EXHIBIT 10.1
WAIVER AND FOURTH AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
     THIS WAIVER AND FOURTH AMENDMENT TO REVOLVING CREDIT AND TERM LOAN
AGREEMENT (this “Waiver and Amendment”) is dated the 13th day of September, 2007
by and among FIRST ACCEPTANCE CORPORATION (the “Borrower”), SUNTRUST BANK as
Administrative Agent and as a Lender and FIRST BANK as a Lender.
RECITALS:
     A. The Borrower, Administrative Agent and Lenders are parties to a
Revolving Credit and Term Loan Agreement dated as of January 12, 2006 (as
previously amended by the Waiver and First Amendment to Revolving Credit and
Term Loan Agreement, as previously amended by the Waiver and Second Amendment to
Revolving Credit and Term Loan Agreement, as previously amended by the Waiver
and Third Amendment to Revolving Credit and Term Loan Agreement, and as amended
from time to time, collectively, the “Credit Agreement”).
     B. Borrower has requested a waiver of compliance by the Borrower with
certain provisions of the Credit Agreement and has requested that certain
provisions of the Credit Agreement be amended.
     C. Subject to the terms of this Fourth Amendment to Revolving Credit and
Term Credit Agreement, the Lenders have agreed to such waivers and amendments as
set forth herein.
     D. Terms not defined herein shall have the meanings ascribed to such terms
in the Credit Agreement.
     NOW, THEREFORE, in consideration of the foregoing, the covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
     Section 1. Waiver of Compliance with Section 6.1 for Certain Period.
Compliance by the Borrower with the terms of Section 6.1 of the Credit Agreement
for the quarter ending June 30, 2007 is hereby waived.
     Section 2. Waiver of Compliance with Section 6.4 for Certain Period.
Compliance by the Borrower with the terms of Section 6.4 of the Credit Agreement
for the quarter ending June 30, 2007 is hereby waived.
     Section 3. Financial Covenant Waiver for Certain Periods. For the periods
ending September 30, 2007, December 31, 2007, March 31, 2008 and June 30, 2008,
compliance by the Borrower with the terms of Section 6.4 of the Credit Agreement
is hereby waived.
     Section 4. Fixed Charge Coverage Ratio. Compliance by the Borrower with
Section 6.1 of the Credit Agreement for the period ended September 30, 2007 is
hereby waived. For the period ending December 31, 2007, compliance with
Section 6.1 of the Credit Agreement shall be

 

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calculated for the period from July 1, 2007 through December 31, 2007. For the
period ending March 31, 2008, compliance with Section 6.1 of the Credit
Agreement shall be calculated for the period from July 1, 2007 through March 31,
2008. For the period ending June 30, 2008, compliance with Section 6.1 of the
Credit Agreement shall be calculated for the period from July 1, 2007 through
June 30, 2008.
     After June 30, 2008, compliance with Section 6.1 of the Credit Agreement
shall be computed and measured as set forth in such section of the Credit
Agreement.
     Section 5. Minimum Thresholds with respect to Fixed Charge Coverage Ratio.
The required minimum threshold for the Fixed Charge Coverage Ratio as set forth
in Section 6.1 of the Credit Agreement shall be as follows:

     
For the period ending December 31, 2007
  Not less than 1.20 to 1.0
For the period ending March 31, 2008
  Not less than 1.40 to 1.0
For the period ending June 30, 2008 and at all times thereafter
  Not less than 1.50 to 1.0

     Section 6. Minimum Net Income. A new Section 6.6 is added to Article VI of
the Credit Agreement and shall read as follows:
     Section 6.6 Minimum Net Income. The Borrower shall maintain minimum Net
Income for the following four fiscal quarters ending as set forth below:

         
September 30, 2007
  $ 1,000,000  
December 31, 2007
  $ 1,200,000  
March 31, 2008
  $ 3,000,000  
June 30, 2008
  $ 2,300,000  

Net Income shall be defined as follows: for any period, the net income (or loss)
of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
     Section 7. Minimum Mandatory Principal Prepayment. On or prior to December
31, 2007, the Borrower shall make a principal prepayment on the Term Loan in the
minimum amount of $6,000,000. From and after the date of such principal
prepayment, the scheduled repayment amounts of the Term Loan required and
described in the Credit Agreement shall be reduced, on a ratable basis, to
reflect such $6,000,000 (or such larger amount actually paid) Term Loan
prepayment. The principal payment described in this Section shall not be
included for purposes of computing the Fixed Charge Coverage Ratio.
     Section 8. Permanent Revolving Commitment Reduction. As of the date of this
Waiver and Amendment, the Revolving Commitments are permanently reduced to an
aggregate amount equal to $2,000,000.

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     Section 9. Interest Rate Change. Effective as of June 30, 2007, the
definition of “Applicable Margin” is deleted and the following is substituted in
lieu thereof:
     “Applicable Margin” shall mean for all Loans outstanding on any date, 1.00%
per annum with respect to Base Rate Loans and 2.50% per annum with respect to
Eurodollar Loans.
     Section 10. Amendment Fee. Concurrently with the execution of this Waiver
and Amendment, Borrower shall pay an amendment fee of $50,000 to Administrative
Agent for the account of the Lenders.
     Section 11. Mandatory Reduction of Term Loans. A new paragraph is added at
the end of Section 7.6 of the Credit Agreement and shall read as follows:
     All net proceeds from the sale of any assets described in either
subparagraph (c) or (d) above shall be paid by Borrower to the Administrative
Agent and shall be applied as a mandatory prepayment of the outstanding Term
Loans within thirty days of the date of any such sale of assets.
     Section 12. No Additional Indebtedness. Section 7.1(i) of the Credit
Agreement is deleted and the following is substituted in lieu thereof:
     (i) other Indebtedness existing in an aggregate principal amount not to
exceed $3,000,000 at any time outstanding, provided, however, that Borrower
shall not create or incur any additional such Indebtedness after the date of
this Waiver and Amendment without the prior written consent of Lenders.
     Section 13. Representations and Warranties. To induce the Administrative
Agent, the Issuing Bank, the Swingline Lender and the Lenders to enter into this
Waiver and Amendment, the Borrower hereby represents and warrants to the Lenders
that:
     (a) Reaffirmation. As of the date of this Waiver and Amendment and after
giving effect to this Waiver and Amendment, the representations and warranties
set forth in Article IV of the Credit Agreement are true and correct in all
material respects (except to the extent that any such representation or warranty
expressly relates to a specified earlier date, in which case such representation
or warranty shall be true and correct as of such earlier date, and except for
changes in facts and circumstances which are not prohibited by the terms of the
Credit Agreement); and
     (b) No Default. As of the date hereof and after giving effect to this
Waiver and Amendment, no Default or Event of Default shall have occurred and be
continuing.
     Section 14. Payment of Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for its reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of this Waiver and
Amendment.
     Section 15. Conditions. The effectiveness of this Waiver and Amendment is
subject to the satisfaction of the following conditions precedent:

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     (a) The Lenders shall have received this Waiver and Amendment (and any
other documents necessary to evidence the transactions relating thereto) duly
executed by the Borrower and the Guarantors, as applicable;
     (b) No Default or Event of Default shall exist;
     (c) Payment of the amendment fee described in Section 10 above; and
     (d) The Administrative Agent shall have received an incumbency certificate
with respect to the officer(s) of Borrower executing this Waiver and Amendment,
and a certificate of existence for the Borrower.
     Section 16. Resolutions. Within 10 days of the date of this Waiver and
Amendment, Borrower shall deliver to the Administrative Agent a resolution of
the Borrower ratifying and affirming the execution and delivery of this Waiver
and Amendment and all transactions related thereto, in form and substance
satisfactory to the Administrative Agent and its counsel. Failure to deliver
such resolution within such period shall constitute an Event of Default under
the Credit Agreement.
     Section 17. Counterparts. This Amendment may be executed by one or more of
the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
     Section 18. Severability; Headings. Any provision of this Waiver and
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The section and
subsection headings used in this Amendment are for convenience of reference only
and are not to affect the construction hereof or to be taken into consideration
in the interpretation hereof.
     Section 19. Continuing Effect of Other Documents. This Waiver and Amendment
shall not constitute an amendment or waiver of any other provision of the Credit
Agreement not expressly referred to herein and, except to the extent that the
Credit Agreement expressly has been amended hereby, shall not be construed as a
waiver or consent to any further or future action on the part of the Borrower
that would require a waiver or consent of the Required Lenders or the
Administrative Agent. Except as expressly amended, modified or supplemented
hereby, the provisions of the Credit Agreement are and shall remain in full
force and effect.
     Section 20. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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     IN WITNESS WHEREOF, the parties hereto have executed this Waiver and Fourth
Amendment to Revolving Credit and Term Loan Agreement as of the date first set
forth above.

              FIRST ACCEPTANCE CORPORATION
 
       
 
  By:   /s/ Michael J. Bodayle
 
       
 
  Title:   Chief Financial Officer — Insurance
 
      Company Operations
 
            SUNTRUST BANK, as Administrative Agent and as a Lender
 
       
 
  By:   /s/ William Christensen
 
       
 
  Title:   Director
 
            FIRST BANK, as a Lender
 
       
 
  By:   /s/ Douglas A. Remke
 
       
 
  Title:   Vice President

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CONSENT OF GUARANTORS
The undersigned, each a Guarantor, as defined in the Subsidiary Guarantee
Agreement, hereby execute this Waiver and Fourth Amendment to Revolving Credit
and Term Loan Agreement to evidence their consent thereto, as well as the
transactions contemplated thereby, and agree that the Subsidiary Guarantee
Agreement dated January 12, 2006, remains in full force and effect.

            USAUTO HOLDINGS, INC., as a Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        TRANSIT AUTOMOBILE CLUB, INC., as a Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        ALABAMA ACCEPTANCE INSURANCE AGENCY, INC., as a
Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        ACCEPTANCE INSURANCE AGENCY OF TENNESSEE, INC., as a
Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer   

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            ACCEPTANCE INSURANCE AGENCY, INC., as a Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        FIRST ACCEPTANCE SERVICES, INC., as a Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        ACCEPTANCE INSURANCE AGENCY OF ILLINOIS, INC., as a
Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        LNC HOLDINGS, INC., as a Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer        ACCEPTANCE INSURANCE AGENCY OF TEXAS, INC., as a
Guarantor
      By:   /s/ Michael J. Bodayle         Name:   Michael J. Bodayle       
Title:   Treasurer     

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