EXHIBIT 10.4
October 4, 1996
Home State Holdings, Inc.
Three South Revmont Drive
Shrewsbury New Jersey 07702
Attention: Xxxx Xxxxxx
Acting President and
Chief Executive Officer
Re: Investment by Swiss Reinsurance America Company
("Swiss Re") and Reliance Insurance Company ("Reliance")
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Gentlemen:
Reference is made to the Purchase Agreement dated as of October 3, 1994
among Home State Holdings, Inc. (the "Company") and the Purchasers named therein
(as amended, the "Note Purchase Agreement"). Capitalized terms used herein which
are defined in the Note Purchase Agreement shall have the same meanings herein
as therein, unless defined or the context requires otherwise.
1. Consent. The undersigned Holders of a majority of (i) the aggregate
principal amount of the Notes outstanding, and (ii) the outstanding shares of
Warrant Stock (as defined in the Registration Rights Agreement) hereby consent
to (A) the execution, delivery and performance of the Securities Purchase
Agreement of even date herewith among the Company, Swiss Re and Reliance (the
"Securities Purchase Agreement") and each of the agreements and instruments
contemplated thereby (including the Other Transaction Documents and the
Securities (each as defined in the Securities Purchase Agreement)), and (B) the
consummation of the transactions contemplated by each of the foregoing,
including without limitation the issuance of the Preferred Shares and the
Warrants (both, as defined in the Securities Purchase Agreement) and any
subsequent exercise of Warrants. Without limiting the foregoing consent, the
undersigned consent to the following:
a) Restricted Payments. So long as no Event of Default, and no event which
with the passage of time or the giving of notice, or both, would
constitute an Event of Default, has occurred and is continuing, the
declaration and payment of dividends upon the Preferred Shares in
accordance with the Certificate of Designations (as defined in the
Securities Purchase Agreement) shall not be deemed to violate or to be
prohibited by Section 9.3 of the Note Purchase Agreement;
b) Funded Indebtedness. The issuance and subsequent ownership of the
Preferred Shares and the Warrants (and any exercise of such Warrants)
shall not be deemed to violate the terms and provisions of Section 9.6 of
the Note Purchase Agreement; and
c) Transaction with Affiliates. The agreements, including without limitation,
the Other Transaction Documents, executed or to be executed in connection
with, or contemplated by the Securities Purchase Agreement, to which the
Company or any of its Subsidiaries, on the one hand, and Swiss Re or
Reliance, on the other, are parties, and the performance by the respective
parties of their obligations thereunder and the consummation of the
transactions contemplated thereby shall not be deemed to violate or to be
prohibited by Section 9.11 of the Note Purchase Agreement.
The granting of the consents 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 Note Purchase Agreement or
any other default which may occur or may have occurred under the Note Purchase
Agreement. Notwithstanding anything to the contrary contained herein, the
granting of the above consent shall not be deemed to be a consent by the Holders
to any payment upon the redemption or repurchase of the Preferred Shares
following the occurrence of a Redemption Event (as defined in the Certificate of
Designations) or otherwise prior to the payment in full of the Notes and any
consent requested with respect to any such payment may be withheld or granted by
the Holders in their sole discretion.
2. Amendment to Registration Rights Agreement. The undersigned Holders
and the Company hereby amend the Registration Rights Agreement as follows:
a) Additional Demand. Section 2(a) of the Registration Rights Agreement is
hereby amended by inserting the phrase "on two separate occasions" before
the words "the Holders" in the first sentence thereof. Section 2(b) of the
Registration Rights Agreement is hereby amended by deleting the phrase
"one time only" in the first sentence thereof and inserting in place
thereof, "on two separate occasions". Any and all references in the
Registration Rights Agreement to "the Demand Registration" or "a Demand
Registration" shall be deemed to be a reference to one of the two separate
requests that the Holders of majority of the shares of Warrant Stock may
make pursuant to Section 2(a) of the Registration Rights Agreement, as
amended
b) Priority of Demands. Notwithstanding anything to the contrary contained
in the Registration Rights Agreement, the rights of the Holders with
respect to any requested Demand Registration pursuant to Section 2 of the
Registration Rights Agreement shall be subject to the terms and provisions
of Sections 2.1(b) and 2.5 of a Registration Rights Agreement dated on or
about September 30, 1996 among the Company, Swiss Re and Reliance (the
"1996 Registration Rights Agreement").
c) Priority of Piggybacks. Notwithstanding anything to the contrary contained
in the Registration Rights Agreement, the rights of the Holders with
respect to any request to include Restricted Stock in a Piggyback
Registration pursuant to
Section 3 of the Registration Rights Agreement shall be subject to the
terms and provisions of Section 3.3 of the 1996 Registration Rights
Agreement.
d) Future Registrations Rights. Notwithstanding anything to the contrary
contained in the Registration Rights Agreement, the rights of the Holders
with respect to any future registration rights pursuant to Section 11 of
the Registration Rights Agreement shall be subject to the terms and
provisions of Sections 2.1(b), 2.5 and 3.3 of the 1996 Registration Rights
Agreement.
The amendment of the Registration Rights Agreement 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
Registration Rights Agreement or any other default which may occur or may have
occurred under the Note Purchase Agreement.
3. Certain Amendments. The Company agrees that it shall not permit the
amendment of the 1996 Registration Rights Agreement or the Securities Purchase
Agreement if such amendment would have a material adverse effect upon the rights
of the Holders.
4. No Defaults. The Company hereby represents and warrants that, after
giving effect to this Letter Agreement and the transactions to be effected as of
the Closing (as defined in the Securities Purchase Agreement) pursuant to the
Securities Purchase Agreement, no Event of Default exists under the Note
Purchase Agreement or any other related document.
5. Counterparts. This Letter Agreement 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.
Please indicate your consent to and acknowledgment of the following in
the spaces provided below.
XXXXX XXXXXXXX & COMPANY
By_____________________________
Xxxxx Xxxxx
Executive Vice President
Consented to and acknowledged as
of the date first above written
HOME STATE HOLDINGS, INC.
By__________________________
Xxxx X. Xxxxx
Assistant Secretary
