HALLMARK FINANCIAL SERVICES, INC.
14651 Dallas Parkway, Suite 900
Dallas, Texas 75240
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1997
_______________________
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Hallmark Financial Services, Inc., a
Nevada corporation (the "Company"), to be voted at the 1997 Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, May 29, 1997, at
the time and place and for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders (the "Notice"), and at any adjournment(s)
thereof. When proxies in the accompanying form are properly executed and
received, the shares represented thereby will be voted at the Annual Meeting
in accordance with the directions noted thereon. If no direction is indicated
on the proxy, the shares represented thereby will be voted for the election of
each of the nominees for director, in favor of the other proposals set forth
in the Notice and in the discretion of the proxy holder on any other matter
that may properly come before the meeting.
Submitting a proxy will not affect a shareholder's right to vote in
person at the Annual Meeting. Any shareholder who gives a proxy may revoke it
at any time before it is exercised by delivering written notice of revocation
to the Company, by substituting a new proxy executed on a later date, or by
making a written request in person at the Annual Meeting that the proxy be
returned. However, mere attendance at the Annual Meeting will not of itself
revoke the proxy.
All expenses of preparing, assembling and mailing this Proxy Statement
and the enclosed materials and all costs of soliciting proxies will be paid by
the Company. In addition to solicitation by mail, proxies may be solicited by
officers and regular employees of the Company by telephone or in person. Such
officers and employees who solicit proxies will receive no compensation for
their services other than their regular salaries. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of shares they hold,
and the Company may reimburse them for reasonable out-of-pocket expenses they
incur in forwarding these materials.
The principal executive offices of the Company are located at 14651
Dallas Parkway, Suite 900, Dallas, Texas 75240. The Company's mailing address
is the same as that of its principal executive offices.
This Proxy Statement and the accompanying form of proxy are first being
mailed or given to shareholders on or about April 25, 1997. A copy of the
Company's Annual Report for the fiscal year ended December 31, 1996, is
<PAGE>
enclosed herewith, but constitutes no part of the materials used for the
solicitation of proxies.
PURPOSES OF THE MEETING
At the Annual Meeting, the shareholders of the Company will consider and
vote on the following matters:
1. Election of ten directors to serve until the next Annual Meeting
of Shareholders or until their successors are duly elected and qualified;
2. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
QUORUM AND VOTING
The record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting was the close of business on April 14,
1997 (the "Record Date"). On the Record Date, there were 10,662,277 shares of
Common Stock of the Company, par value $0.03 per share (the "Common Stock"),
issued and outstanding, each of which is entitled to one vote on all matters
to be acted upon at the Annual Meeting. There are no cumulative voting
rights. The presence, in person or by proxy, of holders of one-third of the
outstanding shares of Common Stock entitled to vote at the meeting is
necessary to constitute a quorum to transact business. Assuming the presence
of a quorum, directors will be elected by a plurality of the votes cast. The
affirmative vote of the holders of a majority of the shares of Common Stock
actually voted will be required for the approval of all other matters to come
before the Annual Meeting.
Abstentions and broker non-votes will be counted solely for purposes of
determining whether a quorum is present at the Annual Meeting. Pursuant to
the Bylaws of the Company, abstentions and broker non-votes will not be
counted in determining the number of shares voted on any matter and will have
no effect on the election of directors or the approval of any proposal
submitted to a vote of the shareholders at the Annual Meeting.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table and the notes thereto set forth certain information
regarding the beneficial ownership of the Common Stock as of the Record Date,
by (I) each current director and nominee for director of the Company; (ii) all
executive officers and current directors of the Company as a group; and (iii)
each other person known to the Company to own beneficially more than five
percent of the presently outstanding Common Stock. Unless otherwise
indicated, the persons identified in the table have sole voting and
dispositive power with respect to the shares shown as beneficially owned by
them. The mailing address for all directors and executive officers is the
same as that of the Company.
<PAGE>
<TABLE>
No. of Shares Percent of Class
Shareholder Beneficially Owned Beneficially Owned
<S> <C> <C>
Ramon D. Phillips (1) 810,466 7.3
Raymond A. Kilgore (2) 739,266 6.6
Linda H. Sleeper (3) 178,000 1.6
Jack R. Daugherty (4) 404,235 3.7
Kenneth H. Jones, Jr. (5) 709,500 6.6
Samuel W. Rizzo (6) 208,834 1.9
A. R. Dike (7) 91,000 0.8
James H. Graves (8) 147,500 1.4
George R. Manser (9) 98,200 0.9
C. Jeffrey Rogers (8) 95,000 0.9
All executive officers
and current directors,
as a group
(11 persons)(10) 3,633,001 28.8
Derby Trust PLC (11) 1,663,000 15.6
</TABLE>
___________________
(1) Includes 177,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date and 309,733 shares
which may be acquired upon exercise of a Common Stock Purchase Warrant.
(2) Includes 175,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date and 282,133 shares
which may be acquired upon exercise of a Common Stock Purchase Warrant.
(3) Includes 175,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date.
(4) Includes 95,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date and 107,567 shares
which may be acquired upon exercise of a Common Stock Purchase Warrant.
(5) Includes 77,500 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date and 16,000 shares which
may be acquired upon exercise of a Common Stock Purchase Warrant. Also
includes 600,000 shares held as trustee of trusts for the benefit of children
of Jack R. Daugherty, over which shares Mr. Jones disclaims beneficial
ownership.
(6) Includes 77,500 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date and 50,000 shares which
may be acquired upon exercise of a Common Stock Purchase Warrant. Also
includes 5,000 shares held by Mr. Rizzo's spouse, over which shares he
exercises no voting or dispositive authority, and 20,000 shares held by an
irrevocable trust, over which shares Mr. Rizzo shares voting and dispositive
authority. Mr. Rizzo disclaims beneficial ownership of all shares held by his
spouse and such trust.
(7) Includes 77,500 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date.
<PAGE>
(8) Includes 70,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date.
(9) Includes 70,000 shares which may be acquired pursuant to stock options
exercisable on or within 60 days after the Record Date. Also includes 8,400
shares held by Mr. Manser's spouse, over which shares Mr. Manser shares voting
and dispositive authority.
(10) Includes 1,959,933 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date or upon
exercise of Common Stock Purchase Warrants.
(11) The address for Derby Trust PLC is 1 Connaught Place, London W2 2DY,
United Kingdom.
ELECTION OF DIRECTORS
(Item 1)
The Company's Board of Directors for the ensuing year will consist of
ten directors who are to be elected for a term expiring at the 1998 annual
meeting of the Company's shareholders or when their successors are elected and
qualify. Directors will be elected by a plurality of the votes cast at the
Annual Meeting. Cumulative voting is not permitted in the election of
directors.
The Company's Board of Directors has proposed the election of the
following slate of nominees for election as directors at the Annual Meeting.
None of the nominees was selected on the basis of any special arrangement or
understanding with any other person. None of the nominees bears any family
relationship to any other nominee or to any executive officer of the Company.
In the absence of instructions to the contrary, shares represented by proxy
will be voted for the election of each nominee named below. Each nominee has
accepted nomination and agreed to serve if elected. If any nominee becomes
unable to serve before election, shares represented by proxy may be voted for
the election of a substitute nominee designated by the Board of Directors.
The Board of Directors recommends a vote FOR election of each nominee
below.
<TABLE>
Director
Name Age Since Current Position(s) w/Company
<S> <C> <C> <C>
Ramon D. Phillips 63 1989 President, Chief Executive
Officer, Director and Chairman
of the Board of Directors
Linda H. Sleeper 49 1996 Executive Vice President and
Chief Operating Officer
Raymond A. Kilgore 48 1988 Senior Vice President,
Secretary and Director
Jack R. Daugherty 49 1988 Director
Kenneth H. Jones, Jr. 62 1991 Director
Samuel W. Rizzo 61 1991 Director
A. R. Dike 61 1993 Director
James H. Graves 48 1995 Director
George R. Manser 65 1995 Director
C. Jeffrey Rogers 49 1995 Director
</TABLE>
<PAGE>
Ramon D. Phillips has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since May 1989. For 12
years before joining the Company, Mr. Phillips was an executive with Pizza
Inn, Inc., a restaurant chain, holding the positions of Vice President -
Finance (1977 - 1986), Executive Vice President (1986 - May 1989) and director
(1979 - May 1989). Mr. Phillips was again elected to Pizza Inn's board of
directors in August 1990 and continues to serve in that capacity.
Linda H. Sleeper joined the Company as Vice President of Corporate
Development and Administration in May 1993 and was promoted to Executive Vice
President and Chief Operating Officer in December 1994. From 1992 until May
1993, Ms. Sleeper was self-employed as a management consultant. From 1989
until 1992, she served as a Vice President for Audisys Corporation, a
financial consulting firm, and was Senior Assistant Treasurer of Southmark
Corporation from 1988 until 1989. Ms. Sleeper held various offices at Pizza
Inn, Inc. from 1979 until 1988, completing her tenure as Vice President of
Finance. Ms. Sleeper was an accountant with Peat, Marwick, Mitchell & Co.
from 1975 until 1979. She is a certified public accountant.
Raymond A. Kilgore has served as Senior Vice President of the Company
since December 1994. From February 1988 until December 1994, Mr. Kilgore
served as Vice President of the Company, and also served as interim Chief
Executive Officer from August 1988 until May 1989. From 1985 until February
1988, Mr. Kilgore was a Vice President of Cash America Investments, Inc. (now
known as Cash America International, Inc.) ("Cash America"), a publicly held
company operating pawn shops and jewelry stores.
Jack R. Daugherty founded Cash America in 1983 and has served as its
Chairman of the Board and Chief Executive Officer since that time.
Kenneth H. Jones, Jr. is a director and Vice-Chairman of KBK Capital
Corp., a publicly held corporation engaged in commercial finance, and has
served in such capacities since January 1995. For 25 years prior to January
1995, Mr. Jones was in the private practice of law as a member of the Fort
Worth, Texas firm of Decker, Jones, McMackin, McClane, Hall & Bates, P.C. or
its predecessors, and remains "of counsel" with such firm. Mr. Jones is also
a director of AmeriCredit Corp., a publicly held company engaged in automobile
finance.
Samuel W. Rizzo has served as a consultant to Service Corporation
International ("SCI"), a publicly held funeral services company, since 1990.
He served as Executive Vice President of SCI from 1990 until October 1995, as
Chief Financial Officer of SCI from 1990 until February 1995, and as Treasurer
of SCI from 1993 until February 1995. Mr. Rizzo served as Executive Assistant
to the Chairman of the Board of SCI from 1987 to 1990. He is also a director
of Cash America and Tanknology Environmental, Inc., a publicly held company
engaged in the environmental services business.
A. R. Dike has served as President and Chairman of Willis Corroon Life
Inc. of Texas, a multi-line insurance agency, since 1991. Mr. Dike served as
Chairman and Chief Executive Officer of The Insurance Alliance, Inc. from 1988
to 1991. He is also a director of Cash America.
James H. Graves is a Managing Director and Partner of J.C. Bradford &
Co., a Nashville based regional securities firm which provides investment
banking, underwriting and brokerage services. He serves on the firm's
Commitment Committee and jointly heads the Corporate Finance Department, which
provides general investment banking services for corporate clients. In this
<PAGE>
capacity, Mr. Graves has rendered advisory services to the Company. Prior to
joining J.C. Bradford & Co. in 1991, Mr. Graves had for 11 years been employed
by Dean Witter Reynolds, where he completed his tenure as the head of the
Special Industries Group in New York City.
George R. Manser is a director and Chairman of Uniglobe Travel (Capital
Cities), Inc., a master franchisee of Uniglobe Travel International, Inc.
which provides travel services through subfranchisees operating in 16 states
and the District of Columbia. Mr. Manser also presently serves as a director
of Cardinal Health, Inc., Check-Free Systems, Inc., AmerLink Corp. and State
Auto Financial Corp., and is an advisory director of J.C. Bradford & Co. From
1984 to 1994, Mr. Manser also served as a director and Chairman of North
American National Corporation and its subsidiaries, Pan-Western Life Insurance
Company, Brookings International Life Insurance Company and Howard Life
Insurance Company. During this period, he also served as the Chairman and a
director of National Masonic Provident Association and as a director of
DevelopMed Associates, Inc.
C. Jeffrey Rogers is Vice Chairman, President, Chief Executive Officer
and a director of Pizza Inn, Inc., which owns, franchises and supplies a chain
of pizza restaurants located in the United States and various foreign
countries. Prior to joining Pizza Inn, Inc. in 1989, Mr. Rogers was
President, Chief Executive Officer and a director of USA Cafes General
Partner, Inc., which owns and franchises the Bonanza Family Restaurant chain
of restaurants.
Board Committees and Meetings
Standing committees of the Board of Directors of the Company include the
Executive Committee, the Audit Committee, the Compensation Committee and the
Stock Option Committee. The Board of Directors has no nominating committee.
The Executive Committee is presently composed of Directors Phillips,
Sleeper, Kilgore, Daugherty, Graves, Manser and Rogers. Between meetings of
the Board of Directors, the Executive Committee has the full power and
authority of the Board in the management of the business and affairs of the
Company, except to the extent limited by statute and the Bylaws of the
Company. The Executive Committee meets periodically between meetings of the
Board of Directors and held seven such meetings during 1996.
The Audit Committee is presently composed of Messrs. Jones, Rizzo,
Graves and Manser. The Audit Committee consults with management regarding
reports and recommendations submitted by the Company's independent auditors,
reviews the independent auditors' billings, and makes recommendations to the
full Board with respect to the engagement or dismissal of independent
auditors. The Audit Committee met twice during 1996.
The Compensation Committee is composed of Messrs. Daugherty, Dike and
Rogers. At the direction of the full Board, this committee reviews and makes
recommendations with respect to compensation of the executive officers of the
Company. The Compensation Committee did not meet during 1996.
The Stock Option Committee is composed of Messrs. Daugherty, Dike and
Rogers. The Stock Option Committee administers the Company's 1991 Key
Employee Stock Option Plan and 1994 Key Employee Long Term Incentive Plan,
including the determination of participants therein and the grant of options
thereunder. The Stock Option Committee did not meet during 1996.
<PAGE>
The Board of Directors held four meetings during 1996. Each director
attended at least 75% of the aggregate of (I) the total number of meetings of
the Board of Directors and (ii) the total number of meetings held by all
committees of the Board on which such director served.
Director Compensation
The Company pays all directors a fee of $1,500 for each Board meeting
attended and a fee of $750 for each committee meeting attended. Pursuant to
an amendment to the 1994 Non-Employee Director Stock Option Plan approved by
the shareholders of the Company on May 21, 1996, each of the non-employee
directors was granted options to purchase an additional 50,000 shares of the
Common Stock. No other compensation was paid to any non-employee director
during 1996.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The Company's executive officers, directors and beneficial owners of
more than 10% of the Company's Common Stock are required to file reports of
ownership and changes of ownership of the Common Stock with the Securities and
Exchange Commission. Based solely upon information provided to the Company by
individual directors, executive officers and beneficial owners, the Company
believes that all such reports were timely filed during and with respect to
the fiscal year ended December 31, 1996, except that, each of the directors
other than Linda H. Sleeper filed late their Form 5 reporting the grant of
additional stock options and/or the extension of the exercisability of certain
warrants and, to the Company's knowledge, Derby Trust PLC did not file any
reports under Section 16(a).
EXECUTIVE OFFICERS AND COMPENSATION
Executive Officers
The following persons are the executive officers of the Company:
<TABLE>
Name Age Position(s) with the Company
<C> <C> <C>
Ramon D. Phillips 63 President, Chief Executive Officer,
Director and Chairman of the Board
of Directors
Linda H. Sleeper 49 Executive Vice President, Chief
Operating Officer and Director
Raymond A. Kilgore 48 Senior Vice President, Secretary
and Director
Johnny J. DePuma 59 Senior Vice President and Chief
Financial Officer
</TABLE>
No executive officer bears any family relationship to any other
executive officer or to any director or nominee for director of the Company.
Information concerning the business experience of Ramon D. Phillips, Linda H.
Sleeper and Raymond A. Kilgore is provided under Election of Directors.
Johnny J. DePuma joined the Company in August 1990 as Vice President and
Chief Financial Officer and was promoted to his present position in December
1994. For the 10 years prior to joining the Company, he was Vice President
<PAGE>
and chief financial officer of HiLite Industries, Inc., a manufacturer of
original equipment auto parts.
Summary Compensation Table
The following table sets forth certain information concerning
compensation of the Chief Executive Officer and certain other executive
officers of the Company (the "Named Executive Officers") for the last three
fiscal years. No other executive officer's salary and bonus totaled more than
$100,000 for fiscal 1996.
<TABLE>
Long Term
Annual Compensation Compensation
Other Securities
Year Annual Underlying All Other
Name and Princi- Ended Salary Bonus Compensation Options Compensation
pal Position Dec. 31 ($) ($) ($)* (#)** ($)***
<S> <C> <C> <C> <C> <C> <C>
Ramon D. Phillips 1996 200,000 100,000 15,744 -0- 26,975
President, Chief 1995 174,667 -0- 2,624 -0- 15,608
Executive Officer 1994 145,000 -0- 641 200,000 12,351
and Chairman of the
Board of Directors
Linda H. Sleeper 1996 130,000 70,000 744 -0- 6,750
Executive Vice 1995 107,083 -0- -0- -0- -0-
President and 1994 82,000 -0- -0- 125,000 -0-
Chief Operating
Officer
Raymond A. Kilgore 1996 90,500 40,000 561 -0- 11,250
Senior Vice 1995 90,500 -0- -0- -0- 8,000
President and 1994 82,000 -0- -0- 200,000 2,000
Secretary
Johnny J. DePuma 1996 100,000 40,000 620 -0- -0-
Senior Vice 1995 100,000 -0- -0- -0- -0-
President and 1994 90,500 -0- -0- 125,000 -0-
Chief Financial
Officer
</TABLE>
* Represents car allowance, premiums on long-term disability insurance and
the portion of premiums on a reverse split-dollar insurance policy on the life
of Ramon D. Phillips which are considered compensation to Mr. Phillips for
federal income tax purposes. See, Certain Transactions.
** Represents options to purchase shares of the Common Stock of the
Company. 1994 includes options previously granted to Messrs. Phillips,
Kilgore and DePuma to purchase 85,000, 75,000 and 25,000 shares, respectively,
which were repriced. Does not include certain warrants to purchase shares of
the Company's Common Stock issued in consideration of the agreement of Messrs.
Phillips, Kilgore and DePuma to pledge their respective shares of the Common
Stock to secure a line of credit for the Company. See, Certain Transactions.
*** Represents director fees and the incremental annual increase in the
accrued cash surrender value of a reverse split-dollar insurance policy on the
<PAGE>
life of Ramon D. Phillips which is payable to the estate of Mr. Phillips in
the event of his death. See, Election of Directors and Certain Transactions.
Option Grants in Last Fiscal Year
No stock options or stock appreciation rights were granted to the Named
Executive Officers during the fiscal year ended December 31, 1996.
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
Shown below is information with respect to the Named Executive Officers
regarding option exercises during the fiscal year ended December 31, 1996, and
the value of unexercised options held as of December 31, 1996.
<TABLE>
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options (#) Options ($) (1)
Acquired On Value
Name Exerc. (#) Received Exerc. Unexerc Exerc. Unexerc.
<C> <C> <C> <C> <C> <C> <C>
Ramon D. Phillips(2) -0- -0- 160,000 40,000 80,000 20,000
Linda H. Sleeper -0- -0- 175,000 25,000 87,500 12,500
Raymond A. Kilgore(2) -0- -0- 160,000 40,000 80,000 20,000
Johnny J. DePuma(2) -0- -0- 175,000 25,000 87,500 12,500
</TABLE>
___________________
1 Values stated are pre-tax and are based upon the closing price of $0.875
per share of the Common Stock on the American Stock Exchange Emerging Company
Marketplace on December 31, 1996, the last trading day of the fiscal year.
2 Does not include certain warrants to purchase shares of the Company's
Common Stock issued in consideration of the agreement of Messrs. Phillips,
Kilgore and DePuma to pledge their respective shares of the Common Stock to
secure a line of credit for the Company. See, Certain Transactions.
Executive Compensation Agreements
The Company has entered into an Executive Compensation Agreement with
each of Ramon D. Phillips, Raymond A. Kilgore, Linda H. Sleeper and Johnny J.
DePuma. Each agreement is for a two year term, which term is automatically
extended by an additional year on the first day of each calendar year unless
notice has previously been given to the executive that the agreement will not
be so renewed. The Executive Compensation Agreement with the Chief Executive
Officer specifies minimum levels of base salary and benefits and provides for
various performance bonuses. The agreement with each other executive officer
provides for compensation and bonus as determined by the Chief Executive
Officer, subject to review by the Board or the Compensation Committee. Each
agreement includes covenants of the executive to at all times maintain the
confidentiality of the Company's trade secrets and not to compete with the
Company during the term of employment and for two years thereafter.
Pursuant to these agreements, if the Company terminates the executive
without "cause" (as defined therein), or the executive resigns within six
<PAGE>
months after a "change of control" (as defined therein), the Company is
obligated to pay the executive a lump sum cash payment equal to two times
(three times in the case of the Chief Executive Officer) the sum of (a) the
executive's then current annual salary (but not less than the executive's
highest annual salary during the preceding three fiscal years), plus (b) the
highest amount of bonus and other cash compensation received by the executive
during any one of the three preceding fiscal years. In addition, all
incentive stock options granted under the Company's 1991 Key Employee Stock
Option Plan and 1994 Key Employee Long Term Incentive Plan provide for
accelerated vesting in the event of a change of control of the Company.
CERTAIN TRANSACTIONS
Guaranty Warrants
In October 1992, the Company issued to its executive officers and
directors warrants (the "Guaranty Warrants") to purchase shares of its Common
Stock in consideration for the recipients' agreement to pledge shares of the
Company's Common Stock owned by them to secure a working capital line of
credit from a commercial bank. The bank advised management that the pledges
were necessary in view of regulatory restrictions on the Company's ability to
grant security interests in the stock or assets of its insurance subsidiary.
The Guaranty Warrants were originally exercisable between October 2,
1992 and October 1, 1994. In March 1994, the Board of Directors extended the
exercisability of the Guaranty Warrants through October 1, 1996. In March
1996, the Board of Directors again extended the exercisability of the Guaranty
Warrants through October 1, 1998, at which time they will expire to the extent
not exercised. The exercise price of each Guaranty Warrant is $0.50 per
share, an amount equal to the last reported sale price of the Common Stock on
the American Stock Exchange Emerging Company Marketplace prior to October 2,
1992. The Guaranty Warrants are not transferrable, except to the estate of a
deceased recipient.
The following table indicates the current executive officers and
directors holding Guaranty Warrants, the number of shares of the Common Stock
pledged by the recipient and the number of shares issuable upon exercise of
the Guaranty Warrants.
<TABLE>
No. of Shares
Warrant Recipient No. of Shares Pledged Issuable Upon Exercise
<C> <C> <C>
Ramon D. Phillips 309,733 309,733
Raymond A. Kilgore 282,133 282,133
Johnny J. DePuma 20,000 20,000
Jack R. Daugherty 107,567 107,567
Kenneth H. Jones, Jr. 16,000 16,000
Samuel W. Rizzo 50,000 50,000
</TABLE>
Split-Dollar Life Insurance
In April 1991, the Company entered into a Reverse Split-Dollar Agreement
(the "Split-Dollar Agreement") with Ramon D. Phillips with respect to a so-
called reverse split-dollar life insurance policy on Mr. Phillips. The Split-
Dollar Agreement obligates the Company to pay the entire premium for the
policy while the Split-Dollar Agreement is in effect. The policy provides for
<PAGE>
the death benefits to be divided between the policy's $1,000,000 face amount
and its accrued cash surrender value. The Company was designated as
beneficiary of the face amount of the policy and Mr. Phillips' estate was
designated as beneficiary of the accrued cash surrender value of the policy.
Mr. Phillips owns the policy, but the Split-Dollar Agreement restricts
all his ownership rights except the right to borrow against the policy's cash
surrender value. The Split-Dollar Agreement provides that Mr. Phillips may
not change the beneficiary of the face amount benefit or surrender the policy
for its cash value while the Split-Dollar Agreement is in effect. The Split-
Dollar Agreement may be terminated by either party as of the end of any policy
year and will automatically terminate upon Mr. Phillips' retirement,
resignation or discharge, with or without cause.
OTHER BUSINESS
(Item 2)
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come
before the Annual Meeting, the persons named in the accompanying proxy will
vote the proxy as they in their discretion may deem appropriate, unless they
are directed by the proxy to do otherwise.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand ("C&L") as
independent certified public accountants to audit the consolidated financial
statements of the Company for the 1997 fiscal year. C&L also reported on the
Company's consolidated financial statements for the fiscal years ended
December 31, 1996, 1995 and 1994. Representatives of C&L are expected to be
present at the Annual Meeting, will have the opportunity to make a statement
if they so desire and are expected to be available to respond to appropriate
questions from stockholders.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for inclusion in the proxy
material relating to the 1998 annual meeting of shareholders must do so in
writing. The proposal must be received at the Company's principal executive
offices by December 26, 1997.
By Order of the Board of Directors
Raymond A. Kilgore, Secretary
April 25, 1997
Dallas, Texas
<PAGE>
[FRONT]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
HALLMARK FINANCIAL SERVICES, INC.
TO BE HELD MAY 29, 1997
The undersigned hereby appoints Ramon D. Phillips and Raymond A.
Kilgore, and each of them individually, as the lawful agents and Proxies of
the undersigned, with full power of substitution, and hereby authorizes each
of them to represent and to vote, as designated below, all the shares of
Common Stock of Hallmark Financial Services, Inc. held of record by the
undersigned on April 14, 1997, at the Annual Meeting of Shareholders to be
held at 10:00 a.m. on May 29, 1997, or at any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed below
INSTRUCTIONS: To withhold authority to vote for any nominee, mark the space
beside the nominee's name with an "X".
Ramon D. Phillips _________ Samuel W. Rizzo _________
Linda H. Sleeper _________ A. R. Dike _________
Raymond A. Kilgore _________ James H. Graves _________
Jack R. Daugherty _________ George R. Manser _________
Kenneth H. Jones _________ C. Jeffrey Rogers _________
2. In their discretion, the Proxies are authorized to vote on any other
matter which may properly come before the Annual Meeting or any adjournment
thereof.
When properly executed, this proxy will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS PROPOSED IN ITEM 1.
The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and confirms all that said Proxies may do by virtue
hereof.
<PAGE>
[BACK]
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Date: _______________________, 1997 ______________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
__________________________________
Signature, if held jointly
PLEASE CHECK THIS BOX IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING
OF SHAREHOLDERS. [ ]
<PAGE>
HALLMARK FINANCIAL SERVICES, INC.
14651 Dallas Parkway, Suite 900
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1997
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Shareholders of Hallmark Financial Services, Inc. (the "Company")
will be held at the Doubletree Hotel at Lincoln Center, 5410 LBJ
Freeway, Dallas, Texas, at 10:00 a.m., Dallas time, on Thursday,
May 29, 1997, for the following purposes:
1. To elect ten directors to serve until the next Annual
Meeting of Shareholders or until their successors are duly
elected and qualified;
2. To transact such other business that may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on April 14,
1997, are entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof.
All shareholders of the Company are cordially invited to
attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Raymond A. Kilgore, Secretary
Dated: April 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED STAMPED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[ XX ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule
14a-12
HALLMARK FINANCIAL SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
Hallmark Financial Services, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ XX ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-
6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________
_____________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________
_____________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: ___/
____________________________________________________________
_____________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________
_____________________________________________________
___/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
<PAGE>
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
