UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): | November 1, 2016 |
HALLMARK FINANCIAL SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada
(State or Other Jurisdiction of Incorporation)
| 001-11252 | 87-0447375 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 777 Main Street, Suite 1000, Fort Worth, Texas | 76102 |
| (Address of Principal Executive Offices) | (Zip Code) |
817-348-1600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(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 (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
On November 1, 2016, Hallmark Financial Services, Inc. (“Hallmark” and, collectively with its subsidiaries, the “Company”) entered into a First Amendment to Revolving Facility B Agreement (the “First Amendment”) with Frost Bank (“Frost”). The First Amendment amends the existing Revolving Facility B Agreement with Frost to extend by one year the termination date for draws under the Revolving Facility B Agreement and the maturity date for amounts outstanding thereunder.
As amended, the Facility B Agreement provides Hallmark a $30.0 million revolving credit facility (“Facility B”), in addition to a separate $15.0 million revolving credit facility with Frost. Hallmark may use Facility B loan proceeds solely for the purpose of making capital contributions to two of its insurance company subsidiaries, American Hallmark Insurance Company of Texas and Hallmark Insurance Company. Hallmark may borrow, repay and reborrow under Facility B until December 17, 2018, at which time all amounts outstanding thereunder are converted to a term loan.
Facility B bears interest at a rate equal to the prime rate or LIBOR plus 3.00%, at Hallmark’s election. Until December 17, 2018, interest only on amounts from time to time outstanding under Facility B are payable quarterly. Any amounts outstanding on Facility B as of December 17, 2018 become payable in quarterly installments over five years based on a seven year amortization of principal plus accrued interest. All unpaid principal and accrued interest are due and payable on December 17, 2023. In connection with the First Amendment, Hallmark paid Frost a one-time fee of $30,000. Hallmark will pay Frost a quarterly fee through December 17, 2018 of 0.25% per annum of the average daily unused balance of Facility B.
The foregoing description of the First Amendment is qualified in its entirety by reference to the definitive agreement filed as an exhibit to this Current Report on Form 8-K and incorporated herein by this reference.
| Item 9.01 | Financial Statements and Exhibits |
| (c) | Exhibits. |
| 10.1 | First Amendment to Revolving Facility B Agreement between Hallmark Financial Services, Inc. and Frost Bank dated November 1, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.
| HALLMARK FINANCIAL SERVICES, INC. | |||
| Date: November 1, 2016 | By: | /s/ Jeffrey R. Passmore | |
| Jeffrey R. Passmore, Chief Accounting Officer | |||
Exhibit 10.1
First
Amendment
to
Revolving Facility B Agreement
This FIRST AMENDMENT TO REVOLVING FACILITY B AGREEMENT (this “First Amendment”), dated as of November 1, 2016 (effective as provided herein), is between HALLMARK FINANCIAL SERVICES, INC., a Nevada corporation (“Borrower”), and FROST BANK, a Texas state bank (“Lender”).
RECITALS:
Borrower and Lender are parties to the Revolving Facility B Agreement dated as of December 17, 2015 (such agreement, together with all amendments and restatements thereto, the “Facility B Agreement”). Borrower, American Hallmark Insurance Company of Texas, a Texas insurance corporation, Hallmark Insurance Company, an Arizona insurance corporation, and Lender are parties to the Credit Agreement dated as of June 30, 2015 (such agreement, together with all amendments and restatements thereto, the “Credit Agreement”).
Borrower has requested an amendment to the Facility B Agreement to extend the Facility B Termination Date and the Facility B Maturity Date.
Lender has agreed to extend the Facility B Termination Date and the Facility B Maturity Date, subject to the terms of this First Amendment.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Definitions. All capitalized terms not otherwise defined herein have the same meanings as in the Facility B Agreement and the Credit Agreement.
ARTICLE II
Amendments to Facility B Agreement
2.1 Amendments to Facility B Agreement Section 1.1.
(a) The definition of “Facility B Maturity Date” is amended by deleting “December 17, 2022” and substituting “December 17, 2023” in lieu thereof.
(b) The definition of “Facility B Termination Date” is amended by deleting “December 17, 2017” and substituting “December 17, 2018” in lieu thereof.
First Amendment to Revolving Facility B Agreement – Page 1 |
2.2 Amendment to Facility B Agreement Section 2.3. Facility B Agreement Section 2.3 is amended by deleting “April 1, 2018” and substituting “April 1, 2019” in lieu thereof.
ARTICLE III
Conditions Precedent
3.1 Conditions. The effectiveness of this First Amendment is subject to the satisfaction of the following conditions precedent:
(a) Documents. Lender shall have received all of the following, each dated (unless otherwise indicated) the date of this First Amendment and the following shall have occurred, in form and substance satisfactory to Lender:
(i) First Amendment. This First Amendment executed by Borrower and Lender.
(ii) First Restated Facility B Note. The duly executed First Restated Facility B Note in the form of Exhibit A, payable to the order of Lender, and in the amount of the Facility B Commitment.
(iii) Other Documents. In form and substance satisfactory to Lender and Special Counsel, such other documents, instruments and certificates as Lender may reasonably require in connection with the transactions contemplated hereby.
(b) Fee. Lender shall have received an amendment fee in an amount equal to $30,000.00, due and payable as of the date hereof, which fee is fully earned and non-refundable (subject to Credit Agreement Section 10.11).
(c) Interest. Lender shall have received all accrued, unpaid interest on the Facility B Loan, accrued through October 31, 2016.
(d) Expenses. Lender shall have received reimbursement from Borrower for Attorney Costs incurred through the date hereof.
(e) No Default. No Default or Event of Default shall exist prior to giving effect to this First Amendment or immediately after giving effect to this First Amendment.
(f) Representations and Warranties.
(i) All of the representations and warranties contained in Article VIII of the Credit Agreement and in Article V of the Facility B Agreement, as amended hereby, and in the other Loan Documents shall be true and correct on and as of the date of this First Amendment with the same force and effect as if such representations and warranties had been made on and as of such date, except to the extent such representations and warranties speak to a specific date.
(ii) All of the representations and warranties contained in Article V of this First Amendment shall be true and correct, both before and after giving effect to this First Amendment.
3.2 Effectiveness. Upon satisfaction of the conditions precedent in Section 3.1, this First Amendment shall be effective as of date hereof.
First Amendment to Revolving Facility B Agreement – Page 2 |
ARTICLE IV
Ratification and Acknowledgement
4.1 Ratification. The terms and provisions set forth in this First Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Facility B Agreement and except as expressly modified and superseded by this First Amendment, the terms and provisions of the Facility B Agreement, the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Borrower agrees that the Facility B Agreement, as amended hereby, the Credit Agreement and the other Loan Documents to which it is a party or subject shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.
ARTICLE V
Representations and Warranties
5.1 Loan Documents. Borrower hereby represents and warrants to Lender that (a) the execution, delivery and performance of this First Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action on the part of Borrower and will not violate any organization or governance document of Borrower or any agreement to which Borrower is a party or its property is subject, (b) this First Amendment constitutes a valid and legally binding agreement enforceable against Borrower, (c) the representations and warranties contained in the Facility B Agreement, as amended hereby, and in the Credit Agreement made by or as to Borrower, AHIC and HIC and in each other Loan Document are true and correct on and as of the date hereof (both before and immediately after giving effect to this First Amendment), as though made on and as of the date hereof, except to the extent such representations and warranties speak to a specific date, and (d) no Default or Event of Default exists prior to giving effect to this First Amendment or will exist immediately after giving effect to this First Amendment.
ARTICLE VI
Miscellaneous
6.1 Reference to Facility B Agreement. Each of the Loan Documents, including the Facility B Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Facility B Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Facility B Agreement shall mean a reference to the Facility B Agreement as amended hereby. This First Amendment is a Loan Document.
6.2 Severability. The provisions of this First Amendment are intended to be severable. If for any reason any provision of this First Amendment shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
6.3 Counterparts. This First Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this First Amendment by signing any such counterpart.
First Amendment to Revolving Facility B Agreement – Page 3 |
6.4 GOVERNING LAW. THIS FIRST AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE LOAN DOCUMENTS ARE PERFORMABLE IN SAN ANTONIO, BEXAR COUNTY, TEXAS, AND BORROWER WAIVES THE RIGHT TO BE SUED ELSEWHERE. BORROWER AND LENDER AGREE THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN SAN ANTONIO, TEXAS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS FIRST AMENDMENT AND THE OTHER LOAN DOCUMENTS.
6.5 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS FIRST AMENDMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS FIRST AMENDMENT AND EXTENDING THE REVOLVING LOAN MATURITY DATE.
6.6 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
| The Remainder of This Page Is Intentionally Left Blank. |
First Amendment to Revolving Facility B Agreement – Page 4 |
Executed as of the date first written above.
| BORROWER: | HALLMARK FINANCIAL SERVICES, INC., | |
| a Nevada corporation | ||
| By: | ||
| Print Name: | ||
| Print Title: | ||
First Amendment to Revolving Facility B Agreement (Hallmark) – Signature Page |
| LENDER: | FROST BANK, a Texas state bank | |
| By: | ||
| Print Name: | ||
| Print Title: | ||
First Amendment to Revolving Facility B Agreement (Hallmark) – Signature Page |
EXHIBIT A
Facility B Note
First Amendment to Revolving Facility B Agreement – Exhibit A