EXHIBIT 10(bs)
December 30, 2002
Dorinco Reinsurance Company
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxxx
RE: Loan Agreement dated March 10, 1997, and amended by Amendment No. 1
executed August 14, 1998, Amendment No. 2 effective March 5, 1999 and
Amendment No. 3 effective November 19, 1999 and Amendment No. 4
effective November 8, 2001 (as amended, the "Loan Agreement") between
Hallmark Financial Services, Inc. ("Borrower") and Dorinco Reinsurance
Company ("Lender")
Dear Xx. Xxxxxxxxxxx:
The purpose of this letter is to obtain written acknowledgement of Lender's
consent to a restructuring of Borrower's ownership in certain of its
subsidiaries and waiver of Sections 6.g. and 7.h. of the Loan Agreement in
connection with such restructuring. This letter will further evidence the
termination of that certain Stock Pledge and Security Agreement (the "Pledge
Agreement") dated March 11, 1997, between Lender and ACO Holdings, Inc.
("ACO") and the release of all collateral held by Lender therunder.
Borrower's Board of Directors proposes to cause ACO to contribute the
outstanding capital stock of Hallmark Finance Corporation ("HFC") to
American Hallmark Insurance Company of Texas ("AH"). As a result of the
restructuring, HFC would be a wholly-owned subsidiary of AH rather than ACO.
HFC would continue to be an indirect wholly-owned subsidiary of Borrower. A
primary purpose of this restructuring is to enhance AH's Statutory Capital
and Surplus (as defined in the Loan Agreement).
In accordance with the Loan Agreement, the capital stock of HFC is pledged
to Lender pursuant to the terms of that certain Stock Pledge and Security
Agreement (the "Pledge Agreement") dated March 11, 1997, between ACO and
Lender. In order to permit the equity in HFC to be included in AH's
Statutory Capital and Surplus, Lender has agreed to terminate the Pledge
Agreement and release all of the Pledged Stock (as defined in the Pledge
Agreement) from Lender's security interest. Lender has further agreed to
return to ACO all certificates representing the Pledged Stock and to file
releases of any financing statements covering the Pledged Stock.
Page 2
December 30, 2002
Dorinco Reinsurance Company Lender's Consent
Please acknowledge Lender's consent to the proposed restructuring, its
waiver of Sections 6.g. and 7.h. of the Loan Agreement in connection
therewith and its termination of the Pledge Agreement and release of the
Pledged Stock by executing and returning to the undersigned the enclosed
duplicate original of this letter. Thank you for your courtesy and
cooperation in this matter.
Very truly yours,
HALLMARK FINANCIAL SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx,
Chairman of the Board of Directors
CONSENTED TO AND AGREED AS OF DECEMBER 30, 2002:
By: /s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxx X. Xxxxxxxxxxx
Vice President
