EXHIBIT 99.7
Important Tax Information Regarding Backup Withholding
Under the United States federal income tax laws, dividend payments that
may be made by Hallmark Financial Services, Inc. (the "Company") on shares
of its Common Stock, par value $0.03, issued upon the exercise of non-
transferable subscription rights (the "Rights"), may be subject to backup
withholding. Generally such payments will be subject to backup withholding
unless the holder (i) is exempt from backup withholding or (ii) furnishes
the payer with its correct taxpayer identification number ("TIN") and
certifies that the number provided is correct and further certifies that
such holder is not subject to backup withholding as a result of a failure to
report all interest or dividend income in the past. Each Rights holder that
exercises Rights and wants to avoid backup withholding should provide the
Subscription Agent, as the Company's agent in respect of exercised Rights,
with such holder's correct taxpayer identification number (or with a
certification that such holder is awaiting a taxpayer identification number)
and with a certification that such holder is not subject to backup
withholding by completing Substitute Form W-9 below.
Certain holders (including, among others, all corporations and certain
foreign individuals) are exempt from these backup withholding and reporting
requirements. In general, in order for a foreign individual to qualify as an
exempt recipient, that holder must submit a statement, signed under the
penalties of perjury, attesting to that individual's exempt status. Such
statements may be obtained from the Subscription Agent. Exempt holders,
while not required to file Substitute Form W-9, should file Substitute Form
W-9 to avoid possible erroneous backup withholding. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
If backup withholding applies, the Company or the Subscription Agent,
as the case may be, will be required to withhold up to 30% of any such
dividend payments made to a stockholder or other payee. Backup withholding
is not an additional tax. Rather, the amount of backup withholding is
treated, like any other withheld amounts, as an advance payment of the
person's tax liability, and the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
Purpose of Substitute Form W-9
To prevent backup withholding on dividend payments, a Rights holder
that exercises Rights is required to notify the Subscription Agent of such
holder's correct TIN by completing the Substitute Form W-9 below and
certifying on Substitute Form W-9 that the TIN provided is correct (or that
such Rights holder is awaiting a TIN). In addition, the holder is required
to certify on Substitute Form W-9 that it is (i) exempt from backup
withholding, or (ii) not subject to backup withholding due to prior under
reporting of interest or dividend income, or (iii) the Internal Revenue
Service (the "IRS") has notified it that it is no longer subject to backup
withholding.
What Number to Give the Subscription Agent
The Rights holder that exercises Rights is required to give the
Subscription Agent the TIN of the record owner of the shares of Common Stock
issued upon the exercise of the Rights. If such record owner is an
individual, the TIN is the taxpayer's social security number. For most other
entities, the TIN is the employer identification number. If the shares of
Common Stock issued upon the exercise of the Rights are in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidelines on what number to report. If
the Subscription Agent is not provided with the correct taxpayer
identification number in connection with such payments, the holder may be
subject to a penalty imposed by the IRS.
SUBSTITUTE FORM W-9
Payer's Request for Taxpayer Identification Number (TIN)
PAYERS NAME: [__________]
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Part 1 - PLEASE PROVIDE YOUR TIN ____________________________
AND CERTIFY BY SIGNING AND DATING Social Security Number or
BELOW Employer ID Number
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Part 2 - Certification - under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), (2) I am not
subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup withholding, and (3) all other
information provided on this form is true, correct and complete. [ ]
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Part 3 - Awaiting TIN [ ]
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Part 4 - For Payee Exempt from Backup Withholding [ ]
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Please fill in your name and address below.
______________________________________________________
Name
______________________________________________________
Address (number and street)
______________________________________________________
City, State and Zip Code
Certificate Instructions - You must cross out Item (2) in Part 2 above if
you have been notified by the IRS that your are currently subject to backup
withholding because of under reporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding, you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross
out Item (2). If you are exempt from backup withholding, check the box in
part 4 above.
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Signature___________________________________ Date ____________________, 2005
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NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
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CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER.
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 30% of all reportable
payments made to me thereafter will be withheld until I provide a number.
Signature__________________________________ Date _________________, 2005
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer - Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
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For this Give the For this Give the EMPLOYER
type of SOCIAL SECURITY type of IDENTIFICATION
Account: number of - Account: number of -
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1. Individual The individual 8. Sole proprietorship The owner (4)
account
2. Two or more The actual owner 9. A valid trust, Legal entity (5)
individuals of the account estate, or pension
(joint account) or, if combined trust
funds, any
one of the 10. Corporate The corporation
individuals (1)
3. Husband and The actual owner 11. Association, The organization
wife (joint of the account club religious,
account) or, if joint charitable,
funds, either educational or
person (1) other tax-exempt
organization
4. Custodian The minor (2) 12. Partnership The partnership
account of a
minor (Uniform 13. A broker or The broker or
Gift to Minors registered nominee
Act) nominee
5. Adult and minor The adult or, if 14. Account with the
(joint account) the minor is the Department of The public
only contributor, Agriculture in the entity
the minor (1) name of a public
entity (such as
6. Account in the The ward, minor a State or local
name of or incompetent government school
guardian or person (3) district, or
committee for prison) that
a designated receives
ward, minor, agricultural
or incompetent program payments
person
7. a. The usual The grantor-
revocable trustee (1)
savings trust
account
(grantor is
also trustee)
b. So-called The actual
trust account owner (1)
that is not a
legal or valid
trust under
State law
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(1) List all names first and circle the name of the person whose number
you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Provide the name of the owner. You may also enter your business or
"doing business as" name. You may use either your Social Security
Number or Taxpayer Identification Number (if you have one).
(5) List all names first and circle the name of the legal trust, estate,
or pension trust. (Do not furnish the identification number of the
personal representative or trustee unless the legal entity itself
is not designated in the account title).
Note: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number * Payments of tax-exempt interest
If you do not have a taxpayer (including exempt interest
identification number or you do not dividends under Section 852)
know your number, obtain Form SS-5, * Payments described in Section
Application for a Social Security 6049(b) (5) to non-resident aliens.
Number Card, or Form SS-4, * Payments on tax-free covenant
Application for Employer bonds under Section 1451.
Identification Number, at the * Payments made by certain
local office of the Social Security foreign organizations.
Administration or the Internal * Payments made to a nominee.
Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding EXEMPT PAYEES DESCRIBED ABOVE MUST
Payees specifically exempted from STILL COMPLETE THE SUBSTITUTE FORM
backup withholding on ALL payments W-9 TO AVOID POSSIBLE ERRONEOUS
include the following: BACKUP WITHHOLDING. FILE THE
SUBSTITUTE FORM W-9 WITH THE
* A corporation. PAYER, FURNISH YOUR TAXPAYER
* A financial institution. IDENTIFICATION NUMBER, WRITE
* An organization exempt from tax "EXEMPT" ON THE FACE OF THE FORM,
under Section 501 (a) of the AND RETURN IT TO THE PAYER. IF THE
Internal Revenue Code of 1986, PAYMENTS ARE INTEREST, DIVIDENDS
as amended (the "Code"), or an OR PATRONAGE DIVIDENDS, ALSO SIGN
individual retirement plan. AND DATE THE FORM.
* The United States or any agency
or instrumentality thereof. Certain payments other than
* A State, the District of Columbia, interest, dividends, and patronage
a possession of the United dividends that are not subject to
States, or any subdivision or information reporting are also not
instrumentality thereof. subject to backup withholding. For
* A foreign government, a political details, see the regulations under
subdivision of a foreign Sections 6041, 6041A(a), 6045, and
government, or any agency or 6050A of the Code.
instrumentality thereof.
* An international organization or Privacy Act Notice - Section 6109
any agency, or instrumentality of the Code requires most
thereof. recipients of dividends, interest,
* A registered dealer in securities or other payments to give correct
or commodities registered in the taxpayer identification numbers to
U.S. or a possession of the U.S. payers who must report the
* A real estate investment trust. payments to IRS. IRS uses the
* A common trust fund operated by a numbers for identification
bank under Section 584(a) of the purposes and to help verify the
Code. accuracy of your tax return.
* An exempt charitable remainder Payers must be given the numbers
trust, or a non-exempt trust whether or not recipients are
described in Section 4947(a)(1) required to file tax returns. Payers
of the Code. may be required to withhold 30% of
* An entity registered at all times taxable interest, dividends and
under the Investment Company Act certain other payments to a payee
of 1940. who does not furnish a taxpayer
* A foreign central bank of issue. identification number to payer.
Certain penalties may also apply.
Payments of dividends and patronage Penalties
dividends not generally subject to
backup withholding include the (1) Failure to Furnish Taxpayer
following: Identification Number - If you
fail to furnish your correct
* Payments to nonresident aliens taxpayer identification number to
subject to withholding under a payer, you are subject to a
Section 1441 of the Code. penalty of $50 for each such
* Payments to partnerships not failure unless your failure is
engaged in a trade or business due to reasonable cause and not
in the U.S. and which have at willful neglect.
least one nonresident partner. (2) Civil Penalty for False
* Payments of patronage dividends Information With Respect to
where the amount received is not Withholding - If you make a false
paid in money. statement with no reasonable
* Payments made by certain foreign basis which results in no backup
organizations. withholding, you are subject to a
penalty of $500.
Payments of interest not generally (3) Criminal Penalty For Falsifying
subject to backup withholding include Information - Will- fully falsifying
the following: certifications or affirmations may
subject you to criminal penalties
* Payments of interest on obligations including fines and/or imprisonment.
issued by individuals. Note: You (4) Misuse of TINs - If the
may be subject to backup requester discloses or uses
withholding if this interest is taxpayer identification numbers
$600 or more and is paid in the in violation of Federal law, the
course of the payer's trade or requester may be subject to civil
business and you have not and criminal penalties.
provided your correct taxpayer
identification number to payer. FOR ADDITIONAL INFORMATION,
CONTACT YOUR TAX CONSULTANT OR
THE INTERNAL REVENUE SERVICE.