Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period year ended:
 
COMMISSION FILE NUMBER:
June 30, 2012
 
000-54627
ATLAS FINANCIAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
 
 
CAYMAN ISLANDS
  
27-5466079

(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
 
 
150 NW POINT BOULEVARD
  
60007
Elk Grove Village, IL
  
(Zip Code)
(Address of principal executive offices)
  
 
Registrant’s telephone number, including area code: (847) 472-6700
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS:
 
 
 
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Common, $0.001 par value per share
 
 
 
TSX Venture Exchange


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   þ No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
      Large Accelerated Filer ¨                              Accelerated Filer          ¨         
Non-Accelerated Filer ¨                              Smaller Reporting Company     ¨
(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   ¨    No   þ

There were 18,433,153 shares of the Registrant's common stock outstanding as of August 1, 2012 of which 4,628,292 shares as of August 1, 2012 were held by non-affiliates of the Registrant.

For purposes of the foregoing calculation only, the Registrant has included in the shares owned by affiliates, and those shares owned by directors and officers of the Registrant, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.



ATLAS FINANCIAL HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2012


  2
  2
 

  2
 

  3
 

  4
 

  5
 

  6
 
 
 

  15
 
 
 
  31
 
 
 
 
  33
 
 
 
  33
 
 
 
  33
 
 
 
  33
 
 
 
  33
 
 
 
  33
 
 
 
  33
 
 
 
  34


1

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

ATLAS FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands, except par values)


June 30, 2012
(unaudited)
 
December 31,
2011
Assets
 
 
 
Investments, available for sale
 
 
 
Fixed income securities, at fair value (Amortized cost $102,109 and $101,473)
$
104,622

 
$
103,491

Equity securities, at fair value (cost $994)
1,327

 
1,141

Total Investments
105,949

 
104,632

Cash and cash equivalents
17,592

 
23,249

Accrued investment income
626

 
586

Accounts receivable and other assets (Net of allowance of $606 and $4,254)
14,764

 
9,579

Reinsurance recoverables, net
8,545

 
8,044

Prepaid reinsurance premiums
1,961

 
2,214

Deferred policy acquisition costs
2,781

 
3,020

Deferred tax asset, net
6,544

 
6,775

Software and office equipment, net
1,008

 
440

Assets held for sale
166

 
13,634

Total Assets
$
159,936

 
$
172,173

 
 
 
 
Liabilities
 
 
 
Claims liabilities
$
77,350

 
$
91,643

Unearned premiums
17,612

 
15,691

Due to reinsurers and other insurers
4,843

 
5,701

Other liabilities and accrued expenses
3,100

 
2,884

Total Liabilities
$
102,905

 
$
115,919

 
 
 
 
Shareholders’ Equity
 
 
 
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at June 30, 2012 and December 31, 2011. Liquidation value $1.00 per share
$
18,000

 
$
18,000

Ordinary voting common shares, par value per share $0.001, 800,000,000 shares authorized, 4,628,292 shares issued and outstanding at June 30, 2012 and 4,625,526 at December 31, 2011
4

 
4

Restricted voting common shares, par value per share $0.001, 100,000,000 shares authorized, 13,804,861 shares issued and outstanding at June 30, 2012 and December 31, 2011
14

 
14

Additional paid-in capital
152,713

 
152,652

Retained deficit
(115,576
)
 
(115,841
)
Accumulated other comprehensive income, net of tax
1,876

 
1,425

Total Shareholders’ Equity
$
57,031

 
$
56,254

Total Liabilities and Shareholders’ Equity
$
159,936

 
$
172,173


See accompanying Notes to Condensed Consolidated Financial Statements.


2

Table of Contents


ATLAS FINANCIAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
($ in thousands, except per share data)
 
Three Months Ended
Six Months Ended
 
June 30, 2012
 
June 30, 2011
June 30, 2012
 
June 30, 2011
Net premiums earned
$
7,552

 
$
9,062

$
15,861

 
$
17,871

Net claims incurred
5,408

 
6,723

11,312

 
13,612

Acquisition costs
1,395

 
1,844

2,768

 
3,623

Other underwriting expenses
1,617

 
1,773

3,267

 
3,821

Underwriting loss
(868
)
 
(1,278
)
(1,486
)
 
(3,185
)
Net investment income
657

 
934

1,265

 
1,933

Net investment gains
291

 
417

319

 
850

Other income (expense), net
50

 
120

167

 
(110
)
Income (loss) from operations before income tax (benefit)/expense
$
130

 
$
193

$
265

 
$
(512
)
Income tax expense

 


 

Net income (loss) attributable to Atlas
$
130

 
$
193

$
265

 
$
(512
)
 
 
 
 
 
 
 
Other comprehensive loss related to Available for Sale Securities:
 
 
 
 
 
Changes in net unrealized gains (losses)
$
798

 
$
520

$
1,024

 
$
139

Reclassification to income of net gains
(174
)
 
(368
)
(344
)
 
(903
)
Effect of income tax
(210
)
 

(229
)
 

Other comprehensive income/(loss) for the period
$
414

 
$
152

$
451

 
$
(764
)
Total comprehensive income/(loss)
$
544

 
$
345

$
716

 
$
(1,276
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
18,433,153

 
18,374,066

18,435,296

 
18,371,386

Loss per common share, basic
$

 
$

$
(0.01
)
 
$
(0.05
)
Diluted weighted average common shares outstanding
18,433,153

 
18,374,066

18,435,296

 
18,371,386

Loss per common share, diluted
$

 
$

$
(0.01
)
 
$
(0.05
)

See accompanying Notes to Condensed Consolidated Financial Statements.


3

Table of Contents

ATLAS FINANCIAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in thousands)
 
Six Month Periods Ended
 
June 30, 2012
 
June 30, 2011
Operating Activities
 
 
 
Net income/(loss)
$
265

 
$
(512
)
Adjustments to reconcile net loss to net cash used by operating activities:
 
 
 
Adjustments for non-cash items
315

 
581

Changes in other operating assets and liabilities
(4,162
)
 
(456
)
Changes in net claims liabilities
(14,293
)
 
(20,568
)
Net cash flows used in operating activities
(17,875
)
 
(20,955
)
 
 
 
 
Investing activities
 
 
 
Proceeds from sale and maturity of investments
31,031

 
28,937

Purchases of investments
(31,814
)
 
(23,367
)
Purchases of property and equipment and other
(345
)
 
(111
)
Proceeds from sale of property and equipment
13,342

 
1,983

Net cash flows provided by investing activities
12,214

 
7,442

 
 
 
 
Financing activities
 
 
 
Options Exercised
4

 
16

Net cash flows provided by financing activities
4

 
16

Net decrease in cash and cash equivalents

(5,657
)
 
(13,497
)
Cash and cash equivalents, beginning of period
23,249

 
19,037

Cash and cash equivalents, end of period
$
17,592

 
$
5,540

 
 
 
 
 

 
 
See accompanying Notes to Condensed Consolidated Financial Statements.
 
 
 
 



4



ATLAS FINANCIAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
($ in thousands)
 
Preferred Shares
 
Ordinary Voting Common Shares
 
Restricted Voting Common Shares
 
Additional Paid-in Capital
 
Retained Deficit
 
Accumulated Other Comprehensive Income (loss)
 
Total
Balance December 31, 2010
$
18,000

 
$
4

 
$
14

 
$
152,466

 
$
(113,371
)
 
$
3,056

 
$
60,169

Net loss
 
 
 
 
 
 
 
 
(512
)
 
 
 
(512
)
Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
(764
)
 
(764
)
Share-based compensation
 
 
 
 
 
 
57

 
 
 
 
 
57

Stock options exercised
 
 
 
 
 
 
16

 
 
 
 
 
16

Balance June 30, 2011
$
18,000

 
$
4

 
$
14

 
$
152,539

 
$
(113,883
)
 
$
2,292

 
$
58,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2011
$
18,000

 
$
4

 
$
14

 
$
152,652

 
$
(115,841
)
 
$
1,425

 
$
56,254

Net income
 
 
 
 
 
 
 
 
265

 
 
 
265

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
451

 
451

Share-based compensation
 
 
 
 
 
 
57

 
 
 
 
 
57

Stock options exercised
 
 
 
 
 
 
4

 
 
 
 
 
4

Balance June 30, 2012
$
18,000

 
$
4

 
$
14

 
$
152,713

 
$
(115,576
)
 
$
1,876

 
$
57,031

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying Notes to Condensed Consolidated Financial Statements.


5


ATLAS FINANCIAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
( All amounts in thousands of US dollars, except for amounts preceded by “C” as Canadian dollars, share and per share amounts)

1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Atlas Financial Holdings, Inc. ("Atlas", or "The Company") and its insurance subsidiaries, American Service Insurance Company, Inc. (“American Service”) and American Country Insurance Company (“American Country”), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and the results of operations. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the audited financial statements and the footnotes thereto included in the Company’s latest Annual Report on Form 10-K (as amended).
The primary business of Atlas, which is carried out through its insurance subsidiaries, is the underwriting of commercial automobile insurance policies in the United States, with a niche market orientation and focus on insurance in the “light” commercial automobile sector. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business autos. Automobile insurance products provide insurance coverage in three major areas: liability, accident benefits and physical damage. Liability insurance provides coverage where the insured is responsible for an automobile accident, for the payment for injuries and property damage to third parties. Accident benefit policies or personal injury protection policies provide coverage for loss of income, medical and rehabilitation expenses for insured persons who are injured in an automobile accident, regardless of fault. Physical damage coverage provides for the payment of damages to an insured automobile arising from a collision with another object or from other risks such as fire or theft. In the short run, automobile physical damage and liability coverage generally provides more predictable results than automobile accident benefit or personal injury insurance.
Atlas' insurance subsidiaries distribute their insurance products through a network of independent retail agents. Together, American Country and American Service are licensed to write property and casualty (“P&C”) insurance in 47 states in the United States. The management and operating infrastructure of the insurance subsidiaries are fully integrated.
Seasonality - The P&C insurance business is seasonal in nature. While Atlas' net premiums earned are generally stable from quarter to quarter, Atlas' gross premiums written follow the common renewal dates for the "light" commercial risks that represent its core lines of business. For example, January 1 and March 1 are common taxi cab renewal dates in Illinois and New York, respectively. Net underwriting income is driven mainly by the timing and nature of claims, which can vary widely. Atlas' ability to generate written premium is also impacted by the timing of policy periods in the states in which Atlas operates.
The accounting policies followed in these unaudited condensed consolidated financial statements are identical as those applied in Atlas' audited annual consolidated financial statements on Form 10-K for the period ended December 31, 2011. Atlas has consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect.
2. NEW ACCOUNTING STANDARDS
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts - In October 2010, the Financial Accounting Standards Board ("FASB") issued guidance modifying the definition of the types of costs incurred by insurance entities that can be capitalized in the acquisition of new and renewal insurance contracts. The guidance specifies that the costs must be directly related to the successful acquisition of insurance contracts. The guidance also specifies that advertising costs should be included as deferred acquisition costs only when the direct−response advertising accounting criteria are met. The new guidance became effective for reporting periods beginning after December 15, 2011. Atlas' previous policy for accounting for acquisition costs was already consistent with this guidance. Therefore the adoption of this guidance in the three and six month periods ended June 30, 2012 did not have an impact on our financial statements.
Amendments to Fair Value Measurement and Disclosure Requirements - In May 2011, the FASB issued guidance that clarifies the application of existing fair value measurement and disclosure requirements and amends certain fair value measurement principles, requirements and disclosures. Changes were made to improve consistency in global application. The guidance is to be applied prospectively for reporting periods beginning after December 15, 2011. Early adoption was not permitted. The impact of adoption was not material to the Company's results of operations or financial position.
Presentation of Comprehensive Income - In June and December 2011, the FASB issued guidance amending the presentation of comprehensive income and its components. Under the new guidance, a reporting entity has the option to present comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance is effective for reporting periods beginning after December 15, 2011 and is to be applied retrospectively. The new guidance affected presentation only and had no material impact on the Company's results of operations or financial position.


3. EARNINGS PER SHARE
Earnings per ordinary and restricted voting common share for the three and six month periods ended June 30, 2012 and June 30, 2011 is as follows:
 
 
Three Month Periods Ended
 
Six Month Periods Ended
 
June 30, 2012
June 30, 2011
 
June 30, 2012
June 30, 2011
Net income/(loss) attributable to Atlas
$
130

$
193

 
$
265

$
(512
)
Less: Preferred share dividends
202

202

 
402

402

Net loss attributable to common shareholders
(72
)
(9
)
 
(137
)
(914
)
Basic:
 
 
 
 
 
 
Weighted average common shares outstanding
18,433,153

18,374,066

 
18,435,296

18,371,386

Basic loss per common share
$

$

 
$
(0.01
)
$
(0.05
)
Diluted:
 
 
 
 
 
 
Weighted average common shares outstanding
18,433,153

18,374,066

 
18,435,296

18,371,386

 
Dilutive potential ordinary shares


 


Dilutive average common shares outstanding
18,433,153

18,374,066

 
18,435,296

18,371,386

Dilutive loss per common share
$

$

 
$
(0.01
)
$
(0.05
)
For 2012 and 2011, basic loss per common share has been computed by dividing net loss attributable to common shareholders for the period by the weighted average number of common shares outstanding during the period.
Diluted loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding each period plus the incremental number of shares added as a result of converting dilutive potential ordinary shares, calculated using the treasury stock method. Atlas’ dilutive potential common shares consist of outstanding stock options and warrants to purchase ordinary voting common shares. The effects of options and warrants to issue ordinary voting common shares are excluded from the computation of diluted loss per share in periods in which the effect would be anti-dilutive. For both the three and six month periods ended June 30, 2012 and June 30, 2011 , potential ordinary voting common shares were anti-dilutive due to the net loss attributable to common shareholders.
4. INVESTMENTS
The amortized cost, gross unrealized gains and losses and fair value for Atlas’ investments are as follows:
June 30, 2012
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
 
 
 
 
 
 
Fixed Income:
 
 
 
 
 
U.S.
- Government
$
36,213

$
955

$
2

$
37,166

 
- Corporate
40,690

1,115


41,805

 
- Commercial mortgage backed
20,710

346

15

21,041

 
- Other asset backed
4,496

117

3

4,610

Total Fixed Income
 
$
102,109

$
2,533

$
20

$
104,622

Equities
 
994

333


1,327

 Totals
 
$
103,103

$
2,866

$
20

$
105,949


6


December 31, 2011
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
 
 
 
 
 
 
Fixed Income:
 
 
 
 
 
U.S.
- Government
$
44,835

$
911

$

$
45,746

 
- Corporate
35,572

825

24

36,373

 
- Commercial mortgage backed
17,493

208


17,701

 
- Other asset backed
3,573

99

1

3,671

Total Fixed Income
 
$
101,473

$
2,043

$
25

$
103,491

Equities
 
994

147


1,141

 Totals
 
$
102,467

$
2,190

$
25

$
104,632

The following tables summarize carrying amounts of fixed income securities by contractual maturity. As certain securities and debentures have the right to call or prepay obligations, the actual settlement dates may differ from contractual maturity.
As at the period ended June 30, 2012
One year or less
One to five years
Five to ten years
More than ten years
Total
Fixed Income Securities
$
20,359

$
22,035

$
18,177

$
44,051

$
104,622

Percentage of total
19.5
%
21.1
%
17.4
%
42.0
%
100.0
%
As at the year ended December 31, 2011
One year or less
One to five years
Five to ten years
More than ten years
Total
Fixed Income Securities
$
29,407

$
27,317

$
10,242

$
36,525

$
103,491

Percentage of total
28.4
%
26.4
%
9.9
%
35.3
%
100.0
%
Management performs a quarterly analysis of Atlas’ investment holdings to determine if declines in fair value are other than temporary. The analysis includes some or all of the following procedures as deemed appropriate by management:
identifying all security holdings in unrealized loss positions that have existed for at least six months or other circumstances that management believes may impact the recoverability of the security;
obtaining a valuation analysis from third party investment managers regarding these holdings based on their knowledge, experience and other market based valuation techniques;
reviewing the trading range of certain securities over the preceding calendar period;
assessing if declines in market value are other than temporary for debt security holdings based on their investment grade credit ratings from third party security rating agencies;
assessing if declines in market value are other than temporary for any debt security holding with a non-investment grade credit rating based on the continuity of its debt service record; and
determining the necessary provision for declines in market value that are considered other than temporary based on the analyses performed.
The risks and uncertainties inherent in the assessment methodology utilized to determine declines in market value that are other than temporary include, but may not be limited to, the following:
the opinion of professional investment managers could be incorrect;
the past trading patterns of individual securities may not reflect future valuation trends;
the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company’s financial situation; and
the debt service pattern of non-investment grade securities may not reflect future debt service capabilities and may not reflect a company’s unknown underlying financial problems.
There were no impairments recorded in the three month period ended June 30, 2012 or the year ended December 31, 2011 as a result of the above analysis performed by management to determine declines in fair value that may be other than temporary. All securities in an unrealized loss position as at the period ended June 30, 2012 and as at the year ended December 31, 2011 have been in said position for less than 12 months.
The following table summarizes the components of net investment income for the three month periods ended June 30, 2012 and 2011 :

7



 
 
June 30, 2012
June 30, 2011
Total investment income
 
 
 
 
Interest (from fixed income securities)
$
744

$
1,038

Investment expenses
 
(87
)
(104
)
Net investment income
 
$
657

$
934

Collateral pledged:
As at the period ended June 30, 2012 , bonds and term deposits with a fair value of $9,783 were on deposit with state and provincial regulatory authorities, versus $11,843 as at the year ended December 31, 2011 . Also, from time to time, the Company pledges securities to third parties to collateralize liabilities incurred under its policies of insurance. As at the period ended June 30, 2012 , the amount of such pledged securities was $11,596 versus $10,396 at December 31, 2011. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company’s standard risk management controls. These assets and investment income related thereto remain the property of the Company while pledged. Neither the state and/or provincial regulatory authorities nor any other third party has the right to re-pledge or sell said securities held on deposit.
5. FINANCIAL AND CREDIT RISK MANAGEMENT
By virtue of the nature of Atlas’ business activities, financial instruments make up the majority of the balance sheet. The risks which arise from transacting financial instruments include credit risk, market risk, liquidity risk and cash flow risk. These risks may be caused by factors specific to an individual instrument or factors affecting all instruments traded in the market. Atlas has a risk management framework in place to monitor, evaluate and manage the risks assumed in conducting its business. Atlas’ risk management policies and practices are as follows:
Credit risk - Atlas is exposed to credit risk principally through its fixed income securities and balances receivable from policyholders and reinsurers. Atlas controls and monitors concentration and credit quality risk through policies to limit and monitor its exposure to individual issuers or related groups (with the exception of U.S. Government bonds) as well as through ongoing review of the credit ratings of issuers held in the securities portfolio. Atlas’ credit exposure to any one individual policyholder is not material. Atlas has policies requiring evaluation of the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvency.
Atlas' allowance for bad debt as at the year ended December 31, 2011 primarily related to a single agent. Settlement proceedings with this agent were executed in April 2012, and resulted in a minor recovery of previously fully reserved amounts. As a result, in the three month periods ended June 30, 2012 and 2011 , Atlas recognized $79 in income from the settlement of bad debts (substantially related to the aforementioned agent) and $35 of bad debt expense, respectively.
Equity price risk - This is the risk of loss due to adverse movements in equity prices. Atlas' investment in equity securities comprises a small percentage of its total portfolio, and as a result, the exposure to this type of risk is minimal.
Foreign currency risk - Atlas is not currently exposed to material changes in the U.S. dollar currency exchange rates with any other foreign currency.
Liquidity and cash flow risk - Liquidity risk is the risk of having insufficient cash resources to meet current financial obligations without raising funds at unfavorable rates or selling assets on a forced basis. Liquidity risk arises from general business activities and in the course of managing the assets and liabilities of Atlas. There is the risk of loss to the extent that the sale of a security prior to its maturity is required to provide liquidity to satisfy policyholder and other cash outflows. Cash flow risk arises from risk that future inflation of policyholder cash flow exceeds returns on long-term investment securities. The purpose of liquidity and cash flow management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they fall due. The liquidity and cash flow requirements of Atlas’ business have been met primarily by funds generated from operations, asset maturities and income and other returns received on securities. Cash provided from these sources is used primarily for claims and claim adjustment expense payments and operating expenses. The timing and amount of catastrophe claims are inherently unpredictable and may create increased liquidity requirements.
Fair value - Fair value amounts represent estimates of the consideration that would currently be agreed upon between knowledgeable, willing parties who are under no compulsion to act.
Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market based inputs are used to estimate the fair value. These valuation models may use

8


multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. The calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values.
Atlas records the available for sale securities held in its securities portfolio at their fair value. Atlas primarily uses the services of external securities pricing vendors to obtain these values. The securities are valued using quoted market prices or prices established using observable market inputs. In volatile market conditions, these quoted market prices or observable market inputs can change rapidly causing a significant impact on fair value and financial results recorded.
Atlas employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The hierarchy is comprised of quoted market prices (Level 1), third party models using observable market information (Level 2) and internal models without observable market information (Level 3). The following table summarizes Atlas' investments at fair value as at the three month period ended June 30, 2012 and as at the year ended December 31, 2011 :
June 30, 2012
Level 1
Level 2
Level 3
Total
Fixed Income Securities
$
9,727

$
94,895

$

$
104,622

Equities
1,327



1,327

Totals
$
11,054

$
94,895

$

$
105,949

December 31, 2011
Level 1
Level 2
Level 3
Total
Fixed Income Securities
$
13,363

$
90,128

$

$
103,491

Equities
1,141



1,141

Totals
$
14,504

$
90,128

$

$
104,632

Of the total portfolio of fixed income securities, only holdings of U.S. Treasury Securities are classified within Level 1. There were no transfers in or out of Level 2 during either period.
Capital Management - The Company manages capital using both regulatory capital measures and internal metrics. The Company’s capital is primarily derived from common shareholders’ equity, retained deficit and accumulated other comprehensive income (loss).
As a holding company, Atlas could derive cash from its insurance subsidiaries generally in the form of dividends to meet its obligations, which will primarily consist of operating expense payments. Atlas’ insurance subsidiaries fund their obligations primarily through premium and investment income and maturities in the securities portfolio. The insurance subsidiaries require regulatory approval for the return of capital and, in certain circumstances, prior to the payment of dividends. In the event that dividends available to the holding company are inadequate to cover its operating expenses, the holding company would need to raise capital, sell assets or incur future debt.
The insurance subsidiaries must each maintain a minimum statutory capital and surplus of $1,500 under the provisions of the Illinois Insurance Code. Dividends may only be paid from statutory unassigned surplus, and payments may not be made if such surplus is less than a stipulated amount. The dividend restriction is the greater of statutory net income or 10% of total statutory capital and surplus.
Net loss computed under statutory-basis accounting for American Country and American Service were $(2,328) and $(497) respectively for the year ended December 31, 2011 , versus $(1,451) and $(5,351) for the year ended December 31, 2010. Statutory capital and surplus of the insurance subsidiaries was $49,954 and $45,560 at December 31, 2011 and 2010, respectively.
Atlas did not pay any dividends to its common shareholders during the three month period ended June 30, 2012 or in the year ended December 31, 2011, and has no current plans to pay dividends to its common shareholders.

6. INCOME TAXES
The effective tax rate was 0.0% for both of the three month periods ended June 30, 2012 and 2011 , respectively, compared to the U.S. statutory income tax rate of 34% as shown below:

9


 
3 months ended
 
6 months ended
 
June 30, 2012
June 30, 2011
 
June 30, 2012
 
June 30, 2011
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
Expected income tax benefit at statutory rate
$
44

 
34.0
 %
 
$
66

 
34.0
 %
 
$
90

 
34.0
 %
 
$
(174
)
 
34.0
 %
Valuation allowance
(44
)
 
(34.0
)%
 
(108
)
 
(56.0
)%
 
(92
)
 
(34.8
)%
 
131

 
(25.6
)%
Nondeductible expenses
1

 
0.8
 %
 
42

 
22.0
 %
 
5

 
1.9
 %
 
43

 
(8.4
)%
Other
(1
)
 
(0.8
)%
 

 
 %
 
(3
)
 
(1.1
)%
 

 
 %
Total
$

 
 %
 
$

 
 %
 
$

 
 %
 
$

 
 %
Upon the transaction forming Atlas on December 31, 2010, a yearly limitation as required by U.S. tax law Section 382 that applies to changes in ownership on the future utilization of Atlas’ net operating loss carry-forwards was calculated. The insurance subsidiaries’ prior parent retained those tax assets previously attributed to the insurance subsidiaries which could not be utilized by Atlas as a result of this limitation. As a result, Atlas’ ability to recognize future tax benefits associated with a portion of its deferred tax assets generated during prior years and the current year have been permanently limited to the amount determined under U.S. tax law Section 382. The result is a maximum expected net deferred tax asset which Atlas has available after the merger which is believed more-likely-than-not to be utilized in the future, after consideration of valuation allowance.
Income tax expense consists of the following for the six month period ended June 30, 2012 :
 
2012
2011
Current tax expense/(benefit)
$

$

Deferred tax (benefit)/expense


Total
$

$

The components of deferred income tax assets and liabilities as of June 30, 2012 and December 31, 2011 are as follows:
 
June 30, 2012
December 31, 2011
Deferred tax assets:
 
 
Unpaid claims and unearned premiums
$
2,822

$
3,004

Loss carry-forwards
16,520

15,558

Bad debts
101

1,297

Other
1,480

1,338

Valuation Allowance
(12,269
)
(12,361
)
Total deferred tax assets, net of allowance
$
8,654

$
8,836

 
 
 
Deferred tax liabilities:
 
 
Investment securities
967

740

Deferred policy acquisition costs
946

1,027

Other
197

294

Total gross deferred tax liabilities
$
2,110

$
2,061

Net deferred tax assets
$
6,544

$
6,775


10


Amounts and expiration dates of the operating loss carry forwards as of June 30, 2012 are as follows:
Year of Occurrence
Year of Expiration
Amount
2001
2021
$
14,750

2002
2022
4,317

2006
2026
7,825

2007
2027
5,131

2008
2028
1,949

2009
2029
1,949

2010
2030
1,949

2011
2031
7,762

2012
2032
2,957

Total
 
$
48,589

Atlas established a valuation allowance of $ 12,269 and $ 12,361 for its gross deferred tax assets as at the period ended June 30, 2012 and as at the year ended December 31, 2011 , respectively.
Atlas accounts for uncertain tax positions in accordance with the income taxes accounting guidance. Atlas has analyzed filing positions in the federal and state jurisdiction where it is required to file tax returns, as well as the open tax years in these jurisdictions. Atlas believes that its federal and state income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal and state income tax positions have been recorded. Atlas would recognize interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. Atlas did not incur any federal income tax related interest income, interest expense or penalties for the three month periods ended June 30, 2012 and 2011 . Tax years 2006 through 2011 are subject to examination by the Internal Revenue Service.

7. ASSETS HELD FOR SALE
On May 22, 2012, Atlas closed the sale of the headquarters building to 150 Northwest Point, LLC, a Delaware limited liability company. Atlas also leased back one floor of the building after the sale for a 5 year term. As at the year ended December 31, 2011 , the property was recorded as a component of assets held for sale on Atlas' statement of financial position.
The total sales price of the property, which was paid in cash, amounted to $13,975 , less closing costs and related expenses of approximately $633 . In connection with the sale, the Company also wrote down an accrual of approximately $ 792 held for real-estate taxes. Approximately $ 830 of the sales price was held in escrow for real-estate taxes.
Atlas recognized a gain on the sale of the property of $213 , which will be deferred and recognized over the 5 year lease term. In the three month period ended June 30, 2012 , Atlas recognized $5 as income.
There are two properties located in Alabama which remain for sale. These properties are listed for amounts greater than carried values. Both were assets of Southern United Fire Insurance Company, which was merged into American Service in February 2010.
8. UNDERWRITING POLICY AND REINSURANCE CEDED
Underwriting Risk - Underwriting risk is the risk that the total cost of claims and acquisition expenses will exceed premiums received and can arise from numerous factors, including pricing risk, reserving risk, catastrophic loss risk, reinsurance coverage risk and that loss and loss adjustment expense reserves are not sufficient.
Reinsurance Ceded - As is customary in the insurance industry, Atlas reinsures portions of certain insurance policies it writes, thereby providing a greater diversification of risk and minimizing exposure on larger risks. Atlas remains contingently at risk with respect to any reinsurance ceded and would incur an additional loss if an assuming company were unable to meet its obligation under the reinsurance treaty.
Atlas monitors the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium, ceded loss reserve balances and ceded paid losses. These policies mitigate the risk of credit quality or dispute from becoming a danger to financial strength. To date, the Company has not experienced any material difficulties in collecting reinsurance recoverables.
Gross premiums written and ceded premiums, losses and commissions as of and for the three and six month periods ended June 30, 2012 and June 30, 2011 are as follows:
 
3 months ended
 
6 months ended
 
June 30, 2012
June 30, 2011
 
June 30, 2012
June 30, 2011
Gross premiums written
$
9,242

$
7,856

 
$
20,996

$
22,022

Ceded premiums written
1,427

1,455

 
2,960

3,206

Net premiums written
7,815

6,401

 
18,036

18,816


 
 
 
 
 
Ceded premiums earned
$
1,570

$
1,844

 
$
3,213

$
4,166

Ceded losses and loss adjustment expenses
605

787

 
1,410

202

Ceded commissions
484

685

 
1,053

1,360

 
 
 
 
 
 
Ceded unpaid losses and loss adjustment expenses
8,153

7,968

 
 
 
Ceded unearned premiums
1,961

2,734

 
 
 
Other amounts due from reinsurers
393

618

 
 
 
 
 
 
 
 
 
9. UNPAID CLAIMS
Claims liabilities - The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the three and six month periods ended June 30, 2012 and June 30, 2011 were as follows:
 
Three Months Ended
Six Months Ended
 
June 30, 2012

 
June 30, 2011

June 30, 2012

 
June 30, 2011

Unpaid claims, beginning of period
$
83,902

 
$
119,604

$
91,643

 
$
132,579

Less: reinsurance recoverable
8,081

 
7,077

7,825

 
6,477

Net beginning unpaid claims reserves
75,821

 
112,527

83,818

 
126,102

Incurred related to:
 
 
 
 
 
 
Current year
5,367

 
6,731

11,165

 
13,635

Prior years
41

 
(8
)
147

 
(23
)
 
5,408

 
6,723

11,312

 
13,612

Paid related to:
 
 
 
 
 
 
Current year
2,264

 
2,335

3,921

 
4,173

Prior years
9,768

 
12,872

22,012

 
31,498

 
12,032

 
15,207

25,933

 
35,671

 
 
 
 
 
 
 
Net unpaid claims, end of period
$
69,197

 
$
104,043

$
69,197

 
$
104,043

Add: reinsurance recoverable
8,153

 
7,968

8,153

 
7,968

Unpaid claims, end of period
$
77,350

 
$
112,011

$
77,350

 
$
112,011

The process of establishing the estimated provision for unpaid claims is complex and imprecise as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results will deviate, perhaps substantially, from the best estimates made.
10. STOCK OPTIONS AND WARRANTS
Stock options - Stock option activity for the three month periods ended June 30, 2012 and 2011 follows (all prices in Canadian dollars):
 
June 30, 2012
June 30, 2011
 
Number
Avg. Price
Number
Avg. Price
Outstanding, beginning of period
408,325

$
1.90

110,600

$
1.00

Granted


369,749

2.00

Exercised
(2,766
)
1.00

(15,703
)
1.00

Expired
(3,710
)
1.00



Outstanding, end of period
401,849

$
1.92

464,646

$
1.80

Information about options outstanding at June 30, 2012 is as follows:

11


Grant Date
Expiration Date
Number Outstanding
Number Exercisable
January 18, 2011
January 18, 2021
369,749

184,874

March 18, 2010
March 18, 2020
32,100

32,100

Total
 
401,849

216,974

On January 18, 2011, Atlas granted options to purchase 369,749 ordinary shares of Atlas stock to officers and directors at an exercise price of C $2.00 per share. The options vest 25% at date of grant and 25% on each of the next three anniversary dates and expire on January 18, 2021. The weighted average grant date fair value of the options is C $1.24 per share.
The Black-Scholes option pricing model was used to estimate the fair value of compensation expense using the following assumptions – risk-free interest rate 2.27% to 3.13% ; dividend yield 0.0% ; expected volatility 100% ; expected life of 6 to 9 years.
In accordance with Accounting Standard Codification 718 (Stock-Based Compensation), Atlas has recognized stock compensation expense on a straight-line basis over the requisite service period of the last separately vesting portion of the award. In the six month periods ended June 30, 2012 and June 30, 2011 respectively, Atlas recognized $57 and $57 in expense, which is a component of other underwriting expenses on the income statement. Total unrecognized stock compensation expense associated with the January 18, 2011 grant is $281 as at the period ended June 30, 2012 which will be recognized ratably through the next 2.5 years.
The weighted average exercise price of all the shares exercisable at June 30, 2012 and December 31, 2011 was C $1.85 and the grants have a weighted average remaining life of 8.8 years. The stock options granted on January 18, 2011 have an intrinsic value of $0 as at the period ended June 30, 2012 .
Warrants - On November 1, 2010, American Acquisition closed a private placement where it issued 3,983,502 subscription receipts for ordinary voting common shares of Atlas and warrants to purchase 3,983,502 ordinary voting common shares of Atlas for C$2.00 per share in connection with the merger. The subscription receipts were converted to Atlas ordinary voting shares in connection with the merger. All the warrants were still outstanding at June 30, 2012 and expire on December 31, 2013.
Atlas' closing stock price on June 29, 2012 (the last trading day of the quarter) was C$1.50.
11. OTHER EMPLOYEE BENEFIT PLANS
Defined Benefit Plan – Prior to December 31, 1997, substantially all salaried employees of American Country were covered by a defined benefit pension plan known as the American Country Pension Plan (the “pension plan”). Benefits were based on the employee’s length of service and wages and benefits, as defined by the pension plan. The funding policy of the pension plan was generally to contribute amounts required to maintain minimum funding standards in accordance with the Employee Retirement Income Security Act. Effective December 31, 1997, upon resolution by the board of directors, the pension plan was frozen. During 2010, American Country made an application to the U.S. Internal Revenue Service to dissolve the pension plan and distribute the net plan assets to the beneficiaries. In the fourth quarter of 2011, the plan assets were fully distributed. As a result of the plan liquidation, the Company recognized a settlement charge of $2,544 within other underwriting expenses in the fourth quarter of 2011. The settlement impact was previously reflected as an unrecognized adjustment to other comprehensive income and therefore, had created a nil impact to shareholders' equity.
Defined Contribution Plan - In January 2011, Atlas formed a defined contribution 401(k) plan covering all qualified employees of Atlas and its subsidiaries. Employees can choose to contribute up to 60% of their annual earnings but not more than $17,000 for 2011 to the plan. Qualifying employees age 50 and older can contribute an additional $5,500 in 2012. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant. Atlas contributions are discretionary. Employees are 100% vested in their own contributions and vest in Atlas contributions based on years of service with 100% vested after five years. Company contributions were $57 and $51 for the six months ended June 30, 2012 and 2011, respectively.
Employee Stock Purchase Plan - In the second quarter of 2011, Atlas initiated the Atlas Employee Stock Purchase Plan (the “ESPP”) to encourage continued employee interest in the operation, growth and development of Atlas and to provide an additional investment opportunity to employees. Beginning in June 2011, full time and permanent part time employees working more than 30 hours per week are allowed to invest up to 5% of adjusted salary in Atlas ordinary voting common shares. Atlas matches 50% of the employee contribution up to 5% of annual earnings for a total maximum expense of 2.5% of annual earnings per participant. Employees who signed up for the ESPP by May 30, 2011 each received an additional 100 ordinary voting common shares as an initial participation incentive. Atlas will also pay administrative costs related to this plan. In the six month periods ended June 30, 2012 and June 30, 2011 , Atlas incurred costs related to the plan of $26 and $10 , respectively.

12. SHARE CAPITAL
The share capital for the common shares:

12


As at:
 
June 30, 2012
December 31, 2011
 
Shares Authorized
Shares Issued and Outstanding
Amount
Shares Issued and Outstanding
 
Amount
Ordinary
800,000,000

4,628,292

$
4

4,625,526

 
$
4

Restricted
100,000,000

13,804,861

14
13,804,861

 
14
Total common shares
900,000,000

18,433,153

$
18

18,430,387

 
$
18


All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway America Inc., ("Kingsway") a wholly owned subsidiary of Kingsway Financial Services Inc. or other Kingsway subsidiaries. In the event that such shares are disposed of such that Kingsway’s beneficial interest is less than 10% of the issued and outstanding restricted voting common shares, the restricted voting common shares shall be converted into fully paid and non-assessable ordinary voting common shares.
The restricted voting common shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders.
The restricted voting common shares will convert to ordinary voting common shares in the event that these Kingsway owned shares are sold to non-affiliates of the Company.
Preferred shares are not entitled to vote and are beneficially owned or controlled by Kingsway. Preferred shareholders are entitled to dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of U.S. $0.045 per share per year ( 4.5% ) and may be paid in cash or in additional preferred shares at the option of Atlas. In liquidation, dissolution or winding-up of Atlas, preferred shareholders receive the greater of US $1.00 per share plus all declared and unpaid dividends or the amount it would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary voting common shares immediately prior to liquidation. Preferred shares are convertible into ordinary voting shares at the option of the holder at any date after the fifth year of issuance at the rate of 0.3808 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of US $1.00 per share plus accrued and unpaid dividends commencing at the earlier of two years from issuance date (December 31, 2012) of the preferred shares or the date the preferred shares are transferred to a party other than Kingsway or its subsidiaries or entities in which Kingsway holds a 10% or greater interest.
The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation or sooner, if Atlas declares dividends, is $1,212 as at the period ended June 30, 2012 .
13. DEFERRED POLICY ACQUISITION COSTS
Deferred policy acquisition costs for the six month periods ended June 30, 2012 and June 30, 2011 :
 
 
June 30, 2012
June 30, 2011
Balance, beginning of period
 
$
3,020

 
$
3,804

Acquisition costs deferred
 
2,529

 
3,325

Amortization charged to income
 
2,768

 
3,623

Balance, end of period
 
$
2,781

 
$
3,506


14. RELATED PARTY TRANSACTIONS
The business of Atlas is carried on through its insurance subsidiaries. Atlas’ insurance subsidiaries have been a party to various transactions with affiliates in the past, although activity in this regard has diminished over time. Related party transactions, including services provided to or received by Atlas’ insurance subsidiaries, are carried out in the normal course of operations and are measured at the amount of consideration paid or received as established and agreed upon by the parties. Such transactions typically include claims handling services, marketing services and commission payments. Management believes that consideration paid for such services approximates fair value.
For the six month periods ended June 30, 2012 and June 30, 2011 , Atlas incurred $ 1,031 and $ 1,255 , respectively, in commissions to Avalon Risk Management, Inc. (“Avalon”). In the six month periods ended June 30, 2012 and June 30, 2011 , Atlas also incurred expenses of $ 0 and $ 48 respectively, for marketing services performed by Avalon. Avalon was a KFSI subsidiary through October 2009, and has certain investors and directors in common with Atlas. Avalon acts as a program manager for a surety program primarily consisting of U.S. Customs bonds. In this capacity they are responsible for coordinating marketing, customer service

13


and claim handling for the surety bonds written under this agreement. This program is 100% reinsured by an unrelated third party.
As at June 30, 2012 and December 31, 2011 , Atlas reported net amounts receivable from (payable to) affiliates as follows which are included within other assets and accounts payable and accrued expenses on the balance sheets:
As at:
June 30, 2012
December 31, 2011
Kingsway America, Inc.
$
86

$
291

Universal Casualty Company
(117
)
(500
)
Kingsway Amigo Insurance Company
9

(1
)
Total
$
(22
)
$
(210
)

15. SUBSEQUENT EVENTS
Through August 13, 2012, no material reportable subsequent events have occurred.


14



Item 2. Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations
Section
Description
Page
I.
Consolidated Performance
II.
Application of Critical Accounting Estimates
III.
Operating Results
IV.
Financial Condition



15

Table of Contents

Overview
This MD&A contains “forward-looking information” which may include, but is not limited to, statements with respect to estimates of future expenses, revenue and profitability; trends affecting financial condition and results of operations; the availability and terms of additional capital; dependence on key suppliers, and other strategic partners; industry trends and the competitive and regulatory environment; the impact of losing one or more senior executives or failing to attract additional key personnel; and other factors referenced in this MD&A.
Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Atlas to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political, regulatory and social uncertainties.
Although Atlas has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this MD&A and Atlas disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty in them.


16

Table of Contents

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

I. CONSOLIDATED PERFORMANCE
Second Quarter 2012 Highlights (Comparisons are to second quarter 2011 unless otherwise noted):
Gross written premium increased by 17.6% , which included an increase of 222.6% in our core commercial auto business.
Underwriting results improved by $410 .
The combined ratio improved by 2.6%
Net income for the three month period ended June 30, 2012 was $130
Basic and diluted loss per common share was $0.00 , net of accounting treatment for preferred shares
We actively distributed our core products in thirty states during the three month period ended June 30, 2012 .
Book value per common share diluted on June 30, 2012 was $2.05 , compared to $2.03 at March 31, 2012 .
The following financial data is derived from Atlas’ unaudited condensed consolidated financial statements for the for the three and six month periods ended June 30, 2012 and June 30, 2011 :
Table 1 Selected financial information
 
3 months ended
 
6 months ended
 
June 30, 2012

June 30, 2011

 
June 30, 2012

June 30, 2011

Gross premium written
$
9,242

$
7,856

 
$
20,996

$
22,022

Net premium earned
7,552

9,062

 
15,861

17,871

Losses on claims
5,408

6,723

 
11,312

13,612

Acquisition costs
1,395

1,844

 
2,768

3,623

Other underwriting expenses
1,617

1,773

 
3,267

3,821

Net underwriting loss
(868
)
(1,278
)
 
(1,486
)
(3,185
)
Net investment and other income
998

1,471

 
1,751

2,673

Net income/(loss) before tax
130

193

 
265

(512
)
Income tax (benefit) expense


 


Net income/(loss)
$
130

$
193

 
$
265

$
(512
)
 
 
 
 
 
 
Key Financial Ratios:
 
 
 
 
 
Loss ratio
71.6
%
74.2
%
 
71.3
%
76.2
 %
Acquisition cost ratio
18.5
%
20.3
%
 
17.5
%
20.3
 %
Other underwriting expense ratio
21.4
%
19.6
%
 
20.6
%
21.4
 %
Combined ratio (see Table 6)
111.5
%
114.1
%
 
109.4
%
117.9
 %
Return on equity
0.5
%
0.7
%
 
0.5
%
(0.9
)%
Loss per common share, basic and diluted
$

$

 
$
(0.01
)
$
(0.05
)
Book value per common share, basic and diluted
$
2.05

$
2.21

 
$
2.05

$
2.21

Second Quarter 2012:
Atlas’ combined ratio for the three month period ended June 30, 2012 was 111.5% , compared to 114.1% for the three month period ended June 30, 2011 and 107.4% for the three month period ended March 31, 2012 .
As planned, core commercial automobile lines continues to be the most significant component of Atlas’ gross premium written as a result of the strategic focus on these core lines of business coupled with positive response from new and existing agents. Gross premium written related to these core commercial lines increased by 222.6% for the three month period ended June 30, 2012 as compared to three month period ended June 30, 2011 . As a result, the overall loss ratio for the three month period ended June 30, 2012 improved to 71.6% compared to 74.2% in the three month period ended June 30, 2011 and 71.0% for the three month period ended March 31, 2012 .
Investment performance and other income generated $998 of income for the three month period ended June 30, 2012 , of which $291 are realized gains. This resulted in a 2.6% annualized yield for the three month period ended June 30, 2012 . Cash and invested assets were $123,541 as at the period ended June 30, 2012 and were $4,340 lower than December 31, 2011, resulting primarily from the payment of claim settlements. This reduction in cash and invested assets is in line with expectations.
Overall, Atlas generated net income of $130 for the three month period ended June 30, 2012 . After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted loss per common share in the three month period ended June 30, 2012 was $0.00 . This compares to net income of $193 or a loss of $0.00 per common share diluted in the three month period ended June 30, 2011 and income of $135 or a loss per share of $0.00 per common share diluted in the three month period ended March 31, 2012 .

17

Table of Contents


Year to Date June 30, 2012:
Atlas’ combined ratio for the six month period ended June 30, 2012 was 109.4% , compared to 117.9% for the six month period ended June 30, 2011 . This improvement in the combined ratio was mostly attributable to the loss ratio reduction, from 76.2% to 71.3% , as a result of the exiting of the non-standard automobile lines. Our core commercial lines of business grew 106.8% during the six month period ended June 30, 2012 versus the six month period ended June 30, 2011 .
Investment performance and other income generated $1,751 of income for the six month period ended June 30, 2012 , of which $319 are realized gains. This resulted in a 2.6% annualized yield for the six month period ended June 30, 2012 .
Overall, Atlas generated net income of $265 for the six month period ended June 30, 2012 . After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted loss per common share in the six month period ended June 30, 2012 was $0.01 . This compares to a net loss of $512 or a loss of $0.05 per common share diluted in the six month period ended June 30, 2011 .
Book value per common share diluted as at the period ended June 30, 2012 was $2.05 , compared to $2.21 as at the period ended June 30, 2011 and $2.03 as at the three month period ended March 31, 2012 .


II. APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining:
Fair value and impairment of financial assets
Deferred policy acquisition costs recoverability
Reserve for property-liability insurance claims and claims expense estimation
Deferred tax asset valuation
In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. It is reasonably likely that changes in these estimates could occur from period to period and result in a material impact on our consolidated financial statements.
A brief summary of each of these critical accounting estimates follows. For a more detailed discussion of the effect of these estimates on our consolidated financial statements, and the judgments and assumptions related to these estimates, see the referenced sections of this document. For a complete summary of our significant accounting policies, see the notes to the consolidated financial statements.
Fair values of financial instruments - Atlas has used the following methods and assumptions in estimating its fair value disclosures:
Fair values for bonds and equity securities are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or values obtained from independent pricing services through a bank trustee.
Atlas' fixed income portfolio is managed by Asset Allocation Management (“AAM”), an SEC registered investment advisor specializing in the management of insurance company portfolios. Management works directly with AAM to ensure that Atlas benefits from their expertise and also evaluates investments as well as specific positions independently using internal resources. AAM has a team of credit analysts for all investment grade fixed income sectors. The investment process begins with an independent analyst review of each security's credit worthiness using both quantitative tools and qualitative review. At the issuer level, this includes reviews of past financial data, trends in financial stability, projections for the future, reliability of the management team in place, market data (credit spread, equity prices, trends in this data for the issuer and the issuer's industry). Reviews also consider industry trends and the macro-economic environment. This analysis is continuous, integrating new information as it becomes available. In short, Atlas does not rely on rating agency ratings to make investment decisions, but instead with the support of its independent investment advisors, does independent fundamental credit analysis to find the best securities possible. AAM has found that over time this process creates an ability to sell securities prior to rating agency downgrades or to buy securities before upgrades. As at the period ended June 30, 2012 , this process did not generate any significant difference in the rating assessment between Atlas' review and the rating agencies.
Atlas employs specific control processes to determine the reasonableness of the fair value of its financial assets. These processes are designed to supplement those performed by AAM to ensure that the values received from them are accurately recorded and

18

Table of Contents

that the data inputs and the valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. For example, on a continuing basis, Atlas assesses the reasonableness of individual security values which have stale prices or whose changes exceed certain thresholds as compared to previous values received from AAM or to expected prices. The portfolio is reviewed routinely for transaction volumes, new issuances, any changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for market valuations. When fair value determinations are expected to be more variable, they are validated through reviews by members of management or the Board of Directors who have relevant expertise and who are independent of those charged with executing investment transactions.
Impairment of financial assets - Atlas assesses, on a quarterly basis, whether there is objective evidence that a financial asset or group of financial assets is impaired. An investment is considered impaired when the fair value of the investment is less than its cost or amortized cost. When an investment is impaired, the Company must make a determination as to whether the impairment is other-than-temporary.
Under U.S. GAAP, with respect to an investment in an impaired debt security, other-than temporary impairment (OTTI) occurs if (a) there is intent to sell the debt security, (b) it is more likely than not it will be required to sell the debt security before its anticipated recovery, or (c) it is probable that all amounts due will be unable to be collected such that the entire cost basis of the security will not be recovered. If Atlas intends to sell the debt security, or will more likely than not be required to sell the debt security before the anticipated recovery, a loss in the entire amount of the impairment is reflected in net realized gains (losses) on investments in the consolidated statements of comprehensive income. If Atlas determines that it is probable it will be unable to collect all amounts and Atlas has no intent to sell the debt security, a credit loss is recognized in net realized gains (losses) on investments in the consolidated statements of comprehensive income to the extent that the present value of expected cash flows is less than the amortized cost basis; any difference between fair value and the new amortized cost basis (net of the credit loss) is reflected in other comprehensive income (losses), net of applicable income taxes.
Deferred policy acquisition costs - Atlas defers brokers’ commissions, premium taxes and other underwriting and marketing costs directly relating to the successful acquisition of premiums written to the extent they are considered recoverable. These costs are then expensed as the related premiums are earned. The method followed in determining the deferred policy acquisition costs limits the deferral to its realizable value by giving consideration to estimated future claims and expenses to be incurred as premiums are earned. Changes in estimates, if any, are recorded in the accounting period in which they are determined. Anticipated investment income is included in determining the realizable value of the deferred policy acquisition costs. Atlas’ deferred policy acquisition costs are reported net of deferred ceding commissions.
Valuation of deferred tax assets - Deferred taxes are recognized using the asset and liability method of accounting. Under this method the future tax consequences attributable to temporary differences in the tax basis of assets, liabilities and items recognized directly in equity and the financial reporting basis of such items are recognized in the financial statements by recording deferred tax liabilities or deferred tax assets.
Deferred tax assets related to the carry-forward of unused tax losses and credits and those arising from temporary differences are recognized only to the extent that it is probable that future taxable income will be available against which they can be utilized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
In assessing the need for a valuation allowance, Atlas considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized or if it is deemed premature to conclude that these assets will be realized in the near future, a valuation allowance is recorded.
Claims liabilities - The provision for unpaid claims represent the estimated liabilities for reported claims, plus those incurred but not yet reported and the related estimated loss adjustment expenses. Unpaid claims expenses are determined using case-basis evaluations and statistical analyses, including insurance industry loss data, and represent estimates of the ultimate cost of all claims incurred. Although considerable variability is inherent in such estimates, management believes that the liability for unpaid claims is adequate. The estimates are continually reviewed and adjusted as necessary; such adjustments are included in current operations and are accounted for as changes in estimates.



19

Table of Contents

III. OPERATING RESULTS
Gross Premium Written
Table 2   Gross premium written by line of business
 
3 months ended
 
6 months ended
 
June 30, 2012
June 30, 2011
%
 
June 30, 2012
June 30, 2011
% Change
Commercial automobile
8,209

2,545

222.6
 %
 
18,927

9,154

106.8
 %
Non-standard automobile
(143
)
3,709

(103.9
)%
 
(509
)
9,669

(105.3
)%
Other
1,176

1,602

(26.6
)%
 
2,578

3,199

(19.4
)%
 
$
9,242

$
7,856

17.6
 %
 
$
20,996

$
22,022

(4.7
)%
Table 2 above summarizes gross premium written by line of business.
Second Quarter 2012:
For the three month period ended June 30, 2012 , gross premium written was $9,242 compared to $7,856 in the three month period ended June 30, 2011 , and $11,754 in the three month period ended March 31, 2012 , representing a 17.6% increase and 21.4% decrease, respectively. The increase relative to the three month period ended June 30, 2011 is due primarily to the substantial growth of the core commercial auto business, which offset the exit of the non-standard auto line of business. The decrease relative to three month period ended March 31, 2012 is primarily the result of seasonality.
Commercial Automobile
The commercial automobile policies we underwrite provide coverage for light weight commercial vehicles typically with the minimum limits prescribed by statute, municipal or other regulatory requirements. The majority of our policy holders are individual owner or small fleet operators. In the three month period ended June 30, 2012 , gross premium written from commercial automobile was $8,209 , representing a 222.6% increase relative to the three month period ended June 30, 2011 and a 23.4% decrease compared to the three month period ended March 31, 2012 . The cessation of non-standard auto written premium allowed Atlas to focus its resources on its core line of business. As a percentage of the insurance subsidiaries’ overall book of business, commercial auto gross premium written represented 88.8% of gross premium written in the three month period ended June 30, 2012 compared to 32.4% during the three month period ended June 30, 2011 and 91.2% in the three month period ended March 31, 2012 .
Commercial automobile insurance has outperformed the overall P&C industry in each of the past ten years based on data compiled by the NAIC. Each of the specialty business lines on which Atlas’ strategy is focused is a subset of this historically profitable industry segment.
Because there are a limited number of competitors specializing in these lines of business, management believes a strong value proposition is very important to attract new business and can result in desirable retention levels as policies renew on an annual basis. There are also a relatively limited number of agents who specialize in these lines of business. As a result, strategic agent relationships are important to ensure efficient distribution.
There is a positive correlation between the economy and commercial automobile insurance in general. However, operators of commercial automobiles may be less likely than other business segments within the commercial auto line to take vehicles out of service as their businesses and business reputations rely heavily on availability. With respect to certain business lines such as the taxi line, there are also other factors such as the cost and limited supply of medallions which may discourage a policy holder from taking vehicles out of service in the face of reduced demand for the use of the vehicle.
Maintaining continuous insurance on all vehicles under dispatch is an important aspect of Atlas’ target policyholders’ businesses.
Non-Standard Automobile
Non-standard automobile insurance is principally provided to individuals who do not qualify for standard automobile insurance coverage because of their payment history, driving record, place of residence, age, vehicle type or other factors. Such drivers typically represent higher than normal risks and pay higher insurance rates for comparable coverage.
Consistent with Atlas’ focus on commercial automobile insurance, Atlas has transitioned away from the non-standard auto line in 2012. Atlas ceased renewals of policies of this type in 2011, allowing surplus and resources to be devoted to the expected growth of the commercial automobile business. The negative written premium within the non-standard auto line reflects policies canceled mid-term.
Other
This line of business is primarily comprised of Atlas’ surety business, which is 100% reinsured.

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Table of Contents

Year to Date June 30, 2012:
For the six month period ended June 30, 2012 , gross premium written was $20,996 compared to $22,022 in the six month period ended June 30, 2011 , representing a 4.7% decrease. While we saw significant gains in commercial automobile premium, there was still a small decrease relative to the six month period ended June 30, 2011 . This is due primarily to our exit from the non-standard auto line of business, which had strong premium written in the first quarter of 2011.
Commercial Automobile
In the six month period ended June 30, 2012 , gross premium written from commercial automobile was $18,927 , representing a 106.8% increase relative to six month period ended June 30, 2011 . As a percentage of the insurance subsidiaries’ overall book of business, commercial auto gross premium written represented 90.1% of gross premium written in the six month period ended June 30, 2012 compared to 41.6% during the six month period ended June 30, 2011 .

Geographic Concentration
Table 3 Gross premium written by state
 
3 months ended
 
6 months ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Michigan
$
1,833

19.8
%
 
$
772

9.8
%
 
$
3,724

17.7
%
 
$
1,718

7.8
 %
Illinois
1,448

15.7
%
 
5,092

64.8
%
 
7,012

33.4
%
 
15,315

69.5
 %
Minnesota
1,139

12.3
%
 
546

7.0
%
 
1,595

7.6
%
 
1,082

5.1
 %
New York
817

8.8
%
 
364

4.6
%
 
2,333

11.1
%
 
1,165

5.4
 %
Texas
654

7.1
%
 
129

1.6
%
 
856

4.1
%
 
341

1.5
 %
Nevada
478

5.2
%
 

%
 
478

2.3
%
 

 %
Virginia
311

3.4
%
 
18

0.2
%
 
661

3.1
%
 
(16
)
(0.1
)%
Georgia
107

1.2
%
 

%
 
602

2.9
%
 

 %
Indiana
103

1.1
%
 
431

5.5
%
 
115

0.5
%
 
1,620

7.4
 %
Other
2,352

25.4
%
 
504

6.6
%
 
3,620

17.3
%
 
797

3.6
 %
Total
$
9,242

100.0
%
 
$
7,856

100.1
%
 
$
20,996

100.0
%
 
$
22,022

100.0
 %
Second Quarter 2012:
As illustrated by the data in Table 3 above, 19.8% of Atlas’ gross premium written three month period ended June 30, 2012 came from Michigan and 47.8% came from the three states currently producing the most premium volume (Michigan, Illinois and Minnesota), as compared to 81.6% in the three month period ended June 30, 2011 (Illinois, Michigan, Minnesota) and 76.3% in the three month period ended March 31, 2012 (Illinois, New York and Michigan). This is also the first quarter where Atlas' largest state by premium volume was a state besides Illinois. Further, in the three month period ended June 30, 2012 , Atlas also made significant inroads in states such as Nevada, where Atlas had no presence in 2011. Atlas is seeing the results of its commitment to diversifying geographically by expanding in new areas of the country, leveraging experience, historical data and research. This commitment resulted in written premium in a total of 13 states during the three month period ended June 30, 2012 in which we had no presence in the three month period ended June 30, 2011 .
Year to Date June 30, 2012:
Atlas saw similar geographic diversification in the six month period ended June 30, 2012 compared to the six month period ended June 30, 2011 . 62.2% of our premium volume came from the top three states (Michigan, Illinois, New York) in 2012, compared to 84.7% in 2011.
The decline of written premiums for the six month period ended June 30, 2012 versus the six month period ended June 30, 2011 in Illinois and Indiana is primarily attributable to Atlas’ exiting the non-standard automobile insurance lines. The majority of the 2011 non-standard automobile written premiums came from those two states. This was mostly offset by gains in commercial auto premiums in other states, both in established markets such as Michigan and New York and new states like Georgia and Nevada.
Ceded Premium Written
Ceded premium written is equal to premium ceded under the terms of Atlas’ inforce reinsurance treaties. Ceded premium written decreased 2.0% to $ 1,427 for the three month period ended June 30, 2012 compared with $ 1,456 for the three month period ended June 30, 2011 , and decreased 6.9% from $1,533 for the three month period ended March 31, 2012 .
In the six month period ended June 30, 2012 , ceded premium written was $2,960 , a reduction of 7.7% from $3,207 for the six month period ended June 30, 2011 . The reduction of Atlas’ surety gross premium written is the main cause of this decline.

21

Table of Contents

Net Premium Written
Net premium written is equal to gross premium written less the ceded premium written under the terms of Atlas’ inforce reinsurance treaties. Net premium written increased 22.1% to $7,815 for the three month period ended June 30, 2012 compared with $6,400 for the three month period ended June 30, 2011 but decreased 23.5% versus the three month period ended March 31, 2012 . These changes are attributed to the combined effects of the issues cited in the ‘Gross Premium Written’ and ‘Ceded Premium Written’ sections above.
The success of our focus on commercial auto insurance in 2012 is more pronounced when viewed in terms of net premium written. As a percentage of the total net premium written, commercial auto represented 101.5% for the three month period ended June 30, 2012 and 102.7% for the three month period ended March 31, 2012 , versus only 39.3% in the three month period ended June 30, 2011 . Premium credits in the non-standard personal lines caused the percentage of core commercial auto premium to exceed 100% of the total net written premium for the three month period ended June 30, 2012.
Similarly, in the six month period ended June 30, 2012 , commercial auto insurance comprised 102.2% of the total net premium written versus just 47.5% in the six month period ended June 30, 2011 . As indicated above, premium credits in the non-standard personal lines caused the percentage of core commercial auto premium to exceed 100% of the total net written premium for the six month period ended June 30, 2012.
Net Premium Earned
Premiums are earned ratably over the term of the underlying policy. Net premium earned was $7,552 in the three month period ended June 30, 2012 , a 16.7% decrease compared with $9,062 in the three month period ended June 30, 2011 and an 9.1% decrease versus the three month period ended March 31, 2012 .
In the six month period ended June 30, 2012 , net premium earned was $15,861 , an 11.2% decrease compared to $17,871 for the six month period ended June 30, 2011 .
The decrease in net premiums earned is attributable to the written premium decline related to the transition away from non-standard automobile insurance and other non-core lines of business in early 2012. Policy periods in Atlas’ core lines of business are typically twelve months. Net earned premiums on our core lines were $6,225 in the three month period ended June 30, 2012 , a 67.5% increase compared with $3,716 in the three month period ended June 30, 2011 and a 21.3% increase versus the three month period ended March 31, 2012 . Similarly, net earned premiums on our core lines for the six month period ended June 30, 2012 were $11,356 , a 53.7% increase compared to the six month period ended June 30, 2011 .
Claims Incurred
The loss ratio relating to the claims incurred in the three month period ended June 30, 2012 was 71.6% compared to 74.2% in the three month period ended June 30, 2011 and 71.0% for the three month period ended March 31, 2012 .
For the six month period ended June 30, 2012 , the loss ratio was 71.3% , compared to 76.2% for the six month period ended June 30, 2011 .
The favorable trend in loss ratios in 2012 is attributable to the increased composition of commercial auto as a percentage of the total written premium. Atlas has extensive experience and expertise with respect to underwriting and claims management in this specialty area of insurance and expects the loss ratio to continue decreasing. The Company is committed to retain this claim handling expertise as a core competency as the volume of business increases.
Acquisition Costs
Acquisition costs represent commissions and taxes incurred on net premium earned. Acquisition costs were $1,395 in the three month period ended June 30, 2012 or 18.5% of net premium earned, as compared to 20.3% in the three month period ended June 30, 2011 and 16.5% in the three month period ended March 31, 2012 .
For the six month period ended June 30, 2012 , the ratio was 17.5% as compared to 20.3% in the six month period ended June 30, 2011 .
The favorable trend in acquisition costs is primarily due to the shift away from non-standard automobile insurance which carries higher commission rates.
Other Underwriting Expenses
The other underwriting expense ratio was 21.4% in the three month period ended June 30, 2012 compared to 19.6% in the three month period ended June 30, 2011 and 19.9% in the three month period ended March 31, 2012 . Although the other underwriting expense ratio has increased, nominally other underwriting expenses have decreased by $156 in the three month period ended June 30, 2012 compared to the three month period ended June 30, 2011 , the result of several recent cost saving initiatives.
For the six month period ended June 30, 2012 , this ratio was 20.6% , as compared to 21.4% for the six month period ended June 30, 2011 . However, 2011 includes $627 in non-recurring expenses (detailed below) which unfavorably impacted the year-to-date

22

Table of Contents

ratio by 3.5% . After adjustment for these non-recurring expenses, nominally other underwriting expenses remained static year over year.
Table 4 First Quarter 2011 Non-recurring Expenses
Expense Item
Description
Non-recurring Expense
Licenses, taxes and assessments
Amounts paid in Q1 2011
$
198

Professional fees
Legal and Accounting fees
121

Salary and benefits
Q1 staff reduction impacts
174

EDP expense
Decommissioning software expenses previously capitalized
84

Occupancy/Miscellaneous expense
Straight-line lease adjustment
50

Total non-recurring expenses
 
$
627


Net Investment Income
Table 5   Investment Results
 
3 months ended
 
6 months ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Average securities at cost (including cash)
$
118,482

 
$
150,781

 
$
123,206

 
$
157,843

Interest income after expenses
657

 
934

 
1,265

 
1,933

Percent earned on average investments (annualized)
2.2
%
 
2.5
%
 
2.1
%
 
2.4
%
Net realized gains
$
291

 
$
417

 
$
319

 
$
850

Total investment income
948

 
1,351

 
1,584

 
2,783

Total realized yield (annualized)
3.2
%
 
3.6
%
 
2.6
%
 
3.5
%
Investment income (excluding net realized gains) decreased by 29.6% to $657 in the three month period ended June 30, 2012 , compared to $934 in the three month period ended June 30, 2011 , and increased by 8.2% from $607 for the three month period ended March 31, 2012 . These amounts are primarily comprised of interest income. This decrease correlates with a similar decline in the average securities held. The annualized realized yield on invested assets (including net realized gains of $291 ) in the three month period ended June 30, 2012 decreased to 3.2% as compared with 3.6% in the three month period ended June 30, 2011 and increased compared to 2.1% for the three month period ended March 31, 2012 . This is primarily due to the relative absence of realized gains during the three month period ended June 30, 2012 versus those periods.
On a year-to-date basis, investment income decreased by 34.6% to $1,265 from $1,933 for the six month period ended June 30, 2011 . This decrease correlates with a similar decline in the average securities held. The annualized realized yield on invested assets (including realized gains) decreased to 2.6% from 3.5% , due primarily to a reduction in realized gains year over year.
Net Realized Investment Gains (Losses)
Net realized investment gains in the three month period ended June 30, 2012 were $291 compared to $417 in the three month period ended June 30, 2011 and $28 during the three month period ended March 31, 2012 . On a year-to-date basis, there was a similar decline from $850 in the six month period ended June 30, 2011 compared to $319 for the six month period ended June 30, 2012 . The gains in 2011 were the result of management's decision to sell certain securities consistent with the Company's liquidity needs and expected duration of claim payment triangles during favorable market conditions.
Miscellaneous Income (Loss)
Atlas recorded miscellaneous income in the three month period ended June 30, 2012 of $50 compared to $120 for the three month period ended June 30, 2011 and $117 in the three month period ended March 31, 2012 . Miscellaneous income in 2012 is primarily comprised of rental income received prior to the sale of the corporate headquarters in Elk Grove Village, Illinois.
Combined Ratio
Atlas’ combined ratio for the three month periods ended June 30, 2012 and 2011 are summarized in the table below. The underwriting loss is attributable to the factors described in the ‘Claims Incurred’, ‘Acquisition Costs’, and ‘Other Underwriting Expenses’ sections above.
Table 6 Combined Ratios
3 month period ended
June 30, 2012
 
June 30, 2011
 
March 31, 2012
Net premium earned
$
7,552

 
$
9,062

 
$
8,309

Underwriting expenses *
8,420

 
10,341

 
8,927

Combined ratio
111.5
%
 
114.1
%
 
107.4
%

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Table of Contents


6 month period ended
June 30, 2012
 
June 30, 2011
Net premium earned
$
15,861

 
$
17,871

Underwriting expenses *
17,347

 
21,056

Combined ratio
109.4
%
 
117.8
%
    
*Underwriting expenses are the combination of claims incurred, acquisition costs, and other underwriting expenses
Income/Loss before Income Taxes
Atlas generated pre-tax income of $130 in the three month period ended June 30, 2012 , compared to income before tax of $193 in three month period ended June 30, 2011 and income before income taxes of $135 in the three month period ended March 31, 2012 .
In the six month period ended June 30, 2012 , Atlas generated pre-tax income of $265 compared to a loss of $512 in the six month period ended June 30, 2011 .
Income Tax Benefit
Atlas recognized no tax expense in the three month period ended June 30, 2012 , nor during the three month period ended June 30, 2011 or three month period ended March 31, 2012 . The following table reconciles tax benefit from applying the statutory U.S. Federal tax rate of 34.0% to the actual percentage of pre-tax losses provided for the three month periods ended June 30, 2012 and 2011 :
Table 7 - Tax Rate Reconciliation
 
3 months ended
 
6 months ended
 
June 30, 2012
June 30, 2011
 
June 30, 2012
 
June 30, 2011
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
Expected income tax benefit at statutory rate
$
44

 
34.0
 %
 
$
66

 
34.0
 %
 
$
90

 
34.0
 %
 
$
(174
)
 
34.0
 %
Valuation allowance
(44
)
 
(34.0
)%
 
(108
)
 
(56.0
)%
 
(92
)
 
(34.8
)%
 
131

 
(25.6
)%
Nondeductible expenses
1

 
0.8
 %
 
42

 
22.0
 %
 
5

 
1.9
 %
 
43

 
(8.4
)%
Other
(1
)
 
(0.8
)%
 

 
 %
 
(3
)
 
(1.1
)%
 

 
 %
Total
$

 
 %
 
$

 
 %
 
$

 
 %
 
$

 
 %
Upon the transaction forming Atlas on December 31, 2010, a yearly limitation as required by U.S. tax law Section 382 that applies to changes in ownership on the future utilization of Atlas’ net operating loss carry-forwards was calculated. The insurance subsidiaries’ prior parent retained those tax assets previously attributed to the insurance subsidiaries which could not be utilized by Atlas as a result of this limitation. As a result, Atlas’ ability to recognize future tax benefits associated with a portion of its deferred tax assets generated during prior years and the current year have been permanently limited to the amount determined under U.S. tax law Section 382. The result is a maximum expected net deferred tax asset which Atlas has available after the merger which is believed more-likely-than-not to be utilized in the future, after consideration of valuation allowance.
Net Income/Loss and Earnings/Loss per Common Share
Atlas earned $130 during the three month period ended June 30, 2012 compared to income of $193 during the three month period ended June 30, 2011 and $135 for the three month period ended March 31, 2012 . After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted loss per common share in the three month period ended June 30, 2012 was $0.00 versus a loss per common share of $0.00 in three month period ended June 30, 2011 and a loss per common share of $0.00 in the three month period ended March 31, 2012 .
There were 18,433,153 weighted average common shares outstanding for the three month period ended June 30, 2012 used to compute basic and diluted loss per share. There were 18,374,066 weighted average common shares outstanding for the three month period ended June 30, 2011 used to compute both basic and dilutive loss per common share, and 18,432,758 common shares used to compute basic and diluted loss per common share for the three month period ended March 31, 2012 .
Atlas earned $265 during the six month period ended June 30, 2012 compared to a loss of $512 during the six month period ended June 30, 2011 . The basic and diluted loss per common share in the six month period ended June 30, 2012 was $0.01 compared to $0.05 in the six month period ended June 30, 2011 .
Book Value per Ordinary Share
Book value per ordinary share was $2.05 as at the period ended June 30, 2012, $2.21 as at the period ended June 30, 2011, and $2.03 as at the year ended December 31, 2011.

24

Table of Contents

IV. FINANCIAL CONDITION

Table 8 Consolidated Statements of Financial Condition
 
 
 
 
 
 
 
($ in thousands, except par values)
 
 
 
 
 


June 30, 2012
(unaudited)
 
December 31,
2011
Assets
 
 
 
Investments, available for sale
 
 
 
Fixed income securities, at fair value (Amortized cost $102,109 and $101,473)
$
104,622

 
$
103,491

Equity securities, at fair value (cost $994)
1,327

 
1,141

Total Investments
105,949

 
104,632

Cash and cash equivalents
17,592

 
23,249

Accrued investment income
626

 
586

Accounts receivable and other assets (Net of allowance of $606 and $4,254)
14,764

 
9,579

Reinsurance recoverables, net
8,545

 
8,044

Prepaid reinsurance premiums
1,961

 
2,214

Deferred policy acquisition costs
2,781

 
3,020

Deferred tax asset, net
6,544

 
6,775

Software and office equipment, net
1,008

 
440

Assets held for sale
166

 
13,634

Total Assets
$
159,936

 
$
172,173

 
 
 
 
Liabilities
 
 
 
Claims liabilities
$
77,350

 
$
91,643

Unearned premiums
17,612

 
15,691

Due to reinsurers and other insurers
4,843

 
5,701

Other liabilities and accrued expenses
3,100

 
2,884

Total Liabilities
$
102,905

 
$
115,919

 
 
 
 
Shareholders’ Equity
 
 
 
Preferred shares, par value per share $0.001, 100,000,000 shares authorized, 18,000,000 shares issued and outstanding at June 30, 2012 and December 31, 2011. Liquidation value $1.00 per share
$
18,000

 
$
18,000

Ordinary voting common shares, par value per share $0.001, 800,000,000 shares authorized, 4,628,292 shares issued and outstanding at June 30, 2012 and 4,625,526 at December 31, 2011
4

 
4

Restricted voting common shares, par value per share $0.001, 100,000,000 shares authorized, 13,804,861 shares issued and outstanding at June 30, 2012 and December 31, 2011
14

 
14

Additional paid-in capital
152,713

 
152,652

Retained deficit
(115,576
)
 
(115,841
)
Accumulated other comprehensive income, net of tax
1,876

 
1,425

Total Shareholders’ Equity
$
57,031

 
$
56,254

Total Liabilities and Shareholders’ Equity
$
159,936

 
$
172,173

 
 
 
 
Investments
Investments Overview and Strategy
Atlas aligns its securities portfolio to support the liabilities and operating cash needs of the insurance subsidiaries, to preserve capital and to generate investment returns. Atlas invests predominantly in corporate and government bonds with relatively short durations that correlate with the payout patterns of Atlas’ claims liabilities. A third-party investment management firm manages Atlas’ investment portfolio pursuant to the Company’s investment policies and guidelines as approved by its Board of Directors. Atlas monitors the third-party investment manager’s performance and its compliance with both its mandate and Atlas’ investment policies and guidelines.
Atlas’ investment guidelines stress the preservation of capital, market liquidity to support payment of liabilities and the diversification of risk. With respect to fixed income securities, Atlas generally purchases securities with the expectation of holding

25

Table of Contents

them to their maturities; however, the securities are available for sale if liquidity needs arise.
Portfolio Composition
Atlas held securities with a fair value of $105,949 as at the period ended June 30, 2012 , which was comprised primarily of fixed income securities. The securities held by the insurance subsidiaries must comply with applicable regulations that prescribe the type, quality and concentration of securities. These regulations in the various jurisdictions in which the insurance subsidiaries are domiciled permit investments in government, state, municipal and corporate bonds, preferred and common equities, and other high quality investments, within specified limits and subject to certain qualifications.
The following table summarizes the fair value of the securities portfolio, including cash and cash equivalents, as at the dates indicated.
Table 9 Fair value of securities portfolio
June 30, 2012
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Fixed Income:
 
 
 
 
 
U.S.
- Government
$
36,213

$
955

$
2

$
37,166

 
- Corporate
40,690

1,115


41,805

 
- Commercial mortgage backed
20,710

346

15

21,041

 
- Other asset backed
4,496

117

3

4,610

Total Fixed Income
 
$
102,109

$
2,533

$
20

$
104,622

Equities
 
994

333


1,327

 Totals
 
$
103,103

$
2,866

$
20

$
105,949

                       
December 31, 2011
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Fixed Income:
 
 
 
 
 
U.S.
- Government
$
44,835

$
911

$

$
45,746

 
- Corporate
35,572

825

24

36,373

 
- Commercial mortgage backed
17,493

208


17,701

 
- Other asset backed
3,573

99

1

3,671

Total Fixed Income
 
$
101,473

$
2,043

$
25

$
103,491

Equities
 
994

147


1,141

 Totals
 
$
102,467

$
2,190

$
25

$
104,632


Liquidity and Cash Flow Risk
The following table summarizes the fair value by contractual maturities of the fixed income securities portfolio excluding cash and cash equivalents at the dates indicated.
Table 10 Fair value of fixed income securities by contractual maturity date
As at:
June 30, 2012
 
December 31, 2011
 
Amount
%
 
Amount
%
Due in less than one year
$
20,359

19.5
%
 
$
29.407

28.4
%
Due in one through five years
22,035

21.1
%
 
27.317

26.4
%
Due after five through ten years
18,177

17.4
%
 
10.242

9.9
%
Due after ten years
44,051

42.0
%
 
36.525

35.3
%
Total
$
104,622

100.0
%
 
$
103.491

100.0
%
As at the period ended June 30, 2012 , 40.6% of the fixed income securities, including treasury bills, bankers’ acceptances, government bonds and corporate bonds had contractual maturities of five years or less. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. Atlas holds cash and high grade short-term assets which, along with fixed income security maturities, management believes are sufficient for the payment of claims on a timely basis. In the event that additional cash is required to meet obligations to policyholders, Atlas believes that high quality securities portfolio provides us with sufficient liquidity. With a weighted average duration of 3.2 years, changes in interest rates will have a modest market value impact on the Atlas portfolio relative to longer duration portfolios. Atlas can and typically does hold bonds to maturity by matching duration with the anticipated liquidity needs.

26

Table of Contents

Market Risk
Market risk is the risk that Atlas will incur losses due to adverse changes in interest rates, currency exchange rates or equity prices. Having disposed of a majority of its asset backed securities, its primary market risk exposures in the fixed income securities portfolio are to changes in interest rates. Because Atlas’ securities portfolio is comprised of primarily fixed income securities that are usually held to maturity, periodic changes in interest rate levels generally impact its financial results to the extent that the securities in its available for sale portfolio are recorded at market value. During periods of rising interest rates, the market value of the existing fixed income securities will generally decrease and realized gains on fixed income securities will likely be reduced. The reverse is true during periods of declining interest rates.
Credit Risk
Credit risk is defined as the risk of financial loss due to failure of the other party to a financial instrument to discharge an obligation. Atlas is exposed to credit risk principally through its investments and balances receivable from policyholders and reinsurers. It monitors concentration and credit quality risk through policies to limit and monitor its exposure to individual issuers or related groups (with the exception of U.S. government bonds) as well as through ongoing review of the credit ratings of issuers in the securities portfolio. Credit exposure to any one individual policyholder is not material. The Company's policies, however, are distributed by agents who may manage cash collection on its behalf pursuant to the terms of their agency agreement. Atlas has policies to evaluate the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurers’ insolvency.
The following table summarizes the composition of the fair value of the fixed income securities portfolio, excluding cash and cash equivalents, as of the dates indicated, by ratings assigned by Fitch, S&P or Moody’s Investors Service. The fixed income securities portfolio consists of predominantly very high quality securities in corporate and government bonds with 92.4% rated ‘A’ or better as at the period ended June 30, 2012 compared to 95.3% as at the year ended December 31, 2011 .
Table 11 Credit ratings of fixed income securities portfolio
As at:
June 30, 2012
 
December 31, 2011
 
Amount
% of Total
 
Amount
% of Total
AAA/Aaa
$
56,854

54.4
%
 
$
54,717

52.9
%
AA/Aa
14,983

14.3
%
 
21,567

20.8
%
A/A
24,786

23.7
%
 
22,380

21.6
%
BBB/Baa
7,999

7.6
%
 
4,827

4.7
%
Total Securities
$
104,622

100.0
%
 
$
103,491

100.0
%
Other-than-temporary impairment
Atlas recognizes losses on securities for which a decline in market value was deemed to be other-than-temporary. Management performs a quarterly analysis of the securities holdings to determine if declines in market value are other-than-temporary. Atlas did not recognize charges for securities impairments that were considered other-than-temporary for the three month period ended June 30, 2012 , the three month period ended June 30, 2011 or the three month period ended March 31, 2012 .
The length of time securities may be held in an unrealized loss position may vary based on the opinion of the appointed investment manager and their respective analyses related to valuation and to the various credit risks that may prevent us from recapturing the principal investment. In cases of securities with a maturity date where the appointed investment manager determines that there is little or no risk of default prior to the maturity of a holding, Atlas would elect to hold the security in an unrealized loss position until the price recovers or the security matures. In situations where facts emerge that might increase the risk associated with recapture of principal, Atlas may elect to sell securities at a loss. Atlas had no material gross unrealized losses in its portfolio as at the period ended June 30, 2012 , as at the period ended June 30, 2011 , or as at the year ended December 31, 2011 .
Estimated impact of changes in interest rates and securities prices
For Atlas’ available-for-sale fixed income securities held as at the period ended June 30, 2012 , a 100 basis point increase in interest rates on such held fixed income securities would have increased net investment income and income before taxes by approximately $172. Conversely, a 100 basis point decrease in interest rates on such held fixed income securities would decrease net investment income and income before taxes by $187.
A 100 basis point increase would have also decreased other comprehensive income by approximately $3,779 due to “mark-to-market” requirement; however, holding investments to maturity would mitigate this impact. Conversely, a 100 basis point decrease would increase other comprehensive income by the same amount. The impacts described here are approximately linear to the change in interest rates.

27

Table of Contents

Due from Reinsurers and Other Insurers
Atlas purchases reinsurance from third parties in order to reduce its liability on individual risks and its exposure to large losses. Reinsurance is insurance purchased by one insurance company from another for part of the risk originally underwritten by the purchasing (ceding) insurance company. The practice of ceding insurance to reinsurers allows an insurance company to reduce its exposure to loss by size, geographic area, and type of risk or on a particular policy. An effect of ceding insurance is to permit an insurance company to write additional insurance for risks in greater number or in larger amounts than it would otherwise insure independently, having regard to its statutory capital, risk tolerance and other factors.
Atlas generally purchases reinsurance to limit net exposure to a maximum amount on any one loss of $500 with respect to commercial automobile liability claims. Atlas also purchases reinsurance to protect against awards in excess of its policy limits. Atlas continually evaluates and adjusts its reinsurance needs based on business volume, mix, and supply levels.
Reinsurance ceded does not relieve Atlas of its ultimate liability to its insured in the event that any reinsurer is unable to meet their obligations under its reinsurance contracts. Therefore, Atlas enters into reinsurance contracts with only those reinsurers deemed to have sufficient financial resources to provide the requested coverage. Reinsurance treaties are generally subject to cancellation by the reinsurers or Atlas on the anniversary date and are subject to renegotiation annually. Atlas regularly evaluates the financial condition of its reinsurers and monitors the concentrations of credit risk to minimize its exposure to significant losses as a result of the insolvency of a reinsurer. Atlas believes that the amounts it has recorded as reinsurance recoverables are appropriately established. Estimating amounts of reinsurance recoverables, however, is subject to various uncertainties and the amounts ultimately recoverable may vary from amounts currently recorded. Atlas had $8,545 recoverable from third party reinsurers (exclusive of amounts prepaid) and other insurers as at the period ended June 30, 2012 as compared to $ 8,044 as at the year ended December 31, 2011 .
Estimating amounts of reinsurance recoverables is also impacted by the uncertainties involved in the establishment of provisions for unpaid claims. As underlying reserves potentially develop, the amounts ultimately recoverable may vary from amounts currently recorded. Atlas’ reinsurance recoverables are generally unsecured. Atlas regularly evaluates its reinsurers, and the respective amounts recoverable, and an allowance for uncollectible reinsurance is provided for, if needed.
Atlas’ largest reinsurance partners are Great American Insurance Company (“Great American”), a subsidiary of American Financial Group, Inc. and Gen Re, a subsidiary of Berkshire Hathaway, Inc. Great American has a financial strength rating of A+ from Standard & Poor’s, while Gen Re has a financial strength rating of Aa1 from Moody’s.
Deferred Tax Asset
Table 12 Components of Deferred Tax
As at period ended:
June 30, 2012
December 31, 2011
Deferred tax assets:
 
 
Unpaid claims and unearned premiums
$
2,822

$
3,004

Loss carry-forwards
16,520

15,558

Bad debts
101

1,297

Other
1,480

1,338

Valuation Allowance
(12,269
)
(12,361
)
Total gross deferred tax assets
$
8,654

$
8,836

 
 
 
Deferred tax liabilities:
 
 
Investment securities
$
967

$
740

Deferred policy acquisition costs
946

1,027

Other
197

294

Total gross deferred tax liabilities
$
2,110

$
2,061

Net deferred tax assets
$
6,544

$
6,775

Atlas established a valuation allowance of approximately $12,269 and $ 12,361 for its gross future deferred tax assets as at the period ended June 30, 2012 and as at the year ended December 31, 2011 , respectively.
Based on Atlas’ expectations of future taxable income, as well as the reversal of gross future deferred tax liabilities, management believes it is more likely than not that Atlas will fully realize the net future tax assets, with the exception of the aforementioned valuation allowance. Atlas has therefore established the valuation allowance as a result of the potential inability to utilize a portion of its net operation losses in the U.S. which are subject to a yearly limitation. The uncertainty over the Company’s ability to utilize a portion of these losses over the short term has led to the recording of a valuation allowance.
Atlas has the following total net operating loss carry-forwards as at the period ended June 30, 2012 :

28

Table of Contents

Table 13 Net operating loss carry-forward by expiry
Year of Occurrence
Year of Expiration
Amount
2001
2021
$
14,750

2002
2022
4,317

2006
2026
7,825

2007
2027
5,131

2008
2028
1,949

2009
2029
1,949

2010
2030
1,949

2011
2031
7,762

2012
2032
2,957

Total
 
$
48,589

Assets Held for Sale
On May 22, 2012, Atlas closed the sale of the headquarters building to 150 Northwest Point, LLC, a Delaware limited liability company. As at the year ended December 31, 2011 , the property was recorded as a component of assets held for sale on Atlas' statement of financial position.
The total sales price of the property, which was paid in cash, amounted to $13,975, less closing costs and related expenses of approximately $633. In connection with the sale, the Company also wrote down an accrual of approximately $792 held for real-estate taxes. Approximately $830 of the sales price was held in escrow for real-estate taxes. Atlas recognized a gain on the sale of this property of $213 , which will be deferred and recognized over the 5 year lease term. In the three month period ended June 30, 2012 , Atlas recognized $5 as income.
There are two properties located in Alabama which are still for sale. These properties are listed for sale for amounts greater than carried values. Both were assets of Southern United Fire Insurance Company, which was merged into American Service in February 2010.
Claims Liabilities
The table below shows the amounts of total case reserves and incurred but not reported (“IBNR”) claims provision as at the period ended June 30, 2012 and as at the year ended December 31, 2011 . The provision for unpaid claims decreased by 15.6% to $77,350 as at the period ended June 30, 2012 compared to $91,643 as at the year ended December 31, 2011 . During the three month period ended June 30, 2012 , case reserves decreased by 8.2% compared to December 31, 2011, while IBNR reserves decreased by 32.9% generally due to the reporting of claims related to prior accident years and case reserve changes, which are consistent with management’s expectations.
Table 14 Provision for unpaid claims by type - gross
As at:
June 30, 2012
December 31, 2011
YTD% Change
Case reserves
$
58,991

$
64,276

(8.2
)%
IBNR
18,359

27,367

(32.9
)%
Total
$
77,350

$
91,643

(15.6
)%
Table 15 Provision for unpaid claims by line of business – gross
As at:
June 30, 2012
December 31, 2011
YTD% Change
Non-standard auto
$
13,918

$
18,175

(23.4
)%
Commercial auto
54,638

64,881

(15.8
)%
Other
8,794

8,587

2.4
 %
Total
$
77,350

$
91,643

(15.6
)%
Table 16 Provision for unpaid claims by line of business - net of reinsurance recoverables
As at:
June 30, 2012
December 31, 2011
YTD% Change
Non-standard Auto
$
13,918

$
18,175

(23.4
)%
Commercial Auto
52,369

62,497

(16.2
)%
Other
2,910

3,146

(7.5
)%
Total
$
69,197

$
83,818

(17.4
)%
The reduction of the provision for unpaid claims is consistent with the change in written premium in prior years. However, because the establishment of reserves is an inherently uncertain process involving estimates, current provisions may not be sufficient.

29

Table of Contents

Adjustments to reserves, both positive and negative, are reflected quarterly in the statement of income as estimates are updated.
The financial statements are presented on a calendar year basis for all data. Claims payments and changes in reserves, however, may be made on accidents that occurred in prior years, not on business that is currently insured. Calendar year losses consist of payments and reserve changes that have been recorded in the financial statements during the applicable reporting period, without regard to the period in which the accident occurred. Calendar year results do not change after the end of the applicable reporting period, even as new claim information develops. Calendar year information is presented in Note 9 to the unaudited condensed consolidated financial statements and shows the claims activity and impact on income for changes in estimates of unpaid claims. Accident year losses consist of payments and reserve changes that are assigned to the period in which the accident occurred. Accident year results will change over time as the estimates of losses change due to payments and reserve changes for all accidents that occurred during that period.
Due to Reinsurers
The decrease in due to reinsurers is consistent with the payout patterns of the underlying claims liabilities.
Off-balance sheet arrangements
As of June 30, 2012 , Atlas has the following cash obligations related to its operating leases:
Table 17 Operating Lease Commitments
Year
2012
2013
2014
2015
2016 and beyond
Total
Amount
184
776
683
693
995
3,331

Shareholders’ Equity
The table below identifies changes in shareholders’ equity for the six month periods ended June 30, 2012 and June 30, 2011 :
Table 18 Changes in Shareholders' Equity
 
Preferred Shares
 
Ordinary Voting Common Shares
 
Restricted Voting Common Shares
 
Additional Paid-in Capital
 
Retained Deficit
 
Accumulated Other Comprehensive Income (loss)
 
Total
Balance December 31, 2011
$
18,000

 
$
4

 
$
14

 
$
152,652

 
$
(115,841
)
 
$
1,425

 
$
56,254

Net income
 
 
 
 
 
 
 
 
265

 
 
 
265

Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
451

 
451

Share-based compensation
 
 
 
 
 
 
57

 
 
 
 
 
57

Stock options exercised
 
 
 
 
 
 
4

 
 
 
 
 
4

Balance June 30, 2012
$
18,000

 
$
4

 
$
14

 
$
152,713

 
$
(115,576
)
 
$
1,876

 
$
57,031

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2010
$
18,000

 
$
4

 
$
14

 
$
152,466

 
$
(113,371
)
 
$
3,056

 
$
60,169

Net loss
 
 
 
 
 
 
 
 
(512
)
 
 
 
(512
)
Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
(764
)
 
(764
)
Share-based compensation
 
 
 
 
 
 
57

 
 
 
 
 
57

Stock options exercised
 
 
 
 
 
 
16

 
 
 
 
 
16

Balance June 30, 2011
$
18,000

 
$
4

 
$
14

 
$
152,539

 
$
(113,883
)
 
$
2,292

 
$
58,966

As of August 1, 2012, there are 4,628,292 ordinary voting common shares, 13,804,861 restricted voting common shares and 18,000,000 preferred shares issued and outstanding.
The holders of restricted voting shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders.
All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway, or its affiliated entities. The restricted voting common shares will convert to ordinary voting common shares in the event that these Kingsway

30

Table of Contents

owned shares are sold to non-affiliates of the Company.
Preferred shares are not entitled to vote and are beneficially owned or controlled by Kingsway. They accrue dividends on a cumulative basis whether or not declared by the Board of Directors at the rate of $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. Upon liquidation, dissolution or winding-up of Atlas, holders of preferred shares receive the greater of $1.00 per share plus all declared and unpaid dividends or the amount they would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary voting common shares immediately prior to liquidation. Preferred shares are convertible into ordinary voting common shares at the option of the holder at any date that is after December 31, 2015, the fifth year after issuance at the rate of 0.3808 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes. The preferred shares are redeemable at the option of Atlas at a price of US$1.00 per share plus accrued and unpaid dividends commencing at the earlier of December 31, 2012, two years from issuance date, or the date at which Kingsway's beneficial interest is less than 10%.
The cumulative amount of dividends to which the preferred shareholders are entitled upon liquidation or sooner, if Atlas declares dividends, is $1,212 as at the period ended June 30, 2012 . The accumulation of these dividends has an unfavorable impact on book value per share of $0.07 as at the period ended June 30, 2012 and an unfavorable impact to earnings per share of $0.02 for the three month period ended June 30, 2012 .
Liquidity and Capital Resources
The purpose of liquidity management is to ensure there is sufficient cash to meet all financial commitments and obligations as they become due. The liquidity requirements of Atlas’ business have been met primarily by funds generated from operations, asset maturities and income and other returns received on securities. Cash provided from these sources is used primarily for payment of claims and operating expenses. The timing and amount of catastrophe claims are inherently unpredictable and may create increased liquidity requirements.
As a holding company, Atlas may derive cash from its subsidiaries generally in the form of dividends and in the future may charge management fees to the extent allowed by statute or other regulatory approval requirements to meet its obligations. The insurance subsidiaries fund their obligations primarily through premium and investment income and maturities in their securities portfolio. Refer also to the discussion “Investments Overview and Strategy." The insurance subsidiaries require regulatory approval for the return of capital and, in certain circumstances, payment of dividends. In the event that dividends and management fees available to the holding company are inadequate to service its obligations, the holding company would need to raise capital, sell assets or incur debt obligations. As at June 30, 2012 , Atlas did not have any outstanding debt, and therefore, no near term debt service obligations.
Atlas currently has no material commitments for capital expenditures.
Capital Requirements
In the United States, a RBC formula is used by the NAIC to identify P&C insurance companies that may not be adequately capitalized. The NAIC requires capital and surplus not fall below 200% of the authorized control level. As of December 31, 2011 (when the last annual calculation was performed), the insurance subsidiaries are well above the required risk based capital levels, with risk based capital ratios based on the statutory financial statements of 592.5% and 803.4% for American Country and American Service, respectively, and have estimated aggregate capital in excess of the 200% level of approximately $36,402.

Item 4.
Controls and Procedures  
Disclosure Controls and Procedures  
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as at the period ended June 30, 2012 that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting  
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

31

Table of Contents




32

Table of Contents

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings:
In connection with its operations, the Company and its insurance subsidiaries are, from time to time, named as defendants in actions for damages and costs allegedly sustained by the plaintiffs. While it is not possible to estimate the outcome of the various proceedings at this time, such actions have generally been resolved with minimal damages or expense in excess of amounts provided and the Company does not believe that it will incur any significant additional loss or expense in connection with such actions.
Item 1A.
Risk Factors:
Information regarding risk factors appears in our Annual Report on Form 10-K for the year ended December 31, 2011 in Part I, Item 1A. Risk Factors.  There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K as amended.
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of securities during the three month period ended June 30, 2012 or the year ended December 31, 2011.
Item 3.     DEFAULTS UPON SENIOR SECURITIES
None.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
Item 5.     OTHER INFORMATION
None.
Item 6.
EXHIBITS
Item 10 - Material Contracts
10.8
150 Northwest Point - Sale Agreement
10.9
150 Northwest Point - Sale Agreement, Amendment 1
10.10
150 Northwest Point - Sale Agreement, Amendment 2
10.11
150 Northwest Point - Lease Agreement
Item 31 – Rule 13a-14(a)/15d-14(a) Certifications

31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Item 32 – Section 1350 Certifications

32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Item 101 - Interactive Data Files
101.INS
XBRL Instance Document

101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.

33

Table of Contents


SIGNATURE
Pursu ant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
Date: August 13, 2012
 
Atlas Financial Holdings, Inc.
 
 
(Registrant)
 
 
 
 
 
By:
 
/s/ Paul A. Romano
 
 
 
 
Paul A. Romano
 
 
 
 
Vice President and Chief Financial Officer
 



34


EXHIBIT 10.8








SALE AGREEMENT

By and Between

American Service Insurance Company, Inc., an Illinois corporation

(Seller)

and

150 Northwest Point LLC,
a Delaware limited liability company

(Purchaser)






TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE
1

1.1

Agreement of Purchase and Sale
1

1.2

Payment of Purchase Price
2

1.3

Deposit
2

1.4

Earnest Money Provisions
2

1.5

Independent Contract Consideration
3

 
 
 
ARTICLE II
TITLE AND SURVEY: ASIC LEASE
3

2.1

Title Commitment
3

2.2

Title Examination
4

2.3

Pre Closing "Gap" Title Defects
5

2.4

Permitted Exceptions
5

2.5

ASIC Lease
6

 
 
 
ARTICLE III
REVIEW OF PROPERTY
6

3.1

Right of Inspection
6

3.2

Right of Termination
7

 
 
 
ARTICLE IV
CLOSING
8

4.1

Time and Place
8

4.2

Seller's Obligations at Closing
8

4.3

Purchaser's Obligations at Closing
9

4.4

Credits and Prorations
10

4.5

Transaction Taxes and Closing Costs
14

4.6

Conditions Precedent to Obligation of Purchaser
14

4.7

Conditions Precedent to Obligation of Seller
15

 
 
 
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
16

5.1

Representations and Warranties of Seller
16

5.2

Knowledge Defined
18

5.3

Covenants of Seller
19

5.4

Representations and Warranties of Purchaser
21

5.5

Purchaser's Knowledge Defined
22

5.6

Survival of Purchaser's Representations and Warranties
22

 
 
 
ARTICLE VI
DEFAULT
23

6.1

Default by Purchaser
23

6.2

Default by Seller
23

6.3

Recoverable Damages
23

 
 
 
ARTICLE VII
RISK OF LOSS
24

7.1

Minor Damage
24

7.2

Major Damage
24

7.3

Definition of "Major" Loss or Damage
24






ARTICLE VIII
BROKERAGE AND INDEMNIFICATION
25

8.1

Brokerage Commissions
25

 
 
 
ARTICLE IX
DISCLAIMERS AND WAIVERS
25

9.1

No Reliance on Documents
25

9.2

AS IS SALE; DISCLAIMERS
25

9.3

Survival of Disclaimers
27

 
 
 
ARTICLE X
MISCELLANEOUS
27

10.1

Confidentiality
27

10.2

Public Disclosure
27

10.3

Assignment
27

10.4

Notices
28

10.5

Modifications
29

10.6

Entire Agreement
29

10.7

Further Assurances
29

10.8

Counterparts
29

10.9

Facsimile Signatures
29

10.10

Severability
29

10.11

Applicable Law
29

10.12

No Third Party Beneficiary
30

10.13

Captions
30

10.14

Construction
30

10.15

Recordation
30

10.16

Attorneys' Fees and Costs
30

10.17

Governmental Approvals
30

10.18

Limitation of Liability
30

10.19

Saturdays, Sundays, Holidays
31






SALE AGREEMENT

THIS SALE AGREEMENT (this "Agreement") is made as of April 5, 2012 (the "Effective Date") by and between American Service Insurance Company, Inc., an Illinois corporation (the "Seller") and 150 Northwest Point LLC, a Delaware limited liability company (the "Purchaser").




Seller desires to sell, and Purchaser desires to purchase, the following (collectively, the "Property"): (i) fee simple title to certain improved real property located in Elk Grove Village, Illinois, commonly known as 150 Northwest Point Boulevard and legally described on Exhibit A attached hereto together with all of Seller's right, title and interest, if any, in and to the appurtenances pertaining thereto, including but not limited to Seller's right, title and interest in and to the streets, alleys and right-of-ways which abut such real property, and any easement rights, air rights, subsurface rights, development rights and water rights appurtenant to such real property (the "Land"); (ii) all of Seller's right, title and interest in and to the buildings, structures, fixtures, systems and other improvements affixed to or located on the Land, excluding fixtures owned by tenants (collectively the "Improvements") (the Land and the Improvements are referred to together hereinafter as the "Real Property"); (iii) all of Seller's right, title and interest in and to tangible personal property located upon the Land or within the Improvements, excluding those items of personal property owned by Seller listed on Exhibit J attached hereto and excluding cash, computers, software, and all items of personal property owned by the property manager and located in the management office for the Property and all items of personal property owned by tenants or other occupants of the Real Property, located on and used exclusively in connection with the operation of the Land and the Improvements (collectively, the "Personal Property"); (iv) all of Seller's right, title and interest in and to all leases, licenses and occupancy agreements covering all or any portion of the Real Property, to the extent they are in effect on the date of the Closing (as defined in Section 4.1), including all rents, security deposits and all related guaranties (collectively, the "Leases"); (v) all of Seller's right, title and interest in and to all Assumed Operating Agreements (as defined in Section 5.4(d)); and (vi) all of Seller's right, title, and interest in and to all assignable existing permits, licenses, approvals, warranties, and authorizations issued by any governmental authority in connection with the Property, in each case to the extent they are in effect as of the date of the Closing and transferrable (the "Licenses and Permits"), and all of Seller's right, title, and interest in and to the right to use the name "150 Northwest Point" (collectively, the "Intangibles"). No later than five (5) days prior to the expiration of the Inspection Period (as hereinafter defined), Seller shall provide Purchaser a written inventory listing the Personal Property located at the Real Property.

NOW, THEREFORE, in consideration of and in reliance upon the above recitals, the terms, covenants and conditions contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

ARTICLE I PURCHASE AND SALE

1.1 Agreement of Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agrees to sell the Property to Purchaser, and Purchaser agrees to purchase the Property, for a purchase price equal to Thirteen Million Nine Hundred Seventy-Five Thousand and No/100 Dollars ($13,975,000.00), subject to such prorations and adjustments as provided in this Agreement (the "Purchase Price").

1.2 Payment of Purchase Price. The Purchase Price shall be payable in full at Closing (as defined below) by wire transfer of immediately available funds to a bank account designated by Seller in writing to the Escrow Agent (as defined in Section 1.3 hereof) prior to the Closing.

1.3 Deposit. Within (2) business days after the Effective Date, Purchaser shall deposit with First American Title Insurance Company (the "Escrow Agent" or "Title Company"), having its office at 30 North LaSalle Street, Chicago, Illinois 60602, Attention: Dick Seidel, the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the "Initial Deposit") in good funds, by federal wire transfer pursuant to the wiring





instructions attached hereto as Exhibit H. Within two (2) business day after the expiration of the Inspection Period (as defined in Section 3.1), Purchaser shall deposit the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the "Additional Deposit"; the Initial Deposit and the Additional Deposit together with all interest earned thereon, are referred to as the "Deposit") in good funds, by federal wire transfer pursuant to the wiring instructions attached hereto as Exhibit H. The Escrow Agent shall hold the Deposit in an interest-bearing account reasonably acceptable to Seller and Purchaser, in accordance with the terms and conditions of this Agreement. All interest on such sum shall be deemed income of Purchaser. The Deposit shall be distributed in accordance with the terms of this Agreement. The failure of Purchaser to timely deliver the Initial Deposit or the Additional Deposit hereunder shall be a material default, and shall entitle Seller, at Seller's sole option, to terminate this Agreement immediately, and in the event Seller so elects to terminate this Agreement, the Deposit, if any, shall be promptly returned to Purchaser.

1.4      Earnest Money Provisions.

(a) Investment and Use of Funds. The Escrow Agent shall invest the Deposit in interest-bearing accounts satisfactory to Purchaser and Seller, shall not commingle the Deposit with any funds of the Escrow Agent and shall promptly provide Purchaser and Seller with confirmation of the investments made. Notwithstanding the foregoing, the Escrow Agent may commingle the Deposit with other funds prior to the Escrow Agent's receipt of any required investment instructions. If the Closing under this Agreement occurs, the Escrow Agent shall apply the Deposit against the Purchase Price due Seller at Closing.

(b) In the event Purchaser's terminates this Agreement on or before the last day of the Inspection Period in accordance with Section 3.2 hereof and Purchaser delivers a copy of such notice of termination to the Escrow Agent, Escrow Agent shall be irrevocably obligated to release the Deposit to Purchaser without the need for any joint order or other direction of the parties.

(c) Strict Joint Order. In the event Purchaser elects not to terminate this Agreement, then after the expiration of the Inspection Period, except as may be required by a court order, other than the application of the Deposit against the Purchase Price due Seller at Closing, the Deposit shall be released solely upon the joint instruction of Purchaser and Seller.

(d) Interpleader. Subject to Section 1.4(b) hereof, Seller and Purchaser agree that in the event of any controversy regarding the Deposit arises after the expiration of the Inspection Period, unless written instructions from Seller and Purchaser are received by the Escrow Agent directing the Deposit's disposition, the Escrow Agent shall not take any action, but instead shall await the disposition of any proceeding relating to the Deposit or, at the Escrow Agent's option, the Escrow Agent may interplead all parties and deposit the Deposit with a court of competent jurisdiction in which event the Escrow Agent may recover all of its court costs and reasonable attorneys' fees. Seller or Purchaser, whichever loses in any such interpleader action, shall be solely obligated to pay such costs and fees of the Escrow Agent, as well as the costs of the interpleader, and the reasonable attorneys' fees of the prevailing party in accordance with the other provisions of this Agreement.

(e) Liability of Escrow Agent. The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any loss, cost or expense incurred by Seller or Purchaser resulting from the Escrow Agent's mistake of law respecting the Escrow Agent's scope or nature of its duties. Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent hannless from and against all costs, claims and expenses, including reasonable attorneys' fees, incurred in connection with the performance of the Escrow Agent's duties hereunder, except with respect to actions or omissions taken or made by the Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of the Escrow Agent.






Escrow Agent shall execute this Agreement solely for the purpose of being bound by the provisions of Sections 1.3 and 1.4 hereof.

1.5 Independent Contract Consideration. Immediately prior to the execution of this Agreement, Purchaser paid one (1) dollar ($1.00) (the "Independent Contract Consideration") to Seller, which amount Seller and Purchaser hereby bargained for and agreed to as consideration for Seller's execution and delivery of this Agreement. The Independent Contract Consideration is non-refundable and in addition to any other payment or deposit required by this Agreement, and Seller shall retain the Independent Contract Consideration notwithstanding any other provision of this Agreement to the contrary.

ARTICLE II
TITLE AND SURVEY; ASIC LEASE

2.1 Title Commitment and Survey. Within two (2) business days following the Effective Date, Seller shall deliver to Purchaser a title insurance commitment issued by the Title Company for the issuance of a 2006 ALTA Owner's Title Policy covering the Real Property (the "Title Commitment") together with copies of each of the Schedule A and Schedule B underlying title documents and/or exceptions set forth therein and a survey of the Real Property (the "Existing Survey"). Within ten (10) business days following the Effective Date, Seller shall deliver to Purchaser an update of the Existing Survey made in accordance with the current Minimum Standard Detail Requirements for ALTA/ACSM Title Land Surveys, jointly established and adopted by ALTA and NSPS and includes Items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11(a), 14, 16, 17, 18 and 21 of Table A (the "Survey"). In the event the Survey is not delivered within such ten (10) business day period, the Title Exam Deadline (as hereinafter defined) shall be extended for one day for each day of such delay until such date that the Survey is delivered to Purchaser. Costs of the Title Commitment and Survey shall be paid as provided in Section 4.5 below.

2.2 Title Examination. Purchaser shall have until April 27, 2012 (the "Title Exam Deadline") to notify Seller in writing (the "Title Notice") which exceptions to title (including matters disclosed by the Existing Survey or the Survey), if any, will not be accepted by Purchaser. Any exception to title or matter disclosed in the Title Commitment, the Existing Survey, or the Survey to which Purchaser does not object by the Title Exam Deadline shall be deemed Permitted Exceptions (as defined in Section 2.4 hereof). If Purchaser gives Seller a Title Notice on or prior to the Title Exam Deadline, Seller shall have the right, but not the obligation, to attempt to remove, satisfy or otherwise cure any such exceptions or matters identified in such Title Notice, except for the Must Removes (as hereinafter defined). Within two (2) business days after receipt of Purchaser's Title Notice ("Seller's Notice Period"), Seller shall give written notice to Purchaser stating either (a) that Seller will remove such objectionable exceptions or matters from title on or before the Closing (as defined in Section 4.1 hereof); provided that Seller may extend the Closing Date (as defined in Section 4.1 hereof) for such period as shall be required to effect such cure, but not beyond thirty (30) days; or (b) that Seller elects not to cause such objectionable exceptions or matters to be removed. If Seller fails to give written notice of its election within Seller's Notice Period, Seller shall be deemed to have elected not to attempt to cure the exceptions or matters objected to in such Title Notice. The procurement by Seller of a commitment for the issuance of the Title Policy (as defined in Section 4.6(e) hereof) or an endorsement thereto (in a form reasonably acceptable to Purchaser) insuring Purchaser against any title exception or matter which was properly objected to by Purchaser in a Title Notice pursuant to this Section 2.2 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (b) above, then Purchaser shall have the right to terminate this Agreement upon written notice to Seller given within five (5) business days after the expiration of the Seller's Notice Period, and in such event the Deposit shall be promptly returned to Purchaser. If Seller gives Purchaser notice under clause (b) above or fails to give Purchaser such a notice, and Purchaser fails to terminate this Agreement on or prior to the expiration of the Inspection Period, then such objectionable exceptions or matters will be deemed to constitute Permitted Exceptions, except for any Must Removes. If this Agreement is terminated pursuant to the foregoing provisions of this Section 2.2, then neither party shall have any further rights or obligations hereunder (except for those obligations of a party that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. Notwithstanding the foregoing or anything in Sections 2.3 or 2.4 to the contrary, (a) any "Must Removes" (as defined below) shall not be Permitted Exceptions hereunder (and Purchaser shall not be required to notify Seller of its





objection thereto) and (b) at Closing, Seller shall cause the Must Removes to be released of record, deleted from the Title Policy or insured over by the Title Company pursuant to an endorsement reasonably satisfactory to Purchaser. For the purposes of this Section 2.2, the term "Must Removes" shall mean (i) the mortgage and other instruments securing Seller's mortgage loan which encumbers the Property, (ii) any judgment liens against Seller in the amount of $100,000 or less, and (iii) any tax or mechanic's lien which encumbers the Property and was created by or results from the acts or omissions of Seller except for (x) the lien of real estate taxes and assessments not due and payable and (y) mechanic's liens arising out of tenant improvement work (i) being performed by a tenant under such tenant's Lease so long as such tenant has an obligation to remove said lien or indemnify the landlord with respect to such lien pursuant to its Lease, and (ii) being performed by Seller as landlord under the Leases, for which Purchaser is responsible or shall receive a credit against the Purchase Price pursuant to Section 4.4(b)(v) hereof. In no event shall Must Removes be considered Permitted Exceptions.

2.3 Pre Closing "Gap" Title Defects. Purchaser shall have the right to object to any Material Exceptions (as defined below) by giving written notice (the "Gap Notice") of the Material Exceptions to which Purchaser is objecting within three (3) business days after receiving written notice of such new matter. If Purchaser does not object to any such Material Exception by giving a timely Gap Notice as herein provided, such Material Exception shall be a Permitted Exception except for any Must Removes. If Purchaser sends a Gap Notice to Seller, Seller shall have three (3) business days after receipt of the Gap Notice to notify Purchaser (i) that Seller will remove such objectionable exceptions from title on or before the Closing; provided that Seller may extend the Closing Date for such period as shall be required to effect such cure, but not beyond thirty (30) days; or (ii) that Seller elects not to cause such exceptions to be removed. If Seller fails to give written notice of its election within such three (3) business day period, Seller shall be deemed to have elected not to attempt to cure the exception or matter objected to in a Gap Notice. The procurement by Seller of a commitment for the issuance of the Title Policy, or an endorsement thereto (in a form reasonably acceptable to Purchaser) insuring Purchaser against any title exception or matter which was properly objected to by Purchaser in a Gap Notice pursuant to this Section 2.3 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (ii) above or fails to give Purchaser such a notice, Purchaser shall have five (5) business days in which to notify Seller that (x) Purchaser will nevertheless proceed with the purchase of the Property, in which case title to the Property shall be subject to such exceptions (i.e., such exceptions will be deemed to constitute Permitted Exceptions), or (y) Purchaser will terminate this Agreement. If Purchaser fails to give written notice of its election within such five (5) business day period, then Purchaser shall be deemed to have elected clause (x) above. If this Agreement is terminated pursuant to the provisions of this Section 2.3, then neither party shall have any further rights or obligations hereunder (except for those obligations of a party that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. As used herein, "Material Exception" shall mean any exception to title or matter shown on any amendment to the Title Commitment or revisions to the Survey issued after the expiration of the Inspection Period (a) that was not disclosed on the latest version of the Title Commitment received by Purchaser at least five (5) business days prior to the expiration of the Inspection Period, the Existing Survey, or the latest version of the Survey received by Purchaser at least five (5) business days prior to the expiration of the Inspection Period or that did not exist prior to the expiration of the Inspection Period, and (b) is not a Permitted Exception hereunder.

2.4 Permitted Exceptions. For purposes of this Agreement, the "Permitted Exceptions" are and mean: (i) those matters that are or have become Permitted Exceptions pursuant to Section 2.2 or 2.3 hereof; (ii) the rights of tenants under the Leases, as tenants only, with no options to purchase or rights of first offer or refusal to purchase the Property; (iii) the lien of all ad valorem real estate taxes and assessments not due and payable as of the Closing Date, subject to adjustment as herein provided; (iv) local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property, except for any violation of the foregoing; and (v) matters that have arisen as a result of acts done or suffered by or through Purchaser.

2.5 ASIC Lease. Prior to the expiration of the Inspection Period, Purchaser, as landlord, and Seller, as tenant, shall finalize the form of that certain lease for 30,552 rentable square feet located on the 3rd floor of the Property which shall be in form and substance reasonably acceptable to Purchaser and Seller and shall





provide for the following: (i) commencement on the date of the Closing ("Commencement"); (ii) a term of five (5) years; (iii) annual rent of $21.00 gross per rentable square foot with a 2012 base year and three percent (3%) annual increases plus electricity usage to be billed to tenant on a pro rata basis; (iv) no tenant improvement allowance or commissions; (v) notwithstanding clause (iii) above, rent abatement for five (5) months upon Commencement, provided, tenant shall be responsible for payment of all utilities during such abatement period, (vi) that for so long as Purchaser maintains training rooms on the first (1st) floor of the Property, Purchaser shall provide access to such training rooms as requested by Seller, subject to any conditions set forth in the lease, (vii) a guaranty from Atlas Financial Holdings, Inc. ("Atlas"), an affiliate of Seller, unconditionally and irrevocably guaranteeing the payment and performance of Seller's obligations under the lease, and (viii) an unconditional, standby and irrevocable, self-renewing letter of credit in the amount of Three Hundred Twenty Thousand Seven Hundred Ninety Six and No/100 Dollars ($320,796.00), in form and substance reasonably approved by Purchaser, as security for the full and faithful performance of every provision of the lease to be performed by Seller throughout the term of the lease (the "ASIC Lease"). The ASIC Lease shall replace any existing lease with Atlas (the "Existing Lease") in effect as of the Effective Date and the Existing Lease shall be terminated and of no further force or effect as of the Closing. At the Closing, Purchaser shall pay to Seller $7,670 as a lump sum as consideration for any costs associated with relocating Seller at the Property pursuant to the ASIC Lease. Purchaser and Seller shall execute the ASIC Lease as of the date of Closing.

ARTICLE III REVIEW OF PROPERTY

3.1 Right of Inspection. During the period (the "Inspection Period") beginning on the Effective Date and ending at 5:00p.m. Chicago, Illinois time on May 7, 2012. Purchaser shall have the right to make a physical inspection of the Real Property, including an inspection of the environmental condition thereof pursuant to the terms and conditions of this Agreement, and to examine documents and files located at the Real Property or delivered by Seller to Purchaser in connection with this Agreement concerning the leasing, maintenance and operation of the Property (collectively, the "Property Information"), but excluding internal memoranda, financial projections, appraisals and similar proprietary, confidential or privileged information (collectively, the "Confidential Documents").

Purchaser understands and agrees that any on site inspections of the Real Property shall occur at reasonable times agreed upon by Seller and Purchaser after not less than 24 hours' prior notice to Seller which notice shall include the dates of such entries, the work to be performed, and the names of the parties entering the Property. Such inspections shall be conducted so as not to interfere unreasonably with the use of the Property by Seller or their tenants or other occupants of the Property. Seller reserves the right to have a representative present during any such inspections. If Purchaser desires to do any invasive testing at the Real Property, Purchaser shall do so only after notifying Seller and obtaining Seller's prior written consent thereto, which consent may be withheld by Seller in its sole discretion and may be subject to any terms and conditions imposed by Seller in its sole discretion. Purchaser shall promptly restore the Property to its condition prior to any such inspections or tests, at Purchaser's sole cost and expense. Purchaser shall keep the Property free and clear of all mechanics', materialmen's and other liens resulting from its or its agents' or independent contractors' activities with respect to the Property. Purchaser agrees to protect, indemnify, defend and hold Seller, and Seller's partners, members, and their respective agents, independent contractors and employees harmless from and against any and all claims for liabilities, liens, losses, costs, expenses (including reasonable attorneys' fees), damages or injuries arising out of or resulting from the inspection of the Property by Purchaser or its agents or independent contractors (excluding any damages arising from the mere discovery of an adverse condition affecting the Property), and notwithstanding anything to the contrary in this Agreement, such obligation to indemnify and hold harmless Seller, and Seller's partners, members, and their respective agents, independent contractors and employees shall survive Closing or any termination of this Agreement. Purchaser shall not have the right to contact any tenant, occupant, vendor, contractor, property manager or asset manager of the Property without in each case first obtaining the prior consent of Seller thereto. In addition, Seller, at Seller's election, shall be entitled to have a representative on any telephone call or other such contact made by Purchaser and to be present at any meeting between Purchaser and any of said parties. Purchaser shall keep in force during the term hereof, and shall cause all agents and consultants retained by Purchaser in connection with any investigation of the Property to have during the performance of their





work, at no expense to Seller, commercial liability insurance, including public liability and property damage insurance, in the amount of at least $1,000,000, combined single limit for personal injuries or death of persons or property damage occurring in or about the Property, as well as workers' compensation insurance with limits in accordance with applicable laws. All such insurance shall: (a) name Seller as an additional insured; (b) specifically cover the liability assumed by Purchaser under this Agreement; (c) be issued by an insurance company reasonably acceptable to Seller; and (d) be primary and noncontributory with any insurance which may be carried by Seller. Purchaser shall deliver said policy or policies or certificates thereof to Seller prior to commencing any entry upon the Property, and renewals thereof at least thirty (30) days before the expiration date thereof. Purchaser's compliance with the provisions of this Section shall not limit Purchaser's liability under any of the other provisions of this Agreement.

In the event that the Closing hereunder shall not occur for any reason whatsoever (other than Seller's default), Purchaser shall, upon Seller's request, deliver to Seller, at no cost to Seller, and without representation or warranty, the copies of all tests, reports and inspections of the Property (provided the same do not restrict such delivery to a third party), made and conducted by or for the benefit of Purchaser.

3.2 Right of Termination. If for any reason or no reason Purchaser determines that the Property, or any aspect thereof, is unsuitable for Purchaser's acquisition, Purchaser shall have the right to terminate this Agreement by giving written notice thereof to Seller prior to the expiration of the Inspection Period. If Purchaser gives such notice of termination on or prior to the expiration of the Inspection Period, then this Agreement shall terminate and neither party shall have any further rights or obligations hereunder (except for those obligations that expressly survive the termination of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. If Purchaser fails to give Seller a notice of termination prior to the expiration of the Inspection Period, Purchaser shall be deemed to have waived its right to terminate this Agreement under this Section 3.2.

ARTICLE IV CLOSING

4.1 Time and Place. The consummation of the transaction contemplated hereby (the "Closing") shall be held on May 22, 2012, or sooner upon the mutual agreement of Purchaser and Seller (the "Closing Date"), through an escrow administered by Escrow Agent. At the Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3 hereof, the performance of which obligations shall be concurrent conditions. The Purchase Price and all documents shall be deposited with the Escrow Agent as escrowee.

4.2 Seller's Obligations at Closing. On the Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:

(a) a duly executed and acknowledged special warranty deed in the form attached hereto as Exhibit B (the "Deed") subject only to the Permitted Exceptions;

(b)      a duly executed bill of sale and assignment in the form attached hereto as
Exhibit C (the "Bill of Sale and Assignment");

(c) a notice (the "Tenant Notice"), which Purchaser shall send to the tenant under each of the Leases promptly after the Closing, informing such tenant of the transactions contemplated herein in a form reasonably acceptable to Seller and Purchaser;

(d) A certificate certifying that all of the representations, warranties and covenants made by Seller in this Agreement continue to be true and correct in all materials respects as of the Closing Date;
(e) duly completed and signed real estate transfer tax declarations and other state, county or municipal law, code or ordinance disclosures;






(f) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Seller;

(g) a certificate in the form attached hereto as Exhibit D duly executed by Seller stating that Seller is not a "foreign person" as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 (the "FIRPTA");

(h) such affidavits or documents as may be customarily and reasonably required by the Title Company in order to issue the Title Policy, in a form reasonably acceptable to Seller;

(i)      a closing and proration statement (the "Closing Statement");

(j) notices to vendors under the Assumed Operating Agreements, if required by the terms of such Assumed Operating Agreements;

(k) either (x) a certificate issued by the Illinois Department of Revenue stating that the withholding obligations under Section 9.02(d) do not apply, (y) or an indemnification in form as satisfactory to Purchaser that indemnifies, defends and holds harmless Purchaser with respect to all liabilities which may be imposed upon Purchaser as a result of Section 9.02(d), any Seller's state sales and use tax and unemployment insurance tax liability (the "Tax Indemnity");

(1) the ASIC Lease executed by Seller and the guaranty of the ASIC Lease executed by Atlas;

(m) such additional documents as shall be reasonably required to consummate the transactions contemplated by this Agreement;

(n) originals of all estoppel certificates from each tenant on the Property, substantially in the form attached as Exhibit E;

(o) a current rent roll as of Closing of all Leases, certified to Purchaser to be true and correct in all material respects to the best of Seller's knowledge; and

(p)      evidence of termination of all Operating Agreements, except for the
Assumed Operating Agreements.

Seller shall leave the following (but in all cases excluding any Confidential Documents) at the management office for the Property (collectively, the "Property Records"): (i) the original (or, if unavailable, copies of) Leases and the Assumed Operating Agreements; (ii) to the extent in the possession or control of Seller or the property manager at Closing, copies or originals of all books and records of account, contracts, copies of correspondence with tenants and suppliers, receipts for deposits, unpaid bills and other papers or documents which pertain to the Property; (iii) all available licenses, permits, warranties, and guarantees then in effect; (iv) to the extent any of such items are in the possession or control of Seller or the property manager, at Closing, all keys, access cards to, and combinations to locks and other security devices located at the Property excepting those that will continue to be used by tenants of the Property; and (v) all available plans and specifications and all operation manuals. Seller shall cooperate with Purchaser after Closing to transfer to Purchaser any Property Records stored electronically. Seller shall have the right to make copies of Property Records and retain such copies after the Closing. Each of Seller's and Purchaser's obligation under this Section 4.2 shall survive the Closing.

4.3 Purchaser's Obligations at Closing. On the Closing Date (and prior to 12:00 PM Chicago, Illinois time with respect to Section 4.3(a) below), Purchaser shall deliver in escrow with the Escrow Agent the following:

(a) the Purchase Price, less the amount of the Deposit that is applied to the Purchase Price, as increased or decreased by prorations and adjustments as herein provided (including, without limitation, pursuant to Section 4.4 hereof), in immediately available wire transferred funds;






(b) counterparts of the Bill of Sale and Assignment, the Tenant Notice, the real estate transfer tax declarations, the Closing Statement and the ASIC Lease;

(c) such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser or Purchaser's affiliates;

(d)      such affidavits as may be customarily and reasonably required by the Title
Company to issue the Title Policy, in a form reasonably acceptable to Purchaser; and

(e) such additional documents as shall be reasonably required to consummate the transactions contemplated by this Agreement.

4.4 Credits and Prorations.

(a)      All income and expenses of the Property shall be apportioned as of 12:01 a.m., on the Closing Date, as if Purchaser was vested with title to the Property during the entire day upon which Closing occurs. Such prorated items shall include without limitation, the following:

(i)      all rents, electricity charges and other sums due under the Leases
(collectively, the "Rents"), if any, as and when collected;

(ii) all real estate taxes and assessments (including personal property taxes, if any, on the Personal Property) affecting the Property as provided in Section 4.4(b)(ii) below;

(iii) all utility charges for which Seller is liable, if any, such charges to be apportioned at Closing on the basis of the most recent meter reading occurring prior to Closing (dated not more than thirty (30) days prior to Closing) or, if unmetered, on the basis of a current bill for each such utility; and

(iv)      all amounts payable under the Assumed Operating Agreements;

(v) any other operating expenses or other items pertaining to the Property which are customarily prorated between a purchaser and a seller in the county in which the Property is located.

(b) In addition to and notwithstanding anything contained in Section 4.4(a) hereof

(i) At Closing, (A) Seller shall, at Seller's option, either deliver to Purchaser all security deposits together with interest required to be paid thereon (collectively, the "Security Deposits") actually held by Seller pursuant to the Leases or credit to the account of Purchaser the amount of such Security Deposits and (B) Seller shall be entitled to receive and retain refundable cash or other deposits posted with utility companies. At Closing, Seller shall, to the extent assignable, assign (at Seller's cost, unless the Tenant is responsible for the cost thereof under its Lease) to Purchaser any letters of credit or other non-cash Security Deposits (to the extent such Security Deposits have not been properly applied against delinquent Rents as provided in the Leases) or, if such letters of credit or other non-cash security deposits are not assignable, Seller shall reasonably cooperate with Purchaser to have them re-issued in the name of Purchaser at Seller's cost. In the event that post-Closing, such letters of credit or other non-cash Security Deposits have not been transferred to Purchaser and Purchaser is entitled to draw thereon pursuant to the terms of the applicable Lease, then at Purchaser's request, Seller shall draw on such letters of credit or other non-cash Security Deposits and immediately upon receipt transfer such funds to Purchaser, or take such other actions post-Closing as are reasonably necessary to





realize on such letters of credit pursuant to the terms of the Lease. The obligations of Seller and Purchaser under this Section 4.4(b)(i) shall survive the Closing until all Security Deposits have been assigned and transferred to Purchaser.

(ii) Seller shall be responsible for real estate taxes assessed during calendar year 2011 which are payable in calendar year 2012, real estate taxes for all years prior to 2011 and real estate taxes for the portion of 2012 in which Seller owned the Property. Purchaser shall be responsible for real estate taxes for the portion of 2012 in which Purchaser owned the Property and real estate taxes for all subsequent years. At Closing, Seller shall deposit with the Escrow Agent the following funds to be held by Escrow Agent in an interest bearing account: (x) $420,265 which is 45% of the actual 2010 real estate taxes ($951,265) ("Seller's 2011 Tax Funds") for payment of the 2011 second installment real estate tax bill, (y) funds equal to the amount of Seller's share of 2012 real estate taxes determined by multiplying the amount of the actual 2010 real estate taxes ($951,265) by a fraction, the numerator of which is the number of days in the calendar year for the period commencing on January 1, 2012 and ending on the day before the Closing Date, and the denominator of which is 365 ("Seller's 2012 Tax Funds") for payment of the 2012 real estate taxes (payable in 2013), and (z)
funds equal to the amount of $40,000, which is Seller's approximate portion of the real estate taxes due under that certain Declaration of Covenants, Easements and Restrictions dated June 25, 2001, as amended (the "Parking Garage Agreement"), with the owner (the "Garage Owner") of the parking garage adjacent to the Property and located at 50 Northwest Point (the "Parking Garage") plus the amount of Seller's portion of the operating costs due under said agreement and determined by the Garage Owner and Seller in accordance with the Parking Garage Agreement ("Seller's Garage Funds"). All interest earned on such funds shall be for the benefit of Seller. Upon receipt of the 2011 second installment real estate tax bill, Purchaser shall promptly deliver the original bill to the Escrow Agent with a copy to Seller.      Escrow Agent shall disburse Seller's 2011 Tax Funds for timely payment of the 2011 second installment real estate tax bill and any excess Seller's 2011 Tax Funds shall be refunded to Seller and any deficiency in Seller's 2011 Tax Funds shall be promptly paid to Escrow Agent by Seller.      Upon receipt of the 2012 first installment real estate tax bill, Purchaser shall promptly deliver the original bill to the Escrow Agent, with a copy to Seller, together with funds sufficient to pay Purchaser's portion of the bill. Escrow Agent shall disburse Seller's 2012 Tax Funds, together with said Purchaser's funds, for timely payment of the 2012 first installment real estate tax bill. Seller and Purchaser agree to re-prorate 2012 real estate taxes upon receipt of the 2012 second installment real estate tax bill. Purchaser shall promptly deliver the original 2012 second installment real estate tax bill to the Escrow Agent, with a copy to Seller, together with funds sufficient to pay Purchaser's portion of the bill. Escrow Agent shall disburse Seller's 2012 Tax Funds, if any such funds are remaining, together with said Purchaser's funds, for timely payment of the 2012 second installment real estate tax bill and any excess Seller's 2012 Tax Funds shall be refunded to Seller and any deficiency in Seller's 2012 Tax Funds shall be promptly paid to Escrow Agent by Seller. Upon receipt of a statement of amounts due from the owner of the Property for its portion of 2012 real estate taxes and operating costs for the Parking Garage from the Garage Owner, Seller and Purchaser shall prorate said amounts between Seller and Purchaser with respect to their respective periods of ownership. Seller shall promptly deliver the statement to the Escrow Agent, together with a statement of proration of such amounts prepared by Seller and Purchaser. Purchaser shall deposit with Escrow Agent its share of said proration. Escrow Agent shall disburse Seller's Garage Funds in the amount set forth on the statement of proration, together with said Purchaser's funds, to the Garage Owner, and any excess Seller's Garage Funds shall be refunded to Seller and any deficiency in Seller's Garage Funds shall be promptly paid to Escrow Agent by Seller. Any credit or refund paid to Seller by the Garage Owner related to real estate taxes for 2011 and prior years for the Parking Garage shall be retained by Seller. Seller shall pay the portion of any special assessments due and payable prior to the Closing Date, and Purchaser shall pay the





portion of any special assessments due and payable on and after the Closing Date;

(iii) charges referred to in Section 4.4(a) hereof which are payable by any tenant to a third party, shall not be apportioned hereunder (except as provided in Section 4.4(b)(vii)), and Purchaser shall look solely to the tenant responsible therefor for the payment of the same;

(iv) as to utility charges referred to in Section 4.4(a)(iii) hereof, Seller may on notice to Purchaser elect to pay one or more or all of said items accrued to the date hereinabove fixed for apportionment directly to the person or entity entitled thereto, and to the extent Seller so elects, such item shall not be apportioned hereunder, and Seller's obligation to pay such item directly in such case shall survive the Closing; and

(v) unpaid and delinquent Rent (including, without limitation, Reimbursable Tenant Expenses) shall not be prorated at Closing. Unpaid and delinquent Rent collected by Seller and Purchaser after the Closing Date shall be delivered as follows: (a) if Seller collects any unpaid or delinquent Rent for the Property, Seller shall, within fifteen (15) days after Seller's receipt thereof, deliver to Purchaser any such Rent which Purchaser is entitled to hereunder relating to the period from and after Closing Date, and (b) if Purchaser collects any unpaid or delinquent Rent from the Property, Purchaser shall, within fifteen (15) days after the receipt thereof, deliver to Seller any such Rent which Seller is entitled to hereunder relating to the period prior to the Closing Date. Seller and Purchaser agree that all Rent received after the Closing Date shall be applied first to costs of collection, next to current Rent, then to rent payable during the month in which the Closing occurs and finally to delinquent Rent due prior to the Closing Date, if any, in the inverse order of maturity. Purchaser will make a good faith commercially reasonable effort after Closing to collect all delinquent Rents in the usual course of the operation of the Property, but Purchaser will not be obligated to institute any lawsuit or other collection procedures to collect delinquent Rents. Seller may attempt to collect any delinquent Rents owed Seller and may institute any lawsuit or collection procedures but may not evict any tenant or terminate any Lease.

(c) Seller and Purchaser shall each have the right to file and prosecute an appeal of the real property tax assessment for calendar year 2012 (payable in 2013) and for the tax years prior to Closing, and may take related actions which Seller or Purchaser, as applicable, deems appropriate in connection therewith. The parties shall cooperate with each other in connection with such appeal and collection of a refund of real property taxes paid. Purchaser owns and holds all right, title and interest in and to such appeal and refund, and all amounts payable in connection therewith shall be paid directly to Purchaser by the applicable authorities. If such refund or any part thereof is received by Seller, Seller shall promptly pay such amount to Purchaser. Any refund received by Purchaser, or paid to Purchaser by Seller per the immediately preceding sentence, shall be distributed as follows: first, to reimburse the applicable party for all costs incurred in connection with the appeal; second, with respect to refunds payable to tenants of the Real Property pursuant to the Leases, to such tenants in accordance with the terms of such Leases (if any); and third, to Seller and Purchaser in proportion to the period of time each owned the Real Property, with Purchaser being deemed to have owned the Real Property on the Closing Date. Each party shall have the right to participate in an appeal of the other party.

(d) Except as otherwise provided herein, any revenue or expense amount which cannot be ascertained with certainty as of Closing shall be prorated on the basis of the parties' reasonable estimates of such amount, and shall be the subject of a final proration thirty (30) days after Closing, or as soon thereafter as the precise amounts can be ascertained; but in no event shall (i) any reproration under this Agreement, other than with respect to real estate taxes and assessments pursuant to Section 4.4(b)(ii) above and Reimbursable Tenant Expenses pursuant to Section 4.4(b)(vi) above, occur more than one hundred eighty (180) days after the Closing; and (ii) any reproration of real estate taxes and assessments pursuant to Section 4.4(b)(ii) occur any later than forty-five (45) days after the issuance of the final real estate tax bill for calendar year 2012 (payable in 2013). Each party shall promptly notify the other when it becomes





aware that any such estimated amount has been ascertained. Once all revenue and expense amounts have been ascertained, Purchaser shall prepare, and certify as correct, a final proration statement which shall be subject to Seller's approval. Upon Seller's acceptance and approval of any final proration statement submitted by Purchaser, such statement shall be conclusively deemed to be accurate and final.

(e) Any amounts due Seller or Purchaser under this Section 4.4 from the other party, which are not paid within ten ( 10) business days following written demand, shall bear interest from and after the date of demand at the annual rate of interest equal to the Prime Rate (as hereinafter defined) plus 5%. "Prime Rate" shall mean annual rate of interest the highest prime rate (or base rate) reported, from time to time, in the Money Rates column or section of The Wall Street Journal as having been the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank). Subject to Section 4.4(d) hereof, the provisions of this Section 4.4 shall survive Closing.

4.5 Transaction Taxes and Closing Costs.

(a) Seller and Purchaser shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance;

(b) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses: (i) one-half (112) of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; (ii) State and County transfer taxes; (iii) the premium charged by the Title Company for Title Policy, including the costs of any extended coverage endorsement and those endorsements required to cure title exceptions that Seller is obligated to remove pursuant to Sections 2.2 or 2.3, but excluding the costs of any other endorsement to the Title Policy; (iv) the cost of the Survey; and (v) the fees and expenses of the Broker (as hereinafter defined).

(c) Purchaser shall pay the fees of any counsel representing Purchaser in connection with this transaction. Purchaser shall also pay the following costs and expenses: (i) one-half (112) of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; (ii) the Village of Elk Grove transfer tax; (iii) the premium for all endorsements to the Title Policy (other than an extended coverage endorsement and those endorsements required to cure title exceptions that Seller is obligated to remove pursuant to Sections 2.2 and 2.3); and (iv) all costs and expenses incurred in connection with the transfer of any transferable warranties, permits or licenses in connection with the ownership or operation of the Property;

(d) All costs and expenses incident to this transaction and the closing thereof, and not specifically described above, shall be paid by the party incurring same; and

(e)      The provisions of this Section 4.5 shall survive the Closing.

4.6 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

(a) Seller shall have delivered to Purchaser all of the items required to be delivered by Seller pursuant to the terms of Section 4.2 hereof;

(b)     All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the Closing Date.

(c)      Seller shall have satisfied the Estoppel Condition (defined below);






(d) Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing;

(e)     The Title Company, and/or another national title company approved by Purchaser in its reasonable discretion shall be irrevocably prepared to issue its 2006 ALTA Owner's Policy of Title Insurance (with an extended coverage endorsement, those endorsements required to cure title exceptions that Seller is obligated to cure pursuant to Section 2.2 or Section 2.3 and the endorsements requested by Purchaser to the extent customarily available) covering the Real Property, in the aggregate amount of the Purchase Price, subject only to the Permitted Exceptions (the "Title Policy"); and

(f) Seller shall not have been adjudged bankrupt nor filed a voluntary petition or had a petition filed against it by its creditors or made any assignment for the benefit of creditors.

If any of the conditions to Purchaser's obligations under Section 4.6 shall fail to occur, and such failure is not otherwise a default by Seller under this Agreement (in which event Purchaser would be afforded the rights under Section 5.2 hereof), then Purchaser may, as its exclusive remedies, either (i) elect to waive such failure and proceed to Closing, or (ii) as long as Purchaser is not in default hereunder, and as its sole and exclusive remedy, terminate this Agreement by written notice to Seller, in which event the Deposit shall be promptly returned to Purchaser and neither party shall have any further rights or obligations hereunder (except for those obligations of either party that expressly survive the termination of this Agreement pursuant to the other provisions of this Agreement). Notwithstanding the foregoing, in the event any condition to Purchaser's obligations hereunder described in this Section 4.6 shall not have been satisfied, Seller shall have the right (but not the obligation) to attempt to cure or satisfy such condition and the Seller shall be entitled to a reasonable adjournment of the Closing Date not to exceed five (5) business days in order to do so.

4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Seller in its sole discretion:

(a) Purchaser shall have delivered to Escrow Agent the Purchase Price as adjusted as provided herein, pursuant to and payable in the manner provided for in this Agreement;

(b) Purchaser shall have delivered to Escrow Agent all of the items required to be delivered to Escrow Agent pursuant to Section 4.3 hereof;

(c)      All of the representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the Closing Date; and

(d) Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the date of Closing.

ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Representations and Warranties of Seller. Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date and as of the Closing Date:

(a) Organization. Seller has been duly formed and organized, and is validly existing in the State of Illinois and is qualified to do business and in good standing under the laws of the State of Illinois.

(b) Operating Agreements. The list of all service agreements, management contracts, maintenance contracts, equipment leases and like contracts and agreements that will be binding upon Purchaser after Closing (subject to Purchaser's right to require termination of certain such agreements





pursuant to Section 5.4(d) below) (collectively, the "Operating Agreements") attached hereto as Exhibit F is true, correct, and complete in all material respects and includes all of the Operating Agreements in effect on the Effective Date. The documents constituting the Operating Agreements that are delivered or made available to Purchaser pursuant to Section 3.1 are, to Seller's knowledge, true, correct and complete copies of all of the Operating Agreements affecting the Property as of the date of their delivery, including any and all amendments. To Seller's knowledge, neither Seller nor any other party to any Operating Agreement is in default thereunder. Seller has no knowledge of any event which with notice or the passage of time or both would constitute a default by Seller or any party under any Operating Agreement.

(c) Condemnation. Seller has received no written notice from any governmental authority of any condemnation proceedings relating to the Property and to Seller's knowledge, no such proceeding is pending or threatened against the Property.

(d) Litigation. Seller has not received notice of any litigation which has been filed against the Property or Seller that arises out of the ownership of the Property and affects the Property or use thereof, or Seller's ability to perform hereunder. Seller has not received any written notice and has no knowledge of any pending or threatened liens, government investigations, special assessments or impositions to be made against the Property, other than real estate taxes imposed on the Real Property for 2012 and subsequent years.

(e) Violations. Seller has not received written notice nor has any knowledge of any uncured violation of any federal, state or local law, code, ordinance or regulation relating to the ownership, use or operation of the Property which would materially adversely affect the Property or use thereof.

(f) Leases. The list of leases attached hereto as Exhibit G is accurate in all material respects, and includes all of the existing leases in effect as of the Effective Date (the "Existing Leases"). The documents constituting the Existing Leases that are delivered to or made available to Purchaser pursuant to Section 3.1 are, to Seller's knowledge, true, correct and complete copies of all of the Leases affecting the Property as of the date of their delivery, including any and all amendments and guarantees. Seller has neither sent nor received any currently effective notice of default under any of the Leases. Seller has no knowledge of any event which with notice or the passage of time or both would constitute a default by Seller or any party under any of the Existing Leases.

(g) Authority to Enter/Noncontravention. Seller has full right, authority, power and capacity: (i) to enter into this Agreement and each closing document to be executed and delivered by or on behalf of it pursuant to this Agreement; and (ii) to carry out the transactions contemplated hereby and thereby. This Agreement and the closing documents executed and delivered by or on behalf of Seller constitute, or when executed and delivered will constitute, the legal, valid and binding obligation of said Seller, each enforceable against said Seller in accordance with their respective terms, except as the same may be limited or affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors' rights and remedies generally, or by equitable principles, including principles of commercial reasonableness, good faith and fair dealing (whether applied in a proceeding at law or in equity). The execution, delivery and performance of this Agreement and the closing documents does not and will not violate any term, conditions or provisions of, or constitute a default under, any of Seller's organizational documents or any bond, note, or other evidence of indebtedness or any contract, lease or other instrument, to which Seller is a party or affecting the Property, or require Seller to obtain any approval, consent or waiver of, or make any filing with, any person or authority (governmental or otherwise) that will not be obtained or made prior to Closing.

(h) ERISA. Seller is not (i) an "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title 1 of ERISA, (ii) a "plan" that is subject to the prohibited transaction provisions of Section 4975 of the Internal Revenue Code of 1986 (the "Code") or (iii) an entity whose assets are treated as "plan assets" under ERISA by reason of an employee benefit plan's or plan's investment in such entity. Seller





has no knowledge of any liens against the Property which are attributable to Employee Benefit Plans (as hereinafter defined). For the purposes of this Section 5.1(h), "Employee Benefit Plans" means, collectively, any "employee benefit plan" as defined in Section 3(3) of ERISA, including any Employee Pension Benefit Plan (within the meaning of Section 3(2) of ERISA), Employee Welfare Benefit Plan (within the meaning of Section 3(1) of ERISA), or any other benefit program or arrangement whether or not subject to ERISA and whether written or oral, any written bonus, deferred compensation, pension, retirement, profit-sharing, stock bonus, restricted stock, stock option, stock purchase, employment, severance, compensation, vacation plan, education or tuition program, medical, post-retirement medical, disability, fringe benefit, unemployment, welfare or other plan, agreement, policy or arrangement, that covers employees, consultants, directors or officers of Seller or any of its affiliates, or pursuant to which former employees, consultants, directors or officers of Seller or any of its affiliates are or may be entitled to current or future benefits.

(i) Patriot Act. Seller is not, and to Seller's knowledge, no party holding a direct interest in Seller is, named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, "Specially Designated National and Blocked Person," or another banned or blocked person, entity, or nation pursuant to any Law that is enforced or administered by the Office of Foreign Assets Control.

(j) Non-Foreign Entity. Seller is not a "foreign person" or "foreign corporation" as those terms are defined in the Internal Revenue Code (and the regulations promulgated thereunder).

(k) Insurance. Seller has not received any written notice from any insurance company or board of fire underwriters of any defects or inadequacies in or on the Improvements or any part or component thereof that would adversely affect the insurability of the Improvements or cause any increase in the premiums for insurance for the Improvements.
(1) Environmental Matters. Seller has not received written notice of any violation of any law relating to environmental conditions, hazardous waste or toxic materials with respect to the Property. To Seller's knowledge, except as disclosed in the Property Information or any other environmental report obtained by Purchaser, there is no hazardous substance located on the Property in violation of any federal, state or local environmental or human health or safety laws, codes, ordinances or regulations.

(m) Licenses and Permits. To Seller's knowledge, Exhibit I identifies all existing Licenses and Permits and true, correct and complete copies of all Licenses and Permits in Seller's possession will be delivered as provided in Section 3.1. Seller has not received written notice of any violation, revocation or termination of any such Licenses or Permit.

(n) Commissions. Except for any commissions that may become due as the result of any extension or renewal right exercised after the Effective Date by a Tenant, there are no commissions or referral fees that are or may become due relating to the Existing Leases.

(o) Special Assessments. Seller has no knowledge of any proposed or pending special assessments, affecting all or any portion of the Property.

(p) Property Documents. The Property Information delivered or made available to Purchaser pursuant to Section 3.1 comprises, to Seller's knowledge, true, correct and complete copies of all such documents and information affecting the Property which are utilized by Seller in the normal course of its ownership and operation of the Property.

5.2 Knowledge Defined. Any and all uses of the phrase, "to Seller's actual knowledge" or other references to Seller's knowledge in this Agreement, shall mean the actual, present, conscious knowledge of Scott Wollney, Paul Romano and Leslie DiMaggio (collectively, the "Seller Knowledge Individuals") as to





a fact at the time given without any investigation or inquiry. Without limiting the foregoing, Purchaser acknowledges that the Seller Knowledge Individuals have not performed and are not obligated to perform any investigation or review of any files or other information in the possession of Seller or to make any inquiry of any persons, or to take any other actions in connection with the representations and warranties of Seller set forth in this Agreement. Neither the actual, present, conscious knowledge of any other individual or entity, nor the constructive knowledge of any other individual or entity, shall be imputed to the Seller Knowledge Individuals. Furthermore, Seller's representations and warranties shall be deemed to be modified to reflect any facts or circumstances disclosed in the tenant estoppels received by Purchaser.

5.3 Survival of Seller's Representations, Warranties and Other Obligations. The representations and warranties of Seller set forth in Section 5.1 hereof as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period of one (1) year (the "Survival Period"). No claim for a breach of any representation, warranty, covenant or agreement of Seller under or pursuant to this Agreement including any instrument delivered to Purchaser under or pursuant to this Agreement shall be actionable or payable if Purchaser had actual knowledge of the breach in question prior to the Closing. Seller shall have no liability to Purchaser for a breach of any representation, warranty, covenant or agreement under or pursuant to this Agreement, (but excluding the Deed, the Bill of Sale and Assignment, the FIRPTA and the Tax Indemnity (collectively, the "Closing Instruments")) (a) unless the valid claims for all such breaches collectively aggregate more than Ten Thousand Dollars ($10,000.00), in which event the full amount of such valid claims shall be actionable up to, but not in excess of Seven Hundred Fifty Thousand Dollars ($750,000.00), plus reimbursement of any fees due pursuant to Section 10.16 hereof (the "Cap"), and (b) unless written notice containing a description of the specific nature of such breach and the amount claimed to be due from Seller (a "Post-Closing Claim") shall have been given by Purchaser to Seller prior to the expiration of the Survival Period and an action shall have been commenced by Purchaser against Seller with respect to such Post-Closing Claim within 30 days after the expiration of the Survival Period. In no event shall Seller be liable for any consequential or punitive damages or for any damages in excess of the Cap. Seller hereby covenants that, from the Closing Date through, and including, the date which is the later of (i) the last day of the Survival Period and (ii) the date on which any Post-Closing Claim timely commenced by Purchaser within the aforementioned 30 day period is resolved by a court of competent jurisdiction, it shall have and maintain a net worth of no less than $750,000.00 ("Minimum Net Worth Requirement"). "Net worth" shall mean Seller's assets minus its liabilities as determined in accordance with generally accepted accounting principles. Furthermore, in order to ensure performance by Seller of any liabilities resulting from a Post-Closing Claim or any payments due from Seller because of any reproration of taxes or other costs in accordance with Section 4.4 hereof or any post-closing liability resulting from any indemnity by Seller or a breach by Seller of representation or warranty in the Closing Instruments (collectively, "Seller's Post Closing Obligations"), Atlas Financial Holdings, Inc. joins this Agreement for the purposes of being jointly and severally liable with Seller for any and all of Seller's Post Closing Obligations.

5.4      Covenants of Seller.

Seller hereby covenants with Purchaser as follows:

(a) From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall operate and maintain the Property, including, without limitation, performing repairs and maintenance and performing its obligations under the Leases, in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof;

(b) Except as provided in this Section 5.4(b), a copy of any amendment, renewal, termination or expansion of an Existing Lease or of any new Lease which Seller desires to execute between the Effective Date and the Closing Date will be submitted to Purchaser prior to execution by Seller, which shall include all Tenant Inducement Costs and leasing commissions to be incurred in connection therewith. Seller shall not enter into any new Lease or amend any existing Lease without the approval of Purchaser, which approval (i) may be withheld or denied in Purchaser's sole and absolute discretion after the expiration of the Inspection Period and (ii) shall not be unreasonably withheld, delayed or conditioned during the Inspection Period. Purchaser agrees to notify Seller in writing within five (5) business days after its receipt





thereof of either its approval or disapproval thereof. In the event Purchaser fails to notify Seller of its approval or disapproval within the five (5) business day period set forth above, Purchaser shall be deemed to have approved such new Lease, amendment, renewal or expansion. Notwithstanding the foregoing, Purchaser shall have no right to approve any amendment to an existing Lease entered into by Seller pursuant to evidence the exercise by a tenant of a right or option granted to such tenant in its Lease.

(c) A copy of any amendment or renewal of an existing Operating Agreement or of any new operating agreement which Seller desires to execute between the Effective Date and the Closing Date will be submitted to Purchaser prior to execution by Seller. Except as it relates to Operating Agreements that may be terminated without penalty upon no more than thirty (30) days' notice, Seller shall not enter into any new operating agreement, service contract or other agreement that would affect the Property or amend any existing Operating Agreement without the approval of Purchaser, which approval (i) may be withheld or denied in Purchaser's sole and absolute discretion after the expiration of the Inspection Period and (ii) shall not be unreasonably withheld, delayed or conditioned during the Inspection Period. Purchaser agrees to notify Seller in writing within five (5) business days after its receipt thereof of either its approval or disapproval thereof. In the event Purchaser fails to notify Seller in writing of its approval or disapproval within the five (5) business day period set forth above, Purchaser shall be deemed to have approved such new operating agreement, amendment, or renewal. Any operating agreement or amendment or renewal of an existing Operating Agreement entered into pursuant to this Section 5.4(c) shall be deemed to be an "Assumed Operating Agreement" (as defined below).

(d) Upon written notice from Purchaser on or before the expiration of the Inspection Period, Seller shall give appropriate notices of termination of those Operating Agreements designated by Purchaser by a written notice given to Seller prior to the expiration of the Inspection Period (but only to the extent termination is permitted thereunder without penalty); provided, however, that (i) those Operating Agreements designated with an "asterisk" on Exhibit F are not terminable and shall be deemed Assumed Operating Agreements, which Purchaser shall assume at Closing; and (ii) if the notice period required to terminate such Operating Agreements shall not have expired prior to Closing, at Closing, the Property will be subject to the terms of such Operating Agreements and such Operating Agreements shall be deemed to be Assumed Operating Agreements. The Operating Agreements which Purchaser has not required be terminated or which otherwise are not required to be terminated as aforesaid are herein collectively referred to as the "Assumed Operating Agreements".

(e) Seller shall maintain in existence and comply with all of the terms and conditions of the Licenses and Permits in a manner generally consistent with the manner that Seller has done so as of the Effective Date. Seller shall maintain insurance coverages substantially the same as those currently in effect with respect to the Property, so long as such coverages remain available at commercially reasonable rates, and shall maintain such coverages as Seller would be maintaining if Seller did not intend to sell the Property.

(f) Seller shall use commercially reasonable efforts to deliver to Purchaser on or prior to the Closing Date an estoppel letter substantially in the form attached as Exhibit E (or, with respect to any tenant, in such other form as may be provided for in such tenant's Lease), from each tenant at the Improvements (the "Estoppel Condition"). Seller's failure to satisfy the Estoppel Condition shall in no instance constitute a default by Seller under this Agreement and in the event of such failure, Purchaser's sole right shall be either to terminate this Agreement in which case the Deposit, and all interest earned thereon, shall be returned to Purchaser, or to waive the Estoppel Condition (to the extent not satisfied) and proceed with the Closing. Notwithstanding the foregoing, the parties agree that Seller shall have a right, from time to time, to extend the Closing Date for up to a total of thirty (30) days in order to attempt to satisfy the Estoppel Condition upon the giving of notice of such election to Purchaser at least two (2) business days prior to the then existing Closing Date.

(g) Personal Property. From the Effective Date until Closing, not transfer or remove any of the





Personal Property from the Improvements except for the purpose or repair or replacement (except as it relates to any artwork) thereof. Any item of Personal Property replaced after the Effective Date will be installed prior to Closing and be of substantially the same quality of the item of Personal Property being replaced.

(h) Notices. From the Effective Date until Closing, promptly deliver to Purchaser copies of written default notices, notices of lawsuits and notices of violations affecting the Property.

(i) No Mortgages, Purchase Agreements or Options. Seller shall not grant any mortgages or security interests in or to the Property or sell or enter into any agreement to sell or grant an option to purchase the Property.

(j) Environmental Questionnaire. Seller shall complete, execute and deliver any environmental questionnaire that may be reasonably requested by Purchaser's environmental consultant in connection with its preparation of an environmental survey of the Property; provided, however, completion of the same shall not include or be construed to include any representation or warranty by Seller as to the environmental conditions of the Property.

(k) Removal of Signage. Prior to the Closing Date, unless otherwise mutually agreed, Seller shall remove, at Seller's sole cost and expense, any and all exterior signage located upon the Real Property which identifies Seller or any affiliate of Seller, including, without limitation, the signage mounted to the exterior of the building identifying Atlas, and Seller shall repair any damage caused by such removal.

5.5 Representations and Warranties of Purchaser. Purchaser hereby makes the following representations and warranties to Seller as of the Effective Date and as of the Closing Date:

(a) Organization and Authority. Purchaser has been duly organized and is validly existing under the laws of the State of Delaware.

(b) Pending Actions. To Purchaser's actual knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement.

(c) Authority to Enter/Noncontravention. Purchaser has full right, authority, power and capacity: (i) to enter into this Agreement and each closing document to be executed and delivered by or on behalf of Purchaser pursuant to this Agreement; and (ii) to carry out the transactions contemplated hereby and thereby. This Agreement and the closing documents executed and delivered by or on behalf of Purchaser constitute, or when executed and delivered will constitute, the legal, valid and binding obligation of Purchaser, each enforceable against Purchaser in accordance with their respective terms, except as the same may be limited or affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditor's rights and remedies generally, or by equitable principles, including principles of commercial reasonableness, good faith and fair dealing (whether applied in a proceeding at law or in equity). To Purchaser's actual knowledge, the execution, delivery and performance of this Agreement and the closing documents does not and will not violate any term, conditions or provisions of or constitute a default under any bond, note or other evidence of indebtedness or any contract, lease or other instrument, to which Purchaser is a party or requires Purchaser to obtain any approval, consent or waiver of, or make any filing with, any person or authority (governmental or otherwise) that will not be obtained or made prior to the Closing.

(d) Patriot Act. Purchaser is not, and to Purchaser's knowledge, no party holding a direct membership interest in Purchaser is, named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to





Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, "Specially Designated National and Blocked Person," or another banned or blocked person, entity, or nation pursuant to any Law that is enforced or administered by the Office of Foreign Assets Control.

5.6 Purchaser's Knowledge Defined. Any and all uses of the phrase, "to Purchaser's actual knowledge" or other references to Purchaser's knowledge in this Agreement, shall mean the actual, present, conscious knowledge of Thomas Frey (the "Purchaser Knowledge Individual") as to a fact at the time given without any investigation or inquiry. Without limiting the foregoing, Seller acknowledges that the Purchaser Knowledge Individual have not performed and are not obligated to perform any investigation or review of any files or other information in the possession of Purchaser or to make any inquiry of any persons, or to take any other actions in connection with the representations and warranties of Purchaser set forth in this Agreement. Neither the actual, present, conscious knowledge of any other individual or entity, nor the constructive knowledge of any other individual or entity, shall be imputed to the Purchaser Knowledge Individuals.

5.7 Survival of Purchaser's Representations and Warranties. The representations and warranties of Purchaser set forth in Section 5.5 hereof as updated as of the Closing Date in accordance with the terms of this Agreement, shall survive Closing for the Survival Period. No claim for a breach of any representation, warranty, covenant or agreement of Purchaser under or pursuant to this Agreement including any instrument delivered to Seller under or pursuant to this Agreement shall be actionable or payable if Seller had actual knowledge of the breach in question prior to the Closing. Purchaser shall have no liability to Seller for a breach of any representation or warranty set forth in Section 5.5 (a) unless the valid claims for all such breaches collectively aggregate more than Ten Thousand and Noll 00 Dollars ($10,000.00), in which event the full amount of such valid claims shall be actionable up to, but not in excess of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00), plus reimbursement of any fees due pursuant to Section 10.16 hereof(the "Cap"), and (b) unless written notice containing a description of the specific nature of such breach and the amount claimed to be due from Seller (a "Post-Closing Claim") shall have been given by Purchaser to Seller prior to the expiration of the Survival Period and an action shall have been commenced by Purchaser against Seller with respect to such Post-Closing Claim within 30 days after the expiration of the Survival Period.

ARTICLE VI DEFAULT

6.1 Default by Purchaser. In the event that the transaction contemplated by this Agreement fails to close due to Purchaser's default, then Seller shall be entitled, as its sole and exclusive remedy, to terminate this Agreement and receive the Deposit as liquidated damages for the breach of this Agreement, it being agreed between the parties hereto that the actual damages to Seller in the event of such breach are impractical to ascertain and the amount of the Deposit is a reasonable estimate thereof.

6.2 Default by Seller. In the event that the transaction contemplated by this Agreement fails to close due to Seller's default, Purchaser shall be entitled, as its sole remedy, either: (a) to receive the return of the Deposit, which return shall operate to terminate this Agreement and release Seller from any and all liability hereunder, provided that Seller shall reimburse Purchaser for all reasonable out-of-pocket costs incurred by Purchaser in connection with the negotiation of this Agreement and its inspection of the Property, not to exceed $75,000, plus reimbursement of any fees due pursuant to Section 10.16 hereof or (b) to enforce specific performance of Seller's obligations under this Agreement, it being acknowledged that the Property is unique and that monetary damages would not be an adequate remedy of specific performance shall not be available to enforce any other obligation of Seller hereunder. Purchaser shall be deemed to have elected to terminate this Agreement and receive back the Deposit if Purchaser fails to file suit for specific performance against Seller in a court having jurisdiction in the county and state in which the Property is located, on or before ninety (90) days following the date upon which Closing was to have occurred. If Purchaser timely elects to seek specific performance of this Agreement, then as a condition precedent to any suit for specific performance, Purchaser shall, on or before the Closing Date, time being of the essence, fully perform all of its obligations hereunder which arc capable of being performed (other than the payment of the Purchase Price, which shall be paid as and when required by the court in the suit for specific performance). In





addition, notwithstanding any provision to the contrary contained in this Agreement, the parties hereto hereby agree that Seller's aggregate liability for any actual or alleged default or breach of this Agreement (including, without limitation, any breach of a representation or warranty made by Seller hereunder, but excluding any claim based upon Seller failure to close the sale of the Property when legally required to do so as to which Purchaser's sole remedies are set forth in the first sentence of this Section 6.2), or any other claim arising under or relating to this Agreement and/or the Property, shall not exceed the Cap (as defined in Section 5.3 hereof). The foregoing limitation of remedies and liability was separately bargained for and constitutes material consideration for Seller entering into this Agreement.

6.3 Recoverable Damages. Notwithstanding Sections 6.1 and 6.2 hereof, in no event shall the provisions of Sections 6.1 and 6.2 limit the damages recoverable by (i) either party against the other party due to the other party's obligation to indemnify such party in accordance with Article VIII of this Agreement and (ii) by either party against the other party due to a breach of a party's obligations under Section 4.4 hereof.

ARTICLE VII RISK OF LOSS

7.1 Minor Damage. In the event of loss or damage to the Property or any portion thereof which is not "Major" (as hereinafter defined), Seller shall promptly deliver written notice thereof to Purchaser and this Agreement shall remain in full force and effect provided that Seller shall, at Seller's option, either (a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's right, title and interest in and to any claims and proceeds Seller may have with respect to any insurance policies (including any rent loss insurance aiJplicable to any period on and after the Closing Date) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time, not to exceed thirty (30) days, in order to allow for the completion of such repairs. If Seller elects to assign a casualty claim to Purchaser, the Purchase Price shall be reduced by an amount equal to the lesser of the deductible amount under Seller's insurance policy and the cost to complete the repairs. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser.

7.2 Major Damage. In the event of a "Major" loss or damage, Seller shall promptly deliver written notice thereof to Purchaser and Purchaser may elect to either (i) terminate this Agreement by written notice to Seller, in which event the Deposit shall be returned to Purchaser and neither party shall have any further rights or obligations hereunder (except those obligations of a party that expressly survive the termination of this Agreement), or (ii) waive such termination right and proceed with Closing. If Purchaser elects to terminate this Agreement within ten (1 0) business days after Seller sends Purchaser written notice of the occurrence of such Major loss or damage (which notice shall state the cost of repair or restoration thereof as opined by an architect, construction company, or estimator in accordance with Section 7.3 hereof), then Purchaser shall be deemed to have elected to terminate this Agreement. In the event that Purchaser elects to proceed with Closing, Seller shall, at Seller's option, either (a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's right, title and interest in and to any claims and proceeds Seller may have with respect to any insurance policies (including any rent loss insurance applicable to any period on and after the Closing Date) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time, not to exceed thirty (30) days, in order to allow for the completion of such repairs. If Seller elects to assign a casualty claim to Purchaser, the Purchase Price shall be reduced by an amount equal to the deductible amount under Seller's insurance policy. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser.

7.3 Definition of "Major" Loss or Damage. For purposes of Sections 7.1 and 7.2, "Major" loss or damage refers to the following: (a) loss or damage to the Property hereof such that the cost of repairing or restoring the premises in question to substantially the same condition which existed prior to the event of damage would be, in the opinion of an architect, construction company or estimator selected by Seller and reasonably approved by Purchaser, equal to or greater than One Million and No/100 Dollars ($1,000,000.00), (b) any loss due to a condemnation which permanently and materially impairs the current use of the Property, or (c) any uninsured loss for which Seller has not agreed to provide Purchaser with a credit to the Purchase Price at Closing. If Purchaser





does not give written notice to Seller of Purchaser's reasons for disapproving an architect, construction company or estimator within five (5) business days after receipt of notice of the proposed architect, Purchaser shall be deemed to have approved the party selected by Seller.

ARTICLE VIII BROKERAGE AND INDEMNIFICATION

8.1 Brokerage Commissions. Seller represents to Purchaser that Seller has not retained any broker in connection with the transaction contemplated in this Agreement, other than CBRE (the "Seller's Broker"), whose commission shall be paid by Seller. Purchaser represents to Seller that Purchaser has not retained any broker, other than Bob Reaumond with CBRE ("Purchaser's Broker", together with the Seller's Broker, the "Broker") connection with the transaction contemplated in this Agreement. Each party hereto agrees that if any person or entity other than Broker, makes a claim for brokerage commissions or other fees related to the sale of the Property by Seller to Purchaser, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives, said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including reasonable attorneys' fees) in connection therewith. The provisions of this Section shall survive Closing or any termination of this Agreement.

ARTICLE IX DISCLAIMERS AND WAIVERS

9.1 No Reliance on Documents. Except as expressly set forth in the representations and warranties made in Sections 5.1 and 8.1 of this Agreement or contained in any Closing Instrument delivered in connection with the Closing (the "Reps and Warranties"), Seller make no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller or its agent to Purchaser in connection with the transaction contemplated hereby, including without limitation, any information contained in any offering memorandum delivered to Purchaser. Purchaser acknowledges and agrees that all materials, data and information delivered by Seller or any other party to Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein. Except in connection with the Reps and Warranties, neither Seller, nor any Affiliate (as defined in Section 10.3 hereof) of Seller, nor the person or entity which prepared any report or reports delivered by Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from any such reports.

9.2 AS IS SALE; DISCLAIMERS. EXCEPT FOR THE REPS AND WARRANTIES, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT OF THE REPS AND WARRANTIES. OTHER THAN THE REPS AND WARRANTIES, PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY PARTY REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING. PURCHASER ALSO ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS AND TAKES INTO ACCOUNT THAT THE PROPERTY IS BEING SOLD "AS IS", SUBJECT TO THE REPS AND WARRANTIES.

PURSUANT TO THIS TERMS OF THIS AGREEMENT SELLER HAS GIVEN PURCHASER THE





OPPORTUNITY TO CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS OF THE PROPERTY, AS PURCHASER MAY DEEM NECESSARY OR DESIRABLE TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND PURCHASER WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN THE REPS AND WARRANTIES AND COVENANTS OF SELLER. SUBJECT TO THE REPS AND WARRANTIES, UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS, AND OTHER THAN WITH RESPECT TO THE REPS AND WARRANTIES, PURCHASER, UPON CLOSING, DOES HEREBY WAIVE, RELINQUISH AND RELEASE SELLER AND SELLER'S AFFILIATES FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING, BUT NOT LIMITED TO, CAUSES OF ACTION IN TORT), LOSSES, DAMAGESLIABILITIES, COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS' FEES) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S AFFILIATES) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, ENVIRONMENTAL CONDITIONS (INCLUDING PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC SUBSTANCES ON OR ABOUT THE PROPERTY) VIOLATIONS OF ANY APPLICABLE LAWS AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY.

9.3 Survival of Disclaimers. The provisions of this Article IX shall survive Closing or any termination of this Agreement.

ARTICLE X MISCELLANEOUS

10.1 Confidentiality. Purchaser and its representatives shall hold in strictest confidence all Confidential Documents, whether obtained before or after the execution and delivery of this Agreement, and shall not disclose the same to others; provided, however, that it is understood and agreed that Purchaser may disclose such data and information to the directors, investors, employees, lenders, consultants, accountants, co-venturers, advisors and attorneys of Purchaser provided that such persons are told of the confidential nature of such materials and that Purchaser shall be liable for any breach by them of this Section 10.1; provided, further, however, that Purchaser may disclose such data and information (a) to comply with law, regulation or judicial order, or (b) to enforce the terms of this Agreement. In the event this Agreement is terminated or Purchaser fails to perform hereunder, Purchaser shall promptly destroy any Confidential Documents obtained from Seller in connection with this Agreement or the transaction contemplated herein. In the event of a breach or threatened breach by Purchaser or its agents or representatives of this Section 10.1, Seller shall be entitled to an injunction restraining Purchaser or its agents or representatives from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Seller from pursuing any other available remedy at law or in equity for such breach or threatened breach. The provisions of this Section 10.1 shall terminate at Closing but shall survive any termination of this Agreement.

10.2 Public Disclosure. Prior to and after the Closing, any release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in the form and content approved by Purchaser and Seller. As a public company, Seller may be required to publicly disclose this Agreement and/or the sale contemplated herein as a material event, and any such disclosure shall not be considered a breach of Article X of this Agreement. The provisions of this Section 10.2 shall survive the Closing or any termination of this Agreement.






10.3 Assignment. Subject to the provisions of this Section 10.3, the terms and provisions of this Agreement are to apply to and bind the successors and permitted assigns of the parties hereto. Seller shall have no right to assign its rights under this Agreement. Purchaser may not assign its rights under this Agreement without first obtaining Seller's written approval, which approval shall not be unreasonably withheld, provided that Seller consent shall not be required so long as the proposed assignee is an Affiliate (as defined in this Section) of Purchaser. In the event Purchaser intends to assign its rights hereunder, (a) Purchaser and the proposed assignee shall execute an assignment and assumption of this Agreement in form and substance reasonably satisfactory to Seller, and (b) in no event shall any assignment of this Agreement release or discharge Purchaser from any liability or obligation hereunder. "Affiliate" shall mean, with respect to any specified entity, an entity that controls, is controlled by, or is under common control with such specified entity, with control meaning the power through the ownership of voting securities, by contract or otherwise to direct the management and policies of such entity. The provisions of this Section 10.3 shall survive the Closing or any termination of this Agreement.

10.4 Notices. Any notice pursuant to this Agreement shall be given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, (d) legible facsimile transmission or (e) email transmission, in each case sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile or email transmission, as of the date of the transmission provided that such transmission is received by the intended addressee prior to 5:00p.m. Chicago, Illinois time (and any transmission received from and after 5:00p.m., Chicago, Illinois time, shall be deemed received on the next business day). Notices given by Seller's or Purchaser's attorneys identified below shall be deemed to have been given by Seller or Purchaser, as the case may be. Unless changed in accordance with this Section 10.4, the addresses for notices given pursuant to this Agreement shall be as follows:

If to Seller:              c/o Atlas Financial Holdings, Inc.
150 Northwest Point Boulevard
Elk Grove Village, IL 60007
Attention: Scott Wollney
Telephone No.: (847) 700-8600
Fax No.: (847) 228-2580
Emai1: swollney@atlas-fin.com


with a copy to:          DLA Piper LLP (US)
203 North LaSalle Street, Suite 1900
Chicago, Illinois 60601
Attention: Kimberlie Pearlman, Esq.
Telephone No.: (312) 368-7061
Fax No.: (312) 251-2162
Email: kimberlie.pearlman@dlapiper.com
 
        
If to Purchaser:             150 Northwest Point LLC
c/o Topco Associates LLC
7711 Grosse Point Road
Skokie, IL 60077
Attn: Thomas Frey
Fax No.: (847) 676-5634
Email: tfrey@topco.com

        





with a copy to:            K&L Gates LLP
70 West Madison, Suite 3100
Chicago, Illinois 60602
Attn: Lawrence A. Eiben
(312)827-1268
E-mail: larry.eiben@klgates.com



10.5 Modifications . This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought.

10.6 Entire Agreement. This Agreement, including the exhibits and schedules hereto (all of which are incorporated in this Agreement), contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter, other than any confidentiality or access agreement executed by Purchaser and Seller in connection with the Property.

10.7 Further Assurances. Each party agrees that it will execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by another party to consummate the transaction contemplated by this Agreement so long as the same imposes no additional liability on such party. The provisions of this Section 10.7 shall survive Closing.

10.8 Counterparts. This Agreement may be executed in counterparts, all such executed counterparts shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

10.9 Facsimile Signatures. In order to expedite the transaction contemplated herein, telecopied, facsimile, or .pdf (exchanged via e-mail) signatures may be used in place of original signatures on this Agreement. Seller and Purchaser intend to be bound by the signatures on the telecopied, facsimile or pdf document, are aware that the other party will rely on the telecopied, facsimile or .pdf signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature.

10.10 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect; provided that the invalidity or unenforceability of such provision does not materially adversely affect the benefits accruing to any party hereunder.

10.11 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without regard to its conflicts of laws principles. Purchaser and Seller agree that the provisions of this Section 10.11 shall survive the Closing or any termination of this Agreement.

10.12 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party. Accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

10.13 Captions. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof.

10.14 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.






10.15 Recordation. This Agreement may not be recorded by any party hereto without the prior written consent of the other parties hereto. The provisions of this Section 10.15 shall survive the Closing or any termination of this Agreement.

10.16 Attorneys' Fees and Costs. In the event suit or action is instituted to interpret or enforce the terms of this Agreement, or in connection with any arbitration or mediation of any dispute, the prevailing party (as hereinafter defined) shall be entitled to recover from the other party such sum as the court, arbitrator or mediator may adjudge reasonable as such party's costs and attorney's fees, including such costs and fees as are incurred in any trial, on any appeal, in any bankruptcy proceeding (including the adjudication of issues peculiar to bankruptcy law) and in any petition for review. In addition a prevailing party shall also have the right to recover its reasonable costs and attorneys' fees incurred in collecting any sum or debt owed to it by the other party, with or without litigation, if such sum or debt is not paid within fifteen (15) days following written demand therefor. A "prevailing party" shall mean the party that obtains a final unappealable judgment in its favor.

10.17 Governmental Approvals. Nothing contained in this Agreement shall be construed as authorizing Purchaser to apply for a zoning change, variance, subdivision maps, lot line adjustment, or other discretionary governmental act, approval or permit with respect to the Property prior to the Closing, and Purchaser agrees not to do so. Purchaser agrees not to submit any reports, studies or other documents, including, without limitation, plans and specifications, impact statements for water, sewage, drainage or traffic, environmental review forms, or energy conservation checklists to any governmental agency, or any amendment or modification to any such instruments or documents prior to the Closing. Purchaser's obligation to purchase the Property shall not be subject to or conditioned upon Purchaser's obtaining any variances, zoning amendments, subdivision maps, lot line adjustment or other discretionary governmental act, approval or permit.

10.18 Limitation of Liability. Purchaser and Seller agree that neither Purchaser nor Seller has, and will not have any claims or causes of action against any disclosed or undisclosed officer, director, employee, trustee, shareholder, member, partner, principal, parent, subsidiary or affiliate of the other party, or the director, employee, trustee, shareholder, member, partner or principal of any such parent, subsidiary or other affiliate (collectively, the "Protected Affiliates"), arising out of or in connection with this Agreement or the transactions contemplated hereby. Without limiting the foregoing, the Protected Affiliates are expressly excluded from any obligation to indemnify or hold harmless any party or any similar obligations or Purchaser or Seller, as the case may be, under this Agreement. Each of Purchaser and Seller agrees to look solely to the other party to this Agreement and its assets for the satisfaction of any liability or obligation arising under this Agreement or the transactions contemplated hereby, or for the performance of any of the covenants, warranties or other agreements contained herein, and further agrees not to sue or otherwise seek to enforce any personal obligation against any of the Protected Affiliates with respect to any matters arising out of or in connection with this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing provisions of this Section 10.18, Purchaser and Seller hereby unconditionally and irrevocably waive any and all claims and causes of action of any nature whatsoever it may now or hereafter have against the Protected Affiliates, and hereby unconditionally and irrevocably release and discharge the Protected Affiliates from any and all liability whatsoever which may now or hereafter accrue in favor of Purchaser and Seller against the Protected Affiliates, in connection with or arising out of this Agreement or the transactions contemplated hereby. The provisions of this Section 10.18 shall survive the termination of this Agreement and the Closing. Nothing contained in this Section 10.18 shall release, prohibit or limit the obligations of Atlas pursuant to Section 5.3 and the Joinder to the Agreement.

10.19 Saturdays, Sundays, Holidays. If, under the terms of this Agreement and the calculation of the time periods provided for herein, the Closing Date or any other date to be determined under this Agreement should fall on a Saturday, a Sunday, a legal holiday or other day on which banks located in Chicago, Illinois are not open for business, then such date shall be extended to fall on the next business day. The term "business day" shall mean any day other than Saturday or Sunday or such other day that banks located in Chicago, Illinois are authorized or required to close.

[SIGNATURE PAGES FOLLOW]






IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.

Seller:

American Service Insurance Company
        
By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO






[Signature Page to Sale Agreement made by and between American Service Insurance Company, Inc. and 150 Northwest Point LLC]

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company

By:          /s/ Thomas Frey
Name:        Thomas Frey
Title:        Senior Vice President & CFO






[Signature Page to Sale Agreement made by and between American Service Insurance Company, Inc. and 150 Northwest Point LLC]

Escrow Agent executes this Agreement below solely for the purpose of acknowledging that it agrees to be bound by the provisions of Sections 1.3 and 1.4 hereof.

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:              /s/ Paula Podvin
Name:             Paula Podvin
Title:             Senior National Escrow Officer






JOINDER

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, Atlas Financial Holdings, Inc., an affiliate of Seller, hereby joins this Agreement for the purposes of being jointly and severally liable with Seller for any and all of Seller's Post Closing Obligations as defined in Section 5.3 of the Agreement.

ATLAS FINANCIAL HOLDINGS, INC.

By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO







EXHIBIT A

LEGAL DESCRIPTION

PARCEL 1:

LOT 1 IN THE FINAL PLAT OF RESUBDIVISION OF LOT 7 IN THE PARK AT NORTHWEST POINT, BEING A SUBDIVISION OF PART OF THE NORTHEAST 1/4 OF SECTION 21, TOWNSHIP 41 NORTH, RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 6, 2001 AS DOCUMENT 0010828531, IN COOK COUNTY, ILLINOIS.

PARCEL 2:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS RECORDED ON OCTOBER 15, 2001 AS DOCUMENT NUMBER 0010957201, AS AMENDED FROM TIME TO TIME, MADE BY PNWP, LLC, A COLORADO LIMITED LIABILITY COMPANY, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

(i) FOR VEHICULAR AND PEDESTRIAN ACCESS, INGRESS AND EGRESS ON, OVER AND ACROSS THOSE PORTIONS OF ANY PRIVATE ROADS OR DRIVES AND WALKWAYS:

(ii) FOR ACCESS, INGRESS AND EGRESS BY EMERGENCY VEHICLES AND PERSONNEL ON, OVER AND ACROSS PRIVATE ROADS OR DRIVES OVER THE REAL PROPERTY, SUBJECT TO ANY RELOCATION RIGHTS DESCRIBED HEREIN;

(iii) FOR UTILITIES ON, OVER AND THROUGH THE REAL PROPERTY, FOR THE USE, MAINTENANCE, REPAIR AND REPLACEMENT OF SUCH UTILITIES, AND EACH OWNER AGREES FOR THE BENEFIT OF EACH OTHER OWNER TO GRANT SUCH UTILITY EASEMENTS

(iv) FOR VEHICULAR PARKING ON, OVER AND ACROSS 213 PARKING SPACES IN THE COMMON GARAGE AND 55 SPACES OF SURFACE PARKING ON THE BUILDING 50 PROPERTY

(v) WITH RESPECT TO THE BUILDING 50 PROPERTY GENERALLY ON AND OVER THE AREA ON THE SITE PLAN AS THE COMMON GARAGE TO CONSTRUCT, USE, OPERATE, MAINTAIN, REBUILD, AND REPLACE THE COMMON GARAGE IN ACCORDANCE WITH THE TERMS OF THE DECLARATION;

(vi) FOR THE PURPOSE OF PASSING STORM WATER DRAINAGE FROM THE BUILDING 150 PROPERTY ON SURFACE OR OVER AND THROUGH THE STORM DRAINAGE PIPES AND SYSTEM NOW OR HEREAFTER CONSTRUCTED ON THE BUILDING 50 PROPERTY AND THE RIGHT TO ENTER ONTO THE BUILDING 50 PROPERTY TO CONSTRUCT AND REPLACE THE NECESSARY STORM DRAINAGE PIPES AND SYSTEM TO CARRY SUCH WATER;

(vii) TO USE AND MAINTAIN TRASH DUMPSTERS AND RELATED EQUIPMENT ON THE BUILDING 50 PROPERTY.

PARCEL 3:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS DATED DECEMBER 30, 1982 RECORDED ON FEBRUARY 3, 1983 AS DOCUMENT NUMBER 26495247, AS AMENDED FROM TIME TO TIME, BY LASALLE NATIONAL BANK, NOT PERSONALLY OR INDIVIDUALLY, BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 5, 1980 AND KNOWN AS TRUST NO. 102000, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:






FOR INGRESS AND EGRESS OVER, UNDER, ACROSS, IN AND UPON THE PROPERTY AND PROVIDE REASONABLE AND NECESSARY ACCESS TO COMMON PROPERTIES AND FOR THE PURPOSE OF PERFORMING THE CONSTRUCTION, INSTALLATION, MAINTENANCE, OR REPAIR OF SUCH COMMON PROPERTIES.





EXHIBIT B

SPECIAL WARRANTY DEED

This Deed, made this ___ day of ____, 2012, between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation (" Grantor"), and 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Grantee"), WITNESSETH, that Grantor, for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration in hand paid, by Grantee, the receipt of which is hereby acknowledged, by these presents does REMISE, RELEASE, ALIENATE AND CONVEY unto the Grantee, FOREVER, all the following described real estate, situated in the County of Cook and State of Illinois, known and described as follows, to wit:


See Schedule 1 attached hereto and made a part hereof.


Together with all and singular hereditaments and appurtenances belonging there, or in anyway appertaining, and the reversion or reversions, remainder or remainders, rents, issues and profits thereof, and all the estate, right, title, interest, claim or demand whatsoever, of the Grantor, either at law or in equity of, in and to the above-described premises, with the hereditaments and appurtenances:

TO HAVE AND TO HOLD the said premises as described above, with the appurtenances, unto the Grantee, forever.

And Grantor, for itself and its successors, does covenant, promise and agree to and with Grantee and its successors and assigns that it has not done or suffered to be done, anything whereby the said premises hereby granted are, or may be, in any manner encumbered or charged, except as herein recited; and that it WILL WARRANT AND DEFEND, FOREVER, said premises against all persons lawfully claiming, or to claim the same, by, through or under it, subject only to those matters listed on Schedule 2 attached hereto and made a part hereof.

IN WITNESS WHEREOF, Grantor executed this Deed the day and year first above written.

AMERICAN SERVICE INSURANCE COMPANY, INC., an
Illinois corporation



By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO











STATE OF ILLINOIS           )
)
COUNTY OF _________         )




This instrument was acknowledged before me on the ________day of ________ 2012, by _______ of American Service Insurance Company, Inc., an Illinois corporation, on behalf of said corporation.




______________________    
Notary Public in and for
the State____________
Printed Name: _______



My commission expires:
______________________






SCHEDULE 1 TO SPECIAL WARRANTY DEED
DESCRIPTION OF LAND

PINs:
Address:







SCHEDULE 2 TO SPECIAL WARRANTY DEED PERMITTED EXCEPTIONS

[INSERT all items listed on Schedule B of the Title Policy]






EXHIBIT C

FORM OF BILL OF SALE AND ASSIGNMENT

This Bill of Sale and Assignment is executed and delivered as of the ______ day of , 2012 pursuant to that certain Sale Agreement (the "Agreement"), dated ____, 2012, by and between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Seller"), and 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), covering the real property described in Schedule 1 attached hereto ("Real Property").

1. Sale of Personal Property, Intangibles. For good and valuable consideration, Seller hereby sells, transfers, sets over and conveys to Purchaser all of Seller's right, title and interest in and to: (a) the Personal Property (as defined in that certain Sale Agreement dated as of April , 2012 made by Seller and Purchaser (the "Agreement")) and (b) the Intangibles (as defined in the Agreement). Seller does hereby represent and warrant to Purchaser and its successors and assigns that the Personal Property and Intangibles are free and clear from any encumbrances and that Seller is the true and lawful owner of the Personal Property and Intangibles and has good right and lawful authority to bargain and sell the Personal Property and Intangibles to Purchaser. Except as otherwise expressly set forth herein or in the Agreement, the Personal Property and Intangibles are being transferred by Seller to Purchaser without any representation or warranty of any kind or nature, express, implied, statutory or otherwise.
2. Assignment of Leases. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts such assignment of, all of Seller's right, title and interest in and to the leases described in Schedule 2 attached hereto (the "Leases").

3. Assignment of Assumed Operating Agreements. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts such assignment of, all of the Seller's right, title and interest in and to the contracts described in Schedule 3 attached hereto (the "Assumed Operating Agreements").

4. Assumption. Purchaser hereby assumes the obligations of Seller under the Leases and Assumed Operating Agreements first arising from and after the date hereof.

5. Indemnification. Seller shall defend, indemnify and hold Purchaser harmless from and against any claims, losses, or liability (including but without limitation, reasonable attorneys fees and disbursements) in any way related to the Leases or the Assumed Operating Agreements and arising or accruing prior to the date hereof. Purchaser shall defend, indemnify and hold Seller harmless from and against any claims, losses or liability (including but without limitation, reasonable attorneys fees and disbursements) in any way related to the Leases or the Assumed Operating Agreements and first arising or accruing on or after the date hereof.

6. Execution in Counterparts. This instrument may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one instrument. To facilitate execution of this instrument, the parties may execute and exchange by facsimile counterparts of the signature pages. This instrument shall benefit and bind Seller and Purchaser and the heirs, legal representatives, successors, and assigns of each of them.

[Signatures Follow]





IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and
Assignment to be executed as of the date written above.

SELLER:




AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation

By:                     
Name:                 
Title:                     


150 NORTHWEST POINT LLC, a
Delaware limited liability company

By:                     
Name:                      
Title:                     






Schedule 1 to Bill of Sale and Assignment

Description of Real Property





Schedule 2 to Bill of Sale and Assignment

List of Leases






Schedule 3 to Bill of Sale and Assignment

List of Assumed Operating Agreements





EXHIBIT D

FORM OF FIRPTA CERTIFICATE

Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code") provides that a transferee (purchaser) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee (purchaser) that withholding of tax is not required upon the disposition of an ownership interest in U.S. real property by ("Transferor"), Transferor hereby certifies, under the penalty of perjury that:

Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and in Income Tax Regulations provided thereunder).

Transferor/seller is not a disregarded entity as defined in Section 1.1445 2(b)(2)(iii);

Transferor's Federal Employer Identification Number is              

Transferor's office address is:
____________________
____________________
____________________

Attention         
Telephone         
Fax             

The address or description of the property which is the subject matter of the indirect disposition is 150 Northwest Point Boulevard, Elk Grove Village, Illinois.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Transferor declares that it has examined this certification and to the best of its knowledge and belief, it is true, correct and complete, and further declares that the individual executing this certification on behalf of Transferor has full authority to do so.

[SIGNATURE PAGE FOLLOWS]









This FIRPTA Certificate is executed as of the _______ day of ________ 2012

AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation

By:                     
Name:                 
Title:                     





EXHIBIT E
TENANT ESTOPPEL FORM

Re: 150 Northwest Point Boulevard, Suite , Elk Grove Village, Illinois

Ladies and Gentlemen:

Reference is made to that certain Lease, dated as of ______20__, between AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Landlord"), and the undersigned (herein referred to as the "Lease"). A list of the documents comprising the Lease is attached hereto as Exhibit A. The undersigned understands that (a) Landlord has entered into an agreement with 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), for the sale and purchase of the building commonly known as 150
Northwest Point Boulevard, Elk Grove Village, Illinois (the "Building"), (b) Landlord has requested that the undersigned execute and deliver this Tenant Estoppel Certificate to Purchaser and present and future lenders providing financing with respect to the Building and related property (each, a "Lender"), and (c) Purchaser, Lender and their respective successors and assigns will rely upon the certifications by the undersigned in this Tenant Estoppel Certificate in connection with the purchase and financing of the Building. The undersigned hereby certifies as follows:

1. The undersigned is the current tenant under the Lease and [has/has not yet] taken possession of the leased premises.

2. The Lease is in full force and effect and has not been amended, modified, supplemented or superseded except as indicated in Exhibit A . The Lease is the entire agreement between Landlord and the undersigned Tenant, and, without limiting the generality of the foregoing, Landlord is not obligated to provide any services to Tenant other than those expressly set forth in the Lease.

3. There is no defense, offset, claim or counterclaim by or in favor of the undersigned against Landlord under the Lease or against the obligations of the undersigned under the Lease. The undersigned has no renewal, extension or expansion option, no right of first offer or right of first refusal and no other similar right to renew or extend the term of the Lease or expand the property demised thereunder except as may be expressly set forth in the Lease.

4. The undersigned is not aware of any default now existing of the undersigned or of Landlord under the Lease, nor of any event which with notice or the passage of time or both would constitute a default ofthe undersigned or of Landlord under the Lease except: .

5. The undersigned has not received notice of a prior transfer, assignment, hypothecation or pledge by Landlord of any of Landlord's interest in the Lease.

6. The current monthly base rent is $ , and the current monthly additional rent is $ Base rent and additional rent have been paid through ____. Tenant's Proportionate Share is ___%. Tenant has fully paid all base rent, additional rent and other sums due and payable under the Lease on or before the date of hereof and Tenant has not paid any rent more than one month in advance.

7.     There is no remaining rent abatement under the Lease except for:

8.     The term of the Lease commenced on [or shall commence on]     and expires on ____, 20___, unless sooner terminated pursuant to the provisions of the Lease.

9. The undersigned has deposited the sum of$ with Landlord as security for the performance of its obligations as tenant under the Lease, and no portion of such deposit has been applied by Landlord to any obligation under the Lease.






10. All tenant improvement allowances to be paid under the Lease have been paid or credited in full except as follows: _

11. Tenant is occupying the Premises and has not assigned the Lease or sublet any portion of the Premises or granted any licenses or occupancy agreements, except as follows -


Very truly yours,

[TENANT NAME]

By:
Name:
Title:








EXHIBIT A TO TENANT ESTOPPEL CERTIFICATE LIST OF DOCUMENTS COMPRISING LEASE






EXHIBIT F OPERATING AGREEMENTS

See attached.






Contracted Vendors


Vendor              Service Provided
Affiliated Customer Service      Fire Alarm Monitoring
Aramark              Deli
Midco                  Security System & Badging
Sebert                  Landscape and Snow Removal
B & B Maintenance          Janitorial
C & C             Pest Control
ComEd              Electric
Constellation New Energy      Electric
Diamond Detective Agency      Guard Service
Fujitec                  Elevators
Waste Management          Garbage Service
Westside Mechanical          HVAC
Cintas                  Lobby Floor Mat Cleaning


Equipment Leases (Contracted)


Vendor              Service Provided
Quench              Water Coolers
Sweetbush              Plant Rental and Service (lobby plants only)
Absolute Vending          Coffee Machines & Vending Machines






EXHIBIT G
LIST OF LEASES



1.      Lease Agreement dated December 31, 2010 made by American Service Insurance
Company, Inc. and Universal Casualty Company; and

2.      Lease Agreement dated August 15, 2010 made by American Service Insurance Company, Inc. and Avalon Risk Management Insurance Agency LLC.






EXHIBIT H
ESCROW AGENT'S WIRING INSTRUCTIONS

See attached.






EXHIBIT I

LICENSES AND PERMITS

None.





EXHIBIT J
EXCLUDED PERSONAL PROPERTY OF SELLER


General
-      All telephones, conference phones, switches, software and related equipment
- All leased furniture, fixtures and equipment, included but not limited to:
o      Coffee Machines
o      Water Coolers
o      Lobby Plants
o      Vending Machines
o      Mail Center Furniture and Equipment
o      Scanning Center Equipment
o      Copy machines

1st Floor


Deli      all inventory, service equipment and/or other property owned by the deli operator
Fitness Center- all fitness center equipment
-      Lobby
-     All company signs
-
Mail Center
-
all furniture, fixtures and equipment located in the mail center at the time of inspection
-     Scanning Center - all furniture, fixtures and equipment located in the scanning center at the time of inspection
-
Training Room #1- all computer equipment, excluding A/V equipment, located in Training Room #1 at the time of inspection-- Note: we are open to leaving this equipment in the training room for shared use by all building users should this be of interest to Purchaser
-    Unfinished Storage Area - all storage boxes , located in the storage area at the time of inspection -- Note: unless otherwise agreed with Purchaser, these boxes will be moved prior to the close date

2nd Floor


Tenant Space- all artwork and tenant owned furniture, fixtures and equipment.
Note: cubicles and cubicle chairs, as located on the 2nd floor at the time of inspection, are not tenant owned and would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term

3rd Floor
-
All artwork and furniture, fixtures and equipment, excluding cubicles and attached desks, located on the 3rd floor at the time of inspection. This includes, but is not limited to, furniture in enclosed





offices, filing cabinets and other business equipment.

Note: cubicles and cubicle chairs, as located on the 3rd floor at the time of inspection, would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term

4th Floor
Tenant Space
all artwork and tenant owned furniture, fixtures and equipment, excluding cubicles and cubicle chairs, located on the 4th floor at the time of inspection

--Note: cubicles and cubicle chairs, as located on the 4 111 floor at the time of inspection, are not tenant owned and would become the property of Purchaser on the Close Date but continue to be available for use by tenant during lease term
Data Center- Nortel Phone System, all equipment tagged with an Atlas asset tag, all server racks tagged with an Atlas asset tag (including all equipment contained within designated servers) at the time of inspection

5th Floor

Nothing excluded as of the time of inspection

6th Floor


Nothing excluded as of the time of inspection



For the purposes of this Exhibit J , "the time of inspection" shall mean the time of Purchaser's inspection during the Inspection Period.





EXHIBIT 10.9


FIRST AMENDMENT TO SALE AGREEMENT

This First Amendment to Sale Agreement (this “ Amendment" ) is made as of the 7th day of May, 2012, between 150 NORTHWEST POINT LLC, a Delaware limited liability company (" Purchaser" ), and AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation (''Seller'').

A. Purchaser and Seller are parties to that certain Sale Agreement dated as of April 5, 2012 (the " 'Sale Agreement" ), regarding real property commonly known as 150 Northwest Point Boulevard, Elk Grove Village, Illinois, as more particularly described in the Sale Agreement. All initially capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Sale Agreement.

B.      The parties desire to amend the Sale Agreement to extend the Inspection Period as provided herein.

AGREEMENTS

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.      Extension of Inspection Period. The Inspection Period is hereby extended to expire at 5:00 p.m Chicago, Illinois time on May 11, 2012. All references in the Sale Agreement to the expiration of the Inspection Period shall mean 5:00p.m Chicago, Illinois time on May 11,2012.

2.      Sale Agreement in Full Force and Effect. Except as expressly set forth above, all of the terms and conditions of the Sale Agreement remain in full force and effect.

3.      Delivery: Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together will constitute one agreement binding on all the parties.      This Amendment may be delivered by facsimile or electronic (e-mail) transmission of signed original counterparts.

[Signatures on Following Pages]






IN WITNESS WHEREOF, intending to be legally bound, the parties have caused this Amendment to be duly executed as of the day and year first written above.

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company

By:          /s/ Thomas Frey
Name:        Thomas Frey
Title:        Senior Vice President & CFO


[Signatures Continue on Following Page]






[Signature Page to First Amendment to Sale Agreement made by and between American Service
Insurance Company, Inc. and 150 Northwest Point LLC]




SELLER:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation


By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO


Atlas Financial Holdings, Inc., which executed a Joinder to the Sale Agreement for the purposes therein stated, hereby consents to this Amendment.

ATLAS FINANCIAL HOLDINGS, INC.

By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO





EXHIBIT 10.10

SECOND AMENDMENT TO SALE AGREEMENT

This Second Amendment to Sale Agreement (this "Amendment") is made as of the 11th day of May, 2012, by and between 150 NORTHWEST POINT LLC, a Delaware limited liability company ("Purchaser"), and AMERICAN SERVICE INSURANCE COMPANY, INC., an Illinois corporation ("Seller").

A.      Purchaser and Seller are parties to that certain Sale Agreement dated as of April 5, 2012 (the "Initial Sale Agreement"), as amended by the certain First Amendment to Sale Agreement dated as of May 7, 2012 (the "First Amendment"), together with the Initial Sale Agreement, the "Sale Agreement") regarding real property commonly known as 150 Northwest Point Boulevard, Elk Grove Village, Illinois, as more particularly described in the Sale Agreement. All initially capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Sale Agreement.

B. The parties desire to amend the Sale Agreement on the terms and conditions as provided herein.

AGREEMENTS

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Post Closing Repair Work. The parties acknowledge and agree that Klein and Hoffman, Inc. (the "Engineer") has recommended that certain repairs be made to the exterior concrete panels and their anchor and support systems and the windows on the Improvements at the Property as detailed in the Engineer's Executive Summary Report attached hereto as Exhibit A and made a part hereof (the "Work"). The parties have agreed that Seller shall pay the following portions of the total cost of Work ("Seller's Share"):

a.
Seller shall pay Sixty-Six and 67/100 percent (66.67%) ofthe total cost of the portion of the Work related to the repairs of the three dislocated concrete panels, which the Engineers have estimated to cost $50,000.

b.
Seller shall pay Fifty percent (50%) of the total cost of the portion of the Work related to the replacement of the concrete panel shims throughout the building, which the Engineers have estimated to cost $60,000.

c.
Seller shall pay Sixty-Six and 67/100 percent (66.67%) ofthe total cost of the portion of the Work related to the repairs to the window systems, which the Engineers have estimated to cost $100,000.

d.
Seller shall pay fifty percent (50%) of the costs of the engineering and inspection reports, which costs shall not exceed $30,000 for such reports.

2.      Holdback Escrow. At Closing, Seller shall deposit $145,000 into a strict joint escrow with the Title Company by and among Seller, Purchaser and the Title Company (the "Holdback Escrow"), which shall be separate from the escrows described in Section 4.4 of the Sale Agreement. The cost of the Holdback Escrow, if any, shall be split equally by the parties.

3.      Payment for the Work. Purchaser shall obtain quotes from three contractors to perform the Work or any portion thereof (excluding subcontractors) within a reasonable period after the Closing. The selection of the contractor(s) that will perform the Work or any portion thereof shall be by mutual agreement, provided that Seller must approve at least one of the contractors for each portion of the Work from whom Purchaser obtained a quote. Upon the completion of the Work, each party shall execute and deliver a direction to the Title Company authorizing it to pay to Purchaser all or the portion of the funds held in the Holdback Escrow as necessary to cover Seller's Share of the actual costs of the Work as set forth on a statement of the final costs of the Work which shall include final invoices from each contractor (the "Final Costs"). If Seller's Share of the Final Costs exceeds





the amount paid to Purchaser from the Holdback Escrow, Seller shall, within 10 days after receiving the notice of the Final Costs, pay to Purchaser the amount of funds necessary to have fully paid Seller's Share of the Final Costs.

If Seller's Share of the Final Costs is less than the amount of funds in Holdback Escrow, then after the payment of Seller's Share of the Final Costs to Purchaser, all remaining funds shall be promptly released to Seller by the Title Company and in such event Seller and Purchaser agree to execute and deliver a joint direction to direct the Title Company to pay such remaining funds to Seller.

4.      Survival. Paragraphs 1, 2 and 3 of this Amendment shall survive the Closing.

5.      Sale Agreement in Full Force and Effect. Except as expressly set forth above, all of the terms and conditions of the Sale Agreement remain in full force and effect.

6. Delivery; Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together will constitute one agreement binding on all the parties. This Amendment may be delivered by facsimile or electronic (e-mail) transmission of signed original counterparts.






IN WITNESS WHEREOF, intending to be legally bound, the patiies have caused this
Amendment to be duly executed as of the day and year first written above.

PURCHASER:

150 NORTHWEST POINT LLC, a Delaware limited liability company
        
By:          /s/ Thomas Frey
Name:        Thomas Frey
Title:        Senior Vice President & CFO


[Signatures Continue on Following Page]







[Signature Page to Second Amendment to Sale Agreement made by and between American
Service Insurance Company, Inc. and 150 Northwest Point LLC]

SELLER:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation


By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO


Atlas Financial Holdings, Inc., which executed a Joinder to the Sale Agreement for the purposes therein stated, hereby consents to this Amendment.

ATLAS FINANCIAL HOLDINGS, INC.

By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO







EXHIBIT A
ENGINEER REPORT
[Attachment]













EXHIBIT 10.11


LEASE AGREEMENT

THIS LEASE AGREEMENT (the " Lease" ) is made and entered into this 22nd of May, 2012 (the " Effective Date" ), between 150 Northwest Point LLC, a Delaware limited liability company (" Landlord" ), and American Service Insurance Company, Inc., an Illinois corporation ("Tenant").

WITNESSETH:

1. Leased Premises, Shared Areas and Term

A. Leased Premises.

In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions, and covenants hereof, Landlord hereby demises and Leases to Tenant, and Tenant hereby accepts and Leases from Landlord, the following described space, to wit: approximately 30,552 rentable square feet as shown and outlined on the plan attached hereto as Exhibit A (the " Leased Premises" ) on the third floor, located in the building commonly known as 150 Northwest Point Boulevard (the " Building" ), situated on the real property described in Exhibit B attached hereto (the " Property" ) which is part of a development in the Park at Northwest Point, Elk Grove Village, Illinois (the " Development" ). The Leased Premises shall be occupied and used exclusively for general office purposes and for legal purposes incidental thereto and shall not be used for any other purpose.

B. Shared Areas.

Tenant shall have the right to use certain Shared Areas (as hereinafter defined) upon reasonable notice to Landlord, but only to the extent Landlord keeps in place said Shared Areas in the Building and subject to terms and conditions contained herein. " Shared Areas " shall mean those certain areas on the first floor of the Building as may be designated from time to time by Landlord for Tenant's shared use, which as of the Effective Date shall include one conference room, a training room, two smaller training areas, the deli area, a mailroom, and a restroom/shower/locker areas, all as located on the first floor of Building. Landlord may remove any areas from the Shared Areas upon written notice to Tenant, provided that Tenant shall be entitled to use the deli area to satisfy its obligations under the Deli Contract (as hereinafter defined) until the Contract Assumption Date. Furthermore, Tenant's right to use the conference room, training room and training areas or any similar areas as may be designated by Landlord, shall be subject to the following conditions: (i) Tenant shall have requested use of such area by delivering written notice to Landlord within a reasonable period in advance of the date Tenant requested to use such area, (ii) such requested area shall not be reserved by Landlord or another tenant at such time or otherwise needed by Landlord at such time, and (iii) Tenant shall clean such area after its use and repair any damage to the area, furnishing or other personal property located therein to a condition that existed prior to Tenant's use of such area.

Tenant agrees to continue maintain the Food Services Management Agreement dated January 1, 2012 by and between Tenant and Aramark Corporation for the operation of the deli on the first floor of the Building (the "Aramark Contract") at Tenant's sole cost and expense from the Effective Date until such date (the " Contract Assumption Date" ) which is the earlier to occur of (a) the date Landlord moves a substantial portion of its business operations to the Building, or (b) December 31,2012. Upon the Contract Assumption Date, Tenant shall assign and Landlord agrees to assume the Aramark Contract, provided that Tenant is not in default under any of the terms of the Aramark Contract. Notwithstanding the foregoing, Landlord shall have the right to terminate Aramark Contract at anytime after the Contract Assumption Date. For the purposes of this paragraph a "substantial portion" shall mean more than 200 employees. During the term of the Aramark Contract or any replacement contract for deli services at the Building (collectively, the " Deli Contract" ), Landlord, Tenant and any other tenants in the Building that utilize the food services provided under the Deli Contract (the "Participating Tenants") shall share in the monthly costs of the Deli Contract (the "Shared Deli Contract Costs" ) incurred by (y) Tenant up and until and Contract Assumption Date and (z) Landlord from and after the Contract Assumption Date in accordance with the terms of this paragraph, unless such costs are a result of a default by Landlord or Tenant, which costs shall paid solely by the party that caused





any such default thereunder. Landlord's share of the Shared Deli Contract Costs shall be equal to the percentage calculated by dividing number of employees of Landlord in occupancy of the Building on the first day of the month for which the Shared Deli Contract Costs are incurred by the total number of employees of Landlord, Tenant and Participating Tenants that are in occupancy on the first day of the same month. Tenant's share of the Shared Deli Contract Costs shall be equal to the percentage calculated by dividing number of employees of Tenant in occupancy of the Building on the first day of the month for which the Shared Deli Contract Costs are incurred by the total number of employees of Landlord, Tenant and the Participating Tenants that are in occupancy of the Building on the first day of the same month. The party that is then responsible for the payment of the Share Deli Contract Costs shall timely pay the same and shall send a copy of the invoice to the other party, which shall pay its percentage share of the Shared Deli Contract Costs within fifteen (15) days after receipt of the invoice for the same. Landlord or Tenant within five (5) days after the request of the other shall advise the requesting party of the total number of its employees that are in occupancy of the Building on the first day of the month in question. The party responsible for paying the Shared Deli Contract Costs shall also make arrangements to obtain headcount information from the Participating Tenants.

C. Term.

TO HAVE AND TO HOLD the same for a term of sixty (60) months commencing on the Effective Date, and ending on the date five (5) years after the Effective Date (" Term" ) unless terminated or extended pursuant to any provision hereof. Tenant acknowledges that no representations as to the repair of the Leased Premises, nor promises to alter, remodel or improve the Leased Premises have been made by Landlord, unless such are expressly set forth in this Lease.

D. Moving Allowance.

On the Effective Date, Landlord shall pay Tenant $7,670 as a cash moving allowance. Within fifteen (15) days after Tenant's receipt of Landlord's written notice, Tenant agrees to move all equipment, furnishing and other personal property from the first floor mail and copy center to the Leased Premises. Tenant shall repair any damage to the Building caused by moving such equipment.

E. Condition of Leased Premises.

The taking of possession by Tenant shall be deemed conclusively to establish that the Building, other improvements, and the Leased Premises are in good and satisfactory condition as of when possession was so taken (except for such items as Landlord is permitted to complete at a later date, which items shall be specified by Landlord to Tenant in writing).

2. Rent

A. Annual Rent and Security Deposit.

i.      Tenant agrees to pay to Landlord for the Leased Premises in lawful money of the United States rent for the first twelve (12) months of the Term equal annual rent equal to $641,592 (" Annual Rent" ), (which is equal to $21.00 per rentable square feet) payable in equal monthly installments, in advance, on the first day of the month of each month of the Term, except that the monthly installment which otherwise shall be due on the commencement date recited above, shall be due and payable on the date hereof. Provided that Tenant's is not in default of its obligations hereunder, the monthly rent for the first five (5) months of the Term shall abate. Notwithstanding the foregoing, during such abatement period, Tenant will be responsible for its share of electricity pursuant to Paragraph 3 below and any Additional Rent (as hereinafter defined) as may be due during such period. Beginning with the sixth (6th) month of the Term, each monthly installment shall be due and payable without demand on or before the first day of each calendar month succeeding the commencement date; further provided, that the rental payment for any fractional calendar month at the commencement or end of the Lease term shall be prorated. The Annual Rent shall increase by three percent (3%) per year on the first anniversary of the Effective Date and on each such succeeding anniversary of the Effective Date during the Term.






ii. In addition, Tenant agrees to deposit with Landlord on the date hereof a standby, irrevocable, transferable letter of credit in favor of Landlord, in form and substance substantially similar to the form attached hereto as Exhibit C and otherwise acceptable to Landlord, in the amount of $485,000 (the " Letter of Credit" ), issued by a U.S. financial institution reasonably acceptable to Landlord, which shall be maintained for the duration of the lease or until such earlier time as determined by Landlord in its sole discretion, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. The term of the Letter of Credit should extend to the date which is 60 days of the expiration of Term. Notwithstanding the foregoing, if for any reason the Letter of Credit shall terminate prior to such time, Tenant shall deliver to Landlord a replacement Letter of Credit at least thirty (30) days prior to the expiration of the current Letter of Credit. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by any event of Tenant's default; and Tenant shall deliver to Landlord on demand a new or re-issued Letter of Credit in the full amount required hereby. In addition, if Tenant fails to deliver to Landlord a replacement Letter of Credit at least thirty (30) days prior to the expiration of the current Letter of Credit as required hereunder, then Landlord shall be entitled to draw down the entire Letter of Credit as a cash security deposit, held to secure Tenant's obligations under this Lease.

In the event of a default resulting in Landlord drawing down on this letter of credit, any remaining balance not required to remedy said default shall be returned by Landlord to Tenant at such time after termination of this Lease when Landlord shall have determined that all Tenant's obligations under this Lease have been fulfilled.

Within thirty (30) days after Tenant's delivery of the Letter of Credit and an invoice evidencing full payment of the cost of the same, Landlord shall pay to Tenant an amount equal to the lesser of (i) one-half of the service fee charge by the issuing bank for the issuance the Letter of Credit, or (i) six thousand dollars ($6,000). Notwithstanding the foregoing, Landlord shall have the right at any time by delivering written notice to Tenant, to permit Tenant to reduce the total amount of the Letter of Credit to $320,796 and in such event, Landlord's obligation to pay Tenant shall be reduced to an amount equal to the lesser of (i) one-quarter of the service fee charge by the issuing bank for the issuance the Letter of Credit, or (i) one thousand six hundred dollars ($1,600).

B. Additional Rent. " Additional Rent " shall mean any other amounts due by Tenant to Landlord hereunder, including without limitation charges for Taxes, Operating Costs, and Data Center Costs, payable pursuant to Sections 23, 24 and 25 hereof. " Rent " shall mean Annual Rent and Additional Rent.

3. Electric Service

To the extent Tenant is not billed directly by a public utility, Tenant shall pay, upon demand, as Additional Rent, for all electricity used by Tenant in the Leased Premises for lighting, convenience outlets, and other direct uses, an amount, as reasonably estimated by Landlord from time to time, which Tenant would pay for such electricity if the same were separately metered to the Leased Premises by the local electric utility provider(s) and billed to Tenant at such utility provider(s)' then current rates. Initially, Tenant shall pay Tenant's proportionate share (as defined in Section 21 hereof) of the total electrical charges for the Building, provided that Landlord may (but shall have no obligation to) (i) install a separate electric meter for all or any portion of the Leased Premises and in such event Tenant shall pay metered amount directly to the electric utility provider(s), or (ii) engage an MEP engineer or electrical contractor ("Electrical Contractor") to determine Tenant's usage of electricity and allocate Tenant's usage as a percentage of the total usage for the portions of the Property on the same meter as Tenant, and Tenant shall pay the percentage of total electricity charges as determined by the Electrical Contractor. Tenant shall furnish, at its own expense, all electric light bulbs, tubes and ballasts. Tenant will not without the written consent of Landlord use any apparatus or device in the Leased Premises which will in anyway increase its usage beyond the amount of electricity which Landlord determines to be commercially reasonable for use of the Leased Premises as general office space, nor connect with electric current (except through existing electrical outlets in the Leased Premises) any apparatus or device for the purpose of using electric current. If Tenant shall require electric current in excess of that which is reasonably obtainable from existing electric outlets and normal for use of the Leased Premises as general





office space, then Tenant shall first procure the consent of Landlord (which consent will not be unreasonably withheld). Tenant shall pay all costs of installation of all facilities necessary to furnishing such excess capacity and for such increased electricity usage. As used herein, "local utility provider" shall include any and all public utility companies and/or private utility providers (including resellers) that charge for providing electrical service to the Building.

Interruptions of any service shall not be deemed an eviction or disturbance of Tenants use and possession of the Leased Premises or any part thereof, or render Landlord liable for damages by abatement of rent or otherwise or relieve Tenant from performance of Tenant's obligations under this Lease.

4. Alterations

All improvements and alterations to the Leased Premises to be made by Tenant shall be installed at the cost and expense of Tenant (which cost shall be payable on demand by Landlord as additional rent), but only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, and only by Landlord or by contractors and subcontractors approved in writing by Landlord (which approval shall not be unreasonably withheld). In connection with any request for an approval of alterations by Tenant, Landlord may retain the services of an architect and/or engineer and Tenant shall reimburse Landlord for the reasonable fees of such architect and/or engineer. All alterations, additions, improvements and partitions erected by Tenant shall be and remain the property of Tenant during the term of this Lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, improvements and partitions erected by Tenant made after Lease Commencement and restore the Leased Premises to its original condition by the date of termination of this Lease or upon earlier vacating of the Leased Premises; provided, however, that, if at such time Landlord so elects, such alterations, additions, improvements and partitions shall become the property of Landlord as of the date of termination of this Lease or upon earlier vacating of the Leased Premises and title shall pass to Landlord under this Lease as by a bill of sale. All such removals and restoration shall be accomplished in a good workmanlike manner by contractors approved in writing by Landlord so as not to damage the primary structure or structural qualities of the Building. All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all governmental laws, ordinances, rules and regulations and Tenant shall, prior to construction, provide such assurances to Landlord, including but not limited to, waivers of lien, surety company performance bonds and personal guaranties of individuals of substance, as Landlord shall require to assure payment of the costs thereof and to protect Landlord against any loss from any mechanics', laborers', materialmen's or other liens.

As of the Effective Date, Tenant shall be allowed to maintain its signage located on the North side of the exterior of the building as well as interior signs in the first and third floor lobbies, provided that (i) any and all costs to maintain said signs will be paid solely by Tenant, and (ii) upon not less than thirty (30) days notice, Tenant shall at its sole cost and expense remove the exterior sign from the Building and repair any and all damage to the Building caused by such removal. In the event Landlord is installing exterior signage at the time it delivers notice to Tenant to remove its sign, Landlord agrees to pay one-half of the cost of the lift required for the removal of Tenant's sign. Upon the expiration of this Lease, any remaining signs will be removed by Tenant at Tenant's sole expense and shall remain the property of Tenant. Except as expressly set forth herein, Tenant shall have no right to install any signage on the Property or the interior or exterior of the Building.

5. Service

A. Landlord agrees to furnish Tenant, while occupying the Leased Premises, water, hot, cold and refrigerated, at those points of supply provided for general use of tenants; heated and refrigerated air conditioning in season at such times as Landlord normally furnishes these services to all tenants of the Building (including 9 AM to 1 PM on Saturday), and at such temperatures and in such amounts as are in accordance with any applicable statutes, rules or regulations and are considered by Landlord to be standard, such service at other times and on Saturday (except for 9 AM to 1 PM), Sunday, and holidays to be optional on the part of Landlord (Landlord hereby reserves the right to charge Tenant for any such optional service requested by Tenant on such basis as Landlord, in its sole discretion, determines); janitor service to the Leased Premises on weekdays other than holidays and such window washing as may from time to time in Landlord's judgment be reasonably required; operatorless passenger elevators for ingress and





egress to the floor on which the Leased Premises are located, provided Landlord may reasonably limit the number of elevators to be in operation on Saturdays, Sundays, and holidays; but failure to any extent to furnish or any stoppage or interruption of these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to any person, property, or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord cease to function properly, Landlord shall use reasonable diligence to repair the same promptly, but Tenant shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. Whenever heat generating machines or equipment are used by Tenant in the Leased Premises which affect the temperature otherwise maintained by the air conditioning equipment, Landlord reserves the right to install supplementary air conditioning units in the Leased Premises (or for the use of the Leased Premises) and the expense of such purchase, installation, maintenance, and repair shall be paid by Tenant upon demand as additional rent. Tenant shall have access to the Building and Premises seven (7) days a week, twenty four (24) hours a day, three hundred sixty five (365) days a year, subject to the terms and conditions hereof.

6. Use of Premises

A. Tenant will not occupy or use, nor permit any portion of Leased Premises to be occupied or used, for any business or purpose other than that described above or for any use or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will render void or in any way increase the rate of fire insurance on the Building or its contents, and Tenant, shall immediately cease and desist from such use, paying all costs and expenses resulting therefrom.

B. Tenant shall at its own cost and expense promptly obtain any and all licenses and permits necessary for any permitted use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use and its occupancy of the Leased Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Leased Premises, all at Tenant's sole expense. If, as a result of any change in the governmental laws, ordinances, and regulations, the Leased Premises must be altered to lawfully accommodate Tenant's use and occupancy, such alterations shall be made only with the consent of Landlord, but the entire cost shall be borne by Tenant; provided, that, the necessity of Landlord's consent shall in no way create any liability against Landlord for failure of Tenant to comply with such laws, ordinances and regulations.

C. Tenant will maintain the Leased Premises (including all fixtures installed by Tenant, water heaters within the Leased Premises and plate glass) in good repair, reasonable wear and tear excepted, and in a clean and healthful condition, and comply with all laws, ordinances, orders, rules, and regulations (state, federal, municipal, and other agencies or bodies having any jurisdiction thereof) with reference to condition, or occupancy of the Leased Premises. Any repairs or replacements shall be with materials and workmanship of the same character, kind and quality as the original. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or door lettering or advertising media of any type on or about the Leased Premises.

D. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy, or disturb other tenants or Landlord in the management of the Building.

E. Tenant shall pay upon demand as additional rent the full cost of repairing any damage to the Leased Premises, Building or related facilities resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, servants, employees, patrons, customers, or any other person entering upon the Development as a result of Tenant's business activities or resulting from Tenant's default hereunder.

F. Tenant and Tenant's agents, employees, and invitees will comply fully with all rules and regulations of the Development, the Building, parking area and related facilities which Landlord may establish from time to time. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for the safety, care, and cleanliness of the





Building or the Development and for the preservation of good order therein. Copies of all rules and regulations, changes, and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by Tenant's employees, servants, agents and visitors.

G. Tenant shall have access to any parking spaces designated for the Building on a first come, first service for its employees and invitees, provided that it shall not be entitled to use more parking spots than Tenant's parking share (as hereinafter defined). "Tenant's parking share" is the total number of parking spots determined by dividing the square footage of the Leased Premises by 250 (which as of the date of the Lease equals 122 parking spots). Notwithstanding the foregoing, Landlord shall have the right to designate certain parking spaces for the exclusive use by Landlord, its employees and invitees, provided that if Landlord designates more than twenty-five (25) parking spaces for its exclusive use then Tenant shall be entitled to a number of reserved parking spaces equal to Tenant's Share of Excess Reserved Spaces. "Tenant's Share of Excess Reserved Space" shall mean a number of reserved parking spaces on the Property equal to Tenant's proportionate share of the amount that Landlord's total number of reserved parking spaces exceeds twenty-five (25).
H. At termination of this Lease, upon its expiration or otherwise, Tenant shall deliver up the Leased Premises with all improvements located thereon (except as herein provided) in good repair and condition, reasonable wear and tear excepted, broom clean and free of all debris.

7. Inspections

Landlord shall have the right to enter the Leased Premises at any reasonable time upon prior notice to Tenant (which may be oral notice), for the following purposes: (i) to ascertain the condition of the Leased Premises; (ii) to determine whether Tenant is diligently fulfilling Tenant's responsibilities under this Lease; (iii) to clean and to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease; or (iv) to do any other act or thing which Landlord deems reasonable to preserve the Leased Premises and the Building. During the six (6) months prior to the end of the term hereof and at any time Tenant is in default hereunder, Landlord shall have the right to enter the Leased Premises at any reasonable time during business hours for the purpose of showing the premises. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating and shall arrange to meet with Landlord for a joint inspection of the Leased Premises. In the event of Tenant's failure to give such notice or arrange such joint inspection, Landlord's inspection at or after Tenant's vacating the Leased Premises shall be conclusively deemed correct for purposes of determining Tenant's responsibility for repairs and restoration.

8. Assignment and Subletting

A. Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Leased Premises, whether voluntarily or by operation of law, or permit the use or occupancy of the Leased Premises by anyone other than Tenant, without the prior written consent of Landlord, and such restrictions shall be binding upon any assignee or subtenant to which Landlord has consented (which consent shall not be unreasonably withheld). In the event Tenant desires to sublet the Leased Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord within a reasonable time prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease and copies of financial reports and other relevant financial information of the proposed subtenant or assignee. In no event may Tenant sublet, nor will Landlord consent to any sublease of, all or any portion of the Leased Premises if the rent is determined in whole or in part based upon the income or profits derived by the sub-lessee (other than a rent based on a fixed percentage or percentages of receipts or sales). Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of his Lease. Upon the occurrence of an "event of default" (as hereinafter defined), if the Leased Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and





apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder. Tenant shall pay to Landlord, on demand, a reasonable service charge for the processing of the application for the consent and for the preparation of the consent. Such service charge shall be collectible by Landlord only where consent is granted by Landlord.

B. In addition to, but not in limitation of, Landlord's right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Leased Premises, to recapture the portion of the Leased Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice thereof within thirty (30) days following Landlord's receipt of Tenant's written notice as required above. If this Lease shall be terminated with respect to the entire Leased Premises pursuant to this paragraph, the term of this Lease shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the term hereof. If Landlord recaptures under this paragraph only a portion of the Leased Premises, the rent during the unexpired term shall abate proportionately based on the rent contained in this Lease as of the date immediately prior to such recapture. Tenant shall, at Tenant's own cost and expense, discharge in full any outstanding commission obligation on the part of Landlord with respect to this Lease, and any commissions which may be due and owing as a result of any proposed assignment or subletting, whether or not the Leased Premises are recaptured pursuant hereto and rented by Landlord to the proposed tenant or any other tenant. In the event of the recapture of a portion of the Leased Premises by Landlord pursuant to the terms of this paragraph, Tenant shall pay all costs associated with the separation of the recaptured premises from the portion not recaptured, including, but without limitation, the cost of all demising partitions, changes in lighting and HVAC distribution systems and all reasonable architectural and/or engineering fees.

C. Any assignment or subletting by Tenant pursuant to subparagraph 8A of all or any portion of the Leased Premises, or termination of the Lease for a portion of the Leased Premises pursuant to subparagraph 8B, shall automatically operate to terminate each and every right, option, or election, if any exist, belonging to Tenant, including by way of illustration, but not limitation, any option to expand its premises or to extend or renew the term of Tenant's Lease for all or any portion of the Leased Premises -i.e. such rights and options shall cease as to both space sublet or assigned and as to any portion of the original Leased Premises retained by Tenant.

D. For the purposes of this Section 8 an assignment shall be deemed to include (without limitation) (i) the sale or transfer of more than thirty-three percent (33%) of the direct ownership interest of Tenant, (ii) the sale, assignment or transfer of a substantial portion of the assets of Tenant, or (iii) any merger or consolidation of Tenant with any entity, and shall require Landlord's consent in accordance with subparagraph 8A hereof.

9. Fire and Casualty Damage

A. If the Building, improvements, or Leased Premises are rendered partially or wholly untenantable by fire or other casualty, and if such damage cannot, in Landlord's reasonable estimation, be materially restored within ninety (90) days of such damage, then Landlord may, at its sole option, terminate this Lease as of the date of such fire or casualty. Landlord shall exercise its option provided herein by written notice within sixty (60) days of such fire or other casualty. For purposes hereof, the Building or Leased Premises shall be deemed "materially restored" if they are in such condition as would not prevent or materially interfere with Tenant's use of the Leased Premises for the purpose for which it was then being used.

B. If this Lease is not terminated pursuant to Paragraph 9A, then Landlord shall proceed with all due diligence to repair and restore the Building, improvements or Leased Premises, as the case may be (except that Landlord may elect not to rebuild if such damage occurs during the last year of the term exclusive of any option which is unexercised at the date of such damage).

C. If this Lease shall be terminated pursuant to this Paragraph 9, the term of this Lease shall end on the date of such damage as if that date had been originally fixed in this Lease for the expiration of the term hereof. If this Lease shall





not be terminated by Landlord pursuant to this Paragraph 9 and if the Leased Premises is untenantable in whole or in part following such damage, the rent payable during the period in which the Leased Premises is untenantable shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and material restoration within one hundred fifty (150) days after the date of such damage, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, whereupon the Lease shall end on the date of such notice as if the date of such notice were the date originally fixed in this Lease for the expiration of the term hereof; provided however, that if construction is delayed because of changes, deletions, or additions in construction requested by Tenant, strikes, lockouts, casualties, acts of God, war, material or labor shortages, governmental regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

In no event shall Landlord be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in or about the Leased Premises by Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Leased Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

D. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Leased Premises, Building or Property requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon the Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the term hereof.

E. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire, extended coverage perils, vandalism or malicious mischief, sprinkler leakage or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, including any other tenants or occupants of the remainder of the Building in which the Leased Premises is located; provided, however, that this release shall be applicable and in force and effect only to the extent that such release shall be lawful at that time and in any event only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each Landlord and Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so. If such other party fails to pay such extra cost, the release provisions of this paragraph shall be inoperative against such other party to the extent necessary to avoid invalidation of such releasor's insurance.

F. In the event of any damage or destruction to the Building or the Leased Premises by any peril covered by the provisions of this Paragraph 9, Tenant shall, upon notice from Landlord, remove forthwith, at its sole cost and expense, such portion or all of the property belonging to Tenant or his licensees from such portion or all of the Building or the Leased Premises as Landlord shall request and Tenant hereby indemnifies and holds Landlord harmless from any loss, liability, costs, and expenses, including attorney's fees, arising out of any claim of damage or injury as a result of any alleged failure to properly secure the Leased Premises prior to such removal and/or such removal.

10. Liability

Landlord shall not be liable for and Tenant will indemnify and hold Landlord harmless from any loss, liability, costs and expenses, including attorney's fees, arising out of any claim of injury or damage on or about the Leased Premises caused by the negligence or misconduct or breach of this Lease by Tenant, its employees, subtenants, invitees or by any other person entering the Leased Premises or the Building or Development under express or implied invitation of Tenant or arising out of Tenant's use of the Leased Premises. Landlord shall not be liable to Tenant or





Tenant's agents, employees, invitees or any person entering upon the Development in whole or in part because of Tenant's use of the Leased Premises for any damage to persons or property due to condition, design, or defect in the Building or its mechanical systems which may exist or occur, and Tenant assumes all risks of damage to such persons or property. Landlord shall not be liable or responsible for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, or other matter beyond control of Landlord, or for any injury or damage or inconvenience, which may arise through repair or alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's willful acts or gross negligence. Tenant shall procure and maintain throughout the term of this Lease a commercial general liability policy of insurance and a property policy of insurance, each in form and substance satisfactory to Landlord, at Tenant's sole cost and expense, insuring both Landlord and Tenant against all claims, demands or actions arising out of or in connection with: (i) the Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant's operations in and maintenance and use of the Leased Premises; and (iv) Tenant's liability assumed under this Lease; the limits of such policies to be in the amount of not less than $1,000,000 per occurrence and $2,000,000 aggregate liability in respect of injury to persons (including death) and in the amount of not less than $1,000,000 per occurrence and $2,000,000 aggregate in respect of property damage or destruction, including loss of use thereof. Such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. A certified copy of such policies (including additional insured endorsements naming Landlord and any other designee of Landlord as an additional insured), together with receipt evidencing payment of the premium, shall be delivered to Landlord prior to the commencement date of this Lease. Not less than thirty (30) days prior to the expiration date of such policy, a certified copy of a renewal thereof (bearing notations evidencing the payment of the renewal premium) shall be delivered to Landlord. Such policy shall further provide that not less than thirty (30) days' written notice shall be given to Landlord before such policy may be canceled or changed to reduce the insurance coverage provided thereby.

11. Condemnation

A. If any substantial part of the Building, improvements, or Leased Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the Building or Leased Premises for the purpose for which it is then being used, this Lease shall terminate effective when the physical taking shall occur in the same manner as if the date of such taking were the date originally fixed in this Lease for the expiration of the term hereof.

B. If part of the Building, improvements, or Leased Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this Lease is not terminated as provided in the subparagraph above, this Lease shall not terminate but the rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances and Landlord shall undertake to restore the Building, improvements, and Leased Premises to a condition suitable for Tenant's use, as near to the condition thereof immediately prior to such taking as is reasonably feasible under all the circumstances.

C. In the event of any such taking or private purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any condemnation proceedings; provided that Tenant shall not be entitled to receive any award for Tenant's loss of its leasehold interest, the right to such award being hereby assigned by Tenant to Landlord.

12. Holding Over

Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Tenant retains possession of the Leased Premises or any part thereof after such termination, then Landlord may, at its option, serve written notice upon Tenant that such holding over constitutes any one of (i) creation of a month to month tenancy, upon the terms and conditions set forth in this Lease, or (ii) creation of a tenancy at sufferance, in any case upon the terms and conditions set forth in this Lease; provided, however, that the monthly rental (or daily rental under (ii) shall, in addition to all other sums which are to be paid by Tenant hereunder, whether or not as Additional





Rent, be equal to one hundred fifty percent (150%) of the Rent being paid monthly to Landlord under this Lease immediately prior to such termination (prorated in the case of (ii) on the basis of a 365 day year for each day Tenant remains in possession). If no such notice is served, then a tenancy at sufferance shall be deemed to be created at the rent in the preceding sentence. Tenant shall also pay to Landlord all damages sustained by Landlord resulting from retention of possession by Tenant, including the loss of any proposed subsequent tenant for any portion of the Leased Premises. The provisions of this paragraph shall not constitute a waiver by Landlord of any right of re-entry as herein set forth; nor shall receipt of any rent or any other act in apparent affirmance of the tenancy operate as a waiver of the right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant's part to be performed.

13. Quiet Enjoyment

Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the Leased Premises for the term hereof without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

14. Default

A. Tenant's Default. Tenant shall be in default under this Lease if:

i. Tenant shall fail to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, whether such sum be any installment of the rent herein reserved, any other amount treated as additional rent hereunder, or any other payment or reimbursement to Landlord required herein, whether or not treated as additional rent hereunder, and such failure shall continue for a period of five (5) days from the date such payment was due; or

ii. Tenant shall fail to comply with any term, provision or covenant of this Lease other than by failing to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, and shall not cure such failure within twenty (20) days (forthwith, if the default involves a hazardous condition) after written notice thereof to Tenant; or

iii. Tenant shall abandon or vacate any substantial portion of the Leased Premises and cease to pay rent; or

iv. Tenant shall fail to vacate the Leased Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant's right to possession only; or

v. The leasehold interest of Tenant shall be levied upon under execution or be attached by process of law or Tenant shall fail to contest diligently the validity of any lien or claimed lien and give sufficient security to Landlord to insure payment thereof or shall fail to satisfy any judgment rendered thereon and have the same released, and such default shall continue for ten (10) days after written notice thereof to Tenant; or

vi. Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof; or

vii. A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant a bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order,





judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof.

B. Landlord's Remedies. Upon the occurrence of any of such events of default described in Paragraph 14 hereof or elsewhere in this Lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever:

i. Landlord may, at its election, terminate this Lease or terminate Tenant's right to possession only, without terminating the Lease;

ii. Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant's right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Leased Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Leased Premises in such event with or without process of law and to repossess Landlord of the Leased Premises as of Landlord's former estate and to expel or remove Tenant and any others who may be occupying or within the Leased Premises and to remove any and all property therefrom, without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant hereby waving any right to claim damage for such reentry and expulsion, and without relinquishing Landlord's right to rent or any other right given to Landlord hereunder or by operation of law;

iii. Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent hereunder, and other sums due and payable by Tenant on the date of termination, plus the sum of (i) an amount equal to the then present value of the rent, including any amounts treated as additional rent hereunder, and other sums provided herein to be paid by Tenant for the residue of the stated term hereof, less the fair rental value of the Leased Premises for such residue (taking into account the time and expense necessary to obtain a replacement tenant or tenants, including expenses hereinafter described in subparagraph (d) relating to recovery of the Leased Premises, preparation for reletting and for reletting itself), and (ii) the cost of performing any other covenants which would have otherwise been performed by Tenant;
iv.      (1) Upon any termination of Tenant's right to possession only without termination of the Lease, Landlord may, at Landlord's option, enter into the Leased Premises, remove Tenant's signs and other evidences of tenancy, and take and hold possession thereof as provided in subparagraph (b) above, without such entry and possession terminating the Lease or releasing Tenant, in whole or in part, from any obligation, including Tenant's obligation to pay the rent, including any amounts treated as additional rent, hereunder for the full term. In any such case Tenant shall pay forthwith to Landlord, if Landlord so elects, a sum equal to the entire amount of the rent, including any amounts treated as additional rent hereunder, for the residue ofthe stated term hereof plus any other sums provided herein to be paid by Tenant for the remainder of the Lease term;

(2)      Landlord may, but need not, relet the Leased Premises or any part thereof for such rent and upon such terms as Landlord, in its sole discretion, shall determine (including the right to relet the Leased Premises for a greater or lesser term than that remaining under this Lease, the right to relet the Leased Premises as a part of a larger area, and the right to change the character or use made of the Leased Premises). If Landlord decides to relet the Leased Premises or a duty to relet is imposed upon Landlord by law, Landlord and Tenant agree that Landlord shall only be required to use the same efforts Landlord then uses to Lease other properties Landlord owns or manages (or if the Leased Premises is then managed for Landlord, then Landlord will instruct such manager to use the same efforts such manager then uses to Lease other space or properties which it owns or manages); provided, however that Landlord (or its manager) shall not be required to give any preference or priority to the showing or teasing of the Leased Premises over any other space that Landlord (or its manager) may be leasing or have available and may place a suitable prospective tenant in any such available space regardless of when such alternative space becomes available; provided, further that Landlord shall not be required to observe any instruction given by Tenant about such reletting or accept any tenant offered by Tenant unless such offered tenant has a creditworthiness acceptable to Landlord, Leases the entire Leased Premises, agrees to use the leased premises in a manner consistent with the Lease and Leases the Leased Premises at the same rent, for no more than the current term and on the same





other terms and conditions as in this Lease without the expenditure by Landlord for tenant improvements or broker's commissions. In any such case, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Leased Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall, upon demand, pay the cost thereof, together with Landlord's expenses of reletting, including, without limitation, any broker's commission incurred by Landlord. If the consideration collected by Landlord upon any such reletting plus any sums previously collected from Tenant are not sufficient to pay the full amount of all rent, including any amounts treated as additional rent hereunder and other sums reserved in this Lease for the remaining term hereof, together with the costs of repairs, alterations, additions, redecorating, and Landlord's expenses of reletting and the collection of the rent accruing therefrom (including attorney's fees and broker's commissions), Tenant shall pay to Landlord the amount of such deficiency upon demand and Tenant agrees that Landlord may file suit to recover sums failing due under this section from time to time;

v. Landlord may, at Landlord's option, enter into and upon the Leased Premises, with or without process of law, if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible hereunder and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage resulting therefrom and Tenant agrees to reimburse Landlord, on demand, as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease;

vi. Any and all property which may be removed from the Leased Premises by Landlord pursuant to the authority of the Lease or of law, to which Tenant is or may be entitled, may be handled, removed and stored, as the case may be, by or at the direction of Landlord at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Leased Premises shall, at Landlord's option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

In the event Tenant fails to pay any installment of rent, including any amount treated as additional rent hereunder, or other sums hereunder as and when such installment or other charge is due, Tenant shall pay to Landlord on demand a late charge in an amount equal to five percent (5%) of such installment or other charge overdue in any month and five percent (5%) each month thereafter until paid in full to help defray the additional cost to Landlord for processing such late payments, and such late charge shall be additional rent hereunder and the failure to pay such late charge within ten (10) days after demand therefor shall be an additional event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Leased Premises, and no agreement to terminate this Lease or accept a surrender of said premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Landlord's acceptance of the payment ofrental or other payments hereunder after the
occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or any subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate





for Landlord to employ or consult with an attorney concerning or to enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any attorney's fees so incurred.

Without limiting the foregoing, Tenant hereby: (i) expressly waives any right to trial by jury; and (ii) expressly waives the service of any notice under any existing or future law of the State of Illinois applicable to landlords and tenants.

Tenant hereby constitutes and irrevocably appoints any attorney of any court to be the true and lawful attorney of Tenant, and, in the name, place and stead of Tenant, to appear for and on behalf of Tenant in any court of record at any time in any suit or suits brought against Tenant for the enforcement of any right hereunder by Landlord, to waive the issuance and service of process and trial by jury, and, from time to time, to confess judgment or judgments in favor of Landlord and against Tenant for any rent, including any amounts treated as additional rent hereunder, other charges, and interest thereon due hereunder by Tenant to Landlord and not paid and for costs of suit and for a reasonable attorney's fee in favor of Landlord to be fixed by the court, and to release all errors that may occur or intervene in such proceedings, including the issuance of execution upon any such judgment, and to stipulate that no appeal shall be prosecuted from such judgment or judgments, or that no proceedings in chancery or otherwise shall be filed or prosecuted to interfere in any way with the operation of such judgment or judgments, or of any execution issued thereon or with any supplemental proceedings taken by Landlord to collect the amount of any such judgment or judgments, and to consent that execution on any judgment or decree in favor of Landlord and against Tenant may issue forthwith.

15. Landlord's Lien

In addition to any statutory lien for rent in Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a continuing security interest for all rentals and other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Leased Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged. In the event of a default under this Lease, Landlord shall have, in addition to any other remedies provided herein or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Paragraph 16 at public or private sale upon five (5) days' notice to Tenant. Tenant hereby agrees to execute such financing statements and other instruments necessary or desirable in Landlord's discretion to perfect the security interest hereby created. Any statutory lien for rent is not hereby waived, the express contractual lien herein granted being in addition and supplementary thereto.

16. Mortgages


Tenant accepts this Lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a first lien or charge upon the Property, or the improvements situated thereon, provided, however, that if the mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant's interest in this Lease superior to any such instrument, then by notice to Tenant from such mortgagee, trustee or holder, this Lease shall be deemed superior to such lien whether this Lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage or for the purpose of evidencing the superiority of this Lease to the lien of any such mortgage, as may be the case.

17. Landlord's Liability

In no event shall Landlord's liability for any breach of this Lease exceed the amount of rental then remaining unpaid for the then current term (exclusive of any renewal periods which have not then actually commenced). This provision is not intended to be a measure or agreed amount of Landlord's liability with respect to any particular breach, and shall not be utilized by any court or otherwise for the purpose of determining any liability of Landlord hereunder,





except only as a maximum amount not to be exceeded in any event.

18. Mechanics and Other Liens

Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Leased Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this Lease. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Leased Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Leased Premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, liability, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of Landlord in the Leased Premises or under the terms of this Lease. Tenant will not permit any mechanic's lien or liens or any other liens which may be imposed by law affecting Landlord's or its mortgagees' interest in the Leased Premises or the Building to be placed upon the Leased Premises or the Building arising out of any action or claimed action by Tenant, and in case of the filing of any such lien Tenant will promptly pay same. If any such lien shall remain in force and effect for twenty (20) days after written notice thereof from Landlord to Tenant, Landlord shall have the right and privilege of paying and discharging the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be so much additional rent hereunder due from Tenant to Landlord and shall be paid to Landlord immediately on rendition of bill therefor. Notwithstanding the foregoing, Tenant shall have the right to contest any such lien in good faith and with all due diligence so long as any such contest, or action taken in connection therewith, protects the interest of Landlord and Landlord's mortgagee in the Leased Premises, and Landlord and any such mortgagee are, by the expiration of said twenty (20) day period, furnished such protection, and indemnification against any loss, liability, cost or expense related to any such lien and the contest thereof as are satisfactory to Landlord and any such mortgagee.

19. Notices

Any notice pursuant to this Lease shall be given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, (d) legible facsimile transmission or (e) email transmission, in each case sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile or email transmission, as of the date of the transmission provided that such transmission is received by the intended addressee prior to 5:00 p.m. Chicago, Illinois time (and any transmission received from and after 5:00p.m., Chicago, Illinois time, shall be deemed received on the next business day). Notices given by Landlord's or Tenant's attorneys identified below shall be deemed to have been given by Landlord or Tenant, as the case may be. Unless changed in accordance with this Paragraph 19, the addresses for notices given pursuant to this Lease shall be as follows:

If to Tenant:     
American Service Insurance Company, Inc.
c/o Atlas Financial Holdings, Inc.
150 Northwest Point Boulevard
Elk Grove Village, IL 60007
Attention: Scott Wollney
Fax No.: (847) 228-2580
Email: swollney@atlas-fin.com

with a copy to:     
DLA Piper LLP (US)
203 North LaSalle Street, Suite 190





Chicago, Illinois 60601
Attention: Kimberlie Pearlman, Esq.
Fax No.: (312) 251-2162
Email: kimberlie.pearlman@dlapiper.com

If to Landlord:     
150 Northwest Point LLC
c/o Topco Associates LLC
7711 Grosse Point Road
Skokie, IL 60077
Attention: Thomas Frey
Fax No.: (847) 676-5634
Email: tfrey@topco.com

with a copy to:     
K&L Gates LLP
70 West Madison, Suite 3100
Chicago, Illinois 60602
Attention: Lawrence A. Eiben
Fax No.: (312) 827-1268
Email: larry.eiben@klgates.com

20. Miscellaneous

A. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

B. The terms, provisions and covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns, except as otherwise expressly provided herein. Landlord shall have the right to assign any of its rights and obligations under this Lease and Landlord's grantee or Landlord's successor shall upon such assignment, become "Landlord" hereunder, thereby freeing and relieving the grantor or assignor of all covenants and obligations of "Landlord" hereunder; provided, however, that no successor Landlord shall be responsible for the return of any security deposit provided for pursuant to Paragraph 2ii unless such successor receives the deposit. Tenant agrees to furnish promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of Tenant to enter into this Lease. Nothing herein contained shall give any other Tenant in the Building of which the Leased Premises is a part any enforceable rights either against Landlord or Tenant as a result of the covenants and obligations of either party set forth herein.

C. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof.

D. Tenant shall at anytime and from time to time within ten (10) business days after written request from Landlord execute and deliver to Landlord or any prospective Landlord or mortgagee or prospective mortgagee a sworn and acknowledged estoppel certificate, in form reasonably satisfactory to Landlord and/or Landlord's mortgagee or prospective mortgagee certifying and stating as follows: (i) this Lease has not been modified or amended (or if modified or amended, setting forth such modifications or amendments); (ii) this Lease (as so modified or amended) is in full force and effect (or if not in full force and effect, the reasons therefor); (iii) Tenant has no offsets or defenses to its performance of the terms and provisions of this Lease, including the payment of rent (or if there are any such defenses or offsets, specifying the same); (iv) Tenant is in possession of the Leased Premises if such be the case; (v) if an assignment of rents or Leases has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has received such assignment and agrees to be bound by the provisions thereof; and (vi) any other





accurate statements reasonably required by Landlord or its mortgagee or prospective mortgagee. It is intended that any such statement delivered pursuant to this subsection may be relied upon by any prospective purchaser or mortgagee and their respective successors and assigns and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant hereby irrevocably appoints Landlord or if Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant such estoppel certificate if Tenant fails to deliver the same within such ten (10) business day period and such certificate as signed by Landlord or Landlord's beneficiary, as the case may be, shall be fully binding on Tenant, if Tenant fails to deliver a contrary certificate within five (5) days after receipt by Tenant of a copy of the certificate executed by Landlord or Landlord's beneficiary, as the case may be, on behalf of Tenant.

E. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

F. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Lease shall survive the expiration or earlier termination of the term hereof, including without limitation, all payment obligations with respect to taxes and Operating Costs and all obligations concerning the condition of the premises. Upon the expiration or earlier termination of the term hereof, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary: (i) to repair and restore the Leased Premises as provided herein; and (ii) to discharge Tenant's obligation for unpaid taxes, Operating Costs or other amounts due Landlord, if any. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any security deposit held by Landlord shall be credited against the amount payable by Tenant under this subparagraph 21F.

G. If any clause, phrase, provision or portion of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable under applicable law, such event shall not affect, impair or render invalid or unenforceable the remainder of this Lease nor any other clause, phrase, provision or portion hereof, nor shall it affect the application of any clause, phrase, provision or portion hereof to other persons or circumstances, and it is also the intention of the parties to this Lease that in lieu of each such clause, phrase, provision or portion of this Lease that is invalid or unenforceable, there be added as a part of this Lease contract a clause, phrase, provision or portion as similar in terms to such invalid or unenforceable clause, phrase, provision or portion as may be possible and be valid and enforceable.

H. Submission of this Lease shall not be deemed to be a reservation of the Leased Premises. Landlord shall not be bound hereby until its delivery to Tenant of an executed copy hereof signed by Landlord, already having been signed by Tenant, and until such delivery Landlord reserves the right to exhibit and Lease the Leased Premises to other prospective tenants. Notwithstanding anything contained herein to the contrary, Landlord may withhold delivery of possession of the Leased Premises from Tenant until such time as Tenant has paid to Landlord the security deposit required by subparagraph 2B hereof, the first month's rent as set forth in subparagraph 2A hereof, and any sum owed pursuant to Paragraph 5 hereof.

I. Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to causes of any kind whatsoever which are beyond the control of Landlord.


J. Each of the parties (i) represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease; and (ii) indemnifies and holds the other harmless from any and all losses, liability, costs or expenses (including attorneys' fees) incurred as a result of an alleged breach of the foregoing warranty.

21. Substitution of Premises

At any time after date of execution of this Lease, Landlord may substitute for the Leased Premises, other





premises in the Development (the " new premises" ), in which event the new premises shall be deemed to be the Leased Premises for all purposes under this Lease, provided: (i) the new premises shall be substantially similar to the Leased Premises in square footage and appropriateness for the use of Tenant's purposes; (ii) if Tenant is then occupying the Leased Premises, Landlord shall pay all reasonable expenses directly related to moving Tenant, its property and equipment to the new premises and such moving shall be done at such time and in such manner so as to cause the least inconvenience to Tenant; (iii) Landlord shall give to Tenant not less than ninety (90) days' prior written notice of such substitution; (iv) Landlord shall, at its sole cost, improve the new premises with improvements substantially similar to those located in the Leased Premises, and (v) Landlord shall reimburse Tenant for all costs ancillary to such move including but not limited to stationery, business card, changes in websites and other public materials referencing Tenant's address, filing fees for notice to regulatory bodies of the change of address, transition and service fees incurred to ensure a smooth transition of computer hardware and software applications.

22. Certain Rights Reserved To Landlord

Landlord reserves and may exercise the following rights without affecting Tenant's obligations hereunder:

A. to change the name or street address of the Building;

B. to install and maintain a sign or signs on the exterior of the Building;

C. to have access for Landlord and the other tenants of the Building to any mail chutes located on the Leased Premises according to the rules of the United States Post Office;

D. to designate all sources furnishing sign painting and lettering, ice, drinking water, towels, coffee cart service and toilet supplies, lamps and bulbs used on the leased premises, subject to any conditions set forth in the Aramark Contract;

E. to retain at all times pass keys to the Leased Premises;

F. to grant to anyone the exclusive right to conduct any particular business or undertaking in the Building, other than insurance or insurance related businesses;

G. to close the Building after regular working hours and on the legal holidays subject, however, to Tenant's right to admittance, under such reasonable regulations as Landlord may prescribe

from time to time, which may include by way of example but not of limitation, that persons entering or leaving the Building identify themselves to a watchman by registration or otherwise and that said persons establish their right to enter or leave the Building; and

H. to take any and all measures, including inspections, repairs, alterations, decorations, additions and improvements to the Leased Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Leased Premises or the Building or Landlord's interests, or as may be necessary or desirable in the operation of the Building.

I. to add, remove or modify buildings, roadways, walkways, landscaping, lakes, grading and other improvements in or to the Development.

Landlord may enter upon the Leased Premises and may exercise any or all of the foregoing rights hereby reserved without being deemed guilty of an eviction or disturbance of Tenant's use or possession and without being liable in any manner to Tenant and without abatement of rent or affecting any of Tenant's obligations hereunder.


23. Taxes.


A. Landlord agrees to pay all general and special taxes, assessments and governmental charges of any kind and





nature whatsoever (collectively " Taxes" ) lawfully levied against the Property, the Building, and the grounds, parking areas, driveways and alleys around the Building. If for any calendar year applicable to the Term (or any extension of such Term), the Taxes that are due and payable during such calendar year shall exceed the Taxes that were due and payable during the 2011 calendar year (subject to any later adjustments) ("Landlord's Share"), Tenant shall pay to Landlord as additional rent, upon demand at the time the bill for such tax year issues, Tenant's proportionate share of the amount of such excess applicable to each installment less any monthly payments paid by Tenant as provided below for such tax year.

B. During December of each year of the Term or as soon thereafter as practicable, Landlord shall give Tenant written notice of its estimate of amounts payable under subparagraph A above for the ensuing calendar year. On or before the first day of each month thereafter, Tenant shall pay to Landlord as additional rent one-twelfth (1/12th) of such estimated amount, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the prior year's estimate until the first day of the month after the month in which such notice is given. If at any time it appears to Landlord that the amounts payable under subparagraph A above for the then current calendar year will vary from its estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.

Within ninety (90) days after the close of each calendar year or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement showing the taxes under subparagraph A above and Tenant's proportionate share thereof. If such statement shows an amount due from Tenant that is less than the estimated payments previously paid by Tenant, it shall be accompanied by a refund of the excess to Tenant. If such statement shows an amount due from Tenant that is more than the estimated payments previously paid by Tenant, Tenant shall pay the deficiency to Landlord, as Additional Rent, within thirty (30) days after delivery of the statement.

" Tenant's proportionate share " as used in this Lease shall mean a fraction, the numerator of which is the gross leasable area of the Leased Premises and the denominator of which is the gross leasable area contained in the Building, in each case as reasonably determined by Landlord. For purposes hereof the numerator is 30,552 and the denominator is 176,844 and Tenant's "proportionate share" is 17.28%.

C. If at any time during the term of this Lease, the present method of taxation shall be changed so that in lieu of or in addition to the whole or any part of any taxes, assessments or governmental charges levied, assessed or imposed on real estate and the improvements thereon, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents for the present or any future building on the Property, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be included within the term "taxes" for the purposes hereof.

D. Any payment to be made pursuant to this Paragraph 23 with respect to the real estate tax year in which this Lease commences or terminates shall be prorated.

24. Operating Cost Escalation.


A. If, in any calendar year falling partly or wholly within the Term, Operating Costs (as hereinafter defined) paid or incurred by Landlord shall exceed the Operating Costs for the 2011 calendar year, Tenant shall pay upon demand to Landlord for such year as additional rent Tenant's proportionate share of such excess. Any payment to be made pursuant to this Paragraph 24 with respect to the year in which this Lease commences or terminates shall be prorated.

As used in this Lease, the term " Operating Costs " shall mean any and all expenses, costs and disbursements (other than taxes) of any kind and nature whatsoever incurred by Landlord in connection with the ownership, leasing, management, maintenance, operation, cleaning and repair of the Building or the Property or any improvements situated on the Property (including, without limitation, the costs of maintaining and repairing parking lots, parking structures, and easements, the costs of maintaining, repairing and providing utilities to the Shared





Areas, property management fees, increased interest costs as specified below, salaries, fringe benefits and related costs, for building staff, janitorial services for the Building and Property, waste hauling and disposal, insurance costs of every kind and nature, heating and air conditioning costs, common area utility costs such as electricity, sewer and water charges, the costs of routine repairs, maintenance and decorating, and the Building's or Property's share of costs of the Development, and the Building's or Property's share of the costs payable under the parking garage easement) which Landlord shall pay or become obligated to pay in respect of a calendar year (regardless of when such operating costs were incurred), except the following: (i) costs of alterations of Tenants' premises; (ii) costs of capital improvements, (except that Operating Costs shall include the costs of any capital improvements which are required by any law, code, regulation or ordinance enacted after the Effective Date or which are intended to reduce Operating Costs); (iii) depreciation; (iv) interest and principal payments on mortgages, and other debt costs (but any cost due to an increase in the interest rate over the initial rate on the original long term first lien mortgage shall be included); (v) real estate brokers' leasing commissions or compensation; (vi) any cost or expenditure (or portion thereof) for which Landlord is reimbursed, whether by insurance proceeds or otherwise, and (vii) cost of any service furnished to any other occupant of the Building which Landlord does not provide to Tenant hereunder. Notwithstanding anything contained herein to the contrary, depreciation of any capital improvements made after the date of this Lease which are intended to reduce Operating Costs or which are required under any governmental laws, regulations, or ordinances which were not applicable to the Building at the time it was constructed, shall be included in Operating Costs. The useful life of any such improvement shall be reasonably determined by Landlord. In addition, interest on the undepreciated cost of any such improvement (at the prevailing construction loan rate available to Landlord on the date the cost of such improvement was incurred) shall also be included in Operating Costs. In the event Landlord elects to self insure, insure with a deductible in excess of $1,000 or obtain insurance coverage in which the premium fluctuates in proportion to losses incurred, then Landlord shall estimate the amount of premium that Landlord would have been required to pay to obtain insurance coverage (or insurance coverage without such provision) with a recognized carrier and such estimated amount shall be deemed to be an Operating Cost. Landlord may, in a reasonable manner, allocate insurance premiums for so-called "blanket" insurance policies which insure other properties as well as the Building and said allocated amount shall be deemed to be an Operating Cost.

In the event during all or any portion of any calendar year the Building is not fully rented and occupied, Landlord may elect to make an appropriate adjustment in Operating Costs for such year, employing sound accounting and management principles, to determine Operating Costs that would have been paid or incurred by Landlord had the Building been fully rented and occupied and the amount so determined shall be deemed to have been Operating Costs for such year.

Landlord and Tenant acknowledge that certain of the costs of management, operation and maintenance of the Development are contractually allocated among all of the buildings in the Development using methods of allocation that are considered reasonable and appropriate for the circumstances. Tenant hereby consents to such contractual allocations provided that the determination of such costs and the allocation of all or part thereof to Operating Costs hereunder shall be in accordance with generally accepted accounting principles applied on a consistent basis.

B. During December of each year or as soon thereafter as practicable, Landlord shall give Tenant written notice of its estimate of amounts payable under subparagraph A above for the ensuing calendar year. On or before the first day of each month thereafter, Tenant shall pay to Landlord as additional rent one-twelfth (I !12th) of such estimated amounts, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the prior year's estimate until the first day of the month after the month in which such notice is given. If at any time it appears to Landlord that the amounts payable under subparagraph A above for the then current calendar year will vary from its estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.

Within ninety (90) days after the close of each calendar year or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement showing the Operating Costs under subparagraph A above and Tenant's proportionate share thereof. If such statement shows an amount





due from Tenant that is less than the estimated payments previously paid by Tenant, it shall be accompanied by a refund of the excess to Tenant. If such statement shows an amount due from Tenant that is more than the estimated payments previously paid by Tenant, Tenant shall pay the deficiency to Landlord, as additional rent, within thirty (30) days after delivery of the statement.

C. Tenant or its representatives shall have the right to examine Landlord's books and records of Operating Expenses during normal business hours within twenty (20) days following the furnishing of the statement to Tenant. Unless Tenant takes written exception to any item within thirty (30) days following the furnishing of the statement of Tenant, such statement shall be considered as final and accepted by Tenant. The taking of exception to any item shall not excuse Tenant from the obligation to make timely payment based upon the statement as delivered by Landlord.



25. Data Center.

Subject to terms and conditions hereof, Tenant shall have shared access to the Data Center located on the 4th floor and operated by Landlord. Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of the total Data Center Costs for any calendar year falling partly or wholly within the Term. The " Data Center Costs " shall include all costs and expenses related to the ownership, repairs, maintenance and operation of the Data Center, including, without limitation, the Data Center's proportionate share (based on square footage of Data Center as a percentage of the total square footage of occupied areas of the Building) of the Taxes and insurance costs for the Building, electrical and other utility costs as reasonably allocated to the Data Center by Landlord, the costs of the maintenance and operation of the climate control systems (HVAC) maintenance, fire suppression system and electrical power distribution systems (collectively, the "Systems"), and the costs of any capital repairs or mutually agreed improvements to the portions of the Building elements and/or Systems that exclusively serve the Data Center and that are shared or benefit both Landlord and Tenant, provided that such capital repairs, replacements and improvements shall be amortized over the useful life (in accordance with GAAP) and only the amortized costs of such capital repairs, replacements and improvements shall be included as Data Center Costs. The Data Center Costs shall be calculated separately by Landlord and included as a separate charge either on the statement of Operating Costs or by separate invoice and shall be paid by Tenant in the same manner as the Operating Costs, however, Tenant shall be responsible for fifty (50%) of the entire portion of the Data Center Costs (not just increases over a base year). Any payment to be made pursuant to this Paragraph 25 with respect to the year in which this Lease commences or terminates shall be prorated. Landlord, at its sole discretion, shall have the right to allow other tenants or occupants of the Building to utilize the Data Center and in such event the percentage of Data Center Costs to be shared by Tenant, Landlord and the other users shall be prorated on a basis that is mutually agreed upon by Landlord and Tenant.

26. Exhibits.

The Exhibits attached hereto shall form part of this Lease as if the same were embodied herein.






[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]







EXECUTED 22nd DAY OF MAY , 2012

LANDLORD:

150 NORTHWEST POINT LLC

By: TOPCO ASSOCIATES
Its SOLE MEMBER

By:          /s/ Thomas Frey
Name:        Thomas Frey
Title:        Senior Vice President & CFO


TENANT:

AMERICAN SERVICE INSURANCE COMPANY, Inc., an Illinois corporation


By:          /s/ Scott D. Wollney
Name:         Scott D. Wollney
Title:        President & CEO







EXHIBIT A

LEASED PREMISES

(to be attached)






EXHIBIT B

PROPERTY


DESCRIPTION OF LAND

PARCEL 1:

LOT 1 IN THE FINAL PLAT OF RESUBDIVISION OF LOT 7 IN THE PARK AT NORTHWEST POINT, BEING A SUBDIVISION OF PART OF THE NORTHEAST 1/4 OF SECTION 2I, TOWNSHIP 4I NORTH, RANGE II EAST OF THE THIRD PRINCIPAL MERIDIAN ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 6, 2001 AS DOCUMENT 00 I 0828531, IN COOK COUNTY, ILLINOIS.

PARCEL2:

PERPETUAL EASEMENTS IN FAVOR OF PARCEL 1 NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS RECORDED ON OCTOBER 15, 200I AS DOCUMENT NUMBER 0010957201, AS AMENDED BY FIRST AMENDMENT RECORDED AS DOCUMENT NO. OOII148327, SECOND AMENDMENT DATED OCTOBER 3I, 2003, THIRD AMENDMENT RECORDED AS DOCUMENT NO. 06I2222161, MADE BY PNWP, LLC, A COLORADO LIMITED LIABILITY COMPANY, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

(I) NON-EXCLUSIVE EASEMENT FOR VEHICULAR AND PEDESTRIAN ACCESS, INGRESS AND EGRESS ON, OVER AND ACROSS THOSE PORTIONS OF ANY PRIVATE ROADS OR DRIVES AND WALKWAYS AS SET FORTH THEREIN;

(II) NON-EXCLUSIVE EASEMENT FOR ACCESS, INGRESS AND EGRESS BY EMERGENCY VEHICLES AND PERSONNEL ON, OVER AND ACROSS PRIVATE ROADS OR DRIVES OVER THE BUILDING 50 PROPERTY, SUBJECT TO ANY RELOCATION RIGHTS DESCRIBED THEREIN;

(III) NON-EXCLUSIVE EASEMENT FOR UTILITIES ON, OVER AND THROUGH THE BUILDING 50 PROPERTY, AND FOR THE USE, MAINTENANCE, REPAIR AND REPLACEMENT OF SUCH UTILITIES, AND EACH OWNER AGREES FOR THE BENEFIT OF EACH OTHER OWNER TO GRANT SUCH UTILITY EASEMENTS;

(IV) EXCLUSIVE EASEMENT FOR VEHICULAR PARKING ON, OVER AND ACROSS 20I PARKING SPACES IN THE COMMON GARAGE AND 15 SPACES OF SURFACE PARKING ON THE BUILDING 50 PROPERTY;

(V) NON-EXCLUSIVE EASEMENT WITH RESPECT TO THE BUILDING 50 PROPERTY GENERALLY ON AND OVER THE AREA SHOWN ON THE SITE PLAN AS THE COMMON GARAGE TO CONSTRUCT, USE, OPERATE, MAINTAIN, REBUILD, AND REPLACE THE COMMON GARAGE IN ACCORDANCE WITH THE TERMS OF THE DECLARATION;

(VI) NON-EXCLUSIVE EASEMENT FOR THE PURPOSE OF PASSING STORM WATER DRAINAGE FROM THE BUILDING 150 PROPERTY ON SURFACE OR OVER AND THROUGH THE STORM DRAINAGE PIPES AND SYSTEM NOW OR HEREAFTER CONSTRUCTED ON THE BUILDING 50 PROPERTY AND THE RIGHT TO ENTER ONTO THE BUILDING 50 PROPERTY TO CONSTRUCT AND REPLACE THE NECESSARY STORM DRAINAGE PIPES AND SYSTEM TO CARRY SUCH WATER;

(VII) NON-EXCLUSIVE EASEMENT TO USE AND MAINTAIN TRASH DUMPSTERS AND RELATED EQUIPMENT ON THE BUILDING 50 PROPERTY;

(VIII) NON-EXCLUSIVE EASEMENT FOR THE USE OF THE BUILDING 150 LOADING SPACES LOCATED ON THE BUILDING 50 PROPERTY.






PARCEL 3:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL I NOTED IN THE DECLARATION OF COVENANTS, EASEMENTS AND RESTRICTIONS DATED DECEMBER 30, 1982 RECORDED ON FEBRUARY 3, 1983 AS DOCUMENT NUMBER 26495247, AS AMENDED BY FIRST AMENDMENT RECORDED AS DOCUMENT NO. 88197029, SECOND AMENDMENT RECORDED AS DOCUMENT NO. 98240102, THIRD AMENDMENT REOCRDED AS DOCUMENT NO. 98240102, ASSIGNMENT AND ASSUMPTION TO MGA DEVELOPMENT ASSOCIATES, L.P. RECORDED AS DOCUMENT NO. 98240104 AND DESIGNATION OF BUILDING SITE RECORDED AS DOCUMENT NO. 0011148328, BY LASALLE NATIONAL BANK, NOT PERSONALLY OR INDIVIDUALLY, BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED MARCH 5, 1980 AND KNOWN AS TRUST NO. 102000, FOR THE FOLLOWING PURPOSES ON THE REAL PROPERTY AS DEFINED THEREIN:

FOR INGRESS AND EGRESS OVER, UNDER, ACROSS, IN AND UPON THE PROPERTY AND TO PROVIDE REASONABLE AND NECESSARY ACCESS TO COMMON PROPERTIES AND FOR THE PURPOSE OF PERFORMING THE CONSTRUCTION, INSTALLATION, MAINTENANCE, OR REPAIR OF SUCH COMMON PROPERTIES AND THE RIGHT TO USE AND ENJOY THE COMMON PROPERTIES.

PARCEL 4:

PERPETUAL, NON-EXCLUSIVE EASEMENT IN FAVOR OF PARCEL I NOTED IN AN EASEMENT AGREEMENT DATED SEPTEMBER 10, 1987 AND RECORDED SEPTEMBER 11, 1987 AS DOCUMENT NO. 87499181 BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER THE PROVISIONS OF A TRUST AGREEMENT DATED MARCH 15, 1980 AND KNOWN AS TRUST NO. 102000, LASALLE NATIONAL BANK, AS TRUSTEE UNDER THE PROVISIONS OF A TRUST AGREEMENT DATED OCTOBER 28, 1983 AND KNOWN AS TRUST NO. 107201 AND NORTHWEST POINT ASSOCIATION, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, FOR THE FOLLOWING PURPOSES AS DEFINED THEREIN:

FOR DEVELOPMENT, CONSTRUCTION, INSTALLATION, MAINTENANCE, REPLACEMENT AND REPAIR OF LANDSCAPING AND RELATED IMPROVEMENTS (INCLUDING, WITHOUT LIMITATION, SPRINKLER SYSTEMS) AND INGRESS AND EGRESS TO THE EASEMENT PARCEL.

PINs: 08-21-202-082-0000

Address: 150 Northwest Point Boulevard, Elk Grove Village, Illinois







Exhibit C

Form of Letter of Credit




150 Northwest Point, LLC
7711 Gross Point Road
Skokie, IL 60077-2697
ATTN: Ray Nicholus


150 Northwest Point, LLC:

DATE OF EXPIRATION: _________, 2013


We hereby open our Irrevocable Standby Letter of Credit in your favor available by your drafts drawn on NAME OF TENANT'S BANK at sight for any sums not exceeding in total FOUR HUNDRED EIGHTY FIVE THOUSAND AND N0/100 ($485,000.00) U.S. Dollars for account of American Service Insurance Company, Inc. Drafts must be accompanied solely by Beneficiary's written statement on its letterhead signed by a purported officer reading: "American Service Insurance Company, Inc. has failed to comply with one or more of the terms and conditions of the Lease Agreement between American Service Insurance Company, Inc., as Tenant, and 150 Northwest Point, LLC, as landlord, for the premises leased to such Tenant located at 150 Northwest Point Boulevard, Elk Grove Village, Illinois."

We hereby engage with you that draft(s) drawn under and in compliance with the terms of this credit will be duly honored at time of presentation and delivery of documents as specified at this office on or before the EXPIRATION DATE, or any extended EXPIRATION DATE if applicable.

It is a condition of this Letter of Credit that it shall be deemed automatically extended without amendment for one year from the present or any future EXPIRATION DATE unless at least sixty (60) days prior to such EXPIRATION DATE, we notifY you in writing by certified mail or express courier that we elect not to renew this Letter of Credit for any such additional one year period. In the event that we elect not to renew this Letter of Credit and American Service Insurance Company, Inc. does not provide Beneficiary with a replacement letter of credit on the same terms and conditions as this Letter of Credit then Beneficiary may draw on this Letter of Credit in the manner set forth in paragraph 1 herein.

Notwithstanding any provision of the Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC publication No. 600 (including Articles 29 and 36), if this office is for any reason (including without limitation a force majeure event or otherwise) closed on the last business day for presentation hereunder, then the EXPIRATION DATE is automatically extended to the day occurring thirty (30) days after this office re-opens for business. Until this office shall re-open for business: (i) we may authorize another reasonable place in the United States for presentation, by notice to you in writing by certified mail or express courier, at which you may draw upon this Letter of Credit, in which case the EXPIRATION DATE shall be no later than 30 days after your receipt of such notice, or (ii) you may elect, at your option, to draw upon this Letter of Credit at any office of the NAME OF TENANT'S BANK in the United States at which letters of credit are issued or at the NAME OF TENANT'S BANK chief executive office in the United States.

Draft(s) must be marked "Drawn on NAME OF TENANT'S BANK Irrevocable Standby Letter of Credit No. XXXXXX."






Partial Drawings are Allowed.

This credit is subject to the "Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC publication No. 600"





EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Scott D. Wollney, certify that:
 
1
I have reviewed this quarterly report on Form 10-Q of Atlas Financial Holdings, Inc. for the quarterly period ended June 30, 2012;
 
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 13, 2012
 
 
 
/s/ Scott D. Wollney
 
 
Scott D. Wollney
 
 
President and Chief Executive Officer










EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paul A. Romano, certify that:
 
1
I have reviewed this quarterly report on Form 10-Q of Atlas Financial Holdings, Inc. for the quarterly period ended June 30, 2012;
 
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 13, 2012  
/ S /    Paul A. Romano
Paul A. Romano
Chief Financial Officer










Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the following certification is being made to accompany this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (the “Report”) of Atlas Financial Holdings, Inc. (the “Company”) and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates by reference.
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the Company hereby certifies, to such officer's knowledge, that:
 
 
(i)
the Report of the Company fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
 
 
(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 9, 2012
 
/ S /    Scott D. Wollney
Scott D. Wollney
Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to Atlas Financial Holdings, Inc. and will be retained by Atlas Financial Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.





EXHIBIT 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the following certification is being made to accompany this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (the “Report”) of Atlas Financial Holdings, Inc. (the “Company”) and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates by reference.
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of the Company hereby certifies, to such officer's knowledge, that:
 
 
(i)
the Report of the Company fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
 
 
(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 13, 2012
 
/ S /    Paul A. Romano
Paul A. Romano
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Atlas Financial Holdings, Inc. and will be retained by Atlas Financial Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.