SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to section 240.14a-11(c) or section
240.14a-12
HALLWOOD ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
HALLWOOD ENERGY CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
........................................................................
(4) Proposed maximum aggregate value of transaction:
........................................................................
(5) Total fee paid:
........................................................................
( ) Fee paid previously with preliminary materials.
( ) 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
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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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HALLWOOD ENERGY CORPORATION
3710 Rawlins Street, Suite 1500
Dallas, Texas 75219
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to Be Held May 9, 1995
To the Shareholders of HALLWOOD ENERGY CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Hallwood Energy Corporation (the "Company") will be held at 3710 Rawlins
Street, Suite 1500, Dallas, Texas on May 9, 1995 at 10:00 a.m. (Dallas
time) for the following purposes:
1. To elect six directors to hold office until the next annual
election of directors or until their respective successors have
been duly elected and have qualified.
2. To transact any and all other business that may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1995
as the Record Date for the determination of shareholders entitled to
notice of and to vote at the meeting or any adjournments thereof. Only
shareholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING; HOWEVER, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED PROMPTLY TO
MARK, SIGN, DATE AND MAIL THE ENCLOSED FORM OF PROXY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED
AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE
OF A QUORUM MAY BE ASSURED AT THE MEETING. YOU HAVE THE RIGHT TO REVOKE
YOUR PROXY AT ANY TIME PRIOR TO VOTING, EITHER IN PERSON AT THE ANNUAL
MEETING OR BY GIVING WRITTEN NOTICE TO THE COMPANY IN THE MANNER
PROVIDED ON THE INITIAL PAGE OF THE ENCLOSED PROXY STATEMENT. PROMPT
RETURN OF THE PROXY BY OUR SHAREHOLDERS WILL REDUCE THE TIME AND EXPENSE
OF PROXY SOLICITATION.
By Order of the Board of Directors,
Cathleen M. Osborn
Secretary
March 31, 1995
Dallas, Texas
HALLWOOD ENERGY CORPORATION
3710 Rawlins Street, Suite 1500
Dallas, Texas 75219
Proxy Statement For
Annual Meeting of Shareholders
to be Held May 9, 1995
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited on behalf of the Board of Directors of
Hallwood Energy Corporation (the "Company") to be voted at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held
on May 9, 1995, at 10:00 a.m., at 3710 Rawlins Street, Suite 1500, Dallas,
Texas, for the purposes set forth in the accompanying Notice of Annual
Meeting, and at any adjournments thereof. This Proxy Statement and
accompanying form of Proxy are being first mailed or distributed on or
about April 7, 1995.
The accompanying form of Proxy is designed to permit each shareholder to
vote for, or to withhold voting for, any or all of the nominees for
election as directors of the Company listed under Proposal 1 and to
authorize the proxies to vote in their discretion with respect to any
other proposal brought before the Annual Meeting. When a shareholder's
executed and dated proxy card specifies a choice with respect to a voting
matter, the shares will be voted accordingly. If no specification is
made, the Proxy will be voted at the Annual Meeting FOR the election of
the nominees specified under the caption "Election of Directors."
The Company encourages the personal attendance of shareholders at its
annual meetings, and giving a Proxy does not preclude the right to vote in
person should any shareholder giving the Proxy so desire. Any shareholder
of the Company giving a Proxy has the unconditional right to revoke his
Proxy at any time prior to the voting thereof either in person at the
Annual Meeting or by giving written notice to the Company addressed to Ms.
Cathleen M. Osborn, Secretary, 4582 South Ulster Street Parkway, Suite
1700, Denver, Colorado 80237. No notice of revocation will be effective,
however, until it has been received by the Company, and the notice of
revocation must be received at or before the Annual Meeting.
In addition to the solicitation of Proxies by use of the mail, officers
and regular employees of the Company may solicit the return of Proxies by
personal interview, mail, telephone and telegraph. The officers and
employees will not be additionally compensated but will be reimbursed for
out-of-pocket expenses. Brokerage houses and other custodians, nominees
and fiduciaries will be requested to forward solicitation materials to the
beneficial owners of stock. The cost of preparing, printing, assembling
and mailing the Notice of Annual Meeting, this Proxy Statement, the form
of Proxy and any additional material, the cost of forwarding solicitation
material to the beneficial owners of stock and other costs of solicitation
will be borne by the Company.
The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1994, including audited financial statements, is enclosed
with this Proxy Statement. The Annual Report does not form any part of
the materials for the solicitation of Proxies.
PURPOSES OF THE MEETING
At the Annual Meeting, the shareholders will consider and vote upon the
following matters:
1. The election of six directors to hold office until the next annual
election of directors or until their respective successors have been
duly elected and have qualified.
2. Such other and further business as may properly come before the meeting
or any adjournments thereof.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
GENERAL
The Board of Directors has fixed the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting as of
the close of business on March 31, 1995 (the "Record Date"). On the
Record Date, there were 494,126 shares of Common Stock, 9,864 shares of
Series D Preferred Stock, par value $0.01 per share ("Series D Preferred
Stock") and 356,000 shares of Series E Preferred Stock, par value $0.01
per share ("Series E Preferred Stock") issued and outstanding. The Series
D Preferred Stock and Series E Preferred Stock are sometimes referred to
together as "Preferred Stock."
REQUIRED VOTE
The Company's Restated Articles of Incorporation prohibit cumulative
voting. Assuming the presence of a quorum, the affirmative vote of a
plurality of the votes cast by the holders of shares of Common Stock is
necessary for the election of directors. Holders of Preferred Stock are
not entitled to vote on the election of directors. Votes will be counted
by The First National Bank of Boston, the Company's transfer agent and
registrar. With respect to abstentions, the shares are considered present
at the meeting for purposes of determining a quorum and voting on a
particular matter, but since they are not affirmative votes for the
matter, they will have the same effect as votes against the matter. With
respect to broker non-votes, the shares are considered present at the
meeting for purposes of determining a quorum but are not entitled to vote
on the particular matter as to which the broker does not have voting
authority.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information concerning the number of shares
of Common Stock and each class of Preferred Stock of the Company owned
beneficially as of the Record Date by the persons who, to the knowledge of
management, beneficially owned more than 5% of the outstanding Common
Stock or either class of Preferred Stock. Unless otherwise indicated,
each of the persons named has sole voting and investment power with
respect to the shares reported.
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
NAME AND ADDRESS CLASS OF BENEFICIALLY CLASS OF THE
OF BENEFICIAL OWNER STOCK OWNED COMPANY
<S> <C> <C>
The Hallwood Group Incorporated Common 240,605 48.7
3710 Rawlins Street, Suite 1500 Series E
Dallas, Texas 75219 Preferred (1) 356,000 100.0
William Baxter Lee III Common 40,500 8.2
406 Willow Avenue
Knoxville, Tennessee 37915
Prudential Assurance Co., Ltd. Common 36,625 7.4
142 Holborn Bars Series D
London ECIH 2NH Preferred (2) 5,000 50.7
United Kingdom
J. Romeo & Co. Series D
c/o Chemical Bank Preferred (2) 4,864 49.3
4 New York Plaza
New York, New York 10004
__________________
<F1>
(1) Each share of Series E Preferred Stock is convertible into one share of
Common Stock.
<F2>
(2) Each share of Series D Preferred Stock is convertible into 8 shares of
Common Stock.
</TABLE>
The following table sets forth information concerning the number of shares
of Common Stock of the Company owned beneficially as of the Record Date by
(i) each director and executive officer of the Company who owns Common
Stock and (ii) the directors and executive officers of the Company as a
group. No director or executive officer owns any Preferred Stock. Mr.
Guzzetti has sole voting and investment power with respect to the shares
reported.
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
NAME OF CLASS OF BENEFICIALLY CLASS OF THE
BENEFICIAL OWNER STOCK OWNED COMPANY
<S> <S> <S> <S>
William L. Guzzetti Common 285 *
All directors and executive officers Common 285 *
as a group (nine individuals)
__________________
<F1>
* Represents less than 1% of the outstanding Common Stock.
</TABLE>
The table above does not include the shares of Common Stock held by The
Hallwood Group Incorporated ("Hallwood Group") of which Mr. Gumbiner is
Chairman and Chief Executive Officer and Mr. Troup is President and a
director.
Alpha Trust beneficially owns 1,188,670 shares of common stock (18.6% of
the outstanding common stock) of Hallwood Group, the parent of the
Company, and Epsilon Trust beneficially owns 792,448 shares of common
stock (12.4%) of Hallwood Group. Mr. Gumbiner has the power to
designate and replace the trustees of Alpha Trust and Epsilon Trust. No
other director or executive officer of the Company owns any equity
securities of Hallwood Group. The Company owns 896,000 shares of Common
Stock (14%) of Hallwood Group.
The Company is general partner of Hallwood Energy Partners, L.P. (the
"Partnership") a limited partnership. Mr. Guzzetti owns 100 Units of
limited partner interest (less than .01%) and currently exercisable
options to acquire 21,250 Units (less than 1%, assuming exercise of the
options) of the Partnership. Mr. Sebastian owns 400 Units (less than
.01%) of the Partnership. Mr. Troup owns currently exercisable options to
acquire 28,333 Units (less than 1%, assuming exercise of the options) of
the Partnership, and Mr. Gumbiner owns currently exercisable options to
acquire 42,500 Units (less than 1%, assuming exercise of the options) of
the Partnership. No other director of the Company owns Units of the
Partnership. Executive officers of the Company, including Mr. Guzzetti,
own 403 Units and currently exercisable options to purchase 62,334 Units
(.7%, assuming exercise of the options) of the Partnership.
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company, and persons who own more than ten percent of
the Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and
greater than ten-percent owners are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, the Company believes that, during the year
ended December 31, 1994, all officers and directors of the Company and
greater than ten-percent beneficial owners complied with applicable filing
requirements.
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, shareholders will elect directors to serve until
the 1996 Annual Meeting of Shareholders. The Bylaws of the Company
provide that the Company's Board of Directors must consist of not fewer
than three, nor more than eleven, directors and that the number of
directors, within such limits, will be determined by resolution of the
Board of Directors. By action of the Board of Directors, the number of
directors has been set at six. The six persons currently serving as
directors of the Company have been nominated by the Board of Directors to
serve as directors of the Company until the 1996 Annual Meeting of
Shareholders or until their successors have been duly elected and have
qualified.
Unless otherwise directed on any duly executed and dated Proxy, it is the
intention of the persons named in such Proxy to nominate and to vote the
shares represented by such Proxy for the election of the nominees listed
in the table below for the office of director of the Company to hold
office until their respective successors have been duly elected and have
qualified.
<TABLE>
<CAPTION>
YEAR FIRST
NAME POSITION ELECTED DIRECTOR
<S> <S> <S>
Anthony J. Gumbiner Chairman of the Board and Director 1984
William L. Guzzetti President and Director 1985
Brian M. Troup Director 1984
Hans-Peter Holinger Director 1984
Rex A. Sebastian Director 1993
Nathan C. Collins Director 1995
</TABLE>
The Board of Directors does not contemplate that any of the above-named
nominees for director will refuse or be unable to accept election or to
serve as a director of the Company. Should any of them become unavailable
for nomination or election or refuse to be nominated or to accept election
as a director of the Company, then the person or persons voting the Proxy
will vote the shares represented by such Proxy for the election of such
other person or persons as may be nominated or designated by the Board of
Directors. If elected as a director of the Company, each director will
hold office until his successor has been duly elected and has qualified.
BUSINESS EXPERIENCE OF DIRECTORS
Anthony J. Gumbiner, 50, has served as a director and as Chairman of the
Board and Chief Executive Officer of the Company since May 1984 and
February 1987, respectively. He has also served as Chairman of the Board
of Directors of Hallwood Group, a diversified holding company with real
estate, textile products, hotel, restaurant and energy operations, since
1981 and as Chief Executive Officer of Hallwood Group since April 1984.
Mr. Gumbiner has also served as Chairman of the Board of Directors and as
a director of Hallwood Holdings S.A., a Luxembourg listed real estate
investment company, since March 1984 and as a director of ShowBiz Pizza
Time, Inc., a company primarily engaged in the restaurant business, since
September 1988. He has been a director of Hallwood Consolidated Resources
Corporation ("HCRC") since June 1992 and a director of Hallwood Realty
Corporation ("Hallwood Realty"), which is the general partner of Hallwood
Realty Partners, L.P., since November 1990. He is a Solicitor of the
Supreme Court of Judicature of England.
William L. Guzzetti, 51, has been President, Chief Operating Officer and a
director of the Company since February 1985. Mr. Guzzetti joined the
Company in February 1976 as Vice President, Secretary and General Counsel
and served in these positions until November 1980. He served as Senior
Vice President, Secretary and General Counsel from November 1980 until
February 1985, when he assumed his current office. Mr. Guzzetti is also
an Executive Vice President of Hallwood Group and in that capacity may
devote a portion of his time to the activities of Hallwood Group,
including the management of real estate investments, acquisitions and
restructurings of entities controlled by Hallwood Group. He is a director
and President of Hallwood Realty and in that capacity may devote a portion
of his time to the activities of Hallwood Realty. He is a director and
President of HCRC.
Brian M. Troup, 48, has served as a director of the Company since May
1984. He has been President and Chief Operating Officer of Hallwood Group
since April 1986, and he is a director. He is a director of Hallwood
Holdings S.A. and a director of ShowBiz Pizza Time, Inc. He is also a
director of HCRC and Hallwood Realty. He is an associate of the Institute
of Bankers in Scotland and a member of the Society of Investment Analysts
in the United Kingdom.
Hans-Peter Holinger, 52, is a citizen of Switzerland. He served as
Managing Director of Interallianz Bank Zurich A.G. from 1977 to February
1993. Since February 1993, he has been the majority owner of Holinger
Asset Management AG, Zurich.
Rex A. Sebastian, 65, has served as a director of the Company since
January 1993. Mr. Sebastian is a member of the Boards of Directors of The
Phoenix Resource Companies, Inc. and Ferro Corporation. Mr. Sebastian
served as Senior Vice President--Operations of Dresser Industries, Inc.
from January 1975 until his retirement in July 1985. He joined Dresser in
1966. Mr. Sebastian is now a private investor.
Nathan C. Collins, 60, was appointed a director of the Company in March
1995. Since March 1, 1995 he has been President, Chief Executive Officer
and a director of Flemington National Bank & Trust Co. in Flemington, New
Jersey. From November 1987 until December 1994, he was Chairman of the
Board of Directors, President and Chief Executive Officer of BancTexas
Group Inc. He began his banking career in August 1964 with the Valley
National Bank in Phoenix, Arizona and held various positions there,
finally becoming Executive Vice President, Senior Credit Officer and
Manager of Asset/Liability Group of the bank.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Following are brief biographies of the executive officers of the Company,
other than Mr. Guzzetti.
Russell P. Meduna, 40, became Executive Vice President of the Company in
June 1991. He was Vice President from May 1990 until June 1991. Mr.
Meduna has been Executive Vice President of Hallwood G.P., Inc. ("HGP")
and Hallwood Petroleum, Inc. ("HPI") which are affiliates of the Company,
since October 1989. Mr. Meduna was Vice President of such entities from
April 1989 to October 1989 and Manager of Operations from January 1989 to
April 1989. He joined HPI in 1984 as Production Manager. Mr. Meduna is
also Executive Vice President of HCRC. He is a registered professional
engineer in the States of Colorado and Texas.
Cathleen M. Osborn, 42, became Vice President, Secretary and General
Counsel of the Company in June 1991. Ms. Osborn has been Vice President,
Secretary and General Counsel of HGP and HPI since October 1986 and of
HCRC since June 1992. She joined HGP and HPI in 1985 as senior staff
attorney. Ms. Osborn is a member of the Colorado State Bar.
Robert S. Pfeiffer, 38, became Chief Financial Officer of the Company in
June 1994. He has been Vice President--Finance of the Company since June
1991. Mr. Pfeiffer has been Vice President of HGP and HPI since October
1986 and of HCRC since June 1992. He joined HGP and HPI in 1984. From
July 1979 to May 1984, he was employed by Price Waterhouse as a senior
accountant.
COMMITTEES; MEETINGS OF THE BOARD
The Board's Audit Committee, composed in 1994 of Messrs. Troup, Holinger
and Sebastian, recommends to the Board the firm to be employed as the
Company's and the Partnership's independent auditors and consults with,
and reviews the report of, the Company's independent auditors and HPI's
financial staff. The Audit Committee held two meetings during 1994. The
principal function of the Compensation Committee is to review the
compensation plans for directors, officers and other personnel. The
Compensation Committee held one meeting in 1994 and a meeting in January
1995. At both meetings, the entire Board of Directors acted as the
Compensation Committee. See "Executive Compensation - Board Compensation
Committee Report on Executive Compensation." The Board's Executive
Committee, composed of Messrs. Gumbiner, Troup and Guzzetti, is authorized
to exercise all the authority of the Board in the business and affairs of
the Company, except as limited by applicable law. The Board's Executive
Committee held no meetings during 1994. The Board's Special Committee to
act upon holding securities of, and issuing securities to, affiliates is
composed of Mr. Holinger, and it held no meetings during 1994. The
Company does not have a standing Nominating Committee.
The Board of Directors held four regularly scheduled meetings and three
special meetings during 1994. No director attended fewer than 75% of the
total number of meetings of the Board of Directors and committees of which
he is a member.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The Company has no employees. Management services are provided to the
Company by HPI, an affiliated entity. Employees of HPI perform all duties
related to the management of the Company and the Partnership, including
the operation of various properties in which the Company and the
Partnership own an interest. The Company and the Partnership are charged
for management services by HPI based on an allocation procedure that takes
into account the amount of time spent on management, the number of
properties owned by the Company and the Company's performance relative to
its affiliates. The allocation procedure is applied consistently to all
entities for which HPI performs services.
The following table sets forth the compensation paid by HPI for the years
ended December 31, 1994, 1993 and 1992 to the Chief Executive Officer and
each of the four other most highly compensated officers (determined for
the year ended December 31, 1994).
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation Compensation
<S> <S> <S> <S> <S> LTIP <S> All Other
Name & Principal Position Year Salary Bonus Payouts Compensation (1)
Anthony J. Gumbiner (2) 1994 $125,000(3) $ 0 $ 0 $ 0
Chief Executive Officer 1993 0 0 0 0
1992 0 0 0 0
William L. Guzzetti 1994 200,240 72,800 9,449 6,004
President and Chief 1993 200,240 65,000 5,227 6,004
Operating Officer 1992 206,250 21,491 0 0
Russell P. Meduna 1994 164,024 24,200 9,449 4,409
Executive Vice President 1993 167,356 62,500 5,227 4,477<PAGE>
1992 163,369 15,920 0 0
Robert S. Pfeiffer 1994 107,755 25,700 6,963 3,160
Vice President 1993 109,941 47,025 3,851 3,171
1992 105,745 14,823 0 0
Cathleen M. Osborn 1994 105,848 24,600 6,963 3,160
Vice President and 1993 104,353 50,000 3,851 3,027
General Counsel 1992 102,083 14,723 0 0
______________________
<F1>
(1) Employer contribution to 401(k) account.
<F2>
(2) In addition to compensation listed in the table, HPI has a consulting
agreement with Hallwood Group which expires June 30, 1997, pursuant to
which Hallwood Group receives an annual consulting fee of $300,000. In
1992 and 1993, the agreement was assigned to Hallwood Securities
Limited, a company of which Mr. Gumbiner is a managing director. In
1994, the consulting services were provided by HSC Financial Corporation
("HSC Financial"), through the services of Mr. Gumbiner and Mr. Troup,
and Hallwood Group paid the annual fee it received to HSC Financial.
See "Compensation Committee Interlocks and Insider Participation" below.
<F3>
(3) Mr. Gumbiner has a Compensation Agreement with HPI pursuant to which HPI
pays Mr. Gumbiner $250,000 per year. The Compensation Agreement was
effective August 1, 1994 and continues in effect until terminated by
either party on not less than six months' notice.
</TABLE>
In 1994, $18,594 of the compensation listed above was allocated by HPI to
the Company and $426,099 was allocated to the Partnership. In 1993,
$18,684 was allocated to the Company and $471,309 was allocated to the
Partnership. In 1992, $15,823 was allocated to the Company and $336,447
was allocated to the Partnership.
OPTION EXERCISES AND HOLDINGS
At the end of the 1994 fiscal year, no executive officer held unexercised
options or stock appreciation rights ("SARs") in the Company. No
executive officer exercised options or SARs during 1994. Mr. Guzzetti
relinquished all of his options, for no consideration, in February of
1994.
LONG-TERM INCENTIVE PLAN AWARDS
The following table describes performance units awarded to the executive
officers of the Company for 1994 under the Domestic Incentive Plan and
International Incentive Plan for the Company and affiliated entities. The
value of awards under each plan depends primarily on success in drilling,
completing and achieving production from new wells each year and from
certain recompletions and enhancements of existing wells. The amounts
shown below are aggregate awards under the plans for the Company, the
Partnership and HCRC; the awards were allocated 64% to the Partnership and
36% to HCRC, based on the ownership of the wells included in the plans.
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<CAPTION>
<S> <S> <S> <S>
Performance or Estimated Future
Number of Other Period Payouts under Non-Stock
Name Units Until Payout Price-Based Plans
Anthony J. Gumbiner .00 0 $ 0
William L. Guzzetti .15 2000 11,364 (1)
.22 2004 0 (2)
Russell P. Meduna .15 2000 11,364 (1)
.22 2004 0 (2)
Robert S. Pfeiffer .13 2000 9,849 (1)
.165 2004 0 (2)
Cathleen M. Osborn .13 2000 9,849 (1)
.165 2004 0 (2)
_______________________
<F1>
(1) This amount represents an award under the Domestic Incentive Plan.
There are no minimum, maximum or target amounts payable under the
Domestic Incentive Plan. Payments under the awards will be equal to the
indicated percentage of plan net cash flow from certain wells for the
first five years after an award and, in the sixth year, the indicated
percentage of 40% of the remaining net present value of estimated future
production from the wells. The amounts shown above are estimates based
on estimated reserve quantities and future prices. Because of the
uncertainties inherent in estimating quantities of reserves and prices,
it is not possible to predict cash flow or remaining net present value
of estimated future production with any degree of certainty.
<F2>
(2) This amount represents an award under the International Incentive Plan.
There are no minimum, maximum or target amounts payable under the
International Incentive Plan. Payments under the awards will be equal
to the indicated percentage of gross revenues, net of costs of
transportation and marketing, from international projects. The
Partnership and HCRC have not recorded any proved reserves attributable
to international projects, so the current estimated future payout for
the 1994 awards is 0.
</TABLE>
DIRECTOR COMPENSATION
Each director of the Company who is not an officer or employee of, or
consultant to, the Company is entitled to receive an annual fee of $20,000
which will be proportionately reduced if the director attends fewer than
four meetings of the Board of Directors during any calendar year. In
addition, all directors are reimbursed for their expenses in attending
meetings of the Board of Directors and committees. Only Mr. Sebastian
received the $20,000 annual fee in 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The entire Board of Directors served as the Compensation Committee of the
Company during fiscal year 1994. Mr. Gumbiner is also Chief Executive
Officer of the Company. He is a director and serves on the compensation
committee of Hallwood Group, of which Mr. Troup is President and Mr.
Guzzetti is Executive Vice President. Mr. Gumbiner is also Chief
Executive Officer and a director of HCRC, Mr. Troup is a director of HCRC,
and Mr. Guzzetti is a director and President of HCRC. The Board of HCRC
made compensation decisions for HCRC in 1994 and January 1995. Mr.
Gumbiner is Chief Executive Officer and a director, and Mr. Guzzetti is
President and a director, of Hallwood Realty. During 1994, Messrs.
Gumbiner and Guzzetti served on the compensation committee of Hallwood
Realty.
HPI has a financial consulting agreement with Hallwood Group pursuant to
which Hallwood Group furnishes consulting and advisory services to the
Company and the Partnership and their affiliates. Under the terms of the
financial consulting agreement, HPI is obligated to pay Hallwood Group
three annual payments of $300,000 beginning June 30, 1994, and Hallwood
Group is obligated to furnish consulting and advisory services to HPI, the
Partnership and their affiliates through June 30, 1997. In 1994, the
consulting services were provided by HSC Financial Corporation, through
the services of Mr. Gumbiner and Mr. Troup, and Hallwood Group paid the
annual fee it received to HSC Financial. Of the $300,000 fee paid in
1994, approximately $7,000 was paid by the Company, $166,000 was paid by
the Partnership and the remainder was paid by other affiliates.
The Company and the Partnership reimburse Hallwood Group for expenses
incurred on behalf of the Company and the Partnership. In 1994, the
Company reimbursed Hallwood Group approximately $14,000, and the
Partnership reimbursed Hallwood Group approximately $330,000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General. The Company's primary activity is to serve as general partner of
the Partnership, which in turn controls several other entities
(collectively, the "Energy Companies"). The Company has no employees; all
management is provided by employees of HPI which provides services to all
of the Energy Companies. Accordingly, the Company does not directly pay
any compensation but reimburses HPI for its costs and expenses.
Individual compensation is based on the individual's responsibilities and
performance relating to all of the Energy Companies. Salaries are
allocated among the Energy Companies based on a procedure that takes into
account both the amount of time spent on management and the number of
properties owned by each entity. The cash bonus pool is allocated among
the Energy Companies based upon the entity's performance relative to all
of the Energy Companies. Awards under the long-term incentive plans are
allocated based upon the ownership of the wells included in the plans.
Because the compensation paid to HPI employees is allocated to all of the
Energy Companies, it is reviewed and approved by the Compensation
Committee of the Company on behalf of the Company and the Partnership.
The compensation of the Energy Companies' management employees, including
executive officers, is reviewed and approved at least annually.
During 1994, salaries were reviewed and awards under the Domestic
Incentive Plan and the International Incentive Plan were made by the full
Board of Directors acting as the Compensation Committee. In January 1995,
the full Board of Directors again acted as the Compensation Committee in
determining cash bonuses paid with respect to 1994 and the salaries to be
paid and other awards made in 1995. In determining 1994 compensation of
key employees, the Energy Companies' compensation levels were compared
with those of comparable companies, as reported by compensation
consultants and other industry surveys. The comparable companies consist
of twelve independent oil and gas companies selected by consultants to the
Energy Companies and are not the same as those used in preparing the
performance graph appearing elsewhere in this Proxy Statement. For 1994,
the compensation of the Energy Companies' management employees consisted
of three primary components: salary and annual bonus, cash bonus and
long-term incentive plan awards.
Salary. All non-hourly employees' salaries and annual bonuses are
determined annually based on the individual employee's level of
responsibility and comparisons to similar positions in comparable
companies. Salaries of officers and other professional employees are
generally set at approximately 74% to 90% of the average base salaries
paid by those comparable companies. When an employee's position is not
standard and cannot be compared to similar positions in comparable
companies, compensation is determined in a discretionary process, taking
into consideration the components and overall responsibility of the
employee's position.
Cash Bonus. The Board has determined to award certain management
employees, including executive officers, cash bonuses based on an
assessment of a number of quantitative and qualitative factors. The
primary quantitative factors are performance in reserve finding,
considering overall reserves found and effectiveness of capital
expenditures, in comparison to the historical performance of independent
oil and gas companies as a group and comparison of general and
administrative expenses and operating costs to budget. Qualitative
factors include judgments regarding the effectiveness of management and
administration. Depending on the Energy Companies' success in these
areas, total salaries and cash bonuses paid to management employees may
range from 74% of the compensation paid to similarly situated employees in
comparable companies if the Energy Companies perform poorly to as high as
500% of the compensation paid by comparable companies if the Energy
Companies perform very well. Based on comparisons of the Energy
Companies' performance with the historical performance of other
independent oil and gas companies as a group as reported by generally
published industry statistics, the Compensation Committee determined that
the Energy Companies had a slightly less than average year in the overall
reserves found and effectiveness of capital expenditures. The Board also
concluded that the effectiveness of management and administration and
control of the expenses deserved recognition. Therefore, the cash
bonuses paid to management employees as a group were set at levels that
would result in their total annual compensation being less than that paid
by comparable companies. The aggregate cash bonuses are allocated among
the key and professional employees based on the recommendation of senior
management and a determination of the employees' relative contributions to
the Energy Companies during the year.
The Long-Term Incentive Plans. The Energy Companies' long-term incentive
plans consist of a Domestic Incentive Plan for domestic properties and an
International Incentive Plan for international projects. Both plans are
intended to provide incentive and motivation to the Energy Companies' key
employees, including the Company's executive officers, to increase the oil
and gas reserves of the Energy Companies and to enhance the Energy
Companies' ability to attract, motivate and retain key employees upon
whom, in large measure, the success of the Energy Companies depends.
The Domestic Incentive Plan. Under the Domestic Incentive Plan, the Board
annually determines the portion of the Energy Companies' collective
interests in the cash flow from certain wells drilled, recompleted or
enhanced during that year (the "Plan Year") which will be allocated to
participants in the plan. The portion allocated to participants in the
plan is referred to as the Plan Cash Flow. The board then determines
which key employees may participate in the plan for the Plan Year and
allocates the Plan Cash Flow among the participants. Awards under the
plan do not represent any actual ownership interest in the wells. Awards
are made in the Board's discretion.
Each award under the plan represents the right to receive for five years a
specified share of the Plan Cash Flow attributable to certain wells
drilled, recompleted or enhanced during the Plan Year. In the sixth year
after the award, the participant is paid an amount equal to a specified
percentage of the remaining net present value of estimated future
production from the wells and the award is terminated. Accordingly, the
value of awards under the plan depends primarily on the Energy Companies'
success in drilling, completing and achieving production from new wells
each year and from certain recompletions and enhancements of existing
wells. The percentage of the Energy Companies' cash flow from wells
completed in any Plan Year to be allocated to Plan Cash Flow each Plan
Year, the percentage of the remaining net present value of estimated
future production for which the participants will receive payment in the
sixth year of an award, and the amount to be awarded to individual
participants is determined by the Board each year, after taking into
consideration the recommendation of the Energy Companies' executive
officers.
The awards for the 1994 Plan Year were made in January 1994. For the 1994
Plan Year, the Compensation Committee determined that the total Plan Cash
Flow would be equal to 1% of the cash flow of the wells completed during
the Plan Year. The Compensation Committee also determined that the
participants' interests for the 1994 Plan Year would be purchased in the
sixth year at 40% of the remaining net present value of the wells
completed in the Plan Year. The Compensation Committee also determined
that the total awards would be allocated among key employees primarily on
the basis of salary, to the extent of 70% of the total award, and on
individual performance, to the extent of 30% of the total award.
The International Incentive Plan. The International Incentive Plan was
adopted by the Board in January 1994 and the first awards were made with
respect to the 1994 Plan Year. Under the Plan, for each Plan Year awards
will be made entitling the participants to receive for ten years from the
date of first production an aggregate of 3% of the gross revenues, net of
the costs of transportation and marketing, from international projects
active during the Plan Year. The Board determines which key employees may
participate in the Plan for the Plan Year and allocates the awards among
the participants. Awards under the Plan do not represent any actual
ownership interests in any international projects and are made in the
Board's discretion.
Chief Executive Officer. Effective August 1, 1994, Mr. Gumbiner has a
Compensation Agreement with HPI pursuant to which HPI pays Mr. Gumbiner
for providing consultation and assistance in maintaining relationships
with foreign governments and negotiating contracts outside the United
States. The Energy Companies engaged in certain transactions with
Hallwood Group, of which Mr. Gumbiner is Chairman and Chief Executive
Officer, during 1994. In addition, the Energy Companies have a consulting
agreement with Hallwood Group effective June 30, 1993 and expiring June
30, 1997, pursuant to which the Energy Companies pay Hallwood Group a
$300,000 annual consulting fee. In 1994, the consulting services were
provided by HSC Financial Corporation, through Mr. Gumbiner and Mr. Troup,
and Hallwood Group paid the annual fee it received to HSC Financial. Both
agreements were approved by the Board of Directors of the Company, Mr.
Gumbiner abstaining. See "Compensation Committee Interlocks and Insider
Participation" above.
Members of the Board Who Participated in Compensation
Decisions:
Anthony J. Gumbiner
Brian M. Troup
Hans-Peter Holinger
Rex A. Sebastian
William L. Guzzetti
PERFORMANCE GRAPH
Below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock with the
cumulative total return of the Standard & Poor's 500 Composite Stock Index
("S&P 500") and Kirkpatrick Energy Associates Small Cap E&P Index ("KEA
Small Cap E&P") for the period beginning December 31, 1989 through
December 31, 1994. Dividend reinvestment has been assumed.
<TABLE>
<CAPTION>
<S> <S> <S> <S>
Hallwood Energy KEA Small
Year Corporation S&P 500 Cap E&P
1989 100 100 100<PAGE>
1990 89.6 104.93 86
1991 96 109.36 64
1992 97.6 114.25 81
1993 166.4 122.3 108
1994 178.6 120.43 104
</TABLE>
OTHER BUSINESS
The Board of Directors knows of no other business that may properly be, or
that is likely to be, brought before the Annual Meeting. If, however, any
other matters are properly presented, it is the intention of the persons
named in the accompanying form of Proxy to vote the shares covered thereby
as they deem advisable in their discretion.
INDEPENDENT AUDITORS
Deloitte & Touche LLP currently serves the Company as independent
auditors. Representatives of Deloitte & Touche LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, shareholders may present proper proposals for inclusion in the
Company's proxy statement and for consideration at its Annual Meeting of
Shareholders by submitting their proposals to the Company in a timely
manner. In order to be included for the 1996 Annual Meeting, shareholder
proposals must be received by the Company by November 30, 1995, which is
approximately 120 days in advance of the date the Company anticipates
mailing the proxy statement for the Company's 1996 Annual Meeting of
Shareholders, and must otherwise comply with the requirements of Rule 14a-
8.
By Order of the Board of Directors
Cathleen M. Osborn
Secretary
March 31, 1995
Dallas, Texas
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HALLWOOD ENERGY CORPORATION
FOR ANNUAL MEETING OF SHAREHOLDERS MAY 9, 1995
The undersigned hereby appoints WILLIAM L. GUZZETTI and CATHLEEN M. OSBORN,
and each of them, with full power of substitution, proxies of the
undersigned at the Annual Meeting of Shareholders of Hallwood Energy
Corporation, to be held at 3710 Rawlins, Suite 1500, Dallas, Texas 75219,
on Tuesday, May 9, 1995 at 10:00 a.m., and at all adjournments or
postponements thereof, and hereby authorizes them to represent and to vote
all of the shares of the undersigned as fully as the undersigned could do
if personally present. Said proxies are herein specifically authorized to
vote the shares of the Company which the undersigned is entitled to vote in
the election of Directors and to vote said shares upon such other matters
as may properly come before the Meeting or any adjournment or postponement
thereof, as the above named proxies shall determine.
The shares represented by this Proxy will be voted for Proposals 1 and 2 if
no instruction to the contrary is indicated or if no instruction is given.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1. Election of Directors:
Nominees: For a term expiring at the 1996 Annual Meeting:
ANTHONY J. GUMBINER, BRIAN M. TROUP, WILLIAM L. GUZZETTI, HANS-PETER
HOLINGER, REX A. SEBASTIAN AND NATHAN C. COLLINS
To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.
----------------------------------------------------------------
------ FOR ALL NOMINEES
------ WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
2. To transact such other business as may properly come before the meeting and
all adjournments or postponements thereof.
FOR AGAINST ABSTAIN
---- ---- ----
If no specification is made with respect hereto, such shares will be voted FOR
the election of these Directors and either for or against such other matters as
may properly come before the meeting or any adjournment or postponement thereof,
as the above named proxies may determine.
MARK HERE FOR ADDRESS ------
CHANGE AND NOTE AT LEFT
Sign exactly as name appears on your stock certificate. When signing as
attorney, executor, administrator, guardian or corporate official, please give
your full title as such.
Signature:---------------------------------------------------- Date:-----------
Signature:---------------------------------------------------- Date:-----------
