EXHIBIT 10.1**Fourth Amendment to Credit Agreement**        This FOURTH AMENDMENT TO CREDIT AGREEMENT (this “*Fourth Amendment*”), dated as of August 7,2006, is among AFFIRMATIVE INSURANCE HOLDINGS, INC., a Delaware corporation (“*Borrower*”), eachother Obligor, and THE FROST NATIONAL BANK, a national banking association, as AdministrativeAgent, Lender and L/C Issuer.RECITALS:        Borrower, Administrative Agent, Lender and L/C Issuer have previously entered into the CreditAgreement dated as of July 30, 2004 (such agreement, together with all amendments and restatements,the “*Credit Agreement*”).        Borrower has requested amendments to the Credit Agreement.        Lender has agreed to amend the Credit Agreement, subject to the terms of this FourthAmendment.AGREEMENT:        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, theparties hereto agree as follows:ARTICLE IDefinitions        1.1 Definitions. All capitalized terms not otherwise defined herein have the samemeanings as in the Credit Agreement.ARTICLE IIAmendments to Credit Agreement        2.1 Amendment to Section 1.1.     (a) Section 1.1 is amended by adding the following in alphabetical order:     “*Revolving Facility Date*” means July 30, 2008.     (b) The definition of “*Applicable Rate*” is deleted in its entirety and the following issubstituted *in lieu*thereof:     “*Applicable Rate*” means a per annum percentage equal to (a) withrespect to Loans, 1.50%, and (b) with respect to L/C Fees, 0.75%.     (c) The definition of “*L/C Facility Expiration Date*” is amended by deleting “July 30,2006” and substituting “July 30, 2008” *in lieu*thereof.
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     (d) The definition of “*Term Facility Date*” is deleted in its entirety and the followingis substituted *in lieu*thereof:     “*Term Facility Date*” means August 7, 2006.        (c) The definition of “*Term Loan Maturity Date*” is deleted in its entirety and the followingis substituted *in lieu*thereof:     “*Term Loan Maturity Date*” means August 7, 2006.        (d) The definition of “*Termination Date*” is deleted in its entirety and the following issubstituted *in lieu*thereof:     “*Termination Date*” means July 30, 2011.        2.2 Amendment to Section 2.1(a).        Section 2.1(a) is deleted in its entirety and the following is substituted *in lieu*thereof:     (a) Revolving Loans. Subject to the terms andconditions of this Agreement, each Lender severally agrees to makeloans (each such loan, a “*Revolving Loan*”), to Borrower from time totime on any Business Day during the period from the Agreement Dateto the Revolving Facility Date, in an aggregate amount not to exceedat any time outstanding such Lender’s Commitment; provided,however, that after giving effect to any RevolvingBorrowing,     (i) such Lender’s Pro Rata Share of the OutstandingAmount shall not exceed such Lender’s Commitment, and     (ii) the Outstanding Amount shall not exceed theAggregate Commitments.Prior to the Revolving Facility Date, Borrower may borrow, repay andreborrow Revolving Loans, all in accordance with this Agreement.        2.3 Amendment to Section 2.3(a).        Section 2.3(a) is deleted in its entirety and the following is substituted *in lieu*thereof:     (a) Revolving Loans. The principal amount of allRevolving Loans shall be due and payable (i) on the following datesand in the following amounts, and (ii) in full on the Revolving LoanMaturity Date.
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   Payment Date Payment Amount   Each Payment Date on and after theRevolving Facility Date An amount equal to 1/12thof the aggregate unpaid principalamount of all Revolving Loans on theRevolving Facility Date   The Revolving Loan Maturity Date The remaining unpaid principal of allRevolving Loans        2.4 Amendment to Section 6.2(b)(ii).        Section 6.2(b)(ii) is amended by adding “(excluding the last fiscal quarter of eachfiscal year)” after the first “quarter”.        2.5 Amendment to Section 7.4.        Section 7.4 is amended by deleting “$110,000,000” and substituting “$195,000,000” *inlieu*thereof.        2.6 Amendment to Section 6.2(a)(v).        Section 6.2(a)(v) is amended by deleting “90” and substituting “60” *in lieu*thereof.        2.7 Amendment to Exhibit H (Compliance Certificate).        Exhibit H is deleted in its entirety and a new Exhibit H, in the form ofExhibit H hereto, is substituted *in lieu*thereof.        2.8 Amendment to Schedule 2.1 (Commitments; Pro Rata Shares).        Schedule 2.1 is deleted in its entirety and a new Schedule 2.1, in the form ofSchedule 2.1 hereto, is substituted *in lieu*thereof.        2.9 Affirmative Insurance Company of Michigan. Borrower and each other Obligorrecognize and agree that Affirmative Insurance Company of Michigan, a Michigan insurancecorporation (“*AICM*”), is a RIC for purposes of the Loan Documents; *provided, that*, neither AICM norany Obligor may request, and L/C Issuer shall have no obligation to issue, any Letter of Credit forthe account of or that otherwise assures the performance of any obligation of AICM.        2.10 Effectiveness. Subject to Article III, this Fourth Amendment shall beeffective as of July 30, 2006.
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ARTICLE IIIConditions Precedent        3.1 Conditions. The effectiveness of this Fourth Amendment is subject to thesatisfaction of the following conditions precedent:     (a) Documents. Administrative Agent shall have received all of the following,each dated (unless otherwise indicated) the date of this Fourth Amendment, and the followingshall have occurred, in form and substance satisfactory to Administrative Agent:     (i) This Fourth Amendment executed by Borrower, each other Obligor, Lender andL/C Issuer.     (ii) The First Restated Revolving Note executed by Borrower, in the form ofExhibit A.     (iii) *Pro forma*Compliance Certificate, prepared after giving effect to thisFourth Amendment.     (iv) A certificate of officers acceptable to Administrative Agent of eachObligor certifying as to (A) the incumbency of the officers signing such certificateand the Loan Documents to which it is a party, (B) either (i) no change to itsArticles or Certificate of Incorporation, Certificate of Organization, Certificateof Limited Partnership or other organization document, as applicable, most-recentlydelivered to Administrative Agent and certified as true, complete and correct, or(ii) if there has been any change to its Articles or Certificate of Incorporation,Certificate of Organization, Certificate of Limited Partnership or otherorganization document, as applicable, most recently delivered to AdministrativeAgent, an original certified copy of its Articles or Certificate of Incorporation,Certificate of Organization, Certificate of Limited Partnership or otherorganization document, as applicable, certified as true, complete and correct by theappropriate authority of its state of organization as of a date not more than tendays prior to the date such certificate is delivered to Administrative Agent, (C)either (i) no change to its By-Laws, Limited Liability Company Agreement, LimitedPartnership Agreement or other governance document, as applicable, most recentlydelivered to Administrative Agent and certified as true, complete and correct, or(ii) if there has been any change to its By-Laws, Limited Liability CompanyAgreement, Limited Partnership Agreement or other governance document, asapplicable, most recently delivered to Administrative Agent, a copy of its By-Laws,Limited Liability Company Agreement, Limited Partnership Agreement and each othergovernance document, as applicable, as in effect on the date such certificate isdelivered to Administrative Agent, (D) a copy of the resolutions of the appropriategovernance board authorizing it to execute, deliver and perform the Loan Documentsto which it is a party, and (E) an original certificate of good standing andexistence issued by the appropriate authority of
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its state of organization (certified as of a date not more than ten days priorto the date such certificate is delivered to Administrative Agent).     (v) Searches of the Uniform Commercial Code, Tax lien and other records asAdministrative Agent may require.     (vi) Opinions of counsel to Borrower and each other Obligor addressed toAdministrative Agent, L/C Issuer and Lenders and covering such matters asAdministrative Agent or Special Counsel may reasonably request.     (vii) In form and substance satisfactory to Administrative Agent and SpecialCounsel, such other documents, instruments and certificates as Administrative Agent,L/C Issuer and any Lender may reasonably require in connection with this FourthAmendment.     (b) No Default. No Default or Event of Default shall exist.     (c) Representations and Warranties.     (i) All of the representations and warranties contained in Article VIIIof the Credit Agreement, as amended hereby, and in the other Loan Documents shall betrue and correct on and as of the date of this Fourth Amendment with the same forceand effect as if such representations and warranties had been made on and as of suchdate, except to the extent such representations and warranties speak to a specificdate.     (ii) All of the representations and warranties contained in Article VIshall be true and correct, both before and after giving effect to this FourthAmendment.        3.2 Expenses of Administrative Agent. As provided in the Credit Agreement, Borrowershall pay on demand all reasonable costs and expenses incurred by Administrative Agent inconnection with the preparation, negotiation, and execution of this Fourth Amendment and the otherLoan Documents executed pursuant hereto, including without limitation the reasonable fees andexpenses of Administrative Agent’s legal counsel.ARTICLE IVRatification        4.1 Ratification. The terms and provisions set forth in this Fourth Amendment shallmodify and supersede all inconsistent terms and provisions set forth in the Credit Agreement andexcept as expressly modified and superseded by this Fourth Amendment, the terms and provisions ofthe Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue infull force and effect. Each Obligor agrees that the Credit Agreement, as amended hereby, and theother Loan Documents to which it is a party or subject shall continue to be legal, valid, bindingand enforceable in accordance with their respective terms.
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ARTICLE VRepresentations and Warranties        5.1 Representations and Warranties.     (a) Loan Documents. Each Obligor hereby represents and warrants toAdministrative Agent, Lender and L/C Issuer that (i) the execution, delivery and performanceof this Fourth Amendment and any and all other Loan Documents executed and/or delivered inconnection herewith have been authorized by all requisite action on the part of such Obligorand will not violate any organizational document of such Obligor, (ii) the representationsand warranties contained in the Credit Agreement, as amended hereby, and each other LoanDocument are true and correct on and as of the date hereof as though made on and as of thedate hereof, except to the extent such representations and warranties speak to a specificdate, (iii) no Default or Event of Default exists, and (iv) such Obligor is in fullcompliance with all covenants and agreements contained in the Credit Agreement, as amendedhereby, and the other Loan Documents to which it is a party or it or its property issubject.     (b) New Subsidiary. Affirmative Insurance Company represents and warrants thatit has organized and is the sole shareholder of AICM.ARTICLE VIMiscellaneous        6.1 Reference to Credit Agreement. Each of the Loan Documents, including the CreditAgreement and any and all other agreements, documents, or instruments now or hereafter executed anddelivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amendedhereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreementshall mean a reference to the Credit Agreement as amended hereby.        6.2 Severability. The provisions of this Fourth Amendment are intended to beseverable. If for any reason any provision of this Fourth Amendment shall be held invalid orunenforceable in whole or in part in any jurisdiction, such provision shall, as to suchjurisdiction, be ineffective to the extent of such invalidity or unenforceability without in anymanner affecting the validity or enforceability thereof in any other jurisdiction or the remainingprovisions hereof in any jurisdiction.        6.3 Counterparts. This Fourth Amendment may be executed in any number ofcounterparts, all of which taken together shall constitute one and the same instrument, and anyparty hereto may execute this Fourth Amendment by signing any such counterpart.        6.4 **INTEGRATION****. THIS FOURTH AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS,REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF**
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**PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NOUNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.**     6.5 **GOVERNING LAW****. THIS FOURTH AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BECONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND FEDERAL LAWSAPPLICABLE TO NATIONAL BANKS.**
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     Executed as of the date first written above.     BORROWER: AFFIRMATIVE INSURANCE HOLDINGS, INC.                 By:         Print Name:       Print Title:               RICS: AFFIRMATIVE INSURANCE COMPANY            By:         Print Name:       Print Title:                 INSURA PROPERTY AND CASUALTY INSURANCE COMPANY            By:         Print Name:       Print Title:     FourthAmendment to Credit Agreement — Signature Page
 

 
OTHER OBLIGORS:A-AFFORDABLE INSURANCE AGENCY, INC.