Exhibit 10.1

THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT

This THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”) is dated
as of November 14, 2014 and effective as of September 30, 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 8 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 and as amended by that certain
Second Amendment to Credit Agreement dated as of May 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 Required 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, Required 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. Section 1.01 of the Credit Agreement shall be
amended as follows:

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

“Third Amendment” shall mean that certain Third Amendment and Waiver to Credit
Agreement, dated as of November 14, 2014 and effective as of September 30, 2014,
by and among the Borrower, the Loan Parties, the Required Lenders, and Credit
Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent.

“Third Amendment Effective Date” shall have the meaning set forth in Section 6
of the Third Amendment.

(b) The following definition shall be replaced in its entirety with the
following:

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“Applicable Margin” shall mean (a) with respect to the Loans that are EuroDollar
Loans, (i) 7.25% from the Closing Date to September 29, 2014 and (ii) 9.25% from
and after September 30, 2014; and (b) with respect to Loans that are ABR Loans,
(i) 6.25% from the Closing Date to September 29, 2014 and (ii) 8.25% from and
after September 30, 2014.

2. WAIVER. The Required 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 September 30, 2014
(“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.

3. COVENANTS OF THE BORROWER.

(a) The Borrower shall pay to the Administrative Agent on or before March 31,
2015, for the account of each Lender which has consented to the Third Amendment
as of the Third Amendment Effective Date, a non-refundable cash fee (the
“Delayed Amendment Fee”) in an amount equal to 0.50% of the aggregate principal
amount of outstanding Term Loans held by each such Lender, which 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 March 31, 2015. The parties hereto agree and acknowledge that the
Delayed Amendment Fee will be payable by the Borrower in addition to the Initial
Amendment Fee paid on the Third Amendment Effective Date in accordance with
Section 5.3 below.

(b) The Borrower shall participate in a conference call with the Administrative
Agent and Lenders every two weeks to be held at such time as may be agreed to by
Borrower and Administrative Agent.

(c) On or prior to December 5, 2014, the Borrower shall deliver to the
Administrative Agent a detailed consolidated and consolidating monthly budget
for the fiscal year ending December 31, 2015 (including a projected consolidated
and consolidating balance sheet, income statement and related statements of
projected operations and cash flows as of the end of and for such following
fiscal year and setting forth the assumptions used for purposes of preparing
such budget) and, promptly when available, any significant revisions of such
budget;

(d) The Borrower shall deliver to the Administrative Agent (i) weekly
“production monitor” reports and (ii) reasonably detailed weekly claims data
prepared by the Borrower.

4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to induce the
Required 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:

4.1. 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.

4.2. 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.

4.3. 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 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).

 

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4.4. 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.

4.5. 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).

4.6. 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.

4.7. 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).

5. 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 Required Lender, and only if and when each of the following
conditions is satisfied or waived:

5.1. 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.

5.2. 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.

 

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5.3. Fees and Expenses. The Borrower shall have paid to the Administrative Agent
on the Third Amendment Effective Date (a) for the account of each Lender which
has consented to this Amendment on or prior to the date hereof, a non-refundable
cash fee (the “Initial Amendment Fee”) in an amount equal to 0.50% of the
aggregate principal amount of outstanding Term Loans held by each such Lender,
which 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 Third Amendment Effective Date 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 the Third Amendment
Effective Date.

6. EFFECTIVE DATE. This Amendment shall become effective (the “Third Amendment
Effective Date”) as of September 30, 2014 once the conditions set forth in
Section 5 of this Amendment are satisfied or waived.

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

8. 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.

9. 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.

10. 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.

 

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11. 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.

12. 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 Third
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. USAGENCIES, L.L.C. USAGENCIES MANAGEMENT
SERVICES, INC. By:  

/s/ Michael J. McClure

  Name:   Michael J. McClure   Title:   CEO

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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as Administrative Agent and as Collateral Agent

By:  

/s/

  Name:   Title: Authorized Signatory By:  

/s/

  Name:   Title: Authorized Signatory

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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