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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 24, 2008 Affirmative Insurance Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 000-50795 75-2770432 (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.) 4450 SOJOURN DRIVE, SUITE 500 ADDISON TX 75001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 728-6300 ________________________________________________________________________________ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 8.01 Other Events. The Registrant, Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a distributor and producer of non-standard personal automobile insurance, today announced its intent to enter into a proposed Second Amendment to the $220 million senior secured credit facility (the "Facility") it entered into on January 31, 2007, which Facility was provided by a syndicate of lenders, including Credit Suisse, Cayman Islands Branch, as Administrative Agent and Collateral Agent. The proposed Second Amendment is subject to the approval of a majority of the lenders under the Facility. A copy of the proposed "Second Amendment to Credit Agreement" setting forth substantially all of the contemplated amendments to the terms of the Facility is attached hereto as Exhibit 99.1. Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
99.1 Proposed (DRAFT COPY) of Second Amendment to Credit Agreement between the Registrant, certain lenders to be a party thereto, Credit Suisse, Cayman Islands Branch, as Administrative Agent and Collateral Agent, and The Frost National Bank, as Issuing Bank and Swingline Lender.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Affirmative Insurance Holdings, Inc.
(Registrant)
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January 24, 2008
(Date) |
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/s/ JOSEPH G. FISHER
Joseph G. Fisher Senior Vice President and General Counsel |
Exhibit 99.1
DRAFT COPY
SECOND AMENDMENT TO
CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of January __, 2008, and entered into by and among AFFIRMATIVE INSURANCE HOLDINGS, INC., a Delaware corporation ("Borrower"), the lenders party thereto that are party hereto (the "Required Lenders"), CREDIT SUISSE, CAYMAN ISLANDS BRANCH ("CS"), as Administrative Agent (in such capacity, "Administrative Agent"), as Collateral Agent (in such capacity, the "Collateral Agent"), and THE FROST NATIONAL BANK ("Frost"), as Issuing Bank and Swingline Lender. Capitalized terms used but not defined herein having the meaning given them in the Credit Agreement, hereinafter defined.
Recitals
Whereas, Borrower, the Required Lenders, the Agents and the other parties thereto have entered into that certain Credit Agreement dated as of January 31, 2007 (as amended, amended and restated, extended, supplemented or otherwise modified from time to time, the "Credit Agreement");
Whereas, the Borrower has requested certain amendments to the Credit Agreement, pursuant to and in accordance with Section 9.08(b) of the Credit Agreement; and
Whereas, the Required Lenders and the Agents are willing to agree to the amendments requested by the Borrower, on the terms and conditions set forth in this Amendment;
Now Therefore, in consideration of the premises and the mutual agreements set forth herein, the Borrower, Required Lenders and the Agents agree as follows:
(a) The definition of "Excess Cash Flow" is deleted in its entirety and replaced with the following:
""Excess Cash Flow" shall mean, for any relevant twelve (12) month fiscal period, without duplication, Cash Flow, less (i) the consolidated aggregate amount of all Capital Expenditures for such period, including capital payments for business expenditures and investments, such as capital lease payments, (ii) consolidated state and federal income taxes for such period, (iii) Consolidated Interest Expense, (iv) ordinary corporate dividends made in accordance with the terms hereof during such period, and (v) cash consideration utilized for Permitted Acquisitions during the relevant twelve (12) month fiscal period. The preceding formula shall be adjusted on a pro rata basis for any relevant period that is not a fiscal twelve (12) month period."
(b) The definition of "Regulated Insurance Subsidiaries" is amended by adding the following provisos after the word "company" at the end thereof:
"; provided that for purposes of determining the Borrower's compliance with Section 6.14(b) of this Agreement, with effect as of the Closing Date, US Direct shall not be deemed to be a Regulated Insurance Subsidiary for so long, as measured for any four fiscal-quarter period ending on March 31, 2008 or thereafter for which the financial statements are required to be delivered pursuant to Section 5.04, its gross written premium for such period is less than or equal to $250,000 (it being agreed that for the first three fiscal quarters of 2008, such revenue will be calculated through the annualization of gross written premium generated for the period commencing on January 1, 2008 through the final date of most recently completed fiscal quarter prior to the date of calculation); provided further that a person otherwise constituting a Regulated Insurance Subsidiary shall not be deemed to be a Regulated Insurance Subsidiary for purposes of determining the Borrower's compliance with Section 6.14(b) of this Agreement if and only for so long as (i) the entirety of such person's insurance liabilities are fully assumed pursuant to one or more Qualified Reinsurance Agreements and (ii) such person otherwise remains subject to Section 6.14(a)."
(c) The following definitions of "Qualified Reinsurance" and "Qualified Reinsurance Counterparty" shall be inserted in appropriate alphabetical order:
""Qualified Reinsurance Agreement" shall mean any Reinsurance Agreement entered into by any Regulated Insurance Subsidiary of the Borrower with a counterparty constituting a Qualified Reinsurance Counterparty, which such agreement is qualified under all applicable Requirements of Law to receive the statutory credit assigned to such Reinsurance Agreement in the relevant annual statement or quarterly statement at the time prepared."
""Qualified Reinsurance Counterparty" shall mean (a) any Regulated Insurance Subsidiary of the Borrower and (b) any other person having a rating of "B++" or better by A.M. Best, in each case to whom any Regulated Insurance Subsidiary has ceded liability pursuant to a Qualified Reinsurance Agreement; provided that following any downgrade by A.M. Best of any person constituting a Qualified Reinsurance Counterparty pursuant to the foregoing clause (b), such person shall cease to be a Qualified Reinsurance Counterparty only after a period of 30 consecutive days following the date of such downgrade in which such person is not upgraded to a rating of "B++" or better."
(d) In clause (iii) of the definition of Cash Flow, the phrase "the lesser of" is replaced with the following:
"the greater of."
(e) In the definition of Extraordinary Receipts, the reference to "Section 2.3" is replaced with the following:
"Section 2.13."
"Repayment Date |
Amount |
March 31, 2007 |
$500,000 |
June 30, 2007 |
$500,000 |
September 30, 2007 |
$500,000 |
December 31, 2007 |
$500,000 |
March 31, 2008 |
$500,000 |
June 30, 2008 |
$500,000 |
September 30, 2008 |
$500,000 |
December 31, 2008 |
$500,000 |
March 31, 2009 |
$500,000 |
June 30, 2009 |
$500,000 |
September 30, 2009 |
$500,000 |
December 31, 2009 |
$500,000 |
March 31, 2010 |
$500,000 |
June 30, 2010 |
$500,000 |
September 30, 2010 |
$500,000 |
December 31, 2010 |
$500,000 |
March 31, 2011 |
$500,000 |
June 30, 2011 |
$500,000 |
September 30, 2011 |
$500,000 |
December 31, 2011 |
$500,000 |
March 31, 2012 |
$500,000 |
June 30, 2012 |
$500,000 |
September 30, 2012 |
$500,000 |
December 31, 2012 |
$500,000 |
March 31, 2013 |
$500,000 |
June 30, 2013 |
$500,000 |
September 30, 2013 |
$500,000 |
December 31, 2013 |
$500,000 |
Term Loan Maturity Date |
$186,000,000" |
"(e) No later than the earlier of (i) 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 2007, and (ii) the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding Term Loans in accordance with Section 2.13(g), in an aggregate principal amount equal to (a) the Required Prepayment Percentage of Excess Cash Flow for the fiscal year then ended, less (b) an amount equal to the aggregate amount of all permanent repayments of the Loans (other than mandatory prepayments of Loans under Section 2.13 hereof) made by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that such prepayments by their terms cannot be reborrowed or redrawn and do not occur in connection with a refinancing of all or any portion of such Indebtedness."
1.4. Amendments to Section 6.05(b). Section 6.05(b) of the Credit Agreement is deleted in its entirety and replaced with the following:
"Engage in any Asset Sale otherwise permitted under paragraph (a) above unless (x)(i) such Asset Sale is for consideration at least 80% of which is cash (and no portion of the remaining consideration shall be in the form of Indebtedness of the Borrower or any Subsidiary), (ii) such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of, (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b)(x) shall not exceed $30,000,000 in the aggregate or (y) such sale, transfer, lease or disposition of assets is from USAgencies or a Subsidiary thereof to the Borrower or its Subsidiaries, and the acquirer of such assets is not USAgencies or a Subsidiary thereof."
1.5. Amendments to Section 6.14. Section 6.14 of the Credit Agreement is deleted in its entirety and replaced with the following:
"SECTION 6.14. Combined Ratio. (a) Borrower shall not permit the Combined Ratio of the Regulated Insurance Subsidiaries, on a consolidated basis, to be greater than 105% at any time. (b) Borrower shall not permit the Combined Ratio of any Regulated Insurance Subsidiary to be greater than 105% at any time. For the avoidance of doubt, the inability to calculate any Combined Ratio required to be calculated in accordance with this Section 6.14 shall constitute a Default under this Section 6.14."
[signatures follow; remainder of page intentionally left blank]
IN WITNESS WHEREOF, each of the undersigned has duly executed this Second Amendment to Credit Agreement as of the date set forth above.
AFFIRMATIVE INSURANCE HOLDINGS, INC., as Borrower
By: ___________________________
Name:
Title:
CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent and as Collateral Agent
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
[LENDER],
as Required Lender
By: _______________________________
Name:
Title: