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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Home State Holdings, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
437368 10 3
(CUSIP Number)
Howard E. Steinberg
Senior Vice President and General Counsel
Reliance Financial Services Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 29, 1997
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 437368 10 3 13D PAGE 2 OF 9 PAGES
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Reliance Financial Services Corporation
IRS Employer's Identification No: 51-0113548
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or (e) [X]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7 SOLE VOTING POWER
NUMBER OF
620,251 shares of Common Stock
SHARES -------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 shares of Common Stock
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 620,251 shares of Common Stock
-------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
0 shares of Common Stock
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
620,251 shares of Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.9%**
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14 TYPE OF REPORTING PERSON*
HC
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</TABLE>
* SEE INSTRUCTIONS BEFORE FILLING OUT!
** Based on 5,660,000 shares of Common Stock outstanding as of
April 14, 1997.
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CUSIP NO. 437368 10 3 13D PAGE 3 OF 9 PAGES
The statement on Schedule 13D filed with the Securities and Exchange
Commission (the "Commission") on October 15, 1996 (the "Initial Schedule 13D")
by Reliance Financial Services Corporation (the "Reliance Financial"), as
amended on April 4, 1997 by Amendment No. 1 to the Schedule 13D ("Amendment No.
1"), is hereby amended by this Amendment No. 2 to the Schedule 13D (the Initial
Schedule 13D, as amended, is hereinafter referred to as the "Schedule 13D").
Unless otherwise indicated, all capitalized terms used herein have the meanings
ascribed to them in the Initial Schedule 13D.
Item 4. Purpose of the Transaction
Item 4 is hereby amended and restated in its entirety by the following
information:
The Preferred Shares and Warrants were acquired by RIC for investment
purposes and not with the purpose of changing control of the Company.
In connection with, and as a condition to, the acquisition of the
Preferred Shares and Warrants, the following agreements relating to or bearing
upon such securities were executed and delivered by RIC:
A Stockholders' Agreement (the "Stockholders' Agreement") dated as of
October 4, 1996 (a copy of which is attached hereto as Exhibit 3) by and among
the Company, RIC, Swiss Re, Herrick Partners, L.P., a Delaware limited
partnership ("Herrick Partners'), Michael H. Monier ("Mr. Monier") and Edward D.
Herrick ("Mr. Herrick") pursuant to which, among other things, (i) Swiss Re has
the right to designate an individual to serve as a Director of the Company for
so long as its holds shares of Preferred Stock, (ii) the parties have agreed to
vote in favor of the election of the individual designated by Swiss Re as a
Director of the Company, (iii) each of RIC and Swiss Re has the right, upon the
occurrence of a Redemption Default (as defined in the Stockholders' Agreement),
to designate an individual to serve as a Director of the Company, (iv) the
parties to the Stockholders' Agreement have agreed to vote in favor of the
election of any individual designated by RIC and/or Swiss Re as a Director of
the Company after a Redemption Default, and (v) the parties have agreed to vote
in favor of amending the Certificate of Incorporation of the Company (as
contemplated in the Securities Purchase Agreement and as described below).
A Registration Rights Agreement (the "Registration Rights Agreement")
dated as of October 4, 1996 (a copy of which is attached hereto as Exhibit 4) by
and among the Company, RIC and Swiss Re, pursuant to which RIC and Swiss Re have
been granted certain registration rights with respect to the shares of Common
Stock obtainable upon conversion or exercise of the Warrants.
A Management and Consulting Agreement (the "Consulting Agreement")
dated October 4, 1996 (a copy of which is incorporated herein by reference as
Exhibit 7) between the Company and RIC, pursuant to which RIC has agreed to
render certain management and consulting services to the Company in connection
with the operation and conduct of the Company's and its subsidiaries'
businesses.
A letter agreement (the "Reinsurance Letter") dated October 4, 1996 (a
copy of which is incorporated herein by reference as Exhibit 8) between the
Company, RIC and certain subsidiaries of the Company relating to certain
reinsurance arrangements.
In addition to the foregoing, Robert Abidor, a former executive of the
Company and a holder of 8.55% of the Common Stock, agreed with RIC and Swiss Re,
by letter agreement (the "Abidor Agreement") dated October 4, 1996 (a copy of
which is attached hereto as Exhibit 5) to vote all shares of Common Stock which
he holds or over which he
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CUSIP NO. 437368 10 3 13D PAGE 4 OF 9 PAGES
exercises discretionary voting authority in favor of amending the Certificate of
Incorporation (as contemplated in the Securities Purchase Agreement and as
described below).
The Securities Purchase Agreement requires the Company to present at
the next annual stockholders' meeting, for a vote by the stockholders, certain
proposed amendments to the Certificate of Incorporation of the Company. Such
amendments would facilitate the election of those Directors which may be
designated by RIC and Swiss Re by, among other things, (i) providing for an
increase in the size of the Company's Board of Directors to not less than eight
(8) nor more than ten (10) members, (ii) permitting class voting, (iii)
permitting the removal of Directors without cause, (iv) providing that the
holders of Preferred Stock voting as a class shall be entitled to elect one
Director to the Company's Board of Directors and (v) providing that in the event
of a Redemption Default the holders of Preferred Stock voting as a class shall
be entitled to elect two directors to the Company's Board of Directors. The
parties to the Stockholders' Agreement and Mr. Abidor have agreed to vote all of
their respective shares in favor of the proposed amendments.
On April 29, 1997, RIC and Swiss Re provided a written waiver (the
"Waiver"; a copy of which is attached hereto as Exhibit 9) to the Company
relating to a default by the Company under the Securities Purchase Agreement.
The aforementioned default resulted from the Company's failure 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 of less than 2.5:1.0 for
the Company and its subsidiaries as required by Section 8.13 of the
Securities Purchase Agreement.
Pursuant to the Waiver, RIC and Swiss Re have agreed to waive the
aforementioned default under the Securities Purchase Agreement. As a condition
to the effectiveness of the Waiver, the Board of Directors of the Company was
required to appoint, and it has appointed, a committee (the "Committee") of four
directors consisting of Robert Baylis, Henry Sopher, Edward D. Herrick
and Michael Monier; Mr. Sopher serves as Chairman of the Committee. The
Committee reports to the Board of Directors of the Company and is expressly
empowered to pursue all strategic alternatives to improve the financial
condition of the Company. The Waiver supersedes the waiver provided by RIC and
Swiss Re on March 31, 1997 (a copy of which is attached hereto as Exhibit 6).
The response to Item 3 is incorporated herein by reference. The
Stockholders' Agreement which is attached hereto as Exhibit 3, the Registration
Rights Agreement which is attached hereto as Exhibit 4 and the Abidor Agreement
which is attached hereto as Exhibit 5 are incorporated herein by reference.
Item 7. Material to be Filed as Exhibits
Item 7 is hereby amended and supplemented by the following:
Exhibit 7 -- Management and Consulting Agreement, dated October 4,
1996, between the Company and RIC
Exhibit 8 -- Letter Agreement, dated October 4, 1996, between the
Company, RIC and certain subsidiaries of the Company
Exhibit 9 -- Waiver, dated April 29, 1997 among the Company, RIC and
Swiss Re.
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CUSIP NO. 437368 10 3 13D PAGE 5 OF 9 PAGES
SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned, by its duly authorized officer, certifies that the
information set forth in this statement is true, complete and correct.
RELIANCE FINANCIAL SERVICES
CORPORATION
Date: May 12, 1997 By: /s/ Lowell C. Freiberg
------------------------
Lowell C. Freiberg
Senior Vice President
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CUSIP NO. 437368 10 3 13D PAGE 6 OF 9 PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION SEQUENTIALLY NUMBERED PAGE
----------- ----------- --------------------------
<S> <C> <C>
Exhibit 1 Securities Purchase Agreement, dated as of October __
4, 1996, by and among the Company, RIC and Swiss
Re*
Exhibit 2 Form of Warrant Certificate issued to RIC* __
Exhibit 3 Stockholders' Agreement, dated as of October 4, __
1996, by and among the Company, RIC, Swiss Re,
Mr. Herrick, Herrick Partners and Mr. Monier*
Exhibit 4 Registration Rights Agreement, dated as of October __
4, 1996, by and among the Company, RIC and Swiss
Re*
Exhibit 5 Letter Agreement, dated October 4, 1996, executed __
by Robert Abidor in favor of RIC and Swiss Re*
Exhibit 6 Waiver, dated March 31, 1997, among the Company, __
RIC and Swiss Re**
Exhibit 7 Management and Consulting Agreement, dated __
October 4, 1996, between the Company and RIC***
Exhibit 8 Letter Agreement, dated October 4, 1996, between __
the Company, RIC and certain subsidiaries of the
Company***
Exhibit 9 Waiver, dated April 29, 1997 among the Company, 7
RIC and Swiss Re****.
</TABLE>
* Previously filed with the Initial Schedule 13D
** Previously filed with Amendment No. 1
*** Incorporated by reference to Exhibit 10.35 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
filed with the Commission on April 16, 1997
**** Filed herewith
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CUSIP NO. 437368 10 3 13D PAGE 7 OF 9 PAGES
3 South Revmont Drive
Shrewsbury, New Jersey 07702
CONFIDENTIAL
April 29, 1997
Mr. George Roberts
Reliance Insurance Company
4 Penn Center Plaza
Philadelphia, PA 19103
Mr. James Slattery
Swiss Reinsurance America Corporation
287 Park Avenue
New York, NY 10017
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
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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 Robert Baylis, Henry
Sopher, and two of the following selected by the Company: Perez Ehrich, Edward
D. Herrick, Michael Monier or Harold Stowe, chaired by Henry Sopher, 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.
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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/ Albert Benchimol
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Name: Albert Benchimol
Title: Vice President and Treasurer
SWISS REINSURANCE AMERICA
CORPORATION
By: /s/ James P. Slattery
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Name: James P. Slattery
Title: Senior Vice President
Acknowledged as of the
date first above written
HOME STATE HOLDINGS, INC.
By: /s/ Eric A. Reehl
--------------------------------
Name: Eric A. Reehl
Title: Executive Vice President
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