<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 sec. 240.14a-11(c) or sec. 240.14a-12
THE HALLWOOD GROUP INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
THE HALLWOOD GROUP INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
THE HALLWOOD GROUP INCORPORATED
NOTICE OF ANNUAL MEETING
To the Stockholders of The Hallwood Group Incorporated:
The Annual Meeting of Stockholders of The Hallwood Group Incorporated (the
"Company") will be held as follows:
PLACE: 3710 Rawlins
11th Floor, Conference Room
Dallas, Texas 75219
TIME: Friday, January 26, 1996, at 11:30 a.m.
(Dallas, Texas time)
PURPOSES: 1. To elect one director to hold office for three years and until
his successor is elected and qualified; and
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on December 1, 1995,
will be entitled to notice of and to vote at the Annual Meeting.
December 8, 1995
By order of the Board of Directors
MELVIN J. MELLE
Secretary
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS
IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE EXECUTION OF YOUR PROXY
WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE MEETING.
<PAGE> 3
THE HALLWOOD GROUP INCORPORATED
3710 RAWLINS
SUITE 1500
DALLAS, TEXAS 75219
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 1996
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Hallwood Group Incorporated (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on Friday, January 26, 1996, at 11:30 a.m., Dallas, Texas time, at
3710 Rawlins, 11th Floor, Conference Room, Dallas, Texas 75219, and any
adjournment thereof. This Proxy Statement and the form of proxy to be utilized
at the Annual Meeting are to be mailed or delivered to the stockholders of the
Company on or about December 8, 1995.
MATTERS TO BE CONSIDERED
The Annual Meeting has been called (i) to elect one director to hold office
for three years, and (ii) to transact such other business as may properly come
before the meeting. See "Election of Director" and "Other Business."
RECORD DATE AND VOTING
The directors have fixed the close of business on December 1, 1995 as the
record date (the "Record Date") for the determination of stockholders entitled
to vote at the Annual Meeting and any adjournment thereof. As of the record
date, there were 1,329,635 shares of common stock, $0.10 par value per share
("Common Stock"), outstanding and entitled to vote at the meeting. The number of
outstanding shares excludes 264,709 shares of Common Stock owned by Hallwood
Energy Corporation ("HEC"), which is not permitted to vote its shares of Common
Stock because the Company owns a majority of HEC's common shares.
The presence at the Annual Meeting, either in person or by proxy, of the
holders of outstanding shares of Common Stock having a majority of the voting
power of the Company is necessary to constitute a quorum for the transaction of
business. Each holder of record of Common Stock will be entitled to one vote per
share in each matter that is called to vote at the Annual Meeting.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of the holders of shares of Common Stock having a
majority of the voting power of the Company present in person or represented by
proxy at the Annual Meeting is required to elect directors. The Board of
Directors recommends a vote for the nominee for director. Alpha Trust and
Epsilon Trust, which own approximately 22.3% and 14.9% of the outstanding Common
Stock, respectively, have informed the Company that they will vote all of their
shares of Common Stock for the nominee for director.
PROXY, SOLICITATION, REVOCATION AND EXPENSES
All proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted. Any proxy given by a stockholder may be revoked at
any time before it is exercised by (i) filing with the Secretary of the Company
an instrument revoking it, (ii) a duly executed proxy bearing a later date or
<PAGE> 4
(iii) the stockholder attending the Annual Meeting and expressing a desire to
vote his shares of Common Stock in person.
Shares represented by proxies will be voted for or against the election of
the nominee director named in the proxy in accordance with the specifications
made on the proxy by the stockholder and, if no specification is made, will be
voted in favor of the election of the nominee director. Abstentions, broker
non-votes and proxies directing that the shares are not to be voted will not be
counted as a vote in favor of a matter called for a vote.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the enclosed proxy form and the cost of soliciting proxies related
to the Annual Meeting will be borne by the Company. The Company will request
banks and brokers to solicit their customers who are beneficial owners of shares
of Common Stock listed of record in names of nominees, and will reimburse such
banks and brokers for the reasonable out-of-pocket expenses of such
solicitation. The original solicitation of proxies by mail may be supplemented
by telephone, telegram and personal solicitation by officers and other regular
employees of the Company and its subsidiaries, but no additional compensation
will be paid to such individuals on account of such activities. In addition, the
Company has retained Morrow & Co., Inc. to assist in the solicitation of
proxies, for which such firm will be paid a fee of $2,500 plus reimbursement of
reasonable out-of-pocket expenses.
ELECTION OF DIRECTOR
One person is to be elected to the Board of Directors at the Annual Meeting
and the four remaining directors will continue in office for the terms specified
below. The persons named in the enclosed proxy intend to vote for the election
of the nominee listed below, unless instructions to the contrary are given
therein. The nominee has indicated that he is able and willing to serve as
director. However, if some unexpected occurrence should require the substitution
of some other person for the nominee, the person voting the proxies will vote
for such nominee as the Company may select.
The following table lists the name and age of the nominee and of each of
the four directors whose terms of office will continue after the Annual Meeting,
the annual meeting at which their respective terms of office will expire
(assuming, in the case of the nominee, that he is elected) and the year in which
each director was first elected as a director of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE TERM EXPIRES SINCE
- ------------------------- --- ---------------------------------------------------- --------
<S> <C> <C> <C>
NOMINEE DIRECTOR
Brian M. Troup 48 Third annual meeting following this Annual Meeting 1981
CONTINUING DIRECTORS
Anthony J. Gumbiner 50 First annual meeting following this Annual Meeting 1981
Robert L. Lynch 77 First annual meeting following this Annual Meeting 1984
Charles A. Crocco, Jr. 57 Second annual meeting following this Annual Meeting 1981
J. Thomas Talbot 59 Second annual meeting following this Annual Meeting 1984
</TABLE>
BUSINESS HISTORY OF NOMINEE AND CONTINUING DIRECTORS
Mr. Troup has served as President and Chief Operating Officer of the
Company since April 1986. He has also served as Finance Director of Anglo
Metropolitan Holdings, plc, a real estate holding company located in the United
Kingdom, since 1979; as a director of Hallwood Holdings S.A. ("HHSA") (formerly
Stanwick International Corporation S.A.), a corporation engaged in the real
estate business, since March 1984; as a director of HEC, which serves as the
general partner of Hallwood Energy Partners, L.P. ("HEP") since May 1994; as a
director of ShowBiz Pizza Time, Inc., a corporation engaged in the restaurant
business and an affiliate of the Company ("ShowBiz"), since September 1988; as a
director of Hallwood Realty Corporation ("Hallwood Realty"), which is a
wholly-owned subsidiary of the Company and serves as the general partner of
Hallwood Realty Partners, L.P. ("HRP"), since 1990; and as a director of
Hallwood Consolidated
2
<PAGE> 5
Resources Corporation ("HCRC") since 1992. He is an associate of the Institute
of Bankers in Scotland and a member of the Society of Investment Analysts in the
United Kingdom. Mr. Troup also served as a director of Alliance Bancorporation,
a bank holding company ("Alliance"), from February 1988 until its liquidation in
February 1994.
Mr. Gumbiner has served as Chairman of the Board of Directors of the
Company since 1981 and Chief Executive Officer of the Company since 1984. He has
also served as Chairman of the Board of Directors and Chief Executive Officer of
HEC since May 1984 and February 1987, respectively; as a director of HHSA, since
March 1984; as a director of ShowBiz since September 1988; as a director of
Hallwood Realty since November 1990 and as a director of HCRC since 1992. Mr.
Gumbiner is also a solicitor of the Supreme Court of Judicature of England.
Mr. Lynch has served as Vice Chairman of the Company since May 1984. He is
Chairman of the Board and Chief Executive Officer of Perpetual Storage, Inc., a
corporation engaged in underground storage and maintenance of business and
personal records and in micrographic services. Mr. Lynch has served as a
director of Perpetual Storage, Inc. since 1969 and as a director of ShowBiz
since September 1988.
Mr. Crocco, a shareholder in Crocco & DeMaio, P.C., attorneys at law, is
Chairman of the Company's Compensation Committee. He has also served as a
director of First Banks America, Inc. (formerly BancTEXAS Group, Inc.), a bank
holding company, since April 1988; and as a director of ShowBiz since September
1988.
Mr. Talbot is currently Chairman of the Company's Audit Committee. He has
been a partner of Shaw & Talbot, a commercial real estate investment and
development company, since 1975, and of Pacific Management Group, an asset
management firm, since 1986, and is the owner of The Talbot Company. Mr. Talbot
served as Chairman of the Board and Chief Executive Officer of HAL, Inc., an
airline holding company; and as Chairman of the Board and Chief Executive
Officer of both Hawaiian Airlines, Inc., a commercial airline, and West Maui
Airport between 1989 and July 1991. He was founder and served as Chairman of the
Board of Jet America Airlines between 1980 and 1986. He has served as a director
of Fidelity National Financial, Inc. since December 1990; and as a director of
ShowBiz since September 1988. He has also served as a director of Hemetter
Enterprises, Inc. since May 1993; as a director of The Baldwin Company since
June 1993; and as a director of Koll Real Estate Group (formerly Bolsa Chica
Company) since August 1993. In addition, Mr. Talbot served as a director of
Alliance, from April 1988 until its liquidation, and as Chairman and Chief
Executive Officer of Alliance from August 1992 until its liquidation.
Except as set forth above, neither the nominee nor the continuing directors
hold a directorship in any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or subject to the requirements of Section 15 (d) of the
Exchange Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended.
No family relationships exist between the nominee, the directors and the
executive officers.
COMMITTEES AND MEETINGS OF THE BOARD
Messrs. Talbot (Chairman), Crocco and Lynch served as members of the Audit
Committee during the fiscal year ended July 31, 1995. The Audit Committee met
two times during the fiscal year and was charged with the responsibility of
reviewing the annual audit report and the Company's accounting practices and
procedures and recommending to the Board of Directors the firm of independent
public accountants to be engaged for the ensuing year.
The Compensation Committee is comprised of Messrs. Crocco (Chairman) and
Lynch. The Compensation Committee met one time during the fiscal year ended July
31, 1995, and is responsible for the formulation and implementation of the
Company's compensation policy. For additional information relating to amounts
paid under certain consulting agreements, see "Certain Relationships and Related
Transactions -- Consulting and Management Agreements."
The Board of Directors does not have a standing nominating committee.
3
<PAGE> 6
During the fiscal year ended July 31, 1995, the Board of Directors held
four meetings. Each director attended at least 75% of (i) the total number of
meetings held by the Board of Directors and (ii) the total number of meetings
held by all committees of the Board of Directors on which he served.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on the Record
Date, information as to the beneficial ownership of shares of Common Stock (i)
for any person or "group" (as that term is used in Section 13(d)(3) of the
Exchange Act) who or which the Company knows owns beneficially more than 5% of
the outstanding shares of Common Stock as of the close of business on the Record
Date, (ii) for each director and nominee for director and (iii) for all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE
NAME OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS(1)
----------------------------------------------------------- ------------ ----------
<S> <C> <C>
Alpha Trust................................................ 297,167(2) 22.3%
c/o Radcliffes Trustee Company SA
9 Rue, Charles Humbert
1205 Geneva, Switzerland
Hallwood Energy Corporation................................ 264,709(3) 16.6%
4582 South Ulster Street Parkway
Suite 1700
Denver, Colorado 80237
Epsilon Trust.............................................. 198,112(4) 14.9%
c/o Merohaus Verwaltung AG
Utoquai, 43,8008
Zurich, Switzerland
Charles A. Crocco, Jr...................................... 3,064(5) *
Anthony J. Gumbiner........................................ --(6) --
William L. Guzzetti........................................ --(7) --
Robert L. Lynch............................................ 9,481(8) *
Melvin J. Melle............................................ 12,750(9) *
J. Thomas Talbot........................................... 2,500(10) *
Brian M. Troup............................................. --(11) --
All directors and executive officers as a group (7
persons)................................................. 27,795 2.1%
</TABLE>
- ---------------
* Less than 1%
(1) Assumes, for each person or group listed, the conversion of all convertible
securities owned and the exercise of all stock options held by such person
or group that are convertible or exercisable within 60 days, in accordance
with Rule 13d-3(d) (1) (i) of the Exchange Act, but the conversion of none
of the convertible securities owned by any other holder of such securities.
Because HEC is not permitted to vote the shares it holds, the percentage
ownership for each holder other than HEC is computed as if the shares held
by HEC were not outstanding.
(2) Based on the Amendment to Schedule 13D provided to the Company by Alpha
Trust as of November 9, 1994. Mr. Gumbiner has the power to designate and
replace the trustees of Alpha Trust.
(3) Mr. Gumbiner is the Chairman of the Board of Directors and Chief Executive
Officer and Mr. Guzzetti is the President of HEC.
(4) Based on the Amendment to Schedule 13D provided to the Company by Epsilon
Trust as of December 30, 1994. Mr. Troup has the power to designate and
replace the trustees of Epsilon Trust.
4
<PAGE> 7
(5) Includes currently exercisable options to purchase 2,500 shares of Common
Stock.
(6) Excludes 264,709 shares of Common Stock held by HEC, of which Mr. Gumbiner
is the Chairman of the Board of Directors and Chief Executive Officer, and
297,167 shares of Common Stock held by Alpha Trust. Mr. Gumbiner has the
power to designate and replace the trustees of Alpha Trust. The shares of
Common Stock held by Alpha Trust are pledged to IBJ Schroder Bank & Trust
Company ("IBJ Schroder"), as trustee under an indenture as collateral for
bonds issued by HHSA. HHSA no longer claims beneficial interest in the
shares, but the shares remain pledged as collateral for these bonds. Mr.
Gumbiner is a director of HHSA.
(7) Excludes 264,709 shares of Common Stock held by HEC, of which Mr. Guzzetti
is the President and a director. In addition, Mr. Guzzetti owns 100 units
of HEP and 400 units of HRP.
(8) Includes 6,981 shares of Common Stock, which are owned beneficially and of
record by Perpetual Storage, Inc. Mr. Lynch is deemed to beneficially own
such shares by virtue of his ownership of 96.7% of the outstanding shares
of Perpetual Storage, Inc. Includes currently exercisable options to
purchase 2,500 shares of Common Stock.
(9) Includes currently exercisable options to purchase 12,750 shares of Common
Stock.
(10) Includes currently exercisable options to purchase 2,500 shares of Common
Stock.
(11) Excludes 264,709 shares of Common Stock held by HEC, of which Mr. Troup is
a director, and 198,112 shares of Common Stock held by Epsilon Trust. Mr.
Troup has the power to designate and replace the trustees of Epsilon Trust.
These shares are pledged to IBJ Schroder, as trustee under an indenture as
collateral for the bonds issued by HHSA. HHSA no longer claims beneficial
interest in the shares, but the shares remain pledged as collateral for
these bonds. Mr. Troup is a director of HHSA.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The total compensation paid for each of the last three fiscal years ended
July 31, 1993, 1994 and 1995 to the Chief Executive Officer, and the other
executive officers who received cash compensation in excess of $100,000 for
fiscal 1995 (collectively, the "Named Executive Officers"), is set forth on the
following Summary Compensation Table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
-------------------------------- OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(5) OPTIONS/SARS(#) ($)(7)
- ------------------------------------- ------ --------- -------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner.................. 1995 550,000(1)(2) 50,000 0 (6) 6,200
Chairman and Chief 1994 300,000(2) 0 0 0 6,200
Executive Officer 1993 300,000(2) 0 0 0 6,200
Brian M. Troup....................... 1995 100,000(2) 50,000 0 (6) 3,800
President and Chief 1994 100,000(2) 0 0 0 3,800
Operating Officer 1993 100,000(2) 0 0 0 3,800
William L. Guzzetti.................. 1995 400,240(3) 112,647 (4) 0 (6) 4,620
Executive Vice 1994 412,743 80,000 0 0 6,004
President 1993 412,500 46,491 0 0 3,502
Melvin J. Melle...................... 1995 208,333 0 2,940 (6) 14,300
Vice President, Chief 1994 208,333 0 3,228 0 5,680
Financial Officer and 1993 200,000 0 2,341 0 58,009
Secretary
</TABLE>
- ---------------
(1) Consists of $300,000 paid by the Company and $250,000 paid by Hallwood
Petroleum, Inc. ("HPI"), an affiliate of HEC.
(2) In addition to the compensation paid to Messrs. Gumbiner and Troup, the
Company ("HWG") paid Hallwood Securities Limited ("HSL") or HSC Financial
Corporation ("HSC"), entities with which Messrs. Gumbiner and Troup are
associated, consulting fees of $350,000 for fiscal 1995 and $600,000 for
each of fiscal 1994 and fiscal 1993, primarily in connection with those
entities' activities on behalf of the Company's subsidiaries. The Company
also received from the Hallwood Energy entities consulting fees of $300,000
for each of fiscal 1995, 1994 and 1993, which the Company paid to HSL or HSC
to provide the associated consulting services to the Hallwood Energy
entities. See "Certain Relationships and Related Transactions."
(3) Consists of $200,240 paid by HEC and $200,000 paid by Hallwood Realty.
(4) Consists of $89,314 paid by HEC and $23,333 paid by Hallwood Realty.
(5) Represents reimbursements to compensate for the income tax effect of payment
for life and/or disability insurance.
6
<PAGE> 9
(6) Consists of the following options:
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
NAME COMPANY OPTIONS/SARS(#)
---------------------------------------------- ------- ---------------------
<S> <C> <C>
Anthony J. Gumbiner........................... HRP 25,800
HEP 127,500
HCRC 159,000
Brian M. Troup................................ HRP 17,200
HEP 85,000
HCRC 106,000
William L. Guzzetti........................... HRP 15,000
HEP 63,750
HCRC 79,500
Melvin J. Melle............................... HWG 1,500
</TABLE>
(7) Consists of the following items of compensation:
<TABLE>
<CAPTION>
COMPANY OR SUBSIDIARY
CONTRIBUTIONS TO TAX
FAVORED SAVINGS PLANS OR
IN LIEU THEREOF PAYMENT
UNDER THE HALLWOOD PREMIUM PAYMENTS FOR RELOCATION
SPECIAL BONUS AGREEMENT($) TERM LIFE INSURANCE($) REIMBURSEMENT($)
----------------------------- ----------------------------- ------------------------
NAME 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -------------------------- ----- ----- ----- ----- ----- ----- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Gumbiner.............. 0 0 0 6,200 6,200 6,200 0 0 0
Mr. Troup................. 0 0 0 3,800 3,800 3,800 0 0 0
Mr. Guzzetti.............. 4,620 6,004 3,502 0 0 0 0 0 0
Mr. Melle................. 8,620 0 4,497 5,680 5,680 5,680 0 0 47,832
</TABLE>
The following table discloses certain information for each of the Named
Executive Officers who have been granted options to purchase securities of the
Company or its subsidiaries in the last fiscal year:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES
SECURITIES OPTIONS/SARS EXERCISE OF STOCK PRICE
UNDERLYING GRANTED TO OR APPRECIATION FOR
OPTIONS/ EMPLOYEES BASE OPTION TERM
SARS IN FISCAL PRICE EXPIRATION --------------------
NAME COMPANY GRANTED(#) YEAR(%) ($/SH) DATE 5%($) 10%($)
- ------------------------------- ------- ---------- ------------ -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner............ HRP(1) 25,800 30.0 11.88 2/27/2005 192,678 488,283
HEP(2) 127,500 30.0 5.75 1/31/2005 461,058 1,168,412
HCRC(3) 159,000 30.0 2.00 7/01/2005 199,988 506,810
Brian M. Troup................. HRP(1) 17,200 20.0 11.88 2/27/2005 128,452 325,522
HEP(2) 85,000 20.0 5.75 1/31/2005 307,372 778,942
HCRC(3) 106,000 20.0 2.00 7/01/2005 133,326 337,873
William L. Guzzetti............ HRP(1) 15,000 17.4 11.88 2/27/2005 112,022 283,885
HEP(2) 63,750 15.0 5.75 1/31/2005 230,529 584,206
HCRC(3) 79,500 15.0 2.00 7/01/2005 99,994 253,405
Melvin J. Melle................ HWG(4) 1,500 14.0 11.50 6/27/2005 10,848 27,492
</TABLE>
- ---------------
(1) Options to purchase limited partner units of HRP.
(2) Options to purchase limited partner units of HEP.
(3) Options to purchase shares of common stock of HCRC.
(4) Options to purchase shares of Common Stock of the Company.
7
<PAGE> 10
The following table discloses for each of the Named Executive Officers who
have been granted options to purchase securities of the Company or its
subsidiaries the number of such options held by each of the Named Executive
Officers and the potential realizable values for their options at July 31, 1995.
None of the Named Executive Officers exercised any options during fiscal 1995
and the Company has not granted SARs.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL
YEAR 1995 AND OPTION/SAR VALUES AT JULY 31, 1995
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
JULY 31, 1995(#) JULY 31, 1995($)
--------------------------- ---------------------------
NAME ENTITY EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Anthony J. Gumbiner..................... HRP 8,600 17,200 24,725 49,450
HEP 42,500 85,000 0 0
HCRC 53,000 106,000 0 0
Brian M. Troup.......................... HRP 5,733 11,467 16,482 32,968
HEP 28,333 56,667 0 0
HCRC 35,333 70,667 0 0
William L. Guzzetti..................... HRP 5,000 10,000 14,375 28,750
HEP 21,250 42,500 0 0
HCRC 26,500 53,000 0 0
Melvin J. Melle......................... HWG 12,750 0 0 0
</TABLE>
The following table discloses each of the Named Executive Officers who
received long-term incentive plan awards during the fiscal year ended July 31,
1995 and the estimated future payouts of the awards (Awards were only received
from HEC, whose latest completed fiscal year ended December 31, 1994):
LONG TERM INCENTIVE PLANS -- AWARDS IN FISCAL YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PERFORMANCE OR OTHER PAYOUTS UNDER NON-STOCK
NAME NUMBER OF UNITS(#) PERIOD UNTIL PAYOUT PRICE-BASED PLANS($)
- ------------------------------------ ------------------- -------------------- -----------------------
<S> <C> <C> <C>
William L. Guzzetti................. .15 2000 11,364(1)
.22 2004 0(2)
</TABLE>
- ---------------
(1) This amount represents an award under the HEC Domestic Incentive Plan. There
are no minimum, maximum or target amounts payable under the plan. Payments
under the awards will be equal to the indicated percentage of 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 amount shown above
is an estimate 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.
(2) This amount represents an award under the HEC International Incentive Plan.
There are no minimum, maximum or target amounts payable under the 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. HEP and HCRC have not recorded any proved reserves
attributable to international projects, so the current estimated future
payout for the 1994 awards is 0.
8
<PAGE> 11
COMPENSATION OF DIRECTORS
For the fiscal year ended July 31, 1995, Messrs. Crocco and Talbot received
director fees of $27,500 per year and are entitled to receive $500 for each day
spent on business of the Company, other than at board meetings. In addition, Mr.
Crocco received an additional fee of $12,500 as the Chairman of the Litigation
Committee, which was terminated in January 1995. Each director is also
reimbursed for expenses reasonably incurred in connection with the performance
of his duties. Additional information regarding consulting agreements with or
services provided by Mr. Gumbiner, an entity controlled by him, Mr. Lynch and
Mr. Talbot is included in "Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation," below.
EMPLOYMENT AGREEMENTS
During fiscal 1995, the Company or its subsidiaries had employment
agreements with Messrs. Melle, Troup and Gumbiner.
Mr. Melle's employment agreement provides for payment of a salary of
$200,000 per year plus an annual bonus in an amount as may be determined by the
Board of Directors of the Company. In addition, the employment agreement
provides that the Company will maintain $500,000 of life insurance benefits on
behalf of Mr. Melle and, for the fiscal year ended July 31, 1995, the Company
paid premiums in the amount of $5,680 for such life insurance. Mr. Melle's
employment agreement will continue under the same terms and conditions until
December 31, 1996, and will be automatically extended annually thereafter unless
terminated by either party.
Pursuant to an agreement entered into January 1, 1993, Mr. Troup is
compensated for services rendered to certain subsidiaries of the Company at the
rate of $100,000 per year. Under the agreement, Mr. Troup is required to devote
substantially all of his time and attention to consulting with respect to the
business and investments of the Company and its subsidiaries and associated
companies situated outside the United States. The agreement may be terminated by
either party on one month's notice.
Pursuant to an agreement with a subsidiary of the Company, Mr. Gumbiner
receives compensation of $300,000 per year for providing consulting services in
relation to the Company's business outside the United States. The amount of this
agreement was increased by $75,000 effective October 1, 1995. Effective August
1, 1994, HPI, an affiliate of HEC, entered into a Compensation Agreement with
Mr. Gumbiner pursuant to which HPI pays Mr. Gumbiner $250,000 per year for
providing consultation and assistance in maintaining its relationships with
foreign governments and negotiating transactions outside the United States. The
Compensation Agreement is to continue in effect until terminated by either party
on not less than six month's notice.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Crocco (Chairman) and
Lynch. During the fiscal year ended July 31, 1995, the Company and HEC, a
subsidiary of the Company, retained Crocco & DeMaio, P.C., attorneys at law, of
which Mr. Crocco is a partner, as special counsel on certain legal matters for
which $23,842 was paid (excluding expense reimbursements). Mr. Lynch is Vice
Chairman of the Board of Directors of the Company. Under a month-to-month
extension of a consulting agreement, Mr. Lynch received a consulting fee of
$120,000 for the fiscal year ended July 31, 1995, and a car allowance of $3,852.
He also received compensation for serving as a director of the Company of
$12,500 per year, $750 for each of the four meetings of the Board he attended
(other than telephonic meetings, for which no fee was paid) and $250 for each of
the two Audit Committee meetings and the one Compensation Committee meeting he
attended.
9
<PAGE> 12
COMPENSATION COMMITTEE
REPORTS ON EXECUTIVE COMPENSATION
GENERAL
The Company is a diversified holding company with several subsidiaries and
associated companies. Of the named executive officers, Messrs. Gumbiner and
Troup are involved in the activities of all of the subsidiaries and associated
companies, but for fiscal 1995 Mr. Troup received compensation only from a
wholly owned foreign subsidiary of the Company and Mr. Gumbiner received
compensation from a wholly owned foreign subsidiary and from a company
controlled by HEC; Mr. Melle is involved in the activities of the Company and of
certain subsidiaries and associated companies, but for fiscal 1995 received
compensation only from the Company; and Mr. Guzzetti is involved in the
activities of Hallwood Realty, Hallwood Management Company ("Hallwood
Management"), a wholly owned subsidiary of the Company, and HEC, HCRC and their
subsidiaries and controlled entities. Accordingly, the compensation of Messrs.
Troup and Melle were determined solely by the Company's Compensation Committee.
The compensation of Mr. Gumbiner with respect to his services to the Company and
its subsidiaries generally is determined by the Company's Compensation Committee
and the compensation of Mr. Gumbiner for his services to HEC, HCRC and the
related energy companies is determined by the Boards of Directors of HEC and
HCRC. The compensation of Mr. Guzzetti with respect to his services to Hallwood
Realty is determined by the Board of Directors of Hallwood Realty, the
compensation to Mr. Guzzetti for his services with respect to Hallwood
Management is determined by the Compensation Committee of the Company's Board of
Directors and Mr. Guzzetti's compensation with respect to his services to HEC
and HCRC is determined by HEC's and HCRC's Boards of Directors.
COMPENSATION BY THE COMPANY
The members of the Compensation Committee of the Company's Board of
Directors are appointed by the Board of Directors. During fiscal 1995, the
members of the Compensation Committee were Messrs. Crocco and Lynch. The
Company's Compensation Committee annually determines the compensation of the
Company's executive officers after discussions with each officer and bases the
amount of compensation on the Committee's determination of the reasonable
compensation for that officer. The members of the Compensation Committee,
through their business experience, are generally aware of prevailing
compensation practices and regularly review and remain informed about the recent
financial and operating experience of the Company. Based on this experience and
review, the Compensation Committee establishes compensation that it believes to
be appropriate for each officer. Substantially all of the executive officers'
compensation is paid as salary, although from time to time the Compensation
Committee has awarded substantial bonuses upon completion of significant
acquisitions or other transactions that provide material benefits to the
Company.
The Company operates primarily through its subsidiaries. Accordingly, the
compensation of Mr. Gumbiner, the Company's Chief Executive Officer, is based in
large part on his activities on behalf of the various subsidiaries, including
consultation with respect to acquisitions and financings and identifying and
negotiating investment opportunities. Mr. Gumbiner currently receives
compensation of $300,000 per year as an employee of a foreign subsidiary of the
Company. The Company entered into a financial consulting agreement with HPI, an
affiliate of HEC, dated as of June 30, 1994, which provides that the Company or
its agent shall provide consulting services to HPI for compensation of $300,000
per year. The Compensation Committee determined that these services would be
most appropriately provided by HSC acting as the Company's agent, through the
services of Mr. Gumbiner and Mr. Troup, and that as consideration for these
services the Company would pay to HSC the fee to which the Company is entitled
under the agreement. The Compensation Committee's determination was based
primarily on the fact that Messrs. Gumbiner and Troup had previously provided
similar services through Limited on substantially the same terms. In addition,
for 1995 the Compensation Committee determined to award each of Messrs. Gumbiner
and Troup bonuses of $50,000 in recognition of their success in strengthening
the Company through the resolution of numerous uncertainties and contingencies
involving the Company or its affiliates.
10
<PAGE> 13
Until fiscal 1995, the Company was a party to a consulting agreement with
HSC under which HSC provided consulting and advisory services to the Company for
a fee of $600,000 per year. Effective August 1, 1994, HPI, an affiliate of HEC,
entered into a Compensation Agreement with Mr. Gumbiner pursuant to which HPI
pays Mr. Gumbiner $250,000 per year for providing consultation and assistance in
maintaining its relationships with foreign governments and negotiating
transactions outside the United States. Also effective August 1, 1994, the
Company entered into an agreement with HSC pursuant to which HSC agreed to
provide international consulting and advisory services to the Company and its
affiliates for an annual fee of $350,000.
Hallwood Management has contracted with Hallwood Realty to manage the
properties controlled by Hallwood Realty. Mr. Guzzetti is the President and is
primarily responsible for the operations of Hallwood Management. Hallwood
Management's Executive Incentive Plan authorizes Hallwood Management to pay
annual cash bonuses in an amount up to 10% of Hallwood Management's net
operating income for the prior year. The actual amount to be paid and the
allocation of the total amount to individual employees is recommended by the
Chief Executive Officer of Hallwood Management, Mr. Gumbiner, and approved by
the Board of Directors of Hallwood Management, which consists of Messrs.
Gumbiner, Troup and Guzzetti. Any amount to be paid to an executive officer of
the Company is subject to the approval of the Company's Compensation Committee.
Pursuant to the Executive Incentive Plan, Mr. Gumbiner recommended that a total
bonus of $65,000 (2.79% of Hallwood Management's net operating income, as
defined, for 1994) be paid to four employees of Hallwood Management, including
$15,000 to Mr. Guzzetti. The total amount of the awards under the Executive
Incentive Plan was determined by Mr. Gumbiner based on his determination that
the amount was reasonable in light of Hallwood Management's net operating income
and was allocated to the employees based on Mr. Gumbiner's judgement of the
overall contribution of each employee to Hallwood Management and the
compensation the individual otherwise receives. The Board of Directors of
Hallwood Management and the Company's Compensation Committee approved the
bonuses as recommended by Mr. Gumbiner.
Under the 1995 Stock Option Plan for the Company, the Stock Option
Committee may grant up to 68,000 shares of Common Stock. This plan is intended
to provide an additional incentive to attract and retain qualified and competent
directors, employees and consultants. The Stock Option Committee determines
which directors, employees and/or consultants of the Company or any subsidiary
may receive options and the amount of options granted. Under this plan Messrs.
Crocco, Lynch, Talbot and Melle were granted options to purchase 2,500, 2,500,
2,500 and 1,500 shares of Common Stock, respectively, during fiscal 1995.
Fiscal 1995 Compensation Committee Members:
Charles A. Crocco, Jr.
Robert L. Lynch
Fiscal 1995 Stock Option Committee Members:
Anthony J. Gumbiner
Brian M. Troup
HALLWOOD REALTY COMPENSATION
Compensation of the executive officers of Hallwood Realty is determined by
the entire Board of Directors of Hallwood Realty in consultation with Mr.
Guzzetti, the President of Hallwood Realty. The members of the Compensation
Committee, through their business experience, are generally aware of prevailing
compensation practices and regularly review and remain informed about the recent
financial and operating experience of the Company. With this experience and
review, the Board bases its determination of specific amounts to be paid to
individual executive officers primarily on Mr. Guzzetti's and the Board's
assessments of the individual performance of each officer. Substantially all the
compensation paid by Hallwood Realty to its executive officers consists of
salary, although the Board of Directors may determine to pay bonuses from time
to time based on the Board's determination that Hallwood Realty has experienced
favorable operating results or completed transactions that benefit Hallwood
Realty. For fiscal 1995, Mr. Guzzetti and the Board of Directors determined that
no change was required in the salaries of the executive officers from the prior
year.
11
<PAGE> 14
Under the 1995 Unit Option Plan for HRP, the Board of Directors of Hallwood
Realty may grant up to 86,000 units of limited partnership interest in HRP. This
plan is intended to provide an additional incentive to attract and retain
qualified and competent directors, employees and consultants. The Board of
Directors of Hallwood Realty determines which directors, employees and/or
consultants of HRP, Hallwood Realty or any subsidiary may receive options and
the amount of options granted. Under this plan Messrs. Gumbiner, Troup and
Guzzetti were granted options to purchase 25,800 units, 17,200 units and 15,000
units, respectively.
Fiscal 1995 Members of the Board of Directors:
Anthony J. Gumbiner William L. Guzzetti
Alan G. Crisp William F. Forsyth
Brian M. Troup
HEC COMPENSATION
General. HEC's fiscal year ends December 31. Therefore, this report is
presented with respect to compensation paid during HEC's latest completed fiscal
year ended December 31, 1994. HEC's primary activity is to serve as general
partner of HEP, which in turn controls several other entities (collectively, the
"Energy Companies"). HEC has no employees; all management is provided by
employees of HPI, which provides services to all of the Energy Companies.
Accordingly, HEC 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 HEC on behalf of HEC and
HEP. 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 Plan and
the International Incentive Plan were made by the full Board of Directors of HEC
acting as the Compensation Committee. In January 1995, the full Board of
Directors of HEC 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. 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 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 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 of Directors of HEC 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
12
<PAGE> 15
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, HEC's Compensation Committee determined that the Energy Companies
had a slightly less than average year in the overall reserves found and
effectiveness of capital expenditures. HEC's Board of Directors 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
recommendations 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, an
International Incentive Plan for international projects and the 1995 Unit Option
Plan for HEP. These plans are intended to provide incentive and motivation to
the Energy Companies' key employees, including HEC'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.
Under the Domestic Incentive Plan, HEC's Board of Directors 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 of Directors 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 the 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 of Directors 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, HEC's 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 was adopted by the HEC's Board of
Directors 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 HEC's Board's discretion.
13
<PAGE> 16
Under the 1995 Unit Option Plan for HEP, HEP may from time to time grant up
to 450,000 units of limited partnership interests in HEP. The Board of Directors
of HEC determines which directors, employees and/or consultants of HEC and the
Energy Companies may receive options and the amount of options granted. Under
this plan Messrs. Gumbiner, Troup and Guzzetti were granted options to purchase
127,500 units, 85,000 units and 63,750 units, respectively.
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 the Company effective June 30,
1993 and expiring June 30, 1997, pursuant to which the Energy Companies pay the
Company a $300,000 annual consulting fee. In 1994, the consulting services were
provided by HSC, through Mr. Gumbiner and Mr. Troup, and Hallwood Group paid the
annual fee it received to HSC. Both agreements were approved by the Board of
Directors of HEC, Mr. Gumbiner abstaining.
1994 Compensation Committee Members:
Anthony J. Gumbiner
Brian M. Troup
Hans-Peter Holinger
Rex A. Sebastian
William L. Guzzetti
14
<PAGE> 17
PERFORMANCE GRAPH
The following performance graph compares the 5-year cumulative return of
the Common Stock with that of the Russell 2000 Index and a peer group of
issuers. The issuers included in the peer group are all publicly traded
companies included in Standard Industrial Classification Code 6512 "Operators of
Nonresidential Buildings," with market capitalization of less than $100,000,000
as of July 31, 1995, which consist of Midwest Real Estate Shopping Centers, L.P.
(formerly Equitable Real Estate Shopping Centers, L.P.), HRP, Milestone
Properties, Inc., Pacific Gateway Properties, Inc. and Shopco Laurel Centre,
L.P.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG THE HALLWOOD GROUP INCORPORATED, A PEER GROUP
AND THE RUSSELL 2000 INDEX
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) THE COMPANY PEER GROUP RUSSELL 2000
<S> <C> <C> <C>
7/90 100 100 100
7/91 108 56 109
7/92 79 41 126
7/93 87 45 155
7/94 46 47 162
7/95 38 51 203
</TABLE>
* $100 invested on July 31, 1990 in stock, index or peer group, including
reinvestment of dividends. Fiscal year ending July 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AND MANAGEMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an agreement (the "1994
Consulting Agreement"), with HSC, a corporation with which Messrs. Gumbiner and
Troup are associated, pursuant to which HSC agreed to provide international
consulting and advisory services to the Company and its affiliates for an annual
fee of $350,000 and reimbursement for out-of-pocket and other reasonable
expenses of HSC. The initial term of the 1994 Consulting Agreement, which
expired July 31, 1995, is automatically extended for successive one-year terms
unless notice of termination is provided by either party no less than thirty-one
(31) days prior to the expiration of the end of its term or an extension
thereof.
The Company entered into a financial consulting agreement with HPI, dated
as of June 30, 1994, which provides that the Company or its agent shall provide
consulting services to HPI for compensation of $300,000
15
<PAGE> 18
per year. The Compensation Committee determined that these services would be
most appropriately provided by HSC, acting as the Company's agent, through the
services of Mr. Gumbiner and Mr. Troup, and that as consideration for these
services the Company would pay to HSC the fee to which the Company is entitled
under the agreement. Of the $300,000 payment made in June 1995, HEC paid
approximately $9,000, and HEP and other affiliates of HEC paid the remainder.
Pursuant to an agreement dated December 1, 1988, the Company provides a
variety of financial and managerial consulting services to ShowBiz, for which it
receives an annual payment of $125,000. Effective October 1, 1995, in
recognition that the Company has discontinued its merchant banking activities
and that the services required by the agreement are performed by Messrs.
Gumbiner and Troup, the Company assigned to HSC its rights to the payments
pursuant to this Agreement.
Pursuant to an existing agreement, the Company reimburses HSC for
reasonable and necessary expenses in providing office space and administrative
services used by Mr. Gumbiner. For the fiscal year ended July 31, 1995, the
Company reimbursed HSC in the amount of $271,000. Of the amounts paid in fiscal
1995, approximately $65,000 was paid by the Company, $3,000 was paid by HEC, and
the remainder by HEP and other affiliates of HEC.
See "Compensation Committee Interlocks and Insider Participation," for
information concerning members of the Company's Compensation Committee.
STANWICK HOLDINGS, INC.
The Company shares common offices, facilities and staff with, and certain
executive officers of the Company also served as executive officers or directors
of, Stanwick Holdings, Inc. ("Stanwick"). The Company pays the common general
and administrative expenses of the two companies and charges Stanwick a fee for
its allocable share of such expenses, which totalled $25,000 in fiscal 1995.
Hallwood Management Company, a wholly-owned subsidiary of the Company, manages
two buildings owned by Stanwick and charges Stanwick a fee for property
management, leasing and construction services, which totaled $508,000 in fiscal
1995.
Stanwick is a subsidiary of HHSA. Messrs. Gumbiner and Troup are directors
of HHSA. Under United States securities laws, Limited, with which Messrs.
Gumbiner and Troup are associated, could be considered to share beneficial
ownership of substantially all of the outstanding shares of HHSA.
AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended July 31, 1995, and have been selected to serve in that
capacity again for the fiscal year ended July 31, 1996. A representative of
Deloitte & Touche LLP will be available at the Annual Meeting to respond to
appropriate questions and will be given an opportunity to make a statement if
desired.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the next
Annual Meeting of Stockholders and who wishes to have it set forth in the proxy
statement and identified in the form of proxy prepared by management must notify
management of the Company in such a manner so that such notice is received by
management by August 15, 1996, and in such form as required under the rules and
regulations promulgated by the SEC.
16
<PAGE> 19
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
Annual Meeting. All shares represented by Company proxies will be voted in favor
of the nominee for director set forth herein unless otherwise indicated on the
form of proxy. If any other matters properly come before the meeting, Company
proxy holders will vote thereon according to their best judgment.
By order of the Board of Directors
MELVIN J. MELLE
Secretary
December 8, 1995
17
<PAGE> 20
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THE HALLWOOD GROUP INCORPORATED
P 3710 RAWLINS, SUITE 1500
R DALLAS, TEXAS 75219
O
X This Proxy is Solicited on Behalf of the Board of Directors
Y
The undersigned hereby appoints Anthony J. Gumbiner and
Robert L. Lynch, and each of them, as Proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and
to vote, as designated on the reverse side hereof, all of the shares
of Common Stock, par value $0.10 per share ("Common Stock"), of The
Hallwood Group Incorporated held of record by the undersigned on
December 1, 1995, at the Annual Meeting of Stockholders to be held on
January 26, 1996 or any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
given, this proxy will be voted FOR each of the proposals listed.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/X/ Please mark votes as in this example.
Please mark boxes in blue or black ink.
<TABLE>
<S> <C>
1. Election of Director
NOMINEE: BRIAN M. TROUP
2. In their discretion, the Proxies are
authorized to vote upon such other business
as properly may come before the meeting.
/ / FOR Nominee
/ / WITHHOLD AUTHORITY to vote for nominee MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears at left. When
shares are held by joint tenants, both should sign,
or if one signs he should attach evidence of his
authority. When signing as attorney, executor,
administrator, agent, trustee or guardian, please
give full title as such. If a corporation, please
sign full corporation name by President or other
authorized officer. If a partnership, please sign
full partnership name by authorized person.
COMPLETE, SIGN AND DATE THE PROXY CARD AND RETURN
PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature: Date
------------------------ -------------
Signature: Date
------------------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 21
- --------------------------------------------------------------------------------
PROXY
THE HALLWOOD GROUP INCORPORATED
3710 RAWLINS, SUITE 1500
DALLAS, TEXAS 75219
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS ANTHONY J. GUMBINER AND
ROBERT L. LYNCH, AND EACH OF THEM, AS PROXIES, EACH WITH THE
POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES THEM TO
REPRESENT AND TO VOTE, AS DESIGNATED ON THE REVERSE SIDE
HEREOF, ALL OF THE SHARES OF COMMON STOCK, PAR VALUE $.10 PER
SHARE ("COMMON STOCK"), OF THE HALLWOOD GROUP INCORPORATED
HELD OF RECORD BY THE UNDERSIGNED ON DECEMBER 1, 1995, AT THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 26, 1996
OR ANY ADJOURNMENT THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS LISTED.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK BOXES [ ] OR [x] IN BLUE OR BLACK INK.
<TABLE>
<S> <C> <C> <C>
1. Election of Director FOR nominee listed WITHHOLD AUTHORITY
Nominee: [ ] to vote for nominee listed [ ]
Brian M. Troup
2. In their discretion, the Proxies are authorized to vote upon such other business as properly may
come before the meeting.
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both should sign, or if one
signs he should attach evidence of this
authority. When signing as attorney,
executor, administrator, agent, trustee
or guardian, please give full title as
such. If a corporation, please sign
full corporate name by President or
other authorized officer. If a
partnership, please sign full
partnership name by authorized person.
Dated: , 199
----------------------------- --
--------------------------------------------
Signature
--------------------------------------------
Signature, if held jointly
</TABLE>
COMPLETE, SIGN AND DATE THE PROXY CARD AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
