exv10w1



 








Exhibit 10.1




March 28, 2006




Affirmative Insurance Holdings, Inc.

4450 Sojourn Drive

Suite 500

Addison, Texas 75001





	 	Re:  	 	Third Amendment to Credit Agreement
	 
	 	 	 	Credit Agreement dated as of July 30, 2004 (such agreement, together with all
amendments and restatements, the “Credit Agreement”), by and among Affirmative
Insurance Holdings, Inc., Affirmative Insurance Company, Insura Property and
Casualty Insurance Company, and The Frost National Bank, as Administrative Agent,
Lender and L/C Issuer




Dear Sir or Madam:




     Capitalized terms not otherwise defined in this Third Amendment to Credit Agreement (“Third
Amendment”) have the meaning specified in the Credit Agreement.



     By your execution of this letter, you agree to as follows:



     1. Amendment to Credit Agreement Section 6.2(b)(iii).



     Credit Agreement Section 6.2(b)(iii) is deleted in its entirety and the following is
substituted in lieu thereof:




Within 60 days after the end of each fiscal quarter of Borrower, a Loss Report as at
the last day of such quarter.



     2. Amendment to Credit Agreement Section 7.1.



     Credit Agreement Section 7.1 is deleted in its entirety and the following is
substituted in lieu thereof:




Combined Ratio. Borrower shall not permit the Combined Ratio of any RIC to be
greater than 100% at any time; provided, with respect (a) any RIC which owns
all of the capital stock of another RIC, and (b) any RIC which is a wholly-owned
Subsidiary of another RIC, the Combined Ratio shall be determined on a consolidated
basis for such RICs.



     3. Amendment to Credit Agreement Section 7.2.



     Credit Agreement Section 7.2 is deleted in its entirety and the following is
substituted in lieu thereof.




Risk-Based Capital. Borrower shall not permit Risk-Based Capital of any RIC to be
less than 250% at any time; provided, with respect (a) any RIC which owns
all



 









 






of the capital stock of another RIC, and (b) any RIC which is a wholly-owned
Subsidiary of another RIC, Risk-Based Capital shall be determined on a consolidated
basis for such RICs.



     4. Amendment to Exhibit H (Compliance Certificate).



     Exhibit H to the Credit Agreement is deleted in its entirety and a new Exhibit
H, in the form of Exhibit H hereto, is substituted in lieu thereof.



     5. Amendment to Schedule 8.21 (Key Personnel).



     Schedule 8.21 to the Credit Agreement is deleted in its entirety and a new
Schedule 8.21, in the form of Schedule 8.21 hereto, is substituted in lieu thereof.



     6. No Waiver. Each of Borrower, each RIC and each other Obligor recognizes and agrees
that (a) as of November 13, 2005, Thomas E. Mangold resigned as Chief Executive Officer and
President of Borrower, (b) Credit Agreement Section 9.1(k) provides that an Event of
Default will exist if a Change in Control occurs, (c) a Change in Control occurs when “any of the
individuals described on Schedule 8.21 . . . does not (i) hold the position with Borrower
or the specified Subsidiary described on Schedule 8.21 after the Agreement Date and a
replacement reasonably satisfactory to Required Lenders has not assumed such office or title within
180 days after the occurrence of such event . . .,” (d) the resignation of Thomas E. Mangold as
Chief Executive Officer and President of Borrower and the lack of a Chief Executive Officer and
President of Borrower will be a Change in Control, if replacements reasonably satisfactory to
Required Lenders have not assumed the offices of Chief Executive Officer and President of Borrower
on or before May 12, 2006, (e) the resignation of Thomas E. Mangold as Chief Executive Officer and
President of Borrower and the lack of a Chief Executive Officer and President of Borrower are a
Default (“Existing Default”), and (f) the amendment to Schedule 8.21 (including the lack of
designation of an individual as Chief Executive Officer or President of Borrower) pursuant to this
Third Amendment is not intended as, and shall not be construed as, a waiver of any rights of
Administrative Agent or any Lender with respect to the resignation of Thomas E. Mangold, any
resulting Change in Control or the Existing Default.



     7. Consent. Each of Borrower, each RIC and each other Obligor recognizes and agrees
that (a) as of November 30, 2005, Timothy A. Bienek resigned as Executive Vice President and Chief
Financial Officer of Borrower, (b) Credit Agreement Section 9.1(k) provides that an Event
of Default will exist if a Change in Control occurs, (c) a Change in Control occurs when “any of
the individuals described on Schedule 8.21. . . . does not (i) hold the position with
Borrower or the specified Subsidiary described on Schedule 8.21 after the Agreement Date
and a replacement reasonably satisfactory to Required Lenders has not assumed such office or title
within 180 days after the occurrence of such event . . .”, (d) the resignation of Timothy A. Bienek
as Executive Vice President and Chief Financial Officer of Borrower and the lack of an Executive
Vice President and Chief Financial Officer will be a Change in Control, if replacements reasonably
satisfactory to Required Lenders have not assumed the offices of Executive Vice President and Chief
Financial Officer of Borrower on or before May 29, 2006, (e) the Borrower has elected Mark E. Pape
to the position of Executive Vice President and Chief Financial Officer of Borrower effective
November 30, 2005, (f) the Required Lenders are satisfied with and have consented to the selection
of Mark E. Pape to the position of Executive



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Vice President and Chief Financial Officer of Borrower, and (f) Schedule 8.21 is hereby
amended to include Mark E. Pape as Executive Vice President and Chief Financial Officer of
Borrower.



     8. Ratification. Each of Borrower, each RIC and each other Obligor hereby ratifies
all of its respective obligations under the Credit Agreement and each of the Loan Documents to
which it is a party or it or its property is subject, and agrees and acknowledges that the Credit
Agreement and each of the Loan Documents to which it is a party or it or its property is subject
remains in full force and effect and shall continue in full force and effect.



     9. Representations and Warranties. Borrower, each RIC and each other Obligor hereby
represent and warrant to Administrative Agent, Lender and L/C Issuer that (a) this Third Amendment
has been duly executed and delivered on behalf of Borrower, each RIC and each other Obligor, (b)
this Third Amendment constitutes a valid and legally binding agreement enforceable against
Borrower, each RIC and each other Obligor, (c) the representations and warranties contained in the
Credit Agreement and the Loan Documents are true and correct on and as of the date of this Third
Amendment, both before and after giving effect to this Third Amendment, (d) no Default or Event of
Default exists under the Credit Agreement or under any other Loan Document (other than the Existing
Default), and (e) the execution, delivery and performance of this Third Amendment have been duly
authorized by Borrower, each RIC and each other Obligor.



     10. Conditions to Effectiveness. The effectiveness of this Third Amendment is subject
to satisfaction of the following conditions precedent:




     (a) The execution and delivery hereof by Borrower, each RIC, each other Obligor,
Administrative Agent, Lender and L/C Issuer and receipt by Administrative Agent of original
executed counterparts of this Third Amendment.




     (b) No Default or Event of Default shall exist (other than the Existing Default).




     (c) All of the representations and warranties contained in Article VIII of the
Credit Agreement, as amended hereby, and in the other Loan Documents shall be true and
correct on and as of the date of this Third Amendment with the same force and effect as if
such representations and warranties had been made on and as of such date, except to the
extent such representations and warranties speak to a specific date.




     (d) All of the representations and warranties contained in Section 9 shall be
true and correct, both before and after giving effect to this Third Amendment.



     11. Effectiveness. Upon satisfaction of all conditions precedent in Section
10, this Third Amendment shall be effective as of September 30, 2005.



     12. Counterparts. This Third Amendment may be signed in any number of counterparts,
which may be delivered in original or facsimile form each of which shall construe an original, but
all of which together shall constitute one and the same instrument.



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     13. Final Agreement of the Parties. THIS THIRD AMENDMENT AND THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.







The Remainder of This Page Is Intentionally Left Blank.







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	ADMINISTRATIVE AGENT,

LENDER AND L/C ISSUER:	 	THE FROST NATIONAL BANK,

as Administrative Agent, Lender and
L/C Issuer
	 
	 	 	 	 
	 

	 	By:	 	/s/ STEPHEN S. MARTIN
	 

	 	 	 	 
	 

	 	Print Name:	 	Stephen S. Martin
	 

	 	 	 	 
	 

	 	Print Title:	 	Vice President
	 

	 	 	 	 





Signature Page to Third Amendment




 









 





	 	 	 	 	 
	Acknowledged and agreed to as of	 	 
	March 28, 2006	 	 
	 
	 	 	 	 
	BORROWER:	 	 
	 
	 	 	 	 
	AFFIRMATIVE INSURANCE HOLDINGS, INC.	 	 
	 
	 	 	 	 
	By:
	 	/s/ DAVID B. SNYDER	 	 
	 

	 	 	 	 
	 

	 	David B. Snyder, Senior Vice President	 	 
	 
	 	 	 	 
	RICS:	 	 
	 
	 	 	 	 
	AFFIRMATIVE INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By:
	 	/s/ DAVID B. SNYDER	 	 
	 

	 	 	 	 
	 

	 	David B. Snyder, Senior Vice President	 	 
	 
	 	 	 	 
	INSURA PROPERTY AND CASUALTY INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By:
	 	/s/ DAVID B. SNYDER	 	 
	 

	 	 	 	 
	 

	 	David B. Snyder, Senior Vice President	 	 






OTHER OBLIGORS:



A-AFFORDABLE INSURANCE AGENCY, INC.



A-AFFORDABLE LOCATIONS, INC.



A-AFFORDABLE MANAGING GENERAL AGENCY, INC.



AFFIRMATIVE ALTERNATIVE DISTRIBUTION, INC.



AFFIRMATIVE FRANCHISES, INC.




AFFIRMATIVE INSURANCE GROUP, INC.

(formerly known as American Agencies Insurance Group, Inc.)



AFFIRMATIVE INSURANCE SERVICES, INC.



AFFIRMATIVE INSURANCE SERVICES OF SOUTH CAROLINA, INC.




Signature Page to Third Amendment




 









 




AFFIRMATIVE MANAGEMENT SERVICES, INC.



AFFIRMATIVE PROPERTY HOLDINGS, INC.



AFFIRMATIVE RETAIL, INC.



AFFIRMATIVE SERVICES, INC.



AFFIRMATIVE SERVICES RETAIL, INC.



AFFIRMATIVE UNDERWRITING SERVICES, INC.



AMERICAN AGENCIES GENERAL AGENCY, INC.



AMERICAN AGENCIES INSURANCE SERVICES OF LOUISIANA, INC.



AMERICAN AGENCIES INVESTMENTS, INC.



DRIVER’S CHOICE INSURANCE AGENCIES, INC.



DRIVER’S CHOICE INSURANCE SERVICES, LLC



FED USA FRANCHISING, INC.



FED USA RETAIL, INC.



INSTANT AUTO INSURANCE AGENCY OF ARIZONA, INC.



INSTANT AUTO INSURANCE AGENCY OF COLORADO, INC.



INSTANT AUTO INSURANCE AGENCY OF INDIANA, INC.



INSTANT AUTO INSURANCE AGENCY OF NEW MEXICO, INC.



INSUREONE INDEPENDENT INSURANCE AGENCY, LLC



SPACE COAST HOLDINGS, INC.



YELLOW KEY INSURANCE AGENCY, INC.




	 	 	 	 	 
	By:

	 	/s/ DAVID B. SNYDER	 	 
	 

	 	 	 	 
	 

	 	David B. Snyder, Senior Vice President for all	 	 






Signature Page to Third Amendment





 









 








EXHIBIT H




Compliance Certificate




 









 








Schedule 8.21




Key Personnel




	 	 	 	 	 
	Key Personnel	 	Title	 	Company
	 
	open

	 	Chief Executive Officer
	 	Affirmative Insurance Holdings, Inc.
	 
	 	 	 	 
	open

	 	President
	 	Affirmative Insurance Holdings, Inc.
	 
	 	 	 	 
	Mark E. Pape

	 	Chief Financial Officer

Executive Vice President
	 	Affirmative Insurance Holdings, Inc.
	 
	 	 	 	 
	M. Sean McPadden

	 	Executive Vice President
	 	Affirmative Insurance Holdings, Inc.
	 
	 	 	 	 
	 

	 	President
	 	Affirmative Insurance Company

Insura Property and Casualty
Insurance Company