Exhibit 99.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
January 27, 2006, by and between HALLMARK FINANCIAL SERVICES, INC., a Nevada
corporation (the "COMPANY"), and NEWCASTLE SPECIAL OPPORTUNITY FUND I, L.P. a
Delaware limited partnership (the "INVESTOR").
R E C I T A L S :
WHEREAS, the Company has entered into that certain Purchase Agreement,
dated as of the date hereof (the "PURCHASE AGREEMENT"), with the Investor
pursuant to which the Company has agreed to issue and sell to the Investor a
convertible promissory note (the "NOTE");
WHEREAS, the Company has agreed to grant certain registration rights with
respect to the shares of the Company's Common Stock issuable upon conversion of
the Note;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used but not defined herein shall have the respective
meanings given to them in the Purchase Agreement.
As used herein, the following terms shall have the following respective
meanings:
1.1 "COMMISSION" shall mean the U.S. Securities and Exchange Commission or
any other successor federal agency at the time administering the Securities Act.
1.2 "COMMON STOCK" shall mean the Company's common stock, $0.03 par value
per share.
1.3 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.4 "HOLDERS" shall mean and include the Investor and any transferee
thereof who holds Registrable Securities of record.
1.5 "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration
effected by preparing and filing with the Commission a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
1.6 "REGISTRABLE SECURITIES" means any and all shares of Common Stock (i)
issued or issuable upon conversion of the Note and (ii) issued or issuable with
respect to the Common Stock referred to in clause (i) above upon any stock
split, stock dividend, recapitalization, reclassification, exchange or other
similar event. The term "Registrable Securities" shall exclude in all cases,
however, such shares of Common Stock (i) following their sale by a Holder to the
public pursuant to a registered offering or pursuant to Rule 144 or (ii) sold in
a private transaction in which the Holder's registration rights under this
Agreement are not assigned.
1.7 "REGISTRATION EXPENSES" shall mean all reasonable and customary
expenses incurred by the Company in complying with Articles 2, 3 and 5 hereof,
including, without limitation, all registration, qualification and Commission,
National Association of Securities Dealers, Inc., stock exchange and other
filing fees, printing expenses, duplication expenses relating to copies of any
registration statement or prospectus delivered to any Holders, escrow fees, fees
and disbursements of legal counsel for the Company, fees and disbursements of
the Company's accountants and blue sky fees and expenses.
1.8 "RULE 144" shall mean Rule 144 under the Securities Act or any other
similar rule or regulation then in effect.
1.9 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.10 "SELLING EXPENSES" shall mean all underwriting fees, discounts and
selling commissions applicable to the Registrable Securities registered on
behalf of the Holders and the fees and expenses of any special counsel engaged
by the Holders.
ARTICLE 2
REQUIRED REGISTRATION
2.1 REQUEST FOR REGISTRATION.
(a) At any time from and after the date hereof, the Investor may make a
written request to the Company to file a registration statement under the
Securities Act covering all or part of the Registrable Securities then held by
the Investor. No later than 30 days following its receipt of such written
request (the "DEMAND REGISTRATION FILING DATE"), the Company will prepare and
file with the Commission a registration statement under the Securities Act
covering all of the Registrable Securities requested to be included therein, and
the Company will use its reasonable best efforts to obtain the effectiveness of
such registration as soon as practicable as would permit or facilitate the
original issuance or subsequent resale and distribution of all of such
Registrable Securities. If, however, the Company shall furnish to the Investor a
certificate signed by the Chief Operating Officer of the Company prior to the
Demand Registration Filing Date stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be filed by
reason of a material pending transaction, then the Company shall have the right
to defer such filing for a period of not more than 60 days after the Demand
Registration Filing Date. Such registration statement shall contain (unless the
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Investor otherwise directs) substantially the "Plan of Distribution" attached
hereto as ANNEX A.
(b) The Company shall be obligated to effect only one registration
pursuant to this Section 2.1. If any registration is commenced pursuant to this
Section 2.1 and is not consummated for any reason whatsoever (a "FAILED
REGISTRATION"), such Failed Registration shall not be deemed to constitute a
registration under this Section 2.1 and the Investor shall retain its rights
pursuant to this Section 2.1. Any expenses in connection with a Failed
Registration shall be paid in accordance with Article 4 hereof.
2.2 SHELF REGISTRATION. Not later than the Shelf Registration Filing Date
(as defined below), the Company will prepare and file with the Commission a
registration statement under the Securities Act covering all of the Registrable
Securities then outstanding, and the Company will use its reasonable best
efforts to obtain the effectiveness of such registration as soon as practicable
as would permit or facilitate the original issuance or subsequent resale and
distribution of all of such Registrable Securities by the Holders. If, however,
the Company shall furnish to the Holders a certificate signed by the Chief
Operating Officer of the Company within 30 days of the Shelf Registration Filing
Date stating that, in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed by reason of a material pending
transaction, then the Company shall have the right to defer such filing for a
period of not more than sixty 60 days after the Shelf Registration Filing Date.
Such registration statement shall contain (unless the Holders otherwise direct)
substantially the "Plan of Distribution" attached hereto as ANNEX A. "SHELF
REGISTRATION FILING DATE" shall mean the third anniversary of the date hereof,
provided that the Company's market capitalization on such date is greater than
$300 million; provided, however, that if the Company's market capitalization on
such date is less than or equal to $300 million, then the Shelf Registration
Filing Date shall be 30 days following the first date thereafter (the "MARKET
CAPITALIZATION THRESHOLD DATE") that the Company's market capitalization exceeds
$300 million, and the Company shall give the Investor prompt written notice of
the occurrence of the Market Capitalization Threshold Date.
2.3 UNDERWRITING.
(a) The resale distribution of the Registrable Securities covered by the
registration statements referred to in Section 2.1 and 2.2 above shall be
effected by means of the method of distribution selected by the Holders holding
a majority in interest of the Registrable Securities. The Holders holding a
majority in interest of the Registrable Securities may also change the resale
distribution method from time to time (subject to amendment of the registration
statement at the expense of the Holders as required to describe such changes).
If such distribution is effected by means of an underwriting, the right of any
Holder to registration pursuant to this Article 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
(b) If such distribution is effected by means of an underwriting, the
Company (together with all Holders proposing to distribute their securities
through such underwriting) shall enter into an underwriting agreement in
customary form with a managing underwriter of nationally recognized standing
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selected for such underwriting by the Company and approved by a majority in
interest of the Holders, which approval shall not be unreasonably withheld;
provided, however, that the liability of each Holder shall be limited to an
amount equal to the net proceeds from the offering received by such Holder.
(c) Notwithstanding any other provision of this Article 2, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the Company shall so advise all Holders of
Registrable Securities, and the number of shares of Registrable Securities to be
included in the underwriting shall be allocated among the Holders of Registrable
Securities that have elected to participate in such underwritten offering pro
rata according to the number of Registrable Securities held by each Holder.
Without the consent of a majority in interest of the Holders, no securities
other than Registrable Securities shall be covered by such registration.
(d) If any Holder disapproves of the terms of the underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the other Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration.
ARTICLE 3
COMPANY REGISTRATION
3.1 NOTICE OF REGISTRATION TO INVESTOR. If at any time or from time to
time from and after the date hereof, the Company shall determine to register any
of its securities, either for its own account or the account of a security
holder or holders, other than (i) a registration relating solely to employee
benefit plans on Form S-8 (or any successor form), (ii) a registration on Form
S-4 (or any successor form), (iii) a registration on any form that does not
permit secondary sales or (iv) a registration relating solely to a rights
offering, the Company will:
(a) promptly give to the Investor written notice thereof; and
(b) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein, all of
the Registrable Securities specified in a written request, made within 15 days
after receipt of such written notice from the Company described in Section
3.1(a), by the Investor, but only to the extent that the original issuance or
resale distribution of such Registrable Securities is not already covered by an
effective registration statement under Article 2 above.
3.2 UNDERWRITING.
(a) If the registration of which the Company gives notice is for an
offering involving an underwriting, the Company shall so advise the Investor as
part of the written notice given pursuant to Section 3.1(a). In such event, the
right of the Investor to registration pursuant to this Article 3 shall be
conditioned upon the Investor's participation in such underwriting and the
inclusion of the Investor's Registrable Securities in the underwriting to the
extent provided herein. The Investor shall (together with the Company) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company; provided, however, that the
liability of the Investor shall be limited to an amount equal to the net
proceeds from the offering received by the Investor.
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(b) Notwithstanding any other provision of this Article 3, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the Company shall so advise the Investor, and the
number of shares of Common Stock to be included in such registration shall be
allocated as follows: (i) first, for the account of the Company, all shares of
Common Stock proposed to be sold by the Company; and (ii) second, for the
account of the Investor and any other shareholders of the Company participating
in such registration, the number of shares of Common Stock requested to be
included in the registration by the Investor and such other shareholders in
proportion, as nearly as practicable, to the respective number of shares that
are proposed to be offered and sold by the Investor and such other shareholders
at the time of filing the registration statement. No Registrable Securities or
other shares of Common Stock excluded from the underwriting in this Article 3 by
reason of the underwriters' marketing limitation shall be included in such
registration.
(c) The Company shall so advise the Investor and the other shareholders
distributing their securities through such underwriting of any such limitation
and the number of shares that may be included in the registration. If the
Investor disapproves of the terms of any such underwriting, the Investor may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 3 prior to the effectiveness of
such registration, whether or not the Investor has elected to include
Registrable Securities in such registration.
ARTICLE 4
EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Articles 2, 3 and 5 hereof and the
reasonable fees of one counsel for the Holders of Registrable Securities in the
case of a registration pursuant to Article 2 hereof (up to $5,000) shall be
borne by the Company. All Selling Expenses relating to Registrable Securities
registered on behalf of a Holder shall be borne by such Holder.
ARTICLE 5
REGISTRATION PROCEDURES
(a) In the case of each registration effected by the Company pursuant to
this Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. The Company
agrees to use its reasonable best efforts to effect or cause such registration
to permit the sale of the Registrable Securities covered thereby by the Holders
thereof in accordance with the intended method or methods of distribution
thereof described in such registration statement. In connection with any
registration of any Registrable Securities, the Company shall:
(i) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement filed to
become effective;
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(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness
of such registration statement pursuant to the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such registration statement (provided, however, that the
Company shall not be obliged to maintain the effectiveness of such
registration statement longer than through the earlier of (A) two
years following the effective date of such registration statement and
(B) such time as all Registrable Securities registered thereunder have
been sold pursuant to such registration statement), and furnish to the
Holders of the Registrable Securities covered thereby copies of any
such supplement or amendment prior to its use and/or filing with the
Commission;
(iii) permit one legal counsel for the Holders of Registrable
Securities to be included in a registration statement to review and
comment upon a registration statement, and all amendments and
supplements thereto, within a reasonable amount of time prior to its
filing with the Commission, and not file any registration statement,
or amendment or supplement thereto, in a form to which such legal
counsel reasonably and timely objects. The Company shall furnish to
such legal counsel, without charge, copies of any correspondence from
the Commission to the Company or its representatives relating to any
registration statement;
(iv) promptly notify the Holders of Registrable Securities to
be included in a registration statement hereunder, the sales or
placement agent, if any, therefor and the managing underwriter of the
securities being sold, and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has
been filed and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of
the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of any
proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (D) of
any request by the Commission for any amendment or supplement to a
registration statement or related prospectus or related information or
(E) if, at any time when a prospectus is required to be delivered
under the Securities Act, such registration statement or prospectus,
or any document incorporated by reference in any of the foregoing,
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing. In the case of clause (E), the Company shall promptly
prepare a supplement or amendment to such registration statement to
correct such untrue statement or omission;
(v) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration
statement or any post-effective amendment thereto or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Securities included in
such registration statement for sale in any jurisdiction at the
earliest practicable date;
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(vi) furnish to each Holder of Registrable Securities to be
included in such registration statement hereunder, each placement or
sales agent, if any, therefor and each underwriter, if any, thereof,
without charge, a conformed copy of such registration statement and
any amendment and supplement thereto (in each case including all
exhibits and documents incorporated by reference) and such number of
copies of the prospectus included in such registration statement
(including each preliminary prospectus, any summary prospectus and any
free writing prospectus), and any amendment or supplement thereto, as
such Holder, agent, if any, and underwriter, if any, may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Holder, sold by such agent or underwritten by
such underwriter and to permit such Holder, agent and underwriter to
satisfy the prospectus delivery requirements of the Securities Act;
(vii) use its reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in such registration
statement under such other securities laws or blue sky laws of such
states of the United States or the District of Columbia as may be
reasonably requested by the Holders of a majority of such Registrable
Securities participating in such registration, each placement or sales
agent, if any, therefor or the managing underwriter, if any, thereof,
(B) keep such registrations or qualifications in effect and comply
with such laws at all times during the period described in Section
5(a)(ii) above, and (C) take any and all such actions as may be
reasonably necessary to enable such Holder, agent, if any, and
underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
in order to fulfill the foregoing obligations under this Section
5(a)(vii), the Company shall not (unless otherwise required to do so
in any jurisdiction) be required to (1) qualify generally to do
business as a foreign company or a broker-dealer, (2) execute a
general consent to service of process or (3) subject itself to
taxation;
(viii) furnish, at the request of the Holders of a majority of
such Registrable Securities participating in such registration, on the
date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such
date, of counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders, addressed to
the underwriters, if any, and to such Holders and (ii) a letter, dated
as of such date, from the independent certified public accountants of
the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders, addressed to the underwriters, if any,
and, if permitted by applicable accounting standards, to such Holders;
and
(ix) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission in connection
with any registration hereunder.
(b) The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish in writing to the Company
such information regarding such Holder and such Holder's method of distribution
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of such Registrable Securities as the Company may from time to time reasonably
request. Each such Holder agrees to notify the Company as promptly as
practicable of any inaccuracy or change in information previously furnished by
such Holder to the Company or of the occurrence of any event as a result of
which any prospectus relating to such registration contains an untrue statement
of a material fact regarding such Holder or the distribution of such Registrable
Securities or omits to state any material fact regarding such Holder or the
distribution of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such Holder or the distribution of such Registrable Securities, an untrue
statement or a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(c) Each of the Holders will comply with the provisions of the Securities
Act with respect to disposition of the Registrable Securities to be included in
any registration statement filed by the Company.
ARTICLE 6
INDEMNIFICATION
6.1 The Company will indemnify each Holder, each of its officers,
directors and partners, such Holder's legal counsel and independent accountants,
if any, each person controlling such Holder within the meaning of Section 15 of
the Securities Act, each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement or prospectus, or any amendment or supplement thereto, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction by the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers, directors and partners, such Holder's legal counsel and
independent accountants, each person controlling such Holder, each such
underwriter and each person who controls any such underwriter for any legal and
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such expense, claim, loss, damage, liability or action arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by such Holder expressly for use in such registration
statement or prospectus, or any amendment or supplement thereto.
6.2 Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, severally indemnify the Company, each of its
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directors and officers, its legal counsel and independent accountants, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers, directors, partners, legal counsel and independent accountants, if
any, and each person controlling such Holder within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement or prospectus, or any
amendment or supplement thereto, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, legal counsel, independent accountants,
underwriters and control persons for any legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
such registration statement or prospectus, or any amendment or supplement
thereto; provided, however, that the obligations of each Holder hereunder shall
be limited to an amount equal to the net proceeds to such Holder of Registrable
Securities sold pursuant to such registration statement.
6.3 Each party entitled to indemnification under this Article 6 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall bear the expense
of such defense of the Indemnified Party if representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is materially prejudicial to the ability of the
Indemnifying Party to defend the action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
6.4 If the indemnification provided for in Section 6.1 or 6.2 is
unavailable or insufficient to hold harmless an Indemnified Party, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the expenses, claims, losses, damages or
liabilities (or actions or proceedings in respect thereof) referred to in
Section 6.1 or 6.2, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Holders of Registrable Securities
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on the other hand in connection with statements or omissions which resulted in
such expenses, claims, losses, damages or liabilities (or actions or proceedings
in respect thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Holders of Registrable Securities and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Holders agree that it
would not be just and equitable if contributions pursuant to this Section 6.4
were to be determined by pro rata allocation (even if all Holders of Registrable
Securities were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this Section 6.4. The amount paid by an
Indemnified Party as a result of the expenses, claims, losses, damages or
liabilities (or actions or proceedings in respect thereof) referred to in the
first sentence of this Section 6.4 shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any claim, action or proceeding which is the subject
of this Section 6.4. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of Holders of Registrable Securities to
contribute pursuant to this Section 6.4 shall be several in proportion to the
respective amount of Registrable Securities sold by them pursuant to a
registration statement, and shall be limited to an amount equal to the net
proceeds to each such Holder of Registrable Securities sold pursuant to such
registration statement.
ARTICLE 7
RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of securities
of the Company to the public without registration, the Company agrees to use its
reasonable best efforts to:
7.1 Make and keep public information regarding the Company available, as
those terms are understood and defined in Rule 144, at all times after the date
hereof; and
7.2 File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act.
ARTICLE 8
TRANSFER OF REGISTRATION RIGHTS
The rights to cause the Company to register Registrable Securities under
Section 2.2 of this Agreement, together with all related rights and obligations,
may be assigned by a Holder to any other person; provided, however, that (A) the
transferor shall furnish to the Company written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned prior to such transfer and (B) such
transferee shall agree in writing to be subject to all applicable restrictions
set forth in this Agreement. In each case, such rights may only be transferred
together with the underlying Registrable Securities in a transfer permitted by
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the Securities Act and applicable state securities laws. Any such permitted
transferee or assignee shall be deemed a Holder hereunder.
ARTICLE 9
LIMITATIONS ON REGISTRATION RIGHTS GRANTED TO OTHER SECURITIES
From and after the date of this Agreement, the Company shall not, without
the prior written consent of the Holders of a majority of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company providing for the grant to
such holder of registration rights superior to those granted herein.
ARTICLE 10
MISCELLANEOUS
10.1 GOVERNING LAW. The laws of the State of Texas shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
10.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties hereto and shall inure to the
benefit of and be binding upon each Holder of any Registrable Securities.
10.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
10.4 NOTICES. All notices, requests, consents and other communications
hereunder shall be made in writing and shall be deemed given (i) when made if
made by hand delivery, (ii) one business day after being deposited with an
overnight courier if made by courier guaranteeing overnight delivery, (iii) on
the date indicated on the notice of receipt if made by first-class mail, return
receipt requested or (iv) on the date of confirmation of receipt of transmission
by facsimile, addressed as follows:
(a) if to the Company, at
Hallmark Financial Services, Inc.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
XxXxxxx, Xxxxxxxx & Xxxxxxxx, P.C.
0000 Xxxxxxx Xxxxx
000 X. Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
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Attention: Xxxxxx X. Xxxxxxxx, Esq.
(b) if to the Investor, in care of:
Newcastle Partners, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
(c) if to a Holder, to the address reflected on the records of the
Company, or such other address or addresses as shall have been furnished in
writing by such party to the Company and to the other parties to this Agreement.
10.5 SEVERABILITY. The invalidity, illegality or unenforceability of one or
more of the provisions of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
10.6 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
10.8 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented in any respect only by written agreement by the Company and Holders
representing at least a majority of the Registrable Securities, voting together
as a single class; provided, that no such amendment shall unfairly discriminate
against a particular Holder relative to the other Holders. Any action taken by
the Holders, as provided in this Section 10.8, shall bind all Holders.
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IN WITNESS WHEREOF, the undersigned have hereunto affixed their signatures.
NEWCASTLE SPECIAL OPPORTUNITY
FUND I, L.P.
HALLMARK FINANCIAL SERVICES, INC. BY: NEWCASTLE CAPITAL MANAGEMENT,
L.P., ITS GENERAL PARTNER
By By
------------------------------- -------------------------------
Its Its
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ANNEX A
PLAN OF DISTRIBUTION
We are registering the shares offered by this prospectus on behalf of the
selling shareholders. The selling shareholders, which as used herein includes
donees, pledgees, transferees or other successors-in-interest selling shares of
common stock or interests in shares of common stock received after the date of
this prospectus from a selling shareholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale or at negotiated prices.
The selling shareholders may use any one or more of the following methods
when disposing of shares or interests therein:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling
shareholders to include the pledgee, transferee or other successors in interest
as selling shareholders under this prospectus. The selling shareholders also may
transfer the shares of common stock in other circumstances, in which case the
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transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling shareholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling shareholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
The selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that rule.
The selling shareholders and any broker-dealers that act in connection with
the sale of securities might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the securities sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act.
To the extent required, the shares of our common stock to be sold, the
names of the selling shareholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement that includes this
prospectus.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
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We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling shareholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling shareholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the selling shareholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.
We have agreed with the selling shareholders to keep the registration
statement that includes this prospectus effective until the earlier of (1) two
years following the effective date of the registration statement and (2) such
time as all shares of common stock covered by this prospectus have been sold
pursuant to this prospectus.
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