8-K

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):      March 15, 2018         

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 1.01 Entry into a Material Definitive Agreement

On March 15, 2018, Hallmark Financial Services, Inc. (“Hallmark” and, collectively with its subsidiaries, the “Company”) entered into a Third Amendment to Second Restated Credit Agreement with Frost Bank (“Frost”). The Third Amendment to Second Restated Credit Agreement revised certain definitions in the Second Restated Credit Agreement originally dated as of June 30, 2015, with Frost.

The foregoing description of the Third Amendment to Second Restated Credit Agreement is qualified in its entirety by reference to the definitive agreement filed as exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by this reference.

Item 9.01 Financial Statements and Exhibits

(d)       Exhibits.

10.1 Third Amendment to Second Restated Credit Agreement between Hallmark Financial Services, Inc. and Frost Bank dated March 15, 2018.

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: March 15, 2018	By:	/s/ Jeffrey R. Passmore
		Jeffrey R. Passmore, Chief Accounting Officer

EX-10.1

Exhibit 10.1

Third Amendment
to
Second Restated Credit Agreement

This THIRD AMENDMENT TO SECOND RESTATED CREDIT AGREEMENT (this “Third Amendment”), dated as of March 15, 2018, is among HALLMARK FINANCIAL SERVICES, INC., a Nevada corporation (“Borrower”), American Hallmark Insurance Company of Texas, a Texas insurance corporation (“AHIC”), HALLMARK INSURANCE COMPANY, an Arizona insurance corporation (“HIC”) (hereinafter, HIC and AHIC collectively referred to as “L/C RIC”), and FROST BANK, a Texas state bank (“Lender”).

RECITALS:

Borrower, AHIC, HIC, and Lender have previously entered into (i) the Second Restated Credit Agreement dated as of June 30, 2015 (such agreement, together with all amendments and restatements thereto, the “Credit Agreement”) and (ii) the Revolving Facility B Agreement dated as of December 17, 2015, as amended.

Borrower has requested an amendment to the Credit Agreement.

Lender has agreed to amend the Credit Agreement, subject to the terms of this Third Amendment.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

Definitions

1.1Definitions. All capitalized terms not otherwise defined herein have the same meanings as in the Credit Agreement.

ARTICLE II

Amendments to Credit Agreement

2.1Amendment to Credit Agreement Section 1.1. The definition of “Combined Ratio” is deleted and the following is substituted in lieu thereof:

“Combined Ratio” means the net combined ratio of Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (a) with respect to each fiscal quarter of Borrower ended on or before December 31, 2017, determined for the four fiscal quarter period ended on the date of determination, and (b) with respect to each fiscal quarter of Borrower ended on or after March 31, 2018, for the fiscal quarter ended on the date of determination, all determined in the same manner as used in the determination of the net combined ratio of Borrower and its consolidated Subsidiaries as stated in Borrower’s filed SEC Form 10-Q for the fiscal quarter ended on March 31, 2015.

ARTICLE III

Conditions Precedent

3.1Conditions. The effectiveness of this Third Amendment is subject to the satisfaction of the following conditions precedent:

(a)Documents. Lender shall have received the following in number of counterparts and copies as Lender may request:

(i)Third Amendment. This Third Amendment executed by Borrower, each L/C RIC and Lender.

(ii)Obligor Proceedings. Evidence that all corporate, limited liability company and partnership proceedings of each Obligor and each other Person (other than Lender) taken in connection with the transactions contemplated by this Third Amendment and the other Loan Documents shall be reasonably satisfactory in form and substance to Lender; and Lender shall have received copies of all documents or other evidence which Lender may reasonably request in connection with such transactions.

(iii)Other Documents. In form and substance satisfactory to Lender, such other documents, instruments and certificates as Lender may reasonably require in connection with the transactions contemplated hereby.

(b)No Default. No Default or Event of Default shall exist either before giving effect to this Third Amendment or after giving effect to this Third Amendment.

(c)Expenses. Reimbursement for reasonable Attorney Costs incurred through the date hereof.

(d)Amendment Fee. Lender shall have received an amendment fee in the amount of $5,000.00, which fee shall be fully earned and non-refundable upon receipt (subject to Credit Agreement Section 10.11).

(e)Representations and Warranties.

(i)All of the representations and warranties contained in Article VIII of the Credit Agreement, as amended hereby, and in the other Loan Documents shall be true and correct on and as of the date of this Third 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 hereof shall be true and correct on and as of the date hereof.

(f)Effectiveness. Upon satisfaction of all conditions precedent in Section 3.1 hereof, this Third Amendment shall be effective as of March 15, 2018.

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ARTICLE IV

Ratification

4.1Ratification. The terms and provisions set forth in this Third Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Third Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Each Obligor (a) agrees that the Credit Agreement, as amended hereby, 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 and (b) ratifies and affirms its obligations under each Loan Document to which it is a party.

ARTICLE V

Representations and Warranties

5.1Representations and Warranties of All Obligors. Each Obligor hereby represents and warrants to Lender that (a) the execution, delivery and performance of this Third 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 such Obligor and will not violate any organizational document of such Obligor, (b) the representations and warranties contained in the Credit Agreement, as amended hereby, and each other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof (after giving effect to this Third Amendment), except to the extent such representations and warranties speak to a specific date, (c) no Default or Event of Default exists either before giving effect to this Third Amendment or shall exist after giving effect to this Third Amendment, and (d) such Obligor is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and the other Loan Documents to which it is a party or it or its property is subject.

ARTICLE VI

Miscellaneous

6.1Reference to Credit Agreement. Each of the Loan Documents, including the Credit 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 Credit Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby.

6.2Severability. The provisions of this Third Amendment are intended to be severable. If for any reason any provision of this Third 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.

6.3Counterparts. This Third 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 Third Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Third Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Third Amendment.

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6.4GOVERNING LAW. THIS THIRD 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, EACH L/C RIC AND LENDER WAIVE THE RIGHT TO BE SUED ELSEWHERE. BORROWER, EACH L/C RIC 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 THIRD AMENDMENT AND THE OTHER LOAN DOCUMENTS.

6.5ENTIRE 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.

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Executed as of the date first written above.

BORROWER:	HALLMARK FINANCIAL SERVICES, INC.,
	a Nevada corporation
	By:
		Jeffrey R. Passmore
		Senior Vice President
L/C RICs:	AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS, a Texas insurance corporation
	By:
		Jeffrey R. Passmore
		Chief Financial Officer
	HALLMARK INSURANCE COMPANY (formerly known as Phoenix Indemnity Insurance Company), an
	Arizona insurance corporation
	By:
		Jeffrey R. Passmore
		Chief Financial Officer

Third Amendment to Second Restated Credit Agreement - Signature Page

LENDER:	FROST BANK, a Texas state bank
	By:	Jerry Colwell
		Senior Vice President

Third Amendment to Second Restated Credit Agreement - Signature Page