Exhibit 10.4


 


 


FIRST
AMENDMENT TO LOAN AGREEMENT


THIS
FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”)
is executed the 25th day of April, 2003, by and between AMCOMP
INCORPORATED, a Delaware corporation (the “Borrower”),
and AMSOUTH BANK (the “Bank”).


W I T N E S S E T H:


WHEREAS, the Borrower
and the Bank entered into that certain Loan Agreement dated as of October 12,
2000 (the “Loan Agreement”; all
capitalized terms used herein but not defined shall have the meanings given
such terms in the Loan Agreement), pursuant to which the Bank agreed to make
the Term Loan to the Borrower in the original principal amount of $11,250,000
(the “Original Loan”);


WHEREAS, the Borrower
has requested an increase in the amount of the Term Loan, an extension of the
Maturity Date and certain other amendments to the Loan Agreement;


NOW,
THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Borrower and the Bank hereby agree as follows:


1.             The Loan Agreement is hereby
amended to include and govern in all respects, in addition to the Original
Loan, the outstanding balance of which is $6,968,750 as of the date hereof, the
additional funds loaned the date hereof by the Bank to the Borrower in the
principal amount of $5,531,250.  All
references in the Loan Agreement to $11,250,000 are deleted and the amount of
$12,500,000 is substituted in lieu thereof.


2.             The Loan Agreement is hereby
amended further by deleting Section 2.01(b) and substituting in lieu thereof
the following:


(b)           Borrowing
Procedure.  The amount of $5,531,250 shall
be made available to the Borrower upon the execution and delivery of this
Amendment, that certain Amended and Restated Promissory note of even date
herewith, and all other documents reasonably required by Bank.


3.             The Loan Agreement is hereby
amended further by deleting the date provided in the definition of “Maturity
Date” in Section 1.01 and substituting in lieu thereof “April 10, 2010.”


4.             The Loan Agreement is hereby
amended further by adding the definition of “Additive Basis” in section 1.01 as
follows:


 





















“Additive Basis” means the
financial information from each of the relevant companies is added together
when determining the amount(s) to be used in the calculations required in this
agreement.


5.             The Loan Agreement is hereby
amended further by deleting in the entirety Sections 2.03(a) and 2.03(b) and
substituting in lieu thereof the following:


(a)           Principal.  The principal amount of the Term Loan shall
be repaid in twenty-eight (28) equal and consecutive quarterly installments of
$446,430 each due and payable on the tenth (10th) day of each
January, April, July and October of each calendar year, commencing July 10,
2003 and continuing thereafter through and including April 10, 2010.


 


(b)           Interest.  Accrued interest on the Term Loan shall be
payable in arrears on each Interest Payment Date (or at such other times as may
be specified herein) commencing May 10, 2003 and continuing thereafter through
and including April 10, 2010.


6.             The Loan Agreement is hereby
amended further by deleting the definition of “Debt Service Coverage Ratio” in
section 1.01 and substituting in lieu thereof the following:


“Debt Service Coverage Ratio” means, as of the last day of any fiscal year of the
Borrower, the ratio of (a)(i) Service Fees from Operating Subsidiaries for such
fiscal year, plus (ii) interest received by
the Borrower on the Surplus Notes, plus (iii)
Dividends Available Without Regulatory Approval during such fiscal year, plus (iv) Dividends Available With Regulatory Approval during
such fiscal year, plus (v) amounts in the Payment
Reserve Account, plus (vi) depreciation expense, plus (vii) Tax Sharing Revenue, minus (viii)
Expenses of the Borrower and the Non-Insurance Subsidiaries for such fiscal
year to (b)(i) scheduled interest payments for such fiscal year, plus (ii) scheduled principal payments for such fiscal year.


7.             The Loan Agreement is hereby amended further by
deleting the definition of “Net Written Premiums” in section 1.01 and
substituting in lieu thereof the following:


“Net Written Premiums” means,
as of the last day of any fiscal year, with respect to any Insurance
Subsidiary, the sum of the total amount of premiums written after deducting or
adding premiums on business ceded to or assumed from others (as shown on line
34, column 6, Part 2B, page 8 of the Annual Statement for such date) by each
Insurance Subsidiary in accordance with SAP.


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8.             The Loan Agreement is hereby
amended further by deleting the definition of “Net Losses” in section 1.01 and
substituting in lieu thereof the following:


“Net Losses” means, as of the
last day of any fiscal year, with respect to any Insurance Subsidiary, loss and
loss adjustment expense net of any salvage, subrogation, or deductibles after
deducting reinsured losses (as shown as the total of lines 2 & 3, column 1,
page 4 of the Annual Statement for such date) by each Insurance Subsidiary in
accordance with SAP.


9.             The Loan Agreement is hereby amended further by
deleting all references therein to the acronym “FDOI” and substituting in lieu
thereof the acronym “FOIR” which shall mean the Florida Office of Insurance
Regulation.


10.           The Loan Agreement is hereby
amended further by deleting Section 6.11(a) and substituting in lieu thereof
the following:


(a)  Debt Service Coverage
Ratio.  The Debt Service Coverage Ratio
shall not be less than 1.5 to 1.


11.           The Loan Agreement is hereby amended
further by deleting Section 6.11(b) and substituting in lieu thereof the
following:


(b)  Net Written Premiums to
Statutory Surplus Ratio.  The ratio of Net Written Premiums
to policyholder’s surplus for all Insurance Subsidiaries, on an Additive Basis,
shall not exceed 3.2 to 1.0 as of December 31, 2002 and 2.5 to 1 as of the last
day of all subsequent fiscal years.


12.           The Loan Agreement is hereby amended
further by deleting Section 6.11(c) and substituting in lieu thereof the
following:


(c)  Loss Ratio.  The ratio of Net
Losses to Net Premiums Written for all Insurance Subsidiaries, as of the last
day of each fiscal year, on an Additive Basis, shall not exceed 70% for any one
year or 65% for two consecutive years based on the Annual Statements filed with
the FOIR.


13.           The Loan Agreement is hereby amended
further by deleting Section 6.11(d) and substituting in lieu thereof the
following:


(d)  Combined Ratio.  The ratio of Net
Losses plus Insurance Operating Expenses to Net Premiums Written for all
Insurance Subsidiaries, as of the last day of each fiscal year, on an Additive
Basis, shall not exceed 104% for any one year or 99% for any two consecutive years
based on the Annual Statements filed with the FOIR.


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                14.           The Loan Agreement is hereby amended
further by deleting Section 6.15 in its entirety and substituting in lieu
thereof the following:


SECTION
6.15.  Banking Accounts.  The Borrower
shall at all times maintain its primary depository, investment and other
accounts with the Bank.  In addition, the
Borrower shall establish and maintain an interest bearing depository account of
the Borrower opened with the Bank in the minimum amount of $1,000,000 as a
reserve for future debt service payments on the Term Loan until the Debt
Service Coverage Ratio exceeds 2.0 to 1.0 for two consecutive fiscal years (the
“Payment Reserve Account”).


 


15.           The
Loan Agreement is hereby amended further by deleting Section 5.14 in its
entirety and substituting in lieu thereof the following:


 


SECTION
5.14  Purpose of Term Loan. 
The proceeds of the Term Loan shall be used by the Borrower exclusively
to make a Surplus Note available to the Insurance Subsidiaries and, to the extent
regulatory approval is not obtained to make available such Surplus Note, for
general corporate purposes.


 


16.           As
a condition precedent to the amendments effected hereby, the Chief Financial
Officer of the Borrower shall execute a Compliance Certificate required by the
Bank, in form and substance satisfactory to the Bank in its sole discretion, in
which such Chief Financial Officer shall (1) provide the calculation of all
financial covenants in the Loan Agreement, as amended hereby, (2) attest to the
accuracy of such financial calculations, and (3) certify as to the Borrower’s
compliance with all such covenants.  Such
Compliance Certificate shall be the certificate required by Section 6.01(d) of
the Loan Agreement for all subsequent reporting by the Borrower.


 


                17.           In consideration for the amendments
made hereby, the Borrower shall pay to the Lender simultaneously with the
execution hereof the fee of $25,000.00. 
The Borrower shall also be responsible for, and shall pay simultaneously
with the execution hereof, all legal fees of the Bank incurred in connection
with the amendments discussed herein.


 


18.           Except as expressly set forth herein,
all terms of the Loan Agreement shall be and remain in full force and effect
and shall constitute the legal, valid, binding and enforceable obligations of
the Borrower to the Bank.


19.           The Borrower hereby restates,
ratifies and reaffirms each and every term, representation, covenant and
condition set forth in the Loan Agreement, as amended hereby, effective as of
the date hereof, except for such representations that relate to a specific date
or dates and except with respect to the one-time Loss Ratio 


4





















waiver
set forth in that certain Letter dated December 18, 2001 by and between the
Bank and Borrower.


20.           The Borrower agrees to take such
further actions as the Bank reasonably may request in connection herewith to
evidence the amendments to the Loan Agreement herein contained.


21.           This Amendment may
be executed by one or more of the parties to this Agreement on any number of
separate counterparts (including by telecopy), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.


22.           This Amendment shall
be construed in accordance with and be governed by the law (without giving effect
to the conflict of law principles thereof) of the State of Florida.


                IN WITNESS WHEREOF, the Borrower and the Bank have caused
this Amendment to be duly executed and delivered by their respective authorized
officers as of the day and year first above written.


 


AMCOMP
INCORPORATED,


as
Borrower


 


 


By: /s/
Frederick R. Lowe


Frederick R. Lowe


Chief Executive Officer


 


 


AMSOUTH
BANK, as Bank


 


 


By: /s/
Michael R. Del Rocco


Michael
R. Del Rocco


Vice
President — Commercial Banking


 


 


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