SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant: |X|
Filed by a Party other than the Registrant: |_|
Check the appropriate Box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Hallwood Consolidated Resources Corporation
(Name of Registrant as Specified in Its Charter)
Hallwood Consolidated Resources Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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 amount on which the
filing is calculated and state how it was determined.)
4) Proposed maximum aggregate value of transaction:
|_| 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>
HALLWOOD CONSOLIDATED RESOURCES CORPORATION
3710 Rawlins Street, Suite 1500
Dallas, Texas 75219
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to Be Held May 5, 1997
To the Shareholders of HALLWOOD CONSOLIDATED RESOURCES CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Hallwood
Consolidated Resources Corporation (the "Company") will be held at The Four
Seasons Hotel, 21 Avenue Road, Toronto, Ontario, Canada on May 5, 1997 at 9:30
a.m. (Toronto time) for the following purposes:
1. To elect seven directors to hold office until the next annual election
of directors or until their respective successors have been duly elected and
have qualified.
2. To consider and act upon a proposal to approve the Company's 1997 Stock
Option Plan.
3. To transact any and all other business that may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1997 as
the Record Date for the determination of shareholders entitled to notice of and
to vote at the meeting or any adjournments thereof. Only shareholders of record
at the close of business on the Record Date are entitled to notice of and to
vote at the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING; HOWEVER, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED PROMPTLY TO MARK,
SIGN, DATE AND MAIL THE ENCLOSED FORM OF PROXY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED AND VOTED IN ACCORDANCE
WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED AT
THE MEETING. YOU HAVE THE RIGHT TO REVOKE YOUR PROXY AT ANY TIME PRIOR TO
VOTING, EITHER IN PERSON AT THE ANNUAL MEETING OR BY GIVING WRITTEN NOTICE TO
THE COMPANY IN THE MANNER PROVIDED ON THE INITIAL PAGE OF THE ENCLOSED PROXY
STATEMENT. PROMPT RETURN OF THE PROXY BY OUR SHAREHOLDERS WILL REDUCE THE TIME
AND EXPENSE OF PROXY SOLICITATION. By Order of the Board of Directors, Cathleen
M. Osborn Secretary March 31, 1997 Dallas, Texas.
<PAGE>
HALLWOOD CONSOLIDATED RESOURCES CORPORATION
3710 Rawlins Street, Suite 1500
Dallas, Texas 75219
Proxy Statement For
Annual Meeting of Shareholders
to be Held May 5, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited on behalf of the Board of Directors of
Hallwood Consolidated Resources Corporation (the "Company") to be voted at the
Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be held
on May 5, 1997, at 9:30 a.m., at The Four Seasons Hotel, 21 Avenue Road,
Toronto, Ontario, Canada, for the purposes set forth in the accompanying Notice
of Annual Meeting, and at any adjournments thereof. This Proxy Statement and
accompanying form of Proxy are being first mailed or distributed on or about
April 9, 1997.
The accompanying form of Proxy is designed to permit each shareholder to
vote for, or to withhold voting for, (i) any or all of the nominees for election
as directors of the Company listed under Proposal 1 and (ii) the proposal to
approve the 1997 Stock Option Plan and (iii) to authorize the proxies to vote in
their discretion with respect to any other proposal brought before the Annual
Meeting. When a shareholder's executed and dated proxy card specifies a choice
with respect to a voting matter, the shares will be voted accordingly. If no
specification is made, the Proxy will be voted at the Annual Meeting FOR the
election of the nominees specified under the caption "Election of Directors" and
FOR the proposal to approve the 1997 Stock Option Plan.
The Company encourages the personal attendance of shareholders at its
annual meetings, and giving a Proxy does not preclude the right to vote in
person should any shareholder giving the Proxy so desire. Any shareholder of the
Company giving a Proxy has the unconditional right to revoke his Proxy at any
time prior to the voting thereof either in person at the Annual Meeting or by
giving written notice to the Company addressed to Ms. Cathleen M. Osborn,
Secretary, 4582 South Ulster Street Parkway, Suite 1700, Denver, Colorado 80237.
No notice of revocation will be effective, however, until it has been received
by the Company, and the notice of revocation must be received at or before the
Annual Meeting.
In addition to the solicitation of Proxies by use of the mail, officers and
regular employees of the Company may solicit the return of Proxies by personal
interview, mail, telephone and telegraph. The officers and employees will not be
additionally compensated but will be reimbursed for out-of-pocket expenses.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward solicitation materials to the beneficial owners of stock.
The cost of preparing, printing, assembling and mailing the Notice of Annual
Meeting, this Proxy Statement, the form of Proxy and any additional material,
the cost of forwarding solicitation material to the beneficial owners of stock
and other costs of solicitation will be borne by the Company.
The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1996, including audited financial statements, is enclosed with this
Proxy Statement. The Annual Report does not form any part of the materials for
the solicitation of Proxies.
PURPOSES OF THE MEETING
At the Annual Meeting, the shareholders will consider and vote upon the
following matters:
1. The election of seven directors to hold office until the next annual
election of directors or until their respective successors have been duly
elected and have qualified.
2. A proposal to approve the Company's 1997 Stock Option Plan.
3. Such other and further business as may properly come before the meeting
or any adjournments thereof.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
1
<PAGE>
General
The Board of Directors has fixed the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting as of the
close of business on March 31, 1997 (the "Record Date"). On the Record Date,
there were 992,514 shares of Common Stock, par value $0.01 per share, issued and
outstanding.
Required Vote
The Company's Restated Certificate of Incorporation does not provide for
cumulative voting. Assuming the presence of a quorum, the affirmative vote of a
plurality of the votes cast by the holders of shares of Common Stock is
necessary for the election of directors and the approval of the 1997 Stock
Option Plan. Votes will be counted by Registrar and Transfer Company, the
Company's transfer agent and registrar. With respect to abstentions, the shares
are considered present at the meeting for purposes of determining a quorum and
voting on a particular matter, but since they are not affirmative votes for the
matter, they will have the same effect as votes against the matter. With respect
to broker non- votes, the shares are considered present at the meeting for
purposes of determining a quorum but are not entitled to vote on the particular
matter as to which the broker does not have voting authority.
Security Ownership of Principal Shareholders and Management
The following table sets forth information concerning the number of shares
of Common Stock of the Company owned beneficially as of the Record Date by the
persons who, to the knowledge of management, beneficially owned more than 5% of
the outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount Percent of
of Beneficial Owner Beneficially Owned Common Stock
<S> <C> <C>
Hallwood Energy Partners, L.P. 458,155 (1) 46.2
4582 S. Ulster Street Parkway
Suite 1700
Denver, Colorado 80237
Heartland Advisors, Inc. 136,920 (2) 13.8
790 North Milwaukee Street
Milwaukee, WI 53202
William Baxter Lee, III 60,000 (3) 6.0
c/o Glankler Brown PLLC
One Commerce Square, Suite 1700
Memphis, TN 38103
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<FN>
(1) Includes 13,441 shares held by Hallwood Oil and Gas, Inc., a
subsidiary of Hallwood Energy Partners, L.P. ("HEP"). HEP has sole
voting and investment power with respect to the shares reported. The
general partner of HEP is HEPGP Ltd., a limited partnership, the
general partner of which is Hallwood G.P., Inc. ("Hallwood G.P.") The
executive officers of Hallwood G.P. and the Company are the same
individuals: Anthony J. Gumbiner, William L. Guzzetti, Russell P.
Meduna, Robert S. Pfeiffer and Cathleen M. Osborn.
(2) Information is from the Amendment to the Schedule 13G of Heartland
Advisors dated February 12, 1997. The Schedule 13G states that the
shares are held in investment advisory accounts of Heartland Advisors,
Inc. and that the interests of one such account, Heartland Value Fund,
a series of Heartland Group, Inc., a registered investment company,
relates to more than 5% of the Common Stock.
(3) Information is from the Schedule 13D dated May 14, 1996.
</FN>
</TABLE>
2
<PAGE>
The following table sets forth information concerning the number of shares
of Common Stock of the Company owned beneficially as of the Record Date by (i)
each director and executive officer of the Company who owns Common Stock and
(ii) the directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the persons named has sole voting and investment
power with respect to the shares reported.
<TABLE>
<CAPTION>
Name of Amount Percent of
Beneficial Owner Beneficially Owned Common Stock
<S> <C> <C>
Brian M. Troup 7,067 (2) *
Anthony J. Gumbiner 470,905 (1)(2) 46.9
William L. Guzzetti 463,455 (1)(2) 46.4
Russell P. Meduna 5,039 (2) *
Robert S. Pfeiffer 2,180 (2) *
Cathleen M. Osborn 2,150 (2) *
All directors and executive officers
as a group (ten individuals) 490,491 (1)(2) 47.8
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<FN>
* Represents less than 1% of the outstanding Common Stock.
(1) Includes 458,155 shares beneficially owned by HEP. Mr. Gumbiner is
Chief Executive Officer and Mr. Guzzetti is President and a director
of the general partner of the general partner of HEP.
(2) The following numbers of shares issuable upon the exercise of
currently exercisable options are included in the amounts shown: Mr.
Troup, 7,067 shares; Mr. Gumbiner, 10,600 shares; Mr. Guzzetti, 5,300
shares; Mr. Meduna, 4,946 shares; Mr. Pfeiffer, 2,120 shares and Ms.
Osborn, 2,120 shares.
</FN>
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company, and persons who own more than ten percent of the
Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent owners are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no forms were required for those persons, the Company
believes that, during the year ended December 31, 1996, all officers and
directors of the Company and greater than ten-percent beneficial owners complied
with applicable filing requirements.
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, shareholders will elect directors to serve until the
1998 Annual Meeting of Shareholders. The Bylaws of the Company provide that the
Company's Board of Directors must consist of at least one director and that the
number of directors will be determined by resolution of the Board of Directors.
By action of the Board of Directors, the number of directors has been set at
seven. The seven persons currently serving as directors of the Company have been
nominated by the Board of Directors to serve as directors of the Company until
the 1998 Annual Meeting of Shareholders and until their successors have been
duly elected and have qualified.
3
<PAGE>
Unless otherwise directed on any duly executed and dated Proxy, it is the
intention of the persons named in such Proxy to nominate and to vote the shares
represented by such Proxy for the election of the nominees listed in the table
below for the office of director of the Company to hold office until their
respective successors have been duly elected and have qualified.
<TABLE>
<CAPTION>
Year First
Name Position Elected Director
<S> <C> <C>
Anthony J. Gumbiner Chairman of the Board 1992
and Director
William L. Guzzetti President and Director 1991
Brian M. Troup Director 1992
John R. Isaac, Jr. Director 1992
Jerry A. Lubliner Director 1992
Bill M. Van Meter Director 1996
Hamilton P. Schrauff Director 1996
</TABLE>
The Board of Directors does not contemplate that any of the above-named
nominees for director will refuse or be unable to accept election or to serve as
a director of the Company. Should any of them become unavailable for nomination
or election or refuse to be nominated or to accept election as a director of the
Company, then the person or persons voting the Proxy will vote the shares
represented by such Proxy for the election of such other person or persons as
may be nominated or designated by the Board of Directors. If elected as a
director of the Company, each director will hold office until his successor has
been duly elected and has qualified.
Business Experience of Directors
Anthony J. Gumbiner, 52, has served as a director of the Company since
February 1992. He has also served as Chairman of the Board of Directors of The
Hallwood Group Incorporated ("Hallwood Group"), a diversified holding company
with real estate, textile products, hotel, restaurant and energy operations,
since 1981 and as Chief Executive Officer of Hallwood Group since April 1984. He
has been Chairman of the Board since 1984 and Chief Executive Officer since 1987
of the general partner of HEP. Mr. Gumbiner has also served as Chairman of the
Board of Directors and as a director of Hallwood Holdings S.A., a Luxembourg
real estate investment company, since March 1984, and as a director of ShowBiz
Pizza Time, Inc., a company primarily engaged in the restaurant business, since
September 1988. He has been a director of Hallwood Realty Corporation ("Hallwood
Realty"), which is the general partner of Hallwood Realty Partners, L.P., since
November 1990. He is a Solicitor of the Supreme Court of Judicature of England.
William L. Guzzetti, 53, has been President, Chief Operating Officer and a
director of the Company since May 1991. He has been President, Chief Operating
Officer and a director of the general partner of HEP since 1985. Mr. Guzzetti is
also an Executive Vice President of Hallwood Group and in that capacity may
devote a portion of his time to the activities of Hallwood Group, including the
management of real estate investments, acquisitions and restructurings of
entities controlled by Hallwood Group. He is a director and President of
Hallwood Realty and in that capacity may devote a portion of his time to the
activities of Hallwood Realty.
Brian M. Troup, 50, has served as a director of the Company since February
1992. He has been President and Chief Operating Officer of Hallwood Group since
April 1986, and he is a director. Mr. Troup has been a director of the general
partner of HEP since May 1984. Mr. Troup is a director of Hallwood Holdings S.A.
and a director of ShowBiz Pizza Time, Inc. He is also a director of Hallwood
Realty. He is an associate of the Institute of Bankers in Scotland and a member
of the Society of Investment Analysts in the United Kingdom.
4
<PAGE>
John R. Isaac, Jr., 52, has served as a director of the Company since June
1992. Since February 1996, Mr. Isaac has been President and Chief Executive
Officer of Thorn Americas, Inc., parent of Rent-A-Center USA. From March 1995
until February 1996, Mr. Isaac was President and Chief Operating Officer of
Rent-A-Center USA. From February 1991 to February 1995, Mr. Isaac was President
and Chief Operating Officer of Everything's A Dollar, a division of Value
Merchants, Inc. He was President and Chief Executive Officer of Hallwood
Industries Incorporated from August 1987 to October 1991. He was President of
Tradevest, Inc., a mail order catalog retailer, from 1986 to 1987, and a Vice
President of Service Merchandise Co., Inc., a catalog showroom retailer, from
1981 to 1986.
Jerry A. Lubliner, 42, has served as a director of the Company since June
1992. Dr. Lubliner is a medical doctor who has been in private practice since
1986. From 1986 to 1988, he was Associate Chief-Sports Medicine at the Hospital
for Joint Diseases--Orthopaedic Institute in New York. Dr. Lubliner is a Fellow
of the American Academy of Orthopaedic Surgeons.
Bill M. Van Meter, 64, has served as a director of the Company since
September 1996. From 1986 until May 1996, Mr. Van Meter was President of the
Energy Companies of ONEOK division of ONEOK Inc. Mr. Van Meter is a director of
Ponder Industries, Inc., an oil field tool company. For the past 38 years, Mr.
Van Meter has been employed by both major and independent oil companies.
Hamilton P. Schrauff, 61, has served as a director of the Company since
September 1996. From March 1996 to January 1997 he was Vice President of Capital
Alliance. From August 1995 to February 1996 he was an independent financial
consultant. From October 1991 to August 1995 he was Vice President and Chief
Financial Officer of Basic Capital Management, Inc., Syntek Asset Management,
Inc., American Realty Trust Investors, Inc., Income Opportunity Realty Trust and
Transcontinental Realty Investors, Inc. From October 1991 to February 1994 he
was Executive Vice President and Chief Financial Officer of National Income
Realty Trust and Vinland Property Trust. From December 1990 to October 1991 he
was Vice President Finance-Partnership Investments of Hallwood Group. From
October 1980 to October 1990 he was Vice President Finance and Treasurer, and
from November 1976 to September 1980 he was Vice President Finance, of Texas Oil
and Gas Corporation. Mr. Schrauff is a Certified Public Accountant and Certified
Financial Planner. He is a member of the American Institute of Certified Public
Accountants, the Texas Society of Certified Public Accountants and the Financial
Executives Institute.
Business Experience of Executive Officers
Following are brief biographies of the executive officers of the Company,
other than Mr. Guzzetti.
Russell P. Meduna, 42, became Executive Vice President of the Company in
June 1992. He was Executive Vice President of HEC from June 1991 until November
1996. Mr. Meduna has been Executive Vice President of the general partner of HEP
and Hallwood Petroleum, Inc. ("HPI") since October 1989. Mr. Meduna was Vice
President of HPI from April 1989 to October 1989 and Manager of Operations from
January 1989 to April 1989. He joined HPI in 1984 as Production Manager. Prior
to joining HPI, he was employed by both major and independent oil companies. Mr.
Meduna is a registered professional engineer in the States of Colorado and
Texas.
Cathleen M. Osborn, 44, became Secretary and General Counsel of the Company
in May 1992 and Vice President in June 1992. Ms. Osborn has been Vice President,
Secretary and General Counsel of the general partner of HEP and of HPI since
October 1986. She joined HPI in 1985 as senior staff attorney. Ms. Osborn is a
member of the Colorado Bar Association.
5
<PAGE>
Robert Pfeiffer, 40, became Chief Financial Officer of the Company in June
1994. He has been Vice President of the Company since June 1992. Mr. Pfeiffer
has been Vice President of the general partner of HEP since 1991 and of HPI
since 1986. He joined HPI in 1984. From July 1979 to May 1984, he was employed
by Price Waterhouse as a senior accountant. Mr. Pfeiffer is a member of the
American Institute of Certified Public Accountants and the Colorado Society of
Certified Public Accountants.
Meetings of the Board; Committees
The Board of Directors held four regularly scheduled meetings during 1996.
Each director, except Mr. Troup, attended all meetings of the Board of Directors
and committees of which he is a member. Mr. Troup attended two of the four
meetings of the Board of Directors. The Board's Audit Committee, composed of
Messrs. Troup, Isaac and Lubliner until September 1996 and Messrs. Isaac,
Lubliner, Van Meter and Schrauff from September 1996, recommends to the Board
the firm to be employed as the Company's independent auditors and consults with,
and reviews the report of, the Company's independent auditors and HPI's
financial staff. The Audit Committee held two meetings in 1996. The Company does
not have a standing nominating committee. During 1996, the entire Board of
Directors acted as the Compensation Committee. See "Executive Compensation
Compensation of Executive Officers" below. The Board's Special Committee to
approve transactions involving both the Company and HEC or any entity that HEC
controls, is composed of Messrs. Isaac and Lubliner, and it held no meetings in
1996.
APPROVAL OF THE 1997 STOCK OPTION PLAN
General
On March 3, 1997 the Board of Directors of the Company adopted the 1997
Stock Option Plan (the "Plan") which provides that the Company may grant options
to purchase up to 53,000 shares of the Company's Common Stock to employees,
directors and consultants.
Since the individuals and entities who participate in the Plan are
determined in the discretion of the Board of Directors, it is not possible at
this time to indicate the number, names or positions of those who will receive
options or the number of shares for which options will be granted. The Plan is
not subject to the qualification requirements of Section 401 of the Internal
Revenue Code, nor is the Plan subject to any provisions of ERISA. The Company
anticipates that it will register the Common Stock issuable on the exercise of
the options with the Securities and Exchange Commission during 1997.
Purpose
The purpose of the Plan is to advance the interest of the Company by
providing additional incentives to attract and retain qualified and competent
directors, employees and consultants, upon whose efforts and judgment the
success of the Company (including its subsidiaries) is largely dependent,
through the encouragement of stock ownership in the Company by such persons.
Eligibility
Those persons who are directors or employees of, or consultants to, the
Company or a subsidiary or affiliate of the Company are eligible to participate
in the Plan.
6
<PAGE>
Administration
The Plan is currently administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee currently consists of all
members of the Board of Directors.
Exercise Price of the Options
The exercise price of options granted under the plan is set by the
Compensation Committee at the time of the grant. The closing price of the Common
Stock on April 1, 1997 was $72 per share.
Payment of Exercise Price
The exercise price of an option may be paid in cash, certified or cashier's
check, by money order, by personal check or by delivery of already owned shares
of Common Stock having a fair market value equal to the exercise price, or by
delivery of a combination of cash and already owned shares of Common Stock.
Transferability of the Options
Options granted under the Plan are transferable by the optionee by gift or
by contribution to (a) any member of the optionee's immediate family, (b) any
entity of which the optionee or members of the optionee's family are the sole
equity owners or beneficiaries, or if there are discretionary beneficiaries,
among the class of discretionary beneficiaries, or (c) any combination of the
foregoing.
Exercisability of the Options
The Committee, in its sole discretion, may limit the optionee's right to
exercise all or any portion of an option until one or more dates subsequent to
the date of grant. The Committee also has the right, exercisable in its sole
discretion, to accelerate the date on which all or any portion of an option may
be exercised.
The Plan provides that ten days prior to certain major corporate events
such as, among other things, certain changes in control, mergers or sales of
substantially all of the assets of the Company (a "Major Corporate Event"), each
option shall immediately become exercisable in full.
Expiration of the Options
The expiration date of an option is determined by the Committee at the time
of the grant, but in no event may an option be exercisable after the expiration
of ten years from the date of its grant.
If the employment of an optionee with the Company or a subsidiary or
affiliate of the Company is terminated for any reason (other than retirement,
death or disability), the unexercised portion of an option will expire and
become unexercisable as of the employment termination date. The unexercised
portion of an option will also expire three months after the date on which the
optionee's employment is terminated by reason of retirement or twelve months
after the date on which the optionee's employment is terminated by reason of a
disability or death.
Adjustments
The Plan provides for certain adjustments to the aggregate number of shares
issuable under the Plan and of the number of shares subject to outstanding
options if the number of outstanding shares is increased or decreased as the
result of a stock dividend, stock split, recapitalization or combination or
exchange of shares.
7
<PAGE>
Amendment
The Plan may be amended at the discretion of the Committee. Shareholder
approval will not be sought unless such approval is required by law or the rules
of the National Association of Securities Dealers.
Certain Federal Income Tax Consequences
The following is a brief description of the federal tax treatment which
will generally apply to options granted under the Plan.
The grant of an option is generally not a taxable event for the optionee.
However, upon exercise of the option, the optionee will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares acquired upon exercise (determined as of the date of the exercise) over
the exercise price of the option, and the Company generally will be entitled to
a deduction equal to such amount provided it satisfies certain withholding
obligations on that amount in the case of an optionee who provides services. The
Company intends to comply with this requirement and will withhold income and
applicable FICA taxes on such taxable income in accordance with Internal Revenue
Service rules and regulations for these types of transactions in effect at the
time of the exercise of an option. If the optionee is subject to Section 16(b)
of the Securities Exchange Act of 1934 (the short-swing recovery provisions),
the optionee will not recognize ordinary income (and the Company will not be
entitled to a deduction) until the earlier of the date six months after exercise
of the option or the date the optionee is no longer subject to Section 16(b). At
that time, the optionee will recognize ordinary income and the Company generally
will be entitled to a deduction equal to the excess of the fair market value of
the shares (determined as of that date) over the option exercise price.
Notwithstanding the foregoing, a person subject to Section 16(b) may elect under
Internal Revenue Code Section 83(b) to recognize ordinary income on the date of
exercise, in which case the Company generally would be entitled to a deduction
at that time equal to the amount of ordinary income recognized. All directors
and executive officers of the Company are subject to Section 16(b) while they
remain in such positions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE APPROVING THE 1997 STOCK OPTION PLAN.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The Company has no employees. Management services are provided to the
Company by HPI, an affiliate of the Company. Employees of HPI perform all duties
related to the management of the Company, including the operation of various
properties in which the Company owns an interest. The Company is charged for
management services by HPI based on an allocation procedure that takes into
account the amount of time spent on management, the number of properties owned
by the Company and the Company's performance relative to its affiliates. The
allocation procedure is applied consistently to all entities for which HPI
performs services. In 1996 the Company reimbursed HPI approximately $1,919,000,
of which $580,965 was attributable to compensation paid to executive officers of
the Company.
The following table sets forth the compensation allocated to the Company by
HPI for the years ended December 31, 1996, 1995 and 1994 paid to the Chief
Executive Officer and each of the four other most highly compensated officers
whose compensation paid by HPI exceeded $100,000 (determined for the year ended
December 31, 1996).
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Securities
Underlying
Options/ LTIP All Other
Name & Principal Position Year Salary Bonus SARs (#) Payouts Compensation (1)
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Gumbiner (2) 1996 $125,000 $ 0 0 $ 0 $ 0
Chief Executive Officer 1995 125,000 0 15,900 0 0
1994 62,500 0 0 0 0
William L. Guzzetti 1996 82,943 60,490 0 14,927 2,314
President and Chief 1995 79,721 38,250 7,950 8,507 2,342
Operating Officer 1994 74,089 26,936 0 3,496 2,221
Russell P. Meduna 1996 66,448 46,874 0 14,927 1,827
Executive Vice 1995 65,272 82,110 7,420 8,507 1,876
President 1994 60,689 8,954 0 3,496 1,631
Robert S. Pfeiffer 1996 43,652 26,082 0 10,391 1,746
Vice President and 1995 42,880 47,940 3,180 6,314 1,232
Chief Financial Officer 1994 39,869 9,509 0 2,576 1,169
Cathleen M. Osborn 1996 42,908 28,704 0 10,391 1,827
Vice President and 1995 42,679 48,450 3,180 6,314 1,069
General Counsel 1994 39,164 9,102 0 2,576 1,169
- ----------------------
<FN>
(1) Employer contribution to 401(k) and a service award of $487 paid to
Mr. Guzzetti.
(2) For 1994, 1995 and 1996, Mr. Gumbiner had a Compensation Agreement
with HPI. $125,000 of his compensation was allocated to the Company in
1995 and 1996; $62,500 was allocated to the Company in 1994. The
Compensation Agreement was effective August 1, 1994 and terminated
effective December 1996. In addition to compensation listed in the
table, HPI has a consulting agreement with Hallwood Group for 1994
through 1996, pursuant to which Hallwood Group received an annual
consulting fee of $300,000 from affiliates of HPI. The Company paid
approximately $122,000 in 1996, $111,000 in 1995 and $109,000 in 1994
pursuant to this arrangement. The consulting services were provided by
HSC Financial Corporation ("HSC Financial"), through the services of
Mr. Gumbiner and Mr. Troup, and Hallwood Group paid the annual fee it
received to HSC Financial. See "Compensation Committee Interlocks and
Insider Participation" below.
</FN>
</TABLE>
Option Grants and Exercises in Last Fiscal Year
No options were granted during 1996. No executive officer exercised options
during 1996.
9
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End (#) at FY-End ($)
Name Exercisable/Unexercisable (1) Exercisable/Unexercisable (2)
<S> <C> <C>
Anthony J. Gumbiner 10,600 / 5,300 524,700 / 262,350
William L. Guzzetti 5,300 / 2,650 262,350 / 131,175
Russell P. Meduna 4,946 / 2,474 244,827 / 122,463
Robert S. Pfeiffer 2,120 / 1,060 104,940 / 52,470
Cathleen M. Osborn 2,120 / 1,060 104,940 / 52,470
- ----------------------
<FN>
(1) Options have a ten-year term and vest cumulatively over three years at
the rate of 1/3 on each of the date of grant and the first two
anniversaries of the grant date. All options vest immediately in the
event of certain changes in control of the Company.
(2) The exercise price of the options is $20.00 per share. The closing
price of the Common Stock was $69.50 on December 31, 1996.
</FN>
</TABLE>
Long-Term Incentive Plan Awards
The following table describes performance units awarded to the executive
officers of the Company for 1996 under the Incentive Plan for the Company and
affiliated entities. The value of awards under each plan depends primarily on
success in drilling, completing and achieving production from new wells each
year and from certain recompletions and enhancements of existing wells. The
amounts shown below are the portion of awards under the plan allocated to the
Company.
<TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance or Estimated Future
Number of Other Period Payouts under Non-Stock
Name Units Until Payout Price-Based Plans
<S> <C> <C> <C>
Anthony J. Gumbiner(2)
William L. Guzzetti 0.0841 2001 9,361 (1)
Russell P. Meduna 0.0841 2001 9,361 (1)
Robert S. Pfeiffer 0.0580 2001 6,456 (1)
Cathleen M. Osborn 0.0580 2001 6,456 (1)
- -----------------------
<FN>
(1) This amount represents an award under the Incentive Plan. There are no
minimum, maximum or target amounts payable under the Incentive Plan.
Payments under the awards will be equal to the indicated percentage of
Plan net cash flow from certain wells for the first five years after
an award and, in the sixth year, the indicated percentage of 80% of
the remaining net present value of estimated future production from
the wells allocated to the Plan. The amounts shown above are estimates
based on estimated reserve quantities and future prices. Because of
the uncertainties inherent in estimating quantities of reserves and
prices, it is not possible to predict cash flow or remaining net
present value of estimated future production with any degree of
certainty.
(2) In addition, an award of .4200 units, with an estimated future payout
of $46,750, was made to HSC Financial, with which Mr. Gumbiner is
associated. The payout period ends in 2001.
</FN>
</TABLE>
10
<PAGE>
Director Compensation
Each director of the Company who is not an officer or employee of the
Company, or a director, officer or employee of the general partner of HEP or any
entity controlled by the general partner of HEP, is paid an annual fee of
$20,000 which is proportionately reduced if the director attends fewer than four
regularly scheduled meetings of the Board of Directors during the year. During
1996, Messrs. Isaac and Lubliner were each paid $20,000, and Messrs. Van Meter
and Schrauff were each paid $10,000. In addition, all directors are reimbursed
for their expenses in attending meetings of the Board of Directors and
committees.
Compensation Committee Interlocks and Insider Participation
The entire Board made the 1996 compensation decisions for the Company. Mr.
Gumbiner is Chief Executive Officer of the Company and serves on the
compensation committee of Hallwood Group, of which Mr. Troup is President and
Mr. Guzzetti is Executive Vice President. Mr. Gumbiner was also Chief Executive
Officer and a director of HEC, Mr. Troup was a director of HEC, and Mr. Guzzetti
was a director and President of HEC. Messrs. Gumbiner, Troup and Guzzetti served
on HEC's Board of Directors which made compensation decisions in January 1996.
Mr. Gumbiner is Chief Executive Officer and a director, and Mr. Guzzetti is
President and a director, of Hallwood Realty. During 1996, Mr. Gumbiner and Mr.
Guzzetti served on the compensation committee of Hallwood Realty.
The Company participates in a financial consulting agreement between HPI
and Hallwood Group pursuant to which Hallwood Group furnishes consulting and
advisory services to HPI, the Company and their affiliates. HPI and Hallwood
Group entered into a new financial consulting agreement in March 1997. Under the
terms of the new agreement, HPI and its affiliates are obligated to pay Hallwood
Group $550,000 per year until June 30, 2000. The agreement automatically renews
for successive three year terms; either party may terminate the agreement on not
less than 30 days written notice prior to the expiration of any three year term.
The new financial consulting agreement replaces both a previous financial
consulting agreement and a compensation agreement with Mr. Gumbiner. Under the
terms of the previous financial consulting agreement, HPI and its affiliates
were obligated to pay Hallwood Group three annual payments of $300,000 beginning
June 30, 1994, and Hallwood Group was obligated to furnish consulting and
adivisory services to HPI and its affiliates. In 1996, the consulting services
were provided by HSC Financial Corporation, through the services of Mr. Gumbiner
and Mr. Troup, and Hallwood Group paid the annual fee it received to HSC
Financial. A fee of approximately $121,689 was paid in 1996 by the Company
pursuant to this arrangement. For 1994, 1995 and 1996, Mr. Gumbiner had a
compensation agreement with HPI pursuant to which Mr. Gumbiner was paid $250,000
by HPI, the Company their affiliates. This agreement was terminated effective
December 31, 1996. See "Summary Compensation Table" and footnotes for additional
discussion of this arrangement.
The Company reimburses Hallwood Group for expenses incurred on behalf of
the Company. In 1996, the Company reimbursed Hallwood Group approximately
$249,000.
The Company and HPI entered into a Management Agreement in May 1992, which
provides that HPI will perform all operations on behalf of the Company and that
the Company will reimburse HPI at its cost for direct and indirect expenses
incurred by HPI for the benefit of the Company and its properties. The indirect
expenses for which HPI is reimbursed include employee compensation, office rent,
office supplies and employee benefits. These expenses are generally allocated by
multiplying the aggregate amount of the indirect expenses incurred by HPI by the
estimated time that the employees of HPI spend on managing the Company and
dividing by the aggregate time that the employees of HPI spend on all the
entities that HPI manages. The allocation of certain components of employee
compensation also takes into account the Company's performance relative to its
affiliates and the Company's ownership interest in certain wells. See "Board
Compensation Committee Report on Executive Compensation" below. The costs
charged to the Company by HPI are reviewed annually by the independent members
of the Board of Directors of the Company. HPI does not receive any fee for its
services. The management agreement is for a period of one year, and thereafter,
the management agreement may be extended for successive one-year terms upon the
approval of the independent directors of the Company. The management agreement
has been extended through May 1997. In 1996, the Company reimbursed HPI
approximately $1,919,000 for expenses, not including payments and reimbursements
to Hallwood Group identified above.
11
<PAGE>
Board Compensation Committee Report on Executive Compensation
General. The Company has no employees. All management is provided by
employees of HPI pursuant to a management agreement. These employees also
provide services to HEP and several other affiliated entities (collectively, the
"Energy Companies"). Accordingly, the Company does not directly pay any
compensation but reimburses HPI for its costs and expenses. Individual
compensation is based on the individual's responsibilities and performance
relating to all of the Energy Companies. Salaries are allocated among the Energy
Companies based on a procedure that takes into account both the amount of time
spent on management and the number of properties owned by each entity. The cash
bonus pool is allocated among the Energy Companies based upon those factors and
the entity's performance relative to all of the Energy Companies. Awards under
the long-term incentive plan are allocated based upon the ownership of the wells
included in the plan. Because the compensation paid to HPI employees is
allocated to all of the Energy Companies, it is reviewed and approved by the
Compensation Committee of the general partner of HEP and by the Compensation
Committee of the Company. The compensation of the Energy Companies' management
employees, including executive officers, is reviewed and approved at least
annually.
During 1996, all compensation decisions were made by the Board of
Directors. In March 1997, the full Board of Directors continued to act as the
Compensation Committee in determining cash bonuses paid with respect to 1996 and
the salaries to be paid and other awards made in 1997. In determining 1996
compensation of key employees, the Energy Companies' compensation levels were
compared with those of comparable companies, as reported by compensation
consultants and other industry surveys. The comparable companies consist of
twelve independent oil and gas companies selected by consultants to the Energy
Companies and are not the same as those used in preparing the performance graph
appearing elsewhere in this Proxy Statement. For 1996, 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, except salaries of officers,
and annual bonuses are determined annually based on the individual employee's
level of responsibility and comparisons to similar positions in comparable
companies. Salaries of officers and other professional employees are generally
set at approximately 69% to 90% of the average base salaries paid by those
comparable companies. When an employee's position is not standard and cannot be
compared to similar positions in comparable companies, compensation is
determined in a discretionary process, taking into consideration the components
and overall responsibility of the employee's position.
Cash Bonus. The Board has determined to award certain management employees,
including executive officers, cash bonuses based on an assessment of a number of
quantitative and qualitative factors. The primary quantitative factors are
performance in reserve replacement, considering overall reserves found and
effectiveness of capital expenditures, in comparison to the historical
performance of independent oil and gas companies as a group, the production of
existing reserves in comparison to budget and the prior year, and general and
administrative expenses and operating costs in comparison to budget. Qualitative
factors include judgments regarding the effectiveness of management and
administration. Depending on the Energy Companies' success in these areas, total
salaries and cash bonuses paid to management employees may range from 69% of the
average compensation paid to similarly situated employees in comparable
companies if the Energy Companies perform poorly to as high as 500% of the
average compensation paid by comparable companies if the Energy Companies
perform very well. Based on comparisons of the Energy Companies' performance
with the historical performance of other independent oil and gas companies as a
group as reported by generally published industry statistics, the Compensation
Committee determined that the Energy Companies had a slightly better than
average year in the overall reserves found and a slightly less than average year
in the effectiveness of capital expenditures. The Board also concluded that the
effectiveness of management and administration and control of general and
administrative expenses deserved recognition. Therefore, the cash bonuses paid
to management employees as a group were set at levels that would result in their
total annual compensation being less than that paid by comparable companies. The
aggregate cash bonuses are allocated among the key and professional employees
based on the recommendation of senior management and a determination of the
employees' relative contributions to the Energy Companies during the year.
12
<PAGE>
The Long-Term Incentive Plan. The Energy Companies' long-term incentive
plan is intended to provide incentive and motivation to the Energy Companies'
key employees, including the Company's executive officers and consultants, 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 and
consultants upon whom, in large measure, the success of the Energy Companies
depends. In 1996 the Company's Domestic Incentive Plan for domestic properties
and International Incentive Plan for international projects were combined into
one plan. As a result of the combination, the percentage of the cash flow of the
wells completed during the year was set at 2.4%. For 1995, the percentage under
the Domestic Plan was 1.4%, and the percentage under the International Plan was
3%.
Under the Incentive Plan, the Board annually determines the portion of the
Energy Companies' collective interests in the cash flow from certain
international projects and wells drilled, recompleted or enhanced during that
year (the "Plan Year") which will be allocated to participants in the plan. The
portion allocated to participants in the plan is referred to as the Plan Cash
Flow. The Board then determines which key employees and consultants may
participate in the plan for the Plan Year and allocates the Plan Cash Flow among
the participants. Awards under the plan do not represent any actual ownership
interest in the wells. Awards are made in the 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 domestic 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. Cash flow from international projects, if any,
allocated to the plan is paid to participants for a ten-year period, with no
buy-out for estimated future production. There are no international projects
allocated to the 1996 Plan. Accordingly, the value of awards under the 1996 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 international projects and domestic wells completed in any Plan Year
to be allocated to Plan Cash Flow each Plan Year, the percentage of the
remaining net present value of estimated future production from domestic wells
for which the participants will receive payment in the sixth year of an award,
and the amount to be awarded to individual participants is determined by the
Board each year, after taking into consideration the recommendation of the
Energy Companies' executive officers.
The awards for the 1996 Plan Year were made in January 1996. For the 1996
Plan Year, the Compensation Committee determined that the total Plan Cash Flow
would be equal to 2.4% of the cash flow of the domestic wells completed during
the Plan Year. The Compensation Committee also determined that the participants'
interests in eligible domestic wells for the 1996 Plan Year would be purchased
in the sixth year at 80% of the remaining net present value of the wells
completed in the Plan Year. The Compensation Committee also determined that the
total award 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.
Chief Executive Officer. From August 1, 1994 until December 31, 1996, Mr.
Gumbiner had a Compensation Agreement with HPI pursuant to which HPI paid Mr.
Gumbiner for providing consultation and assistance in maintaining relationships
with foreign governments and negotiating contracts outside the United States.
The Energy Companies also engaged in certain transactions with Hallwood Group,
of which Mr. Gumbiner is Chairman and Chief Executive Officer, during 1996. In
addition, the Energy Companies had a consulting agreement with Hallwood Group
effective June 30, 1993, pursuant to which the Energy Companies pay Hallwood
Group a $300,000 annual consulting fee. In 1996, the consulting services were
provided by HSC Financial Corporation, through Mr. Gumbiner and Mr. Troup, and
Hallwood Group paid the annual fee it received to HSC Financial. Both agreements
were approved by the Board of Directors of the Company, Mr. Gumbiner abstaining.
See "Compensation Committee Interlocks and Insider Participation" above. Mr.
Gumbiner also participated in the 1996 Incentive Plan which was allocated based
on the recommendation of senior management. Mr. Gumbiner and Mr. Troup abstained
from the Board's determinations on these matters.
13
<PAGE>
Members of the Compensation Committee in January 1996:
Anthony J. Gumbiner
Brian M. Troup
William L. Guzzetti
Jerry A. Lubliner
John R. Isaac, Jr.
Additional Members in March 1997:
Bill M. Van Meter
Hamilton P. Schrauff
Performance Graph
Below is a line graph comparing the percentage change in the cumulative
total shareholder return on the Company's Common Stock with the cumulative total
return of the NASDAQ Industrial Index ("NASDAQ Ind. Index") and Kirkpatrick
Energy Associates Large Cap E&P Index ("KEA Large Cap E&P") for the period
beginning June 4, 1992, when the Company's stock began trading, through December
31, 1996. Dividend reinvestment has been assumed.
<TABLE>
TOTAL RETURN TO SHAREHOLDERS
<CAPTION>
Hallwood Consolidated NASD Industrial KEA Large
Period Resources Corporation Index Cap E&P Index
<S> <C> <C> <C>
June 92 100 100 100
Dec 92 97.63 120.49 108
June 93 101.96 121.25 137
Dec 93 84.25 133.94 127
June 94 51.58 118.72 130
Dec 94 55.02 125.29 106
June 95 55.02 147.10 116
Dec 95 65.34 160.34 125
June 96 96.28 184.56 145
Dec 96 191.19 184.43 160
</TABLE>
OTHER BUSINESS
The Board of Directors knows of no other business that may properly be, or
that is likely to be, brought before the Annual Meeting. If, however, any other
matters are properly presented, it is the intention of the persons named in the
accompanying form of Proxy to vote the shares covered thereby as they deem
advisable in their discretion.
14
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP currently serves the Company as independent auditors.
Representatives of Deloitte & Touche LLP will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, shareholders may present proper proposals for inclusion in the
Company's proxy statement and for consideration at its Annual Meeting of
Shareholders by submitting their proposals to the Company in a timely manner. In
order to be included for the 1998 Annual Meeting, shareholder proposals must be
received by the Company by November 30, 1997, which is approximately 120 days in
advance of the date the Company anticipates mailing the proxy statement for the
Company's 1998 Annual Meeting of Shareholders, and must otherwise comply with
the requirements of Rule 14a-8.
By Order of the Board of Directors
Cathleen M. Osborn
Secretary
March 31, 1997
Dallas, Texas
15
<PAGE>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HALLWOOD CONSOLIDATED RESOURCES CORPORATION
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 5, 1997
The undersigned hereby appoints William L. Guzzetti and Cathleen M. Osborn,
and each of them, with full power of substitution, to act as attorneys and
proxies for the undersigned, to vote all shares of common stock of Hallwood
Consolidated Resources Corporation which the undersigned is entitled to vote at
the Annual Meeting of Stockholders, to be held at The Four Seasons Hotel, 21
Avenue Road, Toronto, Ontario, Canada, on Monday, May 5, 1997, at 9:30 a.m. (the
"Annual Meeting"), and at any and all adjournments or postponements thereof.
Said proxies are herein specifically authorized to vote in the election of
Directors and to vote said shares upon such other matters as may properly come
before the Meeting or any adjournment or postponement thereof, as the above
named proxies shall determine.
Dated:_____________, 1997
-------------------------------- --------------------------------
Signature of Stockholder Signature of Stockholder
-------------------------------- --------------------------------
Print Name of Stockholder Print Name of Stockholder
PLEASE MARK VOTES AS IN THIS EXAMPLE
1. The election of all nominees listed below for a term expiring at the
1998 Annual Meeting (except as marked to the contrary below).
_____ For all Nominees
_____ Withhold Authority To Vote For All Nominees
Anthony J. Gumbiner Jerry A. Lubliner
Brian M. Troup Bill M. Van Meter
William L. Guzzetti Hamilton P. Schrauff
John R. Isaac, Jr.
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
- -------------------------------------------------------------------------------
2. The approval of the 1997 Stock Option Plan.
_____ For _____ Against _____ Abstain
3. To transact such other business as may properly come before the
meeting and all adjournments or postponements thereof.
_____ For _____ Against _____ Abstain
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NAMED NOMINEES AND FOR THE OTHER
PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING,
THIS PROXY WILL BE VOTED AT THE DISCRETION OF THOSE NAMED IN THIS PROXY.
Please sign exactly as your name appears on the enclosed card. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. Corporation proxies should be signed in corporate name by an authorized
officer. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
1997 STOCK OPTION PLAN
FOR
HALLWOOD CONSOLIDATED RESOURCES CORPORATION
Section 1. Purpose. The purpose of this 1997 Stock Option Plan for Hallwood
Consolidated Resources Corporation is to advance the interests of Hallwood
Consolidated Resources Corporation, a Delaware corporation (the "Corporation"),
by providing an additional incentive to attract and retain qualified and
competent directors, employees and consultants for the Corporation and its
subsidiaries, upon whose efforts and judgment the success of the Corporation is
largely dependent, through the encouragement of ownership in the Corporation by
such persons.
Section 2. Definitions. As used herein, the following terms shall have the
meaning indicated:
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
(b) "Affiliate" shall mean any entity that directly or indirectly controls, is
controlled by, or is under common control with another entity. As used
herein, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of an entity, whether through ownership of voting securities, by contract
or otherwise.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Business Day" shall mean (i) if the Shares trade on a national securities
exchange, any day that the national securities exchange on which the Shares
trade is open or (ii) if the Shares do not trade on a national securities
exchange, any day that commercial banks in the City of New York are open.
(e) "Committee" shall mean the Compensation Committee of the Board or other
committee, if any, appointed by the Board pursuant to Section 13 hereof.
(f) "Continuing Director" shall mean (i) any member of the Board on the
effective date of this Plan and (ii) any person who subsequently becomes a
member of the Board if such person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing
Directors.
(g) "Corporation" shall mean Hallwood Consolidated Resources Corporation, a
Delaware corporation.
(h) "Date of Grant" shall mean the date specified by the Committee as the
effective date of the grant of an Option to an Eligible Person, provided it
is followed, as soon as reasonably possible, by written notice to the
Eligible Person of the grant.
<PAGE>
(i) "Director" shall mean a member of the Board.
(j) "Eligible Person(s)" shall mean those persons who are Directors or officers
or are employees of, consultants to, the Corporation, any Subsidiary or an
Affiliate.
(k) "Effective Date" shall mean March 3, 1997.
(l) "Fair Market Value" of a Share on any date of reference shall mean the
Closing Price on the business day immediately preceding such date, unless
the Committee in its sole discretion shall determine otherwise in a fair
and uniform manner. For this purpose, the Closing Price of the Shares on
any business day shall be: (i) if the Shares are listed or admitted for
trading on any United States national securities exchange or included in
the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the last reported sale price
of Shares on such exchange or system, as reported in any newspaper of
general circulation; (ii) if Shares are quoted on NASDAQ, or any similar
system of automated dissemination of quotations of securities prices in
common use, the mean between the closing high bid and low asked quotations
for such day of Shares on such system; (iii) if neither clause (i) nor (ii)
is applicable, the mean between the high bid and low asked quotations for
Shares as reported by the National Quotation Bureau, Incorporated, if at
least two securities dealers have inserted both bid and asked quotations
for Shares on at least five of the ten preceding days; or, (iv) in lieu of
the above, if actual transactions in the Shares are reported on a
consolidated transaction reporting system, the last sale price of the
Shares for such day and on such system.
(m) "Nonqualified Option" shall mean an option that is not an incentive stock
option as defined in Section 422 of the Internal Revenue Code.
(n) "Option" (when capitalized) shall mean any option granted under this Plan.
(o) "Optionee" shall mean a person to whom an Option is granted or any
successor to the rights of such Option under this Plan.
(p) "Person shall mean any individual, corporation, limited liability company,
partnership, joint venture or other legal entity.
(q) "Plan" shall mean this 1997 Stock Option Plan for Hallwood Consolidated
Resources Corporation.
(r) "SAR" shall mean a stock appreciation right as defined in Section 9 hereof.
(s) "Share(s)" shall mean shares of the common stock, par value $.01 per share,
of the Corporation.
(t) "Subsidiary" shall mean (i) any corporation of which a majority of the
outstanding stock having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation, irrespective of
whether at the time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
2
<PAGE>
contingency, is at the time, directly or indirectly, owned or controlled by
the Corporation or by one or more Subsidiaries, or by the Corporation and
one or more Subsidiaries or (ii) any partnership, joint venture or limited
liability company of which at least a majority of the equity ownership,
whether in the form of membership, general, special or limited partnership
interests or otherwise, is directly or indirectly owned or controlled by
the Corporation or by one or more Subsidiaries or by the Corporation and
one or more Subsidiaries.
Section 3. Shares and Options. The Corporation may grant to Eligible
Persons from time to time Options to purchase an aggregate of up to Fifty-three
Thousand (53,000) Shares. If any Option granted under the Plan shall terminate,
expire, or be cancelled or surrendered as to any Shares, new Options may
thereafter be granted covering such Shares. An Option granted hereunder shall be
a Nonqualified Option.
Section 4. Conditions for Grant of Options.
(a) Each Option shall be evidenced by an option agreement that may contain any
term deemed necessary or desirable by the Committee, provided such terms
are not inconsistent with this Plan or any applicable law. Optionees shall
be those persons selected by the Committee from Eligible Persons. Any
Person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this
Plan shall not be eligible to receive any Option under this Plan for the
duration of such waiver.
(b) In granting Options, the Committee shall take into consideration the
contribution the Person has made or may make to the success of the
Corporation or its Subsidiaries and such other factors as the Committee
shall determine. The Committee shall also have the authority to consult
with and receive recommendations from officers and other personnel of the
Corporation and any Subsidiary with regard to these matters. The Committee
may from time to time in granting Options under the Plan prescribe such
other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, relating an Option to achievement of
specific goals established by the Committee or the continued employment of
the Optionee for a specified period of time, provided that such terms and
conditions are not more favorable to an Optionee than those expressly
permitted herein.
(c) The Committee in its sole discretion shall determine in each case whether
periods of military or government service shall constitute a continuation
of employment for the purposes of this Plan or any Option.
Section 5. Exercise Price. The exercise price per Share of any Option shall
be any price determined by the Committee.
Section 6. Exercise of Options. An Option shall be deemed exercised when
(i) the Corporation has received written notice of such exercise in accordance
with the terms of the Option, (ii) full payment of the aggregate exercise price
of the Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Corporation of the amount, if any,
3
<PAGE>
that the Committee determines to be necessary for the employer of the Optionee
to withhold in accordance with applicable federal or state income tax
withholding requirements. Unless further limited by the Committee in any Option,
the option price of any Shares purchased shall be paid in cash, by certified or
cashier's check, by money order, with Shares (provided that at the time of
exercise the Committee in its sole discretion does not prohibit the exercise of
Options through the delivery of already-owned Shares) or by a combination of the
above; provided, however, that the Committee in its sole discretion may accept a
personal check in full or partial payment of any Shares. If the exercise price
is paid in whole or in part with Shares, the value of the Shares surrendered
shall be their Fair Market Value. The Corporation in its sole discretion, and on
such terms as it may determine, may lend money to an Optionee, guarantee a loan
to an Optionee, or otherwise assist an Optionee to obtain the cash necessary to
exercise all or a portion of an Option granted hereunder or to pay any tax
liability of the Optionee attributable to such exercise.
Section 7. Exercisability of Options.
(a) Any Option shall become exercisable in such amounts and at such intervals
as the Committee shall provide in any Option, except as otherwise provided
in this Section 7; provided in each case that the Option has not expired on
the date of exercise.
(b) The expiration date of an Option shall be determined by the Committee at
the Date of Grant, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the Date of Grant.
(c) The Committee may in its sole discretion accelerate the date on which any
Option may be exercised.
(d) Unless otherwise provided in any Option, each outstanding Option shall
become fully exercisable immediately upon any of the following dates
unless, in each case, the applicable transaction is approved in advance by
Continuing Directors:
(i) ten (10) days prior to the date of any transaction (which shall
include a series of transactions occurring within 60 days or occurring
pursuant to a plan), which has the result that stockholders of the
Corporation immediately before such transaction would cease to own at
least 662/3% of the voting ownership interests of the Corporation or
of any entity that results from the participation of the Corporation
in a reorganization, consolidation, merger, liquidation, dissolution
or any other comparable form of transaction;
(ii) ten (10) days preceding the record date for the approval by the
stockholders of the Corporation of a plan of reorganization,
consolidation, merger, liquidation, dissolution or other comparable
form of transaction in which the Corporation does not survive or as a
result of which the stockholders of the Corporation immediately before
such transaction would cease to own at least 662/3% of the voting
ownership interests of the Corporation;
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(iii) ten (10) days preceding the record date for the approval by the
stockholders of the Corporation of a plan for the sale, lease,
exchange or other disposition of 50% or more of the property and
assets of the Corporation;
(iv) ten (10) days preceding the record date for the approval by the
stockholders of the Corporation of the removal of or a change in a
majority of the members of the Board; or
(v) the date any tender offer or exchange offer is made by any person,
which, if successfully completed, would result in such person
beneficially owning (within the meaning of Rule 13d-3 promulgated
under the Act) either 331/3% or more of the Corporation's outstanding
Shares or interests in the Corporation having 331/3% or more of the
combined voting power of the Corporation's then outstanding voting
interests.
(e) Notwithstanding any provisions hereof to the contrary, if any Option is
accelerated under Subsection 7(c) or (d), the portion of such Option that
may be exercised to acquire Shares that the Optionee would not be entitled
to acquire but for such acceleration (the "Acceleration Shares"), is
limited to that number of Acceleration Shares that can be acquired without
causing the Optionee to have an "excess parachute payment" under Section
280G of the Internal Revenue Code, determined by taking into account all of
the Optionee's "parachute payments" determined under Section 280G of the
Code. If as a result of this Subsection 7(e), the Optionee may not acquire
all of the Acceleration Shares, then the Acceleration Shares that the
Optionee may acquire shall be the last Shares that the Optionee would have
been entitled to acquire had this Option not been accelerated.
Section 8. Termination of Option Period.
(a) Unless otherwise provided in any Option, the unexercised portion of an
Option shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:
(i) the date on which the Optionee's employment by the Corporation, a
Subsidiary or an Affiliate is terminated for any reason other than by
reason of: (A) retirement (which, for purposes of this Plan, shall
mean any termination of employment after an Optionee has reached the
age of sixty-five (65)); (B) a mental or physical disability as
determined by a medical doctor satisfactory to the Committee; (C)
death; or (D) termination resulting from any transaction described in
Section 7(d) hereof;
(ii) three (3) months after the date on which the Optionee's employment by
the Corporation, a Subsidiary, or an Affiliate is terminated by reason
of retirement;
(iii) twelve (12) months after the date on which the Optionee's employment
by the Corporation, a Subsidiary or an Affiliate is terminated by
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reason of a mental or physical disability as determined by a medical
doctor satisfactory to the Committee;
(iv) ten (10) years after the date of grant of such Option;
(v) (A) twelve (12) months after the date of termination of the Optionee's
employment by the Corporation, a Subsidiary or an Affiliate by reason
of death of the Optionee; (B) three (3) months after the date on which
the Optionee shall die if such death shall occur during the
three-month period specified in Section 8(a)(ii) hereof or the
twelve-month period specified in Section 8(a)(iii) hereof; or (C)
three (3) years after the termination of the employee's employment by
the Corporation, a Subsidiary or an Affiliate by reason of a
transaction specified in Section 7(d) hereof.
(b) If provided in an Option, the Committee in its sole discretion shall have
the power to cancel, effective upon the date determined by the Committee in
its sole discretion, all or any portion of any Option that is then
exercisable (whether or not accelerated by the Committee) upon payment to
the Optionee of cash in an amount that, in the absolute discretion of the
Committee, is determined to be equal to the excess of (i) the aggregate
Fair Market Value of the Shares subject to such Option on the effective
date of the cancellation over (ii) the aggregate exercise price of such
Option.
9. Stock Appreciation Rights and Limited Stock Appreciation
Rights.
(a) The Board shall have authority to grant an SAR or a Limited SAR with
respect to all or some of the Shares covered by any Option ("Related
Option"). An SAR or Limited SAR may be granted on or after the Date of
Grant of such Related Option.
(b) For the purposes of this Section 9, the following definitions shall apply:
(i) The term "Offer" shall mean any tender offer or exchange offer for
twenty-five percent (25%) or more of the outstanding Shares of the
Corporation, other than one made by the Corporation; provided that the
corporation, person or other entity making the Offer acquires Shares
pursuant to such Offer.
(ii) The term "Offer Price Per Share" shall mean the highest price per
Share paid in any Offer that is in effect at any time during the
period beginning on the 60th day prior to the date that a Limited SAR
is exercised and ending on the date that the Limited SAR is exercised.
Any securities or properties that are a part or all of the
consideration paid or to be paid for Shares in the Offer shall be
valued in determining the Offer Price Per Share at the higher of (1)
the valuation placed on such securities or properties by the person
making such Offer, or (2) the valuation placed on such securities or
properties by the Board.
(iii) The term "Limited SAR" shall mean a right granted under this Plan that
shall entitle the holder to an amount in cash equal to the Offer
Spread in the event an Offer is made.
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(iv) The term "Offer Spread" shall mean, with respect to each Limited SAR,
an amount equal to the product obtained by multiplying (1) the excess
of (A) the Offer Price Per Share immediately preceding the date of
exercise over (B) the exercise price per Share of the Related Option
multiplied by (2) the number of Shares with respect to which such
Limited SAR is being exercised.
(v) The term "SAR" shall mean a right granted under this Plan that shall
entitle the Holder thereof to an amount in cash equal to the SAR
Spread.
(vi) The term "SAR Spread" shall mean with respect to each SAR an amount
equal to the product of (1) the excess of (A) the Fair Market Value
per Share on the date of exercise over (B) the exercise price per
Share of the Related Option multiplied by (2) the number of Shares
with respect to which such SAR is being exercised.
(c) To exercise the SAR or Limited SAR, the Holder shall:
(i) Give written notice thereof to the Corporation, specifying the SAR or
Limited SAR being exercised and the number of Shares with respect to
which such SAR or Limited SAR is being exercised, and
(ii) If requested by the Corporation, deliver within a reasonable time the
agreement evidencing the SAR or Limited SAR being exercised, and the
Related Option agreement to the Secretary of the Corporation who shall
endorse or cause to be endorsed thereon a notation of such exercise
and return all agreements to the Holder.
(d) As soon as practicable after the exercise of an SAR or Limited SAR, the
Corporation shall pay to the Holder (i) cash, (ii) at the request of the
Holder and the approval of the Board, or in accordance with the terms of
the Related Option, Shares, or (iii) a combination of cash and Shares,
having a Fair Market Value equal to either the SAR Spread, or to the Offer
Spread, as the case may be; provided, however, that the Corporation may, in
its sole discretion, withhold from such payment any amount necessary to
satisfy the Corporation's, a Subsidiary's or an Affiliate's obligation for
federal and state withholding taxes with respect to such exercise.
(e) An SAR or Limited SAR may be exercised only if and to the extent that the
Related Option is eligible to be exercised; provided, however, a Limited
SAR may be exercised only during the period beginning on the first day
following the date of expiration of the Offer and ending on the 30th day
following such date.
(f) Upon the exercise of an SAR or Limited SAR, the Shares under the Related
Option to that such exercised SAR or Limited SAR relate shall be released,
but such released Shares shall never again be Shares available for grant.
(g) Upon the exercise or termination of a Related Option, the SAR or Limited
SAR with respect to such Related Option likewise shall terminate.
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(h) An SAR or Limited SAR shall be transferable only to the extent, if any,
that the Related Option is transferable, and under the same conditions.
(i) Each SAR or Limited SAR shall be on such terms and conditions not
inconsistent with this Plan as the Board may determine and shall be
evidenced by a written agreement.
(j) The Holder shall have no rights as a stockholder with respect to the
related Shares as a result of the grant of an SAR or Limited SAR.
Section 10. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of
issued and outstanding Shares through the declaration of a stock dividend
or through any recapitalization resulting in a stock split-up, combination
or exchange of Shares, then and in such event.
(i) appropriate adjustment shall be made in the maximum number of Shares
then subject to being optioned under the Plan, so that the same
proportion of the Corporation's issued and outstanding Shares shall
continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of Shares and the
exercise price per Share thereof then subject to outstanding Options,
so that the same proportion of the Corporation's issued and
outstanding Shares shall remain subject to purchase at the same
aggregate exercise price.
(b) The Committee may change the terms of Options outstanding under this Plan,
with respect to the exercise price or the number of Shares subject to the
Options, or both, when, in the Committee's sole discretion, such
adjustments become appropriate by reason of any transaction.
(c) Except as otherwise expressly provided herein, the issuance by the
Corporation of any class, or securities convertible into ownership
interests of any class, either in connection with direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Corporation convertible into such ownership
interests or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to the number of Shares reserved
for issuance under the Plan or the number of or exercise price of Shares
then subject to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner
the right or power of the Corporation to make, authorize or consummate (1)
any or all adjustments, recapitalizations, reorganizations or other changes
in the Corporation's capital structure or its business; (2) any merger or
consolidation of the Corporation; (3) any issue by the Corporation of debt
securities, or partnership interests that would rank above the Shares
subject to outstanding Options; (4) the dissolution or liquidation of the
Corporation; (5) any sale, transfer or assignment of all or any part of the
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assets or business of the Corporation; or (6) any other act or proceeding,
whether of a similar character or otherwise.
Section 11. Transferability of Options. Each Option may provide that such
Option may be transferrable by the Optionee in the Optionee's discretion.
Section 12. Issuance of Shares. No person shall be, or have any of the
rights or privileges of, a stockholder of the Corporation with respect to any of
the Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition of
any transfer of the certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of the Plan, the agreement evidencing the
Option or any law or regulation including, but not limited to, the following:
(i) A representation, warranty or agreement by the Optionee to the
Corporation at the time any Option is exercised that he or she is
acquiring the Shares to be issued to him or her for investment and not
with a view to, or for sale in connection with, the distribution of
any such Shares; and
(ii) A representation, warranty or agreement to be bound by any legends
that are, in the opinion of the Committee, necessary or appropriate to
comply with the provisions of any securities laws deemed by the
Committee to be applicable to the issuance of the Shares and that are
endorsed upon the Share certificates.
Section 13. Administration of the Plan.
(a) The Plan may be administered by the Compensation Committee of the Board or
other committee thereof as appointed by the Board (herein called the
"Committee"); or, if the Board so determines, by the Board and in such case
all references to the Committee shall be deemed to be references to the
Board. Except for the powers set forth in Section 16, the Committee shall
have all of the powers of the Board with respect to the Plan. Any member of
the Committee may be removed at any time, with or without cause, by
resolution of the Board and any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of the Plan. The determinations and the
interpretation and construction of any provision of the Plan by the
Committee shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting
or (ii) without a meeting by the written approval of a majority of the
members of the Committee.
(d) Subject to the express provisions of this Plan, the Committee shall have
the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to
this Plan or any Option; (ii) to construe the terms of this Plan or any
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Option; (iii) as provided in Subsection 10(a), upon certain events to
make appropriate adjustments to the exercise price and number of Shares
subject to this Plan and Option; and (iv) to make all other determinations
and perform all other acts necessary or advisable for administering this
Plan, including the delegation of such ministerial acts and
responsibilities as the Committee deems appropriate. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in
this Plan or any Option in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge
of such expediency. The Committee shall have full discretion to make all
determinations on the matters referred to in this Subsection 13(d), and
such determinations shall be final, binding and conclusive.
Section 14. Government Regulations.
This Plan, Options and the obligations of the Corporation to sell and
deliver Shares under any Options, shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
Section 15. Miscellaneous.
(a) The grant of an Option shall be in addition to any other compensation paid
to the Optionee or other employee benefit plans of the Corporation, a
Subsidiary or an Affiliate or other benefits with respect to Optionee's
position with the Corporation, a Subsidiary or an Affiliate. The grant of
an Option shall not confer upon the Optionee the right to continue in the
Optionee's employment position, or interfere in any way with the rights of
the Optionee's employer to terminate his or her status as an employee.
(b) Neither the members of the Board nor any member of the Committee shall be
liable for any act, omission, or determination taken or made in good faith
with respect to this Plan or any Option, and members of the Board and the
Committee shall, in addition to all other rights of indemnification and
reimbursement, be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement
is approved by independent legal counsel selected by the Corporation, and
amounts paid in satisfaction of a judgment, except a judgment based on a
finding of bad faith) arising from such claim, loss, damage, or expense to
the full extent permitted by law and under any directors' and officers'
liability or similar insurance coverage that may from time to time be in
effect.
(c) Any issuance or transfer of Shares to an Optionee, or to his legal
representative, heir, legatee, distributee or assignee, in accordance with
the provisions of this Plan or the applicable Option, shall, to the extent
thereof, be in full satisfaction of all claims of such persons under the
Plan. The Committee may require any Optionee, legal representative, heir,
legatee, distributee or assignee as a condition precedent to such payment
or issuance or transfer of Shares, to execute a release and receipt for
such payment or issuance or transfer of Shares in such form as it shall
determine.
(d) Neither the Committee nor the Corporation guarantees Shares from loss or
depreciation.
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(e) All expenses incident to the administration, termination, or protection of
this Plan or any Option, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation; provided, however, the
Corporation may recover any and all damages, fees, expenses and costs
arising out of any actions taken by the Corporation to enforce its rights
under this Plan or any Option.
(f) Records of the Corporation shall be conclusive for all purposes under this
Plan or any Option, unless determined by the Committee to be incorrect.
(g) The Corporation shall, upon request or as may be specifically required
under this Plan or any Option, furnish or cause to be furnished all of the
information or documentation that is necessary or required by the Committee
to perform its duties and functions under this Plan or any Option.
(h) The Corporation assumes no liability to any Optionee or his legal
representatives, heirs, legatees or distributees for any act of, or failure
to act on the part of, the Committee.
(i) If any provision of this Plan or any Option is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of this Plan or any Option, but such provision shall
be fully severable, and the Plan or Option, as applicable, shall be
construed and enforced as if the illegal or invalid provision had never
been included in the Plan or Option, as applicable.
(j) Whenever any notice is required or permitted under this Plan, such notice
must be in writing and personally delivered or sent by mail or delivery by
a nationally recognized courier service. Any notice required or permitted
to be delivered under this Plan shall be deemed to be delivered on the date
on which it is personally delivered, or, if mailed, whether actually
received or not, on the third Business Day after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to
the person who is to receive it at the address that such person has
previously specified by written notice delivered in accordance with this
Subsection 15(j) or, if by courier, seventy-two (72) hours after it is
sent, addressed as described in this Subsection 15(j). The Corporation or
the Optionee may change, at any time and from time to time, by written
notice to the other, the address that it or he had previously specified for
receiving notices. Until changed in accordance with this Plan, the address
of the Corporation is 4582 South Ulster St. Pkwy., Suite 1700, Denver,
Colorado 80237 and the address of the Optionee is the Optionee's address in
the records of the Optionee's employer.
(k) Any person entitled to notice under this Plan may waive such notice.
(l) Each Option shall be binding upon the Optionee, his legal representatives,
heirs, legatees and distributees and upon the Corporation, its successors,
and assigns, and upon the Board, the Committee and its successors.
(m) The titles and headings of Sections are included for convenience of
reference only and are not to be considered in construction of this Plan's
provisions.
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(n) Words used in the masculine shall apply to the feminine where applicable,
and wherever the context of this Plan dictates, the plural shall be read as
the singular and the singular as the plural.
Section 16. Amendment and Discontinuation of the Plan. The Committee may
from time to time amend the Plan or any Option; provided, however, that, except
to the extent provided in Section 8, no amendment or suspension of the Plan or
any Option issued hereunder shall, except as specifically permitted in any
Option, substantially impair any Option previously granted to any Optionee
without the consent of such Optionee.
Section 17. Effective Date and Termination Date. The Effective Date of the
Plan is March 3, 1997, which is the date the Board adopted this Plan. The Plan
shall terminate on the tenth anniversary of the effective date of the first
grant of Options under the Plan.
Executed to evidence the 1997 Stock Option Plan of Hallwood Consolidated
Resources Corporation adopted by the Board on March 3, 1997.
Hallwood Consolidated Resources Corporation
By: William L. Guzzetti
Name: William L. Guzzetti
Title: President
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