EXHIBIT 99.3
HALLMARK FINANCIAL SERVICES, INC.
__________ Shares of Common Stock
Offered Pursuant to Rights Distributed to Security Holders
_____________, 2003
Dear Security Holders:
This notice is being distributed by Hallmark Financial Services,
Inc. (the "Company") to all holders of record of shares of its common stock, par
value $0.03 per share (the "Common Stock"), at the close of business on
__________, 2003 (the "Record Date"), in connection with a distribution in a
rights offering (the "Rights Offering") of non-transferable subscription rights
(the "Rights") to subscribe for and purchase shares of its Common Stock. The
Rights are described in the Company's Prospectus dated ______, 2003 (the
"Prospectus").
In the Rights Offering, the Company is offering an aggregate of
_______ shares of Common Stock (the "Underlying Shares"), as described in the
Prospectus.
The Rights will expire, if not exercised, at 5:00 p.m., New York
City time, on ______, 2003, unless extended in the sole discretion of the
Company (as it may be extended, the "Expiration Date").
As described in the Prospectus, you will receive one Right for each
share of Common Stock owned of record at the close of business on the Record
Date.
Each Right allows you to subscribe for _______ shares of Common
Stock (the "Basic Subscription Privilege") at the cash price of $_______ per
share (the "Subscription Price").
In addition, each holder of Rights who exercises their Basic
Subscription Privilege in full will be eligible to subscribe (the
"Over-Subscription Privilege") at the Subscription Price for shares of Common
Stock that are not otherwise purchased pursuant to the exercise of Rights by
other holders of Rights under the Basic Subscription Privilege (the "Excess
Shares"), subject to availability and pro-ration as described below. Shares of
Common Stock will be available for purchase pursuant to the Over-Subscription
Privilege only to the extent that any Underlying Shares are not subscribed for
pursuant to the Basic Subscription Privilege. If there are not enough Excess
Shares to satisfy all subscriptions made under the Over-Subscription Privilege,
the Company will allocate the remaining Excess Shares pro-rata (subject to the
elimination of fractional shares) among those Rights holders who exercised their
Over-Subscription Privileges, in proportion to the number of Underlying Shares
each beneficial holder exercising the Over-Subscription Privilege has purchased
pursuant to the Basic Subscription Privilege; provided, however, that if such
pro-rata allocation results in any Rights holder being allocated a greater
number of Excess Shares than such holder subscribed for pursuant to the exercise
of such holder's Over-Subscription Privilege, then such holder will be allocated
only such number of Excess Shares as such holder subscribed for and the
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remaining Excess Shares will be allocated among all other holders exercising the
Over-Subscription Privilege on the same pro-rata basis outlined above. Such
pro-ration will be repeated until all Excess Shares have been allocated to the
full extent of the Over-Subscription Privilege. See "The Rights
Offering--Subscription Rights--Over-Subscription Privilege" in the Prospectus.
The Rights are evidenced by non-transferable Rights certificates
(the "Rights Certificates") and will cease to have any value at the close of
business on the Expiration Date.
Enclosed are copies of the following documents:
1. Prospectus;
2. Rights Certificate;
3. Instructions as to Use of Rights Certificates;
4. Notice of Guaranteed Delivery for Rights Certificates;
5. Substitute Form W-9 (including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9); and
6. A return envelope addressed to ________________, the Subscription
Agent.
Your prompt action is requested. To exercise Rights, you should
properly complete and sign the Rights Certificate (or the Notice of Guaranteed
Delivery if you are following the Guaranteed Delivery Procedures) and forward
it, with payment of the Subscription Price in full for each share of Common
Stock subscribed for pursuant to the Basic Subscription Privilege and the
Over-Subscription Privilege, to the Subscription Agent, as indicated in the
Prospectus. The Subscription Agent must receive the Rights Certificate or Notice
of Guaranteed Delivery with payment of the Subscription Price, including final
clearance of any checks, prior to 5:00 p.m., New York City time, on the
Expiration Date. FAILURE TO RETURN THE PROPERLY COMPLETED RIGHTS CERTIFICATE
WITH THE CORRECT PAYMENT WILL RESULT IN YOUR NOT BEING ABLE TO EXERCISE YOUR
RIGHTS. A Rights holder cannot revoke the exercise of its Rights. Rights not
exercised prior to the Expiration Date will expire.
Additional copies of the enclosed materials and assistance or
information may be obtained from _____________, the Information Agent. The
Information Agent's telephone number for stockholders is ( ) ________ and
telephone number for banks and brokerage firms is ( ) ________.
Very truly yours,
HALLMARK FINANCIAL SERVICES, INC.
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