HALLMARK FINANCIAL SERVICES, INC.
14651 Dallas Parkway, Suite 900
Dallas, Texas 75240
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 30, 1999
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 1999 Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Wednesday,
June 30, 1999, 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 June 4, 1999. A copy of
<PAGE>
the Company's Annual Report for the fiscal year ended December 31, 1998, is
enclosed herewith. Except as expressly incorporated by reference herein,
such Annual Report does not constitute a 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 six directors to serve until the next Annual
Meeting of Shareholders or until their successors are duly elected and
qualified; and
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
May 17, 1999 (the "Record Date"). On the Record Date, there were
11,048,133 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) 656,476 5.8
Raymond A. Kilgore (1) 603,047 5.4
Linda H. Sleeper (1) 203,000 1.8
Jack R. Daugherty (2) 276,768 2.5
Kenneth H. Jones, Jr. (3) 125,357 1.1
Samuel W. Rizzo (3, 4) 205,262 1.8
A. R. Dike (3) 116,000 1.0
James H. Graves (5) 172,500 1.5
George R. Manser (5, 6) 123,200 1.1
C. Jeffrey Rogers (5) 120,000 1.1
All executive officers
and current directors,
as a group
(11 persons) (7) 2,736,181 21.9
Derby Trust PLC (8) 1,838,000 16.6
Heartland Advisors, Inc. (9) 1,170,600 10.6
</TABLE>
1 Includes 200,000 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date.
2 Includes 125,000 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date.
3 Includes 102,500 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date.
4 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.
5 Includes 95,000 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date.
6 Includes 9,000 shares held by Mr. Manser's spouse, over which shares
Mr. Manser shares voting and dispositive authority.
7 Includes 1,422,500 shares which may be acquired pursuant to stock
options exercisable on or within 60 days after the Record Date.
8 As reported on Schedule 13D filed with the Securities and Exchange
Commission in February, 1996. The address for Derby Trust PLC is 1
Connaught Place, London W2 2DY, United Kingdom.
9 As reported on Schedule 13G filed with the Securities and Exchange
Commission on January 11, 1999. Includes 1,060,000 shares over which
Heartland Advisors, Inc. has no voting power. The address for Heartland
Advisors, Inc. is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.
<PAGE>
ELECTION OF DIRECTORS
(Item 1)
Pursuant to the Bylaws of the Company, the Board of Directors has
reduced the number of directors constituting the Board of Directors from
ten to six, effective as of the Annual Meeting. At the Annual Meeting, six
directors will be elected for a term expiring at the 2000 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 Current Position(s)
Name Age Since with the Company
<S> <C> <C> <S>
Ramon D. Phillips 65 1989 President, Chief Executive
Officer, Director and
Chairman of the Board of
Directors
Linda H. Sleeper 51 1996 Executive Vice President,
Chief Operating Officer and
Director
Raymond A. Kilgore 50 1988 Senior Vice President,
Secretary and Director
James H. Graves 50 1995 Director
George R. Manser 67 1995 Director
C. Jeffrey Rogers 51 1995 Director
</TABLE>
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.
<PAGE>
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.
James H. Graves is a Partner and Managing Director of J.C. Bradford &
Co., a Nashville based regional securities firm which provides investment
banking, underwriting and brokerage services. He serves co-manager of the
Corporate Finance Department, which provides general investment banking
services for corporate clients. In this 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 Director of Corporate Finance of Uniglobe Travel
USA, L.L.C., a franchisor of travel agencies. 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,
the Stock Option Committee and the Nominating Committee.
The Executive Committee is presently composed of Kenneth H. Jones
(chairman), A. R. Dike and Messrs. Phillips and Rogers. Between meetings
of the Board of Directors, the Executive Committee has the full power and
<PAGE>
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 four such meetings during 1998.
The Audit Committee is presently composed of Samuel W. Rizzo
(chairman) and Messrs. Jones, 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 1998.
The Compensation Committee and the Stock Option Committee are each
presently composed of Messrs. Graves (chairman) and Dike and Jack R.
Daugherty. At the direction of the full Board, the Compensation Committee
reviews and makes recommendations with respect to compensation of the
executive officers of the Company. 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. Neither committee met during
1998.
The Nominating Committee is presently composed of Messrs. Rogers
(chairman) and Daugherty. The Nominating Committee investigates and
recommends to the Board of Directors qualified nominees for election to the
Board. The Nominating Committee has not yet implemented procedures for
consideration of nominees submitted by shareholders of the Company. The
Nominating Committee met once during 1998.
The Board of Directors held six meetings during 1998. Various
matters were also approved by the unanimous written consent of the Board of
Directors during the last fiscal year. 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
During the first three quarters of 1998, the Company paid all
directors a fee of $1,500 for each Board meeting attended and a fee of $750
for each committee meeting attended. No other compensation was paid to any
non-employee director during 1998. Commencing in the fourth quarter of
1998, the Company suspended the payment of fees to directors.
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, 1998.
<PAGE>
EXECUTIVE OFFICERS AND COMPENSATION
Executive Officers
The following persons are the executive officers of the Company:
<TABLE>
Name Age Position(s) with the Company
<S> <C> <S>
Ramon D. Phillips 65 President, Chief Executive Officer,
Director and Chairman of the Board
of Directors
Linda H. Sleeper 51 Executive Vice President, Chief
Operating Officer and Director
Raymond A. Kilgore 50 Senior Vice President, Secretary and
Director
Johnny J. DePuma 61 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 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 the other executive
officers of the Company for the last three fiscal years.
<PAGE>
<TABLE>
Other All
Name and Year Annual Other
Principal Ended Compensation Compensation
Position Dec. 31 Salary Bonus ($) 1 ($) 2
<S> <S> <C> <C> <C> <C>
Ramon D. 1998 217,463 -0- 10,000 20,257
Phillips 1997 212,000 -0- 45,736 25,909
President, 1996 200,000 100,000 15,744 26,975
Chief Exec.
Officer and
Chairman of
the Board of
Directors
Linda H. Sleeper 1998 139,504 -0- -0- 4,500
Executive Vice 1997 133,923 -0- 736 7,500
President and 1996 130,000 70,000 744 6,750
Chief Operating
Officer
Raymond A. Kilgore 1998 99,376 -0- -0- 4,500
Senior Vice 1997 94,423 -0- 576 7,500
President and 1996 90,500 40,000 561 11,250
Secretary
Johnny J. DePuma 1998 108,731 -0- -0- -0-
Senior Vice 1997 103,923 -0- 638 -0-
President and 1996 100,000 40,000 620 -0-
Chief Financial
Officer
</TABLE>
1 Represents car allowance, life insurance allowance, premiums on long-
term disability insurance and the portion of premiums on a reverse split-
dollar insurance policy on the life of Ramon D. Phillips which are
considered compensation to Mr. Phillips for federal income tax purposes.
See, Certain Transactions.
2 Represents director fees and the incremental annual increase in the
accrued cash surrender value of a reverse split-dollar insurance policy on
the life of Ramon D. Phillips which is payable to the estate of Mr.
Phillips in the event of his death. See, Election of Directors and Certain
Transactions.
Option Grants in Last Fiscal Year
No stock options or stock appreciation rights were granted to the
executive officers during the fiscal year ended December 31, 1998.
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
Shown below is information with respect to the executive officers
regarding option exercises during the fiscal year ended December 31, 1998,
and the value of unexercised options held as of December 31, 1998.
<PAGE>
("Exer." = Exercisable)
("Unexer." = Unexercisable)
<TABLE>
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options (#) Options ($) 1
on Exercise Value
Name (#) Received Exer. Unexer. Exer. Unexer.
<S> <C> <C> <C> <C> <C> <C>
Ramon D.
Phillips (2) -0- -0- 200,000 -0- 12,500 -0-
Linda H.
Sleeper -0- -0- 200,000 -0- 12,500 -0-
Raymond A.
Kilgore (2) -0- -0- 200,000 -0- 12,500 -0-
Johnny J.
DePuma (2) -0- -0- 200,000 -0- 12,500 -0-
</TABLE>
1 Values stated are pre-tax and are based upon the closing price of
$0.4375 per share of the Common Stock on the American Stock Exchange
Emerging Company Marketplace on December 31, 1998, 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 to pledge 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. The term of each agreement 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
extended. Prior to the conclusion of calendar year 1998, the Board of
Directors notified the executives that the Executive Compensation
Agreements would not be so extended as of January 1, 1999. As a result,
each agreement will expire on December 31, 2000, unless hereafter extended.
The Executive Compensation Agreement with the Chief Executive Officer
specifies minimum levels of base salary and benefits and provides for
various performance bonuses. The Chief Executive Officer has waived a
portion of the specified compensation in each of the last two fiscal years.
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
months after a "change of control" (as defined therein), the Company is
<PAGE>
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 through October 1,
1994, but were successively extended by the Board of Directors through
October 1, 1998. The exercise price of each Guaranty Warrant was $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 on the day
preceding the date of grant. In September 1998, the Board agreed to accept
shares of the Company s issued and outstanding Common Stock (valued for
such purpose at the last reported sale price of the Common Stock on the
American Stock Exchange Emerging Company Marketplace on the day preceding
exercise) in lieu of cash in payment of the exercise price of the Guaranty
Warrants.
On October 1, 1998, certain of the holders exercised their respective
Guaranty Warrants and delivered to the Company shares of the previously
issued and outstanding Common Stock . The following table indicates the
current executive officers and directors who exercised Guaranty Warrants,
the number of shares of the Common Stock delivered in payment of the
exercise price and the number of shares issued upon exercise of the
Guaranty Warrants.
<TABLE>
No. Of Shares
Warrant Recipient No. of Shares Delivered Issued Upon Exercise
<S> <C> <C>
Ramon D. Phillips 176,990 309,733
Raymond A. Kilgore 161,219 282,133
Johnny J. DePuma 11,429 20,000
Jack R. Daugherty 61,467 107,567
Kenneth H. Jones, Jr. 9,143 16,000
Samuel W. Rizzo 28,572 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.
<PAGE>
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 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.
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 1999 fiscal year. C&L also
reported on the Company's consolidated financial statements for the fiscal
years ended December 31, 1998, 1997 and 1996. 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 shareholders.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for inclusion in the
proxy material relating to the 2000 annual meeting of shareholders must do
so in writing. The proposal must be received at the Company's principal
executive offices by February 4, 2000.
By Order of the Board of Directors
Raymond A. Kilgore, Secretary
June 4, 1999
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 JUNE 30, 1999
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 May 17, 1999, at the Annual Meeting of Shareholders to be
held at 10:00 a.m. on June 30, 1999, or at any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for 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 ____ James H. Graves ____
Linda H. Sleeper ____ George R. Manser ____
Raymond A. Kilgore ____ 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: _______________, 1999 ____________________________________
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. [ ]
