SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by 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 Materials Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Hallwood Energy Corporation
(Name of Registrant as Specified in Its Charter)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Name of Person(s) Filing Proxy Statement, if other than the Registrant):
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 amount on which the
filing 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
HALLWOOD ENERGY CORPORATION
4610 S. ULSTER STREET, SUITE 200
DENVER, COLORADO 80237
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Our Stockholders:
The following are the essential facts in the call of the annual meeting of
Stockholders of Hallwood Energy Corporation.
LOCATION.............................. 3710 Rawlins, Suite 1500
Dallas, Texas
TIME......................................... 11:00 a.m. CDT
DATE........................................ Wednesday, May 17, 2000
ITEMS OF BUSINESS TO BE 1.To elect three directors to
hold office for three years;
ADDRESSED........................
2.To transact any other business
properly presented at the
meeting.
RECORD DATE...................... Stockholders of record as of the
close of business on March 24,
2000 are entitled to notice
of and to vote at the annual
meeting of Stockholders or any
adjournment of the meeting.
ANNUAL REPORT................. The Company's 1999 Annual
Report, which is not part of the
proxy soliciting material, is
enclosed. The Annual Report
contains the Company's
Form 10-K.
By Order of the Board of Directors,
Cathleen M. Osborn
Vice President, General Counsel
& Corporate Secretary
April 7, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING REGARDLESS OF
THE NUMBER YOU OWN. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY SIGN
AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE.
<PAGE>
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
OF
HALLWOOD ENERGY CORPORATION
4610 S. ULSTER STREET, SUITE 200
DENVER, COLORADO 80237
TELEPHONE (303) 850-7373
This Proxy Statement contains important information about the 2000 Annual
Meeting of the Stockholders of Hallwood Energy Corporation. This meeting will be
held on Wednesday, May 17, 2000, at 11:00 a.m. CDT, at the offices of Company
located at 3710 Rawlins, Suite 1500, Dallas, Texas. If the annual meeting should
be adjourned to another time or place, this Proxy Statement will also apply to
the resumption of the meeting at that new time and place.
DATE OF MAILING
This Proxy Statement and the accompanying proxy card are being sent to the
Company's stockholders on or about April 7, 2000.
THE PURPOSE OF THIS PROXY STATEMENT -- RECOMMENDATIONS BY THE BOARD OF DIRECTORS
This Proxy Statement is a solicitation of proxies by the Board of Directors of
the Company. The Board asks you to authorize the proxies appointed by the Board
to vote in favor of: (1) the election of three directors to the Board; and (2)
transacting any other business properly presented at the meeting.
VOTING YOUR SHARES BY PROXY
You may vote your shares by signing and returning your proxy card to the Company
in the prepaid envelope. If your shares are held in "street name" with a broker
or similar party, your broker will provide you with voting instructions. If you
hold both Common Stock and Preferred Stock in street name, you will receive two
proxy cards, one for voting each class of stock. Please vote and return both
cards.
The proxies will vote your shares in accordance with the instructions you
provide on your proxy card. If you authorize the proxies to vote your shares but
do NOT specify how your shares should be voted, then your shares will be voted
FOR the election of all Director nominees specified in this Proxy Statement.
The Company does not know of any matters other than the election of Directors
that will be presented at the annual meeting. However, if any other matters are
presented at the meeting, the proxy for your shares will be voted in accordance
with the recommendations of the Company's management unless you withhold
authority to vote on any other such matters.
IF YOU DECIDE TO CHANGE YOUR PROXY OR REVOKE IT
After voting by proxy, you may revoke your proxy at any time prior to the voting
of shares in one of three ways: (1) You may write to the Corporate Secretary of
the Company prior to the annual meeting (in time for the written communication
to reach the Secretary) and tell her in writing that you wish to revoke your
proxy, (2) you may return a later-dated proxy card, or (3) you may revoke your
proxy by attending the annual meeting, informing the Secretary or her designee
prior to the voting of shares at the annual meeting that you wish to revoke your
proxy and then voting by ballot at the meeting.
HOW IS HALLWOOD SOLICITING PROXIES?
Proxies are being solicited initially by mail. The Company, through its officers
and employees, may also solicit proxies in person or by telephone. No Company
employees will receive additional compensation for their services in soliciting
proxies. In addition, certain banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries who hold shares for the benefit of some other
party (the "beneficial owner") may solicit proxies. If so, they will mail proxy
information to, or otherwise communicate with, the beneficial owners of shares
of the Company's stock held by them. The Company also will pay all other
expenses of solicitation of proxies.
WHO IS ENTITLED TO VOTE?
Only persons who own shares of Hallwood's Common Stock or Preferred Stock as of
the close of business on the record date, which is March 24, 2000, as shown on
the official stock ownership records of the Company, will be entitled to vote at
the annual meeting. Hallwood's official records of stock ownership will
conclusively determine whether you are a "holder of record" as of such date and
time. As of March 24, 2000, there were 9,999,754 shares of Common Stock and
2,290,349 shares of Preferred Stock issued and outstanding. All voting at the
annual meeting will be on the basis of shares outstanding on the record date of
March 24, 2000, and stockholders will be entitled to vote only the number of
shares held by them on March 24, 2000. Former limited partners in Hallwood
Energy Partners, L.P. and former stockholders in Hallwood Consolidated Resources
Corporation who did not exchange their HEP Units or Hallwood Consolidated shares
by March 24, 2000 will not be entitled to vote. Approximately 587,460 shares of
Common Stock and 30,990 shares of Preferred Stock of the Company have not been
exchanged and are not entitled to vote at the annual meeting.
Each share of Common Stock and Preferred Stock is entitled to one vote on each
matter to come before the annual meeting (i.e., "one share, one vote"). The
Common Stock and Preferred Stock vote together in the election of Directors and
vote as separate classes on all other matters upon which stockholders may vote.
WHAT CONSTITUTES A QUORUM?
In order to transact business at the annual meeting, a "quorum" of the
stockholders must be present. The presence at the annual meeting of stockholders
who own a majority (i.e. more than 50%) of the total shares of Common Stock and
Preferred Stock outstanding will constitute a quorum for the transaction of
business. Stockholders will be counted as "present" at the meeting if they
attend in person or if they have sent to the Company a properly signed proxy
card. The unexchanged shares of Common Stock and Preferred Stock will be
considered outstanding in determining if a quorum is present.
WHAT IS THE EFFECT OF MY ABSTAINING FROM VOTING ON ANY MATTER?
The Company is a Delaware corporation. Delaware corporation law states that if a
stockholder chooses to abstain from voting, the stockholder will still be
treated as present and entitled to vote for purposes of determining whether a
quorum is present. In other words, those shares will be counted in determining
whether a majority -- more than 50% -- of the Company's shares are considered
"present" at the meeting, therefore constituting a quorum. As a result, if you
complete your proxy card but abstain from voting on any matter, you will be
considered present for purposes of determining whether a quorum is established.
Abstentions will not be counted as a vote "for" or "against" any matter.
However, shares which abstain from voting will have the same effect as voting no
or against any matter voted on at the meeting which requires the affirmative
vote of a majority of the shares present and voting. Delaware corporation law
also provides that broker non-votes will be considered as shares present at the
meeting for purposes of establishing a quorum. A broker non-vote occurs when a
broker who holds customers' securities does not have authority to vote the
securities. A broker non-vote on a matter will only count in determining whether
there is a quorum present at the meeting. Like abstentions, broker non-votes
will not be counted in determining whether a matter has been approved by a
majority of the shares present at the meeting or whether a plurality of the vote
of the shares present and entitled to vote has been cast.
ELECTION OF DIRECTORS
The Board has nominated William L. Guzzetti, Nathan C. Collins and Jerry A.
Lubliner for election to the Board at the annual meeting. Information about
these persons, their business experience and other relevant information may be
found on pages 6 and 7 of this Proxy Statement.
WHAT VOTE IS REQUIRED TO ELECT DIRECTORS?
Directors are elected by a plurality of the votes cast at the meeting either in
person or by proxy. The three nominees for Directors who receive the highest
number of votes cast at the meeting will be elected to the Board.
TERMS OF OFFICE OF DIRECTORS ELECTED AT THE ANNUAL MEETING
Directors who are elected at the annual meeting will serve for a term of office
that continues from the date and time of their election until the 2003 Annual
Meeting of Stockholders. The Board is divided into three classes of Directors,
with each class consisting of approximately one-third of the total number of
Directors and with the classes serving staggered three-year terms. At the annual
meeting, you will elect three Directors to the Board. The remaining Directors
will continue in office for their terms indicated on pages 7 and 8 of this Proxy
Statement.
WHAT HAPPENS IF A NOMINEE CANNOT SERVE?
The persons who have been nominated for election as Directors have told Hallwood
that they are willing to be elected and to serve as Directors of the Company. If
any of these nominees should become unable to serve, or otherwise should become
unavailable for election (for example, if any of them should become ill or
incapacitated or should die), the current members of the Board of Directors (by
majority vote) may name another person as a substitute nominee. If a substitute
nominee is named by a majority vote of the current members of the Board, all
proxies will be voted for the person so named (unless you specify on your proxy
card to withhold voting for such person). The current Board is not required to
name a substitute nominee. If a substitute nominee is not named by the current
Board, then all proxies will be voted for the election of the remaining nominees
(or as directed on your proxy card). In no event will more than three Directors
be elected at the annual meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES AS
DIRECTORS
STOCK OWNERSHIP
The stock ownership table set forth on the next page contains certain
information about large stockholders of the Company as well as information
regarding stock ownership by the Company's Directors and executive officers as
of March 24, 2000.
WHO ARE THE COMPANY'S LARGEST STOCKHOLDERS?
The table on the next page includes information on each stockholder the Company
knows to be the "beneficial" owner of more than five percent (5%) of the
Company's Common Stock and Preferred Stock outstanding. A beneficial owner is
the person or entity entitled to the rights and benefits associated with
ownership of the stock, whether or not that person actually holds legal title.
For example, a person who holds shares in "street name" with a broker is the
beneficial owner, even though the broker may hold actual legal title.
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND SENIOR EXECUTIVES OWN?
The table also includes information on the stock ownership of each Director of
the Company, each of the Named Executive Officers of the Company and all
executive officers and Directors of the Company as a group.
WHO ARE THE NAMED EXECUTIVE OFFICERS?
The "Named Executive Officers" are the Company's Chief Executive Officer and the
four other most highly compensated executive officers of the Company as of the
end of the Company's 1999 fiscal year.
If a person or entity listed in the table on the next page is the beneficial
owner of less than one percent of the Company's Common Stock or Preferred Stock
outstanding, this fact is indicated by an asterisk in the table. Except as
otherwise noted in the footnotes to the table, each of the persons or entities
named in the following table has the sole voting and investment power with
respect to all shares of Common Stock and Preferred Stock of which such person
or entity is the beneficial owner. The address of each of the persons or
entities named in the table is based on information furnished to the Company by
such person or entity and is such person or entity's business address. In
determining the information to include in this table, the Company has
disregarded, and therefore not listed, shares reserved for issuance under
outstanding stock options except where otherwise indicated.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Title of Beneficially Owned Class
Class
5% or Greater Holders
<S> <C> <C> <C>
The Hallwood Group Incorporated(1) Common 1,800,000 18.0
3710 Rawlins Street, Suite 1500
Dallas, Texas 75219
Heartland Advisers, Inc. (2) Common 1,621,259 16.2
789 North Water Street
Milwaukee, Wisconsin 53202
NewSouth Capital Management, Inc. (3)
1000 Ridgeway Loop Rd., Ste. 233 Common 1,092,524 10.9
Memphis, Tennessee 38120
Directors and Executive Officers
Anthony J. Gumbiner (4) (5) Common 1,894,467 18.8
William L. Guzzetti (4) (5) Common 1,853,141 18.4
Preferred 6 *
Russell P. Meduna (5) Common 40,978 *
Cathleen M. Osborn (5) Common 28,730 *
Preferred 300 *
Thomas J. Jung (5) Common 25,933 *
Preferred 1,000 *
Hans-Peter Holinger
Rex A. Sebastian Common 297 *
Preferred 26 *
Nathan C. Collins
John R. Isaac, Jr.
Jerry A. Lubliner
Hamilton P. Schrauff
Bill M. Van Meter (6) Common 500 *
Preferred 2,000 *
All Directors and Executive Officers as a Common 2,114,264 20.5
Group (16 persons) (4) (5) (6) Preferred 5,398 *
<FN>
(1) Information is from the Amendment to Schedule 13D of The Hallwood Group
Incorporated filed February 28, 2000. According to the Schedule 13D, 360,000
of the shares are owned by Epsilon Trust, which has granted Hallwood Group
an irrevocable proxy with respect to those shares, and therefore, Hallwood
Group may be deemed to have sole voting power with respect to all 1,800,000
shares. Epsilon Trust has also granted Hallwood Group a right to purchase
the 360,000 shares for six months and a right of first refusal to the shares
thereafter. Therefore, Hallwood Group may be deemed to share dispositive
power over the 360,000 shares.
</FN>
<FN>
(2) Information is from the Amendment to Schedule 13G of Heartland Advisors
dated January 20, 2000. The Schedule 13G states that the shares are held in
investment advisory accounts of Heartland Advisors, Inc. and that no such
account holds more than 5% of the Common Stock. Heartland Advisors has
advised the Company that it owns 16.2% of the Common Stock as a result of
the consolidation of Hallwood Energy Partners, L.P. and Hallwood
Consolidated Resources Corporation. Heartland Advisors has certified to the
Company that it acquired shares of Common Stock in excess of 14.99%
inadvertently or without knowledge of the effect of the terms of the
Company's Rights Agreement dated June 8, 1999. Therefore, Heartland is not
an "Acquiring Person" under the Rights Agreement.
</FN>
<FN>
(3) Information is from Schedule 13G of NewSouth Capital Management, Inc., dated
December 31, 1999. The Schedule 13G states that NewSouth acquired the shares
on behalf of its investment advisor clients. The Schedule 13G also states
that the Estate of William B. Lee, III has the right to receive, with the
power to direct the receipt of dividends from, or the proceeds from the sale
of, such shares, and the estate's interest relates to more than 5% of the
Common Stock.
</FN>
<FN>
(4) Includes 1,800,000 shares of Common Stock beneficially owned by The
Hallwood Group Incorporated. Mr. Gumbiner is Chairman of the Board and
Chief Executive Officer of The Hallwood Group Incorporated and Mr. Guzzetti
is Executive Vice President.
</FN>
<FN>
(5) The following number of shares issuable upon the exercise of currently
exercisable options are included in the amounts shown: Mr. Gumbiner, 89,767
shares; Mr. Guzzetti, 53,067 shares; Mr. Meduna, 40,034 shares; Ms. Osborn,
27,900 shares; Mr. Jung, 24,533 shares; other executive officers, 64,701
shares.
</FN>
<FN>
(6) 1,200 shares of Preferred Stock are owned by his wife's trust, of which Mr.
Van Meter is the trustee.
</FN>
</TABLE>
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The Board is divided into three classes of Directors, with each class consisting
of approximately one-third of the total number of Directors and with the classes
serving staggered three-year terms. Directors elected at each annual meeting of
stockholders serve for a period of three years. Executive officers are elected
annually by the Board and serve at the discretion of the Board. The following
sets forth certain biographical information concerning each of the Company's
Directors and its executive officers.
DIRECTOR NOMINEES FOR ELECTION FOR A THREE-YEAR TERM ENDING WITH THE 2003 ANNUAL
MEETING
William L. Guzzetti, 56, has been President, Chief Operating Officer and a
Director of the Company since December 14, 1998. He was President, Chief
Operating Officer and a director of the general partner of Hallwood Energy
Partners, L.P. ("HEP") from 1985 until June 1999. He was President, Chief
Operating Officer and a director of Hallwood Consolidated Resources ("Hallwood
Consolidated") from May 1991 until June 1999. Mr. Guzzetti is also an Executive
Vice President of The Hallwood Group Incorporated ("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 Corporation ("Hallwood Realty"), which is the
general partner of Hallwood Realty Partners, L.P., and in that capacity may
devote a portion of his time to the activities of Hallwood Realty. He is a
member of The Florida Bar and the State Bar of Texas.
Nathan C. Collins, 65, has been a Director of the Company since June 8, 1999. He
was a director of the general partner of HEP from March 1997 until June 1999.
Since June 1999, he has been President of Nordstrom fsb. From February 1999
until June 1999, he was a consultant in banking products development for
Nordstrom, Inc. He is also a director of First State Bank of Flagstaff. From
March 1, 1995 until March 1, 1996, he was President, Chief Executive Officer and
a director of Flemington National Bank & Trust 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 Manger of Asset/Liability Group of the bank.
Jerry A. Lubliner, 45, has served as a Director of the Company since June 8,
1999. From June 1992 until June 1999, Dr. Lubliner was a director of Hallwood
Consolidated. Dr. Lubliner is a medical doctor who has been in private practice
since 1986. From 1986 to 1988, he was Associate Chief-Sports Medicine at the
Hospital for Joint Diseases--Orthopaedic Institute in New York. Dr. Lubliner is
a Fellow of the American Academy of Orthopaedic Surgeons.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
John R. Isaac, Jr., 55, has served as a Director of the Company since June 8,
1999. From June 1992 until June 1999, Mr. Isaac was a director of Hallwood
Consolidated. Since June 1, 1999, Mr. Isaac has been President and Chief
Executive Officer of 99(cent)Stuff, LLC, a chain of retail variety stores. Since
October 1997, Mr. Isaac has been Chief Executive Officer and President of Ideas,
Inc., a retail consulting company. From February 1996 to October 1997, Mr. Isaac
was President and Chief Executive Officer of Thorn Americas, Inc., parent of
Rent-A-Center USA. From March 1995 until February 1996, Mr. Isaac was President
and Chief Operating Officer of Rent-A-Center USA. From February 1991 to February
1995, Mr. Isaac was President and Chief Operating Officer of Everything's A
Dollar, a division of Value Merchants, Inc. He was President and Chief Executive
Officer of Hallwood Industries Incorporated from August 1987 to October 1991. He
was President of Tradevest, Inc., a mail order catalog retailer, from 1986 to
1987, and a Vice President of Service Merchandise Co., Inc., a catalog showroom
retailer, from 1981 to 1986.
Rex A. Sebastian, 70, has been a Director of the Company since June 8, 1999. He
was a director of the general partner of HEP from March 1997 until June 1999.
Until April 2000, Mr. Sebastian is a member of the board of directors of Ferro
Corporation. He 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.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING
Anthony J. Gumbiner, 55, has served as a Director of the Company since June 8,
1999. He has also served as Chairman of the Board of Directors of Hallwood Group
since 1981 and as Chief Executive Officer of Hallwood Group since April 1984. He
was Chairman of the Board and Chief Executive Officer of the general partner of
HEP from 1984 until June 1999. He was Chairman of the Board and Chief Executive
Officer of Hallwood Consolidated from February 1992 to June 1999. Mr. Gumbiner
has also served as Chairman of the Board of Directors and as a director of
Hallwood Holdings S.A., a Luxembourg real estate investment company, since March
1984. He has been a director of Hallwood Realty since November 1990. He is a
Solicitor of the Supreme Court of Judicature of England.
Bill M. Van Meter, 66, has served as a Director of the Company since June 8,
1999. From September 1996 until June 1999, Mr. Van Meter was a director of
Hallwood Consolidated. From 1986 until May 1996, Mr. Van Meter was President of
the Energy Companies of ONEOK division of ONEOK Inc. From 1958 to 1996, Mr. Van
Meter was employed by both major and independent oil companies. Mr. Van Meter is
now a private investor.
Hamilton P. Schrauff, 64, has served as a Director of the Company since June 8,
1999. From September 1996 until June 1999, Mr. Schrauff was a director of
Hallwood Consolidated. Since April 1999 Mr. Schrauff has been a partner in Tatum
CFO Partners, LLP. From July 1998 until March 1999 he was an independent
financial consultant. From March 1997 until June 1998, he was Chief Financial
Officer of Burns Controls Company. From March 1996 to January 1997 he was Vice
President of Capital Alliance. From August 1995 to February 1996 he was an
independent financial consultant. From October 1991 to August 1995 he was Vice
President and Chief Financial Officer of Basic Capital Management, Inc., Syntek
Asset Management, Inc., American Realty Trust Investors, Inc., Income
Opportunity Realty Trust and Transcontinental Realty Investors, Inc. From
October 1991 to February 1994 he was Executive Vice President and Chief
Financial Officer of National Income Realty Trust and Vinland Property Trust.
From December 1990 to October 1991 he was Vice President Finance-Partnership
Investments of Hallwood Group. From October 1980 to October 1990 he was Vice
President Finance and Treasurer, and from November 1976 to September 1980 he was
Vice President Finance, of Texas Oil and Gas Corporation. Mr. Schrauff is a
Certified Public Accountant and Certified Financial Planner. He is a member of
the American Institute of Certified Public Accountants, the Texas Society of
Certified Public Accountants and the Financial Executives Institute.
Hans-Peter Holinger, 57, has been a Director of the Company since June 8, 1999.
He was a director of the general partner of HEP from March 1997 until June 1999.
Mr. Holinger served as Managing Director of Interallianz Bank Zurich A.G. from
1977 until February 1993. Since February 1993, he has been the majority owner of
Holinger Asset Management AG, Zurich. Mr. Holinger is a citizen of Switzerland.
EXECUTIVE OFFICERS
Following are brief biographies of the executive officers of the Company, other
than Mr. Gumbiner and Mr. Guzzetti.
Russell P. Meduna, 45, has been Executive Vice President of the Company since
December 15, 1998. Mr. Meduna was Executive Vice President of the general
partner of HEP from October 1989 until June 1999. He was Executive Vice
President of Hallwood Consolidated from June 1992 until June 1999. He has been
Executive Vice President of Hallwood Petroleum, Inc. ("Hallwood Petroleum")
since October 1989. Mr. Meduna was Vice President of Hallwood Petroleum from
April 1989 to October 1989 and Manager of Operations from January 1989 to April
1989. He joined Hallwood Petroleum in 1984 as Production Manager. Prior to
joining Hallwood Petroleum, he was employed by both major and independent oil
companies. Mr. Meduna is a registered professional engineer in the States of
Colorado and Texas.
Cathleen M. Osborn, 47, has been Vice President, Secretary and General Counsel
of the Company since December 15, 1998. She was Secretary and General Counsel of
Hallwood Consolidated from May 1992 until June 1999 and Vice President from June
1992 until June 1999. Ms. Osborn was Vice President, Secretary and General
Counsel of the general partner of HEP from September 1986 until June 1999. She
has been Vice President, Secretary and General Counsel of Hallwood Petroleum
since October 1986. She joined Hallwood Petroleum in 1985 as senior staff
attorney. Ms. Osborn is a member of the Colorado State Bar.
William J. Baumgartner, 44, has been Vice President and Chief Financial Officer
of the Company and Hallwood Petroleum since November 22, 1999. From 1997 until
November 1999 Mr. Baumgartner was Vice President-Finance, Chief Financial
Officer and a director of Miller Exploration Company. He was Vice
President-Finance and Chief Financial Officer of Miller Oil Corporation from
1991 until 1997. He joined Miller Oil Company in 1985. Mr. Baumgartner was
employed in public accounting and with various independent oil and gas
exploration entities prior to joining Miller Oil Company.
Thomas J. Jung, 50, has been Vice President of Investor Relations of the Company
since November 22, 1999. From December 15, 1998 until November 22, 1999, he was
Vice President and Chief Financial Officer of the Company. He was Vice President
and Chief Financial Officer of the general partner of HEP and of Hallwood
Consolidated from May 1998 until June 1999. From January 1997 until April 1998,
he was a Senior Financial Associate with Trinity Petroleum Management, and
during that period he also provided consulting services. From 1994 to 1996, he
was Chief Executive Officer of FAR Gas Acquisitions Corp. From 1986 until 1994,
he was Vice President and Chief Financial Officer of NICOR Exploration &
Production Company and Reliance Pipeline Company.
Betty J. Dieter, 52, has been Vice President of Administration of the Company
since December 15, 1998. She has been Vice President of Hallwood Petroleum since
January 1995. Her previous positions with Hallwood Petroleum have included
Operations Manager, Rocky Mountain and Mid-Continent District Manager and
Manager of Operations Accounting and Administration. She joined Hallwood
Petroleum in 1985, and has 29 years experience in accounting and operations, 19
of which are in the oil and gas industry. Ms. Dieter is a Certified Public
Accountant.
George Brinkworth, 58, has been Vice President of Exploration of the Company
since December 15, 1998. He has been Vice President of Exploration of Hallwood
Petroleum since August 1994. He became associated with Hallwood Petroleum in
1987 when he was President of a joint venture program funded by Hallwood
Petroleum and two other domestic oil companies. Mr. Brinkworth has 35 years
experience with various exploration and production companies, including previous
responsibility for operations in the United Kingdom, Spain, Morocco, Egypt,
Indonesia, Malaysia and Peru, as well as in the United States. He is a
registered geophysicist in the State of California.
William H. Marble, 48, has been Vice President of Business Development of the
Company since December 15, 1998. He has been Vice President of Hallwood
Petroleum since December 1990. His previous positions with Hallwood Petroleum
have included Texas/Gulf Coast District Manager, Manager of Nonoperated
Properties and Chief Engineer. He joined a predecessor general partner of HEP in
1984. Mr. Marble is a registered engineer in the Sate of Colorado and has 25
years oil and gas engineering experience.
HOW MANY TIMES DID THE BOARD AND ITS COMMITTEES MEET LAST YEAR, AND WHICH
DIRECTORS ATTENDED THE MEETINGS?
The Board met three times during the 1999 fiscal year and acted five times by
unanimous written consent. The Board has two standing committees: the Audit
Committee and the Compensation Committee. Information set out below about these
committees tells the number of meetings held by each of these committees. All
directors attended at least 75%, in the aggregate, of the total number of
meetings of the Board and the total number of meetings of all committees on
which they served.
Audit Committee -- The Audit Committee reviews the annual audit report and the
Company's accounting practices and procedures and recommends to the Board the
firm of independent accountants to be engaged each year. The Audit Committee is
composed of Mr. Schrauff, who is Chairman, Mr. Collins, and Mr. Isaac. The
Committee met once during the 1999 fiscal year.
Compensation Committee -- The Compensation Committee determines the annual and
long-term compensation of the Company's executive officers. The Compensation
Committee is composed of Mr. Sebastian, who is Chairman, Mr. Van Meter, Mr.
Holinger and Dr. Lubliner. The Committee met three times during the 1999 fiscal
year.
HOW ARE THE DIRECTORS PAID FOR THEIR SERVICES TO THE COMPANY?
Directors who are not employees of the Company receive $20,000 per year, which
is proportionately reduced if the director attends fewer than four meetings of
the Board during the year. All Directors are reimbursed for their expenses
incurred in attending meetings. Directors who serve on a committee of the Board
receive $1,000 for each committee meeting attended if the committee meeting is
not held in connection with a meeting of the Board. The chairman of each
committee of the Board receives an additional annual fee of $5,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
The Company believes that each of its officers, Directors and greater than
ten-percent owners complied with all Section 16(a) filing requirements
applicable to them during fiscal 1999, except as set forth in the following
table. The following persons made late filings in 1999:
William Baumgartner Form 4 for grant of options, filed late
George Brinkworth Form 3, filed late
Betty Dieter Form 3, filed late
William Marble Form 3, filed late
Bill Van Meter Form 4 for purchase by wife's trust, filed late
EXECUTIVE COMPENSATION
HOW MUCH ARE THE COMPANY'S SENIOR EXECUTIVES PAID?
The following table sets forth the aggregate cash compensation paid for services
rendered during the 1997, 1998, and 1999 fiscal years by (i) the Company's Chief
Executive Officer and (ii) the Company's four other most highly compensated
executive officers who were serving as executive officers at the end of the 1999
fiscal year (collectively, the "Named Executive Officers"). Amounts shown for
1997, 1998 and January 1, 1999 through June 8, 1999 were paid by HEP and
Hallwood Consolidated.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Securities
Underlying
Options/ SARs LTIP All Other
-----
Name & Principal Position Year Salary Bonus (#) Payouts Compensation (1)
- ------------------------- ---- ------ ----- ---- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner (2) 1999 $168,333 $75,000 198,000 $66,208 0
Chief Executive Officer 1998 0 0 (3) 0 0
1997 0 0 (5) 0 0
William L. Guzzetti 1999 $204,811 $171,000 117,000 $23,251 $4,800
President and Chief 1998 204,811 162,800 (3) 30,523 4,800
Operating Officer 1997 204,294 143,870 (5) 42,854 4,750
Russell P. Meduna 1999 $163,664 $88,000 88,500 $23,251 $5,375
Executive Vice 1998 163,664 99,000 (3) 30,523 4,800
President 1997 163,664 111,520 (5) 42,854 4,750
Cathleen M. Osborn 1999 $119,614 $47,000 61,500 $16,956 $4,800
Vice President and 1998 119,614 74,500 (3) 21,458 4,800
General Counsel 1997 105,685 100,000 (5) 30,124 4,750
Thomas J. Jung 1999 $122,278 $21,000 54,000 0 $4,800
Vice President 1998 82,850 60,000 (3) (4) 0 1,922
<FN>
(1) Employer contribution to 401(k) and a service award of $575 paid to Mr.
Meduna in 1999.
</FN>
<FN>
(2) The amount shown in the table for 1999 is for the period from June 9, 1999
through December 31, 1999. During 1997 and 1998 HEP and Hallwood
Consolidated participated in a consulting agreement between Hallwood
Petroleum and Hallwood Group pursuant to which Hallwood Group received a
fee of $550,000 for each year from affiliates of Hallwood Petroleum. A fee
of $241,388 was paid under the agreement for the period January 1, 1999
through June 8, 1999. The consulting services were provided by HSC
Financial Corporation ("HSC Financial"), through the services of Mr.
Gumbiner and a former director of the Company, and Hallwood Group paid the
annual fee it received to HSC Financial.
</FN>
<FN>
(3) Consists of the following options to acquire HEP Class C units granted in
1998. These options have terminated.
</FN>
</TABLE>
Securities Underlying
Name Options/SARs (#)
---- ----------------
Anthony J. Gumbiner 34,588
William L. Guzzetti 16,588
Russell P. Meduna 14,188
Cathleen M. Osborn 10,024
Thomas J. Jung 10,024
(4) Consists of the following options to acquire HEP Class A units and Hallwood
Consolidated common stock granted in 1998. These options have terminated.
Securities Underlying
Name Company Options/SARs (#)
---- ----------- ----------------
Thomas J. Jung HEP 25,500
Hallwood Consolidated 9,540
(5) Consists of the following options to acquire Hallwood Consolidated common
stock granted in 1997. These options have terminated.
Securities Underlying
Name Options/SARs(#)
---- ---------------
Anthony J. Gumbiner 47,700
William L. Guzzetti 23,850
Russell P. Meduna 22,260
Cathleen M. Osborn 9,540
WHAT STOCK OPTIONS HAVE BEEN AWARDED TO THE COMPANY'S SENIOR EXECUTIVES?
The following table sets forth information with respect to all stock
options granted in fiscal 1999 to the Named Executive Officers.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realized Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (2)
------------------ -----
Number of % of Total
Securities Options/SARs
Underlying Granted Exercise or 5% 10%
Options/SARs Employees in Base Price Expiration $9.85 $13.64
Name Granted (1) Fiscal Year ($/Share) Date Share Price Share Price
---- -------- ----------- --------- ---- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner 198,000 30 7.00 6/9/06 $564,241 $1,314,922
William L. Guzzetti 117,000 18 7.00 6/9/06 $333,415 $776,999
Russell P. Meduna 88,500 13 7.00 6/9/06 $252,199 $587,730
Cathleen M. Osborn 61,500 9 7.00 6/9/06 $175,257 $408,423
Thomas J. Jung 54,000 8 7.00 6/9/06 $153,884 $358,615
<FN>
(1) Options have a seven-year term and vest cumulatively over three years at
the rate of 1/3 on each of the date of grant and the first two
anniversaries of the grant date. All options vest immediately in the event
of certain changes in control of the Company.
</FN>
<FN>
(2) Securities and Exchange Commission Rules require calculation of potential
realizable value assuming that the market price of the Common Stock
appreciates in value at 5% and 10% annualized rates. At a 5% annualized
rate of appreciation, the Common Stock price would be $9.85 at the end of
seven years. At a 10% annualized rate of appreciation, the Common Stock
price would be $13.64 at the end of seven years. No gain to an executive
officer is possible without an appreciation in Common Stock value, which
will benefit all holders of Common Stock. The actual value an executive
officer may receive depends on market prices for the Common Stock, and
there can be no assurance that the amounts reflected will actually be
realized.
</FN>
</TABLE>
No options were exercised by executive officers in 1999. The following table
sets forth the value of options held by the executive officers at December 31,
1999.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In-the-Money Options/SARs at
FY-End (#) FY-End ($)
Name Exercisable/Unexercisable (1) Exercisable/Unexercisable (2)
- ---- -------------------------- ---------------------------
<S> <C> <C> <C>
Anthony J. Gumbiner 66,000/132,000 0/0
William L. Guzzetti 39,000/78,000 0/0
Russell P. Meduna 29,500/59,000 0/0
Thomas J. Jung 18,000/36,000 0/0
Cathleen M. Osborn 20,500/41,000 0/0
<FN>
(1) Options have a seven-year term and vest cumulatively over three years at
the rate of 1/3 on each of the date of grant and the first two
anniversaries of the grant date. All options vest immediately in the event
of certain changes in control of the Company.
</FN>
<FN>
(2) The exercise price of the options is $7.00 per share. The closing price of
the Common Stock was $4.375 on December 31, 1999.
</FN>
</TABLE>
IN WHAT OTHER LONG TERM INCENTIVE PLANS DO SENIOR EXECUTIVES PARTICIPATE?
The executive officers and key employees of the Company participate in a phantom
working interest plan that is intended to provide incentive and motivation to
increase the oil and gas reserves of the Company and to continue their
employment with the Company. Under the incentive plan, the Compensation
Committee annually determines the portion of the Company's interests in the cash
flow from certain wells drilled, recompleted or enhanced during that year,
called the "plan year," which will be allocated to participants in the plan and
the percentage of the remaining net present value of estimated future production
from domestic wells for which the participants will receive payment in the sixth
year of an award. The portion allocated to participants in the plan is referred
to as the "plan cash flow." The Compensation Committee then determines which key
employees and consultants 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
Compensation Committee's discretion. The phantom working interest plan is
discussed in greater detail on page 17 of this Proxy Statement.
The following table describes awards to the Named Executive Officers of the
Company for 1999 under the phantom working interest plan.
<TABLE>
<CAPTION>
Long-Term Incentive Plan Awards in Last Fiscal Year
Performance or Estimated Future
Percentage of Other Period Payouts under Non-Stock
Name Plan Cash Flow Until Payout Price-Based Plans (1)
---- -------------- ------------ -----------------
<S> <C> <C> <C>
Anthony J. Gumbiner (2) 37.5 2004 $75,505
William L. Guzzetti 7.14 2004 $14,376
Russell P. Meduna 7.14 2004 $14,376
Thomas J. Jung 5.36 2004 $10,792
Cathleen M. Osborn 5.36 2004 $10,792
<FN>
(1) These amounts 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.
</FN>
<FN>
(2) The award was made to HSC Financial, with which Mr. Gumbiner is associated.
</FN>
</TABLE>
CHANGE IN CONTROL AGREEMENTS
The Company's Chief Executive Officer and its other Named Executive Officers are
parties to Change in Control Agreements dated June 8, 1999, called individually
a "CIC Agreement" and collectively the "CIC Agreements."
The CIC Agreements provide for a number of things to occur if the Company
undergoes a Change in Control (as defined in the CIC Agreements), called a
"CIC." Each agreement is for a term of three years. However, the contracts also
provide for an automatic extension for three years if a CIC occurs. The purpose
of the CIC Agreements is to assure the continued dedication of the executives
who are parties to these agreements, notwithstanding the possibility, threat or
occurrence of a CIC.
If, within two years of a CIC, the Company terminates such an executive's
employment other than for cause, or the executive terminates his own employment
within 180 days of a change in his duties after a CIC, the executive will be
entitled to a lump sum cash payment equal to between two and three times the sum
of such executive's annual base salary and the average annual bonus received by
the executive during the three years immediately prior to the date of the CIC.
Mr. Gumbiner and Mr. Guzzetti will receive three times their base salaries and
bonuses; Mr. Meduna and Ms. Osborn will receive two and one-half times their
base salaries and bonuses; and Mr. Jung will receive two times his base salary
and bonuses. All stock options and other rights under the Company's 1999 Long
Term Incentive Plan will become immediately vested and exercisable.
In addition, under the CIC Agreements, if the Company terminates an executive's
employment other than for cause or the executive terminates his own employment
within 180 days of a change in his duties after a CIC, the executive and his
family will continue to receive the Company's health benefits for eighteen
months following such termination date. The CIC Employment Agreements further
provide for a "gross up" payment in the event that the payments set forth above
are subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code. This means that the Company is obligated to reimburse the executive on a
grossed-up basis for any excise tax imposed because the payments made to the
executive are determined to be excess parachute payments under Section 280G of
the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since June 8, 1999, the Compensation Committee of the Board has been comprised
of four Directors, currently Mr. Sebastian, Chairman, Mr. Van Meter, Mr.
Holinger and Dr. Lubliner. None of these Directors is or was an officer of the
Company or any of its subsidiaries at any time now or in the past.
Prior to June 8, 1999, the entire Board of the general partner of HEP and the
entire Board of Hallwood Consolidated made the 1999 compensation decisions for
those entities. Mr. Gumbiner was Chief Executive Officer of the general partner
of HEP and of Hallwood Consolidated and served on the compensation committee of
Hallwood Group, of which Mr. Guzzetti is Executive Vice President. Mr. Guzzetti
was also director and President of both the general partner of HEP and Hallwood
Consolidated. Messrs. Gumbiner and Guzzetti served on the Boards of the general
partner of HEP and of Hallwood Consolidated which made compensation decisions in
January 1999. Mr. Gumbiner is Chief Executive Officer and a director, and Mr.
Guzzetti is President and a director, of Hallwood Realty. During 1999, Mr.
Gumbiner and Mr. Guzzetti served on the board of directors of the general
partner of Hallwood Realty, which functioned as its compensation committee.
From January 1, 1999 through June 8, 1999, HEP and Hallwood Consolidated
participated in a consulting agreement between Hallwood Petroleum and Hallwood
Group pursuant to which Hallwood Group received a fee of $241,388 from
affiliates of Hallwood Petroleum. The consulting services were provided by HSC
Financial Corporation, through the services of Mr. Gumbiner and a former
director of the Company, and Hallwood Group paid the annual fee it received to
HSC Financial. Hallwood Group is also reimbursed by the Company and its
affiliates for expenses incurred on their behalf. These reimbursements totalled
$323,000 in 1999.
On June 8, 1999, the Company acquired the direct energy interests owned by
Hallwood Group in exchange for 1,312,411 shares of the Company's Common Stock.
The acquisition was made in connection with the consolidation of HEP and
Hallwood Consolidated.
COMPENSATION COMMITTEE REPORT ON 1999 COMPENSATION
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE COMPENSATION?
The Company's compensation philosophy is designed to motivate employees to
contribute to the success of the Company through reserve replacement and
enhancement of cash flow by fostering an atmosphere that encourages an
entrepreneurial approach to the Company's business. The Company's compensation
practices are designed to attract, motivate and retain key personnel by
recognizing individual contributions, as well as the overall performance of the
Company, through the use of "at risk" compensation strategies. The Company's
compensation program for executive officers consists of four main components:
(i) base salaries that, over a two to three year period, are at least 20% below
surveyed market salaries for companies similar in revenue and capital
expenditures to the Company; (ii) annual cash bonus program based on overall
Company performance measured against industry performance; (iii) phantom working
interest awards intended to encourage the successful drilling/workover of wells;
and (iv) stock option awards intended to motivate recipients to enhance stock
value and align executive officer and shareholder interests.
BASE SALARY
The Compensation Committee determines base salaries for executive officers
utilizing market survey data which focuses on other oil and gas companies
similar in size as measured by revenue and capital expenditures. The Company
targets 80% of the average of the executive officer positions for comparable
companies within the surveys in determining executive base pay levels.
Typically, the targeted percentage is reviewed and adjustments are considered
every two to three years.
SALARY ADJUSTMENT IN 1999
Neither the Chief Executive Officer nor any other Named Executive Officers
received salary adjustments in 1999.
1999 BONUSES
The total bonus pool available for distribution to the Company's executive
officers is determined based on an assessment by the Compensation Committee of a
number of quantitative and qualitative factors. The primary quantitative factors
are operating costs, general and administrative costs, the effectiveness of
capital expenditures in reserve replacement and the percentage of production
replacement, in comparison to the historical performance of independent oil and
gas companies as a group. The primary qualitative factors are the effectiveness
of acquisitions and corporate transactions and the overall effectiveness of
management and administration. Depending on the Company's success in these
areas, the aggregate of salaries and cash bonuses paid to management employees
may range from 67% of the average total compensation paid to similarly situated
employees in comparable companies if the Company's performance is poor, to as
high as 500% of the average total compensation paid by comparable companies if
the Company's performance has been excellent. The objective of the bonus plan is
to enhance stockholder value by rewarding employees for attainment of certain
levels in strategic elements of the Company's business. After taking into
account the various quantitative and qualitative factors, the Compensation
Committee determined that the Company had an average year in the categories of
overall reserves found and the effectiveness of capital expenditures, and a very
good year in the arena of transactions. Based on this characterization that the
overall performance of the Company was slightly better than average, the
Compensation Committee authorized a bonus pool for the executive officers of an
amount that, when aggregated with the officers' base salaries, would be equal to
95% of the total compensation paid to officers in comparable companies. This
bonus pool amount, $514,000, is then allocated among the executive officers to
approximately achieve 95% of total compensation of officers with similar
positions in comparable companies.
PHANTOM WORKING INTEREST INCENTIVE PLAN
The Company's phantom working interest incentive plan is intended to provide
incentive and motivation to the key employees of the Company to increase the oil
and gas reserves of the Company and to continue their employment with the
Company. Under the terms of this incentive plan, the Compensation Committee
annually determines whether or not to allocate cash flow of certain wells
completed or enhanced during the year, and if so, the percentage of cash flow to
be allocated. The allocated cash flow is a portion of the Company's interest in
the cash flow from certain international projects, if any, and wells drilled,
recompleted or enhanced during that year. The Compensation Committee also
approves the participants and their sharing percentage in the plan. Awards under
the plan do not represent actual ownership in the wells. In making the awards,
the Compensation Committee takes into consideration the recommendation of the
executive officers of the Company.
An award under the plan means that a participant has the right, for five years,
to receive a specified share of the plan cash flow from certain domestic wells
drilled, recompleted or enhanced during the year of the award. In the sixth
year, a participant receives an amount equal to a specified percentage (as
determined by the Compensation Committee at the time of the award) of the
remaining net present value of estimated future production from the wells, and
the award is terminated. Cash flow from international projects, if any, is paid
to participants for a ten-year period, but there is no buy-out for estimated
future production. There are no international projects allocated to the
Company's 1999 Plan, so the value of awards under the 1999 Plan depends
primarily on the Company's results in 1999 in drilling, completing and achieving
production from new wells and from certain recompletions and enhancements of
existing wells. Five-year average oil and gas prices are used in determining the
net present value of the awards.
The awards for the Company's 1999 phantom working interest plan were made in
June 1999. For the 1999 plan year, the Compensation Committee allocated 2.8% of
the cash flow from the eligible domestic wells to the plan. The Compensation
Committee also determined that the participants' interests in the eligible
domestic wells for the 1999 plan year would be purchased in the sixth year at
80% of the remaining net present value of the wells. These percentages were the
same as under the similar 1999 incentive plan of the Company's predecessors, HEP
and HCRC.
STOCK OPTIONS
The objective of the Company's 1999 Long-Term Incentive Plan, under which stock
options are granted, is to motivate recipients to maximize the long-term growth
and profitability of the Company. Recipients can recognize value from options
granted only if the Company's stock price increases after the date on which such
options are granted, because the exercise price of options granted is at least
equal to the fair market value of the Company's stock on the date of grant. For
this reason, the award of options aligns the long-range interests of the
recipients with those of stockholders. Grants of options are generally made
annually, although in 1999 the Compensation Committee made a second award of
options in connection with the employment of the Company's new chief financial
officer. The Compensation Committee determined the grant levels for grants to
the chief executive officer and the executive officers of the Company after
taking into consideration prior year's grants and the position of the grantee in
relationship to responsibilities which could likely affect the price of the
Company's stock.
PHILOSOPHY OF COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee determined Mr. Gumbiner's salary after reviewing
salary information on salaries paid to chief executive officers at other
comparable companies. In addition to Mr. Gumbiner's base salary, he is also
eligible to participate in the bonus, phantom working interest and stock option
plans of the Company. These "at-risk" components of the Company's total
compensation program serve to align Mr. Gumbiner's interests with those of the
stockholders. The Committee feels that Mr. Gumbiner's compensation, including
base salary, bonus payments, phantom working interest participation and stock
option grants, is appropriately oriented toward risk-based, incentive
compensation.
From January 1, 1999 through June 8, 1999, executive officers of the Company
were compensated by HEP and Hallwood Consolidated, and compensation decisions
were made by the full Boards of the general partner of HEP and of Hallwood
Consolidated. On June 8, 1999, the current Compensation Committee of the Board
of the Company was formed.
<PAGE>
<TABLE>
<CAPTION>
Members of the Compensation Committee Members of the Compensation
of the General Partner of HEP Committee of Hallwood Consolidated Members of the Compensation
-------------- ------------
Committee of the Company
<S> <C> <C>
Anthony J. Gumbiner Anthony J. Gumbiner Rex A. Sebastian
Nathan C. Collins William L. Guzzetti Hans-Peter Holinger
William L. Guzzetti Jerry A. Lubliner Jerry A. Lubliner
Hans-Peter Holinger John R. Isaac, Jr. Bill M. Van Meter
Rex A. Sebastian Bill M. Van Meter
Brian M. Troup Hamilton P. Schrauff
Brian M. Troup
</TABLE>
COMMON STOCK PERFORMANCE
The graph shown below compares the cumulative total stockholder return on the
Company's Common Stock since June 9, 1999, the first day of trading, with the
NASDAQ Stock Market Index and the S & P Oil and Gas Index. The graph is based on
the investment of $100 on June 6, 1999 in the Company and on May 31, 1999 in the
indices.
Measurement Hallwood Energy S&P Oil & Gas Nasdaq Stock
Period Corporation (Exploration & Production) Market (U.S.)
6/9/99 100.00 100.00 100.00
12/31/99 62.50 93.22 160.79
INDEPENDENT AUDITORS
Deloitte & Touche LLP currently serves the Company as independent auditors.
Representatives of Deloitte & Touche LLP will be available at the annual meeting
to respond to appropriate questions from stockholders.
2001 STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented for consideration at the 2001
Annual Meeting of Stockholders and to be included in the Company's Proxy
Statement for that meeting must be received by the Secretary at the Company's
offices, 4610 S. Ulster Street, Suite 200, Denver, Colorado 80237, on or before
December 8, 2000. Only proposals deemed to be for a proper purpose will be
included in the Company's Proxy Statement. As permitted by the Company's Bylaws,
stockholder proposals received after December 8, 2000 and before February 21,
2001 will be considered timely, but will not be included in the Company's Proxy
Statement. Stockholder proposals received after February 21, 2001 will be
considered untimely, and the proxies solicited by the Company for next year's
annual meeting may confer discretionary authority to vote on any such matters
without a description of them in the proxy statement for that meeting.
OTHER MATTERS
It is not presently expected that any matters other than those discussed herein
will be brought before the annual meeting. If, however, other matters do come
before the meeting, it is the intention of the persons named as representatives
in the accompanying Proxy to vote in accordance with the recommendation of the
Company's management.
REVOCABLE PROXY
HALLWOOD ENERGY CORPORATION
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William L. Guzzetti and Cathleen M. Osborn, and
each of them, with full power of substitution, to act as attorneys and proxies
for the undersigned to vote all shares of Hallwood Energy Corporation which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at 3710 Rawlins, Suite 1500, Dallas, Texas, on Wednesday, May 17, 2000, at 11:00
a.m. (the Annual Meeting"), and at any and all adjournments or postponements
thereof. Said proxies are herein specifically authorized 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.
PLEASE VOTE ALL CLASSES OF SHARES YOU OWN.
Common Shares
1. The election of all nominees listed below for a term expiring at the 2003
Annual Meeting (Except as marked to the contrary below).
William L. Guzzetti, Nathan Collins and Jerry A. Lubliner
INSTRUCTION: To withhold your vote for any individual nominee, insert the
nominees name on the line provided below.
For Withhold For All Except
[ ] [ ] [ ]
---------------------------------------------------------------------
2. To transact such other business as may properly come before the
meeting and all adjournments or postponements thereof.
For Against Abstain
[ ] [ ] [ ]
Series A Cumulative Preferred Shares
1. The election of all nominees listed below for a term expiring at the 2003
Annual Meeting (Except as marked to the contrary below).
William L. Guzzetti, Nathan Collins and Jerry A. Lubliner
INSTRUCTION: To withhold your vote for any individual nominee, insert the
nominees name on the line provided below.
For Withhold For All Except
[ ] [ ] [ ]
-----------------------------------------------------------------
2. To transact such other business as may properly come before the meeting and
all adjournments or postponements thereof.
For Against Abstain
[ ] [ ] [ ]
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NAMED NOMINEES AND FOR THE OTHER
PROPOSITION STATED.
Please be sure to sign and date Date_______________________
this Proxy in the box below.
______________________________________________________________________________
| |
| |
| |
|______Stockholder sign above_______________Co-holder (if any) sign above______|
- -------------------------------------------------------------------------------
Detach above card, date, sign and mail in postage-paid envelope provided.
HALLWOOD ENERGY CORPORATION
Please sign exactly as your name appears above on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
Corporation proxies should be signed in corporate name by an officer. If shares
are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
