this Lease is not terminated as provided in the subparagraph above, this Lease shall not terminate but the rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances and Landlord shall undertake to restore the Building, improvements, and Leased Premises to a condition suitable for Tenant's use, as near to the condition thereof immediately prior to such taking as is reasonably feasible under all the circumstances.

C. In the event of any such taking or private purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any condemnation proceedings; provided that Tenant shall not be entitled to receive any award for Tenant's loss of its leasehold interest, the right to such award being hereby assigned by Tenant to Landlord.

12. Holding Over

Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Tenant retains possession of the Leased Premises or any part thereof after such termination, then Landlord may, at its option, serve written notice upon Tenant that such holding over constitutes any one of (i) creation of a month to month tenancy, upon the terms and conditions set forth in this Lease, or (ii) creation of a tenancy at sufferance, in any case upon the terms and conditions set forth in this Lease; provided, however, that the monthly rental (or daily rental under (ii) shall, in addition to all other sums which are to be paid by Tenant hereunder, whether or not as Additional

Rent, be equal to one hundred fifty percent (150%) of the Rent being paid monthly to Landlord under this Lease immediately prior to such termination (prorated in the case of (ii) on the basis of a 365 day year for each day Tenant remains in possession). If no such notice is served, then a tenancy at sufferance shall be deemed to be created at the rent in the preceding sentence. Tenant shall also pay to Landlord all damages sustained by Landlord resulting from retention of possession by Tenant, including the loss of any proposed subsequent tenant for any portion of the Leased Premises. The provisions of this paragraph shall not constitute a waiver by Landlord of any right of re-entry as herein set forth; nor shall receipt of any rent or any other act in apparent affirmance of the tenancy operate as a waiver of the right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant's part to be performed.

13. Quiet Enjoyment

Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the Leased Premises for the term hereof without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

14. Default

A. Tenant's Default. Tenant shall be in default under this Lease if:

i. Tenant shall fail to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, whether such sum be any installment of the rent herein reserved, any other amount treated as additional rent hereunder, or any other payment or reimbursement to Landlord required herein, whether or not treated as additional rent hereunder, and such failure shall continue for a period of five (5) days from the date such payment was due; or

ii. Tenant shall fail to comply with any term, provision or covenant of this Lease other than by failing to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, and shall not cure such failure within twenty (20) days (forthwith, if the default involves a hazardous condition) after written notice thereof to Tenant; or

iii. Tenant shall abandon or vacate any substantial portion of the Leased Premises and cease to pay rent; or

iv. Tenant shall fail to vacate the Leased Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant's right to possession only; or

v. The leasehold interest of Tenant shall be levied upon under execution or be attached by process of law or Tenant shall fail to contest diligently the validity of any lien or claimed lien and give sufficient security to Landlord to insure payment thereof or shall fail to satisfy any judgment rendered thereon and have the same released, and such default shall continue for ten (10) days after written notice thereof to Tenant; or

vi. Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof; or

vii. A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant a bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order,

judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof.

B. Landlord's Remedies. Upon the occurrence of any of such events of default described in Paragraph 14 hereof or elsewhere in this Lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever:

i. Landlord may, at its election, terminate this Lease or terminate Tenant's right to possession only, without terminating the Lease;

ii. Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant's right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Leased Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Leased Premises in such event with or without process of law and to repossess Landlord of the Leased Premises as of Landlord's former estate and to expel or remove Tenant and any others who may be occupying or within the Leased Premises and to remove any and all property therefrom, without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant hereby waving any right to claim damage for such reentry and expulsion, and without relinquishing Landlord's right to rent or any other right given to Landlord hereunder or by operation of law;

iii. Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent hereunder, and other sums due and payable by Tenant on the date of termination, plus the sum of (i) an amount equal to the then present value of the rent, including any amounts treated as additional rent hereunder, and other sums provided herein to be paid by Tenant for the residue of the stated term hereof, less the fair rental value of the Leased Premises for such residue (taking into account the time and expense necessary to obtain a replacement tenant or tenants, including expenses hereinafter described in subparagraph (d) relating to recovery of the Leased Premises, preparation for reletting and for reletting itself), and (ii) the cost of performing any other covenants which would have otherwise been performed by Tenant;

iv.(1) Upon any termination of Tenant's right to possession only without termination of the Lease, Landlord may, at Landlord's option, enter into the Leased Premises, remove Tenant's signs and other evidences of tenancy, and take and hold possession thereof as provided in subparagraph (b) above, without such entry and possession terminating the Lease or releasing Tenant, in whole or in part, from any obligation, including Tenant's obligation to pay the rent, including any amounts treated as additional rent, hereunder for the full term. In any such case Tenant shall pay forthwith to Landlord, if Landlord so elects, a sum equal to the entire amount of the rent, including any amounts treated as additional rent hereunder, for the residue ofthe stated term hereof plus any other sums provided herein to be paid by Tenant for the remainder of the Lease term;

(2) Landlord may, but need not, relet the Leased Premises or any part thereof for such rent and upon such terms as Landlord, in its sole discretion, shall determine (including the right to relet the Leased Premises for a greater or lesser term than that remaining under this Lease, the right to relet the Leased Premises as a part of a larger area, and the right to change the character or use made of the Leased Premises). If Landlord decides to relet the Leased Premises or a duty to relet is imposed upon Landlord by law, Landlord and Tenant agree that Landlord shall only be required to use the same efforts Landlord then uses to Lease other properties Landlord owns or manages (or if the Leased Premises is then managed for Landlord, then Landlord will instruct such manager to use the same efforts such manager then uses to Lease other space or properties which it owns or manages); provided, however that Landlord (or its manager) shall not be required to give any preference or priority to the showing or teasing of the Leased Premises over any other space that Landlord (or its manager) may be leasing or have available and may place a suitable prospective tenant in any such available space regardless of when such alternative space becomes available; provided, further that Landlord shall not be required to observe any instruction given by Tenant about such reletting or accept any tenant offered by Tenant unless such offered tenant has a creditworthiness acceptable to Landlord, Leases the entire Leased Premises, agrees to use the leased premises in a manner consistent with the Lease and Leases the Leased Premises at the same rent, for no more than the current term and on the same

other terms and conditions as in this Lease without the expenditure by Landlord for tenant improvements or broker's commissions. In any such case, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Leased Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall, upon demand, pay the cost thereof, together with Landlord's expenses of reletting, including, without limitation, any broker's commission incurred by Landlord. If the consideration collected by Landlord upon any such reletting plus any sums previously collected from Tenant are not sufficient to pay the full amount of all rent, including any amounts treated as additional rent hereunder and other sums reserved in this Lease for the remaining term hereof, together with the costs of repairs, alterations, additions, redecorating, and Landlord's expenses of reletting and the collection of the rent accruing therefrom (including attorney's fees and broker's commissions), Tenant shall pay to Landlord the amount of such deficiency upon demand and Tenant agrees that Landlord may file suit to recover sums failing due under this section from time to time;

v. Landlord may, at Landlord's option, enter into and upon the Leased Premises, with or without process of law, if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible hereunder and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage resulting therefrom and Tenant agrees to reimburse Landlord, on demand, as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease;

vi. Any and all property which may be removed from the Leased Premises by Landlord pursuant to the authority of the Lease or of law, to which Tenant is or may be entitled, may be handled, removed and stored, as the case may be, by or at the direction of Landlord at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Leased Premises shall, at Landlord's option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

In the event Tenant fails to pay any installment of rent, including any amount treated as additional rent hereunder, or other sums hereunder as and when such installment or other charge is due, Tenant shall pay to Landlord on demand a late charge in an amount equal to five percent (5%) of such installment or other charge overdue in any month and five percent (5%) each month thereafter until paid in full to help defray the additional cost to Landlord for processing such late payments, and such late charge shall be additional rent hereunder and the failure to pay such late charge within ten (10) days after demand therefor shall be an additional event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Leased Premises, and no agreement to terminate this Lease or accept a surrender of said premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Landlord's acceptance of the payment ofrental or other payments hereunder after the

occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or any subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate

for Landlord to employ or consult with an attorney concerning or to enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any attorney's fees so incurred.

Without limiting the foregoing, Tenant hereby: (i) expressly waives any right to trial by jury; and (ii) expressly waives the service of any notice under any existing or future law of the State of Illinois applicable to landlords and tenants.

Tenant hereby constitutes and irrevocably appoints any attorney of any court to be the true and lawful attorney of Tenant, and, in the name, place and stead of Tenant, to appear for and on behalf of Tenant in any court of record at any time in any suit or suits brought against Tenant for the enforcement of any right hereunder by Landlord, to waive the issuance and service of process and trial by jury, and, from time to time, to confess judgment or judgments in favor of Landlord and against Tenant for any rent, including any amounts treated as additional rent hereunder, other charges, and interest thereon due hereunder by Tenant to Landlord and not paid and for costs of suit and for a reasonable attorney's fee in favor of Landlord to be fixed by the court, and to release all errors that may occur or intervene in such proceedings, including the issuance of execution upon any such judgment, and to stipulate that no appeal shall be prosecuted from such judgment or judgments, or that no proceedings in chancery or otherwise shall be filed or prosecuted to interfere in any way with the operation of such judgment or judgments, or of any execution issued thereon or with any supplemental proceedings taken by Landlord to collect the amount of any such judgment or judgments, and to consent that execution on any judgment or decree in favor of Landlord and against Tenant may issue forthwith.

15. Landlord's Lien

In addition to any statutory lien for rent in Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a continuing security interest for all rentals and other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Leased Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged. In the event of a default under this Lease, Landlord shall have, in addition to any other remedies provided herein or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Paragraph 16 at public or private sale upon five (5) days' notice to Tenant. Tenant hereby agrees to execute such financing statements and other instruments necessary or desirable in Landlord's discretion to perfect the security interest hereby created. Any statutory lien for rent is not hereby waived, the express contractual lien herein granted being in addition and supplementary thereto.

16. Mortgages

Tenant accepts this Lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a first lien or charge upon the Property, or the improvements situated thereon, provided, however, that if the mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant's interest in this Lease superior to any such instrument, then by notice to Tenant from such mortgagee, trustee or holder, this Lease shall be deemed superior to such lien whether this Lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage or for the purpose of evidencing the superiority of this Lease to the lien of any such mortgage, as may be the case.

17. Landlord's Liability

In no event shall Landlord's liability for any breach of this Lease exceed the amount of rental then remaining unpaid for the then current term (exclusive of any renewal periods which have not then actually commenced). This provision is not intended to be a measure or agreed amount of Landlord's liability with respect to any particular breach, and shall not be utilized by any court or otherwise for the purpose of determining any liability of Landlord hereunder,

except only as a maximum amount not to be exceeded in any event.

18. Mechanics and Other Liens

Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Leased Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this Lease. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Leased Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Leased Premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, liability, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of Landlord in the Leased Premises or under the terms of this Lease. Tenant will not permit any mechanic's lien or liens or any other liens which may be imposed by law affecting Landlord's or its mortgagees' interest in the Leased Premises or the Building to be placed upon the Leased Premises or the Building arising out of any action or claimed action by Tenant, and in case of the filing of any such lien Tenant will promptly pay same. If any such lien shall remain in force and effect for twenty (20) days after written notice thereof from Landlord to Tenant, Landlord shall have the right and privilege of paying and discharging the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be so much additional rent hereunder due from Tenant to Landlord and shall be paid to Landlord immediately on rendition of bill therefor. Notwithstanding the foregoing, Tenant shall have the right to contest any such lien in good faith and with all due diligence so long as any such contest, or action taken in connection therewith, protects the interest of Landlord and Landlord's mortgagee in the Leased Premises, and Landlord and any such mortgagee are, by the expiration of said twenty (20) day period, furnished such protection, and indemnification against any loss, liability, cost or expense related to any such lien and the contest thereof as are satisfactory to Landlord and any such mortgagee.

19. Notices

Any notice pursuant to this Lease shall be given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, (d) legible facsimile transmission or (e) email transmission, in each case sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile or email transmission, as of the date of the transmission provided that such transmission is received by the intended addressee prior to 5:00 p.m. Chicago, Illinois time (and any transmission received from and after 5:00p.m., Chicago, Illinois time, shall be deemed received on the next business day). Notices given by Landlord's or Tenant's attorneys identified below shall be deemed to have been given by Landlord or Tenant, as the case may be. Unless changed in accordance with this Paragraph 19, the addresses for notices given pursuant to this Lease shall be as follows:

If to Tenant:

American Service Insurance Company, Inc.

c/o Atlas Financial Holdings, Inc.

150 Northwest Point Boulevard

Elk Grove Village, IL 60007

Attention: Scott Wollney

Fax No.: (847) 228-2580

Email: swollney@atlas-fin.com

with a copy to:

DLA Piper LLP (US)

203 North LaSalle Street, Suite 190

Chicago, Illinois 60601

Attention: Kimberlie Pearlman, Esq.

Fax No.: (312) 251-2162

Email: kimberlie.pearlman@dlapiper.com

If to Landlord:

150 Northwest Point LLC

c/o Topco Associates LLC

7711 Grosse Point Road

Skokie, IL 60077

Attention: Thomas Frey

Fax No.: (847) 676-5634

Email: tfrey@topco.com

with a copy to:

K&L Gates LLP

70 West Madison, Suite 3100

Chicago, Illinois 60602

Attention: Lawrence A. Eiben

Fax No.: (312) 827-1268

Email: larry.eiben@klgates.com

20. Miscellaneous

A. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

B. The terms, provisions and covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns, except as otherwise expressly provided herein. Landlord shall have the right to assign any of its rights and obligations under this Lease and Landlord's grantee or Landlord's successor shall upon such assignment, become "Landlord" hereunder, thereby freeing and relieving the grantor or assignor of all covenants and obligations of "Landlord" hereunder; provided, however, that no successor Landlord shall be responsible for the return of any security deposit provided for pursuant to Paragraph 2ii unless such successor receives the deposit. Tenant agrees to furnish promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of Tenant to enter into this Lease. Nothing herein contained shall give any other Tenant in the Building of which the Leased Premises is a part any enforceable rights either against Landlord or Tenant as a result of the covenants and obligations of either party set forth herein.

C. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof.

D. Tenant shall at anytime and from time to time within ten (10) business days after written request from Landlord execute and deliver to Landlord or any prospective Landlord or mortgagee or prospective mortgagee a sworn and acknowledged estoppel certificate, in form reasonably satisfactory to Landlord and/or Landlord's mortgagee or prospective mortgagee certifying and stating as follows: (i) this Lease has not been modified or amended (or if modified or amended, setting forth such modifications or amendments); (ii) this Lease (as so modified or amended) is in full force and effect (or if not in full force and effect, the reasons therefor); (iii) Tenant has no offsets or defenses to its performance of the terms and provisions of this Lease, including the payment of rent (or if there are any such defenses or offsets, specifying the same); (iv) Tenant is in possession of the Leased Premises if such be the case; (v) if an assignment of rents or Leases has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has received such assignment and agrees to be bound by the provisions thereof; and (vi) any other

accurate statements reasonably required by Landlord or its mortgagee or prospective mortgagee. It is intended that any such statement delivered pursuant to this subsection may be relied upon by any prospective purchaser or mortgagee and their respective successors and assigns and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant hereby irrevocably appoints Landlord or if Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant such estoppel certificate if Tenant fails to deliver the same within such ten (10) business day period and such certificate as signed by Landlord or Landlord's beneficiary, as the case may be, shall be fully binding on Tenant, if Tenant fails to deliver a contrary certificate within five (5) days after receipt by Tenant of a copy of the certificate executed by Landlord or Landlord's beneficiary, as the case may be, on behalf of Tenant.

E. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

F. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Lease shall survive the expiration or earlier termination of the term hereof, including without limitation, all payment obligations with respect to taxes and Operating Costs and all obligations concerning the condition of the premises. Upon the expiration or earlier termination of the term hereof, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary: (i) to repair and restore the Leased Premises as provided herein; and (ii) to discharge Tenant's obligation for unpaid taxes, Operating Costs or other amounts due Landlord, if any. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any security deposit held by Landlord shall be credited against the amount payable by Tenant under this subparagraph 21F.

G. If any clause, phrase, provision or portion of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable under applicable law, such event shall not affect, impair or render invalid or unenforceable the remainder of this Lease nor any other clause, phrase, provision or portion hereof, nor shall it affect the application of any clause, phrase, provision or portion hereof to other persons or circumstances, and it is also the intention of the parties to this Lease that in lieu of each such clause, phrase, provision or portion of this Lease that is invalid or unenforceable, there be added as a part of this Lease contract a clause, phrase, provision or portion as similar in terms to such invalid or unenforceable clause, phrase, provision or portion as may be possible and be valid and enforceable.

H. Submission of this Lease shall not be deemed to be a reservation of the Leased Premises. Landlord shall not be bound hereby until its delivery to Tenant of an executed copy hereof signed by Landlord, already having been signed by Tenant, and until such delivery Landlord reserves the right to exhibit and Lease the Leased Premises to other prospective tenants. Notwithstanding anything contained herein to the contrary, Landlord may withhold delivery of possession of the Leased Premises from Tenant until such time as Tenant has paid to Landlord the security deposit required by subparagraph 2B hereof, the first month's rent as set forth in subparagraph 2A hereof, and any sum owed pursuant to Paragraph 5 hereof.

I. Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to causes of any kind whatsoever which are beyond the control of Landlord.

J. Each of the parties (i) represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease; and (ii) indemnifies and holds the other harmless from any and all losses, liability, costs or expenses (including attorneys' fees) incurred as a result of an alleged breach of the foregoing warranty.

21. Substitution of Premises

At any time after date of execution of this Lease, Landlord may substitute for the Leased Premises, other

premises in the Development (the "new premises"), in which event the new premises shall be deemed to be the Leased Premises for all purposes under this Lease, provided: (i) the new premises shall be substantially similar to the Leased Premises in square footage and appropriateness for the use of Tenant's purposes; (ii) if Tenant is then occupying the Leased Premises, Landlord shall pay all reasonable expenses directly related to moving Tenant, its property and equipment to the new premises and such moving shall be done at such time and in such manner so as to cause the least inconvenience to Tenant; (iii) Landlord shall give to Tenant not less than ninety (90) days' prior written notice of such substitution; (iv) Landlord shall, at its sole cost, improve the new premises with improvements substantially similar to those located in the Leased Premises, and (v) Landlord shall reimburse Tenant for all costs ancillary to such move including but not limited to stationery, business card, changes in websites and other public materials referencing Tenant's address, filing fees for notice to regulatory bodies of the change of address, transition and service fees incurred to ensure a smooth transition of computer hardware and software applications.

22. Certain Rights Reserved To Landlord

Landlord reserves and may exercise the following rights without affecting Tenant's obligations hereunder:

A. to change the name or street address of the Building;

B. to install and maintain a sign or signs on the exterior of the Building;

C. to have access for Landlord and the other tenants of the Building to any mail chutes located on the Leased Premises according to the rules of the United States Post Office;

D. to designate all sources furnishing sign painting and lettering, ice, drinking water, towels, coffee cart service and toilet supplies, lamps and bulbs used on the leased premises, subject to any conditions set forth in the Aramark Contract;

E. to retain at all times pass keys to the Leased Premises;

F. to grant to anyone the exclusive right to conduct any particular business or undertaking in the Building, other than insurance or insurance related businesses;

G. to close the Building after regular working hours and on the legal holidays subject, however, to Tenant's right to admittance, under such reasonable regulations as Landlord may prescribe

from time to time, which may include by way of example but not of limitation, that persons entering or leaving the Building identify themselves to a watchman by registration or otherwise and that said persons establish their right to enter or leave the Building; and

H. to take any and all measures, including inspections, repairs, alterations, decorations, additions and improvements to the Leased Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Leased Premises or the Building or Landlord's interests, or as may be necessary or desirable in the operation of the Building.

I. to add, remove or modify buildings, roadways, walkways, landscaping, lakes, grading and other improvements in or to the Development.

Landlord may enter upon the Leased Premises and may exercise any or all of the foregoing rights hereby reserved without being deemed guilty of an eviction or disturbance of Tenant's use or possession and without being liable in any manner to Tenant and without abatement of rent or affecting any of Tenant's obligations hereunder.

23. Taxes.

A. Landlord agrees to pay all general and special taxes, assessments and governmental charges of any kind and

nature whatsoever (collectively "Taxes") lawfully levied against the Property, the Building, and the grounds, parking areas, driveways and alleys around the Building. If for any calendar year applicable to the Term (or any extension of such Term), the Taxes that are due and payable during such calendar year shall exceed the Taxes that were due and payable during the 2011 calendar year (subject to any later adjustments) ("Landlord's Share"), Tenant shall pay to Landlord as additional rent, upon demand at the time the bill for such tax year issues, Tenant's proportionate share of the amount of such excess applicable to each installment less any monthly payments paid by Tenant as provided below for such tax year.

B. During December of each year of the Term or as soon thereafter as practicable, Landlord shall give Tenant written notice of its estimate of amounts payable under subparagraph A above for the ensuing calendar year. On or before the first day of each month thereafter, Tenant shall pay to Landlord as additional rent one-twelfth (1/12th) of such estimated amount, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the prior year's estimate until the first day of the month after the month in which such notice is given. If at any time it appears to Landlord that the amounts payable under subparagraph A above for the then current calendar year will vary from its estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.

Within ninety (90) days after the close of each calendar year or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement showing the taxes under subparagraph A above and Tenant's proportionate share thereof. If such statement shows an amount due from Tenant that is less than the estimated payments previously paid by Tenant, it shall be accompanied by a refund of the excess to Tenant. If such statement shows an amount due from Tenant that is more than the estimated payments previously paid by Tenant, Tenant shall pay the deficiency to Landlord, as Additional Rent, within thirty (30) days after delivery of the statement.

"Tenant's proportionate share" as used in this Lease shall mean a fraction, the numerator of which is the gross leasable area of the Leased Premises and the denominator of which is the gross leasable area contained in the Building, in each case as reasonably determined by Landlord. For purposes hereof the numerator is 30,552 and the denominator is 176,844 and Tenant's "proportionate share" is 17.28%.

C. If at any time during the term of this Lease, the present method of taxation shall be changed so that in lieu of or in addition to the whole or any part of any taxes, assessments or governmental charges levied, assessed or imposed on real estate and the improvements thereon, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents for the present or any future building on the Property, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be included within the term "taxes" for the purposes hereof.

D. Any payment to be made pursuant to this Paragraph 23 with respect to the real estate tax year in which this Lease commences or terminates shall be prorated.

24. Operating Cost Escalation.

A. If, in any calendar year falling partly or wholly within the Term, Operating Costs (as hereinafter defined) paid or incurred by Landlord shall exceed the Operating Costs for the 2011 calendar year, Tenant shall pay upon demand to Landlord for such year as additional rent Tenant's proportionate share of such excess. Any payment to be made pursuant to this Paragraph 24 with respect to the year in which this Lease commences or terminates shall be prorated.

As used in this Lease, the term "Operating Costs" shall mean any and all expenses, costs and disbursements (other than taxes) of any kind and nature whatsoever incurred by Landlord in connection with the ownership, leasing, management, maintenance, operation, cleaning and repair of the Building or the Property or any improvements situated on the Property (including, without limitation, the costs of maintaining and repairing parking lots, parking structures, and easements, the costs of maintaining, repairing and providing utilities to the Shared

Areas, property management fees, increased interest costs as specified below, salaries, fringe benefits and related costs, for building staff, janitorial services for the Building and Property, waste hauling and disposal, insurance costs of every kind and nature, heating and air conditioning costs, common area utility costs such as electricity, sewer and water charges, the costs of routine repairs, maintenance and decorating, and the Building's or Property's share of costs of the Development, and the Building's or Property's share of the costs payable under the parking garage easement) which Landlord shall pay or become obligated to pay in respect of a calendar year (regardless of when such operating costs were incurred), except the following: (i) costs of alterations of Tenants' premises; (ii) costs of capital improvements, (except that Operating Costs shall include the costs of any capital improvements which are required by any law, code, regulation or ordinance enacted after the Effective Date or which are intended to reduce Operating Costs); (iii) depreciation; (iv) interest and principal payments on mortgages, and other debt costs (but any cost due to an increase in the interest rate over the initial rate on the original long term first lien mortgage shall be included); (v) real estate brokers' leasing commissions or compensation; (vi) any cost or expenditure (or portion thereof) for which Landlord is reimbursed, whether by insurance proceeds or otherwise, and (vii) cost of any service furnished to any other occupant of the Building which Landlord does not provide to Tenant hereunder. Notwithstanding anything contained herein to the contrary, depreciation of any capital improvements made after the date of this Lease which are intended to reduce Operating Costs or which are required under any governmental laws, regulations, or ordinances which were not applicable to the Building at the time it was constructed, shall be included in Operating Costs. The useful life of any such improvement shall be reasonably determined by Landlord. In addition, interest on the undepreciated cost of any such improvement (at the prevailing construction loan rate available to Landlord on the date the cost of such improvement was incurred) shall also be included in Operating Costs. In the event Landlord elects to self insure, insure with a deductible in excess of $1,000 or obtain insurance coverage in which the premium fluctuates in proportion to losses incurred, then Landlord shall estimate the amount of premium that Landlord would have been required to pay to obtain insurance coverage (or insurance coverage without such provision) with a recognized carrier and such estimated amount shall be deemed to be an Operating Cost. Landlord may, in a reasonable manner, allocate insurance premiums for so-called "blanket" insurance policies which insure other properties as well as the Building and said allocated amount shall be deemed to be an Operating Cost.

In the event during all or any portion of any calendar year the Building is not fully rented and occupied, Landlord may elect to make an appropriate adjustment in Operating Costs for such year, employing sound accounting and management principles, to determine Operating Costs that would have been paid or incurred by Landlord had the Building been fully rented and occupied and the amount so determined shall be deemed to have been Operating Costs for such year.

Landlord and Tenant acknowledge that certain of the costs of management, operation and maintenance of the Development are contractually allocated among all of the buildings in the Development using methods of allocation that are considered reasonable and appropriate for the circumstances. Tenant hereby consents to such contractual allocations provided that the determination of such costs and the allocation of all or part thereof to Operating Costs hereunder shall be in accordance with generally accepted accounting principles applied on a consistent basis.

B. During December of each year or as soon thereafter as practicable, Landlord shall give Tenant written notice of its estimate of amounts payable under subparagraph A above for the ensuing calendar year. On or before the first day of each month thereafter, Tenant shall pay to Landlord as additional rent one-twelfth (I!12th) of such estimated amounts, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the prior year's estimate until the first day of the month after the month in which such notice is given. If at any time it appears to Landlord that the amounts payable under subparagraph A above for the then current calendar year will vary from its estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.

Within ninety (90) days after the close of each calendar year or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement showing the Operating Costs under subparagraph A above and Tenant's proportionate share thereof. If such statement shows an amount

due from Tenant that is less than the estimated payments previously paid by Tenant, it shall be accompanied by a refund of the excess to Tenant. If such statement shows an amount due from Tenant that is more than the estimated payments previously paid by Tenant, Tenant shall pay the deficiency to Landlord, as additional rent, within thirty (30) days after delivery of the statement.

C. Tenant or its representatives shall have the right to examine Landlord's books and records of Operating Expenses during normal business hours within twenty (20) days following the furnishing of the statement to Tenant. Unless Tenant takes written exception to any item within thirty (30) days following the furnishing of the statement of Tenant, such statement shall be considered as final and accepted by Tenant. The taking of exception to any item shall not excuse Tenant from the obligation to make timely payment based upon the statement as delivered by Landlord.

25. Data Center.

Subject to terms and conditions hereof, Tenant shall have shared access to the Data Center located on the 4th floor and operated by Landlord. Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of the total Data Center Costs for any calendar year falling partly or wholly within the Term. The "Data Center Costs" shall include all costs and expenses related to the ownership, repairs, maintenance and operation of the Data Center, including, without limitation, the Data Center's proportionate share (based on square footage of Data Center as a percentage of the total square footage of occupied areas of the Building) of the Taxes and insurance costs for the Building, electrical and other utility costs as reasonably allocated to the Data Center by Landlord, the costs of the maintenance and operation of the climate control systems (HVAC) maintenance, fire suppression system and electrical power distribution systems (collectively, the "Systems"), and the costs of any capital repairs or mutually agreed improvements to the portions of the Building elements and/or Systems that exclusively serve the Data Center and that are shared or benefit both Landlord and Tenant, provided that such capital repairs, replacements and improvements shall be amortized over the useful life (in accordance with GAAP) and only the amortized costs of such capital repairs, replacements and improvements shall be included as Data Center Costs. The Data Center Costs shall be calculated separately by Landlord and included as a separate charge either on the statement of Operating Costs or by separate invoice and shall be paid by Tenant in the same manner as the Operating Costs, however, Tenant shall be responsible for fifty (50%) of the entire portion of the Data Center Costs (not just increases over a base year). Any payment to be made pursuant to this Paragraph 25 with respect to the year in which this Lease commences or terminates shall be prorated. Landlord, at its sole discretion, shall have the right to allow other tenants or occupants of the Building to utilize the Data Center and in such event the percentage of Data Center Costs to be shared by Tenant, Landlord and the other users shall be prorated on a basis that is mutually agreed upon by Landlord and Tenant.

26. Exhibits.

The Exhibits attached hereto shall form part of this Lease as if the same were embodied herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

EXECUTED 22nd DAY OF MAY , 2012

LANDLORD:

150 NORTHWEST POINT LLC

By: TOPCO ASSOCIATES

Its SOLE MEMBER

By:         /s/ Thomas Frey

Name:        Thomas Frey

Title:        Senior Vice President & CFO

TENANT:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation

By:         /s/ Scott D. Wollney

Name:         Scott D. Wollney

Title:        President & CEO

EXHIBIT A

LEASED PREMISES

(to be attached)

EXHIBIT B

PROPERTY

DESCRIPTION OF LAND

PARCEL 1:

LOT 1 IN THE FINAL PLAT OF RESUBDIVISION OF LOT 7 IN THE PARK AT NORTHWEST POINT, BEING A SUBDIVISION OF PART OF THE NORTHEAST 1/4 OF SECTION 2I, TOWNSHIP 4I NORTH, RANGE II EAST OF THE THIRD PRINCIPAL MERIDIAN ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 6, 2001 AS DOCUMENT 00 I 0828531, IN COOK COUNTY, ILLINOIS.

PARCEL2:

PERPETUAL EASEMENTS IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS RECORDED ON OCTOBER 15, 200I AS DOCUMENT NUMBER 0010957201, AS AMENDED BY FIRST AMENDMENT RECORDED AS DOCUMENT NO. OOII148327, SECOND AMENDMENT DATED OCTOBER 3I, 2003, THIRD AMENDMENT RECORDED AS DOCUMENT NO. 06I2222161, MADE BY PNWP, LLC, A COLORADO LIMITED LIABILITY COMPANY, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

(I) NON-EXCLUSIVE EASEMENT FOR VEHICULAR AND PEDESTRIAN ACCESS, INGRESS AND EGRESS ON, OVER AND ACROSS THOSE PORTIONS OF ANY PRIVATE ROADS OR DRIVES AND WALKWAYS AS SET FORTH THEREIN;

(II) NON-EXCLUSIVE EASEMENT FOR ACCESS, INGRESS AND EGRESS BY EMERGENCY VEHICLES AND PERSONNEL ON, OVER AND ACROSS PRIVATE ROADS OR DRIVES OVER THE BUILDING 50 PROPERTY, SUBJECT TO ANY RELOCATION RIGHTS DESCRIBED THEREIN;

(III) NON-EXCLUSIVE EASEMENT FOR UTILITIES ON, OVER AND THROUGH THE BUILDING 50 PROPERTY, AND FOR THE USE, MAINTENANCE, REPAIR AND REPLACEMENT OF SUCH UTILITIES, AND EACH OWNER AGREES FOR THE BENEFIT OF EACH OTHER OWNER TO GRANT SUCH UTILITY EASEMENTS;

(IV) EXCLUSIVE EASEMENT FOR VEHICULAR PARKING ON, OVER AND ACROSS 20I PARKING SPACES IN THE COMMON GARAGE AND 15 SPACES OF SURFACE PARKING ON THE BUILDING 50 PROPERTY;

(V) NON-EXCLUSIVE EASEMENT WITH RESPECT TO THE BUILDING 50 PROPERTY GENERALLY ON AND OVER THE AREA SHOWN ON THE SITE PLAN AS THE COMMON GARAGE TO CONSTRUCT, USE, OPERATE, MAINTAIN, REBUILD, AND REPLACE THE COMMON GARAGE IN ACCORDANCE WITH THE TERMS OF THE DECLARATION;

(VI) NON-EXCLUSIVE EASEMENT FOR THE PURPOSE OF PASSING STORM WATER DRAINAGE FROM THE BUILDING 150 PROPERTY ON SURFACE OR OVER AND THROUGH THE STORM DRAINAGE PIPES AND SYSTEM NOW OR HEREAFTER CONSTRUCTED ON THE BUILDING 50 PROPERTY AND THE RIGHT TO ENTER ONTO THE BUILDING 50 PROPERTY TO CONSTRUCT AND REPLACE THE NECESSARY STORM DRAINAGE PIPES AND SYSTEM TO CARRY SUCH WATER;

(VII) NON-EXCLUSIVE EASEMENT TO USE AND MAINTAIN TRASH DUMPSTERS AND RELATED EQUIPMENT ON THE BUILDING 50 PROPERTY;

(VIII) NON-EXCLUSIVE EASEMENT FOR THE USE OF THE BUILDING 150 LOADING SPACES LOCATED ON THE BUILDING 50 PROPERTY.

PARCEL 3:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL I NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS DATED DECEMBER 30, 1982 RECORDED ON FEBRUARY 3, 1983 AS DOCUMENT NUMBER 26495247, AS AMENDED BY FIRST AMENDMENT RECORDED AS DOCUMENT NO. 88197029, SECOND AMENDMENT RECORDED AS DOCUMENT NO. 98240102, THIRD AMENDMENT REOCRDED AS DOCUMENT NO. 98240102, ASSIGNMENT AND ASSUMPTION TO MGA DEVELOPMENT ASSOCIATES, L.P. RECORDED AS DOCUMENT NO. 98240104 AND DESIGNATION OF BUILDING SITE RECORDED AS DOCUMENT NO. 0011148328, BY LASALLE NATIONAL BANK, NOT PERSONALLY OR INDIVIDUALLY, BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 5, 1980 AND KNOWN AS TRUST NO. 102000, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

FOR INGRESS AND EGRESS OVER, UNDER, ACROSS, IN AND UPON THE PROPERTY AND TO PROVIDE REASONABLE AND NECESSARY ACCESS TO COMMON PROPERTIES AND FOR THE PURPOSE OF PERFORMING THE CONSTRUCTION, INSTALLATION, MAINTENANCE, OR REPAIR OF SUCH COMMON PROPERTIES AND THE RIGHT TO USE AND ENJOY THE COMMON PROPERTIES.

PARCEL 4:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL I NOTED IN AN EASEMENT AGREEMENT DATED SEPTEMBER 10, 1987 AND RECORDED SEPTEMBER 11, 1987 AS DOCUMENT NO. 87499181 BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER THE PROVISIONS OF A TRUST AGREEMENT DATED MARCH 15, 1980 AND KNOWN AS TRUST NO. 102000, LASALLE NATIONAL BANK, AS TRUSTEE UNDER THE PROVISIONS OF A TRUST AGREEMENT DATED OCTOBER 28, 1983 AND KNOWN AS TRUST NO. 107201 AND NORTHWEST POINT ASSOCIATION, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, FOR THE FOLLOWING PURPOSES AS DEFINED THEREIN:

FOR DEVELOPMENT, CONSTRUCTION, INSTALLATION, MAINTENANCE, REPLACEMENT AND REPAIR OF LANDSCAPING AND RELATED IMPROVEMENTS (INCLUDING, WITHOUT LIMITATION, SPRINKLER SYSTEMS) AND INGRESS AND EGRESS TO THE EASEMENT PARCEL.

PINs: 08-21-202-082-0000

Address: 150 Northwest Point Boulevard, Elk Grove Village, Illinois

Exhibit C

Form of Letter of Credit

150 Northwest Point, LLC

7711 Gross Point Road

Skokie, IL 60077-2697

ATTN: Ray Nicholus

150 Northwest Point, LLC:

DATE OF EXPIRATION: _________, 2013

We hereby open our Irrevocable Standby Letter of Credit in your favor available by your drafts drawn on NAME OF TENANT'S BANK at sight for any sums not exceeding in total FOUR HUNDRED EIGHTY FIVE THOUSAND AND N0/100 ($485,000.00) U.S. Dollars for account of American Service Insurance Company, Inc. Drafts must be accompanied solely by Beneficiary's written statement on its letterhead signed by a purported officer reading: "American Service Insurance Company, Inc. has failed to comply with one or more of the terms and conditions of the Lease Agreement between American Service Insurance Company, Inc., as Tenant, and 150 Northwest Point, LLC, as landlord, for the premises leased to such Tenant located at 150 Northwest Point Boulevard, Elk Grove Village, Illinois."

We hereby engage with you that draft(s) drawn under and in compliance with the terms of this credit will be duly honored at time of presentation and delivery of documents as specified at this office on or before the EXPIRATION DATE, or any extended EXPIRATION DATE if applicable.

It is a condition of this Letter of Credit that it shall be deemed automatically extended without amendment for one year from the present or any future EXPIRATION DATE unless at least sixty (60) days prior to such EXPIRATION DATE, we notifY you in writing by certified mail or express courier that we elect not to renew this Letter of Credit for any such additional one year period. In the event that we elect not to renew this Letter of Credit and American Service Insurance Company, Inc. does not provide Beneficiary with a replacement letter of credit on the same terms and conditions as this Letter of Credit then Beneficiary may draw on this Letter of Credit in the manner set forth in paragraph 1 herein.

Notwithstanding any provision of the Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC publication No. 600 (including Articles 29 and 36), if this office is for any reason (including without limitation a force majeure event or otherwise) closed on the last business day for presentation hereunder, then the EXPIRATION DATE is automatically extended to the day occurring thirty (30) days after this office re-opens for business. Until this office shall re-open for business: (i) we may authorize another reasonable place in the United States for presentation, by notice to you in writing by certified mail or express courier, at which you may draw upon this Letter of Credit, in which case the EXPIRATION DATE shall be no later than 30 days after your receipt of such notice, or (ii) you may elect, at your option, to draw upon this Letter of Credit at any office of the NAME OF TENANT'S BANK in the United States at which letters of credit are issued or at the NAME OF TENANT'S BANK chief executive office in the United States.

Draft(s) must be marked "Drawn on NAME OF TENANT'S BANK Irrevocable Standby Letter of Credit No. XXXXXX."

Partial Drawings are Allowed.

This credit is subject to the "Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC publication No. 600"

EX-14

EXHIBIT 14

Atlas Financial Holdings, Inc.

Code of Business Conduct & Ethics

1.    INTRODUCTION

Our goal at Atlas Financial Holdings Inc. is to achieve the highest business and personal ethical standards as well as to comply with all laws and regulations that apply to our business. Adherence to the standards contained in this Code will help to ensure decisions that reflect care for all of our stakeholders. This Code of Business Conduct and Ethics (the "Code") is intended as an overview of the Company's guiding principles and not as a restatement of Company policies and procedures.

Ethical business behavior is the responsibility of every member of the Company’s team and is reflected not only in our relations with each other but also with our policyholders, other organizations, suppliers, competitors, government and the public. Whatever the area of activity and whatever the degree of responsibility, the Company expects each employee to act in a manner that will enhance its reputation for honesty, integrity and the faithful performance of its undertakings and obligations.

This Code cannot and is not intended to cover every applicable law or provide answers to all questions that might arise; for that we must ultimately rely on each person's good sense of what is right, including a sense of when it is proper to seek guidance from others on the appropriate course of conduct. Because our business depends upon the reputation of the Company and its directors, officers and employees for integrity and principled business conduct, in many instances this Code goes beyond the requirements of the law.

Employees should refer to policies contained in the HR Manual/Employee Handbook (hereinafter, the "Employee Manual"), for a description of the policies and required reporting procedures applicable to them. This Code is a statement of goals and expectations for individual and business conduct. It is not intended to and does not in any way constitute an employment contract or assurance of continued employment, and does not create any rights in any employee, client, supplier, competitor, shareholder or any other person or entity.

2.    WHO IS COVERED

This Code applies to all officers and employees of Atlas Financial Holdings, Inc. This Code also applies to all outside directors with respect to their Atlas related activities. Any reference in this Code to “Atlas” refers to Atlas Financial Holdings, Inc. Any reference to “employees” refers to directors, officers and employees of Atlas Financial Holdings, Inc.

3.    DIRECTOR, OFFICER AND EMPLOYEE OBLIGATIONS

It is the obligation of each and every director, officer and employee of Atlas to become familiar and comply with the policies and procedures of the Company and integrate

them into every aspect of our business. All employees are expected to observe all applicable laws and adhere to the highest ethical standards in all matters dealing with the Company.

4.    CONFLICTS OF INTEREST

Directors, officers and employees of Atlas have a duty of loyalty to the Company, and must therefore avoid any actual, perceived or potential conflict of interest with the Company. A conflict situation can arise when a director, officer or employee takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest also arise when a director, officer or employee, or a member of his or her family i.e. spouse, common-law spouse, child, stepchild, sibling, parent, sister or brother-in-law, grandparent, grandchild, or any variation of such relationships, receives improper personal benefits as a result of his or her position in the Company.

In exercising our responsibilities, it is vital that we be guided by what is in the best interests of the Company and those clients with whom we have business relationships. All of our employees are required to conduct their personal and business affairs in such a way so as to avoid conflicts with the interests of the Company, its shareholders, brokers, policyholders and its customers.

It is each employee’s responsibility to ensure that his or her personal conduct complies with the following principles and to make appropriate disclosures when actual or potential conflicts may arise. Although the principles below are discussed in terms of the employees of the Company, each of us must also exercise care to avoid actual, perceived or potential conflicts of interest which might arise because of the activities of our family members or other members of our household.

1. Employees may not use their affiliation with the Company for personal benefit.

Examples of such prohibited activities include:

Employees receiving remuneration, gifts, entertainment or other compensation of a material nature from any entity performing work or services for the Company or from any entity which is seeking to do business with the Company. Gifts or favors that are generally considered as common business or social courtesies are acceptable only as long as they are reasonable and customary in type, frequency and value such as a luncheon or dinner.

Employees having a financial interest in an entity that sells goods or services to the Company where the employee is able to influence the Company’s business transactions with that entity.

Employees using, for their own personal gain or for the benefit of others, any confidential or “inside” information obtained as a result of their employment with the Company.

Employees misappropriating to themselves or to others the benefit of any business venture or opportunity about which the employees learn or develop in the course of their employment and which is related to a current or prospective business of the Company.

2. Employees may not be employed by or affiliated with a competitor.

Serving as a director, officer, employee, partner, consultant, agent of, or having a significant ownership interest in, an organization, which competes with any function within the Company, violates your duty of loyalty to the Company and is prohibited.

3. Directors, officers and employees have a responsibility to disclose actual, perceived or potential conflicts or any activity that appears to be in conflict with policy or procedure.

Determining whether you have a conflict and, if so, what to do about it can be difficult and no set of guidelines or statement of principles, however comprehensive and detailed, can hope to cover all situations or address every question of judgment. Employees are, therefore, required to disclose all actual, perceived or potential conflicts. If you have any doubt about your disclosure obligations in a particular situation, the best course is to consult with your Manager or Supervisor or the senior executive of the Company or subsidiary. The Chief Executive Officer and members of the Board of Directors must report any such circumstances to the Audit Committee.

5.    USE OF INFORMATION

The insurance business, like other service industries, is based on the collection, organization, evaluation and preservation of information about individuals, organizations and the world at large. To provide the highest quality services to our policyholders and customers, we must be efficient in gathering and storing information, be thorough in our analysis of information collected, and be creative in generating new information. Our ability to remain competitive requires both our willingness and alertness to share information within our organization and our awareness that certain types of information must be protected from disclosure. It is especially important to maintain our reputation by safeguarding information entrusted to us by our policyholders, customers and fellow employees; it is also a legal requirement in many cases. Please refer to Atlas’s Privacy Policy.

As an employer, the Company maintains personnel records for every employee.

Access to this information is limited within the Company, and is generally released to those outside of the Company only if required by law. Preserving the confidentiality of such information is necessary for creation of a productive and comfortable work environment.

6.    CONFIDENTIALITY OF INFORMATION

Our policyholders and customers provide us with confidential and/or personal information about themselves, their families and their business operations (where applicable). The Company will only collect and maintain information for legal and business reasons. This means that only those employees and outside governmental authorities and regulators with legitimate reasons to know should have access to such information.

Employees must adhere to applicable laws for maintaining, updating, disclosing and verifying such confidential information. Employees are also expected to comply with departmental policies and procedures relating to the retention and orderly destruction of records and documents (Refer to the Records Retention Section in this document).

All employees must be aware of the consequences of intentionally or inadvertently revealing such information and recognize that the use of confidential information obtained in the course of our employment for any personal benefit is strictly forbidden. Specific areas in which preventing disclosure or use of confidential information are especially important include personal medical records, financial data for a business entity, and claims investigative, litigation and settlement information.

7.    CONFIDENTIALITY OF INTELLECTUAL PROPERTY

Confidential business information and practices can be defined as information used in trade or business which gives the owner a competitive advantage and which is not generally known to the public. If the owner fails to adequately protect the information or matter, it may lose its confidential status. Such business information and practices could include software code, customer lists or a new invention that is yet to be patented.

Sometimes you may encounter such business information and/or practices in the course of evaluating a service provided to, or a service or product received from a policyholder, customer or vendor. You may be responsible for the loss of such information and/or practice if you reveal it to others, even fellow Company employees, who do not need to know this proprietary information. Both the Company and the employee may be held liable for financial losses to the owner of the business information or practice.

At times you may develop confidential business information and/or practices in the course of your employment. This information is the property of the Company.

Confidential business information and practices of the Company must be identified as such when revealed to outside parties so the recipient is aware he or she should not pass them on further. Before the release of proprietary information to a third party the appropriate confidentiality and non-disclosure agreements should be in place.

If confidential business information and practices are revealed to you during the course of your employment with the Company, you must protect the information even after you stop working for the Company. The Company will take whatever steps it deems appropriate, including legal action, to protect such business information and practices from unauthorized disclosure or use by current or former employees.

8.    CORPORATE OPPORTUNITIES

No director, officer or employee may: (a) take for himself or herself personally opportunities that are discovered through the use of Company property, information or position; (b) use Company property, information or position for personal gain; or (c) compete with the Company. Directors, officers and employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.

9.    USE OF INSIDE INFORMATION (INSIDER TRADING)

It is the Company's goal to protect shareholder investments through strict enforcement of the prohibition against insider trading set forth in provincial (OSC), state (NYSE) or federal (SEC) securities laws and regulations. No director, officer or employee may buy or sell securities of Atlas at a time when in possession of "material non-public information. Passing such information to someone who may buy or sell securities is also prohibited. The prohibition on insider trading applies to Atlas’s securities and to securities of other companies if the director, officer or employee learns of material non-public information about those other companies in the course of his or her duties for Atlas. This prohibition also extends to certain non-employees who may learn about the "material non-public information" about the Company such as spouses, relatives, and close friends of directors, officers or employees. Insider trading is both unethical and illegal and will be dealt with firmly. If you have any questions in connection with whether or not a trade in the company shares is permitted at any particular time, please contact the Audit

Committee.

10.    FAIR DEALING

Each director, officer and employee shall endeavor to deal fairly and in good faith with Atlas customers, shareholders, employees, suppliers, regulators, business partners, competitors and others. No director, officer or employee shall take unfair advantage of anyone through manipulation, concealment, abuse of privileged or confidential information, misrepresentation, fraudulent behavior or any other unfair dealing practice.

11.    ANTI-RETALIATION

Atlas prohibits any retaliation against an employee who makes a good-faith report of perceived violations of this Code or the law or anyone who assists in a Company investigation.

If you believe that you have been subjected to any form of retaliation you should report the matter through one of the channels described in this policy. However, any person making a report in bad faith will be subject to disciplinary action up to and including discharge.

12.    PROTECTION AND USE OF COMPANY ASSETS

Company assets, such as information, materials, supplies, time, intellectual property, software, hardware, and facilities, among other property, are valuable resources owned, licensed, or otherwise belonging to the Company. Safeguarding Company assets is the responsibility of all directors, officers and employees. All Company assets should be used for legitimate business purposes. The personal use of Company assets without permission is prohibited.

Employees are expected to use Company equipment and materials (e.g. telephones, computers, software and photocopiers) for Company business only. All Company equipment and materials are dedicated for business use only and the Company reserves the right to monitor and investigate usage of Company equipment and materials at its discretion.

Employees should not use Company resources for personal benefit or to benefit persons or entities outside the Company. In certain circumstances, the Company may approve of the use of particular corporate resources for charitable or community purposes.

Employees must maintain accurate records and abide by corporate policies concerning reimbursable expenses, and eligibility for all Company benefits, including sick leave, education and disability payments.

13.    OFFERING OF GIFTS

Employees may not make payments or give gifts (other than gifts of nominal value that are generally considered as common business or social courtesies such as lunches, dinners, attendance at sporting events) to government workers or outside suppliers in order to influence regulatory or business decisions. The Company has established internal control procedures to ensure that assets are protected and properly used, and that financial records and reports are accurate and reliable. Employees and supervisors share the responsibility for maintaining and complying

with required internal controls.

The Company’s success relies upon the integrity of all of its employees. The Company has instituted a comprehensive set of procedures, rules and controls to prevent fraud and dishonesty and it will take all action necessary and appropriate to enforce these policies and procedures.

14.    ACCOUNTING PRACTICES

It is the policy of Atlas to fully and fairly disclose the financial condition of the Company in compliance with applicable accounting principles, laws, rules and regulations. All books and records of Atlas shall be administered in such a way, as to fully and fairly reflect all Company transactions.

15.    RECORDS RETENTION

Officers and employees are expected to become familiar with the Company's policies regarding records retention applicable to them and to strictly adhere to those procedures. Records may not be destroyed except in accordance with the applicable records retention policy. If you have any questions in this regard, do not hesitate to contact your supervisor.

16.    COMPLIANCE WITH LAWS, RULES & REGULATIONS

As an insurance provider, the Company is subject to a myriad of laws and regulations on how we must conduct our business. Many of these laws are designed to protect consumers in situations where it is perceived that a business because of size, resources or expertise is able to unfairly control or influence customer decisions. It is critically important that both the Company and its employees comply with the letter and spirit of the laws, which regulate the conduct of our business.

All aspects of Company business are impacted by compliance requirements for example, sales, underwriting, claims, human resources, actuarial, accounting and financial reporting, financial services, investments, and governmental relations. Employees must be aware of the applications of the laws that affect the performance of their jobs and must carry out their job responsibilities in a manner that ensures that the Company is in compliance with external statutory, regulatory and industry requirements.

Atlas takes a proactive stance on compliance with all applicable laws, rules, and regulations, including insider trading laws and applicable anti-trust laws. In addition, the Company requires that its directors, officers and employees comply with the policies set out from time to time in the Employee Manual.

17.    COMMUNICATING WITH REGULATORS AND OTHERS

In the event that an inquiry from a regulator is received the employee must contact the Atlas Audit Committee. All requests from regulators should be responded to in a candid, accurate manner. Employees must not conceal, destroy or alter any documents or information. If an Atlas employee is served with a subpoena they must notify the Atlas Audit Committee immediately by telephone.

18.    DUTY TO REPORT AND CONSEQUENCE

Every director, officer and employee has a duty to adhere to this Code of Business Conduct and Ethics and all existing Company policies and to report to the Company any suspected violations in accordance with applicable procedures.

Employees shall report suspected violations of Company policies by following the reporting procedures for that specific policy as identified in the Employee Manual. All other suspected violations of the Code must be reported to the designated Compliance or Privacy Officer. The Company will investigate any matter so reported and take appropriate disciplinary and corrective action, up to and including prosecution and termination of employment. The Company forbids retaliation against employees who report violations of this Code of Business Conduct and Ethics in good faith.

19.    SCOPE

This Code does not supersede, change or alter the existing Company policies and procedures already in place as stated in the Employee Manual and communicated to Company employees. Certain policies referred to herein are contained in their entirety in the Employee Manual, and Company employees are instructed to refer to this manual for a copy of those policies and required reporting procedures.

No Company policy can provide definitive answers to all questions. If employees have questions regarding any of the goals, or standards discussed or policies referenced in this Code or are in doubt about the best course of action in a particular situation, the employee should refer to the reporting requirements for that particular goal or standard as stated in the Code, or the reporting requirements for policies as stated in the Employee Manual and contact the person or party designated.

Employees must promptly report any violation of the Code to their Manager or

Corporate Compliance/Privacy Officer.

20.    CONTACT US

Requests for further information should be referred to the Atlas Audit Committee:

Jordan Kupinsky

Atlas Audit Committee Chairman c/o JJR Capital Corporation

5 Hazelton Avenue, Suite 300

Toronto, ON M5R 2E1

Telephone# (416) 972-6574

EX-16

EXHIBIT 16

Ontario Securities Commission

British Columbia Securities Commission

Alberta Securities Commission

Dear Sirs and Mesdames:

RE: Atlas Financial Holdings, Inc. (the "Company")- Notice of Change of Auditor

We have read the Notice of Change of Auditor of the Company dated May 17, 2011 (the "Notice") and are in agreement with the statements contained in the Notice, except that we have no basis to agree or disagree with the statement regarding the Audit Committee approval of nomination of Johnson Lambert & Co. LLP as auditor of the company.

Yours very truly,

/s/KPMG LLP Chicago, Illinois

May 17, 2011

EX-21

Exhibit 21

ATLAS FINANCIAL HOLDINGS, INC

LIST OF SUBSIDIARIES

Name	State of Jurisdiction/Organization
American Country Insurance Company, Inc.	Illinois
American Service Insurance, Inc.	Illinois
American Insurance Acquisition Inc.	Delaware
Camelot Services, Inc.	Missouri
Gateway Insurance Company	Missouri

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption "Experts" and to the use in Amendment No. 3 to the Registration Statement on Form S-1 of our reports dated March 26, 2012 relating to the consolidated financial statements and financial statement schedules of Atlas Financial Holdings, Inc.

/s/ Johnson Lambert LLP

(except for Note 18, as to which the date is January 17, 2013)

EX-99.1

AUDIT COMMITTEE CHARTER

NAME

There shall be a committee of the board of directors (the “Board”) of Atlas Financial Holdings, Inc. (the “Company”) known as the Audit Committee.

PURPOSE OF AUDIT COMMITTEE

The Audit Committee has been established to assist the Board in fulfilling its oversight responsibilities with respect

to the following principal areas:

(a) the Company's external audit function; including the qualifications, independence, appointment and

oversight of the work of the external auditors;

(b) the Company's accounting and financial reporting requirements;

(c) the Company's reporting of financial information to the public;

(d) the Company's compliance with law and regulatory requirements;

(e) the Company's risks and risk management policies;

(f) the Company's system of internal controls and management information systems; and

(g) such other functions as are delegated to it by the Board.

Specifically, with respect to the Company's external audit function, the Audit Committee assists the Board in

fulfilling its oversight responsibilities relating to: the quality and integrity of the Company's financial statements; the

independent auditors' qualifications; and the performance of the Company's independent auditors.

MEMBERSHIP

The Audit Committee shall consist of as many members as the Board shall determine but, in any event not fewer

than three directors appointed by the Board. Each member of the Audit Committee shall continue to be a member

until a successor is appointed, unless the member resigns, is removed or ceases to be a director of the Company.

The Board may fill a vacancy that occurs in the Audit Committee at any time.

Members of the Audit Committee shall be selected based upon the following and in accordance with applicable

laws, rules and regulations:

(a) Financially Literate. Each member shall be financially literate or must become financially literate within

a reasonable period of time after his or her appointment to the Audit Committee. For these purposes, an

individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company's financial statements.

CHAIR AND SECRETARY

The Chair of the Audit Committee shall be designated by the Board. If the Chair is not present at a meeting of the

Audit Committee, the members of the Audit Committee may designate an interim Chair for the meeting by majority vote of the members present. The Secretary of the Company shall be the Secretary of the Audit Committee, provided that if the Secretary is not present, the Chair of the meeting may appoint a secretary for the meeting with the consent of the Audit Committee members who are present. A member of the Audit Committee may be designated as the liaison member to report on the deliberations of the Audit Committees of affiliated companies (if applicable).

MEETINGS

The Chair of the Audit Committee, in consultation with the Audit Committee members, shall determine the schedule and frequency of the Audit Committee meetings provided that the Audit Committee will meet at least four times in each fiscal year and at least once in every fiscal quarter. The Audit Committee shall have the authority to convene additional meetings as circumstances require.

Notice of every meeting shall be given to the external and internal auditors of the Company, and meetings shall be convened whenever requested by the external auditors or any member of the Audit Committee in accordance with applicable law. The Audit Committee shall meet separately and periodically with management, legal counsel and the external auditors. The Audit Committee shall meet separately with the external auditors at every meeting of the Audit Committee at which external auditors are present.

MEETING AGENDAS

Agendas for meetings of the Audit Committee shall be developed by the Chair of the Audit Committee in consultation with the management and the corporate secretary, and shall be circulated to Audit Committee members as far in advance of each Audit Committee meeting as is reasonable.

RESOURCES AND AUTHORITY

The Audit Committee shall have the resources and the authority to discharge its responsibilities, including the authority, in its sole discretion, to engage, at the expense of the Company, outside consultants, independent legal counsel and other advisors and experts as it determines necessary to carry out its duties, without seeking approval of the Board or management.

The Audit Committee shall have the authority to conduct any investigation necessary and appropriate to fulfilling its responsibilities, and has direct access to and the authority to communicate directly with the internal and external auditors, the counsel of the Company and other officers and employees of the Company.

The members of the Audit Committee shall have the right for the purpose of performing their duties to inspect all the books and records of the Company and its subsidiaries and to discuss such accounts and records and any matters relating to the financial position, risk management and internal controls of the Company with the officers and external and internal auditors of the Company and its subsidiaries. Any member of the Audit Committee may require the external or internal auditors to attend any or every meeting of the Audit Committee.

RESPONSIBILITIES

The Company's management is responsible for preparing the Company's financial statements and the external auditors are responsible for auditing those financial statements. The Audit Committee is responsible for overseeing the conduct of those activities by the Company's management and external auditors, and overseeing the activities of the internal auditors. The specific responsibilities of the Audit Committee shall include those listed below. The enumerated responsibilities are not meant to restrict the Audit Committee from examining any matters related to its purpose.

1. Financial Reporting Process and Financial Statements

The Audit Committee shall:

a. in consultation with the external auditors and the internal auditors, review the integrity of the Company's financial reporting process, both internal and external, and any major issues as to the adequacy of the internal controls and any special audit steps adopted in light of material control deficiencies;

b. review all material transactions and material contracts entered into between (i) the Company or any subsidiary of the Company, and (ii) any subsidiary, director, officer, insider or related party of the Company, other than transactions in the ordinary course of business;

c. review and discuss with management and the external auditors: (i) the preparation of Company's annual audited consolidated financial statements and its interim unaudited consolidated financial statements; (ii) whether the

financial statements present fairly (in accordance with Canadian and United States generally accepted accounting principles) in all material respects the financial condition, results of operations and cash flows of the Company as of and for the periods presented; (iii) any matters required to be discussed with the external auditors according to Canadian and United States generally accepted auditing standards; (iv) an annual report by the external auditors describing: (A) all critical accounting policies and practices used by the Company; (B) all material alternative accounting treatments of financial information within generally accepted accounting principles that have been discussed with management of the Company, including the ramifications of the use such alternative treatments and disclosures and the treatment preferred by the external auditors; and (C) other material written communications between the external auditors and management;

d. following completion of the annual audit, review with each of: (i) management; (ii) the external auditors; and (iii) the internal auditors, any significant issues, concerns or difficulties encountered during the course of the audit;

e. resolve disagreements between management and the external auditors regarding financial reporting;

f. review the interim quarterly and annual financial statements and annual and interim press releases prior to the release of earnings information; and

g. review and be satisfied that adequate procedures are in place for the review of the public disclosure of financial information by the Company extracted or derived from the Company's financial statements, other than the disclosure referred to in (f), and periodically assess the adequacy of those procedures.

2. External auditors

The Audit Committee shall:

a. require the external auditors to report directly to the Audit Committee;

b. be directly responsible for the selection, nomination, compensation, retention, termination and oversight of the work of the Company's external auditors engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Company, and in such regard recommend to the Board the external auditors to be nominated for approval by the shareholders;

c. approve all audit engagements and must pre-approve the provision by the external auditors of all non-audit services, including fees and terms for all audit engagements and non-audit engagements, and in such regard the Audit Committee may establish the types of non-audit services the external auditors shall be prohibited from providing and shall establish the types of audit, audit related and non-audit services for which the Audit Committee will retain the external auditors. The Audit Committee may delegate to one or more of its members the authority to pre-approve non-audit services, provided that any such delegated pre-approval shall be exercised in accordance with the types of particular non-audit services authorized by the Audit Committee to be provided by the external auditor and the exercise of such delegated pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting following such pre-approval;

d. review and approve the Company's policies for the hiring of partners and employees and former partners and employees of the external auditors;

e. consider, assess and report to the Board with regard to the independence and performance of the external auditors; and

f. request and review the audit plan of the external auditors as well as a report by the external auditors to be submitted at least annually regarding: (i) the external auditing firm's internal quality-control procedures; (ii) any material issues raised by the external auditor's own most recent internal quality-

control review or peer review of the auditing firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the external auditors, and any steps taken to deal with any such issues.

3. Accounting Systems and Internal Controls

The Audit Committee shall:

a. oversee management's design and implementation of and reporting on internal controls. The Audit Committee shall also receive and review reports from management, the internal auditors and the external auditors on an annual basis with regard to the reliability and effective operation of the Company's accounting system and internal controls; and

b. review annually the activities, organization and qualifications of the internal auditors and discuss with the external auditors the responsibilities, budget and staffing of the internal audit function.

4. Legal and Regulatory Requirements

The Audit Committee shall:

a. receive and review timely analysis by management of significant issues relating to public disclosure and reporting;

b. review, prior to finalization, periodic public disclosure documents containing financial information, including the Management's Discussion and Analysis and Annual Information Form, if required;

c. prepare the report of the Audit Committee required to be included in the Company's periodic filings;

d. review with the Company's counsel legal compliance matters, significant litigation and other legal matters that could have a significant impact on the Company's financial statements; and

e. assist the Board in the oversight of compliance with legal and regulatory requirements and review with legal counsel the adequacy and effectiveness of the Company's procedures to ensure compliance with legal and regulatory responsibilities.

5. Additional Responsibilities

The Audit Committee shall:

a. discuss policies with the external auditor, internal auditor and management with respect to risk assessment and risk management;

b. establish procedures and policies for the following

(i) the receipt, retention, treatment and resolution of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and

(ii) the confidential, anonymous submission by directors or employees of the Company of concerns regarding questionable accounting or auditing matters or any potential violations of legal or regulatory provisions;

c. prepare and review with the Board an annual performance evaluation of the Audit Committee;

d. report regularly to the Board, including with regard to matters such as the quality or integrity of the Company's financial statements, compliance with legal or regulatory requirements, the performance of the internal audit function, and the performance and independence of the external auditors; and

e. review and reassess the adequacy of the Audit Committee's Charter on an annual basis.

6. Limitation on the Oversight Role of the Audit Committee

Nothing in this Charter is intended, or may be construed, to impose on any member of the Audit Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which all members of the Board are subject.

Each member of the Audit Committee shall be entitled, to the fullest extent permitted by law, to rely on the integrity of those persons and organizations within and outside the Company from whom he or she receives financial and other information, and the accuracy of the information provided to the Company by such persons or organizations.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles in Canada and the United States and applicable rules and regulations. These are the responsibility of management and the external auditors.