Document:

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                                                                    EXHIBIT 10.1

                             SUBSCRIPTION AGREEMENT

            This Subscription Agreement (this "Agreement") is made and entered
into as of June 30, 2005 between Affirmative Investment LLC, a Delaware limited
liability company (the "Company"), J.C. Flowers I LP, a Delaware limited
partnership ("JCF"), and The Enstar Group, Inc., a Georgia corporation ("Enstar"
and collectively with JCF, the "Investors").

            WHEREAS, JCF and Enstar have caused the Company to be formed as a
limited liability company under the Delaware Limited Liability Company Act as in
effect on the date of this Agreement (currently Chapter 18 of Title 6, Sections
18-101 through 18-1109 of the Delaware Code).

            WHEREAS, the Company has been formed for the purpose of (i)
acquiring shares of common stock of Affirmative Insurance Holdings, Inc.
("Affirmative Common Stock"), (ii) contributing such shares of Affirmative
Common Stock and additional funds to New Affirmative LLC ("New Affirmative") in
exchange for Membership Units of New Affirmative pursuant to the subscription
agreement, dated as of June 13, 2005, by and among New Affirmative, Delaware
Street Capital Master Fund, L.P. and JCF (the "New Affirmative Subscription
Agreement") and (iii) acquiring and holding the Membership Units of New
Affirmative purchased pursuant to the Subscription Agreement.

            WHEREAS, New Affirmative has been formed for the purpose of
acquiring and holding the shares of common stock of Affirmative Insurance
Holdings, Inc. ("Affirmative") to be purchased pursuant to the Stock Purchase
Agreement, dated as of June 14, 2005 (the "Vesta Stock Purchase Agreement"), by
and among New Affirmative, Vesta Insurance Group, Inc., and for certain sections
thereof, Delaware Street Capital Master Fund, L.P. and JCF as well as the shares
of common stock of Affirmative to be contributed by the Company at the Closing
under the Vesta Stock Purchase Agreement (the "Vesta Closing").

            WHEREAS, JCF has entered into the New Affirmative Subscription
Agreement, dated June 13, 2005, pursuant to which, among other things, JCF
agreed to subscribe for membership units of New Affirmative in exchange for the
JCF Investment Amount (as described therein).

            WHEREAS, the Investors desire that JCF's obligation to invest the
JCF Investment Amount (as defined in the New Affirmative Subscription Agreement)
in New Affirmative pursuant to the New Affirmative Subscription Agreement be
assumed by the Company and that JCF's rights under the New Affirmative
Subscription Agreement be assigned to and assumed by the Company.

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            WHEREAS, (i) JCF desires to invest cash in the Company in exchange
for the Flowers Membership Interest (as defined herein) and (ii) Enstar desires
to invest cash in the Company in exchange for the Enstar Membership Interest (as
defined herein).

            NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Investors, intending to be legally bound, hereby agree as
follows:

            1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:

      "Cost Basis" means, with respect to the shares of Affirmative Common
Stock, the cost basis of such shares, including brokerage fees.

      "Expenses" means all of the Company Expenses incurred on or at any time
prior to the Vesta Closing; provided, that "Expenses" hereunder shall include
JCF's pro rata portion of the Expenses under the New Affirmative Subscription
Agreement.

      "Governmental Entity" means any (A) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature, (B) governmental or quasi-governmental entity of any
nature, including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality, officer,
official, representative, organization, taxing authority or unit and any court
or other tribunal (foreign, federal, state or local), (C) Person, or body
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature, or (D) arbitrator or arbitration panel or similar person or body.

      "Laws" means applicable laws (including common law), statutes, codes,
rules, regulations, orders, ordinances, judgments or decrees or other
pronouncements having the effect of law in the United States or any foreign
country or any state, county, city or other subdivision of any Governmental
Entity.

      "Market Purchase Subscription" means the funding by (i) JCF of at least
eighty-six percent (86%) of any purchase and (ii) Enstar of up to fourteen
percent (14%) of any purchase in the event that the Company purchases shares of
Affirmative Common Stock in the open-market or through one or more negotiated
transactions (any such transaction, a "Market Transaction").

      "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations in effect from time to time thereunder.

      "Subscription Closing Investment Amount" means the JCF Investment Amount
less the aggregate value of the Cost Basis of the shares of Affirmative Common
Stock purchased by the Company prior to the Subscription Closing. For the
purposes of this

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definition, the per share value of shares of Affirmative Common Stock shall be
equal to the Cost Basis of the Company for each such share, unless otherwise
agreed to in writing by the parties hereto and to the New Affirmative
Subscription Agreement.

      "Vesta Closing Subscription" means, collectively, (i) the investment by
JCF of the Flowers Closing Investment Amount (as defined herein) in the Company
in exchange for the Flowers Closing Membership Interest (as defined herein) and
(ii) the investment by Enstar of the Enstar Closing Investment Amount (as
defined herein) in the Company in exchange for the Enstar Closing Membership
Interest (as defined herein).

            2. Closings.

                  (a) Time and Place.

                        (i) The closing of any Market Purchase Subscription (a
      "Market Purchase Closing") shall occur at such time and place as shall be
      determined by JCF (with prior notice to Enstar).

                        (ii) The closing of the Vesta Closing Subscription (the
      "Subscription Closing") shall occur at the place of the Vesta Closing
      concurrently with or immediately prior to the Vesta Closing or at such
      earlier time and at such place as mutually determined by JCF (with prior
      notice to Enstar).

                  (b) Subscription; Purchase Price. Upon the terms and subject
to the conditions hereinafter set forth:

                        (i) Market Purchase Subscription

                              (1) Except as otherwise as specifically set forth
            herein, at any Market Purchase Closing, Enstar shall have the right,
            but not the obligation, to subscribe for and purchase an additional
            interest in the Company for a purchase price equal to an amount of
            up to fourteen percent (14%) of the Cost Basis plus all other fees
            and expenses of the Affirmative Common Stock purchased by the
            Company in such Market Transaction (any such amount, the "Enstar
            Market Investment Amount"); and the Company shall issue and sell to
            Enstar a membership interest in the Company in an amount that
            reflects such Enstar Market Investment Amount based on the fair
            market value of the Interests (as such term is defined in the LLC
            Agreement) as of such date (any such Interest, an "Enstar Market
            Membership Interest"). Enstar shall notify the Company within two
            (2) business days of receipt of notice of a Market Transaction (A)
            whether it intends to participate in the Market Transaction, (B) to
            what extent it intends to participate in the Market Transaction and
            (C) the amount of the Enstar Market Investment Amount.
            Notwithstanding any of the foregoing of this Section 2(b)(i)(1),
            Enstar acknowledges and agrees that it shall subscribe for and
            purchase an interest of fourteen percent (14%) of the Market
            Purchase of the 1,183,000 shares of Affirmative

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            Common Stock that occurred on June 28, 2005 (i.e., $2,614,344.82)
            (such Market Purchase, the "June 28 Market Purchase," and the
            applicable Enstar Market Investment Amount with respect to the June
            28 Market Purchase, is sometimes referred to herein as the "Enstar
            June 28 Market Investment Amount").

                              (2) At any Market Purchase Closing (including at
            the closing of the June 28 Market Purchase), JCF hereby subscribes
            for and shall purchase, an additional interest in the Company for a
            purchase price equal to (i) the Cost Basis plus all other fees and
            expenses of the Affirmative Common Stock purchased by the Company in
            a Market Transaction minus (ii) the Enstar Market Investment Amount
            (any such amount, the "Flowers Market Investment Amount"); and the
            Company shall issue and sell to JCF, a membership interest in the
            Company in an amount that reflects such Flowers Market Investment
            Amount based on the fair market value of the Interests of the
            Company as of such date (any such interest, a "Flowers Market
            Membership Interest").

                        (ii) Subscription Closing Investment Amount

                              (1) At the Subscription Closing, JCF hereby
            subscribes for and shall purchase, and the Company shall issue and
            sell to JCF, an Interest in the Company (the "Flowers Closing
            Membership Interest" and collectively with each Flowers Market
            Membership Interest, the "Flowers Membership Interest") for a
            purchase price equal to eighty-six percent (86%) of the Subscription
            Closing Investment Amount (such amount the "Flowers Closing
            Investment Amount").

                              (2) At the Subscription Closing, Enstar hereby
            subscribes for and shall purchase, and the Company shall issue and
            sell to Enstar, an Interest in the Company (the "Enstar Closing
            Membership Interest" and collectively with each Enstar Market
            Membership Interest, the "Enstar Membership Interest") for a
            purchase price equal to fourteen percent (14%) of the Subscription
            Closing Investment Amount (such amount the "Enstar Closing
            Investment Amount").

                              (3) Immediately following the Subscription
            Closing, each of JCF and Flowers shall have received Interests in
            the Company in a proportion equal to such parties' Percentage
            Interest (as defined in the LLC Agreement) measured as at such time.

                  (c) Limited Liability Company Agreement. Concurrently with the
execution of this Agreement, the Investors shall execute the limited liability
company agreement in the form attached hereto as Exhibit B (the "LLC
Agreement").

                  (d) Delivery.

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                        (i) At or prior to each Market Purchase Closing, (A) (1)
      JCF shall deliver to the Company the Flowers Market Investment Amount by
      wire transfer of immediately available funds to an account designated by
      the Company and (2) Enstar shall deliver to the Company the Enstar Market
      Investment Amount, if any, by wire transfer of immediately available funds
      to an account designated by the Company, and (B) the Company shall cause
      (1) the Flowers Market Membership Interest to be reflected in the records
      of the Company and (2) the Enstar Market Membership Interest to be
      reflected in the records of the Company; provided, that in the event that
      Enstar (x) determined to participate in a Market Transaction and (y) does
      not deliver to the Company the Enstar Market Investment Amount at such
      Market Purchase Closing due to the fact that it was not provided notice of
      such Market Transaction at least two (2) business days prior to the Market
      Purchase Closing, JCF shall advance the Enstar Market Investment Amount to
      the Company at the time of any such Market Purchase Closing and, in such
      event, within two (2) business days of written notice of such Market
      Transaction, Enstar shall pay to the Company the Enstar Market Investment
      Amount (without interest) by wire transfer of immediately available funds
      and the Company shall promptly pay to JCF the full amount of the Enstar
      Market Investment Amount. Notwithstanding the foregoing, Enstar shall pay
      to the Company the Enstar June 28 Market Investment Amount by wire
      transfer of immediately available funds on or prior to July 1, 2005.

                        (ii) At or prior to the Subscription Closing, (A) (1)
      JCF shall deliver to the Company the Flowers Closing Investment Amount by
      wire transfer of immediately available funds to an account designated by
      the Company and (2) Enstar shall deliver to the Company the Enstar Closing
      Investment Amount by wire transfer of immediately available funds to an
      account designated by the Company, and (B) the Company shall cause (1) the
      Flowers Closing Membership Interest to be reflected in the records of the
      Company and (2) the Enstar Closing Membership Interest to be reflected in
      the records of the Company; provided, that in the event that Enstar (x)
      determined to participate in a Market Transaction and (y) does not deliver
      to the Company the Enstar Market Investment Amount at such Market Purchase
      Closing due to the fact that it was not provided notice of such Market
      Transaction at least two (2) business days prior to the Market Purchase
      Closing, JCF shall advance the Enstar Market Investment Amount to the
      Company at the time of any such Market Purchase Closing and, in such
      event, within two (2) business days of written notice of such Market
      Transaction, Enstar shall pay to the Company the Enstar Market Investment
      Amount (without interest) by wire transfer of immediately available funds
      and the Company shall promptly pay to JCF the full amount of the Enstar
      Market Investment Amount.

            3. Representations and Warranties and Other Agreements.

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                  (a) Representations and Warranties and Agreements of the
Investors. Each Investor, with respect to itself and not the other Investor,
hereby represents and warrants the following to the Company and to the other
Investor:

                        (i) Such Investor, pursuant to this Agreement, is making
      the investment in the Company for investment for its own account and not
      with a view to, or for sale in connection with, any distribution thereof.
      Such Investor (either alone or together with its advisors) has sufficient
      knowledge and experience in financial and business matters so as to be
      capable of evaluating the merits and risks of its investment and is
      capable of bearing the economic risks of such investment. Such Investor is
      an "accredited investor" as defined in Rule 501 of Regulation D
      promulgated under the Securities Act. Such Investor acknowledges that its
      membership interest in the Company is not registered pursuant to the
      Securities Act and that such membership interests may not be transferred,
      except pursuant to an applicable exemption under the Securities Act.

                        (ii) Such Investor is a limited partnership duly
      organized and validly existing under the laws of the State of Delaware or
      a corporation duly organized and validly existing under the laws of the
      State of Georgia, as the case may be, and has all requisite organizational
      power and authority to conduct its business as it is now being conducted
      and to own, lease and operate its property and assets, except where the
      failure to be in good standing or to have such power or authority would
      not, in the aggregate, be reasonably likely to have a material adverse
      effect on the ability of such Investor to perform its obligations
      hereunder.

                        (iii) Such Investor has all requisite authority and
      power to execute and deliver this Agreement and to consummate the
      transactions contemplated hereby. The execution and delivery of this
      Agreement has been, and, as of the Subscription Closing, the consummation
      of the transactions contemplated hereby will have been, duly and validly
      authorized by all required company and other action on the part of such
      Investor and no other company proceedings on the part of such Investor are
      necessary to authorize the execution and delivery of this Agreement. This
      Agreement has been duly and validly executed and delivered by such
      Investor and, assuming this Agreement constitutes the valid and binding
      obligation of the Company, constitutes the valid and binding obligations
      of such Investor, enforceable against each Investor in accordance with its
      terms, except as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other similar laws now or hereafter in
      effect relating to or affecting creditors' rights generally, including the
      effect of statutory and other laws regarding fraudulent conveyances and
      preferential transfers, and subject to the limitations imposed by general
      equitable principles (regardless whether such enforceability is considered
      in a proceeding at law or in equity).

                        (iv) Neither the execution and delivery of this
      Agreement by such Investor nor the consummation by each Investor of the
      transactions contemplated hereby, in any case will (x) violate any
      provision of

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      such Investor's organizational documents, in each case as presently in
      effect or (y) require any consent, waiver, approval, license,
      authorization or permit of, or filing with or notification to, any
      Governmental Entity.

                        (v) Except as set forth herein (including pursuant to
      the transactions set forth in the recitals hereto), the Investor has no
      present intention of selling, granting any participation in, or otherwise
      distributing its membership interest in the Company or, to the extent
      applicable, its interest in the Affirmative Common Stock. By executing
      this Agreement, the Investor further represents that, except as set forth
      herein (including pursuant to the transactions set forth in the recitals
      hereto), it does not presently have any contract, undertaking, agreement
      or arrangement with any person to sell, transfer or grant participations
      to such person or to any third person, any of the membership interests or,
      to the extent applicable, its interest in the Affirmative Common Stock
      (other than any such arrangement as may be agreed upon by and between JCF
      and Kevin Callahan).

                  (b) Representations and Warranties of the Company. The Company
represents and warrants to each of the Investors the following:

                        (i) The Company is a limited liability company duly
      organized, validly existing and in good standing under the laws of the
      State of Delaware and has all requisite power and authority to conduct its
      business as it is now being conducted in all material respects and to own,
      lease and operate its property and assets, except where the failure to be
      in good standing or to have such power or authority would not, in the
      aggregate, have a material adverse effect on the Company.

                        (ii) As of the date hereof, no other person has made any
      investment in the Company, and the Company has not engaged in any business
      activities or conducted any operation other than in connection with the
      transactions contemplated hereby. As of the date hereof, there are no
      outstanding rights, options, or warrants to subscribe for, purchase or
      otherwise acquire membership interests in the Company (including
      conversion or preemptive rights and rights of first refusal) or agreements
      for the purchase or acquisition from the Company of any membership
      interests in the Company. There are no outstanding contractual obligations
      of the Company to repurchase, redeem or otherwise acquire any membership
      interests in the Company.

                        (iii) The Company has all requisite authority and power
      to execute and deliver this Agreement and to consummate the transactions
      contemplated hereby. The execution and delivery of this Agreement has
      been, and, as of the Subscription Closing, the consummation of the
      transactions contemplated hereby will have been, duly and validly
      authorized by all required corporate action on the part of the Company and
      no other proceedings on the part of the Company are necessary to authorize
      the execution and delivery of this Agreement. This Agreement has been duly
      and validly executed and delivered by the Company and, assuming this
      Agreement constitutes the valid and binding

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      obligation of the Investors, constitutes the valid and binding obligations
      of the Company, enforceable against the Company in accordance with its
      terms, except as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other similar laws now or hereafter in
      effect relating to or affecting creditors' rights generally, including the
      effect of statutory and other laws regarding fraudulent conveyances and
      preferential transfers, and subject to the limitations imposed by general
      equitable principles (regardless whether such enforceability is considered
      in a proceeding at law or in equity).

                        (iv) Neither the execution and delivery of this
      Agreement by the Company nor the consummation by the Company of the
      transactions contemplated hereby, in any case will (a) violate any
      provision of the Company's certificate of formation or limited liability
      company agreement, in each case as presently in effect, (b) require any
      consent, waiver, approval, license, authorization or permit of, or filing
      with or notification to, any Governmental Entity.

                        (v) Subject in part to the truth and accuracy of the
      Investors' representations set forth in this Agreement, the offer, sale
      and issuance of the membership interests as contemplated by this Agreement
      are exempt from the registration requirements of the Securities Act.

                        (vi) As of the Subscription Closing, the Company will
      have good title to 50% of the membership interests of New Affirmative,
      free and clear of any material liens, pledges, charges, encumbrances,
      transfer restrictions, options, rights of first refusal, mortgages, deeds
      of trust, easements, leases, servitudes, security interests, restrictions
      and claims of any kind or other encumbrances of any nature whatsoever
      (other than those set forth in the LLC Agreement or the Limited Liability
      Company Agreement of New Affirmative LLC, dated June 13, 2005, as amended
      (a copy of which is attached hereto as Exhibit C)).

            4. Conditions to Performance. The obligations of the Company and the
Investors to effect the transaction contemplated hereby shall be subject to the
fulfillment, or written waiver by the Company or each Investor, at or prior to
the Market Purchase Closing or the Subscription Closing, as applicable, of each
of the following conditions:

                  (a) The Investors' and the Company's representations and
warranties set forth in Section 3(a) and 3(b) hereof, respectively, shall be
true and correct in all material respects as of the Marked Purchase or Closing
Subscription Closing, as applicable, and no statute, rule, regulation or order
of any Governmental Entity shall be in effect which prohibits the Company or
either of the Investors from consummating the transactions contemplated hereby.

            5. Covenants

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                  (a) Further Assurances. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take or cause to be taken all action, to do or cause
to be done, and to assist and cooperate with the other party hereto in doing,
all things necessary, proper or advisable under applicable Laws and regulations
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement, including, but not limited to,
(i) the satisfaction of the conditions precedent to the obligations of any of
the parties hereto; (ii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the performance of the obligations hereunder or thereunder; and (iii) the
execution and delivery of such instruments, and the taking of such other actions
as the other party hereto may reasonably require in order to carry out the
intent of this Agreement.

                  (b) Guaranty Reimbursement. Enstar agrees that, to the extent
that JCF is required to pay the JCF Percentage (as defined in the Vesta Stock
Purchase Agreement) pursuant to Section 1.1(b) of the Vesta Stock Purchase
Agreement, then JCF shall notify Enstar that it has paid the JCF Percentage, and
Enstar shall pay, within two (2) business days of such notice, to JCF an amount
equal to fourteen percent (14%) of the JCF Percentage by wire transfer in
immediately available funds to an account designated by JCF.

                  (c) Expenses. Each of the Investors and the Company agree that
all Expenses shall be borne in proportion to each such Investor's respective
Percentage Interest in the Company as set forth in the Limited Liability Company
Agreement of Affirmative Investment LLC. Each Investor shall submit to the
Company a detailed account of its Expenses, with supporting documentation
(including evidence of payment of any such Expense by an Investor if any such
payment has been made), within a reasonable period of time of incurring any such
expenses. The Company shall reasonably promptly reimburse each Investor for any
such documented and reasonable Expenses. To the extent that the Company pays any
Expenses, either directly or by reimbursing an Investor, the Company shall
notify the Investors of such payment (setting forth the amounts so paid) and the
Investors shall make a capital contribution to the Company (in accordance with
Section 2.1 of the LLC Agreement) for such payment of Expenses within ten (10)
days of such payment by the Company.

                  (d) Amendments to Other Agreements. Prior to the Vesta
Closing, JCF shall not consent to, or cause, any amendment or modification to
the New Affirmative Subscription Agreement or the Limited Liability Company
Agreement of New Affirmative LLC in a manner that materially and adversely
affects the rights and obligations of Enstar vis-a-vis JCF, without the prior
written consent of Enstar which shall not be unreasonably withheld.

            6. Miscellaneous.

                  (a) Amendments and Modifications; Waivers. This Agreement may
be amended, modified or supplemented, and any provision hereof may be waived, at
any time only by an instrument in writing duly executed by the Investors and the

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Company. At any time prior to the Subscription Closing, the Investors, with
respect to any term or provision hereof to which it is entitled to the benefits,
and the Company, with respect to any term or provision hereof to which it is
entitled to the benefits, may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance with any obligation, covenant, agreement or condition contained
herein.

                  (b) Effectiveness; Entire Agreement; Assignability. This
Agreement and the LLC Agreement shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and shall supersede all
prior agreements and understandings, both written and oral, among such parties
or any of them with respect to the subject matter hereof. This Agreement shall
not be assigned by operation of Law or otherwise; provided, however, that each
of the Investors may its their rights and obligations to any wholly owned
subsidiary of the Investors (unless to do so would restrict or delay the
consummation of the transactions contemplated by this Agreement), but no such
assignment shall relieve such Investors of its obligations hereunder.

                  (c) Applicable Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflict or
choice of Law.

                  (d) Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably submit in any action, suit or proceeding arising out of this
Agreement or any of the transactions contemplated hereby to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York and the jurisdiction of any court of the State of New York located in
the City of New York, Borough of Manhattan. The parties hereto waive any and all
objections to the laying of venue of any such litigation in such jurisdiction
and agree not to plead or claim in any such litigation that such litigation has
been brought in an inconvenient forum.

                  (e) Specific Performance. The parties hereto agree that if any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at Law would exist and damages would be difficult to determine,
and that the parties hereto shall be entitled to specific performance of the
terms hereof, in addition to any other remedy available at Law or in equity.

                  (f) Notices. All notices, requests, claims, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given (i) when received, if delivered
personally, (ii) when transmitted, if by facsimile (which is confirmed) (iii)
upon receipt, if by registered or certified mail (postage prepaid, return
receipt requested) or (iv) the day after it is sent, if sent for next-day
delivery to a domestic address by overnight mail, to the relevant parties hereto
at the following addresses:

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            If to JCF, to:

                  J.C. Flowers I LP
                  717 Fifth Avenue, 26th Floor
                  New York, New York 10022
                  Telephone: (212) 404-6808
                  Facsimile: (646) 304-6424
                  Attention: Avshalom Kalichstein, Principal

            If to Enstar, to:

                  The Enstar Group, Inc.
                  401 Madison Avenue
                  Montgomery, Alabama 36104
                  Telephone: (334) 834-5483
                  Facsimile: (334) 834-2530
                  Attention: Cheryl D. Davis

            with a copy to:

                  King & Spalding LLP
                  191 Peachtree Street
                  Atlanta, GA 30303
                  Telephone: (404) 572-4600
                  Facsimile: (404) 572-5100
                  Attention: Janet Taylor, Esq.

            If to the Company, to:

                  Affirmative Investment LLC

                  c/o J.C. Flowers I LP
                  717 Fifth Avenue, 26th Floor
                  New York, New York 10022
                  Telephone: (212) 404-6808
                  Facsimile: (646) 304-6424
                  Attention:  Avshalom Kalichstein, Principal

                  The Enstar Group, Inc.
                  401 Madison Avenue
                  Montgomery, Alabama 36104
                  Telephone: (334) 834-5483
                  Facsimile: (334) 834-2530
                  Attention: Cheryl D. Davis

            with a copy to:

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                  Skadden, Arps, Slate, Meagher & Flom LLP
                  Four Times Square
                  New York, New York 10036
                  Telephone: (212) 735-3000
                  Facsimile: (212) 735-2000
                  Attention: Lou R. Kling, Esq.
                           Thomas W. Greenberg, Esq.

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
(provided that notice of any change of address shall be effective only upon
receipt thereof).

                  (g) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.

                  (h) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect. If any one or more of the provisions contained in this Agreement or
in any other instrument referred to herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by Law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
valid and enforceable provision as similar in terms and commercial effect to
such invalid or unenforceable provision as shall be possible.

                  (i) Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and nothing in this
Agreement, express or implied, is intended by or shall confer upon any other
Person or Persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement. Any Person who is a beneficiary of any of
the aforementioned provisions shall be entitled to enforce his rights
thereunder.

                  (j) Third Party Beneficiaries. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give to any
third party any rights or remedies against any party hereto.

                  [Remainder of Page Intentionally Left Blank]

                                       12
<PAGE>

IN WITNESS WHEREOF, JCF, Enstar and the Company have executed this Agreement as
of the date first above written.

                                      AFFIRMATIVE INVESTMENT LLC

                                      By: /s/ Avshalom Kalichstein
                                          --------------------------
                                          Name: Avshalom Kalichstein
                                          Title: Authorized Person

                                      J.C. FLOWERS I LP

                                      By:  JCF Associates I LLC,
                                           its General Partner

                                      By: /s/ Avshalom Kalichstein
                                          --------------------------
                                          Name: Avshalom Kalichstein
                                          Title: Principal

                                      THE ENSTAR GROUP, INC.

                                      By: /s/ Nimrod T. Frazer
                                          --------------------------
                                          Name: Nimrod T. Frazer
                                          Title: Chairman & CEO

<PAGE>

                                   EXHIBIT A
                               INVESTMENT AMOUNTS

<TABLE>
<CAPTION>
       INVESTOR          INVESTMENT AMOUNT   PERCENTAGE INTEREST
----------------------   -----------------   -------------------
<S>                      <C>                 <C>
J.C. Flowers I LP        $   16,059,546.78            86%
The Enstar Group, Inc.   $    2,614,344.82            14%
</TABLE>

<PAGE>

                                   EXHIBIT B
                                 LLC AGREEMENT<PAGE>

                                                                    EXHIBIT 10.2

================================================================================

                      LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                           AFFIRMATIVE INVESTMENT LLC

                           Dated as of June 30, 2005

================================================================================

<PAGE>

                               Table of Contents

<TABLE>
<S>                                                                                       <C>
                     ARTICLE 1 FORMATION OF LIMITED LIABILITY COMPANY

Section 1.1    Formation...............................................................   1

Section 1.2    Company Name............................................................   2

Section 1.3    Classes of Members......................................................   2

Section 1.4    Purpose; Powers.........................................................   2

Section 1.5    Registered Office.......................................................   2

Section 1.6    Registered Agent........................................................   2

Section 1.7    Term....................................................................   2

Section 1.8    No State Law Partnership................................................   2

                                ARTICLE 2 CAPITAL ACCOUNTS

Section 2.1    Capital Contributions...................................................   3

Section 2.2    Maintenance of Capital Accounts.........................................   3

Section 2.3    Withdrawals or Loans....................................................   3

                                   ARTICLE 3 ALLOCATIONS

Section 3.1    Allocations.............................................................   4

Section 3.2    Certain Tax Matters.....................................................   4

                                  ARTICLE 4 DISTRIBUTIONS

Section 4.1    Distributions...........................................................   4

Section 4.2    Withholding.............................................................   4

Section 4.3    Restricted Distributions................................................   5

           ARTICLE 5 RIGHTS AND OBLIGATIONS OF MEMBERS; RESTRICTIONS ON MEMBERS

Section 5.1    Limited Liability.......................................................   5

Section 5.2    Other Business; Compensation, Etc.......................................   5

Section 5.3    No Management Fee, Carried Interest or Promotion Fee....................   5

                  ARTICLE 6 MANAGING MEMBER; INVESTMENTS; INDEMNIFICATION

Section 6.1    Identity of the Managing Member.........................................   6

Section 6.2    Powers and Authority of Managing Member.................................   6

Section 6.3    Exculpation and Indemnification.........................................   6
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                      <C>
Section 6.4    Replacement of Managing Member..........................................   7

           ARTICLE 7 NO TRANSFERS OF INTERESTS; RESIGNATIONS; ADDITIONAL MEMBERS

Section 7.1    Transfer of any Member's Interest; Additional Members...................   8

Section 7.2    Resignations............................................................   9

Section 7.3    Additional Members......................................................   9

                    ARTICLE 8 BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS

Section 8.1    Books and Records.......................................................   9

Section 8.2    Reports.................................................................   9

Section 8.3    Filings of Returns and Other Writings; Tax Matters Partner..............  10

                                   ARTICLE 9 TERMINATION

Section 9.1    Events of Dissolution...................................................  11

Section 9.2    Application of Assets...................................................  12

Section 9.3    Gains or Losses in Process of Liquidation...............................  12

                                  ARTICLE 10 DEFINITIONS

                               ARTICLE 11 POWER OF ATTORNEY

Section 11.1       Authority...........................................................  15

Section 11.2       Terms...............................................................  16

                                 ARTICLE 12 MISCELLANEOUS

Section 12.1       Notices.............................................................  16

Section 12.2       Binding Provisions..................................................  17

Section 12.3       Applicable Law......................................................  18

Section 12.4       Severability of Provisions..........................................  18

Section 12.5       Titles..............................................................  18

Section 12.6       Further Assurances..................................................  18

Section 12.7       Amendment...........................................................  18

Section 12.8       Partition...........................................................  18

Section 12.9       Counterparts........................................................  18

Section 12.10      Entire Agreement....................................................  18

Section 12.11      Confidentiality.....................................................  18
</TABLE>

                                       ii
<PAGE>

                      LIMITED LIABILITY COMPANY AGREEMENT
                         OF AFFIRMATIVE INVESTMENT LLC

            AGREEMENT OF LIMITED LIABILITY COMPANY of Affirmative Investment LLC
( the "Company"), dated as of June 29, 2005 among the persons listed on Schedule
A hereto, and any Person added thereto pursuant to Article 7 hereof (the
"Members").

            WHEREAS, the Managing Member (as defined in Section 1.3) caused the
Company to be formed as a limited liability company in accordance with the
provisions of the Delaware Limited Liability Company Act (as from time to time
amended and including any successor statute of similar import, the "Act") for
the purpose of facilitating the participation of the Members, through the
Company, in the purchase, sale and ownership of Membership Units of New
Affirmative LLC, a Delaware limited liability company (the "NAL Membership
Units") and, if applicable, common stock of Affirmative Insurance Holdings, Inc.
("Affirmative Common Stock");

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as follows:

            Capitalized terms used herein without definition are defined in
Article 10.

                                   ARTICLE 1

                     FORMATION OF LIMITED LIABILITY COMPANY

            Section 1.1 Formation. The Company has been formed as a limited
liability company pursuant to the provisions of the Act by the execution and
filing of the Certificate by an authorized person as required by the Act. The
Certificate for the Company has been filed in the Office of the Secretary of
State of the State of Delaware in conformity with the Act. The Members and the
Company hereby adopt, approve, confirm and ratify all actions previously taken
by or on behalf of the Company (including the actions of the authorized person)
in connection with the filing of the Certificate for the Company with the Office
of the Secretary of State of the State of Delaware and other initial formation
and operational matters. The Managing Member is hereby authorized to execute,
file and record all such other certificates and documents, including amendments
to the Certificate, and to do such other acts as may be appropriate to comply
with all requirements for the formation, continuation and operation of a limited
liability company, the ownership of property, and the conduct of business under
the laws of the State of Delaware and any other jurisdiction in which the
Company may own property or conduct business. Each of the Members shall execute
or cause to be executed other instruments, certificates, notices and documents,
and shall do or cause to be done all such filing,

<PAGE>

recording, publishing and other acts, in each case, as may be deemed necessary
or appropriate from time to time by the Managing Member.

            Section 1.2 Company Name. The name of the Company shall be
"Affirmative Investment LLC" and its business shall be carried on under such
name or any fictitious name or names selected by the Managing Member from time
to time, provided that any such name reflects the Company's status as a limited
liability company or is otherwise permitted by applicable law.

            Section 1.3 Classes of Members. The Company shall have two (2)
classes of Members: (i) the Member identified in Section 6.1, which shall have
the rights, powers and obligations of the "Managing Member" specified herein,
together with the rights, powers and obligations of "managers" under the Act
(the "Managing Member") and (ii) all other Members (the "Non-Managing Members").

            Section 1.4 Purpose; Powers. The Company is formed for the object
and purpose of, and the nature of the business to be conducted and promoted by
the Company is, issuing its Interests, acquiring, holding, owning, voting,
pledging, selling, exchanging, transferring or otherwise disposing of the NAL
Membership Units and, if applicable, Affirmative Common Stock, and engaging in
any and all activities that the Managing Member shall deem necessary or
incidental to the foregoing (collectively, the "Purpose")

            Section 1.5 Registered Office. The address of the registered office
of the Company in the State of Delaware is c/o Corporation Trust Center, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801.

            Section 1.6 Registered Agent. The name and address of the registered
agent of the Company for service of process on the Company in the State of
Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801.

            Section 1.7 Term. The existence of the Company commenced on the date
of the filing of the Certificate in the Office of the Secretary of State of the
State of Delaware in accordance with the Act and, subject to the provisions of
Article 9 below, the Company shall have perpetual existence.

            Section 1.8 No State Law Partnership. The Members intend that the
Company shall not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member shall be a partner or joint
venturer of any other Member, for any purposes other than federal and state tax
purposes, and this Agreement shall not be construed to the contrary. Each Member
and the Company shall file all tax returns and shall otherwise take all tax and
financial reporting positions in a manner consistent with such treatment.
Neither the Company nor any Member shall make any elections or take any other
actions inconsistent with such treatment.

<PAGE>

                                   ARTICLE 2

                                CAPITAL ACCOUNTS

            Section 2.1 Capital Contributions. Each Member hereby makes the
Capital Contributions to the Company in cash as set forth on Schedule A annexed
hereto (the "Initial Capital Contributions") pursuant to the terms of a
Subscription Agreement between the Company and such Member in consideration for
their respective Interests. Following the Initial Capital Contributions, the
Interests of the Members shall be fully paid and non-assessable, and the
ownership of the Interests by each Member as represented by their respective
Percentage Interests shall be as set forth on Schedule A annexed hereto. The
Managing Member may, in its sole discretion, require the Members to make
additional Capital Contributions, pro rata based upon their Percentage Interests
in order to further the Purpose and to allow the Company to pay the Company
Expenses. Schedule A shall be amended from time to time to reflect appropriately
any additional Capital Contributions that may be made in exchange for Interests
in the Company or changes as otherwise provided in Article 7 hereto. No Member
shall be required to make any additional Capital Contribution except as set
forth herein and in the Subscription Agreement.

            Section 2.2 Maintenance of Capital Accounts. A separate capital
account (a "Capital Account") shall be established and maintained for each
Member. The balance of each member's Capital Account shall be calculated as
follows: (a) by crediting the Capital Account of such Member for any capital
contribution (including the Initial Capital Contribution) made by such Member;
(b) by crediting or debiting, as the case may be, the Capital Account of such
Member for that Member's share of the Company's profits and losses, as
determined under Article 3, during the immediately preceding Accounting Period;
(c) by debiting the Capital Account of such Member by the amount of any
distributions made to such Member pursuant to Section 4.1; and (d) by
adjustments made in accordance with the other Capital Account maintenance rules
of section 1.704-1(b)(2)(iv) of the Treasury Regulations. This Section 2.2 and
the other provisions of this Agreement relating to the maintenance of capital
accounts are intended to comply with Treasury Regulations Section 1.704-1(b),
and shall be interpreted and applied in a manner consistent with such Treasury
Regulations.

            Section 2.3 Withdrawals or Loans. A Member shall not be entitled to
withdraw any part of its Capital Account or to receive any distributions from
the Company except as provided in Articles 4 and 9; nor shall a Member be
entitled to make any loan to the Company other than as expressly provided herein
or in the Subscription Agreement. No loan made to the Company by any Member
shall constitute a Capital Contribution to the Company for any purpose.

<PAGE>

                                   ARTICLE 3

                                  ALLOCATIONS

            Section 3.1 Allocations. The profits and losses of the Company for
each Accounting Period shall be allocated among the Members in proportion to
their respective Percentage Interests.

            Section 3.2 Certain Tax Matters. For U.S. federal, state and local
income tax purposes, the income, gains, losses and deductions realized by the
Company shall be allocated among the Members in the same manner as such items
affected the Members' Capital Accounts. The foregoing allocation is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b) and shall
be interpreted and applied in a manner consistent with such Treasury
Regulations. The Managing Member may, in its sole discretion, make the election
provided for in Section 754 of the Code.

                                   ARTICLE 4

                                 DISTRIBUTIONS

            Section 4.1 Distributions. Subject to Article 9, which shall govern
distributions upon the dissolution of the Company, distributions shall be made
in cash or in kind at the times and in the aggregate amounts determined by the
Managing Member; provided, however, that upon the receipt of any cash proceeds
by the Company in respect of the Company's ownership of the NAL Membership Units
the Company shall, within thirty (30) days of such receipt, distribute such
proceeds to the Members in a manner consistent with the following sentence;
provided, further, that the Managing Member may in its sole discretion cause the
Company to retain a portion of any such cash distribution to set aside a
reasonably appropriate Company reserve for expenses and contingent liabilities.
Such distributions shall be made to Members in accordance with their respective
Percentage Interests at the time of distribution. Any gain or loss on the
in-kind distributions shall be allocated to the Members in accordance with the
provisions of Article 3 hereof and shall be credited or charged to the Capital
Accounts of such Members accordingly. The amount so credited or charged to the
Members' Capital Accounts for in-kind distributions shall be the fair market
value (as determined in the good faith judgment of the Managing Member) of the
property so distributed.

            Section 4.2 Withholding. Any distribution to a Member pursuant to
Section 4.1 or Article 9 shall be deemed to include any applicable tax deducted
or withheld or otherwise payable with respect to such Member, including, in the
event that the Member receives a distribution from or in respect of which tax
has been withheld, the portion of such tax that is attributable to such Member's
Interest in the Company, and each Member hereby authorizes the Company to
withhold and to pay over, or otherwise pay, any such taxes. If and to the extent
that the Company shall be required to pay any such taxes in respect of any
Member, and such Member is not concurrently entitled to a cash distribution from
the Company, the Company shall notify such Member as to the amount of such tax
and such Member shall make a prompt payment to the Company of

<PAGE>

such amount. Notwithstanding any other provision of this Agreement, if any such
withholding requirement with respect to any Member exceeds the amount
distributable to such Member under applicable provisions of this Agreement or if
any such withholding requirement was not satisfied with respect to any amount
previously allocated, paid or distributed to such Member, such Member and any
successor or assignee with respect to such Member's Membership Units hereby
indemnifies and agrees to hold harmless the other Members and the Company for
such excess amount or such withholding requirement, as the case may be.

            Section 4.3 Restricted Distributions. Notwithstanding any provision
to the contrary contained in this Agreement, distributions shall be made only to
the extent of Available Assets and in compliance with the Act.

                                   ARTICLE 5

                       RIGHTS AND OBLIGATIONS OF MEMBERS;
                            RESTRICTIONS ON MEMBERS

            Section 5.1 Limited Liability. Except as otherwise provided by the
Act or herein, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and the Members shall not be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a member of the Company.

            Section 5.2 Other Business; Compensation, Etc. The Members and their
Affiliates may engage in or possess an interest in other business ventures of
every kind and description, independently or with others. None of the Company or
other Members shall have any rights in or to such independent ventures or the
income or profits therefrom by virtue of this Agreement. To the extent that, at
law or in equity, any Affiliate of a Member or any director, officer,
stockholder, employee, agent or representative of a Member or such Affiliate has
duties (including fiduciary duties) and liabilities to the Company or to the
Members, no such Person shall be liable to the Company or to any Member for its
good faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they expand or restrict the duties and liabilities
of any such Person otherwise existing at law or in equity (including fiduciary
duties), are agreed by the Members to replace fully and completely such other
duties and liabilities of such Person.

            Section 5.3 No Management Fee, Carried Interest or Promotion Fee.
The Members shall not be charged any management fee, carried interest or
promotion fee by any of the Company or the Managing Member with respect to the
investment in the Company by the Members.

<PAGE>

                                   ARTICLE 6

                 MANAGING MEMBER; INVESTMENTS; INDEMNIFICATION

            Section 6.1 Identity of the Managing Member. The Managing Member
shall be Affirmative Associates LLC ("Affirmative Associates").

            Section 6.2 Powers and Authority of Managing Member. The management
of the Company and its assets shall be vested exclusively in the Managing Member
and the Non-Managing Members shall not have the power, authority or right to
bind the Company. The Managing Member need not own an economic interest in the
Company. Without limiting the generality of the foregoing, the Managing Member
shall have the exclusive right to exercise any of the Company's voting, sale or
other rights arising in connection with the NAL Membership Units or, if
applicable, the Affirmative Common Stock. The Managing Member shall devote such
time to the business and affairs of the Company as is necessary for the
performance of its duties, but in any event, shall not be required to devote
full time to the performance of such duties and may delegate its duties and
responsibilities as provided herein. The Managing Member shall have the right to
appoint officers to manage and control the business and affairs of the Company
and such officers shall serve at the discretion of the Managing Member.

            Section 6.3 Exculpation and Indemnification.

            (a) The Company shall indemnify to the fullest extent permitted by
law the Managing Member from and against all costs and expenses (including
attorneys' fees and disbursements), judgments, fines, settlements, claims and
other liabilities ("Claims") incurred by or imposed upon the Managing Member in
connection with, or resulting from, investigating, preparing or defending any
action, suit or proceeding, whether civil, criminal, administrative,
investigative, legislative or otherwise (or any appeal therein), to which the
Managing Member may be made a party or become otherwise involved or with which
the Managing Member may be threatened, in each case by reason of, or in
connection with, the Managing Member's being or having been associated with the
Company or by reason of any action or alleged action, omission or alleged
omission by the Managing Member in any such capacity, to the extent that the
Managing Member is not adjudged by a court of competent jurisdiction to have
engaged in willful misconduct, fraud or gross negligence.

            (b) The personal liability of the Managing Member is hereby
eliminated to the fullest extent permitted by the Act, as the same may be
amended and supplemented. The Managing Member shall not be personally liable to
the Company or its Members for monetary damages for breach of fiduciary duty
(which has been determined by a court of competent jurisdiction) as the Managing
Member, except as to liability to the extent such exemption from liability or
limitation thereof is not permitted under the Act, as the same exists or may
hereafter be amended. If the Act hereafter is amended to further eliminate or
limit the liability of the Managing Member, then the Managing Member, in
addition to the circumstances in which the Managing Member is not personally
liable as set forth in the preceding sentence, shall not be liable to the

<PAGE>

fullest extent permitted by the Act. In furtherance of, and without limiting the
generality of the foregoing, the Managing Member shall not be (i) personally
liable for the debts, obligations or liabilities of the Company, including any
such debts, obligations or liabilities arising under a judgment, decree or order
of a court; (ii) obligated to cure any deficit in any Capital Account; (iii)
required to return all or any portion of any Capital Contribution; or (iv)
required to lend any funds to the Company. Any repeal or modification of this
Section 6.3(b) by the Members shall not adversely affect any right or protection
of the Managing Member existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.

            (c) To the fullest extent permitted by law, the Company shall pay
the expenses incurred by the Managing Member in investigating, preparing or
defending a civil or criminal action, suit or proceeding, in advance of the
final disposition thereof, upon receipt of an undertaking by or on behalf of the
Managing Member to repay such amount if there is an adjudication or
determination by a court of competent jurisdiction that he is not entitled to
indemnification as provided herein.

            (d) None of the provisions of this Section 6.3 shall be deemed to
create or grant any rights in favor of any third party, including, without
limitation, any right of subrogation in favor of any insurer or surety. The
rights of indemnification granted hereunder shall survive the dissolution,
winding up and termination of the Company.

            Section 6.4 Replacement of Managing Member. So long as The Enstar
Group, Inc. ("Enstar") is a Non-Managing Member, Affirmative Associates LLC,
including the managing member thereof (who, as of the date hereof, is J.
Christopher Flowers), shall not be replaced or substituted as the Managing
Member (either directly or indirectly, including by Transfer of the interests in
such Managing Member), other than by an Affiliate of J. Christopher Flowers,
without the prior written consent of Enstar (which shall not be unreasonably
withheld) (any such replacement or substitution in violation of this Section
6.4, a "Prohibited Replacement"). Notwithstanding the foregoing, a Prohibited
Replacement shall not be deemed to have occurred in the event that, following a
Key Man Event, the limited partners of J.C. Flowers I LP ("JCF I") require the
removal of the general partner of the Flowers Fund (the "Existing GP") and
appoint a successor general partner (the "Successor GP"), in each case in
accordance with the terms of the Second Amended and Restated Limited Partnership
Agreement of JCF I (as amended from time to time, the "JCF I Agreement"), then
the Managing Member shall transfer its interest as managing member of the
Company to the Successor GP (or an affiliate thereof) at substantially the same
time as the Existing GP transfers its interest as general partner of JCF I to
the Successor GP (a "Successor GP Replacement").

<PAGE>

                                   ARTICLE 7

          NO TRANSFERS OF INTERESTS; RESIGNATIONS; ADDITIONAL MEMBERS

            Section 7.1 Transfer of any Member's Interest; Additional Members.

            (a) Subject to the provisions of Section 7.1(c) hereof, no Member
may Transfer all or any portion of its Interest or any rights therein, except
(x) with the prior written consent of the Managing Member, which consent shall
not be unreasonably withheld or delayed, (y) to an Affiliate of such Member, or
(z) to another Member (collectively with any transferee pursuant to clauses (x),
and (y), a "Permitted Transferee").

            (b) Notwithstanding Section 7.1(a) above and subject to Section
7.1(c) below, in the event that JCF I proposes to Transfer all or a portion of
its Interests to a third party transferee that is not an Affiliate, such that as
a result of such transfer JCF I (or an Affiliate thereof) would, as a result
thereof, no longer beneficially own a majority Interest in the Company (a "JCF I
Transfer"), then (i) JCF I shall promptly notify Enstar of such JCF I Transfer
and (ii) such Transfer shall require the consent of Enstar (which shall not be
unreasonably withheld or delayed), unless in connection with such JCF I
Transfer, Enstar is given the option to Transfer all or a portion of its
Interest to such third party transferee upon the same terms and conditions,
including price, pro rata in accordance with its Proportionate Percentage;
provided, that in the event that Enstar elects to participate in any such JCF I
Transfer (A) it shall notify JCF I within 10 business days of the delivery of
notice of such JCF I Transfer pursuant to clause (i) above that it elects to
participate in such JCF I Transfer and the Interest that it proposes to include
in such JCF I Transfers and (B) Enstar shall bear its pro rata share of the
costs and expenses incurred by JCF I in connection with such JCF I Transfer.

            (c) JCF I or a Permitted Transferee thereof (so long as such
Permitted Transferee beneficially owns over 70% of the Interests in the Company)
may, at its option, in connection with the Transfer of all but not less than all
of its Interests in the Company, to a third party transferee (which is not an
Affiliate of such member), cause each of the other Members to sell (and each of
the other Members shall agree to sell), in connection with such transfer, all
but not less than all of their Interests in the Company upon the same terms and
conditions, including price, as JCF I. Any costs and expenses incurred by the
Members in connection with such Transfer shall be deemed Company Expenses.

            (d) No Permitted Transferee or New Member (as defined below) may be
admitted as a Member unless such Permitted Transferee or New Member first
executes a counterpart of the signature page of this Agreement and any other
agreements, documents or instruments reasonably specified by the Managing
Member, and any transferring Member shall continue to be bound by its
obligations hereunder unless and until such transferee Affiliate executes and
delivers a written assumption of such obligations to the Company. Upon obtaining
such consent and upon the execution of such signature page and such other
agreements, documents and instruments, such

<PAGE>

Permitted Transferee or New Member shall have all of the rights and powers and
shall be subject to the restrictions and liabilities of a Member hereunder and
the Managing Member shall thereupon have the authority to amend Schedule A to
reflect such additional Member and such Member's Interest, or in the case of a
transfer to an existing Member, the additional Interest of such Member. Any
purported sale, assignment, pledge or other transfer made in violation of this
Agreement shall be null and void.

            (e) Subject to the provisions of Sections 7.1(a), 7.1(b) and 7.1(d)
hereof, new Members ("New Members") shall be admitted, and Interests shall be
issued, only upon the prior written consent of the Managing Member which consent
shall be in the sole discretion of such Managing Member; provided, however, that
in the event that any such New Member is to be admitted, or Interests are to be
issued, in each case, after the Closing Date, each existing Member shall first
be given the opportunity (including reasonable advance notice) to purchase (on
the same terms and at the same price as those being offered to such potential
New Member or such potential purchaser of Interests) such additional Interests
as may be necessary in order to permit each such existing Member to maintain its
Percentage Interest of the Company.

            Section 7.2 Resignations. No Member may resign from the Company
prior to the dissolution of the Company pursuant to Article 9; provided,
however, that a Non-Managing Member who transfers 100% of its Interest in
accordance with Section 7.1 may resign if its transferee expressly assumes all
of such Member's obligations hereunder pursuant to an instrument satisfactory to
the Managing Member.

            Section 7.3 Additional Members. Neither the Company nor the Managing
Member may admit any additional Members to the Company except as provided in
Section 7.1.

                                   ARTICLE 8

                   BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS

            Section 8.1 Books and Records. The Managing Member shall keep, or
cause to be kept, complete and accurate books and records of account of the
Company. The Managing Member shall maintain at the principal business office of
the Company a current list of the full name and last known business address of
each Member, set forth in alphabetical order, a copy of the Certificate,
including all certificates of amendment thereto, copies of the Company's U.S.
federal, state and local income tax returns and reports, if any, for the three
most recent years, copies of this Agreement and of any financial statements of
the Company for the three most recent years and all other records required to be
maintained pursuant to the Act.

            Section 8.2 Reports.

            (a) The Managing Member shall cause to be prepared and transmitted
to each Member such financial information with respect to the Company as the
Managing Member shall determine appropriate or as required by law.

<PAGE>

            (b) Each Member shall have the right, at all reasonable times but in
any event only during usual business hours and upon reasonable written notice
specifying the purpose of such investigation, to audit, examine and make copies
of or extracts from the information and records of the Company described in
Section 18-305(a) of the Act for any purpose reasonably related to its Interest,
provided, however, that the Managing Member shall have the right to withhold any
such information pursuant to Section 18-305(c) of the Act. Such right may be
exercised through any agent or employee of such Member designated by him or by a
certified public accountant designated by such Member. A Member shall bear all
expenses incurred in any investigation made for such Member's account pursuant
to this Section 8.2 or Section 18-305 of the Act.

            (c) Upon request of any Member (the "Requesting Member"), the
Managing Member shall use its best efforts to furnish or cause to be furnished
to the Members all unaudited quarterly and audited annual financial statements
with respect to the Company and New Affirmative LLC, each prepared in accordance
with GAAP, within a reasonable period of time, in light of the circumstances,
prior to the filing deadline required by the Securities and Exchange Commission
for accelerated filers. The reasonable costs and expenses incurred by the
Company and/or the Managing Member in connection with the preparation and
delivery of such financial statement shall be borne by the Requesting Member
(and shall not be deemed Company Expenses); provided, that, in connection with
the preparation of the financial statements of New Affirmative LLC (including,
without limitation, any audit thereof) the Managing Member shall use its
commercially reasonable efforts to minimize the cost and expense thereof,
including by causing (to the extent reasonably practicable) Affirmative
Insurance Holdings, Inc. to prepare such financial statements.

            Section 8.3 Filings of Returns and Other Writings; Tax Matters
Partner. (a) The taxable year for the Company shall be December 31. The Managing
Member shall cause the preparation and timely filing of all Company tax returns
and shall, on behalf of the Company, timely file all other filings required by
any governmental authority having jurisdiction to require such filings. Upon the
request of any Member, the Managing Member will furnish it with copies of all
U.S. federal, state and local income tax returns or information returns that the
Company has filed for such taxable year and such additional information as is
necessary for the preparation of such Member's tax returns. The Members agree
that the Managing Member shall cause the Company to file its tax returns as a
partnership for federal, state and local income and other tax purposes.
Accordingly, the Managing Member shall not permit the Company to elect and the
Company shall not elect to be treated as an association taxable as a corporation
for U.S. federal, state or local income tax purposes under Treasury Regulation
Section 301.7701-3(a) or any corresponding provision of state or local law. The
Managing Member shall prepare and furnish K-1's to the Members in accordance
with applicable legal requirements.

            (b) The "tax matters partner", as defined in Section 6231(a)(7) of
the Code, and any similar provision of any state law, shall be the Managing
Member.

<PAGE>

            (b) Promptly following the written request of the tax matters
partner, the Company shall, to the fullest extent permitted by law, reimburse
and indemnify the tax matters partner for all reasonable expenses, including
reasonable legal and accounting fees, claims, liabilities, losses and damages
incurred by the tax matters partner in connection with any administrative or
judicial proceeding with respect to the tax liability or items of the Company
except for any liability incurred by such tax matters partner by reason of its
gross negligence, fraud or willful misconduct.

            (c) The provisions of this Section 8.3 shall survive the termination
of the Company or the termination of any Member's Interest in the Company and
shall remain binding on the Members for as long a period of time as is necessary
to resolve with the Internal Revenue Service or other taxing authority any and
all U.S. federal, state and local tax matters of the Company.

                                   ARTICLE 9

                                  TERMINATION

            Section 9.1 Events of Dissolution. (a) In accordance with Section
18-801 of the Act, the Company shall be dissolved and the affairs of the Company
wound up upon the occurrence of any of the following events:

                  (i) a unanimous written decision of the Members to dissolve
      the Company;

                  (ii) the entry of a decree of judicial dissolution under
      Section 18-802 of the Act;

                  (iii) the sale or distribution of 100% the securities owned by
      the Company (including, without limitation, the NAL Membership Units, the
      Affirmative Common Stock received by the Company as a liquidation
      distribution from New Affirmative LLC and/or any other securities acquired
      by the Company);

                  (iv) with the consent of a majority of the Members (other than
      the Members who are Affiliates of the Managing Member), upon a Prohibited
      Replacement; or

                  (v) upon the occurrence of a Key Man Event but only if
      following such Key Man Event the limited partners of JCF I require the
      dissolution and liquidation of the JCF I in accordance with the terms of
      the JCF I Agreement; it being understood that if following a Key Man Event
      there a Successor GP Replacement the Company shall neither be dissolved
      nor its affairs wound up.

            (b) Dissolution of the Company shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Company shall not
terminate until

<PAGE>

the assets of the Company shall have been distributed as provided herein and a
certificate of cancellation of the Certificate has been filed with the Secretary
of State.

            Section 9.2 Application of Assets. In the event of dissolution, the
Company shall conduct only such activities as are necessary to wind up its
affairs (including the sale of the assets of the Company in an orderly manner),
and the assets of the Company shall be applied (a) first, to creditors of the
Company, including Members who are creditors, to the extent otherwise permitted
by law, in satisfaction of the liabilities of the Company (whether by payment or
the making of reasonable provision for payment thereof); and (b) second, to the
Members in proportion to and to the extent of the positive balances of the
Capital Accounts of the Members (after reflecting in such Capital Accounts all
adjustments thereto necessitated by (i) all other Company transactions that
occurred during the Accounting Period in which such winding up occurs and (ii)
such winding up).

            Section 9.3 Gains or Losses in Process of Liquidation. Any gain or
loss on disposition (including the distributions described in Section 9.4 below)
of Company property in the process of liquidation shall be allocated to the
Members in accordance with the provisions of Article 3 and be credited or
charged to the Capital Accounts of such Members accordingly.

            Distributions in Kind. Although the Managing Member will make a good
faith attempt to liquidate such amounts into cash, the Managing Member may elect
to pay all or a portion of amounts distributable to Members upon the winding up
of the Company pursuant to this Article 9 in the form of securities; provided
that no Member shall be required to accept more than its pro rata share of any
security. The Managing Member may cause certificates evidencing any securities
to be distributed to any Members to be imprinted with legends as to such
restrictions on transfers that the Managing Member may deem necessary or
appropriate, including legends as to applicable federal or state securities laws
or other legal or contractual restrictions, and may require the Member receiving
such securities to agree in writing that such securities will not be transferred
except in compliance with all such restrictions and to such other matters as the
Managing Member may deem necessary or appropriate.

                                   ARTICLE 10

                                  DEFINITIONS

            Any capitalized term used in this Agreement without definition shall
have the meaning set forth below.

            "Accounting Period" shall mean the period beginning on the day
following any Adjustment Date (or, in the case of the first Accounting Period,
beginning on the day of formation of the Company) and ending on the next
succeeding Adjustment Date.

            "Adjustment Date" shall mean (a) the last day of each taxable year,
(b) the day before the date of admission of any additional Member, (c) the day
before the date a

<PAGE>

Member ceases to be a member of the Company, (d) the day before the date of any
distribution by the Company, other than a distribution made to Members in
accordance with their respective Percentage Interests or (e) any other date
determined by the Managing Member as appropriate for a closing of the Company's
books.

            "Affiliate" shall mean, with respect to any specified Person, a
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.

            "Agreement" shall mean this Limited Liability Company Agreement, as
it may be amended, restated or supplemented from time to time as herein
provided.

            "Available Assets" shall mean, as of any date, the excess of the
cash, cash equivalent items and investments held by the Company over the sum of
the amount of such items determined by the Managing Member to be reasonably
necessary for the payment of the Company Expenses and the Company's liabilities
and other obligations (whether fixed or contingent), and for the establishment
of reasonably appropriate reserves (in the good faith judgment of the Managing
Member) for such expenses, liabilities and obligations as may arise, including
the maintenance of adequate working capital for the continued conduct of the
Company's business.

            "Capital Account" shall have the meaning specified in Section 2.2.

            "Capital Contribution" shall mean any contribution of cash, property
or services to the Company or the obligation to contribute cash, property or
services to the Company made by or on behalf of a Member.

            "Certificate" shall mean the Certificate of Formation of Limited
Liability Company of the Company as provided for pursuant to the Act, as
originally filed with the office of the Secretary of State, and as amended and
restated from time to time as herein provided.

            "Claims" shall have the meaning specified in Section 6.3(a).

            "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor act thereto, and, to the extent applicable, any
Treasury Regulations promulgated thereunder.

            "Company Expenses" shall mean the following reasonable costs and
expenses that, in the good faith judgment of the Managing Member, are incurred
in the formation and operation of the Company and the Managing Member: the fees
and expenses relating to legal, custodial and accounting expenses; auditing
expenses; expenses incurred in maintaining in the State of New York or elsewhere
the principal place of business of the Company (but not including expenses
incurred by the Managing Member in maintaining its principal place of business);
expenses incurred in maintaining a registered office in the State of Delaware;
taxes or other governmental charges payable by the Company; costs of reporting
to the Members; costs of winding up and liquidating the Company; accountants'
and attorneys' fees and expenses incurred in connection with

<PAGE>

any of the foregoing; other costs and expenses approved by a majority in
interest of the Non-Managing Members; provided, (i) Company Expenses shall not
include Claims and (ii) shall not include any salary or other employment related
expenses of any employees of the Company or the Managing Member without the
consent of a majority in interest of the Non-Managing Members.

            "Confidential Information" shall mean confidential, proprietary or
other non-public information and documents, processes or trade secrets relating
to the Company or its subsidiaries or New Affirmative LLC or their respective
assets, business or operations, including the terms and provisions of this
Agreement, subject to the exceptions set forth in Section 12.11 of this
Agreement.

            "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.

            "Interest" shall mean the interest of each Member in and to the
profits and losses of the Company and such Member's right to receive
distributions of the Company's assets.

            "Key Man Event" shall mean death, incapacity or permanent disability
of J. Christopher Flowers.

            "Managing Member" shall have the meaning specified in Section 1.3.

            "Members" shall have the meaning specified in the recitals hereto.

            "New Member" shall have the meaning specified in Section 7.1(c)
hereto.

            "Non-Managing Member" shall have the meaning specified in Section
1.3.

            "Percentage Interest" shall mean with respect to any Member, the
ratio of such Member's Capital Contribution to the total Capital Contributions
of all Members.

            "Proportionate Percentage" shall mean the pro rata percentage, as to
each Member, which shall be the percentage figure which expresses the ratio
between the Interests owned by such Member and the aggregate Interests of the
Company owned by all Members.

            "Person" shall mean a natural person, partnership (whether general
or limited and whether domestic or foreign), limited liability company, foreign
limited liability company, limited liability partnership, trust, estate,
association, corporation, joint-stock company, custodian, nominee or any other
individual or entity in its own or any representative capacity.

            "Secretary of State" shall mean the Secretary of State of the State
of Delaware.

<PAGE>

            "Subscription Agreements" shall mean the Subscription Agreement, in
the form attached hereto as Exhibit A, entered into by and between the Company
and each Member pursuant to which each Member agreed to invest in the Company.

            "Transfer" shall mean, with respect to any Interest in the Company
(whether direct or indirect, of record, beneficial or other) to sell, assign,
transfer, convey, exchange, mortgage, pledge or grant a participation, security
interest or any other rights in, or otherwise encumber or dispose of, including
by merger, consolidation, dividend or distribution, such Company Interest, in
each case, whether made directly or indirectly, voluntarily or involuntarily,
absolutely or conditionally, or by operation of law or otherwise; provided, that
a "Transfer" shall not be deemed to have occurred by reason of (i) any indirect
transfer of any Interest in the Company to a Person acquiring a non-controlling
equity interest or income participation right in any of the Members or their
respective Affiliates or (ii) subject to Section 6.4, any indirect transfer by
reason of a change of control of the ultimate parent of any Member.

            "Treasury Regulations" shall mean the U.S. federal income tax
regulations, including any temporary or proposed regulations, promulgated under
the Code, as such Treasury Regulations may be amended from time to time (it
being understood that all references herein to specific sections of the Treasury
Regulations shall be deemed also to refer to any corresponding provisions of
succeeding Treasury Regulations).

                                   ARTICLE 11

                               POWER OF ATTORNEY

            Section 11.1 Authority. Each Non-Managing Member hereby makes,
constitutes and appoints the Managing Member, with full power of substitution
and resubstitution, its true and lawful attorney for it and in its name, place
and stead and for its use and benefit, to sign, execute, certify, acknowledge,
file and record all instruments amending, restating or canceling the Certificate
that may be appropriate, and to sign, execute, certify, acknowledge, file and
record such other agreements, amendments, instruments or documents as may be
necessary or advisable (a) to reflect the exercise by the Managing Member of any
of the powers granted to it under this Agreement or (b) which may be required of
the Company or of the Members by the laws of Delaware or any other jurisdiction.
Each Non-Managing Member authorizes such attorney-in-fact to take any further
action which such attorney-in-fact shall consider necessary or advisable in
connection with any of the foregoing, hereby giving such attorney-in-fact full
power and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done in and about the foregoing as fully as such
Non-Managing Member might or could do if personally present, and hereby
ratifying and confirming all that such attorney-in-fact shall lawfully do or
cause to be done by virtue hereof; provided, however, nothing herein shall
permit any amendment of or modification to this Agreement unless such amendment
or modification shall first have been adopted in accordance with the terms of
this Agreement.

<PAGE>

            Section 11.2 Terms. The power of attorney granted pursuant to
Section 11.1:

            (a) is a special power of attorney coupled with an interest and,
except as provided in clause (d) of this Section 11.2, is irrevocable;

            (b) may be exercised by such attorney-in-fact by listing all of the
Non-Managing Members executing any agreement, certificate, instrument or
document with the single signature of such attorney-in-fact acting as
attorney-in-fact for all of them;

            (c) shall (i) survive the death, incapacity, dissolution or
termination of any Member and (ii) extend to any Member's successors and
assigns; and

            (d) shall become revocable if the Managing Member shall be indicted
under a criminal statute, dissolve and commence winding-up proceedings or become
subject to bankruptcy proceedings.

                                   ARTICLE 12

                                 MISCELLANEOUS

            Section 12.1 Notices(a) All notices, requests, claims, demands and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given (i) when received, if
delivered personally, (ii) when transmitted, if by facsimile (which is
confirmed) (iii) upon receipt, if by registered or certified mail (postage
prepaid, return receipt requested) or (iv) the day after it is sent, if sent for
next-day delivery to a domestic address by overnight mail, to the relevant
parties hereto at the following addresses:

            If to JCF, to:

                     J.C. Flowers I LP
                     717 Fifth Avenue, 26th Floor
                     New York, New York 10022
                     Telephone: (212) 404-6808
                     Facsimile: (646) 304-6424
                     Attention: Avshalom Kalichstein, Principal

            If to Enstar, to:

                     The Enstar Group, Inc.
                     401 Madison Avenue
                     Montgomery, Alabama 36104
                     Telephone: (334) 834-5483
                     Facsimile: (334) 834-2530
                     Attention: Cheryl D. Davis

            with a copy to:

<PAGE>

                     King & Spalding LLP
                     191 Peachtree Street
                     Atlanta, GA 30303
                     Telephone: (404) 572-4600
                     Facsimile: (404) 572-5100
                     Attention: Janet Taylor

            If to the Company, to:

                     Affirmative Investment LLC

                     c/o J.C. Flowers I LP
                     717 Fifth Avenue, 26th Floor
                     New York, New York 10022
                     Telephone: (212) 404-6808
                     Facsimile: (646) 304-6424
                     Attention: Avshalom Kalichstein, Principal

                     The Enstar Group, Inc.
                     401 Madison Avenue
                     Montgomery, Alabama 36104
                     Telephone:
                     Facsimile:
                     Attention:

            with a copy to:

                     Skadden, Arps, Slate, Meagher & Flom LLP
                     Four Times Square
                     New York, New York 10036
                     Telephone:(212) 735-3000
                     Facsimile: (212) 735-2000
                     Attention: Lou R. Kling, Esq.
                               Thomas W. Greenberg, Esq.

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
(provided that notice of any change of address shall be effective only upon
receipt thereof).

            (b) Upon the admittance of any New Member, the Managing Member shall
appropriately amend this Agreement to reflect notices to be provided to each
such New Member.

            Section 12.2 Binding Provisions. Except as expressly provided
herein, the covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, legal representatives, successors and
permitted assigns of the respective parties hereto.

<PAGE>

            Section 12.3 Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware without reference
to conflict of laws principle. In the event of a conflict between any provision
of this agreement and any non-mandatory provision of the act, the provision of
this Agreement shall control and take precedence.

            Section 12.4 Severability of Provisions. Each provision of this
Agreement shall be considered severable and if for any reason any provision or
provisions herein are determined to be invalid, unenforceable or illegal under
any existing or future law, such invalidity, unenforceability or illegality
shall not impair the operation of or affect those portions of this Agreement
which are valid, enforceable and legal.

            Section 12.5 Titles. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text.

            Section 12.6 Further Assurances. The Members shall execute and
deliver such further instruments and do such further acts and things as may be
required to carry out the intent and purposes of this Agreement.

            Section 12.7 Amendment. Neither this Agreement nor any term or
provision hereof may be amended, waived, modified or supplemented orally, but
only by a written instrument signed by the Managing Member and by the Members
holding not less than fifty percent (50%) of the aggregate Percentage Interests
in the Company (which may include the Percentage Interest of the Managing
Member), provided, the Managing Member may amend Schedule A under the
circumstances set forth in Section 7.1; provided, however that no amendment that
materially and adversely affects the rights of a Non-Managing Member shall be
adopted without the written consent of such adversely affected Non-Managing
Member.

            Section 12.8 Partition. Each Member waives any and all rights that
it may have to maintain an action for partition of the Company's property other
than in accordance with Article 9.

            Section 12.9 Counterparts. This Agreement may be executed in any
number of counterparts, which, when taken together, shall be deemed an original
of this Agreement.

            Section 12.10 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the transactions
contemplated herein, and supersedes all prior understandings or agreements
between the parties.

            Section 12.11 Confidentiality. (a) Each Member shall, and shall
cause its Affiliates and the respective agents and other representatives of the
foregoing to, hold strictly confidential, and not disclose to any Person, any
Confidential Information that is furnished to or obtained by such Member (or the
Managing Member), and if a Member shall cease to be a Member, it shall either
return all Confidential Information to the Company or destroy such Confidential
Information without retaining any record, copy or

<PAGE>

image of such Confidential Information in any physical, electronic or other
form; provided that the term "Confidential Information" shall not include
information (A) that is or becomes generally available to the public other than
as a result of disclosure of such information by such Member or any of its
Affiliates or the respective agents and other representatives of the foregoing,
(B) that is or becomes available to the recipient of such information on a
non-confidential basis from a source that is not, to the recipient's knowledge,
bound by a confidentiality or other similar agreement, or by any other legal,
contractual or fiduciary obligation that prohibits or limits disclosure of such
information to the other Members and their respective agents and other
representatives or (C) that can be demonstrated to have been developed
independently by the representatives of such recipient which representatives
have not had any access to any information that would otherwise be deemed to be
"Confidential Information" pursuant to the provisions of this Section 12.11.

            (b) Notwithstanding anything stated to the contrary herein, the
foregoing provisions shall not apply to any disclosure, (i) to those of such
Member's agents and other representatives who (A) need to know such Confidential
Information to effectuate the Purpose and (B) are advised of the confidential
and proprietary nature of such Confidential Information and bound by
confidentiality obligations prohibiting the further use and disclosure of such
Confidential Information, (ii) where such Member and the agents and other
representatives of the Member are required to disclose such Confidential
Information, by Law; provided further that any such disclosure is limited to
only that portion of the Confidential Information that such Person is compelled
to disclose, (iii) to a proposed transferee in connection with any Transfer
pursuant to Section 7.1 hereof (or pursuant to a transfer of the type described
in the proviso to the definition of "Transfer") so long as such transferee
enters into a confidentiality agreement with respect thereto with terms which
are no less restrictive that the terms set forth in this Section 12.11; (iv) to
the extent a Member is required to disclose such information in a Statement on
Schedule 13D filed by the Members with the Securities and Exchange Commission or
any other filing required by the Securities and Exchange Commission, any
securities exchange on which Affirmative or such Member's securities are listed
or in connection with the filing of Form A Filing with the Illinois Department
of Financial and Professional Regulation - Division of Insurance; provided,
that, in the event that any demand or request for disclosure of Confidential
Information is made pursuant to clause (ii) above, the disclosing Member shall
promptly notify the other Members of the existence of such request or demand and
shall provide the other (and/or the Company) a reasonable opportunity to seek an
appropriate protective order or other remedy, which such Members will cooperate
in obtaining (each at its own expense). Notwithstanding the foregoing, the
Members and their respective Affiliates and the respective agents and other
representatives of the foregoing, are hereby expressly authorized to disclose to
any and all Persons, without limitation of any kind, the tax treatment and any
facts that may be relevant to the tax structure of the transactions contemplated
by this Agreement; provided, however, that such parties may not disclose any
other information that is not relevant to understanding the tax treatment and
tax structure of such transactions (including the identity of any party and any
information that could lead another to determine the identity of any party), or
any other information to the extent that such disclosure could reasonably result
in a violation of any applicable securities law.

<PAGE>

                  [Remainder of Page Intentionally Left Blank]

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

                                       J.C. FLOWERS I LP

                                       By:  JCF Associates I LLC,
                                            its General Partner

                                       By:  /s/ Avshalom Kalichstein
                                           --------------------------------
                                           Name: Avshalom Kalichstein
                                           Title: Principal

                                       THE ENSTAR GROUP, INC.

                                       By: /s/ Nimrod T. Frazer
                                           --------------------------------
                                           Name: Nimrod T. Frazer
                                           Title: Chairman & CEO

                                       AFFIRMATIVE ASSOCIATES LLC

                                       By: /s/ Avshalom Kalichstein
                                           --------------------------------
                                           Name: Avshalom Kalichstein
                                           Title: Authorized Person

<PAGE>

                                                                      SCHEDULE A

<TABLE>
<CAPTION>
     Members and Addresses          Initial Capital Contribution       Percentage Interest
     ---------------------          ----------------------------       -------------------
<S>                                 <C>              <C>               <C>
                                    Market           Subscription
                                    Purchase         Closing
                                    Subscription     Investment

                                                     Amount

Affirmative Associates LLC          N/A              N/A              0%
717 Fifth Avenue, 26th Floor
New York, NY 10022
Attention: J. Christopher Flowers
J.C. Flowers I LP                   $ 16,059,546.78  $[   ]          86%
717 Fifth Avenue, 26th Floor
New York, NY 10022
Attention:  Avshalom Kalichstein
The Enstar Group, Inc.              $  2,614,344.82   $[   ]         14%
401 Madison Avenue
Montgomery, Alabama 36104
</TABLE>

                                   EXHIBIT A

                            Subscription Agreements
                                  See attached

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