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


 


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


 


ARTICLE II



Amendments to Credit Agreement


 


2.1              
Amendment 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


 


3.1              
Conditions. 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.


 






    	 	2	 



     


    

 


ARTICLE IV



Ratification


 


4.1              
Ratification. 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


 


5.1              
Representations 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


 


6.1              
Reference 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.


 


6.2              
Severability. 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.


 


6.3              
Counterparts. 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.


 






    	 	3	 



     


    

 


6.4              
GOVERNING 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.


 


6.5              
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.



 






    	 	4	 



     


    

 


 


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