def14a
|
|
|
|
|
|
|
OMB APPROVAL |
|
|
|
|
|
OMB Number:
|
|
3235-0059 |
|
|
Expires:
|
|
February 28, 2006 |
|
|
Estimated average burden hours per
response |
12.75 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 o |
|
|
Check the appropriate box: |
|
|
|
o Preliminary Proxy Statement |
|
o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
|
x Definitive Proxy Statement |
|
o Definitive Additional Materials |
|
o
Soliciting Material Pursuant to §240.14a-12 |
The Hallwood Group Incorporated
(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. |
|
o
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: |
|
|
|
o Fee paid previously with preliminary materials. |
|
|
|
o 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.: |
|
|
SEC 1913 (11-01) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
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 Wednesday, May 11, 2005, at 1:00 p.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 Friday,
March 18, 2005, are entitled to notice of and to vote at
the annual meeting.
|
|
|
By order of the Board of Directors |
|
|
|
MELVIN J. MELLE |
|
Secretary |
April 26, 2005
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 annual meeting.
TABLE OF CONTENTS
THE HALLWOOD GROUP INCORPORATED
3710 Rawlins, Suite 1500
Dallas, Texas 75219
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 11, 2005
This proxy statement and the accompanying proxy are first being
mailed on or about April 26, 2005. The accompanying proxy
is solicited by the board of directors of the Company.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
|
|
|
|
|
1.
|
|
Q: |
|
Who is entitled to vote? |
|
|
A: |
|
Stockholders of record at the close of business on Friday,
March 18, 2005, 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 the nominee for
director. Abstentions, broker non-votes and proxies directing
that the shares are not to be voted will not be counted as a
vote in favor of the nominee. |
|
|
4.
|
|
Q: |
|
How can I revoke my proxy? |
|
|
A: |
|
You have the right to revoke your proxy at any time by: |
|
|
|
|
(1) notifying our corporate secretary in writing before the
meeting; |
|
|
|
|
(2) voting in person; or |
|
|
|
|
(3) returning a later-dated proxy card before the meeting. |
|
|
|
|
Attending the meeting is not sufficient to revoke your proxy
unless you also take one of the actions above. |
|
|
|
|
|
|
5.
|
|
Q: |
|
How does the board of directors recommend I vote on the
proposal to elect the nominee for director? |
|
|
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 1,326,343 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, you will be considered part of the quorum. In addition,
broker non-votes will be counted toward determining the presence
of a quorum. |
|
|
8.
|
|
Q: |
|
What vote is required to approve the proposal? |
|
|
A: |
|
A plurality of the votes cast at the annual meeting is necessary
to elect the nominee for director. Abstentions and shares held
by brokers that have been designated as not voted will be
counted for purposes of determining a quorum, but will not be
counted as votes cast in favor of the proposal. |
|
2
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 Morrow & Co.s total costs will
be approximately $4,000.
PROPOSAL NO. 1
ELECTION OF DIRECTOR
The Companys board of directors is divided into three
classes serving staggered three-year terms. At the annual
meeting, you will elect one director to serve for three years.
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 a 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. The nominee for
director must be elected by a plurality of the votes cast at the
annual meeting.
Below are the names and ages of the nominee and of the 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
2008 Annual Meeting
|
|
|
Charles A. Crocco, Jr. |
|
Mr. Crocco, age 66, has served as a director since
1981. He is an attorney, who was Counsel to Crocco & De
Maio, P.C., through March 2003. He is a Securities
Arbitrator in proceedings brought under the auspices of the
National Association of Securities Dealers. He also served as a
director of First Banks America, Inc., a bank holding company,
from 1989 until December 2002. Mr. Crocco was an investor
in Hallwood Energy Corporation (HEC) and is an
investor in Hallwood Exploration, L.P. (HEP),
Hallwood Energy III, L.P. (HE III) and
Hallwood Energy II, L.P. (HE II)
(collectively, the Energy Affiliates). The Company
owns between a 16%-22% partnership interest on a fully diluted
basis in each of the Energy Affiliates. |
Directors Continuing in Office Until the 2007 Annual
Meeting
|
|
|
J. Thomas Talbot |
|
Mr. Talbot, age 69, has served as a director since
1981. He was a partner of Shaw & Talbot, a commercial
real estate investment and development company, from 1975 until
August 2003. He has been a partner in Pacific Management Group,
an asset management firm, since 1986. He is also the owner of
The Talbot Company. He served as a director of Fidelity National
Financial, Inc. from 1990 until September 2003. He served as a
director of California Coastal Communities, Inc. from August
1993 to July 2004. Mr. Talbot was an investor in HEC, and
is an investor in HEP, HE III and HE II. |
3
|
|
|
A. Peter Landolfo |
|
Mr. Landolfo, age 56, has served as a director since
May 12, 2004. For more than five years, he has served in
various capacities with, and since 1986, as Senior Vice
President of Bowne of Dallas, LLP, a financial printer in
Dallas, Texas. Since 1992, he has been President of Dallas
Design Concepts, Inc., a specialty gift company. |
Directors Continuing in Office Until the 2006 Annual
Meeting
|
|
|
Anthony J. Gumbiner |
|
Mr. Gumbiner, age 60, has served as a director and
Chairman of the Board since 1981, and Chief Executive Officer of
the Company since 1984. He also served as President and Chief
Operating Officer from December 1999 to March 9, 2005. He
also served 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. (HRP) and its predecessor until HRP was sold
during 2004. Mr. Gumbiner was a director, officer and
option holder in HEC and is a director and officer and holds a
4% profits interest in each of HEP, HE III and HE II.
Mr. Gumbiner is also a solicitor of the Supreme Court of
Judicature of England. |
|
M. Garrett Smith |
|
Mr. Smith, age 43, has served as a director since
November 17, 2004. Mr. Smith is currently a private
investor. From December 2000 through February 2005, he was a
Principal with BP Capital, LLC, a Dallas, Texas-based investment
firm specializing in the oil and gas industry, and as a General
Partner and Portfolio Manager of BP Capital Energy Equity Fund,
an energy hedge fund. From March to December 2000,
Mr. Smith was the Chief Financial Officer of Stonebridge
Technologies. From 1989 to 2000, Mr. Smith held a number of
financial management positions, including Executive Vice
President and Chief Financial Officer, of Pioneer Natural
Resources Company, an exploration and production company. |
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 director.
Committees and Meetings of the Board of Directors
Messrs. Crocco, Gumbiner, Landolfo, Smith and Talbot served
as members of the Companys audit committee during the year
ended December 31, 2004. Messrs. Gumbiner and Talbot
resigned from the Companys audit committee during 2004.
Mr. Landolfo was appointed to the Companys audit
committee on May 12, 2004, and Mr. Smith was appointed
to the Companys audit committee on November 17, 2004.
Mr. Crocco became Chairman of the audit committee as of
July 9, 2004. The audit committee met five times during
2004 and was charged with the responsibility of reviewing the
annual audit report and the Companys accounting practices
and procedures, and recommending to the board of directors the
independent registered public accounting firm to be engaged for
the following year.
The board of directors does not have a standing nominating or
compensation committee. Because Mr. Gumbiner owns more than
50% of the Companys voting power, it is a controlled
company under the
4
rules of the American Stock Exchange and is not required to have
separate nominating and compensation committees.
During the year ended December 31, 2004, the board of
directors held nine 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.
Each of the new directors has attended (1) all of the
meetings held by the board of directors, and (2) at least
75% of the meetings held by all committees of the board of
directors on which he served, since his election or appointment.
The Company does not have a policy with respect to attendance by
the directors at the annual meetings of stockholders. Last year
all members of the board of directors attended the annual
meeting. Each member of the board of directors has indicated his
intent to attend the 2005 annual meeting.
Communication With Directors
The board of directors does not provide a formal process by
which stockholders may send communications to the board of
directors. The Company is small and 64.2% of its voting
securities are owned by a single stockholder. Consequently, the
board of directors does not believe it is necessary to formalize
such a communication process. However, stockholders may
communicate with the Company or request information at any time
by contacting Ms. Mary Doyle, Vice President
Investor Relations at 800.225.0135.
Code of Ethics for Financial Officers
The board of directors has adopted a Code of Business Conduct
and Ethics that applies to all employees, including those
officers responsible for financial matters. The Code of Business
Conduct and Ethics may be accessed through the Companys
website at www.hallwood.com. Any amendments to or waivers of the
Code of Business Conduct and Ethics will be promptly disclosed
on the Companys website. Any stockholder may request a
printed copy of the Code of Business Conduct and Ethics by
contacting Ms. Mary Doyle, Vice President
Investor Relations at 800.225.0135.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as to the beneficial
ownership of shares of the Companys common stock as of the
close of business on the record date (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
Companys common stock; (2) for the continuing
directors and the nominee for director; and (3) for all
directors and executive officers as a group. Unless otherwise
noted, the address of each person listed below is
3710 Rawlins, Suite 1500, Dallas, Texas 75219.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature | |
|
|
|
|
of Beneficial | |
|
Percentage | |
Name and Address of Beneficial Owner |
|
Ownership(1) | |
|
of Class(1) | |
|
|
| |
|
| |
Anthony J. Gumbiner
|
|
|
1,001,575 |
(2) |
|
|
67.8 |
|
Advisory Research, Inc.
|
|
|
93,300 |
(3) |
|
|
7.0 |
|
Charles A. Crocco, Jr.
|
|
|
15,825 |
(4) |
|
|
1.2 |
|
J. Thomas Talbot
|
|
|
15,000 |
(4) |
|
|
1.1 |
|
Melvin J. Melle
|
|
|
13,500 |
(5) |
|
|
1.0 |
|
M. Garrett Smith
|
|
|
|
(6) |
|
|
|
|
A. Peter Landolfo
|
|
|
|
(6) |
|
|
|
|
William L. Guzzetti
|
|
|
|
(7) |
|
|
|
|
All directors and executive officers as a group (7 persons)
|
|
|
1,045,900 |
|
|
|
68.8 |
|
|
|
(1) |
Assumes, for each person or group listed, the exercise of all
stock options or other rights 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 derivative securities owned by any other
holder of options. Unless otherwise noted, the address of each
individual listed above is 3710 Rawlins, Suite 1500,
Dallas, Texas 75219. |
|
(2) |
Includes currently exercisable options to
purchase 150,000 shares of common stock. In addition,
Mr. Gumbiner holds a 4% profits interest in each of HEP,
HE III and HE II. |
|
(3) |
Information derived from Schedule 13G filed by Advisory
Research, Inc. on February 16, 2005. Advisory Research
Inc.s address is listed as 180 North Stetson St.,
Suite 5500, Chicago, Illinois 60601. |
|
(4) |
Includes currently exercisable options to
purchase 15,000 shares of common stock.
Messrs. Crocco and Talbot are investors in HEP, HE III
and HE II. |
|
(5) |
Includes currently exercisable options to
purchase 13,500 shares of common stock. Mr. Melle
is an investor in HE II. |
|
(6) |
Messrs. Smith and Landolfo do not own any shares or hold
any options to purchase shares of the Company. |
|
(7) |
Mr. Guzzetti does not own any shares or hold any options to
purchase shares of the Company. He is both an investor and holds
a 4% profits interest in each of HEP, HE III and HE II. |
6
EXECUTIVE COMPENSATION
The total compensation paid for each of the years ended
December 31, 2004, 2003 and 2002 to the Chief Executive
Officer, and the other executive officers who received cash
compensation in excess of $100,000 for 2004, referred to
collectively as the Named Executive Officers, is set
forth in the following Summary Compensation Table.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term | |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Awards | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
Annual Compensation | |
|
|
|
Securities | |
|
|
|
|
|
|
| |
|
Other Annual | |
|
Underlying | |
|
LTIP | |
|
All Other | |
Name and Principal |
|
Calendar | |
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Options/ | |
|
Payouts | |
|
Compensation | |
Position |
|
Year | |
|
($) | |
|
($) | |
|
($) | |
|
SARs(#) | |
|
($) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Anthony J. Gumbiner
|
|
|
2004 |
|
|
|
0 |
(3) |
|
|
1,908,000 |
(3) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
7,802 |
(9) |
|
Chairman, President |
|
|
2003 |
|
|
|
0 |
(3) |
|
|
0 |
(3) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
7,802 |
(9) |
|
and Chief Executive |
|
|
2002 |
|
|
|
0 |
(3) |
|
|
0 |
(3) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
7,802 |
(9) |
|
Officer(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Guzzetti
|
|
|
2004 |
|
|
|
156,542 |
(4) |
|
|
2,977,333 |
(5) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
20,034 |
(10) |
|
Executive Vice |
|
|
2003 |
|
|
|
208,333 |
(4) |
|
|
169,000 |
(5) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
8,888 |
(10) |
|
President(2) |
|
|
2002 |
|
|
|
208,333 |
(4) |
|
|
169,000 |
(5) |
|
|
0 |
|
|
|
|
(8) |
|
|
0 |
|
|
|
9,248 |
(10) |
Melvin J. Melle
|
|
|
2004 |
|
|
|
208,333 |
|
|
|
0 |
|
|
|
3,279 |
(6) |
|
|
0 |
|
|
|
0 |
|
|
|
15,556 |
(11) |
|
Vice President, Chief |
|
|
2003 |
|
|
|
208,333 |
|
|
|
25,000 |
|
|
|
3,258 |
(6) |
|
|
0 |
|
|
|
0 |
|
|
|
13,380 |
(11) |
|
Financial Officer and |
|
|
2002 |
|
|
|
208,333 |
|
|
|
10,000 |
|
|
|
3,246 |
(6) |
|
|
0 |
|
|
|
0 |
|
|
|
13,380 |
(11) |
|
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amber M. Brookman
|
|
|
2004 |
|
|
|
300,000 |
|
|
|
922,070 |
|
|
|
6,000 |
(7) |
|
|
0 |
|
|
|
0 |
|
|
|
8,772 |
(7) |
|
Chief Executive |
|
|
2003 |
|
|
|
300,000 |
|
|
|
316,623 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
8,242 |
(7) |
|
Officer and President, |
|
|
2002 |
|
|
|
300,000 |
|
|
|
145,288 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,000 |
(7) |
|
Brookwood Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Effective as of March 9, 2005, Mr. Gumbiner resigned
as President and Chief Operating Officer of the Company. |
|
|
(2) |
On March 9, 2005, the board of directors of the Company
appointed Mr. Guzzetti as President and Chief Operating
Officer of the Company. |
|
|
(3) |
Consists of $1,908,000 paid to Mr. Gumbiner personally, as
special bonus compensation in recognition of benefits to the
Company and its stockholders over an extended period of time
regarding the operation and sale of the Companys
investment in HRP. The Company also paid to Hallwood Investments
Limited (HIL), an entity with which
Mr. Gumbiner is associated, consulting fees of $927,500 in
2004 and $795,000 in each of 2003 and 2002, primarily in
connection with HILs activities on behalf of the
Companys subsidiaries and a bonus of $3,000,000 in 2004,
in recognition of benefits to the Company and its stockholders
over an extended period of time regarding the operation and sale
of the Companys investment in HRP. In addition, in each of
March 2004 and 2003, the board of directors of Hallwood Realty,
LLC approved a bonus to HIL in the amount of $150,000, which was
paid by HRP, and in each of March 2004 and 2003, the Board of
Directors of Hallwood Commercial Real Estate, LLC
(HCRE) approved a bonus to HIL of $33,000, which was
paid by HCRE. |
|
|
(4) |
Consists of $109,103 paid by HRP and $47,439 by Hallwood Realty,
LLC in 2004 and $208,333 paid by HRP in 2003 and 2002. In
addition, Mr. Guzzetti received a salary of $125,000 in
2004, $40,000 in 2003 and $76,667 in 2002 from HEC. |
|
|
(5) |
Consists of $1,999,333 paid by the Company and $378,000 paid by
HRP in 2004 and $600,000 paid by the Company in April 2005, as
special bonus compensation in recognition of benefits to the
Company and its stockholders over an extended period of time,
regarding the operation and sale of the Companys
investment in HRP and disposition of the Companys interest
in HEC, respectively. In addition, HRP paid $24,000, and HCRE
paid Mr. Guzzetti bonuses of $145,000 for each of 2003 and
2002. |
|
|
(6) |
Represents reimbursements to compensate for the income tax
effect of payment for life and/or disability insurance. |
7
|
|
|
|
(7) |
Other Annual Compensation includes $6,000 for Brookwoods
matching contribution under its 401(k) Tax Favored Savings Plan.
All Other Compensation includes a $6,000 annual car allowance
and $2,772 and $2,242 excess insurance premiums for 2004 and
2003. |
|
|
(8) |
No options for securities of the Company or any of its
subsidiaries were granted during 2004, 2003 or 2002. In 2002,
HEC granted to each of Messrs. Gumbiner and Guzzetti
options to purchase 4% of the outstanding stock of HEC at
the same price per share as investors paid for the shares. In
2004, the Energy Affiliates granted each of
Messrs. Gumbiner and Guzzetti a 4% profits interest in each
of HEP, HE III and HE II after recovery of the capital
contribution by the investors in each entity. |
|
|
(9) |
Consists of $7,802 for term life insurance premiums in each of
2004, 2003 and 2002. |
|
|
(10) |
Consists of $8,400, $7,700 and $7,700 in 2004, 2003 and 2002,
respectively, for payment of special bonus, in lieu of a Company
matching contribution under its 401(k) Tax Favored Savings Plan;
$1,795, $1,188 and $1,548 excess insurance premiums in 2004,
2003 and 2002, respectively, and $9,839 for prepaid insurance
premiums in 2004. |
|
(11) |
Consists of a twenty-year service award of $1,440 in 2004;
$5,716, $5,680 and $5,680 in 2004, 2003 and 2002, respectively,
for life insurance premiums; and $8,400, $7,700 and $7,700 in
2004, 2003 and 2002, respectively, for payment of special bonus,
in lieu of a Company matching contribution under its 401(k) Tax
Favored Savings Plan. |
OPTIONS/ SAR GRANTS IN LAST FISCAL YEAR
No options to purchase shares of the Companys or any of
its affiliated entities common stock were granted to Named
Executive Officers during 2004. During 2004, each of the Energy
Affiliates granted to each of Messrs. Gumbiner and Guzzetti
a 4% profits interest in the Energy Affiliates after recovery of
the capital contribution by the investors in each entity.
AGGREGATED OPTION/ SAR EXERCISES
AND OPTION/ SAR VALUES AT DECEMBER 31, 2004
The following table discloses for each of the Named Executive
Officers who have been granted options to purchase securities of
the Company or its subsidiaries, the number of options held by
each of the Named Executive Officers and the potential
realizable values for their options at December 31, 2004.
None of the Named Executive Officers exercised any options in
the Company or any of its subsidiaries during the year ended
December 31, 2004, and the Company has not granted SARs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised | |
|
|
|
|
|
|
|
|
Securities Underlying | |
|
in-the-Money | |
|
|
|
|
Securities | |
|
|
|
Unexercised | |
|
Options/SARs at | |
|
|
|
|
Underlying | |
|
|
|
December 31, 2004 (#) | |
|
December 31, 2004 ($) | |
|
|
|
|
Exercised | |
|
Value | |
|
| |
|
| |
Name |
|
Entity | |
|
Options/SARS(#) | |
|
Realized($) | |
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Anthony J. Gumbiner
|
|
|
HWG |
|
|
|
0 |
|
|
|
0 |
|
|
|
150,000/0 |
|
|
|
14,236,548/0 |
|
|
|
|
HRP |
|
|
|
25,800 |
|
|
|
3,220,485 |
|
|
|
0/0 |
|
|
|
0/0 |
|
William L. Guzzetti
|
|
|
HRP |
|
|
|
15,000 |
|
|
|
1,872,375 |
|
|
|
0/0 |
|
|
|
0/0 |
|
Melvin J. Melle
|
|
|
HWG |
|
|
|
0 |
|
|
|
0 |
|
|
|
13,500/0 |
|
|
|
1,262,175/0 |
|
In connection with the sale of HEC in 2004, the options that
each of Messrs. Gumbiner and Guzzetti held to
purchase 4% of the shares of HEC were cancelled in exchange
for a payment of $9,582,556, representing a pro rata portion of
the sales proceeds. Because the Energy Affiliates are not
publicly traded, it is not feasible to value the 4% profits
interest that each of Messrs. Gumbiner and Guzzetti hold in
those entities.
COMPENSATION OF DIRECTORS
For the year ended December 31, 2004, Messrs. Crocco,
Landolfo, Smith and Talbot received director fees of $40,000,
$30,000, $10,000 and $40,000, respectively, and are entitled to
receive $500 for each day spent
8
on business of the Company, other than attendance at board
meetings. Messrs. Crocco and Talbot received $2,000 and
$1,000, respectively, for time spent as directors on Company
business other than attendance at board meetings. As members of
committees of the Board, each of the outside directors,
Messrs. Crocco, Landolfo, Smith and Talbot, also received
an initial fee of $5,000 and meeting attendance fees of
$1,000 per meeting, totaling $10,000, $11,000, $2,000 and
$11,000, respectively. Each director is also reimbursed for
expenses reasonably incurred in connection with the performance
of his duties. Mr. Gumbiner does not receive any director
fees. Additional information regarding consulting agreements
with, or services provided by, Mr. Gumbiner through HIL is
included in Compensation Committee Interlocks and Insider
Participation, below.
EMPLOYMENT AGREEMENTS
During the year ended December 31, 2004, the Company had an
employment agreement with Mr. Melle. The employment
agreement provided 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
provided that the Company will maintain $500,000 of life
insurance benefits and, for the year ended December 31,
2004, the Company paid a life insurance premium in the amount of
$5,716. Mr. Melles employment agreement continued
under the same terms and conditions until December 31,
2004, at which time it was automatically extended for one year,
and will be automatically extended annually unless terminated by
either party.
During the year ended December 31, 2004, Brookwood had a
compensation letter (the Letter) with
Ms. Brookman. The Letter provided for payment of a salary
of $300,000 per year plus an annual bonus in an amount of
the greater of 5% of Brookwoods earnings before taxes or
$100,000. In addition, the Letter provided for a car allowance
of $500 per month. Ms. Brookmans Letter
continued under the same terms and conditions until
December 31, 2004, 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
The board of directors as a whole performs the functions of the
compensation committee. References to the Companys
compensation committee in this proxy statement refer to the
board of directors, acting in its capacity as the compensation
committee.
During 2004, Messrs. Gumbiner and Guzzetti served on the
board of directors of Hallwood Realty, LLC, the general partner
of HRP and on the board of directors of HEC. For HRP, the audit
committee of the board of directors served as the compensation
committee, Mr. Gumbiner was the Chief Executive Officer and
Mr. Guzzetti was the Chief Operating Officer.
As general partner of HRP, Hallwood Realty, LLC earned an asset
management fee from HRP, which amounted to $335,000 for the year
ended December 31, 2004. In addition, HRP reimbursed
Hallwood Realty, LLC $4,430,000 for costs incurred by Hallwood
Realty, LLC on behalf of HRP during the year ended
December 31, 2004. As property manager for HRP, the
Companys HCRE subsidiary received management fees, leasing
commissions and other fees from HRP and related parties of
$2,479,000 during the year ended December 31, 2004. In
addition, HRP reimbursed HCRE $2,135,000 for costs incurred by
HCRE on behalf of HRP during the year ended December 31,
2004. HRP was merged with HRPT Properties Trust in July 2004.
Messrs. Gumbiner and Guzzetti are also members of the board
of directors and executive officers of each of the Energy
Affiliates. During 2004, the Company invested a total of
$10,443,000 in the Energy Affiliates on the same terms as other
affiliated and nonaffiliated investors. In addition,
Messrs. Gumbiner and Guzzetti received compensation from
HEC, as described in this proxy statement.
Since December 31, 1996, the Company has been a party to an
agreement with HIL under which HIL provides international
consulting and advisory services to the Company and its
affiliates. The agreement
9
currently provides for an annual fee of $996,000 ($954,000 prior
to March 1, 2005). According to this agreement, the Company
reimburses HIL for reasonable and necessary expenses in
providing office space and administrative services used by
Mr. Gumbiner. For the year ended December 31, 2004,
HIL was also reimbursed $497,000, of which $324,000 was paid by
the Company and $173,000 was paid by Hallwood Realty, LLC, as
the general partner of HRP, for services rendered to HRP.
COMPENSATION COMMITTEE
REPORTS ON EXECUTIVE COMPENSATION
General
The Company is a holding company with several subsidiaries and
affiliated companies. Of the Named Executive Officers,
Mr. Gumbiner was involved in the activities of all of the
subsidiaries and affiliated companies, but received no salary
directly from the Company. HIL, with which Mr. Gumbiner is
associated, received consulting fees from the Company. The
independent members of Companys board of directors
approved the payments by the Company to HIL. HIL was also
involved in the activities of Hallwood Realty, LLC and HCRE
during 2004. The bonus paid to HIL by Hallwood Realty, LLC and
HRP was determined by the board of directors of Hallwood Realty,
LLC. The bonus paid to HIL by HCRE was determined by the board
of HCRE, subject to the approval of independent members of
Companys board of directors.
Mr. Guzzetti was involved in the activities of Hallwood
Realty, LLC and HCRE prior to their sale in July 2004. The
compensation of Mr. Guzzetti by Hallwood Realty, LLC was
determined by the board of directors of Hallwood Realty, LLC.
Mr. Guzzettis compensation from HCRE was determined
by the board of HCRE, subject to the approval of Companys
board of directors, acting in its capacity as the compensation
committee and his compensation from the Company was determined
by the Companys board of directors.
Mr. Melle is involved in the activities of the Company and
of certain subsidiaries and affiliated companies, but for 2004
received compensation only from the Company. Accordingly, the
compensation of Mr. Melle is determined solely by the
Companys board of directors.
Ms. Brookman is involved in and receives compensation only
from Brookwood. The compensation for her services is determined
by the board of directors of Brookwood, with the approval of
Mr. Gumbiner, the Chairman and Chief Executive Officer of
the Company.
Compensation by the Company
The Companys board of directors, acting in its capacity as
the compensation committee, annually determines the compensation
paid by the Company to its executive officers 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. In general, a substantial portion of the executive
officers compensation from the Company has been paid as
salary, although from time to time the Company has awarded
substantial bonuses upon completion of significant transactions
that provide material benefits to the Company.
Mr. Gumbiner does not receive a salary from the Company.
Pursuant to a consulting agreement entered into in 1997, HIL,
with which Mr. Gumbiner is associated, receives consulting
fees from the Company and reimbursement of out-of-pocket
business expenses incurred in the performance of its duties. See
Compensation Committee Interlocks and Insider
Participation. The fees under the consulting agreement had
previously been set at $795,000 annually. In March 2004, the
members of the board of directors other than Mr. Gumbiner
approved an amendment to the consulting agreement to set these
fees at $954,000. In approving the amendment, the Board
considered that Mr. Gumbiner lives in Europe but that the
fees were
10
paid in U.S. dollars, which had declined significantly
against the Euro, effectively reducing the value of the fees
paid. The Board therefore determined that the increase in fees
was appropriate.
In September 2004, the Company paid special bonuses in the
amount of $3,000,000 to HIL; $1,908,000 to Mr. Gumbiner and
$1,622,000 to Mr. Guzzetti in recognition of benefits to
the Company and its stockholders over an extended period of time
regarding the operation and sale of the Companys
investment in HRP. In April 2005, the Company paid $600,000 to
Mr. Guzzetti as special bonus compensation in recognition
of benefits to the Company and its stockholders regarding the
disposition of the Companys interest in HEC. These bonuses
were approved by a committee of the board of directors,
consisting solely of the independent members of the Board after
receiving advice from an independent consultant that the bonuses
were reasonable and within the boundaries of competitive
practice. The committee also concluded that the bonuses were
reasonable and in the best interests of the Company in light of
several factors, including that the Company had received a
substantial benefit from the real estate operations and the
Companys interest in HEC over a number of years; the
compensation philosophy of the Company includes the concept of
paying substantial bonuses upon the completion of significant
transactions and the increase in the value of the Companys
stock over the recent past. The committee also took into account
the compensation that Messrs. Gumbiner and Guzzetti had
received from the Companys Energy Affiliates and the fact
that the bonuses would not be deductible by the Company.
Section 162(m) of the Internal Revenue Code of 1986
provides that certain compensation in excess of $1,000,000 paid
to the chief executive officer and the other four most highly
compensated executive officers of a public company (determined
as of the last day of the companys tax year) is not
deductible for federal income tax purposes. While the tax impact
of any compensation arrangement is one factor considered by the
board in determining compensation, the impact of that factor is
evaluated in light of the Companys overall compensation
goals. Accordingly, from time to time, the board may award
compensation that is not fully deductible if it determines that
such an award is in the best interests of the Company and its
shareholders. Specifically, in making the awards described
above, the independent members of the board determined that the
awards were appropriate notwithstanding that the amounts that
exceeded $1,000,000 total compensation from the Company to the
individual were not deductible by the Company.
Prior to the merger of HRP in July 2004, Hallwood Realty, LLC
had contracted with HCRE to manage the properties controlled by
Hallwood Realty, LLC. Mr. Guzzetti was the president and
was primarily responsible for the operations of HCRE.
HCREs Executive Incentive Plan authorized HCRE to pay
annual cash bonuses in an amount up to 10% of HCREs net
operating income for the prior year. The actual amount to be
paid and the allocation of the total amount to individual
employees was recommended by Mr. Gumbiner, the chief
executive officer of HCRE, and was approved by the board of
directors of HCRE, which consisted of Messrs. Gumbiner and
Guzzetti. Amounts paid to HIL and Mr. Guzzetti, an
executive officer of the Company, were subject to the approval
of the Companys board of directors.
Compensation by Hallwood Realty, LLC
Prior to the merger of HRP in July 2004, the compensation paid
by Hallwood Realty, LLC to HIL and Mr. Guzzetti was
determined by the audit committee of the board of directors of
Hallwood Realty, LLC in consultation with Mr. Guzzetti, the
president of Hallwood Realty, LLC. The compensation was
authorized by the entire board of directors upon the approval
and recommendation of the audit committee. The compensation paid
by Hallwood Realty, LLC consisted of a salary for
Mr. Guzzetti, and to the extent that Hallwood Realty,
LLCs board of directors determined it to be appropriate,
bonuses to Mr. Guzzetti and HIL based on their
determination that Hallwood Realty, LLC or HRP had experienced
favorable operating results or completed transactions that
benefited Hallwood Realty, LLC or HRP. For 2004, the board of
directors did not consider any changes in
Mr. Guzzettis salary.
Compensation by Energy Affiliates
In 2001, a company then named Hallwood Energy Corporation, in
which the Company held common and preferred stock, was acquired
by a third party and, as a result, the Company disposed of all
of its energy
11
interests. During 2002, a group of investors formed HEC as a new
energy company to explore a potential opportunity in the Barnett
Shale zone of the Fort Worth Basin. This entity was
originally capitalized with contributions of $6.2 million.
The Company elected to contribute approximately 28% of this
amount at the same price as the other affiliated and
unaffiliated investors, including Mr. Guzzetti and the
outside directors of the Company at that time. The cash of HEC
was anticipated to be limited. Therefore, to induce the
management of HEC to exert their best efforts on behalf of HEC
at a lower salary than they had previously received from old
Hallwood Energy Corporation, HEC granted to each of the members
of management, including Messrs. Gumbiner and Guzzetti,
options to purchase 4% of the stock of HEC outstanding from
time to time. The total amount invested in HEC by the Company
through the date of its sale was $6,063,000.
In June 2004, HEC sold approximately 48% of its total net
acreage to HE III, the interests of which were held pro
rata by the HEC shareholders, including the Company. In December
2004 HEC was sold in a transaction in which the Company received
total cash proceeds of $54,180,000. The Company also received
its proportionate share of the HE III debt in the amount of
$1,995,000 and its proportionate interest in the entity that
holds the Worthington salt water disposal well in the amount of
$1,250,000, both of which were contributed to HE III as
additional capital contributions. In connection with this
transaction, the investors and option holders in HEC received in
the aggregate cash of approximately $239,000,000. As holders of
options to purchase 4% of the outstanding stock, each of
Messrs. Gumbiner and Guzzetti received as consideration for
cancellation of their options their pro rata share of the
proceeds, of which each amounted to $9,582,556.
During 2004, the Company has also invested, along with other
affiliated and unaffiliated investors, in the other Energy
Affiliates. The Companys interest in these entities is
approximately 16% to 22% on a fully diluted basis.
Messrs. Gumbiner and Guzzetti are directors and officers of
each of these entities and, in that capacity during 2004,
Mr. Guzzetti received a total salary of $125,000 from the
new entities, as determined from time to time by the board of
directors of those entities. During 2004, the boards of
directors of the Energy Affiliates also awarded to each of
Messrs. Gumbiner and Guzzetti the right to receive up to 4%
of the profits generated by those entities. Because the Company
is a minority investor in the Energy Affiliates, the
Companys board of directors did not participate in the
Energy Affiliates determination of compensation paid to
Messrs. Gumbiner and Guzzetti.
Compensation by Brookwood
Ms. Brookmans compensation is determined by the board
of directors of Brookwood. As described in Employment
Agreements, during 2004, Brookwood had a compensation
letter with Ms. Brookman and the board of directors of
Brookwood did not consider any changes in that Letter. None of
the directors of the Company are directors or officers of
Brookwood.
|
|
|
2004 Members of the Companys Board of
Directors |
|
|
|
Charles A. Crocco, Jr. |
|
Anthony J. Gumbiner |
|
A. Peter Landolfo (from May 2004) |
|
M. Garrett Smith (from November 2004) |
|
J. Thomas Talbot |
12
Report of the Audit Committee
The audit committee is composed of three directors and operates
under an Amended and Restated Audit Committee Charter, adopted
by the board of directors according to the rules and regulations
of the SEC and the American Stock Exchange, a copy of which is
attached to this Proxy Statement as Annex A. The audit
committee members are Charles A. Crocco, Jr. (Chairman), A.
Peter Landolfo and M. Garrett Smith. The board of directors has
determined that each of the members is independent, as defined
by the American Stock Exchanges Listed Company Guide. The
board of directors has determined that Mr. Smith is an
audit committee financial expert, as defined by the
SEC.
Management is responsible for the Companys internal
controls and the financial reporting process.
Deloitte & Touche LLP (D&T), the
Companys independent registered public accounting firm, is
responsible for performing an independent audit of the
Companys consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight
Board generally accepted in the United States of America. The
audit committees responsibility is to monitor and oversee
these processes. The audit committee also recommends to the
board of directors the selection of the Companys
independent registered public accounting firm.
In this context, the audit committee reviewed and discussed the
audited consolidated financial statements with both management
and D&T. Specifically, the audit committee has discussed
with D&T matters required to be discussed by Statement on
Auditing Standards No. 61.
The audit committee received from D&T the written
disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions
with Audit Committee), and has discussed with D&T the issue
of its independence from the Company.
Management is responsible for the Companys financial
reporting process, including its system of internal controls,
and for the preparation of consolidated financial statements in
accordance with the standards of the Public Company Accounting
Oversight Board generally accepted in the United States of
America. The Companys independent registered public
accounting firm is responsible for auditing those financial
statements. The audit committees responsibility is to
monitor and review these processes. It is not the audit
committees duty or responsibility to conduct auditing or
accounting reviews or procedures. Therefore, the audit committee
has relied, without independent verification, on
managements representation that the financial statements
have been prepared with integrity and objectivity and in
accordance with the standards of the Public Company Accounting
Oversight Board generally accepted in the United States of
America and on the representations of the independent registered
public accounting firm included in its report on the
Companys consolidated financial statements. The audit
committees oversight does not provide it with an
independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or
policies, or appropriate internal controls and procedures
designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the audit
committees considerations and discussions with management
and the independent registered public accounting firm do not
assure that the Companys financial statements are
presented in accordance with generally accepted accounting
principles, that the audit of the Companys financial
statements has been carried out in accordance with generally
accepted auditing standards or that the Companys
independent registered public accounting firm is in fact
independent.
Based on the audit committees review of the audited
financial statements and its discussions with management and
D&T noted above and the report of the independent registered
public accounting firm to the audit committee, the audit
committee recommended to the board of directors that the audited
consolidated financial statements be included in the
Companys Annual Report on Form 10-K for the year
ended December 31, 2004.
|
|
|
|
|
2004 Members of the Audit Committee of the Board of
Directors of the Company |
|
|
|
Charles A. Crocco, Jr. |
|
Anthony J. Gumbiner (until May 2004) |
|
A. Peter Landolfo (from May 2004) |
|
M. Garrett Smith (from November 2004) |
|
J. Thomas Talbot (until July 2004) |
13
PROCEDURES FOR DIRECTOR NOMINATIONS
As discussed above, as a controlled company under
the rules of the American Stock Exchange, the Company is not
required to have a standing nominating committee or a written
charter governing the nomination process. As a result, if the
need arises, the full board of directors, of which four members
are independent, would serve that function.
The Companys bylaws provide that a stockholder may
nominate a person for election as a director at an annual
meeting if written notice of the stockholders intent to
make the nomination has been given to the Secretary of the
Company at least 90 days in advance of the meeting or, if
later, the tenth day following the first public announcement of
the date of the meeting. Such notices must comply with the
provisions of the bylaws.
In the event that a stockholder meeting the requirements and
following the procedures of the bylaws was to propose a nominee,
or if a vacancy occurs as a result of an increase in the number
of directors, the board of directors will identify candidates
with superior qualifications and personally interview them, and
if, appropriate, arrange to have members of management interview
such candidates. Preferred candidates would display the highest
personal and professional character and integrity and have
outstanding records of accomplishment in diverse fields of
endeavor. Candidates should have demonstrated exceptional
ability and judgment and have substantial expertise in their
particular fields. Candidates with experience relevant to the
Companys business would be preferred. The board of
directors, upon evaluation and review of the candidates, would
determine who to recommend to the stockholders for approval or
to fill any vacancy. The board of directors would use the same
criteria for evaluating nominees recommended by stockholders as
for those referred by management or any director. The Company
does not pay and does not anticipate paying any fees to third
parties for identifying or evaluating candidates for director.
Mr. Landolfo and Mr. Smith were each recommended to
the board of directors by current officers and directors of the
Company.
14
PERFORMANCE GRAPH
The following performance graph compares the 5-year cumulative
total return of the Companys common stock with that of the
Russell 2000 Index, a new peer group and the old peer group of
issuers. The issuers included in the old peer group are all
publicly traded companies included in Standard Industrial
Classification Code 6512 Operators of Nonresidential
Buildings, which consist of HRP, AmeriVest Properties,
Inc. and Maxus Realty Trust, Inc. The issuers in the new peer
group represent the ten public companies that, at
December 31, 2004, constituted the five companies having a
market capitalization closest to but less than the Company and
the five companies having a market capitalization closest to but
more than that of the Company. These ten companies were 24/7
Real Media, Inc., ACNB Corporation, Cavalry Bancorp, Inc.,
Chordiant Software, Inc., CNB Financial Corporation (Paris),
Durect Corporation, Hickory Tech Corporation, Immunicon
Corporation, Middleburg Financial Corporation and Virologic, Inc.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE HALLWOOD GROUP INCORPORATED, THE RUSSELL 2000
INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
12/99 | |
|
12/00 | |
|
12/01 | |
|
12/02 | |
|
12/03 | |
|
12/04 | |
| |
The Hallwood Group Incorporated
|
|
|
100.00 |
|
|
|
31.79 |
|
|
|
47.18 |
|
|
|
54.15 |
|
|
|
161.39 |
|
|
|
873.81 |
|
RUSSELL 2000 INDEX
|
|
|
100.00 |
|
|
|
96.98 |
|
|
|
99.39 |
|
|
|
79.03 |
|
|
|
116.38 |
|
|
|
137.71 |
|
NEW PEER GROUP
|
|
|
100.00 |
|
|
|
31.93 |
|
|
|
33.57 |
|
|
|
16.14 |
|
|
|
28.15 |
|
|
|
23.80 |
|
OLD PEER GROUP
|
|
|
100.00 |
|
|
|
117.71 |
|
|
|
180.12 |
|
|
|
197.84 |
|
|
|
245.25 |
|
|
|
247.42 |
|
|
|
* |
$100 invested on 12/31/99 in stock or index
including reinvestment of dividends. Fiscal year ending
December 31. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2004, Ms. Brookmans daughter, Amber
Brookman, Jr., and son-in-law, Steven Lerman, were
employees of Brookwood, and each received compensation exceeding
$60,000.
15
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
D&T served as the Companys independent registered
public accounting firm for the years ended December 31,
2004, 2003 and 2002 and has been selected to serve in that
capacity again for the year ending December 31, 2005. A
representative of D&T will be available at the annual
meeting to respond to appropriate questions and will be given an
opportunity to make a statement if desired.
AUDIT FEES
All services rendered by D&T are pre-approved by the audit
committee. D&T has or is expected to provide services to the
Company in the following categories and amounts:
|
|
|
|
|
|
|
|
|
|
|
Calendar Years Ended | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
Audit fees(1)
|
|
$ |
400,381 |
|
|
$ |
324,415 |
|
Audit-related fees(2)
|
|
$ |
38,629 |
|
|
$ |
12,478 |
|
Tax fees(3)
|
|
$ |
272,774 |
|
|
$ |
80,423 |
|
All other fees(4)
|
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
Audit fees These are fees for professional services
performed by D&T for the audit of the Companys annual
consolidated financial statements and review of interim
financial statements included in the Companys
Form 10-Q filings, and services that are normally provided
in connection with statutory regulatory filings or engagements. |
|
(2) |
Audit-related fees These are fees for assurance and
related services performed by D&T that are reasonably
related to the performance of the audit or review of the
Companys financial statements. This includes: employee
benefit and compensation plan audits; attestations by D&T
that are not required by statute and consulting on financial
accounting/reporting standards. |
|
(3) |
Tax fees These are fees for professional services
performed by D&T with respect to tax compliance, tax advice
and tax planning. This includes preparation of original and
amended tax returns for the Company and its consolidated
subsidiaries; refund claims; payment planning; tax audit
assistance; and tax work stemming from Audit-Related
items. |
|
(4) |
All other fees These are fees for other permissible
work performed by D&T that does not meet the above category
descriptions. |
Pre-Approval Policy
The audit committees pre-approval guidelines with respect
to pre-approval of audit and non-audit services are summarized
below.
The audit committee is required to pre-approve the audit and
non-audit services performed by the independent registered
public accounting firm in order to assure that the provision of
such services does not impair the registered public accounting
firms independence. Unless a type of service to be
provided by the independent registered public accounting firm
has received general pre-approval, it will require specific
pre-approval by the audit committee. Any proposed services
exceeding pre-approved cost levels requires specific
pre-approval by the audit committee.
The audit committee may delegate pre-approval authority to one
or more of its members. The member or members to whom such
authority is delegated must report any pre-approval decisions to
the audit committee at its next scheduled meeting. The audit
committee may delegate its responsibilities to pre-approve
services performed by the independent registered public
accounting firm to management.
16
The annual audit services engagement terms and fees are subject
to the specific pre-approval of the audit committee. The audit
committee approves, if necessary, any changes in terms,
conditions and fees resulting from changes in audit scope,
company structure or other matters. In addition to the annual
audit services engagement specifically approved by the audit
committee, the audit committee may grant general pre-approval
for other audit services, which are those services that only the
independent registered public accounting firm reasonably can
provide.
Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review
of the Companys financial statements and that are
traditionally performed by the independent registered public
accounting firm. The audit committee believes that the provision
of audit-related services does not impair the independence of
the registered public accounting firm.
The audit committee believes that the independent registered
public accounting firm can provide tax services to the Company,
such as tax compliance, tax planning and tax advice without
impairing the registered public accounting firms
independence. However, the audit committee will not permit the
retention of the independent registered public accounting firm
in connection with a transaction initially recommended by the
independent registered public accounting firm, the purpose of
which may be tax avoidance and the tax treatment of which may
not be supported in the Internal Revenue Code and related
regulations.
The audit committee may grant pre-approval to those permissible
non-audit services classified as all other services
that it believes are routine and recurring services, and would
not impair the independence of the registered public accounting
firm.
Pre-approval fee levels for all services to be provided by the
independent registered public accounting firm are established
periodically by the audit committee. Any proposed services
exceeding these levels requires specific pre-approval by the
audit committee.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal for action at the
2006 annual meeting and wishes to have the proposal considered
for inclusion in the Companys proxy materials in reliance
on Rule 14a-8 under the Securities Exchange Act, the
proposal must be submitted in writing to the Secretary of The
Hallwood Group Incorporated, at 3710 Rawlins,
Suite 1500, Dallas, Texas 75219 by December 23, 2005.
Such proposals must also meet the other requirements of the
rules of the SEC relating to stockholder proposals.
The Companys 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 ninety (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 10, 2006. 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 2006 annual meeting, and
the proposal fails to comply with the advance notice procedure
prescribed by the bylaws,
17
then the Companys 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
Companys officers and directors, and persons who own more
than 10% of a registered class of the Companys securities,
to file reports of ownership and changes of ownership with the
SEC and the American 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 Companys proxy holders will vote on those matters
according to their best judgment.
Please note, however, that if your shares of common stock are
voted against the nominee for director, the proxy holders will
not use their discretion to vote your shares in favor of any
adjournment or postponement of the annual meeting.
|
|
|
By order of the Board of Directors |
|
|
MELVIN J. MELLE |
|
Secretary |
April 26, 2005
18
ANNEX A
THE HALLWOOD GROUP INCORPORATED
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
General
The role of the Audit Committee is to assist the Board of
Directors (the Board) in fulfilling its oversight
responsibilities by:
|
|
|
|
|
Serving as an independent and objective party to monitor the
Corporations accounting and financial reporting processes,
internal control system and audits. |
|
|
|
Reviewing and appraising the audit efforts of the
Corporations independent registered public accounting firm. |
|
|
|
Providing an open avenue of communication among the independent
registered public accounting firm, financial and senior
management and the Board. |
The Corporation will provide appropriate funding, as determined
by the Audit Committee, for compensation to the independent
registered public accounting firm, for any advisors that the
Audit Committee chooses to engage, and for payment of ordinary
administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
Composition
The Audit Committee shall consist of three or more directors as
determined by the Board, each of whom shall be independent
directors. Independence shall be determined pursuant to the
standards set by the Securities and Exchange Commission (the
Commission) and the requirements of the American
Stock Exchange.
Directors who are affiliates of the Corporation, or officers or
employees of the Corporation or of its subsidiaries who have
been employed by the Corporation or subsidiaries within the past
three years, will not be considered independent. No member of
the Audit Committee may receive direct or indirect (as defined
by the Commission) compensation of any kind (including
consulting and advisory fees) from the Corporation, other than
for services rendered as a member of the Board and as a member
of committees of the Board.
In addition, Directors falling within any of the categories
listed below will not be considered independent:
|
|
|
|
|
A Director who is, or during the past three years was, employed
by the Corporation or by any parent or subsidiary of the
Corporation, other than prior employment as an interim Chairman
or CEO. |
|
|
|
A Director who accepts (or whose immediate family member
accepts) any payment from the Corporation (or any parent or
subsidiary of the Corporation) in excess of $60,000 during the
current or any of the past three previous fiscal years, other
than compensation specifically excluded under
Section 121(b) of the American Stock Exchange Company Guide. |
|
|
|
A Director who is, or has an immediate family member who is, a
partner in, or a controlling shareholder or executive officer
of, any organization to which or from which the Corporation made
or received payments that exceed 5% of the recipients
consolidated gross revenues, or $200,000 (whichever is more) in
any of the most recent three fiscal years. |
|
|
|
A Director who is or has an immediate family member of an
individual who is or has been employed by the Corporation (or
any parent or subsidiary of the Corporation) as an executive
officer during any of the past three years. |
A-1
|
|
|
|
|
A Director who is or was or has an immediate family member who
is or was an executive officer of another entity where at any
time during the most recent three fiscal years any of the
Corporations executive officers serve on the compensation
committee of that entity. |
|
|
|
A Director who is or was or has an immediate family member who
is or was a partner or employee of the Corporations
outside independent registered public accounting firm and worked
on the audit engagement during any of the past three years. |
All members of the Audit Committee must be able to read and
understand fundamental financial statements, including the
Corporations balance sheet, income statement, and cash
flow statement.
In addition, at least one member of the Audit Committee must be
financially sophisticated pursuant to American Stock
Exchange rules and be a financial expert, as such
term is defined by the Commission. Qualifications for such
financial expert would include, among other things, whether a
member has:
|
|
|
|
|
an understanding of generally accepted accounting principles and
financial statements; |
|
|
|
experience applying generally accepted accounting principles in
connection with accounting for estimates, accruals and reserves
that are generally comparable to those used in the
Corporations financial statements; |
|
|
|
experience preparing or auditing financial statements that
present accounting issues that are generally comparable to those
raised by the Corporations financial statements; |
|
|
|
experience with internal controls and procedures for financial
reporting; |
|
|
|
an understanding of audit committee functions; |
|
|
|
past employment experience in finance or accounting; and |
|
|
|
professional certification in accounting. |
The Board shall make all determinations as to whether a Director
is a financial expert, as defined by rules of the
Commission.
The members of the Audit Committee are to be elected by the
Board, which shall make all decisions with respect to whether an
Audit Committee member is independent and/or a
financial expert and shall serve until their
successors are duly elected and qualified. Unless the Chair is
elected by the full Board, the members of the Audit Committee
may designate a Chair by majority vote of the full Audit
Committee membership.
Meetings
The Audit Committee shall meet no less than once per quarter. As
part of its job to foster open communication, the Audit
Committee should meet regularly with management and the
independent registered public accounting firm in separate
executive sessions to discuss any matters that the Audit
Committee or either of these groups believe should be discussed
privately. In addition, the Audit Committee or its Chair should
meet with the independent registered public accounting firm and
management quarterly to review the Corporations financial
statements.
Relationship with Independent Registered Public Accounting
Firm
The Corporations independent registered public accounting
firm is to be ultimately accountable to, and will report
directly to, the Audit Committee, and the Audit Committee shall
have the authority and responsibility to select, evaluate,
determine the compensation of, and, where appropriate, replace
the independent registered public accounting firm. The Audit
Committee will be responsible for resolving any disputes between
the independent registered public accounting firm and the
Corporations management.
A-2
Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee
shall:
|
|
|
A. Documents/Reports Review |
1. Review this Charter at least annually and update it as
conditions dictate.
2. Review the Corporations annual financial
statements and any reports or other financial information
submitted to the Commission or the public, including any
certification, report, opinion or review rendered by the
independent registered public accounting firm.
3. Review with financial management and the independent
registered public accounting firm the Corporations filings
with the Commission prior to their filing or prior to the
release of earnings reports. The Chair of the Audit Committee
may represent the entire Audit Committee for purposes of this
review.
4. Review and discuss with the Chief Executive Officer and
Chief Financial Officer the certifications required by the
Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley).
5. Review and discuss with the independent registered
public accounting firm and management steps necessary for the
Corporation to review and assess its internal control over
financial reporting in order to file the internal control
report of management as required by Sarbanes-Oxley, at
such time as the requirement to file this report becomes
applicable to the Corporation.
6. Review the independent registered public accounting
firms attestation and report on managements internal
control report at such time as the law requiring an internal
control report becomes applicable to the Corporation.
|
|
|
B. Independent Registered Public
Accounting Firm |
1. Select the independent registered public accounting
firm, considering independence and effectiveness, and
pre-approve the fees and other compensation to be paid to the
independent registered public accounting firm.
2. On no less than an annual basis, obtain from the
independent registered public accounting firm, and review and
discuss with the independent registered public accounting firm,
a formal written statement delineating all relationships the
independent registered public accounting firm has with the
Corporation and actively engage in a dialogue with the
independent registered public accounting firm with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the independent registered
public accounting firm.
3. Recommend to the Board any appropriate action to ensure
the independence of the independent registered public accounting
firm.
4. Review the performance of the independent registered
public accounting firm and approve any proposed discharge of the
independent registered public accounting firm when circumstances
warrant.
5. Periodically consult with the independent registered
public accounting firm out of the presence of management about
internal controls and the fullness and accuracy of the
Corporations financial statements.
6. Review and pre-approve any and all audit and non-audit
related services provided to the Corporation by the independent
registered public accounting firm and their affiliates.
7. Obtain and review, at least annually, a report by the
independent registered public accounting firm describing:
(i) the independent registered public accounting
firms internal quality control procedures; (ii) any
material issues raised by the most recent internal quality
control review or peer review of the independent registered
public accounting firm, or by any investigation by governmental
or professional authorities within the last five years,
regarding any independent audit carried out by the independent
registered public accounting firm, and any steps taken to
address these issues; and (iii) all relationships between
the
A-3
independent registered public accounting firm and the
Corporation, addressing the matter set forth in Independence
Standards Board Standard No. 1.
8. Review with the independent registered public accounting
firm: (i) all critical accounting policies and practices;
(ii) all alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management, ramifications or the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent registered public accounting firm;
and (iii) other material written communications between the
independent registered public accounting firm and management,
including, but not limited to, the management letter and
schedule of unadjusted differences.
|
|
|
C. Financial Reporting
Processes |
1. In consultation with the independent registered public
accounting firm, review the integrity of the organizations
financial reporting processes, both internal and external.
2. Consider the independent registered public accounting
firms judgments about the quality and appropriateness of
the Corporations accounting principles as applied in its
financial reporting.
3. Consider and approve, if appropriate, major changes to
the Corporations auditing and accounting principles and
practices as suggested by the independent registered public
accounting firm or management.
4. Establish regular and separate reporting to the Audit
Committee by each of management and the independent registered
public accounting firm regarding any significant judgments made
in managements preparation of the financial statements and
the view of each as to appropriateness of such judgments.
5. Following completion of the annual audit, review
separately with each of management and the independent
registered public accounting firm any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
6. Review any significant disagreement among management and
the independent registered public accounting firm in connection
with the preparation of the financial statements.
7. Review with the independent registered public accounting
firm and management the extent to which changes or improvements
in financial or accounting practices, as approved by the Audit
Committee, have been implemented.
|
|
|
D. Ethical and Legal
Compliance |
1. Establish, review and update periodically a code of
ethics that applies to the Corporations principal
executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, and ensure that management has established a system
to enforce the code of ethics.
2. Review and, if the Audit Committee determines it is
appropriate, approve transactions proposed between the
Corporation and its affiliates.
3. Review, with the Corporations counsel, any legal
matter that could have a significant impact on the
Corporations financial statements.
4. If and when appropriate, appoint independent legal
counsel and other advisors to assist the Audit Committee in
carrying out its duties.
5. Establish procedures for the receipt, collection,
retention and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls
and auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters.
6. Establish hiring policies for employees or former
employees of the independent registered public accounting firm
which prohibits employment of any person as chief executive
officer, controller, chief financial officer or chief accounting
officer (or any person serving in an equivalent position) of the
Corporation who was employed by the independent registered
public accounting firm and participated in the
Corporations audit in any capacity for a period of one
year preceding the date the audit was initiated.
A-4
7. Perform any other activities consistent with this
Charter, the Corporations bylaws and governing law, as the
Audit Committee or the Board deems necessary or appropriate.
|
|
|
Adopted by Resolution of the Board of Directors |
|
March 9, 2005 |
A-5
PROXY
THE HALLWOOD GROUP INCORPORATED
3710 RAWLINS, SUITE 1500
DALLAS, TEXAS 75219
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Anthony J. Gumbiner and 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 18, 2005, at the Annual Meeting of
Stockholders to be held on May 11, 2005, 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
SIDE
|
|
CONTINUED AND TO BE SIGNED ON
REVERSE SIDE
|
|
SEE REVERSE
SIDE |
|
|
|
|
|
|
|
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
|
|
|
|
|
|
|
|
x |
|
Please mark
votes as in
this example.
|
|
|
Please mark boxes in blue or black ink.
1. |
Election of Director. |
|
|
Nominee: (01) Charles A. Crocco, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
|
2. |
|
|
In their
discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. |
|
|
o |
|
|
|
o |
|
|
|
o |
|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT o
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 should attach
evidence of his authority. When signing as attorney, executor,
administrator, agent, trustee or guardian, please give full title as such.
If a corporation, please sign full corporate name by President or other
authorized officer. If a partnership, please sign full partnership name
by authorized person.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
Date:
|
|
|
|
Signature:
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|