<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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE HALLWOOD GROUP, INC
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
THE HALLWOOD GROUP INCORPORATED
NOTICE OF ANNUAL MEETING
Dear Hallwood Group Stockholder:
On behalf of the board of directors, you are cordially invited to attend
the Annual Meeting of Stockholders of The Hallwood Group Incorporated (the
"Company"). The annual meeting will be held on Friday, May 19, 2000 at 11:00
a.m. local time, at the offices of the Company located at 3710 Rawlins, Suite
1500, Dallas, Texas, 75219.
At the annual meeting we will:
1. Elect one director to hold office for three years; and
2. Transact any other business properly presented at the meeting.
Only stockholders of record at the close of business on March 24, 2000 are
entitled to notice of and to vote at the annual meeting.
By order of the Board of Directors
MELVIN J. MELLE
Secretary
April 11, 2000
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE UPON THE MATTERS PRESENTED. IF
YOU ARE UNABLE TO ATTEND THE MEETING; PLEASE COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO
BE REPRESENTED AT THE MEETING. EXECUTING 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 ON FRIDAY, MAY 19, 2000
---------------------
This proxy statement and the accompanying proxy are first being mailed on
or about April 11, 2000. The accompanying proxy is solicited by the board of
directors of the Company.
- --------------------------------------------------------------------------------
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
<TABLE>
<S> <C> <C>
1. Q: WHO IS ENTITLED TO VOTE?
A: Stockholders of record at the close of business on March 24,
2000, the "record date," are entitled to vote at the annual
meeting.
- -----------------------------------------------------------------------
2. Q: WHAT MAY I VOTE ON?
A: You may vote on:
(1) The election of one nominee to serve on the board of
directors for three years; and
(2) Any other business properly presented at the meeting.
- -----------------------------------------------------------------------
3. Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive and return it in
the prepaid envelope. If you return your signed proxy card
but do not mark the boxes showing how you wish to vote, your
shares will be voted FOR the election of our nominee.
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 the nominee.
- -----------------------------------------------------------------------
4. Q: HOW CAN I REVOKE MY PROXY?
A: You have the right to revoke your proxy at any time before
the meeting by:
(1) notifying our corporate secretary;
(2) voting in person; or
(3) returning a later-dated proxy card.
Attending the meeting is not sufficient to revoke your proxy
unless you notify the Company's secretary in writing prior
to the voting of your proxy.
- -----------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
5. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE
PROPOSAL?
A: Your board of directors recommends that you vote FOR the
nominee for director.
- -----------------------------------------------------------------------
6. Q: HOW MANY SHARES CAN VOTE AT THE ANNUAL MEETING?
A: As of the record date, there were 1,424,789 shares of common
stock outstanding and entitled to vote at the annual
meeting. You are entitled to one vote for each share of
common stock you hold.
- -----------------------------------------------------------------------
7. Q: WHAT IS A "QUORUM?"
A: A "quorum" is a majority of the outstanding shares. A quorum
may be present at the meeting or represented by proxy. There
must be a quorum for the meeting to be valid. If you submit
a properly executed proxy card, even if you abstain from
voting, then you will be considered part of the quorum.
- -----------------------------------------------------------------------
8. Q: HOW MANY VOTES DO YOU NEED TO ELECT THE NOMINEE?
A: The affirmative vote of the holders of a majority of the
Company's common stock, voting in person or represented by
proxy at the annual meeting, is necessary to elect the
nominee director.
- -----------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
SOLICITATION OF PROXIES
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 those
banks and brokers for the reasonable out-of-pocket expenses of the 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
those individuals on account of their activities. In addition, the Company has
retained Morrow & Co., Inc. to assist in the solicitation of proxies, for which
it will be paid a fee of $2,500 plus reimbursement of reasonable out-of-pocket
expenses. We estimate that total costs of the proxy solicitation will be
approximately $4,000.
ELECTION OF DIRECTOR
The Company's board of directors is divided into three classes serving
staggered three-year terms. At the annual meeting, you will elect one person to
the board of directors. The two remaining directors will continue in office for
the terms indicated below.
The individuals named on the enclosed proxy card intend to vote for the
election of the nominee listed below, unless you direct them to withhold your
vote. The nominee has indicated that he is able and willing to serve as
director. However, if for some reason the nominee is unable to stand for
election, the individuals named as proxies may substitute some other person for
the nominee and may vote for that nominee.
Below are the names and ages of the nominee and of each of the two
directors whose terms of office will continue after the annual meeting, the year
in which each director was first elected as a director of the Company, their
principal occupations or employment for at least the past five years, and other
directorships they hold.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM ENDING WITH THE 2003 ANNUAL MEETING
Anthony J. Gumbiner........ Mr. Gumbiner, age 55, has served as a director and
Chairman of the Board since 1981 and Chief
Executive Officer of the Company since 1984. He has
also served as President and Chief Operating
Officer since December 21, 1999. He has also served
as Chairman of the Board and Chief Executive
Officer of Hallwood Energy Corporation and its
predecessors since 1987; as a director of Hallwood
Holdings, S.A. ("HHSA") since 1984 and as a
director of Hallwood Realty, LLC, the general
partner of Hallwood Realty Partners, L.P., and its
predecessor since 1990. Mr. Gumbiner is also a
solicitor of the Supreme Court of Judicature of
England.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
Charles A. Crocco, Jr. .... Mr. Crocco, age 61, has served as a director since
1981. He was a shareholder in, and then Of Counsel
to, Crocco & De Maio, P.C., attorneys at law, and
its predecessors, for more than five years. On
January 1, 1999, Crocco & De Maio combined its
practice with Jackson & Nash, LLP where Mr. Crocco
is now Of Counsel. He also has served as a director
of First Banks America, Inc., a bank holding
company since 1988.
J. Thomas Talbot........... Mr. Talbot, age 64, has served as a director since
1981 and is 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
3
<PAGE> 6
firm, since 1986. He is also 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 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
1990. He has also served as a director of
California Coastal Communities, Inc. (formerly Koll
Real Estate Group) since August 1993, and as a
director of Metalclad Corp. (NASDAQ) since March
1999.
Except as indicated above, neither the nominee nor the continuing directors
hold a directorship in any company with a class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the
requirements of Section 15(d) of the Securities 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE INDIVIDUAL NOMINATED FOR ELECTION AS A DIRECTOR.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Messrs. Talbot (Chairman) and Crocco served as members of the Company's
audit committee during the year ended December 31, 1999. The audit committee met
two times during this period 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 following year.
The board of directors does not have a standing nominating committee or
compensation committee.
During the year ended December 31, 1999, the board of directors held five
meetings. Each director attended at least 75% of (1) the total number of
meetings held by the board of directors, and (2) the total number of meetings
held by all committees of the board of directors on which he served.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of shares of the Company's common stock (1) for any person or "group," as that
term is used in Section 13(d)(3) of the Securities Exchange Act, who, or which
the Company knows, owns beneficially more than 5% of the outstanding shares of
the Company's common stock as of the close of business on the record date; (2)
for each director and the nominee for director; and (3) for all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(1)
- ------------------------ ------------ -----------
<S> <C> <C>
Alpha Trust................................................. 686,687(2) 48.2%
c/o Radcliffes Trustee Company SA
12 rue de l'Arquebuse
1204 Geneva, Switzerland
Heartland Advisors, Inc. ................................... 199,450(3) 14.0%
Charles A. Crocco, Jr. ..................................... 15,825(4) 1.1%
Anthony J. Gumbiner......................................... 83,700(5) 5.6%
William L. Guzzetti......................................... --(6) --
Melvin J. Melle............................................. 9,000(7) *
J. Thomas Talbot............................................ 15,000(8) 1.0%
All directors and executive officers as a group (5
persons).................................................. 123,525 8.0%
</TABLE>
- ---------------
* Less than 1%
(1) Assumes, for each person or group listed, the exercise of all stock options
held by that person or group that are exercisable within 60 days, according
to Rule 13d-3(d)(1)(i) of the Securities Exchange Act, but the exercise of
none of the convertible securities owned by any other holder of options.
(2) Mr. Gumbiner has the power to designate and replace the trustees of the
Alpha Trust. Mr. Gumbiner and his family are among the discretionary
beneficiaries of the Alpha Trust.
(3) Based upon the Schedule 13G filed by Heartland Advisors, Inc. on January 20,
2000. The shares of common stock are held in investment advisory accounts of
Heartland Advisors, Inc. Consequently, various persons have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the common stock. No individual investment
account is known to have an interest relating to more than 5% of the common
stock of the Company.
(4) Includes currently exercisable options to purchase 15,000 shares of common
stock.
(5) Includes currently exercisable options to purchase 83,700 shares of common
stock. Excludes 686,687 shares of common stock held by Alpha Trust. In
addition, Mr. Gumbiner holds currently exercisable options to purchase
89,767 shares of Hallwood Energy Corporation, and currently exercisable
options to purchase 25,800 units of Hallwood Realty Partners.
(6) Mr. Guzzetti does not own any shares nor has options to purchase shares of
the Company. He owns 100 units of Hallwood Realty Partners, currently
exercisable options to purchase 53,067 shares of Hallwood Energy Corporation
and currently exercisable options to purchase 15,000 units of Hallwood
Realty Partners.
(7) Includes currently exercisable options to purchase 9,000 shares of common
stock.
(8) Includes currently exercisable options to purchase 15,000 shares of common
stock.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The total compensation paid for each of the years ended December 31, 1999,
December 31, 1998 and December 31, 1997 to the Chief Executive Officer, and the
other executive officers who received cash compensation in excess of $100,000
for 1999, referred to collectively, as the "Named Executive Officers," is set
forth in the following Summary Compensation Table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------
ANNUAL COMPENSATION SECURITIES
------------------------------- OTHER ANNUAL UNDERLYING LTIP ALL OTHER
CALENDAR COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(5) SARS(#) ($) ($)(8)
--------------------------- -------- --------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner(1)....... 1999 168,333(1) 75,000(1) 0 (6) (7) 7,802
Chairman and 1998 0(1) 0 0 (6) (7) 7,802
Chief Executive Officer 1997 0(1) 0 0 (6) (7) 7,802
Brian M. Troup(2)............ 1999 0(1) 0 0 (6) (7) 6,776
President and 1998 0(1) 0 0 (6) (7) 3,800
Chief Operating Officer 1997 0(1) 0 0 (6) (7) 27,633
William L. Guzzetti.......... 1999 413,144(3) 195,000(4) 0 0 23,251 4,800
Executive Vice President 1998 413,144(3) 182,800(4) 0 0 30,523 4,800
1997 412,627(3) 158,870(4) 0 0 42,854 4,750
Melvin J. Melle.............. 1999 209,042 0 3,246 0 0 13,962
Vice President, 1998 208,333 0 2,940 0 0 13,893
Chief Financial Officer and 1997 208,333 0 2,940 6,750 0 13,936
Secretary
</TABLE>
- ---------------
(1) Consists of $168,333 in salary and $75,000 in bonus paid by Hallwood Energy
Corporation. In addition, the Company paid HSC Financial Corporation ("HSC
Financial"), an entity with which Mr. Gumbiner is, and Mr. Troup was (until
December 21, 1999), associated, consulting fees of $825,000 each year for
1999, 1998 and 1997, primarily in connection with HSC Financial's activities
on behalf of the Company's subsidiaries. The Company also received from the
Company's energy entities consulting fees of $241,389 for the period January
1 through June 8, 1999 and $550,000 for the years 1998 and 1997, which the
Company paid to HSC Financial to provide the associated consulting services
to the Company's energy entities. See "Certain Relationships and Related
Transactions." In March 2000, the board of directors of Hallwood Realty, LLC
approved a bonus to HSC Financial in the amount of $150,000, which was paid
by Hallwood Realty Partners. In March 1998, the board of directors approved
bonuses to HSC Financial in the amount of $500,000 from the Company and
$322,539 from the Company's Hallwood Commercial Real Estate, Inc. subsidiary
("HCRE") both of which were accrued and payable as of December 31, 1997 and
were paid during 1998. In March 1997, the Company paid HSC Financial a bonus
of $100,000 and HCRE paid a bonus of $139,000 with respect to its activities
on behalf of the Company outside of the United States. In addition, the
Company received from ShowBiz Pizza Time, Inc., a consulting fee of $31,250,
which the Company paid to HSC Financial to provide associated consulting
services to ShowBiz. The Company owned 13% of the common stock of ShowBiz
until March 1997. Mr. Gumbiner became President of the Company on December
21, 1999.
(2) Mr. Troup resigned from all positions with the Company and its affiliates on
December 21, 1999.
(3) Consists of $204,811 paid by Hallwood Energy Corporation and its affiliates
and $208,333 paid by Hallwood Realty Partners for 1999; $204,811 paid by
Hallwood Energy Partners and affiliates for 1998 and $204,294 for 1997; and
$208,333 paid by Hallwood Realty Partners for each of 1998 and 1997.
(4) Consists of $171,000 paid by Hallwood Energy Corporation and its affiliates
and $24,000 paid by HCRE for 1999; $162,800 paid by Hallwood Energy Partners
and affiliates and $20,000 by HCRE for 1998; $143,870 paid by Hallwood
Energy Partners and affiliates, $7,500 by Hallwood Realty, LLC and $7,500 by
HCRE for 1997.
6
<PAGE> 9
(5) Represents reimbursements to compensate for the income tax effect of payment
for life and/or disability insurance.
(6) Consists of the following options granted during calendar years ended 1999,
1998, and 1997. "HWG" refers to the Company, "HEP" to Hallwood Energy
Partners, "HCRC" to Hallwood Consolidated Resources Corporation and "HEC" to
Hallwood Energy Corporation. Options for units of Hallwood Energy Partners
and options for shares of Hallwood Consolidated Resources Corporation have
been terminated. Share amounts for options for shares of common stock of the
Company reflect a three for two stock split on November 5, 1999. Mr. Troup's
options for shares of common stock of the Company were canceled on December
21, 1999. Mr. Troup's options for units of Hallwood Realty Partners expire
on December 21, 2000.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
OPTIONS/SARS(#)
-------------------------
NAME COMPANY 1999 1998 1997
- ---- ------- ------- ------ ------
<S> <C> <C> <C> <C>
Anthony J. Gumbiner........... HWG 0 0 41,850
HEP Class C Units 0 34,588 0
HCRC 0 0 47,700
HEC 198,000 0 0
Brian M. Troup................ HWG 0 0 27,900
HEP Class C Units 0 22,588 0
HCRC 0 0 10,600
William L. Guzzetti........... HEP Class C Units 0 16,588 0
HCRC 0 0 23,850
HEC 117,000 0 0
</TABLE>
(7) Under the Hallwood Petroleum, Inc. ("HPI") Long-Term Incentive Plan, payouts
were made to HSC Financial in the amount of $66,208 for 1999; $67,977 for
1998 and $54,750 for 1997.
(8) Consists of the following items of compensation in 1999:
<TABLE>
<CAPTION>
COMPANY OR SUBSIDIARY
CONTRIBUTIONS TO TAX
FAVORED SAVINGS PLANS
OR IN LIEU THEREOF
PAYMENT UNDER THE
HALLWOOD SPECIAL PREMIUM PAYMENTS FOR
NAME BONUS AGREEMENT($) TERM LIFE INSURANCE($)
- ---- --------------------- ----------------------
<S> <C> <C>
Anthony J. Gumbiner.................. 0 7,802
Brian M. Troup....................... 0 3,800
William L. Guzzetti.................. 4,800 0
Melvin J. Melle...................... 8,282 5,680
</TABLE>
The board of directors approved reimbursement to Mr. Troup of medical
expenses not covered by Hallwood Group's group medical insurance contract
in the amount of $23,832 in 1997 and $2,976 in 1999, which is included in
"All Other Compensation." No reimbursements were made in 1998.
7
<PAGE> 10
OPTIONS/SAR GRANTS IN LAST CALENDAR YEAR
The following table sets forth the options to purchase shares of Hallwood
Energy Corporation common stock granted to executive officers during 1999. No
options to purchase common stock of the Company were granted and no options held
by executive officers were exercised in 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES OF
-------------------------- SHARE PRICE APPRECIATION
NUMBER OF % OF TOTAL FOR OPTION TERM(2)
SECURITIES OPTIONS/SARS ------------------------------
UNDERLYING GRANTED TO EXERCISE OR 5% 10%
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION $9.85 $13.64
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE SHARE PRICE SHARE PRICE
- ---- ------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner........... 198,000 30 $7.00 June 9, 2006 $564,241 $1,314,922
William L. Guzzetti........... 117,000 18 $7.00 June 9, 2006 333,415 776,999
</TABLE>
- ---------------
(1) Options have a seven-year term. One-third have vested and the remainder vest
one-third on June 8, 2000 and one-third on June 8, 2001. All options vest
immediately in the event of certain changes in control of Hallwood Energy
Corporation.
(2) Securities and Exchange Commission rules require calculation of potential
realizable value assuming that the market price of the shares appreciates in
value at 5% and 10% annualized rates. At a 5% annualized rate of
appreciation, the share price would be $9.85 at the end of seven years. At a
10% annualized rate of appreciation, the share unit price would be $13.64 at
the end of seven years. No gain to an executive officer is possible without
an appreciation in share value, which will benefit all holders of shares.
The actual value an executive officer may receive depends on market prices
for the shares, and there can be no assurance that the amounts reflected
will actually be realized.
AGGREGATED OPTION/SAR EXERCISES
AND OPTION/SAR VALUES AT DECEMBER 31,1999
The following table discloses for each of the Named Executive Officers who
have been granted options to purchase securities of the Company or its
subsidiaries, the number of options held by each of the Named Executive Officers
and the potential realizable values for their options at December 31, 1999. None
of the Named Executive Officers exercised any options during the year ended
December 31, 1999, and the Company has not granted SARs.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1999 (#) DECEMBER 31, 1999 ($)
---------------------- ---------------------
NAME ENTITY(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------- ------------------------- -------------------------
<S> <C> <C> <C>
Anthony J. Gumbiner...................... HWG 83,700/0 181,350/0
HRP(2) 25,800/0 1,015,875/0
HEC 66,000/132,000 0/0
Brian M. Troup........................... HRP(3) 17,200/0 677,250/0
William L. Guzzetti...................... HRP 15,000/0 590,625/0
HEC 39,000/78,000 0/0
Melvin J. Melle.......................... HWG 9,000/0 10,125/0
</TABLE>
- ---------------
(1) Options for units of Hallwood Energy Partners and shares of Hallwood
Consolidated Resources Corporation have been terminated. The number of
shares of common stock of the Company reflect a three-for-two stock split
paid on November 5, 1999.
8
<PAGE> 11
(2) "HRP" refers to Hallwood Realty Partners
(3) Mr. Troup's options for Hallwood Realty Partners expire on December 21,
2000.
The following table discloses each of the Named Executive Officers who
received long-term incentive plan awards during the year ended December 31, 1999
and the estimated future payouts of the awards.
LONG TERM INCENTIVE PLANS -- AWARDS IN YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF PERFORMANCE OR ESTIMATED FUTURE
PLAN CASH OTHER PERIOD PAYOUTS UNDER NON-STOCK
NAME FLOW UNTIL PAYOUT PRICE-BASED PLANS($)(1)
- ---- ------------- -------------- -----------------------
<S> <C> <C> <C>
Anthony J. Gumbiner(2)....................... 37.50 2004 75,505
William L. Guzzetti.......................... 7.14 2004 14,376
</TABLE>
- ---------------
(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.
(2) The award was made to HSC Financial, with which Mr. Gumbiner is associated.
COMPENSATION OF DIRECTORS
For the year ended December 31, 1999, Messrs. Crocco and Talbot received
director fees of $27,500 and are entitled to receive $500 for each day spent on
business of the Company, other than at board meetings. 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, Messrs. Gumbiner and Troup through HSC Financial is
included in "Certain Relationships and Related Transactions" and "Compensation
Committee Interlocks and Insider Participation," below.
EMPLOYMENT AGREEMENTS
During the year ended December 31, 1999, the Company had an employment
agreement with Mr. Melle. 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. 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 year ended December 31, 1999, the Company paid
premiums in the amount of $5,680 for this life insurance. Mr. Melle's employment
agreement continued under the same terms and conditions until December 31, 1999,
at which time it was automatically extended for one year and will be
automatically extended annually unless terminated by either party.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Since November 1997 the board of directors as a whole has performed the
functions of the compensation committee. References to the Company's
compensation committee in this proxy statement refer to the board of directors,
acting in its capacity as the compensation committee.
Messrs. Gumbiner, Troup and Guzzetti served on the board of directors of
Hallwood Realty, LLC, the general partner of Hallwood Realty Partners in 1999,
and on the board of directors of each of Hallwood Consolidated Resources
Corporation and the general partner of Hallwood Energy Partners until June 1999.
For each of these entities, the board of directors served as the compensation
committee, Mr. Gumbiner was the Chief Executive Officer and Mr. Guzzetti was the
Chief Operating Officer. Upon completion of the consolidation of the energy
subsidiaries in June 1999, the board of directors of the newly-formed Hallwood
9
<PAGE> 12
Energy Corporation formed a compensation committee consisting of Messrs. Rex A.
Sebastian, Bill M. Van Meter, Jerry A. Lubliner and Hans-Peter Holinger.
As general partner of Hallwood Realty Partners, Hallwood Realty, LLC earns
an asset management fee and certain related fees from Hallwood Realty Partners,
which amounted to $619,000 for the year ended December 31, 1999. In addition,
Hallwood Realty Partners reimbursed Hallwood Realty, LLC for $2,941,000 of costs
incurred by Hallwood Realty, LLC on behalf of Hallwood Realty Partners in 1999.
As property manager for Hallwood Realty Partners, the Company's HCRE subsidiary
received management fees, leasing commissions and other fees from Hallwood
Realty Partners and related parties of $7,517,000 during the year ended December
31, 1999.
Also during 1999, Hallwood Energy Partners and its affiliates reimbursed
the Company for $140,000 of costs incurred by the Company on behalf of Hallwood
Energy Partners and its affiliates and Hallwood Consolidated Resources
Corporation reimbursed the Company for $107,000 of costs incurred by the Company
on behalf of Hallwood Consolidated Resources Corporation up until the completion
of the consolidation of the energy subsidiaries in June 1999. After the
completion of the consolidation, Hallwood Energy Corporation reimbursed the
Company for $55,000 of costs incurred by the Company on behalf of Hallwood
Energy Corporation.
The Company entered into a financial consulting agreement with HPI, dated
as of December 31, 1996, which provided that the Company or its agent was to
provide consulting services to HPI for compensation of $550,000 per year. The
former compensation committee determined that these services would be most
appropriately provided by HSC Financial, acting as the Company's agent, through
the services of Messrs. Gumbiner and Troup, and that as consideration for these
services, the Company would pay to HSC Financial the fee to which the Company
was entitled under the agreement. The agreement with HPI was terminated in June
1999, upon the completion of the consolidation of Hallwood Energy Partners,
Hallwood Consolidated Resources Corporation and the direct energy interests of
the Company into Hallwood Energy Corporation.
Since December 31, 1996, the Company has been a party to an agreement with
HSC Financial under which HSC Financial provides international consulting and
advisory services to the Company and its affiliates for an annual fee of
$825,000. According to this agreement, the Company reimburses HSC Financial for
reasonable and necessary expenses in providing office space and administrative
services used by Mr. Gumbiner. For the year ended December 31, 1999, the Company
reimbursed HSC Financial in the amount of $313,000. Of the amounts paid in 1999,
$107,000 was paid by the Company, $66,000 was paid by Hallwood Energy Partners
and its affiliates and $140,000 was paid by Hallwood Realty, LLC.
COMPENSATION COMMITTEE
REPORTS ON EXECUTIVE COMPENSATION
GENERAL
The Company is a diversified holding company with several subsidiaries and
affiliated companies. Of the Named Executive Officers, Messrs. Gumbiner and,
until December 21, 1999, Mr. Troup, were involved in the activities of all of
the subsidiaries and affiliated companies, but received no cash compensation
directly from the Company. HSC Financial, with which Messrs. Gumbiner is, and
Mr. Troup was (until December 21, 1999), associated, received consulting fees
from the Company. Since the consolidation of the Company's energy interests with
Hallwood Energy Partners and Hallwood Consolidated Resources Corporation into
Hallwood Energy Corporation in June 1999, Hallwood Energy Corporation has paid
Mr. Gumbiner compensation directly for his services to that company, as
described under "Compensation by Hallwood Energy Corporation -- Executive
Officers," below. The Company's board of directors, acting in its capacity as
the compensation committee, approved the payments by the Company to HSC
Financial. Mr. Gumbiner's compensation for his services with respect to Hallwood
Energy Corporation is determined by Hallwood Energy Corporation's compensation
committee.
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Mr. Melle is involved in the activities of the Company and of certain
subsidiaries and affiliated companies, but for 1999 received compensation only
from the Company. Accordingly, the compensation of Mr. Melle is determined
solely by the Company's board of directors, acting in its capacity as the
compensation committee.
Mr. Guzzetti was involved in the activities of Hallwood Realty, LLC and
HCRE during 1999. He was also involved in the activities of Hallwood Energy
Partners and Hallwood Consolidated Resources Corporation until June 8, 1999, and
of Hallwood Energy Corporation and their subsidiaries and controlled entities
after that. The compensation of Mr. Guzzetti with respect to his services to
Hallwood Realty, LLC is determined by the board of directors of Hallwood Realty,
LLC; the compensation for his services with respect to HCRE is determined by the
Company's board of directors, acting in its capacity as the compensation
committee. Mr. Guzzetti's compensation with respect to his services to Hallwood
Energy Partners and Hallwood Consolidated Resources Corporation was determined
by the boards of directors of Hallwood Energy Partners' general partner and of
Hallwood Consolidated Resources Corporation. Mr. Guzzetti's compensation for his
services with respect to Hallwood Energy Corporation is determined by Hallwood
Energy Corporation's compensation committee.
COMPENSATION BY THE COMPANY
The Company's board of directors, acting in its capacity as the
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 board of directors' determination of the reasonable
compensation for that officer. The members of the board of directors, 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 board of directors 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 Company has
awarded substantial bonuses upon completion of significant acquisitions or other
transactions that provide material benefits to the Company.
HCRE has contracted with Hallwood Realty, LLC to manage the properties
controlled by Hallwood Realty, LLC. Mr. Guzzetti is the President and is
primarily responsible for the operations of HCRE. HCRE's Executive Incentive
Plan authorizes HCRE to pay annual cash bonuses in an amount up to 10% of HCRE'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 Mr.
Gumbiner, the Chief Executive Officer of HCRE, and is approved by the board of
directors of HCRE, which consists of Messrs. Gumbiner and Guzzetti and, until
December 21, 1999, Mr. Troup. Any amount to be paid to an executive officer of
the Company is subject to the approval of the board of directors. No bonuses
were awarded under the Executive Incentive Plan for 1999.
1999 Members of the Board of Directors
Charles A. Crocco, Jr.
Anthony J. Gumbiner
J. Thomas Talbot
Brian M. Troup (until December 21, 1999)
COMPENSATION BY HALLWOOD REALTY, LLC
Compensation of the executive officers of Hallwood Realty, LLC is
determined by the entire board of directors of Hallwood Realty, LLC in
consultation with Mr. Guzzetti, the President of Hallwood Realty, LLC. The
members of the Hallwood Realty, LLC board of directors, 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 Hallwood Realty, LLC and Hallwood Realty Partners. With this
experience and review, Hallwood Realty, LLC's board of directors bases its
determination of specific amounts to be paid to individual executive officers
primarily on Mr. Guzzetti's and the Hallwood Realty, LLC's board
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of directors' assessments of the individual performance of each officer. The
compensation paid by Hallwood Realty, LLC to its executive officers consists of
salary, and to the extent that Hallwood Realty, LLC's board of directors
determines to be appropriate, bonuses based on their determination that Hallwood
Realty, LLC or Hallwood Realty Partners have experienced favorable operating
results or completed transactions that benefit Hallwood Realty, LLC or Hallwood
Realty Partners. For 1999, Mr. Guzzetti and Hallwood Realty, LLC's board of
directors determined that no change was required in the salaries of the
executive officers from the prior year. In recognition of the benefits provided
to Hallwood Realty Partners through the efforts of the executive officers during
the year, Hallwood Realty, LLC's board of directors determined that it was
appropriate to award bonuses to the executive officers of Hallwood Realty, LLC,
including a bonus of $150,000 to Mr. Gumbiner and a bonus of $24,000 to Mr.
Guzzetti.
1999 Members of the Hallwood Realty, LLC Board of Directors
Anthony J. Gumbiner
Alan G. Crisp
William L. Guzzetti
William F. Forsyth
Edward T. Story
Brian M. Troup (until December 21, 1999)
COMPENSATION BY HALLWOOD ENERGY
General. Hallwood Energy Corporation's compensation philosophy is designed
to motivate employees to contribute to the success of the Hallwood Energy
Corporation through reserve replacement and enhancement of cash flow by
fostering an atmosphere that encourages an entrepreneurial approach to Hallwood
Energy Corporation's business. Hallwood Energy Corporation's compensation
practices are designed to attract, motivate and retain key personnel by
recognizing individual contributions, as well as the overall performance of
Hallwood Energy Corporation, through the use of "at-risk" compensation
strategies. Hallwood Energy Corporation's compensation program for executive
officers consists of four main components: (1) 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 Hallwood Energy Corporation; (2)
annual cash bonus program based on overall Hallwood Energy Corporation
performance measured against industry performance; (3) phantom working interest
awards intended to encourage the successful drilling/workover of wells; and (4)
stock option awards intended to motivate recipients to enhance stock value and
align executive officer and shareholder interests.
Base Salary. Hallwood Energy Corporation's compensation committee
determines base salaries for executive officers utilizing market survey data
that focuses on other oil and gas companies similar in size, as measured by
revenue and capital expenditures. Salaries of officers and other professional
employees are targeted at 80% of the average of the executive officer positions
for comparable companies within the surveys. 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.
Cash Bonus. The total bonus pool available for distribution to the
executive officers is determined based on an assessment by Hallwood Energy
Corporation's 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 Hallwood Energy Corporation'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 performance is poor, to as high as 500% of the
average total compensation paid by comparable companies if the performance has
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<PAGE> 15
been excellent. The objective of the bonus plan is to enhance stockholder value
by rewarding employees for attaining certain levels in strategic elements of the
business. After taking into account the various quantitative and qualitative
factors, Hallwood Energy Corporation's compensation committee determined that
Hallwood Energy Corporation had an average year in the categories of overall
reserves found and the effectiveness of capital expenditures, and a very good
year in the area of transactions. Based on this characterization that the
overall performance of Hallwood Energy Corporation was slightly better than
average, Hallwood Energy Corporation's 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
Hallwood Energy Corporation's phantom working interest incentive plan is
intended to provide incentive and motivation to key employees to increase the
oil and gas reserves of Hallwood Energy Corporation and to continue their
employment with Hallwood Energy Corporation.
Under the terms of this incentive plan, Hallwood Energy Corporation's
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
Hallwood Energy Corporation's interest in the cash flow from certain
international projects, if any, and wells drilled, recompleted or enhanced
during that year. Hallwood Energy Corporation's 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,
Hallwood Energy Corporation's compensation committee takes into consideration
the recommendation of the executive officers of Hallwood Energy Corporation.
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 Hallwood Energy Corporation's 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 1999 plan, so the value of awards under the 1999 plan depends
primarily on Hallwood Energy Corporation'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 Hallwood Energy Corporation's 1999 phantom working interest
plan were made in June of 1999. For the 1999 plan year, Hallwood Energy
Corporation's compensation committee allocated 2.8% of the cash flow from the
eligible domestic wells to the plan. It was 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 and 1998
incentive plans of Hallwood Energy Corporation's predecessors, Hallwood Energy
Partners and Hallwood Consolidated Resources Corporation.
Stock Option Plan
The objective of Hallwood Energy Corporation's long-term incentive plan,
under which stock options are granted, is to motivate recipients to maximize the
long-term growth and profitability of Hallwood Energy Corporation. Recipients
can recognize value from options granted only if Hallwood Energy Corporation's
stock price increases after the date on which the options are granted, because
the exercise price of options granted is at least equal the fair market value of
Hallwood Energy Corporation'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
the stockholders. Grants of options are generally made annually, although in
1999 Hallwood Energy Corporation's
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<PAGE> 16
compensation committee made a second award of options in connection with the
employment of the Hallwood Energy Corporation's new chief financial officer.
Hallwood Energy Corporation's compensation committee determined the grant levels
for grants to the chief executive officer and the executive officers of Hallwood
Energy Corporation 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 Hallwood Energy Corporation's stock.
Chief Executive Officer. Hallwood Energy Corporation's 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 Hallwood Energy
Corporation. These latter, "at-risk" components of Hallwood Energy Corporation's
total compensation program serve to align Mr. Gumbiner's interests with those of
the stockholders. Hallwood Energy Corporation's compensation 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 Hallwood Energy Corporation's
executive officers were compensated by Hallwood Energy Partners and Hallwood
Consolidation Resources Corporation, and compensation decisions were made by the
full boards of directors of the general partner of Hallwood Energy Partners and
of Hallwood Consolidated Resources Corporation. On June 8, 1999 the current
compensation committee of the Hallwood Energy Corporation was formed.
Members of Hallwood Energy Partners' general partner's Board of Directors
Anthony J. Gumbiner
Brian M. Troup
Hans-Peter Holinger
Rex A. Sebastian
William L. Guzzetti
Nathan C. Collins
Members of Hallwood Consolidated Resources Board of Directors
Anthony J. Gumbiner
Brian M. Troup
William L. Guzzetti
Hamilton P. Schrauff
Bill M. Van Meter
John R. Isaac
Jerry A. Lubliner
1999 Members of the Compensation Committee of Hallwood Energy Corporation
Rex A. Sebastian
Bill M. Van Meter
Jerry A. Lubliner
Hans-Peter Holinger
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PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative return of
the Company's 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 December 31, 1999. The peer group consists of Hallwood Realty
Partners, Milestone Properties, Inc. and Pacific Gateway Properties, Inc.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE HALLWOOD GROUP INCORPORATED
THE RUSSELL 2000 INDEX AND A PEER GROUP
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HALLWOOD GROUP 100 103 212 497 252 244
PEER GROUP 100 103 138 250 315 342
RUSSELL 2000 100 127 155 204 191 188
</TABLE>
* $100 invested on December 31, 1994 in stock, index or peer group, including
reinvestment of dividends.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENT BETWEEN THE COMPANY AND MR. BRIAN TROUP
On May 7, 1999 the Company announced that it had reached an agreement with
Mr. Troup regarding a separation of their interests, who discontinued his
association with the Company for health reasons. He had been a director and
officer of the Company, a director of the general partner of Hallwood Energy
Partners, a director of Hallwood Consolidated Resources Corporation and a
director of Hallwood Energy Corporation. Completion of the agreement was
conditioned on, among other things, a satisfactory refinancing of the
$14,090,000 outstanding principal amount of the Company's 7% Collateralized
Senior Subordinated Debentures due July 31, 2000 and the completion of the
consolidation of the energy subsidiaries. The consolidation of the energy
subsidiaries was completed on June 8, 1999 and the refinancing of the debentures
was completed on December 21, 1999. According to the agreement and the
satisfaction of these conditions, Mr. Troup resigned from all positions with the
Company, the general partner of Hallwood Realty Partners, and Hallwood Energy
Corporation and their affiliates.
As part of the agreement, the Company transferred to Epsilon Trust, of
which Mr. Troup and members of Mr. Troup's family are beneficiaries, 360,000 of
the shares of the common stock of Hallwood Energy Corporation that the Company
received in the consolidation of the energy subsidiaries, 82,608 units of
Hallwood Realty Partners owned by the Company and all of the outstanding stock
of each of Condominium Hotel and Resort Management, Inc., Integra Resort
Management, Inc., Enclave Resort, Inc. and the Company's rights to all
condominium hotel projects. The Company has the right to purchase all of the
units of Hallwood Realty Partners and shares of Hallwood Energy Corporation at
the then current trading price for a period of six months after December 21,
1999. After that, Mr. Troup may sell the units or shares subject to a number of
restrictions, including a right of first refusal in favor of the Company. In
exchange, Epsilon Trust surrendered its 457,794 shares of common stock of the
Company for cancellation and Mr. Troup surrendered his options to purchase
55,800 shares of the Company.
CONSULTING AND MANAGEMENT AGREEMENTS
Effective December 31, 1996, the Company entered into an agreement with HSC
Financial under which HSC Financial agreed to provide international consulting
and advisory services to the Company and its affiliates for an annual fee of
$825,000 and reimbursement for out-of-pocket and other reasonable expenses of
HSC Financial.
STANWICK HOLDINGS, INC.
The Company shares offices, facilities and staff with, and certain
executive officers of the Company also served as executive officers or directors
of, Stanwick Holdings, Inc. 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 totaled $25,000 for the year ended
December 31, 1999.
Stanwick is a subsidiary of HHSA. Messrs. Gumbiner and Troup are directors
of HHSA. Under United States securities laws, HHSA and HSC Financial are
associated, and HSC Financial 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
years ended December 31, 1997, 1998 and 1999 and have been selected to serve in
that capacity again for the year ended December 31, 2000. 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.
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STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal for action at the 2001
annual meeting and wishes to have the proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act, the proposal must be submitted in writing to the Secretary of
Hallwood Group at 3710 Rawlins, Suite 1500, Dallas, Texas 75219 by December 12,
2000. Such proposals must also meet the other requirements of the rules of the
SEC relating to stockholder proposals.
The Company's bylaws establish an advance notice procedure with regard to
certain matters, including stockholder proposals and nominations of individuals
for election to the board of directors. In general, notice of a stockholder
proposal or a director nomination for an annual meeting must be received by the
Company 90 days or more before the date of the annual meeting and must contain
specified information and conform to certain requirements, as set forth in the
bylaws.
If you wish to submit a proposal at the annual meeting, other than through
inclusion in the proxy statement, you must notify the Company no later than
February 25, 2001. If you do not notify the Company of your proposal by that
date, the Company will exercise its discretionary voting power on that proposal.
In addition, if you submit a proposal outside of Rule 14a-8 of the
Securities Exchange Act for the 2001 annual meeting, and the proposal fails to
comply with the advance notice procedure prescribed by the bylaws, then the
Company's proxy or proxies may confer discretionary authority on the persons
being appointed as proxies on behalf of management to vote on the proposal.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's securities, to file reports of ownership and changes of
ownership with the SEC and the New York Stock Exchange. Officers, directors and
10% stockholders of the Company are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms filed by them.
Based solely on review of copies of the forms received, the Company
believes that, during the last fiscal year, all filing requirements under
Section 16(a) applicable to its officers, directors and 10% stockholders were
timely.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
annual meeting. All shares represented by proxies will be voted in favor of the
nominee for director set forth in this proxy statement unless otherwise
indicated on the form of proxy. If any other matters properly come before the
meeting, the Company's proxy holders will vote on those matters according to
their best judgment.
By order of the Board of Directors
MELVIN J. MELLE
Secretary
April 11, 2000
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DETACH HERE
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 Charles A. Crocco, Jr. and J. Thomas
Talbot, and each of them, as Proxies, each with the power to appoint their
substitutes, and hereby authorizes them to represent and vote, as designated
below, all of the shares of common stock of The Hallwood Group Incorporated
(the "Company"), held of record by the undersigned on March 24, 2000, at the
Annual Meeting of Stockholders to be held on May 19, 2000, 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 the election of the nominee listed and at the discretion of
the Proxies with respect to any other matter that is properly brought before
the meeting.
[SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE
SIDE] SIDE]
<PAGE> 21
DETACH HERE
<TABLE>
<CAPTION>
<S> <C>
Please mark
[x] votes as in
this example
Please mark boxes in blue or black ink For Against Abstain
1. Election of Director: 2. In their discretion, the Proxies
Nominee: Anthony J. Gumbiner are authorized to vote upon such other [ ] [ ] [ ]
For Withheld business as may properly come before
[ ] [ ] the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
COMPLETE, SIGN and DATE the proxy card and return
promptly using the enclosed envelope.
Please sign exactly as name appears at left. When
shares are held by joint tenants, both should sign,
or if one signs he/she should attach evidence of his/her
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.
Signature: Date: 2000 Signature: Date: 2000
----------------------------- ----------, ---------------------------- ----------,
</TABLE>
