Document:

EX-10.7

 Exhibit 10.7 

EMPLOYMENT AGREEMENT 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of May 5, 2014, effective as of May 27, 2014
(the “Effective Date”) by and between Northern Power Systems, Inc., a Delaware corporation (the “Company”) and Lawrence D. Willey (“Employee”), sets forth the terms and conditions of Employee’s
employment with the Company. 
 WHEREAS, the Company wishes to employ Employee in the capacities and on the terms and conditions set
out below, and Employee has agreed to enter into such employment, in the capacities and on the terms and conditions set forth below. 

NOW, THEREFORE, the Company and Employee, in consideration of the respective covenants set out below, hereby agree as follows: 

1. Employment. Pursuant to the terms and conditions herein, the Company shall employ Employee from the Effective Date until
terminated as provided herein.
 2. Title, Duties and Responsibilities. Employee will serve as the Chief Operating Officer of
the Company and will report to the Company’s Chief Executive Officer (the “CEO”), and perform such duties, services, and tasks as requested by the CEO that are commensurate with his position. During Employee’s
employment with the Company, Employee shall devote his full business time, attention and ability to the performance of his duties hereunder and shall not be employed in any other capacity, or render services to any other party, without the prior
written consent of the Company.
 3. Compensation.

a. Base Salary. The Company shall pay Employee a salary of two hundred twenty-five thousand dollars ($225,000) annually
(“Base Salary”), subject to any increases approved by the Company’s Board of Directors (the “Board”), payable in accordance with the Company’s normal payroll practices and subject to applicable taxes and
withholding.
 b. Stock Options. On or promptly following the Effective Date, the Company will grant Employee stock options to
purchase 100,000 common shares of the Company’s parent company, Northern Power Systems Corp. (“NPS Corp”). Such options shall be issued pursuant to, and subject to the terms and conditions of, the Northern Power Systems
Corp. 2014 Stock Option and Incentive Plan (the “Stock Option Plan”) and shall have an exercise price set at the Fair Market Value per share (as defined in the Stock Option Plan) as of the grant date. The options granted to
Employee shall be exercisable for a period of seven (7) years from the date of grant, and shall vest over three years as follows: cliff vesting of the first one-third of options granted on the first anniversary of the Effective Date, with
equal quarterly vesting in arrears thereafter for the balance of the award. Vesting of such options shall be fully accelerated in the event of a termination of Employee’s employment without cause or by Employee for “Good Reason”, in
each case within six months of a Change in Control, as defined in 

 
Employee’s stock option agreement. For purposes hereof, “Good Reason” shall mean: (i) any material diminution in Employee’s functions, duties or responsibilities
from and after the Change in Control; (ii) any reduction in the cash compensation payable to Employee from and after the Change in Control, other than as a part of a salary reduction program affecting all other members of senior management; or
(iii) a change of more than 50 miles in Employee’s permanent workplace without Employee’s consent from and after the Change in Control. In addition, it is anticipated that, based on performance and at the discretion of the
compensation committee of the Board (the “Compensation Committee”) and the Board, additional option grants or other equity awards may be made from time to time. Vesting of any such additional option grants or other equity
awards likewise shall be fully accelerated in the event of termination without cause or by Employee for Good Reason, in each case within six months of a Change in Control. 

c. Bonus. At the discretion of the Compensation Committee and the Board, an annual cash bonus, targeted at 35% of Base Salary,
will be awarded based on performance as described by approved Management By Objective (“MBO”) scorecard goals. The amount of any individual bonus will be discretionary, based on the Board’s evaluation of individual
performance as well as overall Company performance for the given year. All bonuses are subject to approval by the Board. Annual bonus pay out will occur by no later than April 30 of the following year. Employee also shall be eligible
to participate in any and all other bonus plans and packages that are made available to the Company’s executives, on a basis consistent with Employee’s position and then-current Base Salary and in accordance with the policies and practices
of the Company and the Board. 
 d. Relocation. The Company will reimburse you for an amount not to exceed twenty thousand dollars
($20,000) for relocation. All costs must be in compliance with the Company’s relocation policy and supported by receipts. This relocation reimbursement must be repaid on a pro rata basis if Employee resigns from his position with the Company
during the first 12 months after the Effective Date. In addition, during the first six (6) months after the Effective Date, the Company shall reimburse Employee for housing costs in the Barre, Vermont area of up to one thousand dollars ($1,000)
per month. Any unused portion of the $1,000 per month housing reimbursement may be used in addition to the $20,000 relocation reimbursement amount. 

4. Benefits. 
 a.
Health and Benefit Plans. Employee shall be eligible to participate in such medical, dental, disability, life insurance and other benefit plans as may be maintained by the Company from time to time, on the terms and conditions set forth
in such plans.
 b. Vacation. Employee shall be entitled to 20 days paid vacation per full calendar year, which shall accrue in
accordance with the Company’s vacation policy as in effect from time to time. Subject to the provisions of the Company’s policy as in effect from time to time, up to 20 days of unused vacation time may be carried over to subsequent years.
Accrued unused vacation time will be paid out upon termination of employment for any reason per the vacation policy. 

  
 2 

 c. Sick Leave. Employee shall be entitled to five (5) days of paid sick leave
per calendar year pursuant to Company policy. 
 d. Reimbursement for Business Expenses. Upon presentation of appropriate
documentation, Employee shall be reimbursed, in accordance with the Company’s expense reimbursement policy, for all reasonable business expenses incurred in connection with Employee’s performance of services for the Company. All expense
reports shall be submitted no later than the end of the calendar year next following the calendar year in which such reimbursable expenses are incurred. 

5. Representations and Warranties. Employee represents, warrants and covenants to the Company that Employee is free to enter into
this Agreement and provide the services contemplated hereunder, and that the engagement hereunder does not conflict with or violate, and will not be restricted by, any pre-existing business relationship or agreement to which Employee is a party or
otherwise is bound. 
 6. Termination.

a. Generally. Employee’s employment with the Company may terminate for any of the following reasons, with or without any prior
notice (and such notice shall not be required) unless otherwise indicated: 
 i. The Company may terminate Employee for any
act or omission that constitutes “Cause,” provided that any termination for Cause within the meaning of subsection (i) below shall occur only after the Company has provided written notice to Employee describing the reasons for the
proposed termination and giving Employee an opportunity to cure such breach within a reasonable period not to exceed 10 days after such notice. For purposes hereof, “Cause” shall mean: (i) Employee’s willful failure
substantially to perform his duties and responsibilities to the Company or deliberate violation of a material Company policy; (ii) Employee’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has
caused or is reasonably expected to result in material injury to the Company; (iii) unauthorized use or disclosure by Employee of any proprietary information or trade secrets of the Company or any other party to whom Employee owes an obligation
of nondisclosure as a result of his relationship with the Company; or (iv) Employee’s willful and material breach of his obligations under the Assignment of Inventions, Non-Disclosure and Noncompetition Agreement between Employee and the
Company dated May 5, 2014 (the “Assignment Agreement”). 

  
 3 

 ii. The Company may terminate Employee without Cause or because of
Employee’s death or “Disability”. For purposes hereof, “Disability” shall mean Employee’s failure or inability to substantially perform his duties hereunder because of illness or injury, with or without
reasonable accommodation, for either four (4) consecutive months or an aggregate of six (6) months in any rolling twelve (12) month period, as determined in the reasonable judgment of an independent qualified physician selected by the
Company to whom Employee or his personal representative (as the case may be) has no reasonable objection.
 iii. Employee may
resign from the Company, provided that in the case of such resignation, Employee shall have provided the Company with at least 60 days prior written notice and upon receipt of such notice, the Company may elect, in its discretion, to terminate the
employment of Employee at any time following such notice. In the event the Company elects to terminate Employee following notice, Employee’s Base Salary and benefits (subject to customary employee participation) shall continue to be paid during
the notice period. 
 b. Payments Upon Termination by the Company for Cause. Upon the termination of Employee’s employment
by the Company for Cause, Employee shall be paid any unpaid Base Salary and vacation accrual due and owed for periods prior to the termination and any outstanding expense reimbursements (collectively, the “Accrued Obligations”). 

c. Payments Upon Termination by the Company for Death or Disability, or Resignation by Employee. Upon the termination of
Employee’s employment by the Company because of Employee’s death or Disability, or resignation by Employee, Employee (or, in the event of Employee’s death, Employee’s estate) shall be paid the Accrued Obligations and any bonus
which had been awarded to Employee but not yet paid on the date of termination. 
 d. Payments Upon a Termination by the Company without
Cause. Upon the termination of Employee’s employment by the Company without Cause, Employee shall be paid the Accrued Obligations, any bonus which had been awarded to Employee but not yet paid on the date of termination, and a pro-rated
bonus for the year in which the termination occurs for performance through the date of termination, as determined in good faith by the Compensation Committee and the Board pursuant to Section 3(c) above. The Company shall also provide
Employee the following severance for six (6) months from the termination date or, if sooner, up to the commencement of subsequent employment (the “Severance Period”): 

i. the applicable portion of the Base Salary in effect at the time, payable in six (6) installments over the Severance
Period beginning on the first payroll date following the expiration of the Revocation Period referenced below, and including any missed installments between the date of termination of employment and the first such payment date; and 

  
 4 

 ii. all health and dental benefits, through the cost of COBRA continuation
coverage for Employee and his eligible dependents during the Severance Period (subject to Employee’s payment of premiums at the active employee rate), payable beginning on the first payroll date following the expiration of the Revocation Period
referenced below, and including any missed installments between the date of termination of employment and the first such payment date; provided that in the event that Employee obtains other employment that offers group health benefits, such payments
by the Company under this Section 6.d.ii shall immediately cease (with the Base Compensation referenced in Section 6.d.i above, the “Severance Compensation”). 

iii. all vacation benefits, payable beginning on the first payroll date following the expiration of the Revocation Period
referenced below. 
 7. Severance Compensation Terms. Severance Compensation shall be payable on the dates on which such amounts
would have been paid had Employee continued his employment hereunder, provided that Severance Compensation shall only be paid if Employee executes a general release (in a customary and reasonable form) of any and all claims against the
Company, Northern Power Systems Corp., and their affiliates, subsidiaries, officers, employees, and assigns, and continues to comply with the terms and conditions set forth in the Assignment Agreement. Employee will be provided a period of at
least twenty-one (21) days to consider whether to execute the general release, and will be provided a seven (7) day post-execution period in which his agreement to it may be revoked (“Revocation Period”). 

8. Entire Agreement/Amendments. This Agreement embodies the entire understanding with respect to the subject matter hereof and
supersedes all prior understandings and communications with respect to the matters herein except for the Assignment Agreement. This Agreement may not be modified except in writing signed by Employee and a duly authorized officer of the Company.

 9. Governing Law. The validity, interpretation, construction, performance, and enforcement of this Agreement shall be
governed by the laws of the state of Vermont. Any action commenced by employee against the Company shall be brought in the state or federal courts in the state of Vermont, but not in any other jurisdiction. 

10. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”) and the regulations thereunder. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be interpreted in a manner so
that no payment due to Employee shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code. To the extent that any provision in the Agreement is ambiguous as to its compliance with
Section 409A of the Code, or to the extent any provision in the Agreement must be modified to comply with Section 409A of the Code, such provision shall be read, or shall be modified (with the mutual consent of the parties), as the case
may be, in such a manner so that no payment due to Employee shall be subject to an “additional tax” within the meaning of Section 409A(a)(1)(B) of the Code.

  
 5 

 For purposes of Section 409A of the Code, each payment made under this Agreement shall be
treated as a separate payment. In no event may Employee, directly or indirectly, designate the calendar year of any payment. All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of
Section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement be for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the
amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the
calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

Notwithstanding anything to the contrary herein, if a payment or benefit under this Agreement is due to a “separation from service”
for purposes of the rules under Treas. Reg. § 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and Employee is determined to be a “specified employee” (as determined under Treas. Reg. §
1.409A-1(i)), such payment or benefit shall, to the extent necessary to comply with the requirements of Section 409A of the Code, be made or provided on the later of the date specified by the foregoing provisions of this Agreement or the date
that is six months after the date of Employee’s separation from service (or, if earlier, the date of Employee’s death). Any installment payments that are delayed pursuant to this Section 10 shall be accumulated and paid in a lump
sum on the first day of the seventh month following Employee’s separation from service, and the remaining installment payments shall begin on such date in accordance with the schedule provided in this Agreement.

This Section 10 shall survive the termination of this Agreement. 

11. General Provisions. 

a. Notices. All notices and other communications hereunder shall be in writing or by written telecommunication, and shall be deemed
to have been duly given if delivered personally or if sent by overnight courier or by certified mail, return receipt requested, postage prepaid or sent by written telecommunication or telecopy, to the relevant address set forth below, or to such
other address as the recipient of such notice or communication shall have specified in writing to the other party hereto, in accordance with this Section 11(a). 

If to the Company, to: 29 Pitman Road, Barre, VT 05641 

Facsimile: (802) 461-2998 

If to Employee, at his last residence shown on the records of the Company or to such address as the Employee may designate in writing. 

  
 6 

 Any such notice shall be effective (i) if delivered personally, when received, (ii) if sent by
overnight courier, when receipted for, (iii) if mailed, five (5) days after being mailed, and (iv) on confirmed receipt if sent by written telecommunication or telecopy, provided a copy of such communication is sent by regular mail,
as described above. 
 b. Severability. If any provision of this Agreement is deemed by a court of competent jurisdiction or
otherwise or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 

c. Waivers. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such
right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. 

d. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. 

e. Assigns. This Agreement shall be binding upon and inure to the benefit of the Company’s successors and Employee’s
personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable by Employee, it being understood and agreed that this is a contract for Employee’s personal
services. 
 Intentionally Left Blank 

  
 7 

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

  

			
	Northern Power Systems, Inc.:
		
	By:	 	 /s/ Troy C. Patton

		 	Troy C. Patton
		 	President and Chief Executive Officer
	
	Employee:
	
	 /s/ Lawrence D. Willey

	Lawrence D. Willey

  
 8EX-10.1

 Exhibit 10.1 
  

 
 ADDENDUM NO. 2 

to the 
 AUTOMOBILE QUOTA SHARE
REINSURANCE CONTRACT 
 Effective: December 31, 2013 

(the “Contract”) 
 issued
to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the
“Company”) 
 by 

THE SUBSCRIBING REINSURER(S) IDENTIFIED 

IN THE INTERESTS AND LIABILITIES AGREEMENT(S) 

ATTACHED TO AND FORMING PART OF THE CONTRACT 

(the “Reinsurer”) 
 Effective
December 31, 2013, paragraph C of Article 2 – Term – shall be deleted. 
 All other terms and conditions of the Contract shall remain
unchanged. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008	  		  	Addendum No. 2
		  		  	Effective: December 31, 2013

 

 
  

 ENDORSEMENT NO. 2 

to the 
 INTERESTS AND
LIABILITIES AGREEMENT 
 Effective: December 31, 2013 

(the “Agreement”) 
 of

 ACE AMERICAN INSURANCE COMPANY 

(the “Subscribing Reinsurer”) 

with respect to the 
 AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT 
 Effective: December 31, 2013 

(the “Contract”) 
 issued
to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the
“Company”) 
 Addendum No. 2 to the Contract shall form part of the Contract effective December 31, 2013. 

Effective December 31, 2013, as respects the Subscribing Reinsurer’s participation in the Contract, the following shall apply: 

 

	1.	Paragraph A of Article 2 – Term (as previously amended by Addendum No. 1 to the Contract) – is amended to read: 

  

	 	A.	This Contract shall take effect on December 31, 2013 and shall remain in effect until July 1, 2014, applying to losses commencing during the term of this Contract. 

 

	2.	The following Commission Adjustment shall apply in lieu of Article 12 – Commission Adjustment (as previously amended by the Interests and Liabilities Agreement of the Subscribing Reinsurer, Addendum No. 1 to
the Contract, Endorsement No. 1 to the Interests and Liabilities Agreement of the Subscribing Reinsurer): 

  

	 	A.	The provisional commission allowed the Company shall be adjusted in accordance with the provisions set forth herein for each Accounting Period as hereinafter defined. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (ACE)	  	1 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 The adjusted commission rate shall be calculated as follows and be applied to Net Premiums
Earned for the Accounting Period under consideration: 
  

	 	1.	As respects the First Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 73.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 73.0%, but not less than 55.05%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 73.0% and the
actual ratio of Losses Incurred to Net Premiums Earned; 

  

	 	c.	if the ratio of Losses Incurred to net Premiums Earned is 55.0% or less, the adjusted commission rate shall be 40.0%. 

  

	 	2.	As respects the Second Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 71.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 71.0%, but not less than 55.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 71.0% and the
actual ratio of Losses Incurred to Net Premiums Earned; 

  

	 	c.	if the ratio of Losses Incurred to net Premiums Earned is 55.0% or less, the adjusted commission rate shall be 38.0%. 

  

	 	B.	Within 18 months following the inception of this Contract, and every six months thereafter until all losses under Policies covered hereunder have been settled, the Company shall calculate and report the adjusted
commission on Net Premiums Earned for this Contract. Each calculation shall be based on cumulative transactions hereunder from the beginning of this Contract through the date of adjustment. If the adjusted commission on Net Premium Earned as of the
date of adjustment is less than commissions previously allowed by the Reinsurer, the Company shall remit the difference to the Reinsurer with its report. If, for any calculation, the adjusted commission on Net Premiums Earned is greater than
commissions previously allowed by the Reinsurer on Net Premiums Earned, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report. 

 

	 	C.	“First Accounting Period” as used herein shall mean the period from December 31, 2013 through March 31, 2014. “Second Accounting Period” as used herein shall mean the period from
April 1, 2014 through expiration or termination of this Contract. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (ACE)	  	2 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 All other terms and conditions of the Contract shall remain unchanged. 

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed by their duly authorized representative(s) as follows: 

 

													
	this 	 	  22nd   	 	day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 AFFIRMATIVE INSURANCE COMPANY 

/s/ Michael J. McClure 
  

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (ACE)	  	3 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

													
	And on this 	 	  23rd  	 	 day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 ACE TEMPEST RE USA, LLC 

ON BEHALF OF 
 ACE
AMERICAN INSURANCE COMPANY 
 /s/ Ace Tempest Re USA, LLC 

 
 Market Reference Number: 

AFFIRMATIVE INSURANCE COMPANY 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (ACE)	  	4 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 ENDORSEMENT NO. 2 

to the 
 INTERESTS AND
LIABILITIES AGREEMENT 
 Effective: December 31, 2013 

(the “Agreement”) 
 of

 SCOR REINSURANCE COMPANY 

(the “Subscribing Reinsurer”) 

with respect to the 
 AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT 
 Effective: December 31, 2013 

(the “Contract”) 
 issued
to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the
“Company”) 
 Addendum No. 2 to the Contract shall form part of the Contract effective December 31, 2013. 

Effective December 31, 2013, as respects the Subscribing Reinsurer’s participation in the Contract, the following shall apply: 

 

	1.	Paragraph A of Article 2 – Term (as previously amended by Addendum No. 1 and Addendum No. 2 to the Contract) – is amended to read: 

 

	 	A.	This Contract shall take effect on December 31, 2013 and shall remain in effect until July 1, 2014, applying to losses commencing during the term of this Contract. 

 

	2.	The following Commission Adjustment shall apply in lieu of Article 12 – Commission Adjustment (as previously amended by the Interests and Liabilities Agreement of the Subscribing Reinsurer, Addendum No. 1 to
the Contract, Endorsement No. 1 to the Interests and Liabilities Agreement of the Subscribing Reinsurer): 

  

	 	A.	The provisional commission allowed the Company shall be adjusted in accordance with the provisions set forth herein for each Accounting Period as hereinafter defined. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (SCOR)	  	1 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 The adjusted commission rate shall be calculated as follows and be applied to Net Premiums
Earned for the Accounting Period under consideration: 
  

	 	1.	As respects the First Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 73.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 73.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 73.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 95.0%. 

  

	 	2.	As respects the Second Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 71.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 71.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 71.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 93.0%. 

  

	 	B.	Within 18 months following the inception of this Contract, and every six months thereafter until all losses under Policies covered hereunder have been settled, the Company shall calculate and report the adjusted
commission on Net Premiums Earned for this Contract. Each calculation shall be based on cumulative transactions hereunder from the beginning of this Contract through the date of adjustment. If the adjusted commission on Net Premium Earned as of the
date of adjustment is less than commissions previously allowed by the Reinsurer, the Company shall remit the difference to the Reinsurer with its report. If, for any calculation, the adjusted commission on Net Premiums Earned is greater than
commissions previously allowed by the Reinsurer on Net Premiums Earned, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report. 

 

	 	C.	“First Accounting Period” as used herein shall mean the period from December 31, 2013 through March 31, 2014. “Second Accounting Period” as used herein shall mean the period from
April 1, 2014 through expiration or termination of this Contract. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (SCOR)	  	2 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 All other terms and conditions of the Contract shall remain unchanged. 

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed by their duly authorized representative(s) as follows: 

 

													
	this 	 	  22nd   	 	day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 AFFIRMATIVE INSURANCE COMPANY 

/s/ Michael J. McClure 
  

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (SCOR)	  	3 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

													
	And on this 	 	  29th  	 	 day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 SCOR REINSURANCE COMPANY 

/s/ SCOR Reinsurance Company 
  

Market Reference Number: T029045 
 AFFIRMATIVE
INSURANCE COMPANY 
 AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	U4VT0008 (SCOR)	  	4 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 ENDORSEMENT NO. 2 

to the 
 INTERESTS AND
LIABILITIES AGREEMENT 
 Effective: December 31, 2013 

(the “Agreement”) 
 of

 THIRD POINT REINSURANCE COMPANY LTD. 

(the “Subscribing Reinsurer”) 

with respect to the 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

Effective: December 31, 2013 

(the “Contract”) 
 issued
to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the
“Company”) 
 Addendum No. 2 to the Contract shall form part of the Contract effective December 31, 2013. 

Effective December 31, 2013, as respects the Subscribing Reinsurer’s participation in the Contract, the following shall apply: 

 

	1.	The following Term shall apply in lieu of Article 2 – Term (as previously amended by Addendum No. 1 and Addendum No. 2 to the Contract): 

 

	 	A.	This Contract shall take effect on December 31, 2013 and shall remain in effect until January 1, 2015, applying to losses commencing during the term of this Contract. 

 

	 	B.	At termination or expiration of this Contract, the Reinsurer shall return the ceded unearned premium, net of provisional ceding commission, as of the date of termination, on business in force at that date, and shall be
released from liability for losses commencing after termination or expiration. However, in the event the parties agree to terminate this Contract effective July 1, 2014, and further agree that such termination will be on a run-off basis, the
Reinsurer shall remain liable for all Policies covered by this Contract that are in force at expiration, until the termination, expiration or renewal of such Policies, whichever occurs first. 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Third Point)
	  	1 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

	2.	The following paragraph C shall apply in lieu of paragraph C of Article 3 – Retention and Limit: 

  

	 	C.	Notwithstanding the above, it is agreed that the losses under Policies subject to Section C hereunder shall not exceed 125.0% of the ceded Gross Net Earned Premium Income as respects Policies subject to Section C for
the term of this Contract. 

  

	3.	The following Commission Adjustment shall apply in lieu of Article 12 – Commission Adjustment: 

  

	 	A.	The provisional commission allowed the Company shall be adjusted in accordance with the provisions set forth herein for each Accounting Period as hereinafter defined. The adjusted commission rate shall be calculated as
follows and be applied to Net Premiums Earned for the Accounting Period under consideration: 

  

	 	1.	As respects the First Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 73.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 73.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 73.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 95.0%. 

  

	 	2.	As respects the Second Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 71.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 71.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 71.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 93.0%. 

  

	 	B.	 Within 18 months following the inception of this Contract, and every six months thereafter until all losses under Policies covered hereunder have been
settled, the Company shall calculate and report the adjusted commission on Net Premiums Earned for this Contract. Each calculation shall be based on cumulative transactions hereunder from the beginning of this Contract through the date of
adjustment. If the 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Third Point)
	  	2 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

	 	
adjusted commission on Net Premium Earned as of the date of adjustment is less than commissions previously allowed by the Reinsurer, the Company shall remit the difference to the Reinsurer with
its report. If, for any calculation, the adjusted commission on Net Premiums Earned is greater than commissions previously allowed by the Reinsurer on Net Premiums Earned, the Reinsurer shall remit the difference to the Company as promptly as
possible after receipt and verification of the Company’s report. 

  

	 	C.	“First Accounting Period” as used herein shall mean the period from December 31, 2013 through March 31, 2014. “Second Accounting Period” as used herein shall mean the period from
April 1, 2014 through July 1, 2014 or such earlier expiration or termination of this Contract. 

 All other terms and conditions of
the Contract shall remain unchanged. 
 IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed by their duly authorized
representative(s) as follows: 
  

													
	this 	 	  22nd   	 	day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 AFFIRMATIVE INSURANCE COMPANY 

/s/ Michael J. McClure 
  

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
  

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Third Point)
	  	3 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

													
	And on this 	 	  22nd  	 	 day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 THIRD POINT REINSURANCE COMPANY LTD. 

/s/ Third Point Reinsurance Company Ltd. 

 
 Market Reference Number: 

AFFIRMATIVE INSURANCE COMPANY 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Third Point)
	  	4 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 ENDORSEMENT NO. 2 

to the 

INTERESTS AND LIABILITIES AGREEMENT 

Effective: December 31, 2013 

(the “Agreement”) 

of 
 TOKIO
MILLENNIUM RE AG 
 (the “Subscribing Reinsurer”) 

with respect to the 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 

Effective: December 31, 2013 

(the “Contract”) 
 issued
to 
 AFFIRMATIVE INSURANCE COMPANY 

Burr Ridge, Illinois 
 (the
“Company”) 
 Addendum No. 2 to the Contract shall form part of the Contract effective December 31, 2013. 

Effective December 31, 2013, as respects the Subscribing Reinsurer’s participation in the Contract, the following shall apply: 

 

	1.	Paragraph A of Article 2 – Term (as previously amended by Addendum No. 1 to the Contract) – is amended to read: 

  

	 	A.	This Contract shall take effect on December 31, 2013 and shall remain in effect until July 1, 2014, applying to losses commencing during the term of this Contract. 

 

	2.	The following Commission Adjustment shall apply in lieu of Article 12 – Commission Adjustment: 

  

	 	A.	The provisional commission allowed the Company shall be adjusted in accordance with the provisions set forth herein for each Accounting Period as hereinafter defined. The adjusted commission rate shall be calculated as
follows and be applied to Net Premiums Earned for the Accounting Period under consideration: 

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Tokio Millenn)
	  	1 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

	 	1.	As respects the First Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 73.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 73.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 73.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 95.0%. 

  

	 	2.	As respects the Second Accounting Period, the following shall apply: 

  

	 	a.	if the ratio of Losses Incurred to Net Premiums Earned is 69.0% or greater, the adjusted commission rate shall be 22.0%; 

  

	 	b.	if the ratio of Losses Incurred to Net Premiums Earned is less than 69.0%, the adjusted commission rate shall be 22.0%, plus 100.0% of the difference in percentage points between 69.0% and the actual ratio of Losses
Incurred to Net Premiums Earned, sliding 1:1 to a maximum ceding commission of 91.0%. 

  

	 	B.	Within 18 months following the inception of this Contract, and every six months thereafter until all losses under Policies covered hereunder have been settled, the Company shall calculate and report the adjusted
commission on Net Premiums Earned for this Contract. Each calculation shall be based on cumulative transactions hereunder from the beginning of this Contract through the date of adjustment. If the adjusted commission on Net Premium Earned as of the
date of adjustment is less than commissions previously allowed by the Reinsurer, the Company shall remit the difference to the Reinsurer with its report. If, for any calculation, the adjusted commission on Net Premiums Earned is greater than
commissions previously allowed by the Reinsurer on Net Premiums Earned, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report. 

 

	 	C.	“First Accounting Period” as used herein shall mean the period from December 31, 2013 through March 31, 2014. “Second Accounting Period” as used herein shall mean the period from
April 1, 2014 through expiration or termination of this Contract. 

  

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Tokio Millenn)
	  	2 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

 All other terms and conditions of the Contract shall remain unchanged. 

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed by their duly authorized representative(s) as follows: 

 

													
	this 	 	  22nd   	 	day of 	 	  May  	 	, in the year 	 	  2014  	 	.

 AFFIRMATIVE INSURANCE COMPANY 

/s/ Michael J. McClure 
  

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
  

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Tokio Millenn)
	  	3 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

 

 
  

													
	And on this 	 	  5th  	 	 day of 	 	  June  	 	, in the year 	 	  2014  	 	.

 TOKIO MILLENNIUM RE AG, BERMUDA BRANCH 

/s/ Tokio Millennium Re AG 
  

Market Reference Number: 560053-13 

AFFIRMATIVE INSURANCE COMPANY 

AUTOMOBILE QUOTA SHARE REINSURANCE CONTRACT 
  

  

					
	Effective: December 31, 2013	  		  	DOC: May 22, 2014
	 U4VT0008 (Tokio Millenn)
	  	4 of 4	  	Endorsement No. 2
		  		  	Effective: December 31, 2013

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