CUSIP NO. 437368 10 3 13D PAGE 7 OF 9 PAGES
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CONFIDENTIAL
April 29, 1997
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Reliance Insurance Company
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Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Swiss Reinsurance America Corporation
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Gentlemen:
Reference is made to the Securities Purchase Agreement dated as of
October 4, 1996 (as amended, the "Purchase Agreement") by and among Home State
Holdings, Inc. (the "Company") and Swiss Re and Reliance (the "Purchasers"), as
purchasers of the Company's Series A Cumulative Voting Preferred Stock (the
"Preferred Stock") and Class A Warrants. Capitalized terms used herein which are
defined in the Purchase Agreement shall have the same meanings herein as
therein.
The Purchasers hereby waive the default existing under Section 8.13 of
the Purchase Agreement arising from the failure of the Company to maintain a
ratio of "net written premiums" for the fiscal year ended December 31, 1996 to
"statutory surplus" as of such fiscal year-end, for the Company and its
Subsidiaries on a consolidated basis in accordance with SAP, of less than
2.5:1.0 (the "1996 Premium to Surplus Ratio Default"). The Purchasers
acknowledge that the occurrence of the 1996 Premium to Surplus Ratio Default
shall not be deemed a failure by the
CUSIP NO. 437368 10 3 13D PAGE 8 OF 9 PAGES
Company to perform its covenant and agreement set forth in Section 8.13 of the
Purchase Agreement for the fiscal year ended December 31, 1996.
The waiver granted hereunder shall be limited specifically to the
matters set forth above and does not constitute directly or by implication an
amendment or waiver of any other provisions of the Purchase Agreement or any
other default which may occur or may have occurred under the Purchase Agreement.
The foregoing waiver shall be deemed effective as of April 4, 1997
provided that the Board of Directors of the Company appoint, by no later than
April 28, 1997, a committee of four directors consisting of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, and two of the following selected by the Company: ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇, chaired by ▇▇▇▇▇ ▇▇▇▇▇▇, with full
power and authority vested in such committee to pursue all strategic
alternatives for the Company to improve its financial condition and to report to
the Company's Board of Directors. In addition, such committee shall work with
insurance regulatory authorities and rating agencies to maintain and improve the
Company's good standing with regulatory authorities and ratings with rating
agencies. In connection with all of the foregoing, such committee shall have the
authority to hire investment bankers and other advisers to work with such
committee. The waiver hereby evidenced supersedes any prior waiver relating to
the subject matter hereof.
This letter may be executed in one or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument. This letter shall be effective (subject to the
preceding paragraph) when signed by the Purchasers and a copy thereof is
delivered to each of the Purchasers. Each of the Purchasers hereby represents to
the other that it has not received any remuneration or consideration not
specified in this letter for the waiver granted hereunder.
CUSIP NO. 437368 10 3 13D PAGE 9 OF 9 PAGES
Please indicate your acknowledgment of the foregoing in the space
provided below.
RELIANCE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President and Treasurer
SWISS REINSURANCE AMERICA
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Acknowledged as of the
date first above written
HOME STATE HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
