V

STATE OF MICHIGAN

CIRCUIT COURT FOR THE 30TH JUDICIAL CIRCUIT

INGHAM COUNTY

PATRICKM. MCPHARLIN, DIRECTOR OF THE DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES,

Petitioner, No. 15-898-CR

HON. CLINTON CANADY III

AFFIRMATIVE INSURANCE COMPANY [IN REHABILITATION] OF MICHIGAN,

Respondent.

Christopher L. Kerr (P57131) M. Elizabeth Lippitt (P70373) Assistant Attorneys General Attorney for Rehabilitator Michigan Department of Attorney General Corporate Oversight Division P.O. Box 30755 Lansing, Michigan 48909 (517) 373-1160 __________________/

REHABILITATOR'S VERIFIED MOTION TO TERMINATE

REHABILITATION, APPROVE THE ACTIONS OF THE REHABILITATOR,

DISCHARGE THE REHABILITATOR, AND FOR RELATED RELIEF

Patrick M. McPharlin, Director of the Michigan Department of Insurance and

Financial Services ("DIFS"), as Court-appointed and statutory Rehabilitator of

Affirmative Insurance Company of Michigan (the "Rehabilitator"), by and through

his attorneys, Bill Schuette, Attorney General, and Christopher L. Kerr and M.

Elizabeth Lippitt, Assistant Attorneys General, in support of his Verified Motion to

terminate this Rehabilitation, approve the actions of the Rehabilitator, discharge

the Rehabilitator, and for related relief (the "Verified Motion"), states as follows:

HEARING

1. This Verified Motion is scheduled for hearing on July 19, 2017, at

2:30 p.m.

BACKGROUND

2. Affirmative Insurance Company of Michigan ("AIM") is currently in

"run-off' status, having suspended writing any new insurance business on March 1,

2011 and having suspended writing any renewal insurance business on June 24,

2011.

3. AIM is a wholly-owned subsidiary of its parent company, Affirmative

Insurance Company ("AIC"). Specifically, AIM's authorized capital stock consists

solely of 75,000 shares of common stock, par value $100.00 per share, all of which

are issued and outstanding. AIC is the record and beneficial owner of one hundred

percent (100%) of the issued and outstanding shares of AIM stock (the "AIM

Shares").

4. AIC is an Illinois domestic property and casualty insurance company,

and on September 16, 2015, the Illinois Director of Insurance placed AIC into

rehabilitation.

5. Based on AI C's rehabilitation and declining financial position, the

Director of DIFS petitioned this Court on October 28, 2015 for an order placing AIM

into rehabilitation pursuant to MCL 500.8112.

2

6. On October 29, 2015, this Court entered a Stipulated Order Placing

Affirmative Insurance Company of Michigan into Rehabilitation, Approving

Compensation of Special Deputy Rehabilitator, and Providing Injunctive Relief (the

"Rehabilitation Order"). The Rehabilitation Order appointed the DIFS Director as

the Rehabilitator of AIM as required by MCL 500.8113(1), and further approved the

compensation of the Rehabilitator's appointed Special Deputy Rehabilitator, James

E. Gerber, under MCL 500.8114(1). By Order dated December 22, 2015, the Court

similarly approved the compensation of Janice Sylvertooth as an additional Special

Deputy Rehabilitator appointed by the Rehabilitator. Hereafter, Special Deputy

Gerber and Special Deputy Sylvertooth are referred to collectively as the "Deputy

Rehabilitators."

7. On March 24, 2016, the Illinois Director of Insurance placed AIM's

parent, AIC, into liquidation. The Illinois Circuit Court overseeing the AIC

receivership appointed the Illinois Director of Insurance as the Liquidator of AIC

(the "AIC Liquidator").

8. On November 30, 2016, the Illinois Circuit Court approved the AIC

Liquidator's sale of AIM Shares to Enstar Holdings (US), Inc. ("Enstar") for

$5,025,000 (the "Transaction"). The $5,025,000 purchase price represents AIM's

current statutory surplus less estimated adverse loss development on claims over

the near term and a 12% financing factor. The Illinois Circuit Court's Order

approving the Transaction is attached as Exhibit A.

9. Enstar, the AIC Liquidator, and the Rehabilitator subsequently

entered into a Share Purchase Agreement dated as of April 7, 2017 memorializing

3

the terms of the Transaction. The Share Purchase Agreement is attached as

Exhibit B.

10. Under the Share Purchase Agreement, relevant conditions that must

be fulfilled before the Transaction can be consummated and formally close (the

"Closing") include DIFS' approval of the Transaction and an Order from this Court

terminating the AIM Rehabilitation. (See Exhibit B, pp 3, 25.)

11. On July 5, 2017, DIFS issued an Order Approving Acquisition that

approved the Transaction, contingent upon:

a. Pursuant to MCL 500.410, Enstar must increase AIM's capital and

surplus to Michigan's minimum capital and surplus requirement of

$7.5 million by the time of the Closing of the Transaction;

b. This Court's entry of an Order terminating the AIM Rehabilitation;

and

c. Enstar agreeing to remove any officer and/or director who is considered

inappropriate by DIFS based on pending background check results.

(See Exhibit C, DIFS Order Approving Acquisition.)

12. The grounds for AIM's rehabilitation under MCL 500.8112 will no

longer exist after the Closing of the Transaction.

13. Under these circumstances, the Rehabilitator has determined that

terminating AIM's Rehabilitation is now appropriate. Moreover, MCL 500.8116(2)

authorizes the Rehabilitator to petition this Court at any time "for an order

terminating rehabilitation of an insurer."

4

14. Given the unique circumstances involved in this Rehabilitation,

including the present request to terminate based on the Transaction, the

Rehabilitator has relied whenever necessary on provisions of Chapter 81 of the

Michigan Insurance Code, MCL 500.8101- 500.8159 ("Chapter 81"), that by their

terms apply to a liquidation proceeding. The Rehabilitator continues to do so for

purposes of this Verified Motion.

15. By this Verified Motion, the Rehabilitator seeks generally to terminate

the Rehabilitation, approve the Rehabilitator's actions, and discharge the

Rehabilitator. The relief that the Rehabilitator specifically seeks from the Court,

through entry of an Order in the form attached as Exhibit D, is described more fully

below and summarized in the closing section entitled "Relief Requested."

REQUEST FOR COURT APPROVAL OF ALL ACTIONS

TAKEN OR NOT TAKEN BY THE DIFS DIRECTOR AS

THE REHABILITATOR OF AIM

16. From the inception of this Rehabilitation, the Rehabilitator and

Deputy Rehabilitators have taken possession of AIM's assets, marshaled assets,

compromised claims, mitigated liabilities, and otherwise administered the

Rehabilitation and business of AIM in accordance with Chapter 81.1 The

Rehabilitator and Deputy Rehabilitators have taken all of these actions under this

Court's general supervision.

17. Further, the Rehabilitator has complied with this Court's directives in

this matter.

1 These Rehabilitation activities are detailed in the Deputy Rehabilitator's First Report and Accounting filed with this Court on April 25, 2017.

5

18. In addition, throughout the course of this Rehabilitation, the

Rehabilitator sought express Court approval of all material transactions.

19. Consequently, the Rehabilitator seeks entry of an Order approving all

actions taken or not taken by the Rehabilitator and his Deputy Rehabilitators,

representatives, agents, accountants, attorneys, successors, predecessors, officers,

directors, and assigns throughout the Rehabilitation, and providing that such

actions taken or not taken have been properly executed and have met the

requirements of Chapter 81 and the laws of the state of Michigan in general, as

ascertained by and reviewed by this Court through the date of the Order.

REQUEST FOR DISCHARGE OF REHABILITATOR AND

RELEASE OF ALL CLAIMS AGAINST THE DIFS DIRECTOR AS

THE REHABILITATOR OF AIM

20. MCL 500.8146(1) provides for discharge of the liquidator (in this case,

the Rehabilitator) once all assets justifying the expense of collection and

distribution have been collected and distributed under Chapter 81.

21. As explained above, the Rehabilitator has marshaled all readily

collectible assets of AIM, which will be transferred to Enstar via the Transaction.

22. The DIFS Director, as Rehabilitator of AIM, therefore seeks an Order

that the Rehabilitator and his Deputy Rehabilitators, representatives, agents,

accountants, attorneys, successors, predecessors, officers, directors, and assigns are

fully, finally, and unconditionally discharged and released from any duties,

obligations, claims, and liabilities relating to or arising out of the Rehabilitation of

AIM.

6

REQUEST FOR BAR ORDER FOR ALL CLAIMS

AGAINST THE REHABILITATOR

23. The Rehabilitator also requests an Order that all claims and causes of

action against the Rehabilitator and his Deputy Rehabilitators, representatives,

agents, accountants, attorneys, successors, predecessors, officers, directors, and

assigns for any and all actions taken or not taken throughout the Rehabilitation of

AIM are completely and forever barred, and that from and after entry of the Order

terminating the Rehabilitation, these parties shall have no further responsibility,

obligations, or liability under Chapter 81 or the laws of the State of Michigan with

respect to any matter relating to or arising out of the AIM Rehabilitation.

REQUEST FOR APPROVAL OF RECORD DESTRUCTION

24. In anticipation of the Transaction, the Rehabilitator has coordinated

with Enstar for the transfer of AIM company and Rehabilitation estate records. As

necessary, the Rehabilitator (or DIFS Director as former Rehabilitator) will

continue this process following the Closing.

25. With respect to any AIM company and Rehabilitation estate records

that the Rehabilitator retains, whether due to required retention policies and/or

Enstar indicating that their transfer is not necessary (the "Retained AIM Records"),

the Rehabilitator recommends and seeks authority to destroy these Retained AIM

Records on a rolling, yearly basis, such that every year all documents more than

seven (7) years old will be destroyed unless their retention is otherwise required by

law, without further request to the Court by the Rehabilitator/DIFS Director as

former Rehabilitator and without further review or order of this Court.

7

REQUEST FOR ORDER TERMINATING REHABILITATION,

DISCHARGING ALL REPORTING OBLIGATIONS, AND FOR

RELATED RELIEF CONCERNING CLOSING OF THE TRANSACTION

26. The Rehabilitator seeks an Order presently terminating the

Rehabilitation of AIM.

27. The Rehabilitator also requests that no further reports regarding the

Rehabilitation of AIM be required of the Rehabilitator to any person or entity,

including but not limited to reports to this Court and reports to DIFS.

28. Because the Rehabilitation of AIM will terminate prior to the Closing

of the Transaction and the Closing is subject to certain contingencies, the

Rehabilitator requests that the Order include other related, necessary relief.

29. First, during any interim period between entry of the Order

terminating AIM's Rehabilitation and the Closing of the Transaction, AIM's assets

and business operations will be subject to the express control of, and directly

managed by, the AIC Liquidator.

30. Second, within three (3) business days after the Closing, Enstar will

notify the Rehabilitator (or DIFS Director as former Rehabilitator) and his legal

counsel that all contingencies to Closing have been satisfied and the Closing has

occurred. Upon request by the Rehabilitator/DIFS Director as former Rehabilitator,

Enstar will also provide evidence that a sufficient capital contribution has been

made to increase AIM's capital and surplus to a level that meets or exceeds

Michigan's minimum statutory requirement of $7.5 million.

8

31. Third, as soon as practicable after receiving Enstar's confirmation of

the Closing, the Rehabilitator/DIFS Director as former Rehabilitator will petition

the Court for entry of a Final Order closing this case.

32. Fourth, if the Closing of the Transaction does not occur within the time

specified in the Share Purchase Agreement because of Enstar's failure to satisfy a

stated contingency or for any other reason, Enstar or the AIC Liquidator will

promptly notify the Rehabilitator. The Rehabilitator will then file a notice with this

Court that the Closing did not occur (the "Notice"), and upon the filing of such

Notice the Court will vacate the Order terminating AIM's Rehabilitation (as

described above and attached as Exhibit D) and reinstate the Rehabilitation of AIM.

AUTHORIZATION OF SERVICE

33. The Rehabilitator has identified Enstar and the AIC Liquidator

(collectively, the "Transaction Parties") as the only parties having a significant

interest in this Verified Motion and the proposed Order attached as Exhibit D.

Prior to filing, counsel for the Rehabilitator provided a copy of these documents to

authorized representatives of the Transaction Parties for their review.

34. As the attached Proof of Service reflects, a copy of the filed Verified

Motion and Exhibits (including the proposed Order attached as Exhibit D), together

with the Notice of Hearing, were also personally served via U.S. First Class Mail

and e-mail on the Transaction Parties as follows:

Enstar c/o Robert Redpath, Senior Vice President & Corporate Counsel; and

The AIC Liquidator c/o J. Kevin Baldwin, General Counsel & Director of Receivership Operations

9

Again, the Rehabilitator has identified these Transaction Parties as having the

greatest potential interest in this matter, justifying their receipt of personal service.

The Rehabilitator will likewise personally serve any Order entered as a result of

this Verified Motion on the Transaction Parties.

35. Beyond the Transaction Parties, personally serving this Verified

Motion, the Notice of Hearing, and any resulting Order on other individuals or

entities that may have a general interest in AIM's Rehabilitation would be

impractical at this time because there has been no claims submission or other

process for their identification. Moreover, attempting to identify and personally

notify every individual or entity having such a general interest would be time

intensive and costly to the Rehabilitation estate. For these reasons, the

Rehabilitator requests that the Court authorize and ratify service of this Verified

Motion, the Notice of Hearing, and any resulting Order on other potentially

interested individuals or entities by posting electronic copies on the DIFS website,

www.michigan.gov/difs, under the section "Who We Regulate," the subsection

"Receiverships," and the sub-subsection "Affirmative Insurance Company of

Michigan."

36. Service in the foregoing manner is reasonably calculated to give the

Transaction Parties and any other potentially interested individuals or entities

actual notice of these proceedings and is otherwise reasonable under the

circumstances.

10

www.michigan.gov/difs

VERIFICATION

37. This Motion is verified below by James E. Gerber, the Special Deputy

Rehabilitator of AIM.

RELIEF REQUESTED

WHEREFORE, the Director of DIFS, acting in his capacity as the Court

appointed and statutory Rehabilitator of AIM, respectfully requests entry of an

Order in the form attached as Exhibit D:

(a) Granting the Rehabilitator's Verified Motion;

(b) Approving all actions taken or not taken by the Rehabilitator and his past and present agents;

(c) Discharging the Rehabilitator and his past and present agents;

(d) Unconditionally releasing the Rehabilitator and his past and present agents;

(e) Forever barring all claims against the Rehabilitator and his past and present agents;

(f) Authorizing destruction of Retained Records;

(g) Terminating the Rehabilitation and discharging the

Rehabilitator's reporting obligations;

(h) Subjecting AIM's assets and business operations to the direct control and management of the AIC Liquidator during any interim period between entry of the Order terminating AIM's Rehabilitation and the Closing of the Transaction;

(i) Requiring Enstar to notify the Rehabilitator and his legal counsel that all contingencies to Closing have been satisfied and the Closing has occurred, and upon request, providing evidence that AIM's capital and surplus meets or exceeds Michigan's minimum statutory requirement;

(g) If the Closing of the Transaction does not occur within the time . specified in the Share Purchase Agreement, requiring Enstar or

the AIC Liquidator to promptly notify the Rehabilitator, after

11

which the Rehabilitator will file a Notice regarding same with this Court and the Court will vacate the Order terminating AIM's Rehabilitation and reinstate the Rehabilitation of AIM;

(h) Authorizing and ratifying the Rehabilitator's service of this Verified Motion, the Notice of Hearing, and any resulting Order via U.S. First Class Mail and e-mail on the Transaction Parties only, and on any other potentially interested individuals or entities by posting electronic copies on the DIFS website; and

(i) Granting such other and further relief as the law or equity reqmre.

Respectfully submitted,

Bill Schuette Attorney General

LJ(fd}~-tcChristophe;. ~131) M. Elizabeth Lippitt (P70373) Assistant Attorneys General Attorneys for Petitioner Corporate Oversight Division P.O. Box 30755 Lansing, Michigan 48909 (517) 373-1160

Dated: July 12, 2017

12

VERIFICATION

STATE OF MICHIGAN )

)ss.

COUNTY OF INGHAM )

James E. Gerber, who was appointed as Special Deputy Rehabilitator by the

Court-appointed and statutory Rehabilitator of AIM and whose compensation was

approved by the Court, being first duly sworn, deposes and says that he makes this

Verification on the Rehabilitator's behalf; that he has read the foregoing Verified

Motion to Terminate Rehabilitation, Approve the Actions of the Rehabilitator,

Discharge the Rehabilitator, and for Related Relief; that he executes this Verified

Motion for and on behalf of the Rehabilitator and that he is duly authorized to do

so; and that the matters conta ined in the Verified Motion are true to his personal

knowledge and/or are true to the best of his information and belief.

~~~ ~ Special Deputy Rehabilitator

Subscribed and sworn to before me, a Notary Public in and for said county, thisl~day of July, 2017

rwi~~.~ l.ir:da S. Miers

Notary Public, Jackson County, acting in Ingham County, Michigan My commission expires: 12-28-2023

13

V

STATE OF MICHIGAN

CIRCUIT COURT FOR THE 30TH JUDICIAL CIRCUIT

INGHAM COUNTY

PATRICK M. MCPHARLIN, DIRECTOR OF THE DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES,

Petitioner, No. 15-898-CR

HON. CLINTON CANADY III

AFFIRMATIVE INSURANCE COMPANY OF [IN REHABILITATION] MICHIGAN,

Respondent.

Christopher L. Kerr (P57131) M. Elizabeth Lippitt (P70373) Assistant Attorneys General Attorney for Rehabilitator Michigan Department of Attorney General Corporate Oversight Division P.O. Box 30755 Lansing, Michigan 48909 (517) 373-1160 _______________!

PROOF OF SERVICE

The undersigned certifies that a copy of the Rehabilitator's Verified Motion to Terminate Rehabilitation, Approve the Actions of the Rehabilitator, Discharge the Rehabilitator, and for Related Relief, along with Exhibits A-D and the Notice of Hearing, together with this Proof of Service, was served upon the parties listed below by mailing and e-mailing the same to them at their respective addresses with first class postage fully prepaid thereon, on the 12th day of July, 2017:

LIQUIDATOR OF AFFIRMATIVE INSURANCE COMPANY:

J. Kevin Baldwin

General Counsel & Director of Receivership Operations

Illinois Office of the Special Deputy Receiver

222 Merchandise Mart Plaza, Suite 960

Chicago, IL 60654

KBaldwin@osdchi.com

ENSTAR HOLDINGS (US), INC.:

Robert Redpath

Senior Vice President & Corporate Counsel

411 Fifth Avenue

New York, NY 10016

robert.redpath@enstargroup.com

In addition, electronic copies of the foregoing documents will be provided to the Department of Insurance and Financial Services, which will provide courtesy notice to other potentially interested individuals/entities by posting the documents on its website, www.michigan.gov/difs, under the section "Who We Regulate," the subsection "Receiverships," and the sub-subsection "Affirmative Insurance Company of Michigan."

~~e_cfJ~ inda S. Miers, Legal Secretary

2

www.michigan.gov/difsmailto:th@enstargroup.commailto:KBaldwin@osdchi.com

~-- -...... ~ ", '

,. !

EXHIBIT A

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, CHANCERY DMSION

IN THE MATTER OF THE LIQUIDATION OF ) AFFIRi'1ATIVE INSURANCE COMPAA"Y ) NO. 15 CH 13718

ORDER

THIS CAUSE HAVINO COME BEFORE THE COURT upon the Motion of Anne

Melissa Dowling, Acting Director of Insurance of the State of Illinois, in her capacity as the

statutory and court-affirmed Liquidator (the "Liquidator") of Affinnative Insurance Company

("Affinnative") for the entry of an order approving the sale of an estate asset, Affirmative

Insurance Company of Michigan ("AIM"); due notice having been given; the Court having

jurisdiction over the parties hereto and the subject matter hereof; the Court having reviewed the

pleading filed herein and having heard from counsel for the Liquidator thereon; and the Court

having been otherwise advised in the premises;

THE COURT HEREBY ORDERS THAT:

A. The Liquidator's recommendation for approval ofthe sale ofAIM to Enstar

Holdings (US), Inc., ("Enstar") in consideration of Enstar's payment to

Affirmative of five million and twenty-five thousand dollars in United States

currency ($5,025,000) (the "Sale") is approved; and

ENTEREif:dgeAnnaHelenDemacupoul,

NOV 3o2016 CireuitCourt - 2002

Judge Presiding

J. Kevin Baldwin Daniel A. Guberman dgubennan@osdchi.co~ Kevin W. Horan Rory E. Hoskins rhoskins@osdchi.com Counsel to the Receiver 222 Merchandise Mart Plaza Suite 960 Chicago, Illinois 60654 (312) 836-9500 Attorney Code# 16819

2

mailto:rhoskins@osdchi.commailto:dgubennan@osdchi.co

I l . . . . . . . ........... . . .

EXHIBITB

Execution Version

SHARE PURCHASE AGREEMENT

dated as of

April 7, 2017

among

ENST AR HOLDINGS (US), INC.,

Jennifer Hammer,

Director of Insurance for the State of II] inois,

solely in her capacity as the statutory and court-affirmed

Liquidator of Affirmative Insurance Company

and

PATRICKMCPHARLIN

Director of the Michigan Department of Insurance and Financial Services,

solely in his capacity as Rehabilitator for

Affirmative Insurance Company of Michigan

relating to the purchase and sale

of I 00% of the shares

of

AFFIRMATIVE INSURANCE COMPANY OF MICHIGAN

86625280.11

http:86625280.11

TABLE OF CONTENTS

Page

ARTICLE 1. DEFINITIONS ............................................................................................... 2

Section 1.0 I Definitions............................................................................................ 2

Section 1.02 Other Definitional and Interpretative Provisions ................................. 6

ARTICLE 2. PURCHASE AND SALE .............................................................................. 7

Section 2.0 I Purchase and Sale ................................................................................ 7

Section 2.02 Purchase of Shares ............................................................................... 7

Section 2.03 Waiver of Pre-Emption ........................................................................ 7

Section 2.04 Closing ................................................................................................. 7

Section 2.05 Withholding Tax .................................................................................. 8

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER

WITH RESPECT TO THE COMP ANY ..................................................... 8

Section 3.01 Corporate Existence and Power ........................................................... 8

Section 3.02 Non-contravention ............................................................................... 8

Section 3.03 Capitalization ....................................................................................... 8

Section 3.04 Financial Statements ............................................................................ 9

Section 3.05 Absence of Certain Changes .............................................................. 10

Section 3.06 No Undisclosed Material Liabilities .................................................. 10

Section 3.07 Material Contracts.............................................................................. 1 0

Section 3.08 Litigation ............................................................................................ 11

Section 3.09 Comp1iance with Laws and Court Orders; Permits ........................... 11

Section 3.10 Properties ........................................................................................... 12

Section 3.1 1 Intellectual Property ........................................................................... 12

Section 3.12 Finders' Fees ...................................................................................... 13

Section 3.13 Employees; Benefit Plans .................................................................. 13

Section 3 .14 Environmental Matters ....................................................................... 13

Section 3.15 Tax ..................................................................................................... 14

Section 3.16 Insurance Matters ............................................................................... 15

Section 3. 17 Insurance ............................................................................................ 18

Section 3.18 Certain Relationships ......................................................................... 18

Section 3 .19 Books and Records ............................................................................ 18

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER ................... 19

Section 4.01 Corporate Existence and Power ......................................................... 19

Section 4.02 Corporate Authorization .................................................................... 19

Section 4.03 Governmental Authorization ............................................................. 19

Section 4.04 Non-contravention ............................................................................. 19

Section 4.05 Ownership of Shares .......................................................................... 19

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER .................... 20

Section 5.01 Corporate Existence and Power ......................................................... 20

Section 5.02 Corporate Authorization .................................................................... 20

Section 5.03 Governmental Authorization ............................................................. 20

Section 5.04 Non-contravention ............................................................................. 20

Section 5.05 Financing............................................................................................ 20

Section 5.06 Purchase for Investment ..................................................................... 20

-1

TABLE OF CONTENTS ( continued)

Page

Section 5 .07 Litigation ............................................................................................ 21

Section 5.08 Finders' Fees ...................................................................................... 21

ARTICLE 6. COVENANTS OF SELLER ....................................................................... 21

Section 6.0 I Conduct of the Company ................................................................... 21

Section 6.02 Access to Information ........................................................................ 23

Section 6.03 Intercompany Accounts; Affiliate Agreements ................................. 23

ARTICLE 7. COVENANTS OF BUYER ......................................................................... 23

Section 7.01 Confidentiality ................................................................................... 23

Section 7.02 Access ................................................................................................ 24

ARTICLE 8. COVENANTS .............................................................................................. 24

Section 8.01 Reasonable Best Efforts; Further Assurances .................................... 24

Section 8.02 Certain Filings .................................................................................... 24

Section 8.03 Tax Matters ........................................................................................ 25

Section 8.04 Public Announcements ...................................................................... 25

ARTICLE 9. CONDITIONS TO CLOSING .................................................................... 25

Section 9.01 Conditions to Obligations of Buyer and Seller .................................. 25

Section 9.02 Conditions to Obligation of Buyer..................................................... 26

Section 9.03 Conditions to Obligation of the Seller ............................................... 26

ARTICLE 10. SUR VIV AL; INDEMNIFICATION .......................................................... 26

Section I 0.0 l Survival .............................................................................................. 26

Section I 0.02 Indemnification .................................................................................. 27

Section l 0.03 Third Party Claim Procedures ............................................................ 27

Section 10.04 Direct Claim Procedures .................................................................... 28

Section I 0.05 Calculation of Damages ..................................................................... 29

Section l 0.06 Exclusivity ......................................................................................... 29

ARTICLE 11. TERMINATION .......................................................................................... 30

Section 11.01 Grounds for Termination ................................................................... 30

Section 11.02 Effect of Termination......................................................................... 30

ARTICLE 12. MISCELLANEOUS .................................................................................... 31

Section 12.0 I Notices ............................................................................................... 31

Section 12.02 Amendments and Waivers ................................................................. 32

Section 12.03 Transfer Taxes ................................................................................... 32

Section 12.04 Expenses ............................................................................................ 32

Section 12.05 Successors and Assigns ...................................................................... 32

Section 12.06 Governing Law .................................................................................. 33

Section 12.07 Jurisdiction ......................................................................................... 33

Section 12.08 Acknowledgment .............................................................................. 33

Section 12.09 WAIVER OF JURY TRIAL .............................................................. 33

Section 12. l 0 Counterparts; Effectiveness; Third Party Beneficiaries ..................... 33

Section 12.11 Entire Agreement ............................................................................... 33

Section 12.12 Severability ........................................................................................ 34

Section 12.13 Disclosure Schedules ......................................................................... 34

Section 12.14 Specific Performance ......................................................................... 34

-II

SHARE PURCHASE AGREEMENT

THIS AGREEMENT (this ""Agreement") is dated as of April 7, 2017, between Enstar Holdings (US), Inc., a Delaware company ("Buyer"), Jennifer Hammer, Director of Insurance of the State of Illinois, in her capacity as the statutory and court-affirmed liquidator of Affirmative Insurance Company, an Illinois insurance corporation (the "Seller"), and Patrick McPharlin, Director of the Michigan Department of Insurance and Financial Services ("MDIFS"), solely in his capacity as rehabilitator for the Company (acting in such capacity, "Rehabilitator").

WHEREAS, Seller is the record and beneficial owner of alJ of the issued and outstanding shares (the '"Shares") of Affirmative Insurance Company of Michigan, a Michigan insurance corporation (the "Company");

WHEREAS, the Director of the Illinois Department of Insurance ('"ILDOI"), as statutory and court affirmed liquidator of Affirmative Insurance Company pursuant to an order of liquidation entered by the Circuit Court of Cook County (the "Supervisory Court"), dated March 24, 2016 has appointed J. Kevin Baldwin as her lawful agent and attorney-in-fact to act in her name or the name of Affirmative Insurance Company and on her behalf as SelJer;

WHEREAS, the Company has been placed into rehabilitation pursuant to that certain Stipulated Order of the State of Michigan Circuit Court for the 30th Judicial Circuit, Ingham County (the "Michigan Court"), dated October 29, 2015 (the "Rehabilitation Order"), pursuant to which Rehabilitator has been appointed as rehabilitator of the Company; and

WHEREAS, Seller desires to sell the Shares to Buyer, and Buyer desires to purchase the Shares from Seller, on the terms and subject to the conditions set forth in this agreement.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.01 Definitions. (I) As used herein, the following terms have the following meanings:

"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, 'control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and '"controlled" have correlative meanings.

"Applicable Law" means, with respect to any Person, any domestic, foreign, transnational or federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that

iii

is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

"Balance Sheet" means the audited balance sheet of the Company as of the Balance Sheet Date.

"Balance Sheet Date" means December 31, 2015.

"Business Day" means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or Hamilton, Bermuda are authorized or required by Applicable Law to close.

"Closing Date" means the date of the Closing.

"Code" means the United States Internal Revenue Code of 1986.

''Company Intellectual Property Rights" means all Intellectual Property Rights owned or used by the Company.

"Environmental Laws" means any Applicable Law that has as its principal purpose the protection of the environment.

'ERISA" means the United States Employee Retirement Security Act of 1974, as amended to date.

'ERISA Affiliate" means each entity that ts treated as a single employer with the Company for purposes of Section 414 of the Code.

"Governmental Authority" means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof, including the MDIFS.

''GAAP" means genera]]y accepted accounting principles in the United States.

"Intellectual Property Right" means any trademark, service mark, trade name, brand name, logo, mask work, patent, trade secret, copyright, know-how, domain name, computer program (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.

"Knowledge of the Seller", "Seller's Knowledge" or any other similar knowledge qualification in this Agreement means, with respect to matters qualified by the knowledge of the Seller, the actual knowledge, after due inquiry, of James Gerber, Janice Sylvertooth, Dawn Hutchieson, Kimberley Hutchieson, Douglas Harre]] and the Rehabilitator.

"Lien" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, equitable interest, option, right of first refusal or encumbrance in respect of such property or asset.

"Material Adverse Effect" means a material adverse effect on (i) the financial condition,

2

business, assets or results of operations of the Company or (ii) the ability of the Seller to consummate the transactions contemplated hereby on a timely basis, exc1uding any effect resulting from (A) changes in GAAP or changes in the regulatory accounting requirements applicable to any industry in which the Company operates, (B) changes in the genera] economic or political conditions, including any change in commodity prices or increase in interest rates, (C) changes (including changes of Applicable Law) or conditions genera11y affecting any industry in which the Company operates, (D) acts of war, sabotage or terrorism, the outbreak or escalation of hostilities, change in geopolitical conditions or natural disasters, (E) the announcement or consummation of the transactions contemplated by this Agreement (including the identity of Buyer), (F) any action taken (or omitted to be taken) at the request of Buyer, (G) any action taken by the Company that is required by this Agreement, (H) the negotiation and execution of this Agreement, the announcement by Buyer of its intention to acquire the Company or the consummation of the transactions contemplated hereby, or (I) the Rehabilitation Order; provided, however, that any change, event or effect referred to in the foregoing clauses (A) through (D) shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such change, event or effect has a disproportionate effect on the Company compared to other participants in the industries in which the Company operates; provided further, that if any change, event or effect has a material adverse effect on the Company of more than $ I 00,000 individually, or $500,000 in the aggregate, the exc1usions in the foregoing clauses (A) through (G) sha11 be disregarded and such change, event or effect sha11 be deemed "material" and a "Material Adverse Effect" for purposes of this Agreement.

"Permitted Liens" means: (a) Liens disc1osed on Schedule 1.0 I; (b) Liens disc1osed on the Balance Sheet or notes thereto that secure liabilities reflected on the Balance Sheet; (c) Liens for taxes, assessments and similar charges that are not yet due or are being contested in good faith and for which adequate reserves, in accordance with GAAP, have been established; (d) mechanic's, materialman's, carrier's, repairer's and other similar Liens arising or incurred in the ordinary course of business or that are not yet due and payable or are being contested in good faith; or (e) in the case of leased property, Liens to which the interest or title of the applicable lessor or sublessor may be subject.

"Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

"Pre-Closing Tax Period" means (i) any tax period ending on or before the Closing Date and (ii) with respect to a tax period that begins before but ends after the Closing Date, the portion of such period up to and inc1uding the Closing Date.

"Regulatory Approvals" means (i) the formal written consent or non-objection of the MDIFS to the acquisition of the Company by the Buyer and other transaction contemplated by this Agreement, (ii) the approval of the Michigan Court (or any successor thereto) and Rehabilitator to dismiss the rehabilitation proceedings relating to the Rehabilitation Order, (iii) the approval of the Supervisory Court to the sale of the Company to the Buyer upon the terms and conditions set forth in this Agreement, (iv) the approval of the ILDOI, and (v) any other approval of any Governmental Authority required in connection with this Agreement or the transactions contemplated hereby, which approvals shall not be subject to any Burdensome

3

Conditions as defined in Section 8.02(b ).

'"Reinsurance Contract" means any reinsurance or retrocession contract under which the Company may be either obligated to make payments or be eligible to continue to receive benefits, to which the Company is a party (whether as a ceding or assuming company) or by or to which the Company is bound or subject, as each such contract may have been amended, modified or supplemented from time to time, and at any time.

"'SAP" means the statutory accounting principles and practices prescribed or permitted by applicable insurance or similar Law.

'"Tax" means (i) any federal, state, local or foreign tax, governmental fee or other like assessment or charge of any kind whatsoever (including those on or measured by or referred to as income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, value added, property (real or personal), real property gains, escheat obligations, customs' duties, windfall profits taxes, or similar taxes, fees, assessments or charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return)), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax and (ii) any liability for the payment of any amount of the typ~ described in the immediately preceding clause (i) as a result of the Company being a member of an affiliated, consolidated or combined group with any other corporation at any time on or prior to the Closing Date.

"Tax Authority" means any Governmental Authority responsible for the administration or the imposition of Taxes.

"Tax Returns" means any and all returns, declarations, reports, statements, certificates, schedules, claims for refund or other documents of or with respect to any Tax which is supplied to any Tax Authority, including any and all attachments, amendments and supplements thereto.

"Transaction Expenses" means fees, costs and expenses (including legal and accounting fees, costs and expenses) of the Company incurred through the Closing in connection with or arising out of the planning, structuring, negotiation or consummation of the transactions contemplated by this Agreement.

Each of the following terms is defined in the Section set forth opposite such term:

Term Section Affiliate Agreements 3.18 Agreement Preamble Burdensome Condition 8.02(b) Buyer Preamble Cap 10.02(a) Closing 2.04(a) Company Preamble Company Employees 3.13(a)

4

Term Section Cut-Off Date 10.01 Damages I 0.02(a) Financial Statements 3.04(a) Fundamental Representations 10.01 ILDOI Recitals Indemnified Party I0.03(a) Indemnifying Party I 0.03(a) Insurance Licenses 3.16(c) Insurance Policies 3.17 Leased Real Property 3.IO(b) Material Contract 3.07 MDIFS Preamble Michigan Court Recitals Permits 3.09(b) Purchase Price 2.01 Regulatory Filings 3. l 6(k) Rehabilitation Order Recitals Rehabilitator Preamble Schedules Article 3 Scheduled Investments 3.16(1) Seller Preamble Shares Preamble Statutory Financial Statements 3.04(b) Supervisory Court Preamble Third Party Claim I 0.03(a)

Section 1.02 Other Definitional and Interpretative Provisions. The words "hereof', "herein" and "hereunder" and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words "include", "includes" or ""including" are used in this Agreement, they shall be deemed to be followed by the words '"without limitation", whether or not they are in fact followed by those words or words of like import. "Writing", "written" and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments,

5

modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to "law", "laws" or to a particular statute or law shall be deemed also to include any and all Applicable Law.

ARTICLE 2. PURCHASE AND SALE

Section 2.0 I Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the Shares, free and clear of all Liens. The aggregate purchase price for the Shares is five million and twenty-five thousand dollars in United States Currency ($5,025,000 U.S,) (the "Purchase Price").

Section 2.02 Purchase of Shares. Neither Buyer nor Seller shall be obliged to complete the sale and purchase of any of the Shares unless the sale and purchase of all the Shares is completed simultaneously.

Section 2.03 Waiver of Pre-Emption. Seller waives and shall procure that there will be waived before Closing all rights of pre-emption and other restrictions on transfer over the Shares conferred on it or any other person under the articles of incorporation or bylaws of the Company or otherwise and further waives any right to terminate any agreement or arrangement between Seller and the Company which may arise as a result of the transfer of Shares.

Section 2.04 Closing.

(a) The closing (the "Closing") of the purchase and sale of the Shares hereunder shall take place remotely by electronic exchange of executed documents or at the offices of Drinker Biddle & Reath LLP, One Logan Square, Suite 2000, Philadelphia, PA I 9103, as soon as possible, but in no event later than five (5) Business Days, after satisfaction or, to the extent permissible, waiver by the party or parties entitled to the benefit of the conditions set forth in Article 9 ( other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent pennissible, waiver of those conditions at the Closing), or at such other time or place as Buyer and the Seller may agree.

(b) At the Closing, the Seller shall deliver to the Buyer those items set out in Section 9.02 and a properly executed certificate pursuant to Treasury Regulation Section l .14452(b) that Seller is not a foreign person within the meaning of Section 1445 of the Code.

(c) At the Closing, the Buyer shall:

(i) deliver to Seller the Purchase Price, less the amount of the Transaction Expenses set forth on Schedule 2.04(c){ii}, by wire transfer to an account designated by Seller;

6

(ii) pay all unpaid Transaction Expenses set forth on Schedule 2.04(c)(ii) to the parties set forth on such schedule, which shall be delivered to Buyer at least one Business Day prior to the Closing Date; and

(iii) deliver to the Seller those items set out in Section 9.03.

Section 2.05 Withholding Tax. Buyer and the Company shall be entitled to deduct and withhold from any amounts payable under this Agreement all Taxes, if any, that Buyer and the Company may be required to deduct and withhold under any provision of Tax law. All such amounts shall be treated as delivered to Seller hereunder.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT TO THE COMPANY

Except as set forth in the disclosure schedules delivered by Seller to Buyer on the date hereof (the "Schedules"), the Seller represents and warrants to Buyer that:

Section 3.01 Corporate Existence and Power. The Company is a Michigan insurance corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has all corporate power and authority and all governmental licenses, authorizations, permits, consents and approvals required to own its assets and carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not reasonably be expected to have a Material Adverse Effect.

Section 3.02 Non-contravention. The execution, delivery and performance by the Se1ler of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the organizational documents of the Company, (ii) assuming compliance with the matters referred to in Section 4.03, violate any Applicable Law, require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to a loss of any benefit to which the Company is entitled under any provision of any agreement or other instrument binding upon the Company or (iii) result in the creation or imposition of any Lien on any asset of the Company, except for any Permitted Liens with such exceptions, in the case of each of clauses (i) and (ii), as would not reasonably be expected to have a Material Adverse Effect.

Section 3.03 Capitalization. The authorized capital stock of the Company consists solely of 75,000 shares of common stock, par value $100.00 per share, all of which are issued and outstanding. The Shares have been duly authorized and validly issued and are fully paid and non-assessable. The Shares represent the only issued and outstanding equity securities of the Company. All of the Shares were issued in compliance with Applicable Law. None of the Shares were issued in violation of any agreement, arrangement or commitment to which Seller or the Company is a party or is subject, nor are any Shares subject to, or issued in violation of, any preemptive or similar rights of any Person. There are no shares of the Company's capital stock held in the Company's treasury. Except as set forth in this Section, there are no outstanding (i)

7

secunt1es of the Company convertible into or exchangeable for Shares of the Company, (ii) options or other rights to acquire from the Company, or other obligation of the Company to issue, any Shares or securities convertible into or exchangeable for Shares of the Company, (iii) stock appreciation rights, phantom stock, profit participation rights or similar rights or (iv) voting trusts or other agreements or understandings the Company is a party or by which the Company is bound with respect to the voting, transfer or other disposition of its equity securities. The Company does not have any subsidiaries and, except for portfolio investments made in the ordinary course of business, the Company does not (x) own, 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.

Section 3.04 Financial Statements.

(a) Seller has furnished to the Buyer (i) the Balance Sheet and the related audited statements of income and cash flows for the fiscal year ended December 31, 2015 and (ii) the unaudited balance sheet dated June 30, 2016 and the related unaudited statement of income for the six-month period then ended ((i) and (ii) collectively, the "'Financial Statements"). The Financial Statements fairly present in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes to the audited financial statements), the financial position of the Company as of the dates thereof and the results ofoperations and cash flows for the periods then ended.

(b) The Company has timely filed all annual and quarterly statutory financial statements required of the Company with the applicable Governmental Authorities for the periods ended on or after December 31, 2014. Seller has made available to Purchaser prior to date hereof copies of (i) the annual statutory financial statements or similar filings of the Company as of and for the years ended December 31, 2015 and December 31, 2014 and the exhibits, schedules, interrogatories, notes, electronic pages, actuarial opinions and other material related thereto or required in connection therewith, and (ii) the unaudited quarterly statutory financial statements or similar filings of the Company as of and for the quarterly periods ended March 31, 2016, June 30, 2016 and September 30, 2016 and the exhibits, schedules, interrogatories, notes, electronic pages, actuarial opinions and other material related thereto or required in connection therewith (collectively, the "Statutory Financial Statements"). Subject to the notes thereto, the Statutory Financial Statements (A) were derived from the books and records of the Company, (B) were prepared, in all material respects, in accordance with aH applicable Laws and SAP consistently applied during the periods involved and (C) present fairly, in all material respects, the statutory financial position and the statutory results of operations, capital and surplus of the Company as of the respective dates and for the respective periods referred to in the Statutory Financial Statements, subject to, in the case of the Statutory Financial Statements described in clause (ii) of this Section 3.04(b), normal year-end adjustments. No material deficiency in respect of the Statutory Financial Statements has been asserted by a Governmental Authority that has not been cured or otherwise resolved to the satisfaction of such Governmental Authority without imposition of any material penalty, condition or obligation on the Company.

8

(c) The Statutory Financial Statements required to be filed with or submitted to any Governmental Authority have been so filed or submitted on forms prescribed or permitted by such authority. Except as indicated therein, all assets and investments reflected on the Statutory Financial Statements comply in all material respects with all applicable insurance Laws, SAP and investment guidelines regulating the assets and investments of the Company (including restrictions on assets and investments) and are in an amount at least equal to the minimum amount required by Applicable Law, SAP and investment guidelines. The financial statements included in the Statutory Financial Statements accurately reflect in all material respects the extent to which, pursuant to applicable Laws and applicable SAP, the Company is entitled to take credit for reinsurance.

Section 3.05 Absence of Certain Changes. Since the Balance Sheet Date, the business of the Company has been conducted in the ordinary course consistent with past practices and there has not been any event, occurrence or development that has had or would reasonably be expected to have a Material Adverse Effect. Except as expressly contemplated by this Agreement, since the Balance Sheet Date there has not occurred any of the actions or events listed in Section 6.01. Since June 30, 20 I 6, there has not been any material adverse change to the assets (including investments), liabilities, and capital and surplus reflected in the quarterly statutory statement of the Company for the period ended September 30, 2106.

Section 3.06 No Undisclosed Material Liabilities. There are no liabilities, commitments or obligations of the Company of any kind, other than: (a) liabilities provided for in the Balance Sheet or disclosed in the notes thereto; (b) liabilities not required under GAAP to be shown on the Balance Sheet; (c) liabilities disclosed on Schedule 3.06; (d) liabilities incurred in the ordinary course of business since the Balance Sheet Date.

Section 3.07 Material Contracts.

(a) Schedule 3.07 sets forth all of the following contracts and agreements to which the Company is a party:

(i) any agreement involving payments to or from the Company in excess of $50,000 during the last 12 months;

(ii) any lease (whether of real or personal property) providing for annual rentals of $50,000 or more that cannot be terminated on not more than 90 days' notice without payment by the Company of any material penalty;

(iii) any partnership, joint venture or other similar agreement or arrangement;

(iv) any agreement relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise) pursuant to which the Company has ongoing obligations;

(v) any agreement relating to indebtedness for borrowed money (whether incurred, assumed, guaranteed or secured by any asset);

9

(vi) any agreement that limits the freedom of the Company to compete in any line of business or with any Person or in any area or to do business with or employ any Person;

(vii) any agreements with any Governmental Authority;

(viii) any agreements that provide for the indemnification of any Person or the assumption of any liability of any Person, including off balance sheet arrangements;

(ix) any employment agreements, severance agreements, or change of control contracts and all contracts with independent contractors or consultants;

(x) all reinsurance or coinsurance agreements; and

(xi) any other agreement, commitment, arrangement or plan not made in the ordinary course of business that is material to the Company.

Each agreement, contract, lease, arrangement or commitment required to be disclosed pursuant to this Section (each, a "Material Contract") is a valid and binding agreement of the Company, and is in full force and effect, and neither the Company, nor to the Knowledge of Seller, any other party thereto is in default or breach in any respect under the terms of any such agreement, contract, plan, lease, arrangement or commitment, except for any such defaults or breaches which would not reasonably be expected to have a Material Adverse Effect. The Company has not provided or received any notice of intent to terminate any Material Contract and there exists no breach or event of default (or allegation of a breach or event of default) on the part of the Company with respect to any Material Contract, or to the Knowledge of Seller, by any other party thereto, and no condition exists or event has occurred that with the giving of notice or passage of time or both would constitute a violation or default thereunder by the Company or, to the Knowledge of Seller, any other party thereto, result in a termination thereof or permit the acceleration or other change of any material right or obligation or loss of a material right thereunder, or which has had or would reasonably be expected to have a Material Adverse Effect. No consent by, notice to or approval from any third party is required under any of the Material Contracts as a result of or in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein.

Section 3.08 Litigation. Except for the Rehabilitation Order and the related rehabilitation proceeding in Michigan Court, there is no action, suit, investigation or proceeding pending against, or to the Knowledge of Seller, threatened against or affecting, the Company or any of its properties before any arbitrator or any Governmental Authority which, individually or in the aggregate, is material to the Company or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement. Except for the Rehabilitation Order, neither the Company, nor any of its assets, businesses or properties, is subject to any unsatisfied or outstanding order, judgment or decree of any Governmental Authority that (i) would be material to the Company or (ii) challenges the validity or legality of, or has the effect of prohibiting, preventing, material restraining or delaying,

10

making illegal or otherwise materially interfering with the consummation of the transactions contemplated by this Agreement.

Section 3.09 Compliance with Laws and Court Orders; Permits.

(a) The Company is not, and since January 1, 2015 has not been, in material violation of any Applicable Law, including the Rehabilitation Order. Copies of the relevant correspondence between the Company/its advisers and the MDIFS and/or the Rehabilitator in relation to Rehabilitation Order and the related rehabilitation proceeding in Michigan Court are contained in Schedule 3.09.

(b) The Company has in full force and effect all material federal, state, local and foreign governmental approvals, authorizations, consents, licenses and permits (excluding Insurance Licenses, collectively, "Permits") necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted in all material respects; (ii) the Company is, and since January 1, 2015 has been, in compliance with all Permits in all material respects; and (iii) neither Seller nor the Company 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 Law in any material respect, or (y) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancelJation, termination of, or material modification to any Permit which has not been resolved.

Section 3 .10 Properties.

(a) The Company has good title to, or in the case of leased property and assets have valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible) reflected on the Balance Sheet or acquired after the Balance Sheet Date, except for properties and assets sold since the Balance Sheet Date in the ordinary course of business consistent with past practices or where the failure to have such good title or valid leasehold interests would not reasonably be expected to have a Material Adverse Effect. None of such property or assets is subject to any Lien, except Permitted Liens.

(b) The real property demised by the leases described on Schedule 3. IO(b) (the "Leased Real Property") constitutes all of the real property leased by the Company. The Leased Real Property leases are in full force and effect, and the Company holds a valid and existing leasehold interest under each such lease, subject to proper authorization and execution of such lease by the other party and the application of any bankruptcy or creditor's rights laws. Seller has delivered or made available to Buyer copies of each of the leases described on Schedule 3.1 O(b), and none of such leases has been modified in any material respect, except to the extent that such modifications are disclosed by the copies delivered or made available to Buyer. Neither the Company, nor to Seller's knowledge any other Person, is in default in any material respect under any of such leases.

Section 3.11 Intellectual Property.

(a) Except as has not had and would not reasonably be expected to have a Material Adverse Effect, the Company exclusively owns or possesses all right, title and interest

11

in, or has valid, enforceable rights or licenses to use, the Intellectual Property Rights that are used to carry on or are necessary for its business as now conducted, free and clear of all Liens. The Company has taken reasonable steps to maintain and protect its Intellectual Property Rights, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. There are no material actions pending, or to the Knowledge of the Seller, threatened: (1) alleging any infringement, misappropriation or violation of the rights of any third party with respect to any Intellectual Property Rights of such Person or (2) challenging the validity, enforceability or ownership of any Intellectual Property owned or leased by the Company.

(b) (I) The conduct of the business of the Company has not infringed, misappropriated or violated any Intellectual Property Rights of any third party, except to the extent that such infringement, misappropriation or violation, if determined to be unlawful, would not reasonably be expected to have a Material Adverse Effect, (2) to the Knowledge of the Seller, no third party is infringing, misappropriating or violating any Intellectual Property of the Company, and (3) none of the Intellectual Property Rights owned by the Company requires any payment for the use of such Intellectual Property Rights to any third party ( except for the payment of licensing or maintenance fees that do not exceed $50,000 annually in the aggregate to Persons who are not Affiliates of the Company).

Section 3.12 Finders' Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Seller or the Company who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

Section 3.13 Employees; Benefit Plans.

(a) Schedule 3.l 3(a) sets forth a true and complete list of the names, titles, annual salaries or base wage rates of each (i) employee of the Company (the "Company Employees") and (ii) individual independent contractor of the Company.

(b) The Company is in compliance with all Applicable Laws relating to employment, employment practices and terms and conditions of employment, except in each case as would not reasonably be expected to have a Material Adverse Effect.

(c) The Company is not a party to or bound by any labor or collective bargaining agreement and, to the Knowledge of Seller, there are no organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit with respect to, or otherwise attempting to represent, any of the employees of the Company. There is not presently existing any, and to the Knowledge of Seller, there is no threatened, strike, slowdown, picketing, or work stoppage involving the Company or its employees that would reasonably be expected to have a Material Adverse Effect.

(d) Except as set forth in Schedule 3.13{d), neither the Company nor any ERISA Affiliate maintains any "employee benefit plan," as that term is defined in Section 3(3) of ERISA, or any other incentive, bonus, deferred compensation, performance, equity, phantom equity, change in control, severance, retention, vacation, fringe benefit or other similar plans, agreements, arrangements or policies for the benefit of the Company's current or former

12

employees, officers, directors or independent contractors, or with respect to which the Company may have any liability.

(e) Neither the Company nor any ERISA Affiliate maintains, sponsors, contributes to, has any obligation to contribute to, or has any liability or potential liability under or with respect to: (i) any "defined benefit plan" as defined in Section 3(35) of ERISA or any other plan subject to the funding requirements of Section 412 of the Code or Section 302 of Title IV of ERISA; (ii) any "multiemployer plan" as defined in Section 3(37) or 400l(a)(3) of ERISA, Code); (iii) "multiple employer welfare arrangement" (as such term is defined in Section 3(40) of ERISA); (iv) any "multiple employer plan: within the meaning of 210 of ERISA or Section 413(c) of the Code; or (v) any employee benefit plan, program or arrangement that provides for post-retirement medical, life insurance or other welfare-type benefits ( other than health continuation coverage required by COBRA). The Company does not have any liability with respect to any 'employee benefit plan" (as defined in Section 3(3) of ERISA) solely by reason of being treated as a single employer under Section 414 of the Code with any trade, business or entity other than the Company.

Section 3.14 Environmental Matters. Except as to matters that would not reasonably be expected to have a Material Adverse Effect: (a) (i) no written notice, order, request for information, complaint or penalty has been received by the Company, and (ii) there are no judicial, administrative or other actions, suits or proceedings pending or to the Seller's Knowledge, threatened, which allege a violation of any Environmental Law and relate to the Company; (b) there have been no written environmental audit reports completed within the past three years by the Company of any property currently leased by the Company which have not been delivered to Buyer prior to the date hereof. Notwithstanding anything to the contrary herein, except as set forth in this Section 3.14, no representations or warranties are being made in this Agreement with respect to any environmental matters or matters arising under or relating to any Environmental Law.

Section 3.15 Tax.

(a) All Tax Returns required to be filed by or with respect to the Company have been timely filed (taking into account any extensions of time within which to file), all such Tax Returns were true, correct and complete, the books and records of the Company are sufficient to document the accuracy of such Tax Returns and the tax basis of the assets of the Company, and all Taxes due and owing by, or with respect to, the Company (whether or not shown on any Tax Return) have been timely paid.

(b) The Company has complied with all applicable Tax Laws with respect to the withholding of Taxes, information reporting and transfer pricing.

(c) No Liens for Taxes have been filed against the Company, except for Permitted Liens.

(d) No claim has been made by any Tax Authority in any jurisdiction where the Company does not file Tax Returns that the Company is, or may be, subject to Tax by that jurisdiction.

13

(e) The Company is not a party to any action, audit, examination, claim or order by any Tax Authority. There are no pending or threatened actions, audits, examinations, claims or orders applicable to the Company by any Tax Authority.

(t) Except as set forth in Schedule 3. l 5(f), the Company is not a party to, or bound by, any Tax indemnity, Tax sharing or Tax allocation agreement.

(g) No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into or issued by any Tax Authority with respect to the Company.

(h) The Company is not a party to any agreement 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 2800 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). Each "nonqualified deferred compensation plan" (as defined under Section 409A of the Code) of the Company has been operated and administered in compliance with Section 409A of the Code and, if any amendments were reasonably necessary, has been timely amended to comply with Section 409A of the Code.

(i) The Company has not been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes (other than a group in which the Seller is the parent company or a member). The Company has no liability for Taxes of any Person (other than the Seller) under Treasury Regulations 1.1502-6 ( or any corresponding provision of state, local or foreign law), as transferee or successor, by contract or otherwise.

G) The Company will not be required to include any item of income in, or exclude any item or deduction from, taxable income for any taxable period or portion thereof ending after the Closing Date as a result of:

(i) any change in a method of accounting under Section 481 of the Code (or any comparable provision of state, local or foreign Tax laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;

(ii) an installment sale or open transaction occurring on or prior to the Closing Date;

(iii) a prepaid amount received on or before the Closing Date;

(iv) any closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign law; or

(v) any election under Section I08(i) of the Code.

14

(k) The Company is not, and has not been, a party to, or a promoter of, a "reportable transaction" within the meaning of Section 6707A(c)(l) of the Code and Treasury Regulations 1.60 l l -4(b ).

Section 3.16 Insurance Matters.

(a) Schedule 3. l 6(a) lists the jurisdictions in which the Company is licensed to write insurance policies and the types of insurance and other products that the Company is licensed to write in each such jurisdiction. Other than the Rehabilitation Order, the Company is not the subject of any regulatory, supervision, conservation, rehabilitation, liquidation, receivership, insolvency or other similar proceeding and, to the Knowledge of Seller, no such proceeding is threatened. To Seller's Knowledge, no material changes to the Rehabilitation Order are pending or contemplated.

(b) Seller has made available to Buyer or provided Buyer with true, complete and correct copies of: (i) any reports of examination (including, without limitation, financial, market conduct and similar examinations) of the Company issued by any insurance regulatory authority since January I, 2015 and has notified Buyer of any pending examinations; and (ii) all other material filings or submissions under insurance holding company statutes and regulations made by the Company with any insurance regulatory authority since January I, 2015. The Company has filed all material 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 I, 20 I 5. No material deficiencies have been asserted by any Governmental Authority 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 without imposition of any material penalty, condition or obligation on the Company.

(c) Without limiting the generality of the foregoing, (i) the Company has conducted and is conducting its business in compliance in all material respects with all Applicable Laws regulating the business and products of insurance and reinsurance or otherwise administered or enforced by insurance regulators; (ii) the Company holds all qualifications, registrations, filings, licenses, pem1its, 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 its insurance and reinsurance businesses in each of the jurisdictions where the Company conducts or operates its business as of the date of this Agreement (the "Insurance Licenses"); (iii) all of the Insurance Licenses are valid and in full force and effect; and (iv) the Company is not the subject of any pending or, to the Knowledge of Seller, threatened in writing any 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, except as would not materially affect the conduct of the Company's business as of the date of this Agreement. Schedule 3. l 6(c) sets forth a true, correct and complete list of the Insurance

15

Licenses. SeIIer has made available to Buyer, prior to the date hereof, true, correct, and complete copies of the Insurance Licenses.

(d) To the Knowledge of Seller, since January I, 2015 all Persons through whom the Company has placed, sold or administered insurance and reinsurance were duly licensed (to the extent such licensing is required) to sell, place or administer insurance and reinsurance in the jurisdictions where, and at the time when, they did so on behalf of the Company. Except as set forth on Schedule 3.16(d), no agent, broker, intermediary, producer, managing general underwriter, administrator or other Person has any underwriting or binding authority on behalf of the Company and the Company is not a party to any managing general agency contract or other similar arrangement.

(e) All insurance policies issued by the Company, or which are being issued by the Company as of the date hereof, are in compliance, and at their respective dates of issuance were in compliance, in all material respects with all Applicable Laws. All forms of insurance policies currently in force together with all amendments thereto, are on the forms that have been previously provided to Buyer.

(f) There are no in force insurance policies of the Company under which the holders or owners of such insurance contracts have any rights with respect to dividends, surplus, profits, participation or voting rights of the Company.

(g) All insurance claims paid by the Company have in all material respects been paid in accordance with the terms of the insurance contract under which they arose, except for such claims for which the Company has reasonable belief there was a reasonable basis to contest payment, as required by Applicable Law.

(h) Seller has delivered to Buyer true, correct and complete copies of all actuarial reports and studies prepared by actuaries, independent or otherwise, relating to the business and operations of the Company, including reports and studies addressing loss reserves, reserves for claims, losses (including incurred but not reported losses), loss adjustment expenses (whether allocated or unallocated), unearned premiums and uncollectible reinsurance of the Company as of any date on or after January 1, 2015. The information and data furnished by Seller and the Company to their actuaries in connection with the preparation of such actuarial reports were accurate in all material respects for the periods covered by such reports. AII reserve liabilities, including reserves for claims, losses (including incurred but not reported losses), loss adjustment expenses (whether allocated or unallocated), unearned premiums and uncollectible reinsurance, as established or reflected on the Financial Statements, were determined in all material respects in accordance with generally accepted actuarial standards consistently applied, were based on actuarial assumptions that were in accordance with those called for in relevant policy and contract provisions, are fairly stated in accordance with sound actuarial principles, determined in accordance with the provisions of insurance policies and contracts of the Company, and are in compliance with the requirements of GAAP and Applicable Laws.

(i) With respect to each Reinsurance Contract: (i) there has been no separate Contract between the Company and any other party to such Reinsurance Contract that would under any circumstances reduce, limit, mitigate or otherwise affect any actual or potential loss to

16

the parties under any such Reinsurance Contract; and (ii) for each such Reinsurance Contract for which risk transfer is not reasonably considered to be self-evident to the extent required by any Applicable Law, documentation concerning the economic intent of the transaction and the risk transfer analysis evidencing the proper accounting treatment is available for review by the relevant Governmental Authorities for the Company.

G) (i) There is no contract binding on the Company, or order, judgment or decree by or from, any Governmental Authority issued to or binding on the Company and (ii) the Company has not adopted any board resolution at the request of any Governmental Authority, in the case of each of clauses (i) and (ii), that (A) limits in any material respect the ability of the Company to issue or write insurance, (B) requires the divestiture of any material investment of the Company, (C) limits in any material respect the ability of the Company to pay dividends or distributions ofany kind or character, (D) requires any material investment of the Company to be treated as a non-admitted asset (or the local equivalent), or (E) could otherwise have a material adverse effect on the business or operations of the Company. Neither Seller nor the Company has been advised by any Governmental Authority that such regulator is contemplating any undertakings related to any of the foregoing matters.

(k) The Company has filed all material reports, statements, documents, certifications, registrations (including registrations with applicable state insurance regulatory authorities as a member of an insurance holding company system), filings or submissions and any supplements or amendments thereto (collectively, the "Regulatory Filings") required by Applicable Law to be filed by it with any Governmental Entity since January I, 2012. The Regulatory Filings were in compliance with Applicable Law in all material respects when filed and, to the Knowledge of Seller, no material deficiencies or violations have been asserted by any Governmental Authority with respect to any Regulatory Filing. The Seller has delivered to Buyer true and complete copies of all Regulatory Filings submitted since January I, 2012, in the form (including exhibits, annexes and any amendments thereto) filed with the applicable Governmental Authority.

(I) Schedule 3. I 6(1) sets forth a true and correct current list of all bonds, stocks, mortgages and other investment securities of any type owned by the Company (collectively, the "Scheduled Investments"). The Company has good and marketable title to each of the Scheduled Investments, free and clear of all Liens other than Permitted Liens. None of the Scheduled Investments is currently in default in the payment of principal or interest, and, to the knowledge of Seller, neither Seller nor the Company has taken, or omitted to take, any action which would result in the Company being unable to enforce the terms of any Scheduled Investment or which would cause any Scheduled Investment to be subject to any valid offset, defense or counterclaim against the right of the Company to enforce the terms of such Scheduled Investment. None of the Scheduled Investments are derivatives, subject to securities lending or similar agreements, or subject to repurchase/reverse purchase or similar agreements. A copy of the policies of the Company with respect to the investment of the Scheduled Investments has been furnished to the Buyer, and the composition of the Scheduled Investments complies in a11 material respects with, and the Company has complied in all material respects with, such investment policies.

17

Section 3.17 Insurance. Schedule 3.17 contains a true and complete list of all liability, property, workers compensation, directors and officers liability, and other insurance Contracts that insure the business, operations, assets, employees, officers or directors of the Company, other than the Insurance Contracts (the "Insurance Policies") and true and complete copies of the Insurance Policies have been made available to Buyer. The Insurance Policies are in full force and effect and shall remain in full force and effect following the consummation