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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”), each
other Obligor, and THE FROST NATIONAL BANK, a national banking association, as Administrative
Agent, Lender and L/C Issuer.



RECITALS:




        Borrower, Administrative Agent, Lender and L/C Issuer have previously entered into the Credit
Agreement 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 Fourth
Amendment.



AGREEMENT:




        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the
parties hereto agree as follows:



ARTICLE I




Definitions




        1.1 Definitions. All capitalized terms not otherwise defined herein have the same
meanings as in the Credit Agreement.



ARTICLE II




Amendments 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 is
substituted in lieu thereof:




     “Applicable Rate” means a per annum percentage equal to (a) with
respect 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 following
is 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 following
is 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 is
substituted 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 and
conditions of this Agreement, each Lender severally agrees to make
loans (each such loan, a “Revolving Loan”), to Borrower from time to
time on any Business Day during the period from the Agreement Date
to the Revolving Facility Date, in an aggregate amount not to exceed
at any time outstanding such Lender’s Commitment; provided,
however, that after giving effect to any Revolving
Borrowing,




     (i) such Lender’s Pro Rata Share of the Outstanding
Amount shall not exceed such Lender’s Commitment, and




     (ii) the Outstanding Amount shall not exceed the
Aggregate Commitments.




Prior to the Revolving Facility Date, Borrower may borrow, repay and
reborrow 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 all
Revolving Loans shall be due and payable (i) on the following dates
and in the following amounts, and (ii) in full on the Revolving Loan
Maturity Date.



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	Payment Date	 	Payment Amount
	 
	 	 
	Each Payment Date on and after the
Revolving Facility Date

	 	An amount equal to 1/12th
of the aggregate unpaid principal
amount of all Revolving Loans on the
Revolving Facility Date
	 
	 	 
	The Revolving Loan Maturity Date

	 	The remaining unpaid principal of all
Revolving 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 each
fiscal 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” in
lieu 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 of
Exhibit 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 of
Schedule 2.1 hereto, is substituted in lieu thereof.



        2.9 Affirmative Insurance Company of Michigan. Borrower and each other Obligor
recognize and agree that Affirmative Insurance Company of Michigan, a Michigan insurance
corporation (“AICM”), is a RIC for purposes of the Loan Documents; provided, that, neither AICM nor
any Obligor may request, and L/C Issuer shall have no obligation to issue, any Letter of Credit for
the account of or that otherwise assures the performance of any obligation of AICM.



        2.10 Effectiveness. Subject to Article III, this Fourth Amendment shall be
effective as of July 30, 2006.



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ARTICLE III




Conditions Precedent




        3.1 Conditions. The effectiveness of this Fourth Amendment is subject to the
satisfaction 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 following
shall have occurred, in form and substance satisfactory to Administrative Agent:




     (i) This Fourth Amendment executed by Borrower, each other Obligor, Lender and
L/C Issuer.




     (ii) The First Restated Revolving Note executed by Borrower, in the form of
Exhibit A.




     (iii) Pro forma Compliance Certificate, prepared after giving effect to this
Fourth Amendment.




     (iv) A certificate of officers acceptable to Administrative Agent of each
Obligor certifying as to (A) the incumbency of the officers signing such certificate
and the Loan Documents to which it is a party, (B) either (i) no change to its
Articles or Certificate of Incorporation, Certificate of Organization, Certificate
of Limited Partnership or other organization document, as applicable, most-recently
delivered 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 other
organization document, as applicable, most recently delivered to Administrative
Agent, an original certified copy of its Articles or Certificate of Incorporation,
Certificate of Organization, Certificate of Limited Partnership or other
organization document, as applicable, certified as true, complete and correct by the
appropriate authority of its state of organization as of a date not more than ten
days prior to the date such certificate is delivered to Administrative Agent, (C)
either (i) no change to its By-Laws, Limited Liability Company Agreement, Limited
Partnership Agreement or other governance document, as applicable, most recently
delivered to Administrative Agent and certified as true, complete and correct, or
(ii) if there has been any change to its By-Laws, Limited Liability Company
Agreement, Limited Partnership Agreement or other governance document, as
applicable, most recently delivered to Administrative Agent, a copy of its By-Laws,
Limited Liability Company Agreement, Limited Partnership Agreement and each other
governance document, as applicable, as in effect on the date such certificate is
delivered to Administrative Agent, (D) a copy of the resolutions of the appropriate
governance board authorizing it to execute, deliver and perform the Loan Documents
to which it is a party, and (E) an original certificate of good standing and
existence issued by the appropriate authority of



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its state of organization (certified as of a date not more than ten days prior
to the date such certificate is delivered to Administrative Agent).




     (v) Searches of the Uniform Commercial Code, Tax lien and other records as
Administrative Agent may require.




     (vi) Opinions of counsel to Borrower and each other Obligor addressed to
Administrative Agent, L/C Issuer and Lenders and covering such matters as
Administrative Agent or Special Counsel may reasonably request.




     (vii) In form and substance satisfactory to Administrative Agent and Special
Counsel, such other documents, instruments and certificates as Administrative Agent,
L/C Issuer and any Lender may reasonably require in connection with this Fourth
Amendment.




     (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 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 Fourth 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.




     (ii) All of the representations and warranties contained in Article VI
shall be true and correct, both before and after giving effect to this Fourth
Amendment.



        3.2 Expenses of Administrative Agent. As provided in the Credit Agreement, Borrower
shall pay on demand all reasonable costs and expenses incurred by Administrative Agent in
connection with the preparation, negotiation, and execution of this Fourth Amendment and the other
Loan Documents executed pursuant hereto, including without limitation the reasonable fees and
expenses of Administrative Agent’s legal counsel.



ARTICLE IV




Ratification




        4.1 Ratification. The terms and provisions set forth in this Fourth Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and
except as expressly modified and superseded by this Fourth Amendment, the terms and provisions of
the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in
full force and effect. Each Obligor agrees that the Credit Agreement, as amended hereby, and the
other Loan Documents to which it is a party or subject shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms.



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ARTICLE V




Representations and Warranties




        5.1 Representations and Warranties.




     (a) Loan Documents. Each Obligor hereby represents and warrants to
Administrative Agent, Lender and L/C Issuer that (i) the execution, delivery and performance
of this Fourth Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite action on the part of such Obligor
and will not violate any organizational document of such Obligor, (ii) the representations
and warranties contained in the Credit Agreement, as amended hereby, and each other Loan
Document are true and correct on and as of the date hereof as though made on and as of the
date hereof, except to the extent such representations and warranties speak to a specific
date, (iii) no Default or Event of Default exists, and (iv) such Obligor is in full
compliance with all covenants and agreements contained in the Credit Agreement, as amended
hereby, and the other Loan Documents to which it is a party or it or its property is
subject.




     (b) New Subsidiary. Affirmative Insurance Company represents and warrants that
it has organized and is the sole shareholder of AICM.



ARTICLE VI




Miscellaneous




        6.1 Reference to Credit Agreement. Each of the Loan Documents, including the Credit
Agreement and any and all other agreements, documents, or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended
hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement
shall mean a reference to the Credit Agreement as amended hereby.



        6.2 Severability. The provisions of this Fourth Amendment are intended to be
severable. If for any reason any provision of this Fourth Amendment shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.



        6.3 Counterparts. This Fourth Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument, and any
party 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 NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



     6.5 GOVERNING LAW. THIS FOURTH AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.






The Remainder of This Page Is Intentionally Left Blank.








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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:
	 

	 	 	 	 





Fourth
Amendment to Credit Agreement — Signature Page



 









 





OTHER OBLIGORS:




A-AFFORDABLE INSURANCE AGENCY, INC.

A-AFFORDABLE MANAGING GENERAL AGENCY, INC.

AFFIRMATIVE ALTERNATIVE DISTRIBUTION, INC.

AFFIRMATIVE FRANCHISES GROUP, INC.

AFFIRMATIVE INSURANCE SERVICES, INC.

AFFIRMATIVE INSURANCE SERVICES OF FLORIDA, INC.

AFFIRMATIVE INSURANCE SERVICES OF PENNSLYVANIA, INC.

AFFIRMATIVE INSURANCE SERVICES OF SOUTH CAROLINA, INC.

AFFIRMATIVE INSURANCE SERVICES OF TEXAS, INC.

AFFIRMATIVE MANAGEMENT SERVICES, INC.

AFFIRMATIVE PROPERTY HOLDINGS, INC.

AFFIRMATIVE RETAIL, INC.

AFFIRMATIVE SERVICES, INC.

AFFIRMATIVE SERVICES RETAIL, INC.

AFFIRMATIVE UNDERWRITING SERVICES, INC.

AMERICAN AGENCIES INSURANCE GROUP, 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 FRANCHISING GROUP, 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:

	 	 	 	 
	 

	 	 	 	 
	 

	 	David B. Snyder, Senior Vice President for all	 	 





Fourth
Amendment to Credit Agreement — Signature Page



 









 





	 	 	 	 	 
	ADMINISTRATIVE AGENT, LENDER AND L/C

ISSUER:	 	THE FROST NATIONAL BANK, as
Administrative Agent, Lender and L/C
Issuer
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	By:
	 

	 	 	 	 
	 	 	Print Name:
	 

	 	 	 	 
	 	 	Print Title:
	 

	 	 	 	 





Fourth
Amendment to Credit Agreement — Signature Page



 









 





Exhibit A




First Restated Revolving Note




 









 





Exhibit H




Compliance Certificate




 









 





Schedule 2.1




Commitments; Pro Rata Shares




	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Revolving	 	 	 	 	 	Pro Rata	 
	 	Lender	 	 	Commitment	 	 	Term Commitment	 	 	Share	 
	 	The Frost National Bank
	 	 	$20,000,000	 	 	$0	 	 	100%