EXHIBIT 99.9
HALLMARK FINANCIAL SERVICES, INC.
777 MAIN STREET, SUITE 1000
FORT WORTH, TEXAS 76102
_______________, 2005
Securities Transfer Corporation
2591 Dallas Parkway, Suite 102
Frisco, Texas 75034
Ladies and Gentlemen:
In connection with your appointment as Subscription Agent in the
transactions described herein, Hallmark Financial Services, Inc., a Nevada
corporation (the "Company"), hereby confirms its arrangements with you as
follows:
1. RIGHTS OFFERING. As set forth in the Company's Prospectus dated
________, 2005 (the "Prospectus") and incorporated herein by reference, the
Company intends to conduct a rights offering (the "Rights Offering") in
which it shall distribute one right (the "Rights") to subscribe for shares
of common stock, $.03 par value per share (the "Common Stock"), for each
share of Common Stock held at the close of business on April 20, 2005 (the
"Record Date"). Each Right shall entitle the holder thereof to subscribe for
1.37 shares of Common Stock at the price of $0.90 per share (the "Basic
Subscription Privilege"). These Rights shall expire at 5:00 p.m., Dallas,
Texas time, on ________, 2005 (the "Expiration Time") and be evidenced by
non-transferable subscription certificates ("Subscription Certificates"). In
addition, each Rights holder who exercises his Basic Subscription Privilege
in full shall be eligible to subscribe for, at the same price of $0.90 per
share, such additional shares of Common Stock that are available as a result
of unexercised Rights (the "Over-Subscription Privilege"), subject to
proration as set forth below.
2. APPOINTMENT OF SUBSCRIPTION AGENT. You are hereby appointed as the
Subscription Agent for the Rights Offering in accordance with the
Prospectus. Each reference to you in this letter is to you in your capacity
as Subscription Agent, unless the context indicates otherwise.
3. DELIVERY OF DOCUMENTS. Enclosed herewith are the following, the
receipt of which by you is hereby acknowledged:
(a) a copy of the Prospectus;
(b) the form of Subscription Certificate;
(c) the form of Instructions as to Use of Subscription Certificates;
(d) the form of Notice of Guaranteed Delivery;
(e) the form of Letter to Security Holders Who Are Record Holders;
(f) the form of letter to Securities Dealers, Commercial Banks, Trust
Companies and other Nominees;
(g) the form of letter to Clients of Security Holders Who Are
Beneficial Holders;
(h) the form of Nominee Holder Certification Form;
(i) the Beneficial Owner Election Form;
(j) the Substitute Form W-9; and
(k) a return envelope addressed to Securities Transfer Corporation, as
Subscription Agent.
The documents referenced in clauses (c) through (j) above shall be
referred to herein as the "Ancillary Documents."
On or before ________, 2005, you shall mail or cause to be mailed to
each holder of Common Stock, at the close of business on the Record Date
(the "Record Stockholders"), a Subscription Certificate evidencing the
Rights to which such holder is entitled, a Prospectus, the Ancillary
Documents (as applicable) and an envelope addressed to you. Prior to the
mailing, however, the Company shall provide you with blank Subscription
Certificates for you to prepare and issue in the names of the Record
Stockholders for the number of Rights such stockholders are entitled. The
Company shall also provide you with a sufficient number of copies of each of
the documents to be mailed with the Subscription Certificates.
4. SUBSCRIPTION PROCEDURE. (a) Upon your receipt prior to the
Expiration Time (by mail, facsimile or delivery) as Subscription Agent of
(i) any Subscription Certificate completed and endorsed for exercise (except
as provided in paragraph 6 hereof), and (ii) payment in full of the
subscription price set forth on the cover page of the Prospectus for the
shares of Common Stock subscribed for (the "Subscription Price") in U.S.
funds (A) by certified check, bank draft or a postal, telegraphic or express
money order payable at par (without deduction for bank service charges
or otherwise) to you, "AS SUBSCRIPTION AGENT;" (B) by wire transfer of
immediately available funds; or (C) an alternative payment method arranged
by you and approved by the Company, you shall as soon as practicable after
the Expiration Time (but after performing the procedures described in
subparagraphs (b) and (c) below), mail to the subscriber's registered
address on the books of the Company certificates representing the shares of
Common Stock subscribed for pursuant to the Basic and Over-Subscription
Privileges, and furnish a list of all such information to the Company.
(b) As soon as practicable after the Expiration Time, you shall
calculate the number of shares to which each subscriber is entitled pursuant
to the Over-Subscription Privilege. Only subscribers who exercise their
Basic Subscription Privilege in full shall be eligible to subscribe for
those shares of Common Stock not subscribed for pursuant to the Basic
Subscription Privilege (the "Remaining Shares"). Where there are sufficient
Remaining Shares to satisfy all additional subscriptions by subscribers
exercising their rights under the Over-Subscription Privilege, each
subscriber shall be allotted the number of additional shares subscribed for
by them. If the aggregate number of shares subscribed for under the Over-
Subscription Privilege exceeds the number of Remaining Shares, the number of
Remaining Shares initially allotted to each participant in the Over-
Subscription Privilege shall be the lesser of (i) the number of shares
subscribed for under the Over-Subscription Privilege by such subscriber or
(ii) the product (disregarding fractions) obtained by multiplying the number
of Remaining Shares by a fraction, the numerator of which is the number of
shares subscribed for under the Over-Subscription Privilege by such
subscriber, and the denominator of which is the aggregate number of shares
subscribed for under the Over-Subscription Privilege by all subscribers. If
after the initial allotment there are still Remaining Shares and subscribers
whose exercise of the Over-Subscription Privilege has not been fully
satisfied, such Remaining Shares shall be allocated (one or more times as
necessary) in accordance with the foregoing principal until all available
Remaining Shares have been allocated. Any fractional share to which
subscribers exercising their Over-Subscription Privilege would otherwise be
entitled pursuant to such allocation shall be rounded down to the next whole
share.
(c) Upon calculating the number of shares to which each subscriber is
entitled pursuant to the Over-Subscription Privilege and the amount
overpaid, if any, by each subscriber, you shall, as soon as practicable, (i)
furnish a list of all such information to the Company and (ii) inform the
subscribers who participated in the Over-Subscription Privilege of the
number of additional shares, if any, allotted to them.
(d) Upon calculating the number of shares to which each subscriber is
entitled pursuant to the Over-Subscription Privilege and assuming payment
for the additional shares subscribed for has been delivered, you shall mail
to the subscriber's registered address on the books of the Company
certificates representing the additional shares the subscriber has been
allotted as contemplated in subparagraph (b) above. If a lesser number of
shares is allotted to a subscriber under the Over-Subscription Privilege
than the number for which the subscriber has tendered payment, you shall
remit to the subscriber the excess of the payment received from such
subscriber over the amount required to exercise the Over-Subscription
Privilege for the number of shares finally allotted to such subscriber,
without interest or deduction, at the same time as certificates representing
the shares allotted pursuant to the Over-Subscription Privilege are mailed.
(e) You shall promptly remit to the Company, after expiration of the
Rights Offering and issuance of certificates for the shares subscribed for,
all funds received in payment of the Subscription Price under the Basic
Subscription Privilege. Funds received by you pursuant to the Over-
Subscription Privilege shall be held by you in a segregated account pending
allocation of shares issued pursuant to the Over-Subscription Privilege.
Upon mailing certificates representing the shares and refunding each
subscriber's funds for additional shares subscribed for but not allotted, if
any, you shall promptly remit all funds received in payment of the
Subscription Price under the Over-Subscription Privilege to the Company.
5. DEFECTIVE EXERCISE OF RIGHTS; LOST SUBSCRIPTION CERTIFICATES. The
Company shall have the absolute right to reject any defective exercise of
Rights or to waive any defect in exercise. Unless requested to do so by the
Company, you shall not be under any duty to give notification to holders of
Subscription Certificates of any defects or irregularities in subscriptions.
Such subscriptions shall not be deemed to have been made until any such
defects or irregularities have been cured or waived within such time as the
Company determines. You shall as soon as practicable return Subscription
Certificates with defects or irregularities that have not been cured or
waived to the holder of the Rights. If any Subscription Certificate is
alleged to have been lost, stolen or destroyed, you should follow the same
procedures followed for lost stock certificates representing shares of
Common Stock you use in your capacity as transfer agent for the Company's
Common Stock.
6. LATE DELIVERY. If prior to the Expiration Time you receive (i)
payment in full of the Subscription Price for the shares of Common Stock
being subscribed for and (ii) a guarantee notice ("Notice of Guaranteed
Delivery") substantially in the form delivered with the Subscription
Certificate, from a commercial bank or trust company having an office or
correspondent in the United States, or a member firm of any registered
United States national securities exchange or of the National Association of
Securities Dealers, Inc. stating the certificate number of the Subscription
Certificate relating to the Rights, the name and address of the exercising
stockholder, the number of Rights represented by the Subscription
Certificate held by such exercising stockholder, the number of shares of
Common Stock being subscribed for pursuant to the Basic Subscription
Privilege, the number of shares of Common Stock, if any, being subscribed
for pursuant to the Over-Subscription Privilege, and guaranteeing the
delivery to you of the Subscription Certificate evidencing such Rights
within three business days following the date of the Notice of Guaranteed
Delivery, then the Rights may be exercised even though the Subscription
Certificate was not delivered to you prior to the Expiration Time, provided
that within three business days following the date of the Notice of
Guaranteed Delivery you receive the properly completed and duly executed
Subscription Certificate evidencing the Rights being exercised, with
signature guaranteed if required.
7. DELIVERY. You shall deliver to the Company the exercised
Subscription Certificates in accordance with written directions received
from the Company and shall deliver certificates representing shares of
Common Stock to the subscribers who have duly exercised Rights at their
registered addresses as instructed on the Subscription Certificates.
8. REPORTS. You shall notify the Company by telephone on or before the
close of business on each business day during the period commencing with the
mailing of the Rights and ending at the Expiration Time (and in the case of
guaranteed deliveries, ending three business days after the Expiration Time)
(a "daily notice"), which notice shall thereafter be confirmed in writing of
(i) the number of Rights exercised on the day covered by such daily notice,
(ii) the number of Rights subject to guaranteed delivery on the day covered
by such daily notice, (iii) the number of Rights for which defective
exercises have been received on the day covered by such daily notice, (iv)
the number of shares requested under the Over-Subscription Privilege and (v)
the cumulative total of the information set forth in clauses (i) through
(iv) above. At or before the first business day following the Expiration
Time, you shall certify in writing to the Company the cumulative total
through the Expiration Time of all the information set forth in clauses (i)
through (iv) above. You shall maintain and update a listing of holders who
have fully or partially exercised their Rights, and holders who have not
exercised their Rights. You shall provide the Company or its designee with
such information compiled by you pursuant to this paragraph 8 as any of them
shall request.
9. FUTURE INSTRUCTIONS. With respect to notices or instructions to be
provided by the Company hereunder, you may rely and act on any written
instruction signed by (a) Mark E. Schwarz, Chairman and Chief Executive
Officer of the Company or any other authorized officer or employee of the
Company; or (b) Steven D. Davidson of McGuire, Craddock & Strother, P.C.,
counsel for the Company.
10. PAYMENT OF COMPENSATION AND EXPENSES. The Company will pay you
compensation for acting in your capacity as Subscription Agent hereunder as
set forth on Schedule 1 attached hereto.
11. COUNSEL. You may consult with counsel satisfactory to you, which
may be counsel to the Company, and the written advice or opinion of such
counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by you hereunder in good faith and
in accordance with such advice or opinion of such counsel.
12. INDEMNIFICATION. The Company covenants and agrees to indemnify and
hold you harmless against any costs, expenses (including reasonable fees for
legal counsel), losses or damages, which may be paid, incurred or suffered
by or to which you may become subject, arising from or out of, directly
or indirectly, any claim or liability resulting from your actions as
Subscription Agent pursuant hereto; provided that such covenant and
agreement does not extend to such costs, expenses, losses and damages
incurred or suffered by you as a result of, or arising out of, your own
negligence, misconduct or bad faith or that of any employees, agents or
independent contractors used by you in connection with performance of your
duties as Subscription Agent hereunder, or your breaching any of your
obligations under this Agreement.
13. NOTICES. Unless otherwise provided herein, all reports, notices
and other communications required or permitted to be given hereunder shall
be in writing and delivered by hand or confirmed telecopy or by first class
mail, postage prepaid, as follows:
(a) If to the Company, to:
Hallmark Financial Services, Inc.
777 Main Street
Suite 1000
Fort Worth, Texas 76102
Telephone: (817) 348-1600
with a copy to:
McGuire, Craddock & Strother, P.C.
3550 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201
Telephone: (214) 954-6800
Attention: Steven D. Davidson
(b) If to you, to:
Securities Transfer Corporation
2591 Dallas Parkway, Suite 102
Frisco, Texas 75034
Attention: Kevin Halter, Jr.
Telephone: (469) 663-0101
Telecopy: (469) 633-0088
14. ASSIGNMENT, DELEGATION. Neither this Agreement nor any rights or
obligations hereunder may be assigned or delegated by either party without
the written consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective permitted
successors and assigns. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim or to
impose upon any other person any duty, liability or obligation.
15. GOVERNING LAW. The validity, interpretation and performance of
this Agreement shall be governed by the law of the State of Texas, except
that body of law relating to choice of laws.
16. SEVERABILITY. If any provision of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be considered one and the same agreement.
18. CAPTIONS. The captions and descriptive headings herein are for
convenience of the parties only. They do not in any way modify, amplify,
alter or give full notice of the provisions hereof.
19. CONFIDENTIALITY. All books, records, information and data
pertaining to the business of a party that are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement including
the fees for services set forth in the attached schedule shall remain
confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
20. TERM. This Agreement shall remain in effect until 30 days' written
notice has been provided by either party to the other of its termination.
Upon termination of the Agreement, the Subscription Agent shall retain all
cancelled Subscription Certificates and related documentation as required by
applicable law.
21. MERGER OF AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
If the foregoing is in accordance with your understanding of our
arrangements, please sign and return the enclosed duplicate of this letter.
Very truly yours,
HALLMARK FINANCIAL SERVICES, INC.
____________________
By: Mark E. Schwarz
Title: Chairman and Chief Executive Officer
The foregoing is in accordance with our understanding and is hereby
confirmed and accepted.
SECURITIES TRANSFER CORPORATION
____________________
By:
Title:
Dated: ___________, 2005