EXHIBIT 10.49

 

FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT

This FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”) is dated
as of March 31, 2015 and effective as of December 31, 2014, and entered into by
and among AFFIRMATIVE INSURANCE HOLDINGS, INC., a Delaware corporation (the
“Borrower”), the lenders listed on the signature pages hereto, CREDIT SUISSE AG,
CAYMAN ISLANDS BRANCH, as Administrative Agent (in such capacity, the
“Administrative Agent”) and as Collateral Agent (in such capacity, the
“Collateral Agent”), and for purposes of Section 6 hereof, the other Loan
Parties listed on the signature pages hereto.  Capitalized terms used but not
defined herein having the meaning given them in the Credit Agreement (as
hereinafter defined).

Recitals

Whereas, the Borrower, the Lenders from time to time party thereto, the Agents
and the other parties thereto have entered into that certain Credit Agreement
dated as of September 30, 2013, as amended by that certain First Amendment to
Credit Agreement dated as of December 31, 2013, as amended by that certain
Second Amendment to Credit Agreement dated as of May 14, 2014 and as amended by
that certain Third Amendment and Waiver to Credit Agreement dated as of November
14, 2014 (as amended, amended and restated, extended, supplemented or otherwise
modified prior to the date hereof, the “Credit Agreement”);

Whereas, the Borrower has requested an amendment and waiver to the Credit
Agreement, pursuant to and in accordance with Section 9.08(a) of the Credit
Agreement; and

Whereas, the Lenders and the Agents are willing to agree to the amendment and
waiver requested by the Borrower, on the terms and conditions set forth in this
Amendment;

Now Therefore, in consideration of the premises and the mutual agreements set
forth herein, the Borrower, Lenders and Agents agree as follows:

1.AMENDMENTS TO CREDIT AGREEMENT.  Subject to the conditions and upon the terms
set forth in this Amendment and in reliance on the representations and
warranties of the Borrower set forth in this Amendment, the Credit Agreement is
hereby amended as follows:

1.1.Amendment to Section 1.01.

(a)Section 1.01 of the Credit Agreement shall be amended to add the following
definitions in the appropriate alphabetical order:

“13-Week Budget” shall have the meaning assigned to such term in Section
5.04(p).

“Fourth Amendment” shall mean that certain Fourth Amendment and Waiver to Credit
Agreement, dated as of March 31, 2015 and effective as of December 31, 2014, by
and among the Borrower, the Loan Parties, the Lenders party thereto, and Credit
Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent.

 

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“Fourth Amendment Effective Date” shall have the meaning set forth in Section 5
of the Fourth Amendment.

(b)Section 1.01 of the Credit Agreement shall be amended by deleting the
following definitions and replacing them with the following in lieu thereof:

“USAgencies” shall mean USAgencies, L.L.C., a Louisiana limited liability
company and its Subsidiaries; provided, that from and after March 19, 2015, it
shall mean Affirmative, L.L.C. a Louisiana limited liability company, formerly
known as USAgencies, L.L.C., and its Subsidiaries.

“USCasualty” shall mean USAgencies Casualty Insurance Company, Inc., a Louisiana
corporation; provided, that from and after March 3, 2015, it shall mean
Affirmative Casualty Insurance Company, a Louisiana corporation, formerly known
as USAgencies Casualty Insurance Company, Inc..

“USDirect” shall mean USAgencies Direct Insurance Company, Inc., a New York
corporation; provided, that from and after March 3, 2015, it shall mean
Affirmative Direct Insurance Company, a New York corporation, formerly known as
USAgencies Direct Insurance Company, Inc..

1.2.Amendment to Section 2.05.  Section 2.05 of the Credit Agreement shall be
amended by adding the following text after the existing text:

“The Borrower shall pay to each Lender (a) on the Fourth Amendment Effective
Date a fee (the “Initial Fourth Amendment Fee”) equal to each such Lender’s pro
rata share of an amount equal to 2.50% of the aggregate principal amount of all
of the Term Loans outstanding as of the Fourth Amendment Effective Date, which
Initial Fourth Amendment Fee shall not be subject to counterclaim or set-off, or
be otherwise affected by, any claim or dispute relating to any other matter, and
shall be fully earned and due and payable on the Fourth Amendment Effective Date
and (b) on July 31, 2015, and on the last day of each calendar month thereafter
(or the next subsequent Business Day) to each Lender a fee (the “Delayed Fourth
Amendment Fee” and, together with the Initial Fourth Amendment Fee, the “Fourth
Amendment Fee”) equal to each such Lender’s pro rata share of an amount equal to
0.50% of the aggregate principal amount of all of the Term Loans outstanding as
of such payment date, which Delayed Fourth Amendment Fee shall not be subject to
counterclaim or set-off, or be otherwise affected by, any claim or dispute
relating to any other matter, and shall be fully earned and due and payable on
such payment date; provided that (i) the Initial Fourth Amendment Fee shall be
capitalized and added to the amount of the outstanding principal amount of the
Term Loans, and (ii) the Borrower shall have the option, exercisable by written
notice to Administrative Agent not less than three (3) Business Days prior to
each date a Delayed Fourth Amendment Fee is due, to capitalize each such Delayed
Fourth Amendment Fee and add the capitalized amount (each such amount (including
the capitalized amount of the Initial Fourth Amendment Fee), a “PIK Amount”) to
the then outstanding principal amount of Term Loans and in each such event
described in clauses (i) and (ii), the PIK Amount with respect to Term Loans
shall be deemed to have been paid with the proceeds of additional Term Loans by
each Lender, in a principal amount equal to the fee due and payable to such
Lender.  For all purposes under this Agreement, all PIK Amounts capitalized
under this paragraph shall be treated as the principal amount of Term Loans,

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as applicable, once so capitalized, and the final payment due under 2.11(a) on
the Maturity Date shall be deemed increased by such amount.

1.3.Amendment to Section 2.11(a).  Section 2.11(a) of the Credit Agreement shall
be deleted in its entirety and replaced with the following:

(a)  “On the dates set forth below, or if any such date is not a Business Day,
the immediately preceding Business Day (each such date being called a “Repayment
Date”), the Borrower shall pay to the Administrative Agent, for the account of
the Lenders, a principal amount of the Loans (as adjusted from time to time
pursuant to Sections 2.05, 2.11(b), 2.12 and 2.13(g)) equal to the amount set
forth below for such date, together in each case with accrued and unpaid
interest on the principal amount to be paid to but excluding the date of such
payment:

Repayment Date

Amount

December 31, 2013

$2,000,000

March 31, 2014

$2,000,000

June 30, 2014

$2,000,000

September 30, 2014

$2,000,000

December 31, 2014

$3,500,000

June 30, 2015

$7,000,000

September 30, 2015

$3,500,000

December 31, 2015

$4,500,000

Maturity Date

$13,500,000
(as such amount may be increased
pursuant to Section 2.05)”

 

1.4.Amendment to Section 5.04.  Section 5.04 of the Credit Agreement shall be
amended by adding the following clause (o) and (p):

“(o)promptly deliver to the Administrative Agent (i) weekly “production monitor”
reports and (ii) reasonably detailed weekly claims data prepared by the
Borrower, in each case in accordance with the Third Amendment.

(p)(i) on or prior to March 31, 2015, prepare and deliver to the Administrative
Agent a 13-week operating budget in a form reasonably acceptable to the
Administrative Agent and showing intercompany transfers (as updated in
accordance with clause (ii) below, the “13-Week Budget”), which shall reflect
Borrower’s good faith projection of all weekly cash receipts and disbursements
in connection with the operation of its and it Non-Regulated Subsidiaries’
business during such 13-week period; and (ii) no later than five (5) Business
Days after the last day of each calendar month beginning on April 30, 2015,
prepare and deliver to the

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Administrative Agent a four-week update to the most recently delivered 13-Week
Budget, which shall reflect Borrower’s good faith projection of all weekly cash
receipts and disbursements in connection with the operation of its and its
Non-Regulated Subsidiaries’ business during the additional four-week period that
follows the then applicable 13-week period covered by the most recently
delivered 13-Week Budget.”

1.5.Amendment to Section 5.07.  Section 5.07 of the Credit Agreement shall be
amended by adding the following clause (c):

“(c)The Borrower shall participate in a monthly conference call with the
Administrative Agent and Lenders to be held at such time as may be reasonably
agreed to by Borrower and Administrative Agent to discuss the actuarial reserves
and reserve development of the Regulated Insurance Subsidiaries, at which shall
be present the Chief Actuary of the Borrower and such other senior officers of
the Loan Parties as may be reasonably requested to attend (by telephone) by the
Administrative Agent or the Required Lenders, such request or requests to be
made within a reasonable time prior to the scheduled date of such meeting.”

2.WAIVER AND CONSENT.  

2.1 Waiver. The Lenders hereby waive (a) the requirement of Section 6.13 of the
Credit Agreement that the Risk-Based Capital Ratio for any Regulated Insurance
Subsidiary shall be greater than 350% as of December 31, 2014 and as of March
31, 2015 (the “Designated Event”), (b) any other Default or Event of Default or
any other breach of the Credit Agreement or any other Loan Document related to,
or arising from, the Designated Event, and (c) any other Default or Event of
Default or any other breach of the Credit Agreement or any other Loan Document
arising out of any failure by Borrower to provide any notice of the Designated
Event

2.2Consent.  Notwithstanding anything in the Credit Agreement to the contrary,
the Lenders hereby consent to the Borrower entering into that certain capital
contribution agreement in the form provided to the Lenders at 2:12 P.M. (New
York time) on March 30, 2015.

3.REPRESENTATIONS AND WARRANTIES OF THE BORROWER.  In order to induce the
Lenders and the Agents to enter into this Amendment, the Borrower represents and
warrants to each Lender and the Agents that the following statements are true,
correct and complete:

3.1.Power and Authority.  Each of the Loan Parties has all requisite corporate
or limited liability company power and authority to enter into this Amendment
and to carry out the transactions contemplated by, and to perform its
obligations under or in respect of, the Credit Agreement as amended hereby.

3.2.Corporate Action.  The execution and delivery of this Amendment and the
performance of the obligations of each of the Loan Parties under or in respect
of the Credit Agreement as amended hereby have been duly authorized by all
necessary corporate or limited liability company action on the part of each of
the Loan Parties.

3.3.No Conflict or Violation or Required Consent or Approval.  The execution and
delivery of this Amendment and the performance of the obligations of each of the
Loan Parties under or in respect of the Credit Agreement as amended hereby do
not and will not conflict with or violate (a) any provision of the certificate
or articles of incorporation or other constitutive documents or by-laws of any
Loan Party or any of its Subsidiaries, (b) any provision of any law or any
governmental rule or regulation applicable to any Loan Party or any of its
Subsidiaries, (c) any order of any Governmental Authority or

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arbitrator binding on any Loan Party or any of its Subsidiaries, or (d) any
indenture, agreement or instrument to which any Loan Party or any of its
Subsidiaries is a party or by which any Loan Party or any of its Subsidiaries,
or any property of any of them, is bound (except where such violation could not
reasonably be expected to have a Material Adverse Effect), and do not and will
not require any consent or approval of any Person (other than any approval or
consent obtained and is in full force and effect or approvals or consents the
failure to obtain could not reasonably be expected to have a Material Adverse
Effect or which are not material to the consummation of the transaction
contemplated hereby).

3.4.Execution, Delivery and Enforceability.  This Amendment has been duly
executed and delivered by each Loan Party which is a party hereto and is the
legal, valid and binding obligation of such Loan Party, enforceable in
accordance with its terms, except as enforceability may be affected by
applicable bankruptcy, insolvency, and similar proceedings affecting the rights
of creditors generally, and general principles of equity.  The Agents’ Liens in
all Collateral continue to be valid, binding and enforceable Liens which secure
the Obligations to the extent valid, binding and enforceable on the Closing
Date, except as enforceability may be affected by applicable bankruptcy,
insolvency and similar proceedings affecting the rights of creditors generally,
and general principles of equity.

3.5.No Default or Event of Default.  After giving effect to this Amendment, no
event has occurred and is continuing or will result from the execution and
delivery of this Amendment that would constitute a Default or an Event of
Default (other than the Designated Event).

3.6.No Material Adverse Effect.  No event, change or condition has occurred
since the Closing Date that has caused, or could reasonably be expected to
cause, a Material Adverse Effect.

3.7.Representations and Warranties.  Each of the representations and warranties
contained herein and in the Loan Documents is and will be true and correct in
all material respects (except that any representation and warranty that is
qualified by “materiality” or “Material Adverse Effect” shall be true and
correct in all respects) on and as of the date hereof and as of the effective
date of this Amendment, except to the extent that such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects as of such earlier date (except
that any representation and warranty that is qualified by “materiality” or
“Material Adverse Effect” shall be true and correct in all respects as of such
earlier date).

4.CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT.  This Amendment, and the
consents and approvals contained herein, shall be effective only if and when
signed by, and when counterparts hereof shall have been delivered to the Agents
(by hand delivery, mail, telecopy or other electronic transmission) by each Loan
Party, each Lender, and only if and when each of the following conditions is
satisfied or waived:

4.1.No Default or Event of Default; Accuracy of Representations and Warranties.
At the time of and immediately after giving effect to this Amendment, no Default
or Event of Default (other than the Designated Event) shall exist and each of
the representations and warranties made by the Loan Parties herein and in or
pursuant to the Loan Documents shall be true and correct in all material
respects (except that any representation and warranty that is qualified by
“materiality” or “Material Adverse Effect” shall be true and correct in all
respects) as if made on and as of the date on which this Amendment becomes
effective (except that any such representation or warranty that is expressly
stated as being made only as of a specified earlier date shall be true and
correct in all material respects as of such earlier date (except that any
representation and warranty that is qualified by “materiality” or “Material
Adverse Effect” shall be true and correct in all respects as of such earlier
date)) and the Administrative Agent shall have received an officer’s certificate
from the Borrower confirming the same.

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4.2.Amendment to Closing Date Subordinated Credit Agreement.  The Administrative
Agent shall have received a duly executed copy of an amendment and waiver to the
Closing Date Subordinated Credit Agreement substantially in the form attached as
Exhibit A hereto, making amendments thereto that correspond to those made herein
and otherwise in form and substance reasonably satisfactory to the
Administrative Agent.

4.3.Delivery of Documents.  The Administrative Agent shall have received the
following financial statements:

(a)Borrower’s consolidated (and, with respect to the Regulated Insurance
Subsidiaries as a group and their consolidated Subsidiaries, consolidating)
balance sheet and related statements of income and cash flows for the fiscal
month ending January 31, 2015, showing the financial condition of the Borrower
and its consolidated Subsidiaries during such fiscal month and the then elapsed
portion of the fiscal year, including a statement of profits and losses for the
last twelve month period;

(b)Borrower’s and its Non-Regulated Subsidiaries’ consolidated statement of cash
flow as of February 28, 2015, and the then elapsed portion of the fiscal year,
in a form reasonably acceptable to the Administrative Agent; and

(c)Borrower’s and its Non-Regulated Subsidiaries’ consolidated monthly
statements of projected cash flows for the fiscal year 2015, in a form
reasonably acceptable to the Administrative Agent.

4.4.Fees and Expenses.  The Administrative Agent shall have received on the
Fourth Amendment Effective Date (a) the Initial Fourth Amendment Fee which shall
have been paid-in-kind in accordance with Section 2.05 of the Credit Agreement,
as amended by the Fourth Amendment, and (b) all reasonable and documented
out-of-pocket costs and expenses of the Administrative Agent incurred in
connection with this Amendment, any other documents prepared in connection
herewith and the transactions contemplated hereby (in the case of legal fees and
expenses, limited to the reasonable fees, charges and disbursements of Latham &
Watkins LLP, counsel for the Administrative Agent); provided that, the
Administrative Agent and/or Latham & Watkins LLP shall have provided to the
Borrower reasonably detailed supporting backup documentation at least one
Business Day prior to March 31, 2015.

5.EFFECTIVE DATE.  This Amendment shall become effective (the “Fourth Amendment
Effective Date”) as of December 31, 2014 once the conditions set forth in
Section 4 of this Amendment are satisfied or waived.

6.EFFECT OF AMENDMENT; RATIFICATION.  This Amendment is a Loan Document.  From
and after the date on which this Amendment becomes effective, all references in
the Loan Documents to the Credit Agreement and other Loan Documents shall mean
the Credit Agreement as amended hereby.  Except as expressly amended or waived
hereby, the Credit Agreement and the other Loan Documents, including the Liens
granted thereunder, shall remain in full force and effect, and all terms and
provisions thereof are hereby ratified and confirmed. Except as expressly set
forth herein, this Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of or otherwise affect the rights and remedies of
the Lenders or the Administrative Agent under the Credit Agreement or any other
Loan Document, and shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other provision of the Credit Agreement or of any other
Loan Document, all of which are ratified and affirmed in all respects and shall
continue in full force and effect. Except as expressly set forth herein, nothing
herein shall be deemed to be a waiver, amendment, modification or other change
of, any of the terms,

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conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or different circumstances.

7.MISCELLANEOUS.  Each of the Loan Parties confirms that as amended hereby, each
of the Loan Documents to which it is a party is in full force and effect, and
that as of the date hereof, none of the Loan Parties has any defenses, setoffs
or counterclaims to its Obligations.

8.APPLICABLE LAW.  THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.

9.NO WAIVER.  The execution, delivery and effectiveness of this Amendment does
not constitute a waiver of any Default or Event of Default, amend or modify any
provision of any Loan Document except as expressly set forth herein or
constitute a course of dealing or any other basis for altering the Obligations
of any Loan Party.

10.COMPLETE AGREEMENT.  This Amendment sets forth the complete agreement of the
parties in respect of any amendment to any of the provisions of any Loan
Document.  

11.CAPTIONS; COUNTERPARTS; LENDER DIRECTION.  The catchlines and captions herein
are intended solely for convenience of reference and shall not be used to
interpret or construe the provisions hereof.  This Amendment may be executed by
one or more of the parties to this Amendment on any number of separate
counterparts (including by telecopy or other electronic transmission), all of
which taken together shall constitute but one and the same instrument.  Delivery
of an executed counterpart of a signature page of this Amendment by facsimile
transmission or pdf electronic delivery shall be effective as delivery of a
manually executed counterpart hereof.  Each of the Lenders party hereto hereby
directs Credit Suisse AG, Cayman Islands Branch to execute this Amendment in its
capacity as Administrative Agent and Collateral Agent under the Credit
Agreement.

[signatures follow; remainder of page intentionally left blank]

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IN WITNESS WHEREOF, each of the undersigned has duly executed this Fourth
Amendment to Credit Agreement as of the date set forth above.

 

 

AFFIRMATIVE INSURANCE HOLDINGS, INC.,

 

as Borrower

 

By:

/s/ Michael J. McClure

 

 

Name:  Michael J. McClure

 

 

Title:  CEO

 

LOAN PARTIES:

 

AFFIRMATIVE INSURANCE HOLDINGS, INC.

 

AFFIRMATIVE MANAGEMENT SERVICES, INC.

 

AFFIRMATIVE SERVICES, INC.

 

AFFIRMATIVE INSURANCE GROUP, INC.

 

AFFIRMATIVE UNDERWRITING SERVICES, INC.

 

AFFIRMATIVE INSURANCE SERVICES, INC.

 

AFFIRMATIVE, L.L.C., (f/k/a USAgencies, L.L.C.)

 

AFFIRMATIVE GENERAL AGENCY, INC., (f/k/a USagencies Management Services, Inc.)

 

 

 

 

 

 

 

By:

/s/ Michael J. McClure

 

 

Name:  Michael J. McClure

 

 

Title:  CEO

 

Signature Page to Fourth Amendment to Credit Agreement

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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

 

as Administrative Agent and as Collateral Agent

 

 

 

 

 

By:

/s/ Robert Healey

 

 

 

Name:  Robert Healey

 

 

 

Title: Authorized Signatory

 

 

By:

/s/ Matthew M. Tuck

 

 

 

Name: Matthew M. Tuck

 

 

 

Title: Managing Director

 

Signature Page to Fourth Amendment to Credit Agreement

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The Lender acknowledges and agrees that this signature page shall be fully valid
and binding upon the Lender upon its execution and delivery by the Lender to the
Administrative Agent and may not thereafter be revoked, terminated or cancelled
by the Lender.

 

[LENDER]

 

as a Lender

 

 

 

 

 

By:

   /s/ Lender

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

DM_US 59642294-10.074429.0057