Document:

Exhibit 10.2 PurchaseAgreement

Exhibit 10.2

COMMERCIAL LINES
STOCK AND ASSET PURCHASE AGREEMENT
BETWEEN
ACP RE, LTD
AND
AMTRUST FINANCIAL SERVICES, INC.
DATED AS OF JANUARY 3, 2014

TABLE OF CONTENTS

Page

	
				
	ARTICLE I
	DEFINITIONS
	2
	

	Section 1.1
	Definitions
	2
	

	 
	 
	 

	ARTICLE II
	PURCHASE OF THE SHARES AND ASSETS
	7
	

	Section 2.1
	Purchase and Sale
	7
	

	Section 2.2
	Closing
	7
	

	Section 2.3
	Payment of Purchase Price and Delivery of Shares and Purchased Assets
	8
	

	Section 2.4
	Seller's Transaction Closing Date Deliveries
	8
	

	Section 2.5
	Buyer's Transaction Closing Date Deliveries
	8
	

	Section 2.6
	Estimated Closing Balance Sheet; Final Closing Balance Sheet
	9
	

	Section 2.7
	Adjustment to Purchase Price
	11
	

	Section 2.8
	Payment and Interest
	11
	

	 
	 
	 

	ARTICLE III
	REPRESENTATIONS AND WARRANTIES OF SELLER
	11
	

	Section 3.1
	Organization, Standing and Corporate Power
	11
	

	Section 3.2
	Capital Structure; Certain Indebtedness
	11
	

	Section 3.3
	Authority
	12
	

	Section 3.4
	Noncontravention; Consents
	12
	

	Section 3.5
	Brokers
	13
	

	Section 3.6
	Litigation
	13
	

	Section 3.7
	No Other Representations and Warranties
	13
	

	Section 3.8
	Merger Agreement Representations, Warranties and Covenants
	13
	

	 
	 
	 

	ARTICLE IV
	REPRESENTATIONS AND WARRANTIES OF BUYER
	14
	

	Section 4.1
	Organization, Standing and Corporate Power
	14
	

	Section 4.2
	Authority
	14
	

	Section 4.3
	Noncontravention; Consents
	14
	

	Section 4.4
	Purchase Not for Distribution
	15
	

	Section 4.5
	Litigation
	15
	

	Section 4.6
	Brokers
	15
	

	 
	 
	 

	ARTICLE V
	COVENANTS
	15
	

	Section 5.1
	Commercially Reasonable Efforts
	15
	

	Section 5.2
	Consents, Approvals and Filings
	15
	

	Section 5.3
	Public Announcements
	16
	

	Section 5.4
	Further Assurances
	16
	

	Section 5.5
	Notice of Events
	16
	

	Section 5.6
	Merger Agreement
	17
	

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TABLE OF CONTENTS
(continued)
Page

	
				
	Section 5.7
	Transition Services
	17
	

	Section 5.8
	Option to Acquire Assets
	18
	

	 
	 
	 

	ARTICLE VI
	EMPLOYEE MATTERS
	19
	

	Section 6.1
	Transferred Employees
	19
	

	Section 6.2
	No Third Party Beneficiary Rights
	19
	

	 
	 
	 

	ARTICLE VII
	CONDITIONS PRECEDENT
	19
	

	Section 7.1
	Conditions to Each Party's Obligations
	19
	

	Section 7.2
	Conditions to Obligations of Buyer
	20
	

	Section 7.3
	Conditions to Obligations of Seller
	21
	

	Section 7.4
	Frustration of Closing Conditions
	21
	

	 
	 
	 

	ARTICLE VIII
	INDEMNIFICATION
	21
	

	Section 8.1
	Obligation to Indemnify
	21
	

	Section 8.2
	Indemnification Procedures
	22
	

	Section 8.3
	Tax Treatment; Tax Indemnification
	24
	

	 
	 
	 

	ARTICLE IX 
	TERMINATION PRIOR TO CLOSING
	24
	

	Section 9.1
	Termination of Agreement
	24
	

	Section 9.2
	Effect of Termination
	24
	

	 
	 
	 

	ARTICLE X
	GENERAL PROVISIONS
	25
	

	Section 10.1
	No Survival of Representations, Warranties, Covenants and Agreements
	25
	

	Section 10.2
	Fees and Expenses
	25
	

	Section 10.3
	Notices
	25
	

	Section 10.4
	Interpretation
	26
	

	Section 10.5
	Entire Agreement; Third-Party Beneficiaries
	26
	

	Section 10.6
	Governing Law
	26
	

	Section 10.7
	Assignment
	27
	

	Section 10.8
	Dispute Resolution; Enforcement
	27
	

	Section 10.9
	Waiver of Jury Trial
	27
	

	Section 10.10
	Severability; Amendment and Waiver
	28
	

	Section 10.11
	Counterparts
	28
	

	Section 10.12
	Commercially Reasonable Efforts
	28
	

	Section 10.13
	Specific Enforcement
	28
	

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EXHIBITS
		
	Exhibit A
	List of Companies

		
	Exhibit B
	Commercial Lines Bill of Sale and General Assignment and Assumption Agreement

		
	Exhibit C
	Commercial Lines Reinsurance Agreement

		
	Exhibit D
	Loss Portfolio Transfer Agreement

DISCLOSURE SCHEDULE
		
	Section
	Description

		
	Section 3.2
	Capital Structure; Certain Indebtedness 

		
	Section 3.4
	Noncontravention; Consents

		
	Section 4.3
	Noncontravention; Consents

		
	Section 7.1(d)
	Consents

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COMMERCIAL LINES
STOCK AND ASSET PURCHASE AGREEMENT
This COMMERCIAL LINES STOCK AND ASSET PURCHASE AGREEMENT, dated as of January 3, 2014 (this “Agreement”), among ACP Re, Ltd (“Seller”), a Bermuda corporation, and AmTrust Financial Services, Inc. (“Buyer”), a Delaware corporation.
WHEREAS, Seller, Buyer and National General Holdings Corp., a Delaware corporation (“National General”) are jointly entering into a series of related agreements for the purpose of acquiring Tower Group International, Ltd. (“Tower”), a Bermuda insurance holding company which transacts commercial and personal lines insurance business in the United States through fifteen (15) insurance company Subsidiaries, including the Companies which are the subject of this Agreement;
WHEREAS, pursuant to their joint acquisition of Tower, Buyer is acquiring Tower’s Commercial Lines Business, National General is acquiring Tower’s Personal Lines Business and Seller is acquiring the run-off of Tower’s pre-Cut-Through Business through this Agreement, the Merger Agreement and Personal Lines Purchase Agreement, each as described herein, which, in order to effectuate the joint acquisition of Tower, are conditioned on the execution, delivery and closing of each other agreement;
WHEREAS, Seller, pursuant to that certain Merger Agreement among Seller, Merger Sub and Tower dated as of this date (the “Merger Agreement”) is acquiring Tower and its Subsidiaries, including, indirectly, all of the issued and outstanding shares of capital stock of the companies as set forth on Exhibit A (the “Companies”), through the merger of Merger Sub with and into Tower with Tower surviving such merger (the “Merger”) and Buyer and National General are acquiring, respectively, the Commercial Lines Business and Personal Lines Business of Tower and its Affiliates through this Agreement and the related Personal Lines Purchase Agreement; and
WHEREAS, in accordance with Buyer’s, Seller’s and National General’s joint acquisition of Tower, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller or its applicable Subsidiary, the Shares and the Purchased Assets pursuant to the Commercial Lines Bill of Sale and General Assignment and Assumption Agreement, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and of the mutual benefits to be derived from this Agreement, the parties agree as follows:
ARTICLE I 
 
DEFINITIONS

Section 1.1    Definitions.  For purposes of this Agreement, the following terms shall have the respective meanings set forth below:
“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.  For purposes of this definition, “control” (including its correlative meanings “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership or securities or partnership or other ownership interests, by contract or otherwise).
“Aggregate Surplus” means the total aggregate Surplus of the Companies on the Transaction Closing Date.
“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.
“Applicable Law” means any domestic or foreign federal, state or local statute, law, ordinance or code, or any written rules, regulations or administrative interpretations issued by any Governmental Entity pursuant to any of the foregoing, and any order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction applicable to the parties hereto. 
“Applicable Rate” means the prime rate of interest reported from time to time in The Wall Street Journal.
“Books and Records” means all customer lists, policy information, contracts, administrative manuals, sales records, underwriting records, financial records, compliance records prepared for or filed with regulators of Tower or its Affiliates, tax records and all other documents and information related to the operation of the Commercial Lines Business, each in the possession or control of the Seller or its Affiliates, whether or not stored in hardcopy form or on electronic, magnetic or optical media (to the extent not subject to licensing restrictions).  Books and Records shall not include Seller’s organizational documents, minute books, stock ledgers, tax returns (including working papers with respect to the Seller).
“Business Day” means any day other than a Saturday, Sunday or other day on which banking institutions in New York are required or authorized by law or executive order to be closed.
“Buyer” has the meaning set forth in the introductory paragraph of this Agreement.
“Buyer Transition Service” has the meaning set forth in Section 5.7(b).

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“Commercial Lines Business” means all insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including all supplements, riders, endorsements, renewals and extensions (other than Personal Lines Business) issued by a Company.
“Commercial Lines Bill of Sale and General Assignment and Assumption Agreement” means the Commercial Lines Bill of Sale and General Assignment and Assumption Agreement dated as of the Transaction Closing Date among the Seller, Affiliates of Tower acquired by Seller and the Buyer in the form annexed as Exhibit B.
 “Commercial Lines Cut-Through QSA” means that certain Commercial Lines Cut-Through Quota Share Reinsurance Agreement dated as of the date hereof among Technology Insurance Company, Inc. and certain Tower Affiliates, whereby Technology Insurance Company, Inc.  is reinsuring certain commercial lines new policies relating to the Commercial Lines Business.
“Commercial Lines Reinsurance Agreement” means that certain Commercial Lines Quota Share Reinsurance Agreement dated as of the Transaction Closing Date among Technology Insurance Company, Inc. and the Personal Lines Companies in the form of Exhibit C attached hereto.
“Company” or “Companies” has the meaning set forth in the Recitals.
“Company Material Adverse Effect” means any Material Adverse Effect (as defined in the Merger Agreement).
“Cut-Through Business” means the Commercial Lines Business and Personal Lines Business reinsured by, respectively, Affiliates of Buyer and Affiliates of National General pursuant to the Commercial Lines Cut-Through QSA and Personal Lines Cut-Through QSA between Tower and Affiliates of Seller and Tower and Affiliates of National General.
“Disclosure Schedule” means the Disclosure Schedule delivered in connection with, and constituting a part of, this Agreement.
“Effective Time” has the meaning set forth in Section 2.2.
“Estimated Closing Balance Sheet” has the meaning set forth in Section 2.6(a).
“Estimated Purchase Price” shall mean the estimated Aggregate Surplus as of the Transaction Closing Date.
“Final Closing Balance Sheet” has the meaning set forth in Section 2.6(c).
“Governmental Entity” has the meaning set forth in Section 3.4.

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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Indemnified Party” has the meaning set forth in Section 8.2(a).
“Indemnifying Party” has the meaning set forth in Section 8.2(a).
“Insurance Regulators” means all Governmental Entities regulating the business of insurance under Applicable Laws.
“Liens” has the meaning set forth in Section 3.2.
“Losses” means any and all liabilities, claims, obligations, losses, costs, disbursements, penalties, fines, expenses (including reasonable attorneys’, accountants’ and other out-of-pocket professional fees and expenses incurred in the investigation, collection, prosecution or defense or any claims, whether or not involving any third party) and damages, but excluding lost profits or any punitive, exemplary, consequential or similar damages (other than lost profits or any punitive, exemplary, consequential or similar damages actually paid to a third party in a Third Party Claim).
“LPT Agreement” means that certain Loss Portfolio Transfer Agreement dated as of the Transaction Closing Date between CastlePoint Reinsurance Company, Ltd. Or Tower Reinsurance, Ltd., as agreed to by the parties, and Affiliates of Tower in the form of Exhibit D attached hereto whereby CastlePoint Reinsurance Company, Ltd. or Tower Reinsurance, Ltd. will reinsure the loss reserves of the Companies as of the Transaction Closing Date, but not unearned premium reserves of the of the Companies.
“Merger Agreement” has the meaning set forth in the Recitals.
“Merger Sub” means the subsidiary of ACP Re that will merge with Tower pursuant to the Merger Agreement.
“National General” has the meaning set forth in the Recitals.
“Outside Accountants” has the meaning set forth in Section 2.6(d)(i).
“Parent Material Adverse Effect” means any Parent Material Adverse Effect (as defined in the Merger Agreement).
“Permitted Liens” means (a) Liens for Taxes or assessments and similar charges, which either are (i) not delinquent or (ii) being contested in good faith and by any appropriate action or proceeding, and adequate reserves (as determined in accordance with SAP) have been established on the Seller’s books with respect thereto, (b) Liens to secure, landlords, sublandlords, licensors, sublicensors or licensees under real estate leases, licenses or other rental or lease agreements, (c) deposits or pledges made in connection with, or to secure payment of, utilities or similar services, workers’ compensation, unemployment insurance, pension or other social security, governmental 

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insurance and governmental benefits mandated under Applicable Laws, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, (d) mechanics’, materialmen’s or contractors’ Liens or any similar statutory Lien for amounts not yet due and payable and incurred in the ordinary course of business, (e) zoning, entitlement, building and other similar restrictions which are not violated by the current conduct of the Commercial Lines Business, (f) purchase money Liens in any property acquired by the Companies in the ordinary course of business and (g) easements, covenants, rights of way or other encumbrances or restrictions, if any, that do not impair the use of the assets to which they relate.
“Person” means an individual, corporation, partnership (limited or general), joint venture, limited liability company, association, trust, unincorporated organization or other entity.
“Personal Lines Business” has the meaning set forth in the Personal Lines Purchase Agreement.
“Personal Lines Companies” means the Subsidiaries of Tower acquired by National General pursuant to the Personal Lines Purchase Agreement.
“Personal Lines Cut-Through QSA” means that certain Personal Lines Cut-Through Quota Share Reinsurance Agreement dated as of the date hereof among Integon National Insurance Company and certain Tower Affiliates, whereby Integon National Insurance Company is reinsuring certain personal lines new policies relating to the Personal Lines Business.
“Personal Lines Purchase Agreement” means that certain Personal Lines Stock Purchase Agreement dated of even date herewith by and between ACP Re and National General, whereby National General is purchasing all of the capital stock of certain Subsidiaries of Tower and the renewal rights and certain other assets related to the Personal Lines Business of the Companies.
“Pre-Closing Month End” means the last day of the last full month ending prior to the Transaction Closing Date.
“Post-Closing Purchased Assets” has the meaning set forth in Section 5.8(a).
“Preliminary Closing Balance Sheet” has the meaning set forth in Section 2.6(b).
“Purchased Assets” means the Renewal Rights and assets listed on Exhibit A to the Commercial Lines Bill of Sale and General Assignment and Assumption Agreement. 
“Purchase Price” has the meaning set forth in Section 2.1.
“Purchase Price Calculations” has the meaning set forth in Section 2.6(b).

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“Regulatory Approvals” means all approvals, consents and authorizations of the transactions contemplated by this Agreement required under applicable state insurance or insurance holding company laws, including without limitation all approvals, consents and authorizations required by the New York Department of Financial Services, the Illinois Department of Insurance, the Massachusetts Division of Insurance, the Florida Office of Insurance Regulation, the New Jersey Department of Banking and Insurance, the Maine Bureau of Insurance and any other state insurance regulator whose approval is required to consummate any of the transactions contemplated by this Agreement.
“Renewal Rights” means the right from and after the Transaction Closing to renew or replace all insurance contracts issued by Tower or its Affiliates (other than the Companies) as part of the Commercial Lines Business prior to the Closing Date, including all of (i) Tower or its Affiliates’ (other than the Companies) right to produce such insurance contracts with respect to policyholders, if any, (ii) the expiration data relating to such insurance contracts, (iii) all Books and Records pertaining to such insurance contracts and policyholders, (iv) the policyholder and producer lists owned or used by Tower or the Affiliates of Tower (other than the Companies) in the conduct of the Commercial Lines Business, and (v) the relationships that Tower or the Affiliates of Tower (other than the Companies) enjoy with each of the producers.  For the avoidance of doubt, the Buyer acknowledges and agrees that the Seller does not have the power or ability to require any policyholder or producer to write or renew any policies following the Transaction Closing Date, upon expiration or otherwise. 
“SAP” means, with respect to any Company or Subsidiary, the applicable statutory accounting principles (or local equivalents in the applicable jurisdiction) prescribed by the applicable Insurance Regulator under Applicable Law.
“Securities Act” has the meaning set forth in Section 4.4.
“Seller” has the meaning set forth in the introductory paragraph of this Agreement.
“Seller Transition Service” has the meaning set forth in Section 5.7(a).
“Shares” means the capital stock of the Companies.
“Subsidiary” of any Person means another Person 50% or more of the total combined voting power of all classes of capital stock or other voting interests of which, or 50% or more of the equity securities of which, is owned directly or indirectly by such first Person.
“Surplus” means as of any date the surplus of each of the Companies determined in accordance with SAP (in the manner reflected in line 36 of the “Liabilities, Surplus and Other Funds” page of each of the Companies’ unaudited statutory Quarterly Statement); provided that the Surplus as of the Closing Date shall be determined after 

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giving effect to the transactions contemplated by the LPT Agreement and the final determination of the loss reserves transferred thereunder.
“Taxes” means all federal, state, local and foreign taxes of any kind, including those on or measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, value added, property or windfall profits taxes, or similar fees, assessments or charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a tax return), together with any interest and any penalties, additions to tax or additional amounts imposed thereon by any Taxing Authority, domestic or foreign.
“Taxing Authority” means any Governmental Entity or other Person responsible for and having jurisdiction over, the administration of Taxes.
“Third Party Claim” has the meaning set forth in Section 8.2(a).
“Tower” has the meaning set forth in the Recitals.
“Transaction Closing” has the meaning set forth in Section 2.2.
“Transaction Closing Date” has the meaning set forth in Section 2.2.
“Transaction Documents” means this Agreement, the Commercial Lines Bill of Sale and General Assignment and Assumption Agreement, the LPT Agreement and the Commercial Lines Reinsurance Agreement.
“Transition Services Agreement” has the meaning set forth in Section 5.7(c) .
“Unresolved Changes” has the meaning set forth in Section 2.6(d)(i). 
“Wire Transfer” means a payment in immediately available funds by wire transfer in lawful money of the United States of America to such account or accounts as shall have been designated by notice to the paying party.

ARTICLE II     
 
PURCHASE OF THE SHARES AND ASSETS
Section 2.1    Purchase and Sale.  Upon the terms and subject to the conditions of this Agreement, at the Transaction Closing, Seller shall cause all its applicable Subsidiaries directly owning the Shares to sell all of the Shares to Buyer and all its applicable Subsidiaries directly owning the Purchased Assets to sell, transfer, assign, convey and deliver to Buyer the Purchased Assets, and Buyer shall purchase all of the Shares and Purchased Assets from Seller or such Subsidiaries, free and clear of all Liens, except for Permitted Liens only with respect to the Purchased Assets, for an aggregate amount (the “Purchase Price”) equal to the Aggregate 

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Surplus. The Purchase Price shall be allocated among the Shares pro rata based upon the Surplus of the respective Company. 
Section 2.2    Closing.  Unless this Agreement shall have been terminated pursuant to Section 9.1, and subject to the satisfaction or waiver of each of the conditions set forth in Article VII, the closing of the purchase and sale of the Shares and Purchased Assets (the “Transaction Closing”) shall take place at 10:00 a.m. on the “Closing Date” (as defined in the Merger Agreement), at the same location as the “Closing” (as defined in the Merger Agreement).  The effective date and time of the Transaction Closing are herein referred to as the “Transaction Closing Date.”  All of the contemplated transactions under this Agreement shall be deemed to be consummated as of 11:59:59 p.m. Eastern Time on the Transaction Closing Date (the “Effective Time”) and all actions taken at Transaction Closing shall be deemed to have occurred simultaneously and shall be deemed effective as of the dates and times specified in this Agreement.
Section 2.3    Payment of Purchase Price and Delivery of Shares and Purchased Assets.  At the Transaction Closing:
(a)    Buyer shall pay to Seller the Estimated Purchase Price by Wire Transfer; and
(b)    Seller shall cause its Subsidiaries directly owning the Shares to deliver to Buyer the Shares, duly endorsed in blank or with stock powers or other proper instruments of assignment duly endorsed in blank, in proper form for transfer, with all appropriate stock transfer tax stamps affixed.
Section 2.4    Seller’s Transaction Closing Date Deliveries.  Subject to fulfillment or waiver (where permissible) of the conditions set forth in Article VII, at the Transaction Closing, Seller shall deliver to Buyer all of the following:
(a)    FIRPTA Certificate.  Unless the Seller is a foreign person, a certification from Seller and signed by a responsible officer of Seller, as contemplated under Section 1.1445-2(b)(2) of the Treasury Regulations, certifying that Seller is not a foreign person.
(b)    Stock Certificates.  The stock certificates representing the Shares, accompanied by stock powers duly executed in blank, or other proper instruments of assignment duly endorsed in blank, by Seller’s Subsidiaries directly owning such Shares in respect of the Shares of each Company.
(c)    Transaction Documents.  A copy of each Transaction Document (other than this Agreement) executed by Seller and any of its Affiliates prior to giving effect to this Agreement and the Personal Lines Purchase Agreement.

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Section 2.5    Buyer’s Transaction Closing Date Deliveries.  Subject to fulfillment or waiver (where permissible) of the conditions set forth in Article VII, at the Transaction Closing, Buyer shall deliver to Seller all of the following:
(a)    Transaction Documents.  A copy of each Transaction Document (other than this Agreement) executed by Buyer.
(b)    Purchase Price.  Payment by Wire Transfer for the of the Estimated Purchase Price.
Section 2.6    Estimated Closing Balance Sheet; Final Closing Balance Sheet.
(a)    At least five (5) Business Days prior to the Transaction Closing Date, Seller shall deliver to Buyer a pro forma balance sheet of the Companies as of the Pre-Closing Month End determined on a combined basis in accordance with SAP that shall include a calculation of the Estimated Purchase Price (the “Estimated Closing Balance Sheet”).
(b)    Not later than ninety (90) days after the Transaction Closing Date, Buyer shall cause the combined balance sheet of the Companies to be prepared as of the close of business on the Transaction Closing Date in accordance with SAP, and shall deliver such balance sheet to Seller (the “Preliminary Closing Balance Sheet”), which balance sheet shall include Buyer’s calculation of the Aggregate Surplus as of the Transaction Closing Date (the “Purchase Price Calculations”).  
(c)    If, within sixty (60) days following its receipt of the Preliminary Closing Balance Sheet, Seller does not dispute the Preliminary Closing Balance Sheet or the Purchase Price Calculations, the Preliminary Closing Balance Sheet shall be deemed to be the combined balance sheet of the Companies as of the close of business on the Transaction Closing Date (the “Final Closing Balance Sheet”) and the final Purchase Price shall equal the Aggregate Surplus set forth in the Purchase Price Calculations.  
(d)    In the event Seller has any dispute with regard to the Preliminary Closing Balance Sheet or the Purchase Price Calculations, such dispute shall be resolved in the manner described in this Section 2.6.  Seller shall notify Buyer in writing of such dispute within sixty (60) days after Seller’s receipt of the Preliminary Closing Balance Sheet, which notice shall specify in reasonable detail the nature of the dispute.  
		
	(i)
	During the forty-five (45) day period following Buyer’s receipt of such notice, Buyer and Seller shall attempt to resolve such dispute and to determine the final calculation of the Purchase Price.

		
	(ii)
	If, at the end of the forty-five (45) day period specified in subsection (d)(i) above, Buyer and Seller shall have failed to reach 

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a written agreement with respect to all or a portion of such dispute (those items that remain in dispute at the end of such period referred to as the “Unresolved Changes”), the matter shall be referred to a nationally recognized accounting firm (the “Outside Accountants”) jointly selected by Seller and Buyer for review and resolution of any and all matters (but only such matters) which remain in dispute.  Buyer and Seller shall instruct their respective accountants to select the Outside Accountants in good faith within ten (10) days.  If Buyer’s and Seller’s accountants shall not have agreed upon the Outside Accountants within such ten (10) day period, within an additional five (5) days, they shall each designate an Outside Accountant who has not performed work in the last two (2) years for either Seller or Buyer and with experience in the property and casualty insurance business and the Outside Accountants shall be selected by lot from those two accounting firms.  If only one of Seller’s or Buyer’s accountants shall so designate a name of an accounting firm for selection by lot, such accounting firm so designated shall be the Outside Accountants.
		
	(iii)
	Each party hereto agrees to execute, if requested by the Outside Accountants, a reasonable engagement letter.  All fees and expenses relating to the work, if any, to be performed by the Outside Accountants shall be borne pro rata by Seller and Buyer in inverse proportion to the allocation of the dollar amount of the Unresolved Changes, in the aggregate, between Buyer and Seller made by the Outside Accountants such that the party with whom the Outside Accountants agree more closely pays a lesser proportion of the fees and expenses.  The Outside Accountants shall act as an arbitrator to determine, based solely on the provisions of this Agreement and the presentations by Seller and Buyer, or representatives thereof, and not by independent review, only the resolution of the Unresolved Changes.  The Outside Accountants’ resolution of the Unresolved Changes, which for each of the Unresolved Changes shall be within the range of values of the amount claimed by either party as to any of the Unresolved Changes, shall be made within sixty (60) days of the submission of the Unresolved Changes to the Outside Accountants and shall be set forth in a written statement delivered to Seller and Buyer and shall be deemed to be mutually agreed upon by Buyer and Seller 

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for all purposes of this Agreement.  Any changes to the Preliminary Closing Balance Sheet resulting from such resolution of the Unresolved Changes shall be made, and such Preliminary Closing Balance Sheet, as so changed, shall be the Final Closing Balance Sheet and the final Purchase Price as of the close of business on the Transaction Closing Date shall be the Aggregate Surplus recalculated to reflect the Final Closing Balance Sheet.
(e)    At all times prior to the determination of the Final Closing Balance Sheet, the final Purchase Price, Buyer shall, and shall cause the Companies to, cooperate fully with Seller and Seller’s authorized representatives, including providing, on a timely basis, all information necessary or useful in reviewing the Preliminary Closing Balance Sheet, and require Company employees who remain employees of the Companies following the Transaction Closing Date to assist Seller and Seller’s authorized representatives in the review of the Preliminary Closing Balance Sheet and the Purchase Price Calculations.
(f)    Notwithstanding anything to the contrary contained herein:
		
	(i)
	The accounting principles for determining (A) the Preliminary Closing Balance Sheet and the Final Closing Balance Sheet, or (B) the Purchase Price Calculations, shall be the same SAP principles applied in such Companies’ past practices; and

		
	(ii)
	In the event the Transaction Closing Date shall not be the end of a fiscal quarter end, the reserves of each Company as of the Transaction Closing Date reflected in the Final Closing Balance Sheet shall be calculated and determined using the reserving practices and procedures applicable to the preparation of the balance sheet of such Company as of such fiscal quarter end.

Section 2.7    Adjustment to Purchase Price.  If, the Estimated Purchase Price shall exceed the final Purchase Price determined pursuant to Section 2.6, the Seller shall pay to Buyer, as an adjustment to the Purchase Price, in a manner and with interest as provided in Section 2.8, the amount of such excess. If, the Estimated Purchase Price is less than the final Purchase Price determined pursuant to Section 2.6, Buyer shall pay to Seller, as an adjustment to the Purchase Price, in a manner and with interest as provided in Section 2.8, the amount of such deficiency.
Section 2.8    Payment and Interest.  
(a)    Any payment pursuant to Section 2.7 shall be made by the party obligated to make such payment within five (5) Business Days after the Purchase Price has been finally 

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determined, by wire transfer to the party entitled to receive such payment of immediately available funds to an account designated by such recipient.  
(b)    The amount of any payment pursuant to Section 2.7 shall bear interest from and including the Transaction Closing Date but excluding the date of payment at the Applicable Rate.  
ARTICLE III     
 
REPRESENTATIONS AND WARRANTIES 
OF SELLER
Subject to the exceptions and qualifications set forth in the Disclosure Schedule, Seller represents and warrants to Buyer as follows:
Section 3.1    Organization, Standing and Corporate Power.  The Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate power and authority to carry on its business as now being conducted.
Section 3.2    Capital Structure; Certain Indebtedness.  Section 3.2 of the Disclosure Schedule sets forth, as of the date of this Agreement, the name and jurisdiction of organization of each the Companies. Except as set forth in Section 3.2 of the Disclosure Schedule, all of the issued and outstanding shares of capital stock of, or other equity or voting interests in, each of the Companies (except for directors’ qualifying shares) are owned directly or indirectly, beneficially and of record, by Seller free and clear of all pledges, restrictions, claims, liens, charges, encumbrances and security interests of any kind (collectively, “Liens”) and material transfer restrictions, except for such Liens and transfer restrictions of general applicability as may be created under the Securities Act  or other securities Applicable Laws. Each issued and outstanding share of capital stock of each of the Companies is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, and there are no subscriptions, options, warrants, rights, calls, contracts or other commitments, understandings, restrictions or arrangements relating to the issuance, acquisition, redemption, repurchase or sale of any shares of capital stock or other equity or voting interests of any of the Companies, including any right of conversion or exchange under any outstanding security, instrument or agreement, any agreements granting any preemptive rights, subscription rights, anti-dilutive rights, rights of first refusal or similar rights with respect to any securities of any of the Companies. None of the Companies has any outstanding equity compensation or similar plans relating to the capital stock of, or other equity or voting interests in, any of the Companies. Neither the Seller nor any of the Companies has any obligation to make any payments based on the price or value of any securities of any of the Companies or dividends paid thereon.

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Section 3.3    Authority.  Seller has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement.  The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller and no other corporate action or proceeding on the part of Seller or any Affiliate of Seller is necessary (including any shareholder vote).  This Agreement has been duly executed and delivered by Seller and, assuming this Agreement constitutes the valid, legal and binding agreement of Buyer, constitutes a valid, legal and binding obligation of Seller, enforceable against Seller in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
Section 3.4    Noncontravention; Consents.  Neither the execution and delivery of this Agreement by Seller, nor the consummation by Seller of the transactions contemplated by this Agreement, nor performance or compliance by Seller with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the certificate or articles of incorporation, code of regulations, by-laws or other comparable charter or organizational documents of Seller or (ii) assuming (A) that the actions described in Section 4.02(a) of the Merger Agreement have been completed, (B) that the authorizations, consents and approvals referred to in this Section 3.4 are obtained and (C) that the filings referred to in this Section 3.4 are made and any waiting periods thereunder have terminated or expired, in the case of each of clauses (A) through (C), prior to the Effective Time, (x) conflict with, contravene or violate any Law, judgment, writ or injunction of any Governmental Entity applicable to Seller or the Companies or (y) conflict with, contravene or violate or constitute a default or breach under any of the terms, conditions or provisions of any Contract to which Seller or any of the Companies is a party or accelerate Seller’s or any of the Companies’, if applicable, obligations under any such Contract, except, in the case of clause (ii), as would not reasonably be expected to have a Parent Material Adverse Effect.  Except for (a) compliance with the applicable requirements of the Exchange Act, (b) compliance with the rules and regulations of the NASDAQ Stock Market, (c) the filing of appropriate documents with the relevant authorities of other jurisdictions in which any of the Companies is qualified to do business, (d) filings required under, and compliance with other applicable requirements of, the HSR Act, and such other consents, approvals, filings, authorizations, declarations or registrations as are required to be made or obtained under any non-U.S. Antitrust Laws, in each case as set forth in Section 3.4 of the Disclosure Schedule, (e) compliance with any applicable state securities or blue sky laws and (f) the Regulatory Approvals as set forth in Section 3.4 of the Disclosure Schedule, no consent or approval of, action by or in respect of, or filing, license, permit or authorization, declaration or registration with, any court or governmental or regulatory 

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authority or agency, domestic or foreign (a “Governmental Entity”), the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereunder, other than such other consents, approvals, filings, licenses, permits or authorizations, declarations or registrations that, if not obtained, made or given, would not reasonably be expected to have a Material Adverse Effect.
Section 3.5    Brokers.  No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or the Companies.
Section 3.6    Litigation.  There is no suit, action, proceeding or arbitration pending or threatened, to the  knowledge of Seller, in writing against or affecting Seller or any Affiliate of Seller that (i) seeks to restrain or enjoin the consummation of any of the transactions contemplated by this Agreement or (ii) would reasonably be expected to impair the ability of Seller to consummate any of the transactions contemplated by this Agreement.
Section 3.7    No Other Representations and Warranties.  Except for the representations and warranties contained in this Article III (including the related portions of the Disclosure Schedules), none of Seller or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty as to the accuracy or completeness of any information regarding the Companies furnished or made available to Buyer and its representatives.
Section 3.8    Merger Agreement Representations, Warranties and Covenants.  
(a)    To Seller’s knowledge, the representations and warranties set forth in the Merger Agreement are true and correct as of the date hereof and shall be true and correct as of the Closing Date (as defined in the Merger Agreement).  For the avoidance of doubt, all qualifiers as to materiality, material adverse effect and all other qualifiers contained in such representations and warranties in the Merger Agreement shall be given effect in the determination of the accuracy of such representations and warranties pursuant to this Section 3.8(a).     
(b)    To Seller’s knowledge, there has been (i) no breach by Tower of any of its representations and warranties set forth in the Merger Agreement; (ii) no material failure on Tower’s part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement; or (iii) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a breach of any of Tower’s representations or warranties under the Merger Agreement, which in any case or in the 

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aggregate would reasonably be expected to cause any condition to the consummation of the Merger to fail to be satisfied.
ARTICLE IV     
 
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to the exceptions and qualifications set forth in the Disclosure Schedule, Buyer represents and warrants to Seller as follows:
Section 4.1    Organization, Standing and Corporate Power.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate power and authority to carry on its business as now being conducted.
Section 4.2    Authority.  Buyer has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement.  The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Buyer.  No action by the stockholders of Buyer is necessary to authorize the execution and delivery by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by Buyer and, assuming this Agreement constitutes the valid, legal and binding agreement of Seller, constitutes a valid, legal and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
Section 4.3    Noncontravention; Consents.  The execution and delivery of this Agreement do not, and except as disclosed in Section 4.3 of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not, (i) conflict with, be prohibited by, or require any approval that has not already been obtained under, any of the provisions of the certificate of incorporation or the by-laws of Buyer or the comparable organizational documents of any of its Subsidiaries, (ii) subject to the matters referred to in the next sentence, conflict with, result in a breach of or default (with or without notice or lapse of time, or both) under, be prohibited by, require approval or consent under, give rise to a right of termination under, or result in the creation of any Lien (other than a Permitted Lien) on any property or asset of Buyer or any of its Affiliates under, any agreement, permit, franchise, license or instrument to which Buyer or any of its Subsidiaries is a party or (iii) subject to the matters 

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referred to in the next sentence, contravene, be prohibited by, or require approval or consent under, any Applicable Law, judgment, injunction or award applicable to Buyer or any of its Subsidiaries, which, in the case of clauses (ii) and (iii) above, would materially impair the ability of Buyer to consummate any of the transactions contemplated hereby.  No consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity is required by or with respect to Buyer or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Buyer or the consummation by Buyer of any of the transactions contemplated hereby, except for (i) if required, the filing of pre-merger notification and report forms under the HSR Act, (ii) the approvals, filings and notices required under the insurance laws of the jurisdictions set forth in Section 4.3 of the Disclosure Schedule, (iii) such other consents, approvals, authorizations, declarations, filings or notices as are set forth in Section 4.3 of the Disclosure Schedule and (iv) such other consents, approvals, authorizations, declarations, filings or notices that are not required to be set forth pursuant to clauses (ii) and (iii) the failure to obtain or make which, in the aggregate, would not materially impair the ability of Buyer to consummate any of the transactions contemplated hereby.
Section 4.4    Purchase Not for Distribution.  The Shares to be acquired under the terms of this Agreement will be acquired by Buyer for its own account and not with a view to distribution.  Buyer is an “accredited investor” as defined in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”).  Buyer acknowledges that it is informed as to the risks of the transactions contemplated hereby and of ownership of the Shares.  Buyer acknowledges that the Shares have not been registered under the Securities Act or any state or foreign securities laws and that the Shares may not be sold, transferred, offered for sale, assigned, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act and the Shares are registered under any applicable state or foreign securities laws or sold pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities laws.
Section 4.5    Litigation.  There is no suit, action, proceeding or arbitration pending or threatened in writing against or affecting Buyer or any Affiliate of Buyer that (i) seeks to restrain or enjoin the consummation of any of the transactions contemplated by this Agreement or (ii) would reasonably be expected to impair the ability of Buyer to consummate any of the transactions contemplated by this Agreement.
Section 4.6    Brokers.  No broker, investment banker, financial advisor or other person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer or any Affiliate.

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ARTICLE V     
 
COVENANTS
Section 5.1    Commercially Reasonable Efforts.  Upon the terms and subject to the conditions and other agreements set forth in this Agreement, each of the parties agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.
Section 5.2    Consents, Approvals and Filings.  Seller and Buyer shall each use their commercially reasonable efforts, and shall cooperate fully with each other (i) to comply as promptly as practicable with all governmental requirements applicable to the transactions contemplated by this Agreement and (ii) to obtain as promptly as practicable all necessary permits, orders or other consents, approvals or authorizations of Governmental Entities and consents or waivers of all third parties necessary in connection with the consummation of the transactions contemplated by this Agreement.  In connection therewith, Seller and Buyer shall make and cause their respective Affiliates to make all legally required filings as promptly as practicable in order to facilitate prompt consummation of the transactions contemplated by this Agreement, and shall provide and shall cause their respective Affiliates to provide such information and communications to Governmental Entities as such Governmental Entities may request.  The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of all necessary permits, orders or other consents, approvals or authorizations of Governmental Entities and consents or waivers of all third parties necessary in connection with the consummation of the transactions contemplated by this Agreement.
Section 5.3    Public Announcements.  Until the Transaction Closing Date, the parties hereto shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated hereunder, and shall not issue any such press release or make any such public statement prior to such consultation and joint approval of Buyer and Seller, except as may be required by Applicable Law, court process or the rules and regulations of any national securities exchange or national securities quotation system provided that, to the extent possible under the circumstances, the party making such disclosure consults with the other party, and considers in good faith the views of the other party, before doing so.
Section 5.4    Further Assurances.  Seller and Buyer agree, and Seller, prior to the Transaction Closing, and Buyer, after the Transaction Closing, agree to cause the Companies and each of their Subsidiaries, to execute and deliver such other documents, certificates, agreements 

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and other writings and to take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.
Section 5.5    Notice of Events.
(a)    Buyer shall promptly notify Seller, and Seller shall promptly notify Buyer, in writing, upon (1) becoming aware of any order or decree or any complaint praying for an order or decree restraining or enjoining the execution of this Agreement or the consummation of the transactions contemplated by this Agreement, or (2) receiving any notice from any Governmental Entity of its intention to (i) institute a suit or proceeding to restrain or enjoin the execution of this Agreement or the consummation of the transactions contemplated by this Agreement or (ii) nullify or render ineffective this Agreement or such transactions if consummated.
(b)    During the period from the date hereof to the Transaction Closing Date or the earlier termination of this Agreement, Buyer shall promptly notify the Seller in writing if Buyer becomes aware of: (i) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a breach of any of its representations or warranties had any such representation or warranty been made as of the time of the Buyer’s discovery of such event, fact or condition; (ii) any material failure on its part or the Seller’s or the Companies’ part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; or (iii) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a breach of any of Seller’s representations or warranties hereunder.
(c)    During the period from the date hereof to the Transaction Closing Date or the earlier termination of this Agreement, Seller shall promptly notify the Buyer in writing if Seller becomes aware of: (i) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a breach of any of its representations or warranties had any such representation or warranty been made as of the time of the Seller’s discovery of such event, fact or condition; (ii) any material failure on its part or the Buyer’s part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; or (iii) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a breach of any of Buyer’s representations or warranties hereunder.
Section 5.6    Merger Agreement.  During the period from the date hereof to the Transaction Closing Date or the earlier termination of this Agreement, Seller shall promptly notify the Buyer in writing if Seller becomes aware of: (i) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a material 

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breach of any of Tower’s representations or warranties set forth in the Merger Agreement had any such representation or warranty been made as of the time of the Seller’s discovery of such event, fact or condition; (ii) any material failure on Tower’s part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement; or (iii) the occurrence or non-occurrence of any event or the existence of any fact or condition that would cause or constitute a material breach of any of Tower’s representations or warranties under the Merger Agreement.  Seller hereby agrees that without Buyer’s written consent that it shall not waive: (i) any material breach by Tower of any of its representation or warranty set forth in the Merger Agreement; or (ii) any material failure by Tower to comply with any covenants or conditions to closing contained in the Merger Agreement. 
Section 5.7    Transition Services.
(a)    From and after the Transaction Closing until the Transition Services Agreement shall be executed, Seller or its Affiliates shall provide to Buyer and the Companies all usual and customary services and customarily prepared data and information relating to the Commercial Lines Business that is reasonably necessary to renew and replace the insurance contracts (the “Seller Transition Service”) at no cost to Buyer; provided that Buyer shall reimburse Seller for its reasonable out-of-pocket costs and expenses in providing the Seller Transition Services paid to Persons not affiliated with Seller who customarily provided such services relating to renewal or replacement of insurance contracts and provided further that Seller and its Affiliates shall not be obligated to provide Seller Transition Services to the extent Seller and its Affiliates are unable to provide such services, data or information because Buyer has employed the Transferred Employees or acquired the assets necessary to provide same.
(b)    From and after the Transaction Closing until the Transition Services Agreement shall be executed, Buyer and the Companies shall provide to the Personal Lines Companies any usual and customary services and customarily prepared data and information relating to the Personal Lines Business that is reasonably necessary to renew and replace the insurance contracts under the Personal Lines Business (the “Buyer Transition Service”) at no cost to the Personal Lines Companies to the extent Seller and its Affiliates are unable to provide such services, data or information because Buyer has employed the Transferred Employees or acquired the assets necessary to provide same.  In consideration of the provision of the Buyer Transition Services, the Personal Lines Companies shall reimburse Buyer and the Companies for their reasonable out-of-pocket costs and expenses in providing the Buyer Transition Services paid to Persons not affiliated with Buyer who customarily provided such services relating to renewal or replacement of insurance contracts relating to the Personal Lines Business.
(c)    Seller and Buyer shall negotiate with National General in good faith a Transition Services Agreement to take effect following the Transaction Closing Date that among other matters will provide for (i) any Seller Transition Services, Buyer Transition Services or any 

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other services provided by National General or the Personal Lines Companies to Seller, its Affiliates, the Buyer or the Companies with respect to the renewal or replacement of insurance contracts relating to the Personal Lines Business or Commercial Lines Business and (ii) any services to be provided by National General, the Personal Lines Companies, Seller, its Affiliates, the Buyer or the Companies that relate to the administration of business in-force as of the Transaction Closing Date (the “Transition Services Agreement”).
Section 5.8    Option to Acquire Assets.  By written notice delivered to the Seller and National General within ninety (90) days following the Transaction Closing Date, the Buyer may elect to acquire any assets acquired in the Merger of the Seller or the Affiliates of Tower that are reasonably required to conduct the Commercial Lines Business not included among the Companies that have not previously been transferred to National General or the Personal Lines Companies (the “Post-Closing Purchased Assets”) for no additional consideration.  If within ten (10) days following National General’s and Seller’s receipt of such notice, neither National General or Seller has objected to the acquisition of all or any of such Post-Closing Purchased Assets, Seller shall transfer the Post-Closing Purchased Assets as to which no objection shall have been made to Buyer.  If National General or Seller provides such written objection, Seller, National General and Buyer shall negotiate in good faith to coordinate the transfer or retention of such Post-Closing Purchased Assets among themselves.  If an agreement as to the transfer or retention of any of such Post-Closing Purchased Assets is reached, Seller shall transfer such Post- Closing Purchased Assets in accordance with such agreement.  If within thirty (30) days of the delivery of any such objection, Seller, National General and Buyer shall have failed to reach an agreement with respect to the transfer or retention of any of such Post-Closing Purchased Assets to which such objection is related, Seller, Buyer and National General shall enter mediation.  In the event pursuant to such mediation the Seller, National General and Buyer shall reach an agreement as the transfer or retention of such Post-Closing Purchased Assets, Seller shall transfer such Post-Closing Purchased Assets in accordance with such agreement.
ARTICLE VI     
 
EMPLOYEE MATTERS
Section 6.1    Transferred Employees.  
(a)    From time to time on or after the Transaction Closing Date, upon ten (10) days written notice to Seller and National General (a “Transferred Employee Offer Notice”), subject to subsection (b) below, the Buyer may, or may cause an Affiliate to, offer employment to employees of Tower or its Affiliates that Buyer reasonably determines are necessary for the Commercial Lines Business under terms and conditions satisfying the obligations of the Seller under the Merger Agreement with respect to such employees (the employees who accept such offer of employment shall be referred to as the “Transferred Employees”). 

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(b)    If within ten (10) days following a Transferred Employee Offer Notice, neither National General or Seller has objected to the making of offers of employment to the employees indicated in such Transferred Employee Offer Notice, Buyer may make an offer of employment to such employees.  If National General or Seller provides such written objection, Seller, National General and Buyer shall negotiate in good faith to coordinate the employment or retention of such employees among themselves.  If an agreement as to the employment or retention of such employees is reached, Buyer may make offers to such  employees pursuant to such agreement.  If within thirty (30) days of the delivery of any such objection, Seller, National General and Buyer shall have failed to reach an agreement with respect to the employment or retention of such employees, Seller, Buyer and National General shall enter mediation.  In the event pursuant to such mediation the Seller, National General and Buyer shall reach an agreement as the employment or retention of such employees, Buyer may make offers of employment to the employees designated in such agreement.
Section 6.2    No Third Party Beneficiary Rights.  Nothing contained in this Agreement shall confer upon any employee of Tower or any of its Affiliates any right with respect to continued employment by Buyer or any of its Affiliates.  No provision of this Agreement shall create any third-party rights in any such employee, or any beneficiary or dependent thereof, with respect to the compensation, terms and conditions of employment and benefits that may be provided to such employee by Buyer or any of its Affiliates or under any benefit plan that Buyer or any of its Affiliates may maintain.
ARTICLE VII     
 
CONDITIONS PRECEDENT
Section 7.1    Conditions to Each Party’s Obligations.  The respective obligations of each party to effect the purchase and sale of the Shares and the other actions to be taken at the Transaction Closing are subject to the satisfaction or waiver on or prior to the Transaction Closing Date of the following conditions:
(a)    Governmental Consents.  All filings required to be made prior to the Transaction Closing Date with, and all consents, approvals, permits and authorizations required to be obtained prior thereto from, Governmental Entities in connection with the consummation of the transactions contemplated hereby by Seller and Buyer set forth in Section 3.4 and Section 4.3 of the Disclosure Schedule shall have been made or obtained.
(b)    HSR Act.  If premerger notification and report forms are filed under the HSR Act, the waiting period (and any extension thereof) applicable to the transactions contemplated hereby under the HSR Act shall have been terminated or shall have otherwise expired.

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(c)    No Injunctions or Restraints.  No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction and no Applicable Law of any Governmental Entity preventing the consummation of the purchase and sale of the Shares or any of the other transactions contemplated hereby shall be in effect; provided, however, that the party invoking this condition shall have used all reasonable efforts to have any such order or injunction vacated, and no Governmental Entity shall have instituted any proceeding that is pending seeking any such order, preliminary or permanent injunction or other order to prohibit consummation of the purchase and sale of the Shares or any of the other transactions contemplated hereby.
(d)    Consents.  All consents, waivers, clearances, approvals and authorizations from third parties under the contracts and agreements set forth on Section 7.1(d) of the Disclosure Schedule as being required to be obtained prior to Transaction Closing shall have been retained.
(e)    Merger Agreement.    The Closing (as defined in the Merger Agreement) of the Merger (as defined in the Merger Agreement) contemplated by the Merger Agreement shall have occurred.
(f)    LPT Agreement. The LPT Agreement shall have been entered into.
(g)    Personal Lines Acquisition.  The transactions contemplated by the Personal Lines Purchase Agreement to be effected as of the “Transaction Closing” (as defined in the Personal Lines Purchase Agreement) shall occur contemporaneous with the transactions contemplated herein.
Section 7.2    Conditions to Obligations of Buyer.  The obligations of Buyer to effect the purchase and sale of the Shares and the other actions to be taken at the Transaction Closing are further subject to the satisfaction or waiver by Buyer on or prior to the Transaction Closing Date of the following conditions:
(a)    Representations and Warranties.  The representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Transaction Closing Date as though made on and as of the Transaction Closing Date, (except as to any representation or warranty which specifically relates to another date); provided that this condition shall be deemed to be satisfied unless any failure of any such representation or warranty to be true and correct has a Company Material Adverse Effect, either alone or when taken in the aggregate with other breaches of any such representations and warranties.

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(b)    Performance of Obligations of Seller.  Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Transaction Closing Date.
(c)    Closing Deliveries.  Seller shall have delivered to Buyer each of the items described in Section 2.4.
Section 7.3    Conditions to Obligations of Seller.  The obligations of Seller to effect the purchase and sale of the Shares and the other actions to be taken at the Transaction Closing are further subject to the satisfaction or waiver by Seller on or prior to the Transaction Closing Date of the following conditions:
(a)    Representations and Warranties.  The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Transaction Closing Date as though made on and as of the Transaction Closing Date (except as to any representation or warranty which specifically relates to another date); provided that this condition shall be deemed to be satisfied unless any failure of any such representation or warranty to be true and correct has a material adverse effect, either alone or when taken in the aggregate with other breaches of any such representations and warranties.
(b)    Performance of Obligations of Buyer.  Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Transaction Closing Date.
(c)    Consideration.  Seller shall have received the Purchase Price as provided in Section 2.1.
(d)    Closing Deliveries.  Buyer shall have delivered to Seller each of the items described in Section 2.5.
Section 7.4    Frustration of Closing Conditions.  No party to this Agreement may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to cause the Transaction Closing to occur, as required by Section 5.1 hereof.
ARTICLE VIII     
 
INDEMNIFICATION
Section 8.1    Obligation to Indemnify.

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(a)    Seller agrees to indemnify, defend and hold harmless Buyer and its Affiliates and their respective representatives from and against all Losses to the extent arising from or related to (i) any material breach of any of the covenants and agreements of Seller, except any breach of or inaccuracy in any representation or warranty set forth in Article III,  contained in this Agreement,  or (ii) any liability not reflected on the Final Closing Balance Sheet as determined in accordance with Section 2.6.
(b)    Buyer agrees to indemnify, defend and hold harmless Seller and its Affiliates and their respective representatives from and against all Losses to the extent arising from or related to any breach of any of the covenants and agreements of Buyer, except any breach of or inaccuracy in any representation or warranty set forth in Article IV,  contained in this Agreement.
Section 8.2    Indemnification Procedures.
(a)    In order for a party (the “Indemnified Party”) to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by, or an action, proceeding or investigation instituted by, any Person not a party to this Agreement (a “Third Party Claim”), such Indemnified Party must notify the other party (the “Indemnifying Party”) in writing, and in reasonable detail, of the Third Party Claim promptly, and in any event within thirty (30) days, after such Indemnified Party learns of the Third Party Claim; provided, however, that any delay or failure to give such notification shall not affect the indemnification provided hereunder except and only to the extent that the Indemnifying Party forfeits rights or defenses as a result of such failure.  Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, within ten (10) days after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim.
(b)    If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party will be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof at its own expense with counsel selected by the Indemnifying Party.  Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not as long as it conducts such defense be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, except as otherwise set forth herein.  If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense; provided, however, that if in the reasonable opinion of counsel to the Indemnified Party, (i) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party or (ii) there exists a conflict of interest between the Indemnifying Party and 

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the Indemnified Party, the Indemnifying Party shall be liable for the reasonable fees and expenses of one law firm to represent the Indemnified Party and, if applicable, local counsel in the jurisdiction in which an action is held.  The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense thereof.  If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all of the parties hereto shall cooperate in the defense or prosecution thereof in all reasonable respects.  Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information which are relevant to such Third Party Claim (subject, in each case, to the Indemnifying Party entering into a confidentiality agreement with respect to such records and information in a form reasonably acceptable to the Indemnified Party), and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  If the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party’s prior written consent, which consent shall not be unreasonably withheld.  The Indemnifying Party shall not settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action giving rise to a Third Party Claim unless the Indemnifying Party obtains the prior written consent of the Indemnified Party or such settlement, compromise, consent or termination (i) includes an express, unconditional release of such Indemnified Party in form and substance satisfactory to such Indemnified Party from any and all liability relating to such action, (ii) does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of any Indemnified Party and (iii) does not create any financial or other obligation on the part of the Indemnified Party. 
(c)    After the Transaction Closing, the indemnities provided in Section 8.1 shall be the sole and exclusive remedy at law for any breach of covenant or agreement (other than those covenants and agreements which survive the Transaction Closing) or other claim arising out of this Agreement except for claims based on actual fraud, criminal activity or willful misconduct.
(d)    The amount of any Losses for which indemnification is provided under this Agreement shall be (i) net of any amounts actually received by the Indemnified Party from insurers or other third parties with respect to such Losses (less any related costs and expenses, including the aggregate cost of pursuing any insurance claims paid by the Indemnified Party, but not any premiums or charges paid by the Indemnified Party), (ii) net of any amounts taken into account as a reserve, accrual or expense in the calculation of Aggregate Surplus with respect to the facts, circumstances or matters giving rise to such Losses, and (iii) reduced to take account of any Tax benefit realized by the Indemnified Party arising from the incurrence or payment of any such Losses.  

-25-    

(e)    Notwithstanding anything contained herein to the contrary, no Indemnifying Party shall be liable for lost profits or any punitive, exemplary, consequential (but not incidental) or similar damages, except for lost profits or punitive, exemplary, consequential or similar damages actually paid to a third party in a Third Party Claim by an Indemnified Party.
(f)    In accordance with Applicable Law, the Indemnified Party shall take, and shall cause its Affiliates to take, all commercially reasonable steps to mitigate any Losses upon and after becoming aware of any facts, matters, failures or circumstances that would reasonably be expected to result in any Losses that are indemnifiable hereunder.
(g)    In the event of payment by or on behalf of any Indemnifying Party to any Indemnified Party (including pursuant to this Article VIII) in connection with any claim or demand by any Person other than the parties hereto or their respective Affiliates, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such claim or demand against any claimant or plaintiff asserting such claim or demand.  Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost of such Indemnifying Party, in presenting any subrogated right, defense or claim.
Section 8.3    Tax Treatment; Tax Indemnification.  Except to the extent otherwise required by Applicable Law, any indemnity payment made pursuant to this Article VIII hereof will be treated as an adjustment to the Purchase Price for all Tax purposes.  

ARTICLE IX     
 
TERMINATION PRIOR TO CLOSING
Section 9.1    Termination of Agreement.  This Agreement may be terminated at any time prior to the Transaction Closing:
(a)    by the written agreement of the Buyer and the Seller;
(b)    by either the Seller or the Buyer in writing, if there shall be any order, injunction or decree of any Governmental Entity which prohibits or restrains any party from consummating the transactions contemplated hereby, and such order, injunction or decree shall have become final and nonappealable; 
(c)    by either the Seller or the Buyer in writing, if a Governmental Entity shall have disapproved a Regulatory Approval;

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(d)     unless the Seller or the Buyer otherwise agree in writing, upon the withdrawal of filings submitted in connection with any Regulatory Approvals; or
(e)    Automatically following the termination of the Merger Agreement.
Section 9.2    Effect of Termination.  In the event of termination pursuant to Section 9.1, this Agreement shall become null and void and have no effect, (other than Section 5.3 (Public Announcements), this Section 9.2 and Article X (General Provisions), all of which shall survive termination of this Agreement), and there shall be no liability on the part of Seller, the Companies or Buyer or their respective directors, officers and Affiliates, except (a) as liability may exist pursuant to the sections specified in the immediately preceding parenthetical that survive such termination and (b) that no such termination shall relieve any party from liability for any willful and material breach by such party of any representation, warranty, covenant or agreement set forth in this Agreement or fraud.  For purposes hereof, “willful and material breach” means a material breach by a party of the applicable provision of this Agreement as a result of an action or failure to act by such Person that it knew would result in a breach of this Agreement.
ARTICLE X     
 
GENERAL PROVISIONS
Section 10.1    No Survival of Representations, Warranties, Covenants and Agreements.  This Article X, Article VIII and the agreements of the Seller and Buyer contained in Article II, Article V and Article VI shall survive the Effective Time.  No other representations, warranties, covenants or agreements in this Agreement shall survive the Effective Time.
Section 10.2    Fees and Expenses.  Whether or not the purchase and sale of the Shares is consummated, each party hereto shall pay its own fees and expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby.  For the avoidance of doubt, Seller shall be solely responsible for the payment of all of the transaction expenses incurred by or on behalf of Seller or the Companies incident to the transaction which is the subject of this Agreement, including investment banking fees, accounting fees and legal fees.
Section 10.3    Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed as provided below) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
if to Buyer, to

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c/o AmTrust Financial Services, Inc. 
59 Maiden Lane, 43rd Floor 
New York, New York 10038 
(646) 458-7913 
Fax:  (212) 220-7130 
 
Attention: Stephen Ungar, Esq.
if to Seller, to 
 
c/o ACP Re, Ltd 
59 Maiden Lane, 38th Floor 
New York, NY 10038 
(212) 380-9479 
Facsimile:  (212) 380-9498 
Attention:  Jeffrey Weissmann, Esq.
Notice given by personal delivery or overnight courier shall be effective upon actual receipt.  Notice given by facsimile shall be confirmed by appropriate answer back and shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day if not received during the recipient’s normal business hours.  All notices by facsimile shall be confirmed promptly after transmission in writing by personal delivery or overnight courier.
Section 10.4    Interpretation.  When a reference is made in this Agreement to a section, exhibit or schedule, such reference shall be to a section of, or an exhibit or schedule to, this Agreement unless otherwise indicated.  The inclusion of any information in the Disclosure Schedule will not be deemed an admission or acknowledgment, in and of itself and solely by virtue of the inclusion of such information in the Disclosure Schedule, that such information is required to be listed in the Disclosure Schedule or that such items are material to the Companies.  The specification of any dollar amount in the Disclosure Schedule is not intended to imply that such amount, or higher or lower amounts is or is not material for purposes of this Agreement and no party shall use the fact of the setting forth of such amount in any dispute or controversy between the parties as to whether any obligation, item or matter not described therein is or is not material for purposes of this Agreement. Unless the Agreement specifically provides otherwise, neither the specification of any item or matter in any representation or warranty contained in this Agreement nor the inclusion of any specific item in the Disclosure Schedule is intended to imply that such item or matter, or other items or matters, are or are not in the ordinary course of business (except as expressly provided herein), and no party shall use the fact of the setting forth or the inclusion of any such item or matter in any dispute or controversy among the parties as to whether any obligation, item or matter not described in this Agreement or included in any Disclosure Schedule is or is not in the ordinary course of business for purposes of this Agreement 

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(except as expressly provided herein).  The disclosure of an item in one section of the Disclosure Schedule as an exception to a particular covenant, representation or warranty will be deemed adequately disclosed as an exception with respect to all other covenants, representations or warranties to the extent that the relevance of such item to such other covenants, representations or warranties is reasonably apparent on the face of such item, notwithstanding the presence or absence of an appropriate section of the Disclosure Schedule with respect to such other covenants, representations or warranties or an appropriate cross-reference thereto.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, where appropriate.
Section 10.5    Entire Agreement; Third-Party Beneficiaries.  This Agreement (including all exhibits and schedules hereto) constitutes the entire agreement, and supersede all prior agreements, understandings, representations and warranties, both written and oral, among the parties with respect to the subject matter of this Agreement.  Buyer has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its purchase of the Shares and the other transactions contemplated hereby and is capable of bearing the economic risks thereof.  Except as expressly provided herein, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies.
Section 10.6    Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles, except to the extent the provisions of the laws of Bermuda are mandatorily applicable to the Merger.
Section 10.7    Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, and any such assignment that is not consented to shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
Section 10.8    Dispute Resolution; Enforcement.
(a)    In the event of any dispute arising under this Agreement, prior to the commencement of litigation, a senior officer of Buyer and a senior officer of Seller shall attempt in good faith to resolve the dispute consistent with the terms of this Agreement.  If they are 

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unable to resolve the dispute in this manner within a reasonable period of time, the parties may pursue judicial remedies with respect to such dispute.  This section shall not apply to any application to obtain emergency judicial intervention.
(b)    All actions and proceedings arising out of or relating to the interpretation and enforcement of the provisions of this Agreement and in respect of the transactions contemplated by this Agreement (except to the extent any such proceeding mandatorily must be brought in Bermuda) shall be heard and determined in the United States District Court for the Southern District of New York and any Federal appellate court therefrom (or, if United States federal jurisdiction is unavailable over a particular matter, the Supreme Court of the State of New York, New York County) and the parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such action or proceeding.  The consents to jurisdiction and venue set forth in this Section 10.8(b) shall not constitute general consents to service of process in the State of New York and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto.  Each party hereto agrees that service of process upon such party in any action or proceeding arising out of or relating to this Agreement shall be effective if notice is given by overnight courier at the address set forth in Section 10.3 of this Agreement.  The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law; provided, that nothing in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.
Section 10.9    WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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Section 10.10    Severability; Amendment and Waiver.
(a)    Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
(b)    This Agreement may be amended, and the terms hereof may be waived, only by a written instrument signed by each of the parties or, in the case of a waiver, by the party waiving compliance.
(c)    No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.
Section 10.11    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 10.12    Commercially Reasonable Efforts.  Buyer and Seller acknowledge and agree that any reference made to commercially reasonable efforts in this Agreement shall not include any obligation to commence or continue any contested arbitration or litigation other than the filing of a proof of claim or similar filing requirement necessary to preserve a claim against any insolvent or otherwise financially impaired debtor.
Section 10.13    Specific Enforcement.  The parties hereto agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, including if the parties hereto fail to take any action required of them hereunder to consummate this Agreement.  The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the courts described in Section 10.8(b) without proof of damages or otherwise, this 

-31-    

being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of the transactions contemplated hereunder and without that right, neither Buyer nor Seller would have entered into this Agreement.  The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Applicable Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law.  The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 10.13 shall not be required to provide any bond or other security in connection with any such order or injunction.
[Signature Page Follows]

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IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.
ACP RE, LTD

By  /s/ Mike Weiner    
Name:  Mike Weiner    
Title:  CFO    

AMTRUST FINANCIAL SERVICES, INC.

By  /s/ Stephen Ungar    
Name:  Stephen Ungar    
Title:  SVP, General Counsel and Secretary

EXHIBIT A

List of Companies
Tower Insurance Company of New York
Castle Point National Insurance Company
Tower National Insurance Company
Hermitage Insurance Company
Castle Point Florida Insurance Company
Kodiak Insurance Company
North East Insurance Company

EXHIBIT B

Form of Commercial Lines Bill of Sale and Assignment and Assumption Agreement 

This COMMERCIAL LINES BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into as of [ ], 2014, by and among ACP Re, Ltd., a Bermuda corporation (“ACP Re”), the Acquired Affiliates (as defined below), who are signatories hereto as Sellers (collectively with ACP Re, the “Sellers” and each one, individually, a “Seller”) and AmTrust Financial Services, Inc., a Delaware corporation (the “Purchaser”).  
WITNESSETH:
WHEREAS, ACP Re, the Purchaser and National General Holdings Corporation, a Delaware corporation (“National General”), are jointly entering into a series of related agreements for the purpose of acquiring Tower Group International, Ltd. (“Tower”), a Bermuda insurance holding company which transacts commercial and personal lines insurance business in the United States through 15 insurance company Subsidiaries and other non-insurance company Subsidiaries (collectively the “Acquired Affiliates”), including the Subsidiaries of ACP Re that are parties hereto;
WHEREAS, pursuant to that certain Commercial Lines Stock and Asset Purchase Agreement, dated as of January 3, 2014, by and between ACP Re and the Purchaser (the “Agreement”), Purchaser is acquiring the assets listed on Exhibit A attached hereto (the “Purchased Assets”); and
WHEREAS, from and after the date hereof, Purchaser is assuming all liabilities and obligations described on Exhibit A (the “Assumed Liabilities”).
NOW, THEREFORE, for good and valuable consideration paid by Purchaser to Sellers as of the date of this Bill of Sale and Assignment and Assumption Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Sellers by this Bill of Sale and Assignment and Assumption Agreement do hereby convey, grant, bargain, sell, transfer, set over, assign, alienate, remise, release, deliver and confirm unto Purchaser, its successors and assigns, forever, all of Sellers’ right, title, interest in and to the Purchased Assets as of the close of business on the date hereof.
TO HAVE AND TO HOLD all and singular the Purchased Assets unto Purchaser, its successors and assigns, to its and their own use and enjoyment forever.
THE PARTIES FURTHER COVENANT AND AGREE AS FOLLOWS:
		
	A.
	For value received, Sellers hereby assign, and Purchaser hereby assumes and agrees to perform and discharge all rights under the Assumed Liabilities on and after the Transaction Closing Date (as defined in the Agreement).

		
	B.
	This Bill of Sale and Assignment and Assumption Agreement shall not constitute an assignment in whole or in part of any Purchased Asset or Assumed Liability if an attempted assignment of such Purchased Asset or Assumed Liability without the consent of any other party thereto or with an interest therein would constitute a breach thereof or in any way affect the rights of Sellers or Purchaser thereunder or be contrary to applicable law.  If any such consent is not obtained with respect to any such Purchased Asset or Assumed Liability, then the Sellers or Purchaser and their successors and assigns, as applicable, shall act as Purchaser’s agent or Sellers’ agent, as applicable, in order to obtain for Purchaser or Sellers and their successors and assigns, as applicable, the benefits thereunder.

		
	C.
	This Bill of Sale and Assignment and Assumption Agreement is given pursuant to the provisions of the Agreement, and, except as herein otherwise provided, the transfer of the Purchased Assets hereunder is made subject to the terms and provisions of the Agreement.

		
	D.
	This Bill of Sale and Assignment and Assumption Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall not be relied upon, or inure to the benefit of, any other party.

		
	E.
	Any notice, request or other document to be given hereunder or in connection herewith to any party hereto shall be given in the manner described in the Agreement.

		
	F.
	This Bill of Sale and Assignment and Assumption Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[Signature Page Follows]

B-2

IN WITNESS WHEREOF, each of the parties by their respective duly authorized officers has caused this Bill of Sale and Assignment and Assumption Agreement to be executed as of the date first above written.
AMTRUST FINANCIAL SERVICES, INC.
By: ________________________________
Name:     
Title:    
Sellers:
ACP RE, LTD.

By:  ______________________________
Name:     
Title:     
YORK INSURANCE COMPANY OF MAINE

By: ________________________________
Name:     
Title:    
MASSACHUSETTS HOMELAND INSURANCE COMPANY

By: ________________________________
Name:     
Title:    

B-3

PRESERVER INSURANCE COMPANY

By: ________________________________
Name:     
Title:    
CASTLE POINT INSURANCE COMPANY 

By: ________________________________
Name:     
Title:    

Acknowledged and agreed to:
NATIONAL GENERAL HOLDINGS CORPORATION

By:  ______________________________
Name:     
Title:

B-4

EXHIBIT C

Form of Commercial Lines Reinsurance Agreement

THIS COMMERCIAL LINES QUOTA SHARE REINSURANCE AGREEMENT (this “Agreement”) is entered into as of [  ], 2014 by and among YORK INSURANCE COMPANY OF MAINE, an insurance company organized under the laws of Maine, MASSACHUSETTS HOMELAND INSURANCE COMPANY, an insurance company organized under the laws of Massachusetts, PRESERVER INSURANCE COMPANY, an insurance company organized under the laws of New Jersey, and CASTLE POINT INSURANCE COMPANY, an insurance company organized under the laws of New York  (the “Companies” and, each a “Company”), and TECHNOLOGY INSURANCE COMPANY, INC., an insurance company organized under the laws of New Hampshire (the “Reinsurer”) (collectively, the “Parties”).
WHEREAS, ACP Re. Ltd. (“ACP Re”), has entered into that certain Agreement and Plan of Merger of even date herewith by and between Tower Group International, Ltd. (“Tower”), ACP Re and Merger Sub (the “Merger Agreement”) whereby Merger Sub is merging with and into Tower with Tower surviving such merger (the “Merger”);
WHEREAS, (i) AmTrust Financial Services, Inc. (“AmTrust”) has entered into that certain Stock Purchase Agreement dated January 3, 2013 by and between AmTrust and ACP Re (the “Commercial Lines SPA”), pursuant to which AmTrust is purchasing all of the capital stock of certain subsidiaries of Tower (the “Purchased Commercial Lines Companies”) and renewal rights to all of Commercial Lines Business (as defined herein) of the Purchased Personal Lines Companies and (ii) National General Holdings Corporation (“National General”) has entered into that certain Stock Purchase Agreement dated January 3, 2013 by and between ACP Re and National General (the “Personal Lines SPA”), whereby National General is purchasing all of the capital stock of certain subsidiaries of Tower (the “Purchased Personal Lines Companies”) and the renewal rights to all of Personal Lines Business (as defined herein) of the Purchased Commercial Lines Companies; and
WHEREAS, as more particularly set forth herein, the Companies and the Reinsurer wish to enter into a quota share arrangement pursuant to which the Reinsurer will reinsure all Losses with respect to the Fronted Policies (as defined herein) written by the Companies in accordance with the terms hereof following the Effective Time.  
NOW, THEREFORE, in consideration of the mutual and several promises and undertakings herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1 
DEFINITIONS

C-1

Section 1.1    Defined Terms.
The following terms shall have the respective meanings specified below throughout this Agreement.  
“ACP Re” has the meaning set forth in the Recitals.
“Agreement” has the meaning set forth in the first paragraph.
“Affiliate” (and, with a correlative meaning, “Affiliated”) means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person.  As used in this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, as trustee or executor, or otherwise).  
“Applicable Law” means any applicable order, law, statute, regulation, rule, pronouncement, ordinance, bulletin, writ, injunction, directive, judgment, decree, principle of common law, constitution or treaty enacted, promulgated, issued, enforced or entered by any Governmental Authority applicable to the parties hereto, or any of their respective businesses, properties or assets.  
     “Ceding Commission” means an amount equal to the Fronting Acquisition Costs with respect to Fronted Policies, in each case subject to any applicable commission or brokerage adjustments, which adjustments shall be accounted for and settled up as between the Parties as part of the monthly reporting pursuant to Section 3.4. 
“Claim” and “Claims” means any and all claims, requests, demands or notices made by or on behalf of Policyholders, beneficiaries or third party claimants for the payment of Losses and any other amounts due or alleged to be due under or in connection with the Fronted Policies.
“Closing Date” means the date upon which the Merger is effected.
“Commercial Lines Business” means all insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including all supplements, riders, endorsements, renewals and extensions (other than Personal Lines Business) issued by a Company.
“Commercial Lines SPA” has the meaning set forth the Recitals
“Company(ies)” has the meaning set forth in the Recitals.
“Damages” means all damages, losses, liabilities and expenses (including reasonable attorneys’ fees and reasonable expenses of investigation in connection with any action, suit or proceeding).

C-2

“Effective Time” has the meaning set forth in the Merger Agreement.
“Fronted Policies” has the meaning set forth in Section 2.1(a).
“Fronting Acquisition Costs” has the meaning set forth in Section 3.1.
“Fronting Authority” means the authority conferred upon the Reinsurer and its designees under this Agreement to write Fronted Policies.
“Fronting Period” has the meaning set forth in Section 2.1(a).
“Governmental Authority” means any foreign, domestic, federal, territorial, state or local U.S. or non-U.S. governmental authority, quasi-governmental authority, instrumentality, court or government, self-regulatory organization, commission, tribunal or organization or any political or other subdivision, department, branch or representative of any of the foregoing.
“Insurance Contracts” means all insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including all supplements, riders, endorsements, renewals and extensions as to the Commercial Lines Business issued by the Companies or any Company on or after the Effective Time.
“Losses” shall mean liabilities and obligations to make payments to Policyholders, beneficiaries and/or other third party claimants under the Fronted Policies (including, without limitation, liabilities or assessments arising from a Company’s participation, if any, in any voluntary or involuntary pools, guaranty funds, or other types of government-sponsored or government-organized insurance funds) and all loss adjustment expenses and defense costs, including, without limitation, (i) all expenses incurred by or on behalf of the a Company related to the investigation, appraisal, adjustment, litigation, defense or appeal of claims under or covered by the Fronted Policies and/or coverage actions under or covered by the Fronted Policies, (ii) all liabilities for consequential, exemplary, punitive or similar extra contractual damages, or for statutory or regulatory fines or penalties, or for any loss in excess of the limits arising under or covered by any Fronted Policy, and (iii) court costs accrued prior to final judgment, prejudgment interest or delayed damages and interest accrued after final judgment.  Notwithstanding the foregoing, “Losses” shall not include any liabilities or obligations incurred by or on behalf of a Company as a result of any willful, fraudulent and/or criminal act by a Company or any of its Affiliates or any of their respective officers, directors, employees or agents following the Effective Time.
“Merger” has the meaning set forth in the Recitals.  
“Merger Agreement” has the meaning set forth in the Recitals.
“Merger Sub” means the subsidiary of ACP Re that will merge with Tower pursuant to the Merger Agreement.

C-3

“National General” has the meaning set forth in the Recitals.
“Parties” has the meaning set forth in the first paragraph.
“Person” shall mean any individual, corporation, partnership, firm, joint venture, association, joint-stock company, limited liability company, trust, estate, unincorporated organization, Government Authority or other entity.
“Personal Lines SPA” has the meaning set forth in the Recitals.
 “Personal Lines Business” means all insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including all supplements, riders, endorsements, renewals and extensions for personal automobile liability and physical damage, homeowners, personal excess and umbrella coverage issued by the Companies.
“Policyholder” means policyholders and named insureds of the Insurance Contracts.
“Premium(s)” means all gross written premium(s), considerations, deposits, premium adjustments, fees and similar amounts related to the Fronted Policies, less cancellation and return premiums.
“Purchased Commercial Lines Companies” has the meaning set forth in the Recitals.
“Purchased Personal Lines Companies” has the meaning set forth in the Recitals.
“Reinsurer” has the meaning set forth in the first paragraph.
“Taxes” (or “Tax” as the context may require) means all United States federal, state, county, local, foreign and other taxes (including, without limitation, income taxes, payroll and employee withholding taxes, unemployment insurance, social security taxes, premium taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes, severance taxes, capital property taxes and import duties), and includes interest, additions to tax and penalties with respect thereto, whether disputed or not.
“Tower” has the meaning set forth in the Recitals.  
“Transaction Documents” means this Agreement, the Commercial Lines SPA, the Personal Lines SPA, the Personal Lines Quota Share Reinsurance Agreement of even date herewith to be entered into by an Affiliate of National General and certain Affiliates of AmTrust, and such other and further documents reasonably necessary to effectuate the Merger.
ARTICLE 2     
BASIS OF REINSURANCE AND BUSINESS REINSURED
Section 2.1    Fronted Business.

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(a)    From and until two (2) years after the Closing Date (the “Fronting Period”), the Companies, in their own name and on their own behalf, or in the name and on behalf of any of their Affiliates will issue or cause to be issued insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including supplements, riders, endorsements and extensions thereto that are approved and requested by AmTrust or its designee (the “Fronted Policies”).  Neither AmTrust nor any of its Affiliates shall have any obligation to request Companies’ issuance of Fronted Policies.  Any interest of the Companies in renewal rights and expirations relating to the Insurance Contracts shall be property of the Reinsurer.  Upon written request by the Companies to the Reinsurer, the Reinsurer will execute such additional documents or endorsements as are reasonably necessary to effectuate the issuance and administration of Fronted Policies under this Agreement.  
(b)    During the Fronting Period, and as the sole consideration payable hereunder, Reinsurer shall pay the Companies the Ceding Commission in connection with writing the Fronted Policies.
(c)    From and after the Effective Time, each Company hereby cedes, and the Reinsurer hereby assumes, one hundred percent (100%) of all Losses for which such Company is liable in respect of the Fronted Policies that are issued on or after the Effective Time.
(d)    In the event the Reinsurer makes an indemnity payment on behalf of a Company directly to any Policyholder, insured or third party pursuant to any Fronted Policy that pays, in full, a Loss, cost or expense under such Fronted Policy, such payment satisfies and extinguishes any and all obligation of the Reinsurer hereunder to indemnify a Company for such Loss, cost or expense to the extent of such payment.  In no event shall the Reinsurer be obligated hereunder to indemnify with respect to any Loss, cost or expense under a Fronted Policy for an amount in excess of such Loss, cost or expense.
ARTICLE 3     
PAYMENTS, OFFSET, AND SECURITY
Section 3.1    Premium.
(a)    As premium for the Fronted Policies ceded under this Agreement, each Company shall pay to the Reinsurer (to the extent the Reinsurer has not retained such Premiums directly pursuant to Article 4) by wire transfers of immediately available funds one hundred percent (100%) of the collected Premiums attributable to the Fronted Policies, net of a ceding commission in an amount equal to the actual out-of-pocket expenses incurred by such Company for amounts paid or payable by, or on behalf of, such Company to persons who are not Affiliates of such Company to acquire the Fronted Policies, including all brokerage commissions and any adjustments thereto, 

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and any Taxes, surcharges and other similar amounts on premiums required to be paid or collected by such Company or its producers or agents (the “Fronting Acquisition Costs”).  
(b)    The Reinsurer shall pay to the Companies the Ceding Commission pursuant to the monthly settlement under Section 3.4.
Section 3.2    Offset Rights.
Except as otherwise expressly provided, each Party hereto shall have, and may exercise at any time and from time to time, the right to offset any balance or balances due to the other Party arising under this Agreement, and regardless of whether on account of Premiums, Ceding Commissions, or Losses related to or arising under the Fronted Policies; provided, however, that in the event of the insolvency of a Party hereto or any of its Affiliates, offsets shall only be allowed in accordance with the provisions of Applicable Law. 
Section 3.3    Premiums for Fronted Policies.
(a)    The Reinsurer is authorized to collect Premiums for the Fronted Policies from Policyholders of a Company and may deposit such Premiums directly into one or more accounts designated by, and issued in the name of, the Reinsurer.  To the extent any Premiums are collected directly by a Company, such Company shall so advise the Reinsurer and shall promptly remit them to the Reinsurer, net of any Ceding Commissions which shall be retained by such Company.  The Reinsurer and the Companies agree to maintain accounting and operational records and books in adequate detail so as to identify the specific Fronted Policies and Policyholders of the Companies with respect to all collected Premiums.
(b)    The Reinsurer shall: (i) timely pay any return premium coming due under the Fronted Policies payable on or after the Closing Date; or (ii) promptly reimburse a Company for any of the foregoing amounts that are instead paid by such Company. 
Section 3.4    Reports and Remittances.
(a)    The Parties shall conduct monthly settlements based upon monthly bordereaux to be provided by or on behalf of the Reinsurer evidencing the amount due or to be due in a form, and containing such detail, as is agreed to by the Parties.  Such settlements shall take into account and fully settle any profit commission, return commission, loss corridor payment, or other similar premium or commission adjustments payable to or by the Companies pursuant to the terms of any Fronted Policy or any agent or broker contract that relates to the Fronted Policies, which adjustments, whether positive or negative, shall be credited to or charged against the Reinsurer, as the case may be.  Each Party shall pay or credit in cash or its equivalent to the other all net amounts for which it may be liable under the terms and conditions of this Agreement within thirty (30) days after receipt of each monthly bordereau.    

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(b)    The Companies and the Reinsurer shall furnish each other with such records, reports and information with respect to the Losses, Claims and the reinsurance contemplated hereby as may be reasonably required by the other Party to comply with any internal reporting requirements or reporting requirements of any Governmental Authority or to prepare and complete such Party’s quarterly and annual financial statements.    
(c)    If any Company or the Reinsurer receives notice of, or otherwise becomes aware of, any inquiry, investigation, proceeding, from or at the direction of a Governmental Authority, or is served or threatened with a demand for litigation, arbitration, mediation or any other similar proceeding relating to the Fronted Policies, such Company or the Reinsurer, as applicable, shall promptly notify the other party thereof, whereupon the parties shall cooperate in good faith and use their respective commercially reasonable efforts to resolve such matter in a mutually satisfactory manner in light of all the relevant business, regulatory and legal facts and circumstances.
(d)    Each Party shall have the right, through authorized representatives and  upon reasonable advance notice during normal business hours, to periodically audit and inspect all books, records, and papers of the other Party solely in connection with the Fronted Policies and any reinsurance hereunder or claims in connection therewith and the performance of the claims, underwriting and other administration services pursuant to Article 4.  Each Party shall treat the other Party’s books, records, and papers in confidence.  A Party shall be permitted to conduct such audits no more frequently than semi-annually except as is otherwise reasonably necessary in the day-to-day administration of the Fronted Policies including but not limited to Claims. 

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Section 3.5    Collection of Premiums.  Following the Closing Date and subject to Section 3.3(a), all Premiums collected by the Reinsurer or any of its Affiliates shall be retained by the Reinsurer and all Premiums collected by a Company, net of the applicable Ceding Commission, shall be deposited directly into an account (or accounts) designated by, and issued in the name of, the Reinsurer.  Any Premiums collected by a Company pursuant to this Section 3.5 shall, net of any Ceding Commission, be the sole and exclusive property of the Reinsurer and, notwithstanding Section 3.2, shall not be subject to setoff in any form by a Company. 
Section 3.6    Collateral for Ceded Losses. Without limiting the Reinsurer’s other obligations under this Section 3.6, in the event pursuant to Applicable Law of any state of the United States of America or the District of Columbia having jurisdiction over a Company, such Company is no longer able to take full reserve credit on its statutory financial statements for the reinsurance ceded to the Reinsurer without qualifying collateral therefor, the Reinsurer shall promptly agree to modifications to this Agreement so that the Reinsurer shall provide collateral for its obligations hereunder in the amount and form necessary for such Company to take full reserve credit on its statutory financial statements for the reinsurance provided hereunder on terms and conditions reasonably satisfactory to such Company and Reinsurer and in accordance with Applicable Law.  
ARTICLE 4     
CLAIMS, UNDERWRITING AND OTHER ADMINISTRATION
(a)    On and after the Effective Time, each Company will provide prompt notice to the Reinsurer or its designee of all Claims (but only to the extent such Claims are not otherwise known or reported to the Reinsurer or any of its Affiliates), and the Reinsurer or its designee will have the obligation to administer, investigate and defend, as applicable, at its own expense, any Claim affecting this Agreement.  At the request of the Reinsurer or such designee, the applicable Company will jointly associate with the Reinsurer, at the expense of the Reinsurer, in the defense or control of any Claim, suit or proceeding involving this reinsurance, and such Company shall cooperate with the Reinsurer or such designee in every respect to procure the most favorable disposition of such claim, suit or proceeding.  
(b)    Each Company grants to the Reinsurer or one or more of the Reinsurer’s Affiliates designated by the Reinsurer, as of the Effective Time, authority in all matters relating to the administration of the Fronted Policies and any Claims thereunder, including but not limited to the authority (i) to pay and adjust Claims on behalf of such Company, (ii) to communicate directly with Policyholders and to collect on behalf of such Company unpaid Premiums that relate solely to the Fronted Policies, and (iii) to handle the placement, production, underwriting, service and management of the Fronted Policies, including without limitation the authority to (A) solicit, accept and receive submissions for Fronted Policies or renewals of Fronted Policies; (B) secure, at its own expense, reasonable underwriting information through reporting agencies or other appropriate sources relating to each submission; (C) issue, renew and countersign Fronted Policies and 

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endorsements related thereto; (D) collect and receipt for the premiums on Fronted Policies; (E) calculate and pay producer commissions, countersignature fees, inspection fees, loss prevention expenses, and all other expenses directly related to the production, underwriting and administration of the business subject to this Agreement, (F) purchase facultative reinsurance as deemed appropriate by the Reinsurer, (G) adjust and settle claims under the Fronted Policies; (H) set and establish loss reserves for the Fronted Policies; and (I) any and all other acts or duties that would otherwise be performed by such Company necessary and appropriate to the Fronted Policies, to the extent such authority may be granted pursuant to Applicable Law and the Reinsurer, or one or more of the Reinsurer’s Affiliates designated by the Reinsurer, shall perform all such functions as outlined herein.  In exercising such authorities, the Reinsurer or any such Affiliate may delegate the performance of any duty described above to a third party; provided that no such delegation shall relieve the Reinsurer of its obligations hereunder.  Subject to the forgoing limitation, effective as of the Effective Time, each Company hereby appoints the Reinsurer as its attorney-in-fact with respect to the rights, duties and privileges and obligations of such Company in and to the Fronted Policies, with full power and authority to act in the name, place and stead of such Company with respect to such contracts, including without limitation, the power to service such contracts, to adjust, defend, settle and to pay all Claims, to recover salvage and subrogation for any losses incurred and to take such other and further actions as may be necessary or desirable to effect the transactions contemplated by this Agreement, provided, that the Reinsurer covenants to exercise such authority in a professional manner and to use the same level of care as is used in administering the Reinsurer’s other insurance business.  As part of the foregoing, each Company grants full authority to the Reinsurer to adjust, settle or compromise all Losses hereunder, and all such adjustments, settlements and compromises shall be binding on such Company.  Each Company agrees to cooperate fully with the Reinsurer in the transfer of such administration, and the Reinsurer agrees to be responsible for such administration.  Notwithstanding the foregoing, the Parties understand and acknowledge that all management services performed by the Reinsurer with respect to the Insurance Contracts issued by a Company shall be provided subject to the general supervision and control of such Company and its officers and directors.  For the avoidance of doubt, and notwithstanding the delegation of duties contained in this Agreement, each Company has and retains the ultimate control of and authority over the performance of all functions and services delegated hereunder by it.
(c)    Each Company agrees that such Company will not take action to prevent or limit the Reinsurer or its designee from servicing or administering the Fronted Policies or the Claims as contemplated by this Agreement.  If the Reinsurer fails to cure a material breach of its servicing or other obligations hereunder within thirty (30) days following a Company's written notice to Reinsurer of such breach, which notice shall in reasonable detail describe the nature of such breach or, if such breach shall not be reasonably susceptible to cure within such thirty (30) day period such additional reasonable time not exceeding an additional sixty (60) days as shall be necessary to cure 

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such breach, such Company shall have the right to exercise its remedies at law or in equity with respect to such breach.  
(d)    The Reinsurer shall maintain sufficient resources and adequate staffing levels of personnel with appropriate experience to administer the Fronted Policies in a professional manner and shall administer the Fronted Policies in accordance with all Applicable Laws.  
ARTICLE 5     
REGULATORY MATTERS
At all times during the term of this Agreement, the Companies and the Reinsurer shall hold and maintain all licenses and authorizations required under Applicable Law and otherwise take all actions that may be necessary to perform its obligations hereunder.
ARTICLE 6     
DUTY OF COOPERATION & INDEMNITY; REINSURANCE
Section 6.1    Cooperation.
Each Party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Agreement.
Section 6.2    Reinsurance.
Without written consent of the Reinsurer (which consent may be withheld at Reinsurer’s sole discretion), the Companies shall not enter into any reinsurance agreements, treaties and contracts, including any renewals or extensions thereof, to the extent such reinsurance agreements, treaties and contracts provide reinsurance coverage for the Fronted Policies.     
ARTICLE 7     
INSOLVENCY
In the event of the insolvency of a Company, this reinsurance as to Fronted Policies issued by such Company shall be payable directly to such Company or its liquidator, receiver, conservator or statutory successor on the basis of the amount of the claims allowed in the insolvency proceeding without diminution because of the insolvency of such Company or because the liquidator, receiver, conservator or statutory successor of such Company has failed or is unable to pay all or a portion of a claim, except where (a) this Agreement specifically provides another payee of such reinsurance in the event of such Company’s insolvency, provided that this exception shall only apply to the extent that the reinsurance proceeds due such payee are actually paid by the Reinsurer, or (b) the Reinsurer, with the consent of the direct insured or insureds, has assumed such policy obligations of such Company as direct obligations of the Reinsurer to the payees under such policies and in full and complete substitution for the obligations of such Company to such payees.  It is agreed, 

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however, that the liquidator, receiver, conservator or statutory successor shall give written notice to the Reinsurer of the pendency of a claim against such Company indicating the Fronted Policy which involves a possible liability on the part of the Reinsurer within reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership and that, during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to such Company or its liquidator, receiver, conservator or statutory successor.  The expenses thus incurred by the Reinsurer shall be chargeable, subject to the Court’s approval, against such Company as part of the expense of the conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to such Company solely as a result of the defense undertaken by the Reinsurer.
ARTICLE 8     
REGULATORY APPROVALS
The Companies and the Reinsurer shall submit all necessary registrations, filings and notices with, and obtain all necessary consents, approvals, qualifications and waivers from, all Governmental Authorities and other parties which may be required under Applicable Law as a result of the transactions contemplated by, or to perform its respective obligations under, this Agreement.  The Parties agree that where formal approval is required by any Governmental Authority, this Agreement shall not be effective as to any and all Fronted Policies to be reinsured hereunder in such jurisdiction until such approval is obtained.
ARTICLE 9     
DURATION
Subject to Section 2.1 above, this Agreement shall not be subject to termination by any Party except (i) by written agreement between Reinsurer and the respective Company on the date indicated by such agreement, after receipt of any required approval from Government Authorities, or (ii) upon the termination or expiration of the Fronting Authority, the expiration of all liability on all Fronted Policies, and the complete performance by Reinsurer and the Companies of all obligations and duties arising under this Agreement. 
ARTICLE 10     
FOLLOW THE FORTUNES
The Reinsurer’s liability shall attach simultaneously with that of each Company and shall be subject in all respects to the same risks, original terms and conditions, interpretations, waivers, and to the same cancellation of the Fronted Policies as such Company is subject to, the true intent of this Agreement being that the Reinsurer shall, in every case to which this Agreement applies, follow the fortunes and follow the settlements of such Company.

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ARTICLE 11     
INDEMNIFICATION
Section 11.1    Indemnification.
(a)    Each Company agrees to indemnify and hold the Reinsurer and its Affiliates, predecessors, successors and assigns (and their respective officers, directors, employees and agents) harmless from and against and in respect of all Damages resulting from or relating to a breach by such Company of any covenant or agreement of such Company in this Agreement and to be performed post-Closing.
(b)    The Reinsurer agrees to indemnify and hold each Company and its Affiliates, predecessors, successors and assigns (and their respective officers, directors, employees and agents) harmless from and against and in respect of all Damages, resulting from or relating to a breach by the Reinsurer of any covenant or agreement of the Reinsurer in this Agreement and to be performed post-Closing or from any third party claim against a Company resulting from (i) the administration of Fronted Policies or Claims by Reinsurer or (ii) any action or failure to act of a Company pursuant to express written instructions of the Reinsurer.         
ARTICLE 12     
MISCELLANEOUS
Section 12.1    Notices.  All notices, requests, demands and other communications hereunder shall be given in writing and shall be:  (a) personally delivered; (b) sent by telecopier, facsimile transmission or other electronic means of transmitting written documents; or (c) sent to the Parties at their respective addresses indicated herein by registered or certified U.S. mail, return receipt requested and postage prepaid, or by private overnight mail courier service.  The respective addresses to be used for all such notices, demands or requests are as follows:
(a)    If to a Company, to:
c/o National General Management Corp.
59 Maiden Lane, 38th fl
New York, NY 10038
Attention:  Jeffrey Weissmann, Esq.
Facsimile:  (212) 380-9499
E-mail: jeffrey.weissmann@ngic.com

or to such other person or address as the Company shall furnish to the Reinsurer in writing.

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	(b)
	If to the Reinsurer, to:

c/o AmTrust Financial Services, Inc.
AmTrust North America, Inc.
59 Maiden Lane, 43rd fl
New York, NY 10038
Attn:    Stephen Ungar, Esq.
Facsimile No.:  (212) 220-7130
E-mail: Steve.Ungar@amtrustgroup.com

or to such other person or address as the Reinsurer shall furnish to the Companies in writing.
If personally delivered, such communication shall be deemed delivered upon actual receipt; if electronically transmitted pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal.  Any Party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this Section.
Section 12.2    Assignment; Parties in Interest.
(a)    Assignment.  Except as expressly provided herein, the rights and obligations of a Party hereunder may not be assigned, transferred or encumbered without the prior written consent of the other Party. 
(b)    Parties in Interest.  This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and permitted assigns.  Except as provided in Section 3.2, nothing contained herein shall be deemed to confer upon any other Person any right or remedy under or by reason of this Agreement.

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Section 12.3    Waivers and Amendments; Preservation of Remedies. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by each of the Parties or, in the case of a waiver, by the Party waiving compliance.  No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power, remedy or privilege, nor any single or partial exercise of any such right, power, remedy or privilege, preclude any further exercise thereof or the exercise of any other such right, remedy, power or privilege.  The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any Party may otherwise have under Applicable Law or in equity.
Section 12.4    Governing Law; Venue.  This Agreement shall be construed and interpreted according to the internal laws of the State of New York excluding any choice of law rules that may direct the application of the laws of another jurisdiction.  The Parties hereby stipulate that any action or other legal proceeding arising under or in connection with this Agreement may be commenced and prosecuted in its entirety in the federal or state courts sitting in New York, New York, each Party hereby submitting to the personal jurisdiction thereof, and the Parties agree not to raise the objection that such courts are not a convenient forum.  Process and pleadings mailed to a party at the address provided in Section 12.1 shall be deemed properly served and accepted for all purposes.
Section 12.5    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  

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Section 12.6    Entire Agreement; Merger.  This Agreement, the Transaction Documents, and any exhibits, schedules and appendices attached hereto and thereto together constitute the final written integrated expression of all of the agreements among the Parties with respect to the subject matter hereof and is a complete and exclusive statement of those terms, and supersede all prior or contemporaneous, written or oral, memoranda, arrangements, contracts and understandings between the Parties relating to the subject matter hereof.  Any representations, promises, warranties or statements made by any Party which differ in any way from the terms of this Agreement or any applicable provisions contained in the Ancillary Agreements shall be given no force or effect.  The Parties specifically represent, each to the other, that there are no additional or supplemental agreements or contracts between or among them related in any way to the matters herein contained unless specifically included or referred to in this Agreement or any applicable provisions contained in the Transaction Documents.  No addition to or modification of any provision of this Agreement or any applicable provisions of the Transaction Documents shall be binding upon either Party unless embodied in a dated written instrument signed by both Parties.  
Section 12.7    Exhibits and Schedules.  All exhibits, schedules and appendices are hereby incorporated by reference into this Agreement as if they were set forth at length in the text of this Agreement.
Section 12.8    Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof.
Section 12.9    Severability.  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Law or regulations, that provision shall not apply and shall be omitted to the extent so contrary, prohibited, or invalid; but the remainder of this Agreement shall not be invalidated and shall be given full force and effect insofar as possible.
Section 12.10    Expenses. Regardless of whether or not the transactions contemplated in this Agreement are consummated, each of the Parties shall bear their own expenses and the expenses of its counsel and other agents in connection with the transactions contemplated hereby.
Section 12.11    Currency.  The currency of this Agreement and all transactions under this Agreement shall be in United States Dollars.

(Signature Page Follows)

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above to be effective as of the Effective Time.
COMPANIES:
YORK INSURANCE COMPANY OF MAINE

By ______________________________
Title _____________________________

MASSACHUSETTS HOMELAND INSURANCE COMPANY

By _______________________________
Title ______________________________

PRESERVER INSURANCE COMPANY

By _______________________________
Title ______________________________

CASTLE POINT INSURANCE COMPANY 

By _______________________________
Title ______________________________

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REINSURER:
TECHNOLOGY INSURANCE COMPANY, INC.

By _______________________________
Title ______________________________
 

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EXHIBIT D

Form of Loss Portfolio Transfer Agreement

THIS LOSS PORTFOLIO TRANSFER AGREEMENT (this “Agreement”) is entered into as of [ ], 2014 by and among [TOWER INSURANCE COMPANY OF NEW YORK, an insurance company organized under the laws of New York]/[CASTLE POINT NATIONAL INSURANCE COMPANY, an insurance company organized under the laws of Illinois,] TOWER NATIONAL INSURANCE COMPANY, an insurance company organized under the laws of Massachusetts, HERMITAGE INSURANCE COMPANY, an insurance company organized under the laws of New York, CASTLE POINT FLORIDA INSURANCE COMPANY, an insurance company organized under the laws of Florida, KODIAK INSURANCE COMPANY, an insurance company organized under the laws of New Jersey, NORTH EAST INSURANCE COMPANY, an insurance company organized under the laws of Maine, YORK INSURANCE COMPANY OF MAINE, an insurance company organized under the laws of Maine, MASSACHUSETTS HOMELAND INSURANCE COMPANY, an insurance company organized under the laws of Massachusetts, PRESERVER INSURANCE COMPANY, an insurance company organized under the laws of New Jersey, and CASTLE POINT INSURANCE COMPANY, an insurance company organized under the laws of New York, as the Companies (collectively, the “Companies” and, individually, each a “Company”), and either CastlePoint Reinsurance Company Ltd. or Tower Reinsurance, Ltd., as agreed to by the parties (the “Reinsurer”) (collectively, the “Parties”).
WHEREAS, ACP Re, Ltd., a Bermuda corporation (the “Seller”), AmTrust Financial Services, Inc., a Delaware corporation (“AmTrust”), and National General Holdings Corporation, a Delaware corporation (“National General”) are jointly entering into a series of related agreements for the purpose of acquiring Tower Group International, Ltd. (“Tower”), a Bermuda insurance holding company, which transacts commercial and personal lines insurance business in the United States through 15 insurance company subsidiaries, including the Companies which are parties to this Agreement;
WHEREAS, Seller, pursuant to that certain Merger Agreement among Seller, Merger Sub and Tower dated as of January 3, 2014 (the “Merger Agreement”) is acquiring Tower and its subsidiaries, including, indirectly, all of the issued and outstanding shares of capital stock of the Companies, through the merger of Merger Sub with and into Tower with Tower surviving such merger (the “Merger”);
WHEREAS, Technology Insurance Company, Inc. (the “Commercial Lines Reinsurer”) and the Companies are parties to that certain Commercial Lines Cut-Through Quota Share Reinsurance Agreement, dated January 3, 2014 (the “Commercial Lines Cut-Through QSA”) pursuant to which the Commercial Lines Reinsurer is reinsuring Subject Policies (as defined in the 

D-1

Commercial Lines Cut-Through QSA and herein called the “Commercial Lines New Policies”) relating to the Commercial Lines Business (as defined in the Commercial Lines Cut-Through QSA); 
WHEREAS, Integon National Insurance Company (the “Personal Lines Reinsurer”) and the Companies are parties to that certain Personal Lines Cut-Through Quota Share Reinsurance Agreement dated as of January 3, 2014 (the “Personal Lines Cut-Through QSA”) pursuant to which the Personal Lines Reinsurer is reinsuring Subject Policies (as defined in the Personal Lines Cut-Through QSA, and together with the Commercial Lines New Policies herein called the “New Policies”) relating to the Personal Lines Business (as defined in the Personal Lines Cut-Through QSA); and
WHEREAS, as more particularly set forth herein, the Companies and the Reinsurer wish to enter into a new reinsurance arrangement pursuant to which the Reinsurer will reinsure all the business written by the Companies prior to the Effective Time.  
NOW, THEREFORE, in consideration of the mutual and several promises and undertakings herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1     
DEFINITIONS
Section 1.1    Defined Terms.
The following terms shall have the respective meanings specified below throughout this Agreement.  
“Agreement” has the meaning set forth in the first paragraph.
“Affiliate” (and, with a correlative meaning, “Affiliated”) means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person.  As used in this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, as trustee or executor, or otherwise).
“Alternative Accountants” has the meaning set forth in Section 2.2(c). 
“AmTrust” has the meaning set forth in the Recitals.

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“Ancillary Agreements” shall mean the Merger Agreement, the Commercial Lines Cut-Through QSA, the Personal Lines Cut-Through QSA, the Commercial Lines SPA and the Personal Lines SPA. 
“Applicable Law” means any domestic or foreign federal, state or local statute, law, ordinance or code, or any written rules, regulations or administrative interpretations issued by any Governmental Entity pursuant to any of the foregoing, and any order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction applicable to the parties hereto. 
“Claim” and “Claims” means any and all claims, requests, demands or notices made by or on behalf of policyholders, beneficiaries or third party claimants for the payment of Losses and any other amounts due or alleged to be due under or in connection with the Insurance Contracts.
“Closing Date” means the date upon which the Merger is effected.
“Commercial Lines New Policies” has the meaning set forth in the Recitals.
“Commercial Lines Reinsurer” has the meaning set forth in the Recitals.
“Commercial Lines Cut-Through QSA” has the meaning set forth in the Recitals.
“Commercial Lines SPA” means Commercial Lines Stock and Asset Purchase Agreement dated January 3, 2014 between the Seller and AmTrust.
“Company” has the meaning set forth in the first paragraph.
“Damages” means all damages, losses, liabilities and expenses (including reasonable attorneys’ fees and reasonable expenses of investigation in connection with any action, suit or proceeding).
“Effective Time” means 12:01 a.m. Eastern Time on the Closing Date.
“Governmental Entity” means any foreign, domestic, federal, territorial, state or local U.S. or non-U.S. governmental authority, quasi-governmental authority, instrumentality, court or government, self-regulatory organization, commission, tribunal or organization or any political or other subdivision, department, branch or representative of any of the foregoing. 
“IBNR” has the meaning set forth in the definition for the term Loss Reserves.
“Initial Loss Reserve Transfer Amount” has the meaning set forth in Section 2.2(a).
“Insurance Contracts” means all insurance contracts, policies, certificates, binders, slips, covers or other agreements of insurance, including all supplements, riders and endorsements issued or written in connection therewith and extensions thereto, whether or not in-force, issued, renewed, 

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or written by or on behalf of any Company prior to the Effective Time (other than the New Policies reinsured under the Commercial Lines QSA or the Personal Lines QSA).  
“Inuring Reinsurance” means all reinsurance agreements, treaties and contracts, including any renewals or extensions thereof, to the extent such reinsurance agreements, treaties and contracts provide reinsurance coverage for the Insurance Contracts.
“Losses” shall mean liabilities and obligations to make payments to policyholders, beneficiaries and/or other third party claimants under the Insurance Contracts (excluding liabilities or assessments arising from a Company’s participation, if any, in any voluntary or involuntary pools, guaranty funds, or other types of government-sponsored or government-organized insurance funds) and all loss adjustment expenses and defense costs, including, without limitation, (i) all expenses incurred by or on behalf of a Company related to the investigation, appraisal, adjustment, litigation, defense or appeal of claims under or covered by the Insurance Contracts and/or coverage actions under or covered by the Insurance Contracts, (ii) all liabilities for consequential, exemplary, punitive or similar extra contractual damages, or for statutory or regulatory fines or penalties, or for any loss in excess of the limits arising under or covered by any Insurance Contract, and (iii) court costs accrued prior to final judgment, prejudgment interest or delayed damages and interest accrued after final judgment.  
“Loss Reserve True Up Report” has the meaning set forth in Section 2.2(b).
“Loss Reserve Adjustment” has the meaning set forth in Section 2.2(d).
“Loss Reserves” shall mean, with respect to a Company, as of any date the amount recorded on the books of such Company, net of Inuring Reinsurance but without taking into account the reinsurance ceded to the Reinsurer hereunder, on account of its actual or potential obligations for unpaid Losses as of such date, including, without limitation, amounts for incurred but not reported Losses (“IBNR”), calculated consistent with the established actuarial practices applied by such Company in respect of the Insurance Contracts, but in all cases consistent with the reserve requirements, statutory accounting rules and actuarial principles applicable to such Company under Applicable Law as of the date at issue.  For avoidance of doubt, such reserve requirements, statutory accounting rules and actuarial principles as of the date hereof shall be those in effect prior to giving effect to the Merger but thereafter such reserve requirements, statutory accounting rules and actuarial principles shall be those then in effect.
“Merger” has the meaning set forth in the Recitals.
“Merger Agreement” has the meaning set forth in the Recitals.
“Merger Sub” means the subsidiary of the Seller that will merge with Tower pursuant to the Merger.

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“National General” has the meaning set forth in the Recitals.
“New Policies” has the meaning set forth in the Recitals.
“Parties” has the meaning set forth in the first paragraph.
“Person” shall mean any individual, corporation, partnership, firm, joint venture, association, joint-stock company, limited liability company, trust, estate, unincorporated organization, Government Entity or other entity.
“Personal Lines Cut-Through QSA” has the meaning set forth in the Recitals.
“Personal Lines Reinsurer” has the meaning set forth in the Recitals.
“Personal Lines SPA” means that certain Personal Lines Stock Purchase Agreement dated January 3, 2014 between the Seller and National General Holdings.
“Reinsurer” has the meaning set forth in the first paragraph.
“Seller” has the  meaning set forth in the Recitals.
“Tower” has the meaning set forth in the Recitals.
“Trust Account” has the meaning set forth in Section 3.3(b).
“Trust Agreement(s)” has the meaning set forth in Section 3.3(b).
“Trustee” has the meaning set forth in Section 3.3(b).
ARTICLE 2     
BASIS OF REINSURANCE AND BUSINESS REINSURED
Section 2.1    Existing Business.
(e)    Each Company hereby cedes, and the Reinsurer hereby assumes, one hundred percent (100%) of all Losses occurring on or prior to the date hereof for which such Company is liable in respect of the Insurance Contracts (other than Losses assumed under the Commercial Lines Cut-Through QSA and the Personal Lines Cut-Through QSA). All Losses reinsured hereunder and any payments of Claims with respect to such Losses by the Reinsurer shall be net Inuring Reinsurance paid and collected for the benefit of the applicable Company.  
(f)    In the event the Reinsurer makes an indemnity payment on behalf of a Company directly to any policyholder, insured or third party pursuant to any Insurance Contract that pays, in full or in part, a Loss, cost or expense under such Insurance Contract, such payment satisfies and extinguishes any and all obligation of the Reinsurer hereunder to indemnify such 

D-5

Company for such Loss, cost or expense to the extent of such payment.  In no event shall the Reinsurer be obligated hereunder to indemnify with respect to any Loss, cost or expense under an Insurance Contract for an amount in excess of such Loss, cost or expense.
Section 2.2    Transfer of Loss Reserves.
(a)    On the Closing Date, the Companies shall convey to the Reinsurer one hundred percent (100%) of the aggregate Loss Reserves of the Companies by wire transfer of immediately available funds in an amount equal to [ ] Dollars ($[ ]), which amount represents the estimate of the Loss Reserves as of the Closing Date (the “Initial Loss Reserve Transfer Amount”).
(b)    Within ninety (90) days following the Closing Date, the Reinsurer shall perform a calculation of the aggregate Loss Reserves of the Companies as of the Closing Date, and, if different from the Initial Loss Reserve Transfer Amount, the Reinsurer shall send to the Companies its computation of such aggregate Loss Reserve together with its work papers used to compute the same (the “Loss Reserve True Up Report”).  Such aggregate Loss Reserves shall be calculated utilizing the established actuarial practices as followed by the Companies in respect of the Insurance Contracts, as well as the reserve requirements, statutory accounting rules and actuarial principles applicable to the Companies as of the Effective Time.
(c)    Within ten (10) days following the Companies’ receipt of the Loss Reserve True-Up Report, the Parties shall confer in good faith with regard to any disputed calculations and an appropriate adjustment shall be made to the aggregate Loss Reserves as agreed upon by the Parties.  If the Parties are unable to agree on an appropriate adjustment within twenty (20) days of the Loss Reserve True Up Report, “Alternative Accountants,” whose decision on the matter shall be binding on the Parties, shall be designated by agreement between the Companies and the Reinsurer.  If the Parties fail to agree on the selection of the Alternative Accountants, the Alternative Accountants shall be selected by mutual agreement of each of the Companies’ and the Reinsurer’s outside independent auditors.  The Alternative Accountants shall conduct such analysis as they deem appropriate, during a period not to exceed thirty (30) days after they are selected, to determine the amounts which they conclude should have been reflected in the Loss Reserve True Up Report and shall issue their decision (which shall be rendered in writing and shall specify the reasons for the decision) within fifteen (15) days after the conclusion of their analysis.  The Alternative Accountants’ decision shall include a determination of the aggregate Loss Reserve, the amounts which they have determined should be used for the Loss Reserve True Up Report and a determination of the Loss Reserve Adjustment (as that term is defined in Section 2.2(d)) due to the Reinsurer or the Companies, as the case may be.  Each Party shall make available to the other Party and the Alternative Accountants such work papers as may be reasonably necessary to calculate the aggregate Loss Reserves and Loss Reserve Adjustment under this Section 2.2(c).  No Party shall have any ex parte discussions or communications, directly or indirectly, with the Alternative Accountants regarding the subject matter of a dispute arising under this Section 2.2(c), unless the Party seeking such discussions or 

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communications first obtains the other Party’s written consent to such ex parte contact with the Alternative Accountants.  For the avoidance of doubt, in the event of any dispute with respect to the Loss True Up Report, such dispute shall be governed by this Section 2.2 and the procedures set forth herein.
(d)    On the fifth (5th) business day following the deemed acceptance of, the mutual written agreement of the Companies and the Reinsurer to, or the determination by the Alternative Accountants of, the aggregate Loss Reserves, if the aggregate Loss Reserves exceeds the Initial Loss Reserve Transfer Amount, the Companies shall remit funds to the Reinsurer equal to the difference, and if the aggregate Loss Reserves are less than the Initial Loss Reserve Transfer Amount, the Companies shall be paid such difference by the Reinsurer (the amount so transferred being herein called the “Loss Reserve Adjustment”).
(e)    From and after the Effective Time, the Reinsurer shall maintain as a liability on its statutory financial statements adequate reserves for all liabilities ceded under this Agreement.  The Reinsurer shall provide the Companies with its periodic reports filed with its insurance regulators and a copy of its audited financial statements along with the audit report thereon within fifteen (15) days of the Reinsurer’s filing of such statements and reports with the insurance regulator of its jurisdiction of domicile.
Section 2.3    Inuring Reinsurance.
As additional consideration for the liabilities assumed by the Reinsurer pursuant to this Agreement, the parties hereby agree that all Inuring Reinsurance shall inure to the benefit of the Reinsurer and, accordingly, any recovery of funds under the Inuring Reinsurance shall be paid promptly to the Reinsurer.
ARTICLE 3     
PAYMENTS, OFFSET, AND SECURITY
Section 3.1    Offset Rights.
Except as otherwise expressly provided, each Party hereto, and each of its respective Affiliates at the time an offset is asserted, shall have, and may exercise at any time and from time to time, the right to offset any balance or balances due to the other Party under this Agreement at the time an offset is asserted; provided, however, that in the event of the insolvency of a Party hereto or any of its Affiliates, offsets shall only be allowed in accordance with the provisions of Applicable Law. 
Section 3.2    Reports and Remittances.
(a)    The Parties shall conduct monthly settlements based upon monthly bordereaux to be provided by or on behalf of the Reinsurer evidencing the amount due or to be due 

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in a form, and containing such detail, as is agreed to by the Parties.  Each Party shall pay or credit in cash or its equivalent to the other all gross amounts for which it may be liable under the terms and conditions of this Agreement within thirty (30) days after receipt of each monthly bordereau.    
(b)    The Companies and the Reinsurer shall furnish each other with such records, reports and information with respect to the Losses, Claims, Inuring Reinsurance, and the reinsurance contemplated hereby as may be reasonably required by the other Party to comply with any internal reporting requirements or reporting requirements of any Governmental Entity or to prepare and complete such Party’s quarterly and annual financial statements.      
(c)    If a Company or the Reinsurer receives notice of, or otherwise becomes aware of, any inquiry, investigation, proceeding, from or at the direction of a Governmental Entity, or is served or threatened with a demand for litigation, arbitration, mediation or any other similar proceeding relating to the Insurance Contracts, such Company or the Reinsurer, as applicable, shall promptly notify the other party thereof, whereupon the parties shall cooperate in good faith and use their respective commercially reasonable efforts to resolve such matter in a mutually satisfactory manner in light of all the relevant business, regulatory and legal facts and circumstances.
(d)    Each Party shall have the right, through authorized representatives and  upon reasonable advance notice during normal business hours, to periodically audit and inspect all books, records, and papers of the other Party solely in connection with the Insurance Contracts, the Inuring Reinsurance and any reinsurance hereunder or claims in connection therewith.  Each Party shall treat the other Party’s books, records, and papers in confidence. Each Party shall comply in all material respects with its privacy policies as to and all Privacy Laws with respect to Personal Information.  “Personal Information” means any information related to an identified or identifiable natural person and does not meet the definition of de-identified as defined by the Health Insurance Portability and Accountability Act of 1996.  “Privacy Laws” shall mean any laws, statutes, rules, regulations, codes, orders, decrees, and rulings thereunder of any federal, state, regional, county, city, municipal or local government of the United States that relate to privacy, data protection or data transfer issues.
Section 3.3    Security.
(a)    As regards Insurance Contracts coming within the scope of this Agreement, each Ceding Company agrees that, when it files with the applicable jurisdiction(s) or sets up on its books reserves for the Policies covered hereunder, which it is required by law to set up, it will forward to the Reinsurer a statement showing the proportion of such reserves applicable to it.  For purposes of this Article, "reserves" will consist of:
(i)    Loss and loss adjustment expense paid by such Company but not recovered from the Reinsurer; 

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(ii)    Loss and loss adjustment expense reported and outstanding; and
(iii)    A reserve amount for incurred but not reported losses.
(b)    The Reinsurer hereby agrees that with respect to each Ceding Company, severally, it will fund an amount equal to the Reinsurer’s proportion of such reserves by establishing a trust account pursuant to trust agreement (“Trust Account”) which may be combined with one or more of the following:
(i)    Cash advances or funds withheld; or
(ii)    Letters of credit
(c)    Except as otherwise provided herein, the Reinsurer will have the option of determining the method of funding referred to above, provided it is reasonably acceptable to the applicable Ceding Company and, to the extent that funding is required for such Ceding Company to receive credit for the reinsurance under this Agreement, each applicable regulatory authority.  Income on the amounts funded as provided above shall accrue to the benefit of the Reinsurer.
(d)    If a Reinsurer's choice of funding is or includes a letter of credit, it will apply for and secure delivery to the applicable Ceding Company of a clean, irrevocable, unconditional letter of credit, dated on or before December 31 of the year in which the request is made, issued by a member of the Federal Reserve System or any other bank approved for use by the National Association of Insurance Commissioners' Securities Valuation Office and such Ceding Company, containing provisions acceptable to the insurance regulatory authorities having jurisdiction over such Ceding Company's reserves in an amount equal to the Reinsurer's proportion of such reserves as shown in the statement prepared by such Ceding Company.
(e)    Any letter of credit will be issued for a period of not less than one year, and will be automatically extended for one year from its date of expiration or any future expiration date unless thirty (30) days prior to any expiration date the issuing bank notifies the Ceding Company that is the beneficiary of such letter of credit by registered mail that the issuing bank elects not to consider the letter of credit extended for any additional period.  An issuing bank, not a member of the Federal Reserve System or not chartered in the state of domicile of the Ceding Company that is the beneficiary of such letter of credit, will provide 60 days’ notice to such Ceding Company prior to any expiration in the event of nonextension.
(f)    Notwithstanding any other provisions of this Agreement, a Ceding Company or its court-appointed successor in interest may draw upon and apply any amounts which it may draw against such letter of credit or trust agreement (pursuant to the terms of the agreement under which the letter of credit or trust agreement is held), or any other method of funding that may apply, 

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at any time without diminution because of the insolvency of such Ceding Company or of Reinsurer for one or more of the following purposes only:
(i)    To reimburse such Ceding Company for the Reinsurer's share of unearned premium (if applicable) on Insurance Contracts reinsured hereunder on account of cancellations of such Insurance Contracts.
(ii)    To pay the Reinsurer's share or to reimburse such Ceding Company for the Reinsurer's share of any Loss reinsured by this Agreement, which has not been otherwise paid.  
(iii)    To make refund of any sum in excess of 102% of the actual amount of the Reinsurer’s security requirement under this Agreement.  
(iv)    In the event of nonextension of the letter of credit as provided for above, to establish deposit of the Reinsurer's security requirement under this Agreement.  Such cash deposit will be held in an interest-bearing account separate from such Ceding Company's other assets, and interest thereon will accrue to the benefit of the Reinsurer, except that any such interest shall accrue to the benefit of such Ceding Company to the extent that the Reinsurer has not fully complied with its funding obligations hereunder.
(v)    In the event that the Reinsurer funds its obligations hereunder by use of a trust agreement, where such Ceding Company has received notification of termination of the trust account established by the trust agreement to secure the Reinsurer’s obligations to such Ceding Company and where the Reinsurer’s entire obligations to such Ceding Company under the Agreement remain unliquidated and undischarged ten (10) days prior to the termination date, to withdraw amounts equal to such Reinsurer’s obligations under the Agreement, including reserves for outstanding claims (including claims incurred but not reported), reserves for loss adjustment expenses and reserves for unearned premium, if applicable, and deposit those amounts in a separate account, in the name of such Ceding Company in any qualified United States financial institution as defined in relevant state insurance laws and regulations apart from its general assets, in trust for such uses and purposes specified above as may remain executory after such withdrawal and for any period after the termination date.
(vi)    To pay the Reinsurer's share of any other amounts such Ceding Company claims are due under this Agreement. 
(g)    Monthly, each Ceding Company will prepare, for the sole purpose of determining the funding required in this Article, a specific statement of the Reinsurer's security requirement under this Agreement.  If the statement shows that the Reinsurer's security requirement exceeds the balance of funding as of the statement date, the Reinsurer will, within fifteen (15) days 

D-10

after receipt of notice of such excess, make an adjustment increasing the amount of such funding by the amount of such difference.  If, however, the statement shows that the Reinsurer's security requirement is less than the balance of funding as of the statement date, such Ceding Company will, within fifteen (15) days after receipt of written request from the Reinsurer release such excess by making the appropriate adjustment.  
ARTICLE 4     
CLAIMS, UNDERWRITING AND OTHER ADMINISTRATION
(a)    On and after the Effective Time, each Company will provide prompt notice to the Reinsurer or its designee of all Claims (but only to the extent such Claims are not otherwise known or reported to the Reinsurer or any of its Affiliates), and the Reinsurer or its designee will have the obligation to investigate and defend, as applicable, at its own expense, any Claim affecting this Agreement and to administer the Insurance Contracts and the Claims thereunder.  At the request of the Reinsurer or such designee, each Company will jointly associate with the Reinsurer, at the expense of the Reinsurer, in the defense or control of any Claim, suit or proceeding involving this reinsurance, and such Company shall cooperate with the Reinsurer or such designee in every respect to procure the most favorable disposition of such claim, suit or proceeding.
(b)    Each Company grants to the Reinsurer, or one or more of the Reinsurer’s Affiliates designated by the Reinsurer, as of the Effective Time authority in all matters relating to the administration of Inuring Reinsurance, the Insurance Contracts and any Claims thereunder, including the authority (i) to pay Claims on behalf of such Company, (ii) to communicate directly with policyholders, (iii) to handle the service and management of the Insurance Contracts, including without limitation the authority to  (A) adjust and settle claims under the Insurance Contracts; (B) set and establish loss reserves for the Insurance Contracts; and (C) any and all other acts or duties that would otherwise be performed by such Company necessary and appropriate to the Insurance Contracts, to the extent such authority may be granted pursuant to Applicable Law and the Reinsurer, or one or more of the Reinsurer’s Affiliates designated by the Reinsurer, shall perform all such functions as outlined herein, and (iv) to collect amounts payable to such Company under Inuring Reinsurance, including intervening in any action to collect Inuring Reinsurance.  In exercising such authorities, the Reinsurer or any such Affiliate may delegate the performance of any duty described above to a third party; provided that no such delegation shall relieve the Reinsurer of its obligations hereunder.  Subject to the forgoing limitation, effective as of the Effective Time, each Company hereby appoints the Reinsurer as its attorney-in-fact with respect to the rights, duties and privileges and obligations of such Company in and to the Insurance Contracts, with full power and authority to act in the name, place and stead of such Company with respect to such contracts, including without limitation, the power to service such contracts, to adjust, defend, settle and to pay all Claims, to recover salvage and subrogation for any losses incurred and to take such other and further actions as may be necessary or desirable to effect the transactions contemplated by this Agreement, provided, 

D-11

that the Reinsurer covenants to exercise such authority in a professional manner and to use the same level of care as is used in administering the Reinsurer’s other insurance business.  As part of the foregoing, each Company grants full authority to the Reinsurer to adjust, settle or compromise all Losses hereunder, and all such adjustments, settlements and compromises shall be binding on such Company.  Each Company agrees to cooperate fully with the Reinsurer in the transfer of such administration, and the Reinsurer agrees to be responsible for such administration.  
(c)    The Companies agree that so long as (i) the Reinsurer is solvent, and (ii) the Reinsurer or its designee shall not be in material breach of its obligations to service and administer the Insurance Contracts or the Claims under this Agreement, the Companies will not take action to prevent or limit the Reinsurer or its designee from servicing or administering the Insurance Contracts or the Claims as contemplated by this Agreement.  If the Reinsurer (i) becomes insolvent, makes an assignment for the benefit of its creditors, or becomes the subject of any voluntary or involuntary supervision, conservation, rehabilitation, liquidation or other similar proceeding, the Reinsurer’s authority under this Article 4 shall be automatically revoked and the Companies shall handle, or retain a third-party administrator to handle, the administration and runoff of the Insurance Contracts and all reasonable costs and expenses incurred by or on behalf of the Companies in taking back and administering the runoff of the Insurance Contracts shall constitute loss adjustment expenses fully reinsured under this Agreement.  In all other circumstances, if the Reinsurer fails to cure a material breach of its servicing or other obligations hereunder within thirty (30) days following the Companies’ written notice to Reinsurer of such breach, which notice shall in reasonable detail describe the nature of such breach or, if such breach shall not be reasonably susceptible to cure within such thirty (30) day period such additional reasonable time not exceeding an additional thirty (30) days as shall be necessary to cure such breach, the Companies shall have the right to exercise their remedy options set forth in the last sentence of this paragraph.  The remedies available to the Companies, without prejudice to any other remedies otherwise available, shall include: (1) the Companies shall have the option, at its sole discretion, (i) to revoke the Reinsurer’s authority hereunder and handle the administration and runoff of the Insurance Contracts directly or through their designee, or (2) to provide the Reinsurer with a list of three third-party administrators acceptable to the Companies, and the Reinsurer shall, within thirty (30) days, contract (at the Reinsurer's expense) with one of such listed third-party administrator to perform all of the Reinsurer's claim-handling duties and all duties under this Article 4, with the terms of such contract subject to the agreement of the Companies, which agreement shall not be unreasonably withheld; or (3) should the Reinsurer fail to comply with the foregoing clause (2), the Companies shall have the option, at its sole discretion, to revoke all or a portion of the Reinsurer's authority pursuant to this Article 4, and to contract with one of the listed third-party administrators.  In all cases, the reasonable expenses incurred by the Companies pursuant to this Section 4(c) shall be deemed to constitute loss adjustment expenses fully reinsured under this Agreement.

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(d)    The Reinsurer shall maintain sufficient resources and adequate staffing levels of personnel with appropriate experience to administer the Insurance Contracts in a professional manner and shall administer the Insurance Contracts in accordance with all Applicable Laws.  
(e)    The Reinsurer shall use its own claims practices and procedures, loss control services and other administrative practices and procedures in administering and managing the Claims.  The Companies acknowledges that they have reviewed, or had the opportunity to review, all such practices and procedures as in effect at the inception of this Agreement and approve of the same for the Reinsurer’s use in administration and management of the Claims.  Notwithstanding the foregoing, the Parties understand and acknowledge that all management services performed by the Reinsurer with respect to the Insurance Contracts issued by a Company shall be provided subject to the general supervision and control of such Company and its officers and directors.  For the avoidance of doubt, and notwithstanding the delegation of duties contained in this Agreement, each Company has and retains the ultimate control of and authority over the performance of all functions and services delegated hereunder by it.
ARTICLE 5     
REGULATORY MATTERS
At all times during the term of this Agreement, each Company and the Reinsurer shall hold and maintain all licenses and authorizations required under Applicable Law and otherwise take all actions that may be necessary to perform its obligations hereunder.
ARTICLE 6     
DUTY OF COOPERATION & INDEMNITY
Section 6.1    Cooperation.
Each Party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Agreement.
Section 6.2    Indemnity.
This Agreement is an agreement for indemnity reinsurance solely between the Companies and the Reinsurer and shall not create any legal relationship whatsoever between the Reinsurer and any Person other than the Companies.

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ARTICLE 7     
[INTENTIONALLY OMITTED]
ARTICLE 8     
INSOLVENCY
In the event of the insolvency of a Company, this reinsurance shall be payable directly to such Company or its liquidator, receiver, conservator or statutory successor on the basis of the amount of the claims allowed in the insolvency proceeding without diminution because of the insolvency of such Company or because the liquidator, receiver, conservator or statutory successor of such Company has failed or is unable to pay all or a portion of a claim, except where (a) this Agreement specifically provides another payee of such reinsurance in the event of such Company’s insolvency, provided that this exception shall only apply to the extent that the reinsurance proceeds due such payee are actually paid by the Reinsurer, or (b) the Reinsurer, with the consent of the direct insured or insureds, has assumed such policy obligations of such Company as direct obligations of the Reinsurer to the payees under such policies and in full and complete substitution for the obligations of such Company to such payees.  It is agreed, however, that the liquidator, receiver, conservator or statutory successor shall give written notice to the Reinsurer of the pendency of a claim against such Company indicating the Insurance Contract which involves a possible liability on the part of the Reinsurer within reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership and that, during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to such Company or its liquidator, receiver, conservator or statutory successor.  The expenses thus incurred by the Reinsurer shall be chargeable, subject to the Court’s approval, against such Company as part of the expense of the conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to such Company solely as a result of the defense undertaken by the Reinsurer.
ARTICLE 9     
REGULATORY APPROVALS
The Companies and the Reinsurer shall submit all necessary registrations, filings and notices with, and obtain all necessary consents, approvals, qualifications and waivers from, all Governmental Entities and other parties which may be required under Applicable Law as a result of the transactions contemplated by this Agreement.  The Parties agree that where formal approval is required by any Governmental Entity, this Agreement shall not be effective as to any and all Insurance Contracts to be reinsured hereunder in such jurisdiction until such approval is obtained.

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ARTICLE 10     
DURATION
This Agreement shall not be subject to termination by any Party except (i) by written agreement between Reinsurer and the Companies on the date indicated by such agreement, after receipt of any required approval from Government Entities, or (ii) upon the expiration of all liability on all Insurance Contracts, and the complete performance by Reinsurer and the Companies of all obligations and duties arising under this Agreement. 
ARTICLE 11     
FOLLOW THE FORTUNES
The Reinsurer’s liability shall attach simultaneously with that of the Companies and shall be subject in all respects to the same risks, original terms and conditions, interpretations, waivers, and to the same cancellation of the Insurance Contracts as the Companies are subject to, the true intent of this Agreement being that the Reinsurer shall, in every case to which this Agreement applies, follow the fortunes and follow the settlements of the Companies.
ARTICLE 12     
SURVIVAL; INDEMNIFICATION
Section 12.12    Indemnification.
(a)    The Reinsurer agrees to indemnify and hold the Companies and their Affiliates, predecessors, successors and assigns (and their respective officers, directors, employees and agents) harmless from and against and in respect of all Damages resulting from or relating to a breach by the Reinsurer of any covenant or agreement of the Reinsurer in this Agreement and to be performed after the date hereof.
(b)    Each Company agrees, severally and not jointly, to indemnify and hold the Reinsurer and its Affiliates, predecessors, successors and assigns (and their respective officers, directors, employees and agents) harmless from and against and in respect of all Damages, resulting from or relating to a breach by such Company of any covenant or agreement of such Company in this Agreement and to be performed after the date hereof.

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ARTICLE 13     
MISCELLANEOUS
Section 13.1    Notices.  All notices, requests, demands and other communications hereunder shall be given in writing and shall be:  (a) personally delivered; (b) sent by telecopier, facsimile transmission or other electronic means of transmitting written documents; or (c) sent to the Parties at their respective addresses indicated herein by registered or certified U.S. mail, return receipt requested and postage prepaid, or by private overnight mail courier service.  The respective addresses to be used for all such notices, demands or requests are as follows:
(a)    If to any Company, to:
National General Management Corp.
59 Maiden Lane, 38th fl
New York, NY 10038
Attention:  Jeffrey Weissmann, Esq.
Facsimile:  (212) 380-9499
E-mail: jeffrey.weissmann@ngic.com

with copies to:
AmTrust Financial Services, Inc.
59 Maiden Lane, 43rd fl
New York, NY 10038
Attn:    Stephen Ungar, Esq.
Facsimile No.:  (212) 220-7130
E-mail: Steve.Ungar@amtrustgroup.com

or to such other person or address as the Companies shall furnish to the Reinsurer in writing.
		
	(c)
	If to the Reinsurer, to:

ACP Re, Ltd.
59 Maiden Lane, 38th fl
New York, NY 10038
Attention:  Jeffrey Weissmann, Esq.
Facsimile:  (212) 380-9499
E-mail: jeffrey.weissmann@ngic.com

or to such other person or address as the Reinsurer shall furnish to the Companies in writing.
If personally delivered, such communication shall be deemed delivered upon actual receipt; if electronically transmitted pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to this paragraph, such communication shall be 

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deemed delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal.  Any Party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this Section.
Section 13.2    Assignment; Parties in Interest.
(a)    Assignment.  Except as expressly provided herein, the rights and obligations of a Party hereunder may not be assigned, transferred or encumbered without the prior written consent of the other Party. 
(b)    Parties in Interest.  This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and permitted assigns.  Except as provided in Section 3.1, nothing contained herein shall be deemed to confer upon any other Person any right or remedy under or by reason of this Agreement. 
Section 13.3    Waivers and Amendments; Preservation of Remedies. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by each of the Parties or, in the case of a waiver, by the Party waiving compliance.  No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power, remedy or privilege, nor any single or partial exercise of any such right, power, remedy or privilege, preclude any further exercise thereof or the exercise of any other such right, remedy, power or privilege.  The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any Party may otherwise have under Applicable Law or in equity.
Section 13.4    Governing Law; Venue.  This Agreement shall be construed and interpreted according to the internal laws of the State of New York excluding any choice of law rules that may direct the application of the laws of another jurisdiction.  Subject to the provisions of Article 7, the Parties hereby stipulate that any action or other legal proceeding arising under or in connection with this Agreement may be commenced and prosecuted in its entirety in the federal or state courts sitting in New York, New York, each Party hereby submitting to the personal jurisdiction thereof, and the Parties agree not to raise the objection that such courts are not a convenient forum.  Process and pleadings mailed to a party at the address provided in Section 13.1 shall be deemed properly served and accepted for all purposes.
Section 13.5    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  

D-17

Section 13.6    Entire Agreement; Merger.  This Agreement, the Ancillary Agreements, and any exhibits, schedules and appendices attached hereto and thereto together constitute the final written integrated expression of all of the agreements among the Parties with respect to the subject matter hereof and is a complete and exclusive statement of those terms, and supersede all prior or contemporaneous, written or oral, memoranda, arrangements, contracts and understandings between the Parties relating to the subject matter hereof.  Any representations, promises, warranties or statements made by any Party which differ in any way from the terms of this Agreement or any applicable provisions contained in the Ancillary Agreements shall be given no force or effect.  The Parties specifically represent, each to the other, that there are no additional or supplemental agreements or contracts between or among them related in any way to the matters herein contained unless specifically included or referred to in this Agreement or any applicable provisions contained in the Ancillary Agreements.  No addition to or modification of any provision of this Agreement or any applicable provisions of the Ancillary Agreements shall be binding upon either Party unless embodied in a dated written instrument signed by both Parties.  
Section 13.7    Exhibits and Schedules.  All exhibits, schedules and appendices are hereby incorporated by reference into this Agreement as if they were set forth at length in the text of this Agreement.
Section 13.8    Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof.
Section 13.9    Severability.  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Law or regulations, that provision shall not apply and shall be omitted to the extent so contrary, prohibited, or invalid; but the remainder of this Agreement shall not be invalidated and shall be given full force and effect insofar as possible.
Section 13.10    Expenses. Regardless of whether or not the transactions contemplated in this Agreement are consummated, each of the Parties shall bear their own expenses and the expenses of its counsel and other agents in connection with the transactions contemplated hereby.
Section 13.11    Currency.  The currency of this Agreement and all transactions under this Agreement shall be in United States Dollars.

D-18

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above to be effective as of the Effective Time.
[CASTLEPOINT REINSURANCE COMPANY LTD.]/[TOWER REINSURANCE, LTD.]

By _______________________________
Title ______________________________

TOWER INSURANCE COMPANY OF NEW YORK

By                            
Title                        

CASTLE POINT NATIONAL INSURANCE COMPANY

By _______________________________
Title ______________________________

TOWER NATIONAL INSURANCE COMPANY

By _______________________________
Title ______________________________

D-19

HERMITAGE INSURANCE COMPANY

By _______________________________
Title ______________________________

CASTLE POINT FLORIDA INSURANCE COMPANY

By _______________________________
Title ______________________________

KODIAK INSURANCE COMPANY

By _______________________________
Title ______________________________

NORTH EAST INSURANCE COMPANY

By _______________________________
Title ______________________________

YORK INSURANCE COMPANY OF MAINE,

By _______________________________
Title ______________________________

D-20

MASSACHUSETTS HOMELAND INSURANCE COMPANY

By _______________________________
Title ______________________________

PRESERVER INSURANCE COMPANY

By _______________________________
Title _______________________________

CASTLE POINT INSURANCE COMPANY 

By _______________________________
Title _______________________________

D-21Exhibit 10.1 2nd JV Agreement FINAL

SECOND AMENDED AND RESTATED AGREEMENT 
 
by and among 
 
GREENLIGHT REINSURANCE, LTD.,
GREENLIGHT REINSURANCE IRELAND, LTD., 
GREENLIGHT CAPITAL RE, LTD. (for limited purposes) 
 
and 
 
DME ADVISORS, LLC

AMENDED AND RESTATED AS OF JANUARY 1, 2014

	
		
	TABLE OF CONTENTS

	 
	 

	 
	Page

	 
	 

	Article I Definitions
	1

	 
	 

	Article II Organization
	8

	 
	 

	2.1. Purpose of Agreement
	8

	2.2. Assets
	8

	2.3. Term of Agreement
	8

	2.4. Objectives
	9

	2.5. Actions by DME
	9

	2.6. Reliance by Third Parties
	9

	2.7. Liability of Participants
	9

	 
	 

	Article III Capital
	10

	 
	 

	3.1. Contributions to Capital
	10

	3.2. Rights of Participants in Capital
	10

	3.3. Capital Accounts
	10

	3.4. Allocation of Net Profits and Net Losses
	11

	3.5. Allocations Relating to New Issues and Designated Securities
	11

	3.6. Allocation of Management Fee, Withholding Taxes and Certain Other Expenditures
	12

	3.7. Reserves; Adjustments for Certain Future Events
	13

	3.8. Performance Allocation
	14

	3.9. Allocations for Income Tax Purposes
	14

	3.10. Qualified Income Offset
	14

	3.11. Gross Income Allocation
	15

	3.12. Individual Participants’ Tax Treatment
	15

	3.13. Distributions
	15

	 
	 

	Article IV Management
	16

	 
	 

	4.1. Duties and Powers of the Participants
	16

	4.2. Expenses
	17

	4.3. Other Activities of Participants
	17

	4.4. Duty of Care; Indemnification
	18

	4.5. Fiduciary Duties; Discretion
	21

	 
	 

	Article V Admissions and Withdrawals
	21

	 
	 

	5.1. Admission of Participants
	21

	5.2. Withdrawal of Interests of Participants
	22

	5.3. Transfer of Interests in Participants
	23

i

	
		
	 
	 

	Article VI Termination and Liquidation
	24

	 
	 

	6.1. Termination of this Agreement
	24

	6.2. Liquidation of the Venture
	25

	 
	 

	Article VII Accounting and Valuations; Books and Records; Board Meetings
	25

	 
	 

	7.1. Accounting and Reports
	25

	7.2. Valuation of Assets and Interests
	27

	7.3. Determinations by DME
	28

	7.4. Books and Records
	28

	7.5. Greenlight Re or GRIL Board Meeting
	29

	 
	 

	Article VIII General Provisions
	29

	 
	 

	8.1. Amendment of Agreement
	29

	8.2. Notices
	29

	8.3. Agreement Binding Upon Successors and Assigns
	31

	8.4. Governing Law
	31

	8.5. Not for Benefit of Third Parties
	31

	8.6. Consents
	31

	8.7. Miscellaneous
	31

	8.8. Entire Agreement
	32

	 
	 

ii

THIS SECOND AMENDED AND RESTATED AGREEMENT (the “Agreement”) is made as of this 1st day of January, 2014 by and among Greenlight Reinsurance, Ltd., incorporated under the laws of the Cayman Islands as an exempted company with limited liability and a holder of a Class D Insurer’s license issued in accordance with the terms of the Insurance Law, 2010, of the Cayman Islands (“Greenlight Re”), Greenlight Reinsurance Ireland, Ltd., Incorporated under the laws of Ireland as a non-life reinsurer in accordance with the provisions of the European Communities (Reinsurance) Regulation 2006 (“GRIL”) and DME Advisors, LLC, a Delaware limited liability company (“DME”), and, solely for the purposes set forth in Section 4.1(b) and (c), Greenlight Capital Re, Ltd. incorporated under the laws of the Cayman Islands as an exempted company with limited liability (“Greenlight Capital Re”);
WHEREAS, on January 1, 2008, Greenlight Re, DME Advisors, LP (“DMELP”) and Greenlight Capital Re entered into an agreement, as amended by Amendment No. 1 dated as of February 20, 2009, and as amended and restated on August 31, 2010 (the “Original Agreement”) for the purpose of creating a joint venture solely with respect to the management of certain investable assets and to share in the profits and losses therefrom as described in this Agreement;
WHEREAS, the parties to the Original Agreement desire to amend and restate the Original Agreement to (a) have DME join as a Participant (as defined below) in place of DMELP, and (b) permit the venture (as defined below), to enter into the Investment Advisory Agreement (as defined below) with DMELP;    
WHEREAS, (a) DME is willing to become a party to the Agreement, subject to the terms and conditions stated herein, and (b) DMELP is willing to enter into the Investment Advisory Agreement with the venture; 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned parties agree as follows:
_____________
Article I
Definitions
_____________
For purposes of this Agreement:
“Affiliate” means with respect to any Person, a Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person.  For these purposes, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting Securities, by contract or otherwise.
“Agreement” means this Agreement, as amended from time to time.
“Assets” has the meaning set forth in Section 2.2.

    

“Business Day” means any day on which banks are open for business in New York, New York, Ireland and the Cayman Islands.
“Board” means with respect to each of GRIL or Greenlight Re such party’s full board of directors, or, if required by law, regulation or securities exchange upon which such party’s common shares are listed, an independent committee of the Board; provided, however, that any such independent committee shall consist of all members of such party’s board of directors that are not expressly prohibited by applicable law, regulation or securities exchange from participating in an action to be taken by the Board pursuant to this Agreement.
“Capital Account” means with respect to each Participant a memorandum account established and maintained on behalf of such Participant as described in Section 3.3. 
“Carryforward Account” means a memorandum account to be recorded by DME in the books and records of the venture with respect to each Participant that has an initial balance of zero and that is adjusted as follows:
As of the first day after the close of each Performance Period for such Participant (prior to giving effect to the Performance Allocation, if any), the balance of the Carryforward Account (a) is increased by the amount, if any, equal to two and one half times such Participant’s Negative Performance Change for such Performance Period and (b) is reduced (but not below zero) by the amount, if any, of such Participant’s Positive Performance Change for such Performance Period.
“Code” means the U.S. Internal Revenue Code of 1986, as amended and as hereafter amended, or any successor law.
“Commencement Date” means the first date on or as of which a Participant makes a Capital Contribution to the venture pursuant to this Agreement.  The Commencement Date with respect to Greenlight Re is January 1, 2008, with respect to GRIL is August 31, 2010, and with respect to DME is January 1, 2014.
“Company Act” means the U.S. Investment Company Act of 1940, as amended.
“Covered Person” means DME, and its members, partners, managers, directors, officers, employees and agents, and any Person who controls DME.
“Designated Securities” means an Asset, designated as such by DME, either at the time of acquisition or at a later date, in which a Participant has an ownership interest different than its Percentage, which (a) may include no interest at all for a Participant and (b) interest may not be on a pro rata basis.  An Asset may be designated as a Designated Security due to Guideline restrictions or for such other reason as deemed appropriate by DME in its sole discretion.
“Effective Date” means January 1, 2014.
“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

2

“Final Determination” means (1) with respect to U.S. federal income taxes, a “determination” (as defined in Section 1313(a) of the Code) or the execution of a settlement agreement with the Internal Revenue Service (pursuant to Form 870-AD or otherwise) and (2) with respect to taxes other than U.S. federal income taxes, any judicial or administrative determination or settlement that is substantially similar to a Final Determination described in clause (1).
“FINRA” means the Financial Industry Regulatory Authority (formerly known as the National Association of Securities Dealers, Inc.)
“FINRA Rule 5130” means Rule 5130 promulgated by FINRA.
“Fiscal Period” means each period that starts on the Commencement Date (in the case of the initial Fiscal Period) and thereafter on the first day immediately following the last day of the preceding Fiscal Period, and that ends on the earliest of the following dates:
		
	(1)
	the last day of any calendar month; or

		
	(2)
	any date as of which any withdrawal or distribution of capital is made by or to any Participant or as of which this Agreement provides for any amount to be credited to or debited against the Capital Account of any Participant, other than a withdrawal or distribution by or to, or an allocation to the Capital Accounts of, all Participants that does not result in any change of any Participant’s Percentage; or

		
	(3)
	the date that immediately precedes any day as of which a contribution to capital is made pursuant to this Agreement, other than a capital contribution that does not result in any change of any Participant’s Percentage; or

		
	(4)
	any other date that DME, in its reasonable discretion, selects.

“Fiscal Year” means the period commencing on January 1 of each year and ending on December 31 of such year.
“Force Majeure” shall mean fires, floods, acts of God or the public enemy, interference by civil or military authorities, terrorist acts, governmental actions, orders or requests.
“Greenlight Re Cause” means (i) a material violation of applicable law relating to DME’s or DMELP’s advisory business, (ii) DME’s or DMELP’s gross negligence, willful misconduct or reckless disregard of any of DME’s obligations under this Agreement or DMELP’s obligations under the Investment Advisory Agreement, (iii) a material breach by DME or DMELP of the Greenlight Re Guidelines, if such breach is not cured within fifteen (15) days following the earlier of (a) the date that DME or DMELP becomes aware of such breach and (b) the date on which DME or DMELP receives written notification of such breach from Greenlight Re, or (iv) a material breach by DME or DMELP of Section 5.2.  For the avoidance of doubt, any termination hereof by Greenlight Re for “Greenlight Re Cause” shall require the approval of the Greenlight Re Board.  Upon any termination of this Agreement for “Greenlight Re Cause”, DME and DMELP will use all 

3

commercially reasonable efforts to follow the direction of the Greenlight Re Board with respect to the disposition of the applicable Assets necessary to satisfy Greenlight Re’s withdrawal; provided, however, that neither DME nor DMELP makes any guarantee that they can comply with such directions.
“Greenlight Re Guidelines” has the meaning set forth in Section 4.1(h).
“GRIL Cause” means (i) a material violation of applicable law relating to DME’s or DMELP’s advisory business, (ii) DME’s or DMELP’s gross negligence, willful misconduct or reckless disregard of any of DME’s obligations under this Agreement or DMELP’s obligations under the Investment Advisory Agreement, (iii) a material breach by DME or DMELP of the GRIL Guidelines, if such breach is not cured within fifteen (15) days following the earlier of (a) the date that DME or DMELP becomes aware of such breach and (b) the date on which DME or DMELP receives written notification of such breach from GRIL, (iv) a material breach by DME or DMELP of Section 5.2, or (v) unsatisfactory long term performance of DME or DMELP, as determined by the sole discretion of the Board of GRIL on each anniversary date of this Agreement.  For the avoidance of doubt, any termination hereof by GRIL for “GRIL Cause” shall require the approval of the GRIL Board.  Upon any termination of this Agreement for “GRIL Cause”, DME and DMELP will use all commercially reasonable efforts to follow the direction of the GRIL Board with respect to the disposition of the applicable Assets necessary to satisfy GRIL’s withdrawal; provided, however, that neither DME nor DMELP makes any guarantee that they can comply with such directions.
“GRIL Guidelines” has the meaning set forth in Section 4.1(e).
“Guidelines” has the meaning set forth in Section 4.1(e).
“Interest” means all of the rights, obligations and interest(s) (in their entirety) of a Participant in the venture at the relevant time, including the right of such Participant to any and all benefits to which a Participant may be entitled as provided in this Agreement and the obligations of such Participant to comply with all the terms and provisions of this Agreement.
“Investment Advisory Agreement” means the Investment Advisory Agreement, dated as of January 1, 2014, between DMELP and the venture.
“Losses” has the meaning set forth in Section 4.4(a).
“Managed Account” means assets managed by DME, DMELP or any of their Affiliates, whether for its own account or for the account of any third party, that are invested or available for investment in investment or trading activities.
“Management Fee” means with respect to each Participant other than DME, an amount per month equal to 0.125% (an annual rate of 1.5%) of the Capital Account balance of each such Participant. 

4

“Negative Performance Change” has the meaning set forth in the definition of Performance Change.
“Net Assets” means the total value, as determined by DME in accordance with Section 7.2, of the Assets (including net unrealized appreciation or depreciation of the assets and accrued interest and dividends receivable net of any withholding taxes), less an amount equal to all accrued debts, liabilities and obligations chargeable against such Assets in accordance with this Agreement (including any reserves for contingencies accrued pursuant to Section 3.7).  Except as otherwise expressly provided herein, Net Assets as of the first day of any Fiscal Period shall be determined on the basis of the valuation of Assets conducted as of the close of the immediately preceding Fiscal Period but after giving effect to any capital contributions made by any Participant subsequent to the last day of such immediately preceding Fiscal Period and Net Assets as of the last day of any Fiscal Period shall be determined before giving effect to any of the following amounts payable generally or in respect of any Securities which payments or allocations are effective as of the date on which such determination is made:
		
	(1)
	any withdrawals or distributions payable to any Participant that are effective as of the date on which such determination is made;

		
	(2)
	any Management Fee or Performance Allocation as of the date on which such determination is made; and

		
	(3)
	withholding taxes, expenses of processing withdrawals and other items payable, any increases or decreases in any reserves or other amounts recorded pursuant to Section 3.7, and any increases or decreases in the value of any New Issues pursuant to Section 3.5 or in the value of any Designated Securities during the Fiscal Period ending as of the date on which such determination is made, to the extent DME reasonably determines that, pursuant to any provisions of this Agreement, such items should be charged to one or more individual Participants and not charged ratably to the Capital Accounts of all Participants on the basis of their respective Percentages as of the commencement of the Fiscal Period.

“Net Loss” means any amount by which the Net Assets as of the first day of a Fiscal Period exceed the Net Assets as of the last day of the same Fiscal Period.
“Net Profit” means any amount by which the Net Assets as of the last day of a Fiscal Period exceed the Net Assets as of the first day of the same Fiscal Period.
“New Issue” has the meaning assigned to such term in Section 3.5(a) hereof.
“Participant” means any Person (other than Greenlight Capital Re) that is or becomes a party to this Agreement, until the entire Interest of such Person has been withdrawn pursuant to Section 5.2 or a substitute Participant or Participants are admitted with respect to such Person’s entire Interest, or this Agreement is terminated pursuant to Section 6.1 and the Assets distributed or liquidated pursuant to Section 6.2.

5

“Percentage” means a percentage established for each Participant as of the first day of each Fiscal Period representing such Participant’s share of allocations attributable to transactions involving the Capital Account for such Fiscal Period.  The Percentage of a Participant for a Fiscal Period is determined by dividing the amount of the Participant’s Capital Account as of the beginning of the Fiscal Period (excluding the value of Designated Securities and after adjustment for all net contributions or withdrawals, Management Fee and Performance Allocations that are effective as of such date) by the aggregate Capital Accounts of all Participants as of the beginning of the Fiscal Period (excluding the value of Designated Securities after adjustment for all net contributions or withdrawals and Management Fee that are effective as of such date).  The sum of the Percentages of all Participants for each Fiscal Period must equal 100%.
“Performance Allocation” means with respect to each Participant other than DME:
		
	(1)
	10% of the portion of the Positive Performance Change for such Participant’s Capital Account, if any, determined as of the close of each Performance Period, that is less than or equal to the positive balance in such Participant’s Carryforward Account as of the most recent prior date as of which adjustment has been made thereto; plus

		
	(2)
	20% of the portion of the Positive Performance Change for such Participant’s Capital Account, if any, determined as of the close of each Performance Period that exceeds the positive balance in such Participant’s Carryforward Account as of the most recent prior date as of which adjustment has been made thereto.  

“Performance Change” means, with respect to each Participant for each Performance Period, the difference between:
		
	(1)
	the sum of (a) the balance of each such Participant’s Capital Account as of the close of the Performance Period (after giving effect to all allocations to be made to each such Participant’s Capital Account as of such date other than any Performance Allocation to be debited against each such Participant’s Capital Account), plus (b) any debits to each such Participant’s Capital Account during the Performance Period to reflect any actual or deemed distributions or withdrawals with respect to each such Participant’s Interest, plus (c) any debits to each such Participant’s Capital Account during the Performance Period to reflect any items allocable to each such Participant’s Capital Account pursuant to Section 3.6(b) or Section 3.6(c) hereof; and

		
	(2)
	the sum of (a) the balance of each such Participant’s Capital Account as of the commencement of the Performance Period, plus (b) any credits to such Participant’s Capital Account during the Performance Period to reflect any contributions by such Participant pursuant to this Agreement.

If the amount specified in clause (1) exceeds the amount specified in clause (2) such difference is a “Positive Performance Change,” and if the amount specified in clause (2) exceeds 

6

the amount specified in clause (1), the absolute value of such difference is a “Negative Performance Change.”
“Performance Period” means, with respect to a Participant, the period commencing as of the date that such Participant becomes a party to this Agreement (in the case of such Participant’s initial Performance Period) and thereafter each period commencing as of the day following the last day of the preceding Performance Period with respect to such Participant, and ending as of the close of business on the first to occur of the following after the relevant commencement date:
		
	(1)
	the last day of a Fiscal Year; 

		
	(2)
	the withdrawal or Transfer by a Participant of its entire Interest; or

		
	 (3)
	termination of this Agreement pursuant to Section 6.1(a).

“Person” means any individual, partnership, corporation, limited liability company, trust, or other entity.
“Positive Performance Change” has the meaning set forth in the definition of Performance Change.
“Proceeding” has the meaning set forth in Section 3.12.
“Regulations” means the regulations issued under the Code or any successor law.
“Regulation 114 Trust” means a three way investment trust that (i) involves an agreement among a cedent, a financial institution and a non-admitted reinsurer governed by Regulation 114 of the Official Compilation of Codes, Rules and Regulations (11 NYCRR4) of the New York State Insurance Department, (ii) is maintained in the United States in an approved financial institution and (iii) is collateralized only by cash and cash equivalents, U.S. Treasury securities and/or fixed income securities rated “A” or higher.
“Restricted Capital Accounts” has the meaning assigned to such term in Section 3.5(a) hereof. 
“Securities” means equity and debt securities (including derivatives thereon), currencies and commodities (and options, futures, derivatives, swaps, and forward contracts thereon), trade and other claims, arbitrages, loans, break-ups, consolidations, reorganizations and similar securities of non-United States issuers, and everything connected therewith in the broadest sense.
“Tax Proceeding” has the meaning set forth in Section 3.12.
“Tax Treatment” has the meaning set forth in Section 3.12.
“Transfer” means any sale, exchange, transfer, assignment or other disposition by a Participant of his Interest to another party, whether voluntary or involuntary, including a transfer by operation of law.  Notwithstanding the foregoing, a pledge or lien by a Participant of any or all 

7

of its Interest made in accordance with, and permitted by, this Agreement shall not be deemed to be a Transfer.
“Treasury Bill Rate” means, with respect to any calendar month, a rate of interest, determined and adjusted monthly by DME as of the fifth Business Day of each month, equal to the annual coupon equivalent yield on 13-week U.S. Treasury bills resulting from the most recent auction of such instruments prior to the monthly determination date.
“venture” has the meaning set forth in Section 2.1(c).
_____________
Article II 
Organization
_____________
2.1.    Purpose of Agreement
(a)    The parties hereto hereby agree to form a joint venture to jointly own and manage certain assets and to share in net profits and net losses generated by these assets as more particularly described herein.
(b)    Each of the Participants hereby agrees, subject to the remainder of this Agreement, to reasonably cooperate to carry out the intent of this Agreement and to effectuate, implement and continue the valid and subsisting existence of the relationship created hereby.
(c)    The parties hereto acknowledge that they intend that the joint venture created by this Agreement be taxed as a partnership and not as an association taxable as a corporation for United States federal income tax purposes and references herein to the “venture” are references to such joint venture and tax partnership.  No election may be made by a Participant to treat the relationship created by this Agreement as other than a partnership for United States federal income tax purposes.
2.2.    Assets
From and after the Effective Date, the Participants acknowledge and agree that (i) the assets of the venture (the “Assets”) will be jointly owned but held in segregated accounts each in the name of Greenlight Re separate from Greenlight Re’s other assets, and (ii) all of the Assets shall be held in trust for the benefit of all Participants in accordance with the terms of this Agreement.  DME will select one or more custodians for the Assets and will promptly notify each Participant in writing following the selection or change of custodians hereunder.
2.3.    Term of Agreement
The term of this Agreement commences on the Commencement Date and continues, unless earlier terminated pursuant to Section 6.1 hereof, until December 31, 2016; provided, however, that this Agreement shall automatically continue for additional successive three-year periods unless 

8

DME notifies the other Participants that it wishes to terminate this Agreement at least 90 days prior to the end of the then current term.  In the event that any Participant (other than DME) notifies the other Participants that it wishes to withdraw as a Participant and terminate its participation in the venture at least 90 days prior to the end of the then current term, the electing party shall withdraw from the venture, and shall be deemed to have elected a withdrawal of its entire Capital Account as of the end of such term as provided for in Section 5.2 and the provisions of this Agreement shall no longer apply to such Participant (except those provisions which by their terms apply to Participants following their withdrawal).      
2.4.    Objectives 
The object and purpose of and the nature of the business to be conducted pursuant to this Agreement is investing, acquiring, holding, voting, disposing and otherwise dealing with the Securities consistent with the terms of this Agreement (including, without limitation, the applicable Guidelines) and engaging in any and all activities necessary or incidental to the foregoing.
2.5.    Actions by DME
Subject to the limitations contained elsewhere in this Agreement, DME, on behalf of the Participants, may execute, deliver and perform all contracts, agreements and other undertakings and engage in all activities and transactions as may, in the reasonable discretion of DME, be necessary or advisable to carry out the objectives of this Agreement (including without limitation all federal securities filings relating to any of the investment activities set forth in the Investment Advisory Agreement), provided, however, that if a contract, agreement or other undertaking is or is to be made by DME on behalf of Greenlight Re and/or GRIL that could reasonably be expected to require disclosure on a Form 8-K pursuant to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, or other applicable law, DME shall promptly notify Greenlight Re and/or GRIL and cooperate with Greenlight Re and/or GRIL to allow a timely and proper disclosure to be made.  Notwithstanding the foregoing, each of the Participants understands, acknowledges and agrees that DME will delegate certain of the powers and authority granted to DME pursuant to this Section 2.5 to DMELP pursuant to the Investment Advisory Agreement.
2.6.    Reliance by Third Parties
Persons dealing with any Participant, individually or in the aggregate as it relates to the Assets or the relationship created by this Agreement, are entitled to rely conclusively upon the power and authority of each such Participant as herein set forth.
2.7.    Liability of Participants
In no event will any Participant (or former Participant) be obligated to make any capital contribution in addition to its agreed capital contributions (or other payments provided for herein) or have any liability for the repayment or discharge of debts and obligations of the venture except to the extent provided herein or as required by law.

9

_____________
Article III 
Capital
_____________
3.1.    Contributions to Capital
(a)    As of August 31, 2010, GRIL made an initial contribution to the venture.  As of the Effective Date of this Agreement, DME will become a Participant. 
(b)    Each Participant, as applicable, shall make additional capital contributions in accordance with Section 3.6(b), Section 4.1(b) and 4.1(c) hereof.  In the event that DME’s Percentage falls below 1%, it shall promptly (and in any event within five (5) Business Days of such occurrence) make a capital contribution necessary to increase its Percentage to at least 1%.  DME shall not be required to make any other additional capital contributions, except as otherwise specifically contemplated by this Agreement.
3.2.    Rights of Participants in Capital
(a)    No Participant is entitled to interest on any contributions made pursuant to this Agreement.
(b)    No Participant has the right to the return of any contribution made pursuant to this Agreement except (i) upon a withdrawal by a Participant pursuant to Section 5.2 or (ii) upon the termination of this Agreement pursuant to Section 6.1.  The entitlement to any such return at such time is limited to the value of the Capital Account of the Participant.
3.3.    Capital Accounts
(a)    Each Participant shall have a separate Capital Account relating to its Interest.  
(b)    Each Participant’s Capital Account shall have an initial balance equal to the amount of any cash and the net value, as determined in accordance with Section 7.2 hereof, of any assets constituting such Participant’s initial contribution.
(c)    Each Participant’s Capital Account shall be increased by the amount of cash and the net value, as determined in accordance with Section 7.2 hereof, of any assets constituting additional contributions by such Participant and decreased by the amount of cash and the net value of any assets withdrawn by and distributed to such Participant and such Participant’s pro rata portion of the expenses allocable pursuant to Section 4.2(a).
(d)    Each Participant’s Capital Account shall be adjusted in the manner specified in the remaining provisions of Article III.

10

3.4.    Allocation of Net Profits and Net Losses
(a)    Except as otherwise expressly provided herein, all capital contributions by a Participant shall be credited to such Participant’s Capital Account, and all withdrawals by or distributions to such Participant shall be debited from such Participant’s Capital Account to the extent thereof.  Subject to the remaining provisions of this Section 3.4, Section 3.5, and Section 3.8 as of the last day of each Fiscal Period, any Net Profit or Net Loss for such Fiscal Period shall be allocated among and credited to or debited against the Capital Accounts of the Participants in proportion to their respective Percentages for such Fiscal Period.
(b)    Notwithstanding Section 3.4(a), items of income, gains, losses, deduction, credit and expenses that relate to investments in New Issues and Designated Securities shall be allocated pursuant to Section 3.5 below.  DME acknowledges that Greenlight Re holds a Class D Insurer’s license issued in accordance with the terms of the Insurance Law, 2010, of the Cayman Islands and that GRIL is a non-life reinsurer in accordance with the provisions of the European Communities (Reinsurance) Regulations 2006.
3.5.    Allocations Relating to New Issues and Designated Securities
(a)    Pursuant to FINRA Rule 5130, the venture may only acquire certain publicly-offered securities (“New Issues”) if the Capital Accounts of Participants connected with the securities industry (“Restricted Capital Accounts”) are restricted from sharing a beneficial interest in such New Issues in accordance with the provisions of FINRA Rule 5130.  Notwithstanding the provisions of Section 3.4 above, to enable investment in New Issues, DME shall not allocate any items of income, gain, loss, deduction and credit that relate to investments in New Issues to Restricted Capital Accounts except to the extent permitted by FINRA Rule 5130 and shall instead allocate such items among the other Capital Accounts on a pro rata basis.  To the extent that FINRA Rule 5130 permits certain persons with Restricted Capital Accounts to participate in New Issues, DME will allocate such New Issue among such Restricted Capital Accounts on a pro rata basis.  DME may specially allocate a carrying charge to compensate Participants with Restricted Capital Accounts to the extent such Restricted Capital Accounts do not participate in investments in New Issues for the use of capital to purchase or carry such positions.  To the extent consistent with FINRA Rule 5130, as amended from time to time, DME shall determine when all Capital Accounts may participate in the Net Profit and Net Loss from any New Issue.  DME shall value any New Issue at such time at the then-current price of the security in the secondary market.
(b)    DME may, in its discretion, elect to designate an Asset as a Designated Security. Notwithstanding the provisions of Section 3.4 above, items of income, gains, losses, deduction, credit and expense that relate to a Designated Security shall be allocated to Capital Accounts in such percentages as DME shall reasonably determine (taking into account each Participant’s Guidelines, regulatory restrictions and other items deemed relevant by DME).  Whenever DME makes an investment that is in a Designated Security or whenever an existing investment is first designated as a Designated Security by DME, DME shall establish a sub-account with respect to each Participant that participates in such Designated Security to reflect such Participant’s Capital 

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Account’s pro rata share of all allocations and distributions attributable to transactions involving such Designated Security.  If DME determines that an investment no longer warrants treatment as a Designated Security or that a Participant may or must participate at a different percentage, DME will either deem such investment no longer to be a Designated Security or reallocate interest in the Designated Security to reflect the change in ownership percentage.   In the event of a withdrawal request by a Participant pursuant to Section 5.2, DME shall have the discretion to effect such withdrawal request first out of the Participant’s Capital Account (excluding the Designated Securities sub-account) and then out of the Designated Security sub-account. 
3.6.    Allocation of Management Fee, Withholding Taxes and Certain Other Expenditures
(a)    As of the first day of each month, the Management Fee for such month shall be debited against the Capital Account of each Participant (other than DME) and paid in cash to DMELP pursuant to the Investment Advisory Agreement.
(b)    All applicable Management Fee accrues from the Commencement Date with respect to each Participant and is payable monthly in advance on the first day of the month, based on the Capital Account balance of each such Participant as of the beginning of such month (or on the Commencement Date with respect to such Participant in the case of the first month of this Agreement).  If this Agreement is terminated in accordance with its terms as of a date other than the last day of a month, the Management Fee for the final month shall be prorated to the date of termination.  All payments of the Management Fee to DMELP pursuant to the Investment Advisory Agreement shall be made without any reduction, deduction or withholding for or on account of any tax (including without limitation, any value added tax), unless required by law.  If reduction, deduction or withholding of any tax (including without limitation, any value added tax) is required by law from any such payment, the sum payable shall be increased as necessary so that after making all required deductions and withholdings, DMELP receives an amount equal to the amount that it would have received had no such deductions or withholdings been made.
(c)    If the venture or a Participant incurs a withholding tax or other tax obligation with respect to the share of income allocable to any Participant, then DME, on behalf of the venture or of such Participant, shall (unless otherwise agreed by such Participant) withhold the appropriate portion of such Participant’s share of income, timely remit such amount to the applicable taxing authority and cause the amount of such obligation to be debited against the Capital Account of such Participant as of the close of the Fiscal Period during which such obligation was paid.  If the amount of such taxes is greater than such Capital Account balance, then such Participant and any successor to such Participant’s Interest must, in connection with this Agreement, make a capital contribution in the amount of such excess.  No one other than the Participant is obligated to apply for or obtain a reduction of or exemption from withholding tax on behalf of any Participant that may be eligible for such reduction or exemption but DME will provide any assistance reasonably requested by a Participant, at such Participant’s cost, in connection with establishing any such reduction or exemption.  Notwithstanding the foregoing, DME shall bear the financial obligation of any withholding or other tax obligation if the venture, Greenlight Re or GRIL incurs such withholding or other tax obligation with respect to the share of income allocable to Greenlight Re or GRIL, as the case may be, that (i) Greenlight Re or GRIL, as the case may be, would not have been subject 

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to but for the establishment of, and the investment by, the venture, and (ii) increases Greenlight Re’s or GRIL’s aggregate tax liability compared to Greenlight Re’s or GRIL’s aggregate tax liability had the investment been made by Greenlight Re or GRIL, directly or otherwise, outside of the venture. 
(d)    Except as otherwise provided for in this Agreement, any expenditures payable by or on behalf of the venture, to the extent determined by DME to have been paid or withheld on behalf of, or by reason of particular circumstances applicable to, one or more but fewer than all of the Participants, are to be charged to only those Participants on whose behalf such payments are made or whose particular circumstances gave rise to such payments.  Such charges are debited from the Capital Accounts of such Participants as of the close of the Fiscal Period during which any such items were accrued or paid.
3.7.    Reserves; Adjustments for Certain Future Events
(a)    Appropriate reserves may be created, accrued and charged against the Net Assets and proportionately against the Capital Accounts of the Participants for contingent liabilities associated with the venture, including, without limitation, for accrued Performance Allocation amounts, such reserves to be in the amounts that DME, in its reasonable discretion, deems necessary or appropriate.  DME may increase or reduce any such reserve from time to time by such amounts as DME in its reasonable discretion deems necessary or appropriate.  At the reasonable discretion of DME, the amount of any such reserve, or any increase or decrease therein, may be charged or credited, as appropriate, to the Capital Accounts of those parties who are Participants at the time when such reserve is created, increased, or decreased, as the case may be, or alternatively may be charged or credited to those parties who were Participants at the time of the act or omission giving rise to the contingent liability for which the reserve was established.
(b)    If DME in its reasonable discretion determines that it is equitable to treat an amount to be paid or received as being applicable to one or more prior periods, then such amount may be proportionately charged or credited, as appropriate, to those parties who were Participants during such prior period or periods.  If any amount is to be charged or credited to a party who is no longer a Participant, such amount must be paid by (in the case of a charge) or to (in the case of a credit) such party, as the case may be, in cash with interest at the Treasury Bill Rate in effect at that time from the date on which DME determines that such charge or credit is required.  In the case of a charge, the former Participant is obligated to pay the amount of the charge, or if another Participant has already paid the charge, to reimburse such other Participant promptly on demand; provided that (i) in no event is a former Participant obligated to make a payment exceeding the amount of its Capital Account at the time to which the charge relates, and (ii) no such demand may be made if the applicable limitation period under applicable law, if any, has expired.  To the extent DME or the Participants fail to collect, in full, any amount required to be charged to such former Participant pursuant to paragraph (a) or (b) of this Section 3.7, whether due to the expiration of the applicable limitation period, if any, or for any other reason whatsoever, the deficiency may be charged proportionately to the Capital Accounts of the current Participants.
(c)    In the event any reserves in excess of $100,000 are created, accrued or charged against the Net Assets of Greenlight Re’s Capital Account, or any such reserves in excess of $100,000 

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are increased or decreased, DME will promptly, within five (5) Business Days following month end, provide written notice and a description of such event to Greenlight Re.  In the event any reserves in excess of $100,000 are created, accrued or charged against the Net Assets of GRIL’s Capital Account, or any such reserves in excess of $100,000 are increased or decreased, DME will promptly, within five (5) Business Days following month end, provide written notice and a description of such event to GRIL.
3.8.    Performance Allocation
(a)    The Performance Allocation shall be debited against the Capital Account of each Participant (other than DME) as of the last day of each Performance Period with respect to such Participant, and the amount so debited shall be simultaneously credited to the Capital Account of DME.
(b)    DME, in its sole discretion, may waive or reduce the Performance Allocation.
3.9.    Allocations for Income Tax Purposes
(a)    Except as otherwise required by Code Section 704(c), items of income, gain, deduction, loss, or credit that are recognized for income tax purposes in each Fiscal Year shall be allocated among the Participants, in such manner as to reflect equitably amounts credited to or debited against each Participant’s Capital Account, whether in such Fiscal Year or in prior Fiscal Years.  To this end, DME shall establish and maintain records that show the extent to which the Capital Account of each Participant, as of the last day of each Fiscal Year, consists of amounts that have not been reflected in the taxable income of such Participant.  To the extent deemed by DME, in its reasonable discretion, to be feasible and equitable, taxable income and gains in each Fiscal Year shall be allocated among the Participants who have enjoyed the related credits to their Capital Accounts, and items of deduction, loss and credit in each Fiscal Year shall be allocated among the Participants who have borne the burden of the related debits to their Capital Accounts.
(b)    To the extent an adjustment to the adjusted tax basis of any Asset or any Capital Account pursuant to Code Section 734(b) is required under Regulations Sections 1.704-1(b)(2)(iv)(m)(4) and (5) to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Participants in the same manner that the gain or loss displaced by such basis adjustment would have been allocated had the assets in question been sold.
3.10.    Qualified Income Offset
In the event any Participant receives any adjustments, allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704 1(b)(2)(ii)(d)(6) of the Regulations, items of income and gain will be specially allocated to each such Participant in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the deficit balance in the Capital Account of such Participant as quickly as possible, provided that an allocation pursuant to this Section 3.10 may be made only if and to the extent that such Participant would have 

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a deficit balance in its Capital Account after all other allocations provided for in this Article III have been tentatively made as if this Section 3.10 were not in the Agreement.  This Section 3.10 is intended to constitute a “qualified income offset” within the meaning of Regulations Section 1.704-1(b)(2)(ii), and must be interpreted consistently therewith.
3.11.    Gross Income Allocation
In the event any Participant has a deficit Capital Account at the end of any Fiscal Year that is in excess of the sum of (i) the amount such Participant is obligated to restore pursuant to any provision of this Agreement and (ii) the amount such Participant is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such Participant will be specially allocated items of income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 3.11 may be made only if and to the extent that such Participant would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article III have been made as if Section 3.10 hereof and this Section 3.11 were not in the Agreement.
3.12.    Individual Participants’ Tax Treatment
(a)    Except with regard to the treatment of the venture as a partnership for U.S. tax purposes and the treatment of the Performance Allocation as contemplated by this Agreement (“Tax Treatment”), each Participant agrees not to treat, on any income tax return or in any claim for a refund, any item of income, gain, loss, deduction or credit in a manner inconsistent with the treatment of such item pursuant to the terms of this Agreement unless otherwise required by a Final Determination after such Participant uses its commercially reasonable efforts to uphold the treatment of the item in a manner consistent with the terms of this Agreement.  
(b)    Notwithstanding the foregoing, the parties shall not take any position inconsistent with the Tax Treatment.  If a claim, action or proceeding (a “Tax Proceeding”) is brought by the Internal Revenue Service or other taxing authority against a Participant or the venture challenging the Tax Treatment, such Participant shall provide prompt written notice to DME of such Tax Proceeding and DME shall be entitled to assume the defense of, and control all matters with regard to, such Tax Proceeding as it relates to the Tax Treatment in accordance with the procedures set forth in Section 4.4(e).  DME shall indemnify such Participant for any losses, damages, costs and expenses associated with any such Tax Proceeding in accordance with Section 4.4 of this Agreement whether or not it assumes the defense.  DME shall use reasonable efforts to keep such Participant apprised of the status of such Tax Proceeding.  No Participant may settle a Tax Proceeding inconsistent with the Tax Treatment contemplated by this Agreement unless DME fails to assume or maintain the defense of the Tax Proceeding as contemplated by this Section 3.12(b) and Section 4.4(e), or DME provides express prior written consent.
3.13.    Distributions
(a)    Subject to Section 5.2, the amount, form and timing of any distributions pursuant to this Agreement are determined by DME.

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(b)    Notwithstanding any provision to the contrary contained in this Agreement, DME may not make a distribution to any Participant on account of such Participant’s Interest if such distribution would violate any applicable law.
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Article IV 
Management
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4.1.    Duties and Powers of the Participants  
(a)    Notwithstanding anything to the contrary in this Agreement, DME shall use commercially reasonable efforts to avoid engaging in any activity or taking any action that would cause Greenlight Re or GRIL to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes, including investing in any asset that (i) does not qualify for the trading safe harbor provided in Section 864(b)(2) of the Code and the Treasury Regulations promulgated thereunder, or (ii) would be considered a United States real property interest for purposes of Section 897 of the Code.  
(b)    During the term of this Agreement none of Greenlight Capital Re, Greenlight Re or GRIL shall engage a person or entity, other than DME or DMELP or, with the prior written consent of DME, a DME Affiliate, to act as its investment advisor or in a similar capacity.  In furtherance of the foregoing, during the term of this Agreement, each of Greenlight Re and GRIL shall use its respective commercially reasonable efforts to cause substantially all of its investable assets to be contributed to the venture as soon as reasonably practicable; provided, however, that the term “investable assets” shall not be deemed to include (i) any assets of Greenlight Re which are, in the good faith determination of the Board of Greenlight Re, necessary for the operation of Greenlight Re’s business; (ii) up to 10% (20% if approved by the Board of Greenlight Re, and communicated in writing to DME) of Greenlight Re’s assets that are available for investment that are used to collateralize Regulation 114 Trusts; (iii) any assets of GRIL which are, in the good faith determination of the Board of GRIL, necessary for the operation of GRIL’s business; and (iv) up to 10% (20% if approved by the Board of GRIL, and communicated in writing to DME) of GRIL’s assets that are available for investment that are used to collateralize Regulation 114 Trusts.
(c)    During the term hereof (including, for the avoidance of doubt, during any renewal term), Greenlight Re, GRIL and Greenlight Capital Re shall, and shall use their respective commercially reasonable efforts to cause any of their respective subsidiaries that are formed before or after the date hereof to (i) become a Participant or (ii) enter into an agreement similar to this Agreement, in each case relating to the investment of substantially all of their investable assets.
(d)    DME shall be the tax matters partner for purposes of this Agreement and Section 6231(a)(7) of the Code.  The tax matters partner has the exclusive authority and discretion to make any elections required or permitted to be made by the venture under any provisions of the Code or any other applicable laws.

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(e)    Notwithstanding any provision of this Agreement to the contrary, DME hereby agrees to follow (i) the investment guidelines of Greenlight Re attached hereto as Exhibit A-1 (the “Greenlight Re Guidelines”), solely with respect to Assets in which Greenlight Re has an interest, and only to the extent of Greenlight Re’s interest in each such Asset, as the Greenlight Re Guidelines may be amended from time to time by the Board of Greenlight Re, and provided in writing to DME or DMELP, and (ii) the investment guidelines of GRIL attached hereto as Exhibit A-2 (the “GRIL Guidelines”, and together with the Greenlight Re Guidelines, the “Guidelines”), solely with respect to Assets in which GRIL has an interest, and only to the extent of GRIL’s interest in each such Asset, as the GRIL Guidelines may be amended from time to time by the Board of GRIL and provided in writing to DME or DMELP.  For the avoidance of doubt, the Parties hereby acknowledge and agree that (x) the Greenlight Re Guidelines do not apply to any Assets in which Greenlight Re does not have an interest, and (y) the GRIL Guidelines do not apply to any Assets in which GRIL does not have an interest.  DME shall not, except as otherwise approved by Greenlight Re or GRIL in writing, effect any investment transactions for the accounts of such Participant that are inconsistent with the Guidelines applicable to such Participant or other investment restrictions from time to time imposed by applicable regulation (as determined in good faith by the applicable Board) or adopted by the applicable Board; provided that such Guidelines and investment restrictions are communicated in writing to DME or DMELP.  DME may designate certain investments as Designated Securities in order to comply with the applicable Guidelines and investment restrictions.
4.2.    Expenses
(a)    DMELP shall be entitled to reimbursement of expenses as provided in the Investment Advisory Agreement.  Expenses generally will be borne pro rata by the Participants in accordance with the balances in their respective Capital Accounts, except as provided elsewhere in this Agreement, including Sections 3.4, 3.5, 3.6, and 3.9.
(b)    The venture does not have its own separate employees or office, and no Participant is entitled to reimbursement for salaries, office rent and other general overhead costs of such Participant in connection with this Agreement.
4.3.    Other Activities of Participants
(a)    DME is not required to devote its full time to its duties under this Agreement, but must devote such of its time to such duties as it, in its discretion exercised in good faith, determines to be necessary to conduct the affairs contemplated by this Agreement.  
(b)    This Agreement shall not restrict in any way the ability of DME or its Affiliates to engage in any other business or investment activities.  It is expressly understood that DME and its Affiliates may effect investment transactions for their own account and for Managed Accounts which may or may not be affiliated with any Participant, and the Participants further understand and agree that nothing herein shall restrict the ability of DME or its Affiliates to engage in any such transactions notwithstanding the fact that the Participants may have, by virtue of this Agreement or otherwise, or may take a position of any kind; provided, however, that DME shall not, without the prior written consent of the applicable Board, purchase pursuant to this Agreement any Asset from, or sell pursuant to this Agreement, any Asset to, DME or any Managed Account which DME 

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or an Affiliate is the investment advisor to or is otherwise a beneficial owner of; provided further, however, that failure to obtain such prior written consent shall not be deemed a breach of this Agreement if the applicable Board ratifies such purchase or sale after the fact.  Notwithstanding the foregoing, DME may cause the venture and Managed Accounts that invest in parallel therewith to enter into book account trades in the ordinary course of business transferring portions of investments among the venture and all such Managed Accounts in order to reflect changes in the size of the venture relative to the size of such Managed Accounts without the need for consent or ratification by the Board of any such trades.  
(c)    It is understood that when DME determines that it would be appropriate for the venture and one or more of DME’s (or its Affiliates’) other Managed Accounts to participate in an investment opportunity, DME will seek to execute orders for, or otherwise allocate such opportunities to, the venture and such Managed Accounts on an equitable basis.  In such situations, DME may place orders for the venture and each Managed Account simultaneously and if all such orders are not filled at the same price, DME may cause the venture and each Managed Account to pay or receive the average of the prices at which such orders were filled for the venture and all other Managed Accounts.  If all such orders cannot be fully executed under prevailing market conditions, DME may allocate among the venture and the Managed Accounts the securities traded in a manner which DME considers in its reasonable discretion equitable, taking into account the size of the order placed for the venture and each such Managed Account as well as any other factors which DME deems relevant.  However, DME is not obligated to devote any specific amount of time to its duties under this Agreement and is not required to accord exclusivity or priority to the venture or the Participants in the event of limited investment opportunities arising from the application of speculative position limits or other factors.
4.4.    Duty of Care; Indemnification
(a)    Each Participant agrees that no Covered Person shall be liable to the venture or to any of the Participants or their shareholders for any liabilities, obligations, losses, costs, damages, expenses, claims, judgments and reasonable attorney’s fees and expenses (collectively, “Losses”) occasioned by any act or omission of any Covered Person in connection with the performance of such Covered Person’s services hereunder, except that DME shall be liable to the Participants:  (i) for any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by such Covered Person regarding the Participants or the venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by the Covered Person; (ii) for acts or omissions by it which constitute gross negligence, willful misconduct or reckless disregard of DME’s obligations under this Agreement, (iii) for breaches of the applicable Guidelines by DME which are not cured within 15 days of the earlier of (x) the date on which DME becomes aware of such breach, and (y) the date on which DME receives a written notice of such breach from a Participant or an authorized representative of a Participant; or (iv) for breaches of Section 5.2 

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hereof, in each case as finally determined by a court having proper jurisdiction and after all appeals are resolved or exhausted. 
(b)    Each Participant, to the extent of its interest in the Assets only, shall indemnify and hold harmless each Covered Person from and against any Losses arising out of any claim asserted or threatened to be asserted in connection with any matter arising out of or in connection with this Agreement or the venture’s business or affairs; provided, however, that no Covered Person shall be entitled to any such indemnification with respect to any expense, loss, liability or damage which was caused by (i) any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by such Covered Person regarding the Participants or the venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by the Covered Person, (ii) any Covered Person’s gross negligence, willful misconduct or reckless disregard of any of the its obligations under this Agreement, (iii) for breaches of the applicable Guidelines by DME in connection with its actions under this Agreement which breaches are not cured within 15 days of the earlier of (x) the date on which DME becomes aware of such breach, and (y) the date on which DME receives a written notice of such breach from a Participant; or (iv) for breaches of Section 5.2 hereof.  The venture shall advance to any Covered Person the reasonable costs and expenses of investigating and/or defending such claim subject to receiving a written undertaking from the Covered Person to repay such amounts if and to the extent of any subsequent determination by a court or other tribunal of competent jurisdiction that the Covered Person was not entitled to indemnification hereunder.  Notwithstanding the foregoing, no Participant shall be liable hereunder for any settlement of any action or claim effected without its consent thereto, which will not be unreasonably withheld.
(c)    All transactions effected pursuant to this Agreement by DME shall be for the Participants’ accounts and risk.  DME has not made and makes no guarantee whatsoever as to the success or profitability of DME’s trading methods and strategies, and the Participants each acknowledge that it has received no such guarantee from DME or any Covered Person, and has not entered into this Agreement in consideration of or in reliance upon any such guarantee or similar representation from DME or any Covered Person.
(d)    DME shall indemnify and hold harmless each of the Participants against any Losses which were caused by:  (i) any misstatement or omission of material fact contained in a filing made by or on behalf of a Participant under the United States Securities and Exchange Act of 1934 or other federal law or other public disclosure in so far as such losses, damages, expenses or claims arise out of or are based upon any written information provided by DME regarding the Participants or the venture expressly for use in such filing or other public disclosure, to the extent (and only to the extent) that such misstatement or omission of a material fact contained in such filing occurs in reliance upon and in conformity with the written information furnished by DME; (ii) DME’s fraud, gross negligence, willful misconduct or reckless disregard of any of DME’s obligations under this Agreement; (iii) for breaches of the applicable Guidelines by DME in connection with its duties 

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under this Agreement which breaches are not cured within 15 days of the earlier of (x) the date on which DME becomes aware of such breach, and (y) the date on which DME receives a notice of such breach from a Participant; or (iv) for breaches of Section 5.2 hereof; or (v) any Tax Proceeding.
(e)    If a Participant shall receive notice of or has actual knowledge of any Tax Proceeding, such Participant shall give DME written notice of such Tax Proceeding; provided, however, that failure to notify DME shall not relieve DME from any liability which it may have on account of the Tax Proceeding except to the extent that DME shall have been materially prejudiced by such failure.  DME shall be entitled to assume control of the defense or settlement of such matter.  If DME elects to assume such control, the Participant being indemnified and its counsel shall be entitled to consult with DME and its counsel and participate in the defense or settlement of such matter at its own cost; provided, however, that DME shall bear the costs and expenses of such Participant’s counsel (from one law firm) if, in the reasonable opinion of counsel mutually acceptable to the parties hereto, use of such Participant’s counsel is necessary as a result of a conflict of interest between the Participant, on the one hand, and DME, on the other hand.  In any event, DME shall indicate in writing to the Participant being indemnified within 10 calendar days after such Participant has given DME written notice whether DME intends to pay the claim or assume control of the defense or settlement of such matter.
In the event DME exercises its right to assume control of the defense, the Participant being indemnified shall reasonably cooperate with DME in such defense and make available to DME witnesses, pertinent records, materials and information in its possession or under its control relating thereto as are reasonably requested by DME.  No claim may be settled by DME without the written consent of such Participant, which consent shall not be unreasonably withheld or delayed; provided, however, that DME may settle such claim without the consent of such Participant so long as the settlement (x) includes an unconditional release of such Participant, in form and substance reasonably satisfactory to such Participant, from the claimant, (y) does not impose any liabilities or obligations on such Participant, and (z) with respect to any non-monetary provision of any settlement of a claim, does not impose and conditions upon such Participant.
(f)    The amount which any indemnifying party is required to pay to, or for the benefit of, an indemnified person under this Section 4.4 will be reduced (including, without limitation, retroactively) by any insurance proceeds which are actually paid by, or on behalf of, the indemnified party in reduction of the related Losses. 
(g)    If the indemnity provided for in Section 4.4 and to which an Covered Person is otherwise entitled is unavailable to such Covered Person in respect of any Losses referred to therein, then each Participant, to the extent of its interest in the Assets only, in lieu of indemnifying such Covered Person, shall contribute to the amount paid or payable by such Covered Person as a result of such Losses in the proportion the total capital of the Participants in the venture (exclusive of the balance in the Covered Person’s Capital Account (or the Capital Account of DME if the Covered Person is not DME)) bears to the total capital of the venture (including the balance in Covered Person’s Capital Account (or the Capital Account of DME if the Covered Person is not DME), which contribution shall be treated as an expense of the venture calculated as if the DME’s Capital Account balance was equal to zero.

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4.5.    Fiduciary Duties; Discretion
(a)    To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the venture or to any Participant, such Covered Person acting under this Agreement is not liable to the venture or to any Participant for its good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Covered Person.
(b)    To the fullest extent permitted by law, unless otherwise expressly provided for herein, (i) whenever a conflict of interest exists or arises between a Participant or any of its Affiliates, on the one hand, and the venture or any of the other Participants on the other hand, or (ii) whenever this Agreement or any other agreement contemplated herein or therein provides that a Participant must act in a manner which is, or provide terms which are, fair and reasonable, the Participant must resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party, including its own interest, to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles.  In the absence of bad faith by the Participant, the resolution, action or terms so made, taken or provided by the Participant do not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of the Participant at law or in equity or otherwise.
(c)    To the fullest extent permitted by law, except as provided elsewhere in this Agreement, whenever in this Agreement a Person is permitted or required to make a decision (i) in its “sole discretion” or under a grant of similar authority or latitude, such Person is entitled to consider only such interests and factors as it desires, including its own interests, and has no duty or obligation to give any consideration to any interest of or factors affecting the venture or the Participants, or (ii) in its “good faith” or under another express standard, then such Person acts under such express standard and is not subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein or by relevant provisions of law or in equity or otherwise.
_____________
Article V 
Admissions and Withdrawals
_____________
5.1.    Admission of Participants
The Participants may by unanimous written consent, on the first day of any calendar month, or at such other times as the Participants may determine, admit any Person who executes this Agreement or any other writing evidencing the intent of such Person to become a Participant, unless the participation by such Participant would have any of the effects described in clauses (i) through (vi) of Section 5.3(c).

21

5.2.    Withdrawal of Interests of Participants
(a)    The Interest of a Participant may not be withdrawn prior to termination of this Agreement except as provided in this Section 5.2.
(b)    Subject, in the case of DME, to its requirement to maintain at least a 1% interest pursuant to Section 3.1 hereof and subject to the obligations of the other Participants set forth in Section 4.1(b), a Participant may voluntarily withdraw all or part of its Capital Account as of the close of business on any Business Day. If a Participant wishes to withdraw funds, it must give written notice to DME at least 3 Business Days prior to the proposed withdrawal date indicating the amount to be withdrawn from such Participant’s Capital Account in such notice.  DME may with respect to such request, in its reasonable discretion, waive the foregoing notice requirement.  DME shall not be liable for failure to perform or delay in performing under this Section 5.2 when such failure or delay is due to Force Majeure, so long as DME uses its commercially reasonable efforts to cure such event or occurrence as soon as practicably as possible.  Upon receipt by DME of a Participant’s notice of intention to withdraw assets from the venture, DME shall have the discretion to manage the Assets in a manner that would provide for cash being available to satisfy such Participant’s request for withdrawal.  DME may effect withdrawal payments (i) in cash, (ii) in kind, or (iii) in any combination of the foregoing; provided that the DME will use its commercially reasonable efforts to make any such settlement in cash unless otherwise requested by the Participant.  Notwithstanding the foregoing, each of the Participants acknowledges that a substantial amount of withdrawals by one or more Participants could require DME to liquidate positions in order to raise cash necessary to fund the withdrawals at a time when market conditions are adverse or when such liquidations are otherwise not in the best interests of non-withdrawing Participants.
(c)    The right of any Participant to withdraw or of any Participant to have distributed an amount from his Capital Account pursuant to the provisions of this Section 5.2 is subject to the provision by DME, on behalf of the Participants, for all of the venture’s liabilities and for reserves for contingencies provided for in Section 3.7 and Section 4.4 herein.  
(d)    With respect to any amounts withdrawn, a withdrawing Participant does not share in the income, gains and losses resulting from the venture or have any other rights or obligations as a Participant after the effective date of its withdrawal except as provided in Section 3.7 and Section 4.4.
(e)    Notwithstanding any provision of this Agreement to the contrary (i) Greenlight Re may withdraw as a Participant and fully withdraw all of its Capital Account from the venture (x) on 3 Business Days notice if Greenlight Re Cause exists or (y) at the end of the then current term of the Agreement if Greenlight Re elects not to renew the term of the Agreement pursuant to Section 2.3, and (ii) GRIL may withdraw as a Participant and fully withdraw all of the GRIL Assets from the venture (x) on 3 Business Days notice if GRIL Cause exists or (y) at the end of the then current term of the Agreement if GRIL elects not to renew the term of the Agreement pursuant to Section 2.3.
(f)    In the event that a Participant shall have withdrawn from the venture pursuant to Section 5.2(e), (i) such Participant shall no longer be considered a Participant from and after the 

22

date of such complete withdrawal, and (ii) the provisions of this Agreement shall no longer apply to such Participant (except those provisions which by their terms apply to Participants following their withdrawal). 

5.3.    Transfer of Interests in Participants
(a)    Each Participant agrees that it will not make or attempt to make any Transfer of its Interest that would violate this Section 5.3.  In the event of any attempted Transfer of any Participant’s Interest in violation of the provisions of this Section 5.3, without limiting any other rights of DME under this Agreement or otherwise, such attempted transfer shall be void ab initio and DME (or, in the case of a transfer by DME, the other Participants) shall have the right to require the withdrawal of such Participant’s Interest.
(b)    No Transfer of any Participant’s Interest, whether voluntary or involuntary, is valid or effective, and no transferee becomes a substituted Participant, unless the prior written consent of DME (or, in the case of a transfer by DME, a majority in interest) of the other Participants has been obtained, which consent may be withheld for any reason or for no reason in the sole discretion of DME or such Participants; provided, however, that in the case of DME, DME may make an assignment in a transaction that does not result in a change of its actual control or management.  In the event of any Transfer, all of the conditions of the remainder of this Section 5.3 must also be satisfied.
(c)    No Transfer of any Participant’s Interest, whether voluntary or involuntary, is valid or effective unless DME (or, in the case of a transfer by DME, a majority in interest of the other Participants) in its or their sole discretion determines, after consultation with legal counsel, that such Transfer will not:
		
	(i)
	require registration of any Interest under any securities laws of the United States of America, any state thereof or any other jurisdiction;

		
	(ii)
	subject the venture or the Participants to a requirement to register under any securities or commodities laws of the United States of America, any state thereof or any other jurisdiction;

		
	(iii)
	cause the venture to be treated as a “publicly traded partnership” for U.S. federal income tax purposes under Section 7704(b) of the Code;

		
	(iv)
	result in the venture being considered an investment company under the Company Act;

		
	(v)
	violate or be inconsistent with any representation or warranty made by the transferring Participant at the time the Participant purchased an Interest; or

		
	(vi)
	result in Assets being considered “plan assets” for purposes of ERISA.

23

(d)    The transferring Participant must give the other Participants written notice before making any voluntary Transfer and after any involuntary Transfer and must provide sufficient information to allow DME to make the determination that the proposed Transfer will not result in any of the consequences referred to in clauses (i) through (vi) above.  
(e)    Any other provision of this Agreement to the contrary notwithstanding, any successor to any Participant’s Interest is bound by the provisions hereof.  Prior to recognizing any Transfer in accordance with this Section 5.3, the other Participants in their sole discretion may require the transferring Participant to execute and acknowledge an instrument of transfer in form and substance satisfactory to the Participants, and may require the transferee to make certain representations and warranties to the Participants and to accept, adopt and approve in writing all of the terms and provisions of this Agreement.  A transferee becomes a substituted Participant and succeeds to the portion of the transferor’s Capital Account relating to the Interest transferred effective upon the satisfaction of all of the conditions for such Transfer contained in this Section 5.3.
(f)    Notwithstanding the foregoing, the Participants acknowledge that Greenlight Re or GRIL has or may in the future enter into financing arrangements pursuant to which it may grant to lenders a security interest in its rights to its portion of the Assets.  DME agrees to reasonably cooperate with Greenlight Re or GRIL to effect the granting of such security interests, including without limitation, executing a pledge agreement or similar agreement on reasonably acceptable terms including if possible the right to foreclose on a portion of those Assets equal to the Participant’s percentage interest in the Assets (taking into account that a Participant may not participate fully in certain Designated Securities or New Issues), after accounting for liabilities and reserves.  Each of Greenlight Re and GRIL agrees not to pledge more than its percentage interest in any Assets.
_____________
Article VI
 Termination and Liquidation
_____________
6.1.    Termination of this Agreement
(a)    Subject to applicable law, this Agreement will terminate and its affairs must be wound up upon the earliest of:  
		
	(i)
	the end of the term of this Agreement, as determined pursuant to Section 2.3 hereof; and

		
	(ii)
	the date on which only one Participant remains.  

(b)    Except as provided in Section 6.1(a) or applicable law, the death, mental illness, dissolution, termination, liquidation, bankruptcy, reorganization, merger, sale of substantially all of the stock or assets of or other change in the ownership or nature of a Participant, the execution of a joinder agreement to this Agreement by a new Participant, the withdrawal of a Participant, or the transfer by a Participant of its Interests to a third party does not cause this Agreement to terminate.

24

6.2.    Liquidation of the Venture
(a)    Upon termination of this Agreement pursuant to Section 6.1(a), DME shall promptly liquidate the Assets, except that if DME is unable to perform this function, a liquidator elected by Participants whose Percentages represent more than fifty percent (50%) of the aggregate Percentages of all Participants shall liquidate the Assets.
(b)    Net profit and net loss attributable to a Capital Account during the Fiscal Periods that include the period of liquidation shall be allocated pursuant to Article III.  The proceeds from liquidation shall be divided in the following manner, subject to applicable law:
		
	(i)
	the debts, liabilities and obligations of the venture, other than debts to the Participants as Participants, and the expenses of liquidation (including legal and accounting expenses incurred in connection therewith), up to and including the date that distribution of the Assets to the Participants has been completed, shall be first satisfied (whether by payment or the making of reasonable provision for payment thereof);

		
	(ii)
	such debts as are owing to the Participants as Participants shall be next paid; and

		
	(iii)
	the Participants shall be next paid liquidating distributions (in cash, securities, or other assets, whether or not readily marketable) pro rata in accordance with, and up to the positive balances of their respective Capital Accounts, as adjusted pursuant to Article III to reflect allocations for the Fiscal Period ending on the date of the distributions under this Section 6.2(b)(iii).

(c)    Notwithstanding anything in this Section 6.2 to the contrary and subject to the priorities set forth in applicable law, DME, the liquidator or the trustee, as the case may be, may distribute ratably in-kind rather than in cash, upon termination, any Assets, provided, however, that if any in-kind distribution is to be made, (i) the assets distributed in kind must be valued pursuant to Section 7.2 as of the actual date of their distribution, and charged as so valued and distributed against amounts to be paid under Section 6.2(b) above and (ii) any gain or loss (as computed for book purposes) attributable to property distributed in-kind must be included in the net profit or net loss attributable to the Capital Account for the Fiscal Period ending on the date of such distribution.
_____________
Article VII 
Accounting and Valuations; 
Books and Records; 
Board Meetings
_____________
7.1.    Accounting and Reports

25

(a)    DME may adopt, on behalf of the venture, for tax accounting purposes any accounting method that DME decides in its reasonable discretion is in the best interests of the venture and that is permissible for U.S. federal income tax purposes and that does not prejudice any other Participant.  DME will promptly notify each Participant in writing of any change. 
(b)    At the request of a Participant received at least 30 days prior to the end of the Fiscal Year, as soon as practicable after the end of such Fiscal Year, DME shall cause an audit of the financial statements of the venture in accordance with U.S. generally accepted accounting principles as of the end of each such Fiscal Year to be made by a firm of certified public accountants selected by DME, which is reasonably acceptable to Greenlight Re and GRIL; and as soon as is practicable thereafter but subject to Section 7.5, a copy of a set of financial statements prepared on a basis that uses United States generally accepted accounting principles as a guideline (with such adjustments thereto as the Participants determine appropriate), including the report of such certified public accountants, is furnished to each Participant.  For purposes of this Section 7.1(b) the accounting firm of Ernst & Young, LLP shall be deemed acceptable to Greenlight Re and GRIL.
(c)    Promptly after each calendar month end, DME shall arrange for the preparation and delivery to each Participant of an interim statement of its respective Capital Account valued as set forth in Section 7.2, including, but not limited to, balance sheet, income statement, trial balance and detailed holdings report of a Participant’s Capital Account, and other information that the Participant may reasonably request. 
(d)    As soon as practicable after the end of each taxable year, DME shall furnish each Participant such information as may be required to enable each Participant properly to report for United States federal, state and local income tax purposes, as applicable, its distributive share of each Participant’s item of income, gain, loss, deduction or credit for such year.
(e)    DME shall arrange for the preparation and delivery to each Participant a statement setting forth the computation of (i) the Management Fee within 10 Business Days following the beginning of each month and (ii) Performance Allocation within 30 days after the close of each Performance Period.
(f)    DME shall provide a draft of any tax return required to be filed by the venture (together with schedules, statement or attachments thereto) to Greenlight Re and GRIL no later than ten (10) Business Days prior to the due date (including extensions) of such tax return for their review and comment.  DME shall consult with Greenlight Re and GRIL and in good faith consider any comments provided by Greenlight Re and GRIL within five (5) Business Days of their receipt of such tax returns.
(g)    DME shall, or shall cause DMELP to, timely prepare and file on behalf of Greenlight Re, GRIL or the venture any filings under Section 13 or 16 of the Exchange Act with the U.S. Securities and Exchange Commission resulting from any investment made by the venture.  
(h)    DME will, and will cause DMELP to, use commercially reasonable efforts to assist Greenlight Re and GRIL in any required internal control or compliance matters applicable to Greenlight Re and GRIL and related to this Agreement, including preparing any internal control 

26

reviews that are reasonably deemed necessary by Greenlight Re and GRIL.  DME acknowledges that (i) Greenlight Re is subject to the reporting requirements of, among others, the Securities Exchange Act of 1934, as amended, the listing requirements of the Nasdaq Stock Market and the regulatory and information requirements of the Cayman Islands Monetary Authority and A.M Best & Co., and (ii) GRIL is subject to the regulatory and information requirements of the Insurance Supervision Department of the Irish Financial Regulator and A.M. Best & Co. Furthermore, DME will use commercially reasonable efforts to give access to the venture’s books and records related to GRIL in case requested by the Insurance Supervision Department of the Irish Financial Regulator.
(i)    Notwithstanding anything herein to the contrary, all expenses incurred directly in connection with the creation and maintenance of the accounting records for the venture shall be paid for or reimbursed by DME.
7.2.    Valuation of Assets and Interests
(a)    DME shall value or have valued the Securities and other Assets as of the close of business on the last day of each month, at the end of each Performance Period and on any other date selected by DME or reasonably selected by Greenlight Re or GRIL, as the case may be.  In addition, in good faith, DME shall value Securities that are being distributed in kind as of their date of distribution in accordance with Section 6.2(c).  In determining the value of the Assets, no value is placed on the goodwill, if any, created by this Agreement, or the office records, files, statistical data or any similar intangible assets relating to the Assets not normally reflected in the venture’s accounting records, but there must be taken into consideration any related items of income earned but not received, expenses incurred but not yet paid, liabilities fixed or contingent, prepaid expenses to the extent not otherwise reflected in the books of account, and the value of options or commitments to purchase or sell Securities pursuant to agreements entered into on or prior to such valuation date.  Valuation of Securities made pursuant to this Section 7.2 must be based on all relevant factors and is expected to comply generally with the following guidelines:
		
	(i)
	The market value of each Security listed or traded on any recognized national securities exchange shall be the last reported sale price at the relevant valuation date on the composite tape or on the principal exchange on which such Security is traded.  If no such sale of such Security was reported on that date, the market value is the last reported bid price (in the case of Securities held long), or last reported ask price (in the case of Securities sold short).

		
	(ii)
	Dividends declared but not yet received, and rights in respect of Securities that are quoted ex-dividend or ex-rights, shall be recorded at the fair value thereof, as determined by DME, which may (but need not) be the value so determined on the day such Securities are first quoted ex-dividend or ex-rights.

		
	(iii)
	Listed options, or over-the-counter options for which representative brokers’ quotations shall be available, are valued in the same manner as listed or over-the-counter Securities as hereinabove provided. 

27

(b)    The fair value of any assets not referred to in paragraph (a) (or the valuation of any assets referred to therein in the event that DME determines in its reasonable discretion that market prices or quotations do not fairly represent the value of particular assets) shall be determined by or at the direction of DME; but may be audited by Greenlight Re, GRIL or any of their representatives or agents, at Greenlight Re’s or GRIL’s cost and expense, as applicable, at any time upon reasonable notice.  In these circumstances, DME will attempt to use consistent and fair valuation criteria and may (but is not required to) obtain independent appraisals, which shall be considered an expense under Section 4.2.
(c)    Except as otherwise reasonably determined by DME, investment and trading transactions shall be accounted for on the trade date.  Accounts shall be maintained in U.S. dollars and except as otherwise determined by or at the direction DME:  (i) assets and liabilities denominated in currencies other than U.S. dollars shall be translated at the rates of exchange in effect at the close of the relevant valuation period (and exchange adjustments shall be recorded in the results of operations); and (ii) investment and trading transactions and income and expenses shall be translated at the rates of exchange in effect at the time of each transaction.
(d)    The value of each Security and other Asset and the net worth of the Capital Accounts as a whole determined pursuant to this Section 7.2 shall be, in the absence of bad faith or manifest error and/or subject to any audit verification, conclusive and binding on all of the Participants and all parties claiming through or under them.
7.3.    Determinations by DME
(a)    All matters concerning the determination and allocation among the Participants of the amounts to be determined and allocated pursuant to Sections  3.4 through 3.9 hereof, including any taxes thereon and accounting procedures applicable thereto, are and will be determined by DME in good faith unless specifically and expressly otherwise provided for by the provisions of this Agreement, and such determinations and allocations are final and binding on all the Participants.
(b)    DME may make such adjustments to the computation of any of the memorandum accounts maintained pursuant to this Agreement or any component items comprising any of the foregoing as it considers reasonably appropriate to reflect the financial results of the Assets and the intended allocation thereof among the Participants in a reasonably accurate, fair and efficient manner.
7.4.    Books and Records
(a)    DME shall maintain (or arrange for the maintenance) and keep (or cause to be kept) books and records of the venture showing all assets and liabilities, receipts and disbursements, gains and losses, Participants’ Capital Accounts and all transactions entered into in connection with the Assets and this Agreement.  Such books and records shall be kept at DME’s office.
(b)    DME shall retain, or arrange for the retention, for a period of at least five (5) years, copies of any documents it deems pertinent generated or received by DME in the ordinary course of business pertaining to the Assets or to the compensation payable to DME.  DME shall afford to Greenlight Re’s or GRIL’s independent auditors reasonable access to such documents during 

28

customary business hours and shall permit Greenlight Re’s and/or GRIL’s auditors to make copies thereof or extracts therefrom at the expense of Greenlight Re or GRIL, as the case may be.
7.5.    Greenlight Re or GRIL Board Meeting
At the request of Greenlight Re or GRIL, as applicable, and subject to reasonable prior notice, DME shall endeavor to make one of DME’s or DMELP’s representatives available to attend the meetings of such party’s Board, or meetings with such party’s management (in either case in person or telephonically) to report on the ventures’ activities and on other matters pertaining to this Agreement.
_____________
Article VIII 
General Provisions
_____________
8.1.    Amendment of Agreement
This Agreement may be amended, in whole or in part, with the written consent of all of the Participants.
8.2.    Notices
Unless otherwise provided, all notices and other communications required or permitted under this Agreement shall be in writing and shall be sent by facsimile, sent by electronic mail, or delivered personally by hand or by an internationally recognized overnight courier addressed to the party to be notified at the address, facsimile number or e-mail address indicated for such party set forth below, or at such other address, facsimile number or e-mail address as such party may designate by ten days advance written notice to the other parties hereto.  All such notices shall be effective upon receipt.  Unless otherwise provided in writing to the other parties, all notices shall be sent to the following addresses, facsimile numbers or e-mail addresses:

If to DME:
DME Advisors, LLC 
140 East 45th Street, 24th Floor 
New York, NY 10017 
Attention:  Daniel Roitman 
Facsimile No.:  212-973-9219 
E-Mail:  droitman@greenlightcapital.com

29

With a copy to (which shall not constitute notice):
DME Advisors, LLC 
140 East 45th Street, 24th Floor 
New York, NY 10017 
Attention:  Harry Brandler 
Facsimile No.:  212-973-9219 
E-Mail:  HBrandler@greenlightcapital.com
If to Greenlight Re or to Greenlight Capital Re:
Greenlight Reinsurance, Ltd. 
65 Market Street, Suite 1207
Camana Bay
P.O. Box 31110
Grand Cayman, KY 1-1205 
Cayman Islands 
Attention:  Tim Courtis  
Facsimile No.:  345-745-4576 
E-Mail:  Tim@greenlightre.ky

With a copy to (which shall not constitute notice):
Akin Gump Strauss Hauer & Feld LLP 
One Bryant Park  
New York, New York 10036 
Attention:  Kerry E. Berchem, Esq. 
Facsimile No.:  212-872-1002 
E-Mail:  kberchem@akingump.com
If to GRIL:
Greenlight Reinsurance Ireland, Ltd.
Ground Floor, La Touche House
IFSC
Dublin 1, Ireland
Attention: Eamon Brady
Email: Eamon@greenlightre.ie

With a copy to (which shall not constitute notice):
Greenlight Reinsurance Ireland, Ltd.
c/o 65 Market Street, Suite 1207
Camana Bay
P.O. Box 31110
Grand Cayman, KY 1-1205 
Cayman Islands 
Attention: Tim Courtis

30

Facsimile: 345-745-4576
Email: Tim@greenlightre.ky

8.3.    Agreement Binding Upon Successors and Assigns
This Agreement shall be binding upon and inures to the benefit of the parties hereto and their respective successors and permitted assigns as set forth in Section 5.3 hereof.
8.4.    Governing Law
(a)    This Agreement and the rights of the Participants hereunder shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws rules thereof.  The parties acknowledge that the venture is formed under the laws of the State of New York.
(b)    Each party hereto submits to the jurisdiction of any state or federal court sitting in New York, New York in any action arising out of or relating to this Agreement and agrees that all claims in respect of any such action may be heard and determined in any such court.  Each party hereto agrees that a final judgment in any action so brought will be conclusive and may be enforced by action on the judgment or in any other manner provided at law or in equity.  Each party hereto waives any defense of inconvenient forum to the maintenance of any action so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto.
8.5.    Not for Benefit of Third Parties
The provisions of this Agreement are intended only for the regulation of relations among Participants and between Participants and former or prospective Participants.  This Agreement is not intended for the benefit of non-Participants and no rights are granted to non-Participants under this Agreement.
8.6.    Consents
Any and all consents, agreements or approvals provided for or permitted by this Agreement must be in writing and a signed copy thereof must be filed and kept with the books of each Participant.
8.7.    Miscellaneous
(a)    The captions and titles preceding the text of each section hereof shall be disregarded in the construction of this Agreement.
(b)    This Agreement may be executed in counterparts, each of which is deemed to be an original hereof.
(c)    The Participants have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, the Participants intend that this Agreement be construed as if drafted jointly by the Participants and that no presumption or burden of proof arise favoring or disfavoring any Participant by virtue of the 

31

authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local, or foreign statute or law is deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” means including without limitation.  The word “or” is not exclusive.  All words used in this Agreement shall be construed to be of such gender or number as the circumstances require.
(d)    The Participants intend that each representation, warranty, and covenant contained herein has independent significance.  If any Participant has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) that such Participant has not breached does not detract from or mitigate the fact that such Participant is in breach of the first representation, warranty, or covenant.
(e)    If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable.
(f)    Each party hereto hereby agrees that the other would be damaged irreparably if any provision of this Agreement were not performed in accordance with the specific terms or were otherwise breached and each party hereto agrees that any party shall be entitled to seek equitable relief, including, without limitation, any injunction or injunctions, to prevent breaches or threatened breaches of this Agreement by the other parties or any of their representatives and to specifically enforce the terms and provisions of this Agreement.
8.8.    Entire Agreement
This Agreement contains the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof, and each of the parties hereto agrees that each and every such prior agreement is terminated and replaced in its entirety by the rights created by this Agreement.
[SIGNATURE PAGE FOLLOWS] 

32

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first-above written.
GREENLIGHT REINSURANCE, LTD.
	
			
	By: /s/ Barton Hedges
	 
	By: /s/ Tim Courtis

	Name: Barton Hedges
	 
	Name: Tim Courtis

	Title: CEO
	 
	Title: CFO

GREENLIGHT REINSURANCE IRELAND, LTD.
	
			
	By: /s/ Barton Hedges
	 
	By: /s/ Tim Courtis

	Name: Barton Hedges
	 
	Name: Tim Courtis

	Title: CEO
	 
	Title: CFO

DME ADVISORS, LLC
	
			
	By: /s/ Harry Brandler
	 
	By: /s/ Daniel Roitman

	Name: Harry Brandler
	 
	Name: Daniel Roitman

	Title: CFO
	 
	Title: COO

GREENLIGHT CAPITAL RE, LTD. 
solely for the purpose of Section 4.1 (b) and (c)
	
			
	By: /s/ Barton Hedges
	 
	By: /s/ Tim Courtis

	Name: Barton Hedges
	 
	Name: Tim Courtis

	Title: CEO
	 
	Title: CFO

[Signature Page – JV Agreement]

Exhibit A-1
GREENLIGHT RE GUIDELINES
		
	•
	Composition of Investments:  At least 80% of the assets in the investment portfolio will be held in debt or equity securities (including swaps) of publicly traded companies (or their subsidiaries) and governments of the Organization of Economic Co-operation and Development (the “OECD”), high income countries, cash, cash equivalents and gold.  No more than 10% of the assets in the investment portfolio will be held in private equity securities.

		
	•
	Concentration of Investments:  Other than cash, cash equivalents and United States government obligations and gold, no single investment in the investment portfolio will constitute more than 20% of the portfolio.

		
	•
	Liquidity:  Assets will be invested in such fashion that Greenlight Re has a reasonable expectation that it can meet any of its liabilities as they become due.  Greenlight Re will review with the investment advisor the liquidity of the portfolio on a periodic basis.

		
	•
	Monitoring:  Greenlight Re will require the investment advisor to re-evaluate each position in the investment portfolio and to monitor changes in intrinsic value and trading value and provide monthly reports on the investment portfolio to Greenlight Re as Greenlight Re may reasonably determine.

		
	•
	Leverage:  The investment portfolio may not employ greater than 15% indebtedness for borrowed money, including net margin balances, for extended time periods.  The investment advisor may employ, in the normal course of business, up to 30% indebtedness for periods of less than 30 days. 

A-1

Exhibit A-2
GRIL GUIDELINES
		
	•
	Composition of Investments:  At least 80% of the assets in the investment portfolio will be held in debt or equity securities (including swaps) of publicly traded companies (or their subsidiaries) and governments of OECD (the Organization of Economic Co-operation and Development) high income countries, cash, cash equivalents and gold.  No more than 10% of the assets in the investment portfolio will be held in private equity securities.

		
	•
	Concentration of Investments:  Other than cash or cash equivalents and United States government obligations, (1) no single investment in the investment portfolio will constitute more than 10% of the portfolio, (2) the 10 largest investments shall not constitute greater than 50% of the total investment portfolio, and (3) the investment portfolio shall at all times be comprised of a minimum of 50 debt or equity securities of publicly traded companies (or their subsidiaries).

		
	•
	Liquidity:  Assets will be invested in such fashion that GRIL has a reasonable expectation that it can meet any of its liabilities as they become due.  GRIL will review with the investment advisor the liquidity of the portfolio on a periodic basis.

		
	•
	Monitoring:  GRIL will require the investment advisor to re-evaluate each position in the investment portfolio and to monitor changes in intrinsic value and trading value and provide monthly reports on the investment portfolio to GRIL as GRIL may reasonably determine.

		
	•
	Leverage:  The investment portfolio may not employ greater than 5% indebtedness for borrowed money, including net margin balances, for extended time periods.  The investment advisor may use, in the normal course of business, an aggregate of up to 20% net margin leverage for periods of less than 30 days.

A-2

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