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): December 12, 2005
HALLMARK FINANCIAL SERVICES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
0-16090 87-0447375
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(Commission File Number) (IRS Employer Identification No.)
777 Main Street, Suite 1000, Fort Worth, Texas 76102
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(Address of Principal Executive Offices) (Zip Code)
817-348-1600
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(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):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] 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 December 12, 2005, Hallmark Financial Services, Inc. (the "Company")
executed a definitive agreement (the "Purchase Agreement") with Donnell
Children Revocable Trust and Curtis R. Donnell (collectively, the "Seller")
with respect to the Company's acquisition of all of the issued and
outstanding membership interests in Aerospace Holdings, LLC ("Aerospace"), a
Texas limited liability company. Aerospace, through various wholly-owned
subsidiaries, markets and services general aviation property and casualty
insurance products, with a particular emphasis on private and small
commercial aircraft. Prior to execution of the Purchase Agreement, there
was no material relationship between the Seller and the Company or any of
its affiliates.
Pursuant to the Purchase Agreement, the Company will acquire Aerospace
for an aggregate consideration of up to $15,000,000, consisting of
unconditional consideration of $12,500,000 and contingent consideration of
up to $2,500,000. The unconditional consideration is payable in cash at
closing, and is allocated $11,875,000 to the purchase price and $625,000 to
the Seller's compliance with certain restrictive covenants, including a
covenant not to compete for a period of five years after closing. The
payment of any contingent consideration is conditioned on the Seller
complying with its restrictive covenants and Aerospace achieving certain
operational objectives related to premium production and loss ratios. The
contingent consideration, if any, will be payable in cash on or before March
30, 2009, unless the Seller elects to defer a portion of the payment in
order to permit further development of the loss ratios.
Pursuant to the Purchase Agreement, the Company's acquisition of
Aerospace will be effective as of January 1, 2006. The Purchase Agreement
provides for closing of the transaction on the first business day following
the satisfaction of all closing conditions. The closing conditions include,
among other things, the execution of an employment agreement between
Aerospace and Curtis R. Donnell in substantially the form attached to the
Purchase Agreement and obtaining consent to the transaction from various
third parties with whom Aerospace has contractual arrangements. The
Purchase Agreement may be terminated by either the Company or the Seller if
all closing conditions have not been satisfied or waived by March 30, 2006.
The parties presently contemplate that the closing will occur on or about
January 3, 2006.
The description of the Purchase Agreement set forth above 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.
Exhibit 4.1 Purchase Agreement dated December 12, 2005, by and among
Hallmark Financial Services, Inc. and Donnell Children
Revocable Trust and Curtis R. Donnell.
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: December 13, 2005 By: /s/ Mark J. Morrison
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Mark J. Morrison, Chief Operating Officer