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): August 13, 2014

 

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):

 

¨ 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

On August 13, 2014, the Board of Directors of Hallmark Financial Services, Inc. (the “Company”) appointed Naveen Anand to serve as President and Chief Executive Officer of the Company commencing September 8, 2014. Mr. Anand, age 47, has over 25 years of experience in the property/casualty insurance industry. Most recently, Mr. Anand was an executive with Torus Insurance Holdings Limited from 2009 to 2013, serving first as the Global Chief Operating Officer for Torus Group before being promoted to Chief Executive Officer of Torus Americas. Previously, Mr. Anand was employed by CNA Financial Corporation where he served as Vice President from 2002 to 2005, as Senior Vice President and President of the Central Region from 2005 to 2006, as Senior Vice President and President and Chief Underwriting Officer for Commercial Insurance from 2006 to 2009, and as Chairman and President of CNA Claim Plus from 2008 to 2009. From 1988 to 2002, he was employed by Chubb Group of Insurance Companies where he began in the commercial underwriting department, was promoted to Regional Underwriting Manager in 1993, became Assistant Vice President for Commercial Lines in 1995, and rose to Vice President for Commercial Lines, New York Zone, in 1998. Mr. Anand began his insurance career in 1987 as trainee underwriter with St. Paul Insurance Companies.

 

Mr. Anand has no family relationship with any director or other executive officer of the Company. There are no transactions in which Mr. Anand has an interest requiring disclosure under Item 404(a) of Regulation S-K.

 

The Company has entered into an employment letter with Mr. Anand (the “Employment Letter”) confirming his at-will employment as President and Chief Executive Officer of the Company.  The Employment Letter provides for a starting annual base salary of $500,000 and a discretionary annualized bonus targeted at 60%, with a maximum of 100%, of base salary. The Company will also reimburse Mr. Anand for certain relocation expenses. Mr. Anand will be eligible to participate in the Company’s 2005 Long Term Incentive Plan (the “2005 LTIP”) and be entitled to all other benefits offered by the Company to its employees.  Under the 2005 LTIP, and subject to Board or Compensation Committee approval, Mr. Anand is expected to be granted restricted stock units in an amount equal to his base salary divided by the grant date price per share of the Company’s common stock. Restricted stock units represent the right to receive shares of the Company’s common stock upon satisfaction of vesting requirements and performance criteria. Mr. Anand’s initial award is expected to vest on March 31, 2018, and be subject to performance criteria based on the compound average annual growth rate (“CAGR”) in book value per share of the Company from January 1, 2015 to December 31, 2017. He is expected to earn a percentage of a share of common stock per restricted stock unit, as follows: (i) CAGR less than 9% is expected to earn 0%; (ii) 9% CAGR is expected to earn 50%; (iii) 10% CAGR is expected to earn 67%; (iv) 11% CAGR is expected to earn 83%; (v) 12% CAGR is expected to earn 100%; (vi) 13% CAGR is expected to earn 117%; (vii) 14% CAGR is expected to earn 133%; and (viii) 15% or greater CAGR is expected to earn 150%. The foregoing description of the Employment Letter is qualified in its entirety by reference to the definitive document filed as an exhibit to this Current Report on Form 8-K and incorporated herein by this reference.

 

 
 

 

Upon the commencement of Mr. Anand’s tenure on September 8, 2014, the Company’s former President and Chief Executive Officer, Mark J. Morrison, will become a Senior Executive Vice President of the Company reporting directly to Mr. Anand.

 

Item 8.01 Other Events

 

The Company issued a press release on August 14, 2014, announcing Mr. Anand’s appointment as its President and Chief Executive Officer, a copy of which is attached as an exhibit hereto.

 

Item 9.01 Financial Statements and Exhibits

 

(c) Exhibits.

 

10.1 Letter agreement dated August 13, 2014, between Hallmark Financial Services, Inc. and Naveen Anand.

 

99.1 Press release dated August 14, 2014.

 

 
 

 

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: August 14, 2014 By: /s/ Jeffrey R. Passmore
  Jeffrey R. Passmore, Chief Accounting Officer

 

 

 

Exhibit 10.1

 

 

 

August 13, 2014

 

Mr. Naveen Anand

6 Mattben Drive

Warren, New Jersey 07059

 

Dear Naveen,

 

Hallmark Financial Services, Inc. (the “ Company ”) is pleased to offer you employment on the following terms:

 

1.                  Position . You will serve in a full-time capacity as President and Chief Executive Officer of the Company. You will report to the Executive Chairman and Board of Directors of the Company. Your primary duties will be the management of the insurance and business operations of the Company and its subsidiaries.

 

2.                  Starting date . September 8, 2014.

 

3.                  Salary . You will be paid a salary at the annual rate of $500,000.00, payable in accordance with the Company’s standard payroll practices for salaried employees. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from time to time.

 

4.                  Senior Management Bonus Plan . Subject to the approval of the Company’s Board of Directors or its Compensation Committee, your Senior Management Bonus Plan will have a target award level of 60 percent (60%) and a maximum award level of 100 percent (100%) of base salary.

 

5.                  Restricted Stock Units. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be awarded performance based Restricted Stock Units with a target level of 100 percent (100%) of base salary pursuant to the Company’s 2005 Long Term Incentive Plan.

 

6.                  Vacation; Benefits . While employed, you will be entitled to an annual paid vacation of twenty (20) business days. You will also be entitled to those benefits, if any, that the Company makes available to other similarly situated employees in accordance with the Company’s policies as they exist from time to time. The Company will pay the employee paid portion of medical benefits on your behalf.

 

7.                  Reimbursement of Expenses . You may incur necessary and reasonable business expenses in the course of rendering services to Company hereunder. Accordingly, the Company will reimburse you, upon presentation of receipts or other adequate documentation, for all necessary and reasonable business expenses incurred by you in the course of rendering services to Company hereunder.

 

8.                  Relocation Expenses . We will offer a relocation package to include:

 

 
 

 

 

a. Relocation bonus of $10,000 (net of applicable taxes) paid at time of the move for any miscellaneous expenses that may be incurred as a result of the move. Subject to (j) below, there will be no obligation to repay this bonus.
b. Two (2) house hunting trips (employee & spouse) with up to a five (5) day visit. Coach airfare will be arranged with a minimum of seven (7) day advance notice.
c. Reimbursement of real estate commission and closing costs on sale of primary residence (excluding buyer’s closing costs, warranties, etc.).
d. Pack/unpack, load and transport household goods.
e. Transport of three (3) vehicles: one (1) vehicle to be transported immediately, and two (2) vehicles to be transported at time of the move.
f. Twelve (12) months of temporary housing, with a maximum cost of $2,500 per month.
g. Reimbursement of bi-weekly airfare to New Jersey/New York for one hundred eighty (180) days.
h. Reimbursement of closing cost on purchase of home, excluding real estate commission typically paid by the buyer.
i. If loss on sale of existing home is greater than $50,000 the Company will reimburse you for fifty percent (50%) of the excess loss, up to a maximum of $100,000 reimbursement by Company (i.e., loss would have to be $250,000 to result in maximum reimbursement).
j. If you voluntarily leave the Company within twenty four (24) months, you will repay the Company for all relocations costs listed above incurred or reimbursed by the Company.

 

9.                  Policies and Procedures . You will be expected to comply with the Company’s personnel policies and procedures applicable to its employees during the time that you are employed by the Company.

 

10.              Proprietary Information and Inventions Agreement . Like all Company employees, you will be required, as a condition to your employment with the Company, to sign the Company’s standard Employee Proprietary Information and Inventions Agreement.

 

11.              Period of Employment . Your employment with the Company will be “at will,” meaning that either you or the Company will be entitled to terminate your employment at any time and for any reason, with or without cause. Any contrary representations which may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company.

 

12.              Outside Activities . While you render services to the Company, you will not engage in any other gainful employment, business or activity without the written consent of the Company.

 

13.              Withholding Taxes . All forms of compensation referred to in this letter are subject to applicable withholding and payroll taxes.

 

14.              Entire Agreement . This letter contains all of the terms of your employment with the Company and supersedes any prior understandings or agreements, whether oral or written, between you and the Company.

 

15.              Amendment and Governing Law . This letter agreement may not be amended or modified except by an express written agreement signed by you and a duly authorized officer of the Company. The terms of this letter agreement and the resolution of any disputes will be governed by Texas law without regard to the conflict of law principles.

 

 
 

 

 

 

We hope that you find the foregoing terms acceptable. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter and the enclosed Proprietary Information and Inventions Agreement and returning them to me. As required by law, your employment with the Company is also contingent upon your providing legal proof of your identity and authorization to work in the United States. This offer, if not accepted, will expire at the close of business on August 15, 2014.

 

We look forward to having you join us on September 8, 2014.

 

    Very truly yours,
     
    HALLMARK FINANCIAL SERVICES, INC.
       
    By:   /s/ MARK E. SCHWARZ
    Name:  Mark E. Schwarz  
    Title:  Executive Chairman  

 

I have read and accept this employment offer:

 

/s/ NAVEEN ANAND  
Naveen Anand  
   
Dated:  August 13, 2014  

 

 

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

HALLMARK FINANCIAL SERVICES, INC.

ANNOUNCES APPOINTMENT OF CHIEF EXECUTIVE OFFICER

 

FORT WORTH, Texas, (August 14, 2014) - Hallmark Financial Services, Inc. (NASDAQ: HALL) today announced the appointment of Naveen Anand as Chief Executive Officer. Mr. Anand will be based in Fort Worth, Texas, will assume responsibility for all of Hallmark’s business operations and will report directly to the Executive Chairman and the Board of Directors of Hallmark.

 

Mr. Anand has over 25 years of experience in the property/casualty insurance industry. He brings to Hallmark vast knowledge in a wide range of segments, lines of business and distribution channels in the insurance industry. His leadership will be directed towards building upon Hallmark’s specialty lines focus. In addition, his significant underwriting experience will be a natural fit with Hallmark’s underwriting-driven culture.

 

Mr. Anand joins Hallmark most recently from Torus Insurance Holdings Ltd. Mr. Anand joined Torus in 2009 as U.S. Chief Executive and Global Chief Operating Officer. In these roles, he oversaw the development of Torus’ global operating platform and functional capabilities, as well as the formation and development of Torus’ U.S. underwriting platforms, and was responsible for all Torus business lines and operations in North and South America. Under his leadership, Torus U.S. developed from a start-up stage in late 2009 to over $250 million in gross written premiums across six key specialty business lines.

 

Prior to joining Torus, Mr. Anand worked for CNA Financial Corporation where he was responsible for its $3 billion commercial insurance business across all geographies for 11 business units. Prior to CNA, Mr. Anand worked at both Chubb Corporation and at St. Paul Insurance Company.

 

Commenting on the appointment, Mark E. Schwarz, Executive Chairman of Hallmark, said, “We are fortunate to have someone with Naveen’s skills, experience and record of accomplishment assuming the Chief Executive Officer role at Hallmark. I am confident his leadership abilities will be a valuable addition to the Hallmark team and believe he will do a terrific job in furthering Hallmark’s continuing development into a larger and more valuable company.”

 

 
 

 

 

 

Mr. Anand said, “I’m excited to join Hallmark and thrilled about the prospects of continuing to build upon what has already been achieved by the team at Hallmark. I’m delighted that I can have a major influence in shaping the development of Hallmark into an important player in the specialty lines arena. I look forward to working with the team as well as our agents and brokers to continue to develop Hallmark into a leading specialty insurer.”

 

Hallmark also announced that Mark J. Morrison will remain with the Company in the role of Senior Executive Vice President, reporting to Mr. Anand. Mr. Schwarz added, “We appreciate Mr. Morrison’s leadership since joining Hallmark in 2004 and services as its Chief Executive Officer since 2006. Throughout his tenure with Hallmark, Mr. Morrison has played an instrumental role in the transformation of the Company. Under his leadership, Hallmark has developed into a diversified specialty property/casualty insurance company with compound annual growth in gross premiums written and book value per share since 2004 of 34% and 10%, respectively.”

 

About Hallmark Financial Services, Inc.

 

Hallmark Financial Services, Inc. is an insurance holding company which, through its subsidiaries, engages in the sale of property/casualty insurance products to businesses and individuals. Hallmark’s business involves marketing, distributing, underwriting and servicing commercial and personal lines of property/casualty insurance products, as well as providing other insurance related services. Hallmark is headquartered in Fort Worth, Texas and its common stock is listed on NASDAQ under the symbol "HALL."

 

Forward-looking statements in this release are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company’s products and services in the marketplace, competitive factors, interest rate trends, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

 

For further information, please contact:

Mark Morrison, at 817.348.1600

www.hallmarkgrp.com