BY

OFFER TO PURCHASE FOR CASH

THE HALLWOOD GROUP INCORPORATED

UP TO 300,000 SHARES OF ITS COMMON STOCK
AT $27.50 PER SHARE

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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
DENVER TIME, ON MONDAY, JUNE 16, 1997, UNLESS THE OFFER IS EXTENDED.
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THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING
OF THE OFFER. HOWEVER, STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO
TENDER SHARES. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.

THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.

--------------------

The Hallwood Group Incorporated, a Delaware corporation (the "Company"),
invites its stockholders to tender shares of its common stock, par value $0.10
per share (the "Shares"), to the Company at $27.50 per Share (the "Purchase
Price") in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and the related Letter of Transmittal (which, as amended from
time to time, together constitute the "Offer").

The Company will pay the Purchase Price for all Shares validly tendered and
not withdrawn, upon the terms and subject to the conditions of the Offer
including the proration terms hereof. The Company reserves the right, in its
sole discretion, to purchase more than 300,000 Shares pursuant to the Offer.

The Shares are listed and traded on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "HWG." On April 30, 1997 the closing per Share sales
price as reported on the NYSE Composite Tape was $24.50. STOCKHOLDERS ARE URGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7.

--------------------

May 12, 1997

IMPORTANT

Any stockholders desiring to tender all or any portion of their Shares
should either (i) complete and sign the appropriate Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, mail or deliver it with any required signature guarantee and any
other required documents to The Hallwood Group Incorporated Investor Relations
(the "Depositary"), and either mail or deliver the stock certificates for such
Shares to the Depositary (with all such other documents) or follow the procedure
for book-entry delivery set forth in Section 3, or (ii) request a broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact that broker, dealer, commercial bank, trust company or other nominee if
such stockholder desires to tender such Shares. TO EFFECT A VALID TENDER OF
THEIR SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER OF TRANSMITTAL.

Questions and requests for assistance may be directed to The Hallwood Group
Incorporated Investor Relations (the "Information Agent") at the address and
telephone number set forth on the back cover of this Offer to Purchase.
Requests for additional copies of this Offer to Purchase or the Letter of
Transmittal may be directed to the Information Agent.

TABLE OF CONTENTS

SECTION PAGE
------- ----

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Number of Shares; Proration. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Tenders by Owners of Fewer than 100 Shares . . . . . . . . . . . . . . . . . . . 5
3. Procedure for Tendering Shares . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Withdrawal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Purchase of Shares and Payment of Purchase Price . . . . . . . . . . . . . . . . 8
6. Certain Conditions of the Offer. . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Price Range of Shares; Dividends . . . . . . . . . . . . . . . . . . . . . . . . 10
8. Background and Purpose of the Offer; Certain Effects of the Offer. . . . . . . . 10
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares . . . . . . . . . . . . . . . . . . . . . . . 12
10. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Certain Information about the Company. . . . . . . . . . . . . . . . . . . . . . 13
12. Effects of the Offer on the Market for Shares; Registration under the
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13. Certain Legal Matters; Regulatory Approvals. . . . . . . . . . . . . . . . . . . 15
14. Certain United States Federal Income Tax Consequences. . . . . . . . . . . . . . 15
15. Extension of the Offer; Termination; Amendments. . . . . . . . . . . . . . . . . 19
16. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SCHEDULE I CERTAIN TRANSACTIONS INVOLVING SHARES . . . . . . . . . . . . . . . . . . . 22

iii

SUMMARY

This general summary is provided for the convenience of the Company's
stockholders and is qualified in its entirety by reference to the full text and
more specific details of this Offer to Purchase.

Number of Shares to be Purchased.................. 300,000 Shares (or such lesser number Shares as are
validly tendered).
Purchase Price.................................... $27.50 per share.
How to Tender Shares.............................. See Section 3. Call the Information Agent or consult
your broker for assistance.
Dividends......................................... None anticipated.
Brokerage Commissions............................. None.
Stock Transfer Tax................................ None, if payment is made to the registered holder.
Expiration and Proration Dates.................... Monday, June 16, 1997 at 5:00 P.M., Denver time,
unless extended by the Company.
Payment Date...................................... As soon as practicable after the Expiration Date.
Position of the Company and its Directors......... Neither the Company nor its Board of Directors
makes any recommendation to any stockholder as to
whether to tender or refrain from tendering Shares.
Withdrawal Rights................................. Tendered Shares may be withdrawn at any time until
5:00 P.M., Denver time, on Monday, June 16, 1997,
unless the Offer is extended by the Company and,
unless previously purchased, after 5:00 P.M., Denver
time, on Wednesday, July 9, 1997. See Section 4.
Odd Lots.......................................... There will be no proration of Shares tendered by any
stockholder owning beneficially fewer than 100 Shares
in the aggregate as of May 1, 1997 who continues to
beneficially own fewer than 100 Shares on the
Expiration Date, and who tenders all such Shares
on or prior to the Expiration Date and who checks
the "Odd Lots" box in the Letter of Transmittal.
Further Developments Regarding the Offer.......... Call the Information Agent or consult your broker.

THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH
RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION, IF GIVEN OR MADE, AS
HAVING BEEN AUTHORIZED BY THE COMPANY.

To the Holders of Shares of Common Stock
of The Hallwood Group Incorporated:

INTRODUCTION

The Company will pay the Purchase Price for all Shares validly tendered on
or prior to the Expiration Date (as defined in Section 1) and not withdrawn upon
the terms and subject to the conditions of the Offer including the proration
terms described below. The Company reserves the right, in its sole discretion,
to purchase more than 300,000 Shares pursuant to the Offer.

THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.

If, before the Expiration Date, more than 300,000 Shares are validly
tendered and not withdrawn (or such greater number of Shares as the Company may
elect to purchase), the Company will, upon the terms and subject to the
conditions of the Offer, purchase Shares first from all Odd Lot Owners (as
defined in Section 2) who validly tender all their Shares and then on a pro rata
basis from all other stockholders who validly tender Shares (and do not withdraw
them on or prior to the Expiration Date). The Company will return at its own
expense all Shares not purchased pursuant to the Offer. The Purchase Price will
be paid net to the tendering stockholder in cash for all Shares purchased.
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees on the Company's purchase of Shares pursuant to the Offer.
HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN
AND RETURN TO THE DEPOSITARY (AS DEFINED BELOW) THE SUBSTITUTE FORM W-9
CERTIFICATION THAT IS PART OF THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO
REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
In addition, the Company will pay all fees and expenses of The Hallwood Group
Incorporated Investor Relations (referred to herein as the "Information Agent"
and/or the "Depositary") in connection with the Offer. See Section 16.

THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING
OF THE OFFER. HOWEVER, STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR
ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER
TO TENDER OR REFRAIN FROM TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT
NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER.

The Company is making the Offer to (i) realign the Company's capital
structure for the benefit of its stockholders and (ii) afford to those
stockholders who desire liquidity an opportunity to sell all or a portion of
their Shares without the usual transaction costs associated with open market
sales. Moreover, the Board of Directors believes that the Shares represent an
attractive investment opportunity. It also allows stockholders to sell a
portion of their Shares while retaining a continuing equity interest in the
Company if they so desire. After the Offer is completed, the Company expects to
have sufficient cash flow and access to sources of capital to fund its growth
initiatives, including expanding its business operations.

As of the close of business on March 21, 1997, there were 1,566,294 Shares
outstanding and 68,000 Shares issuable upon exercise of outstanding stock
options ("Options") under the Company's 1995 Stock Option Plan. The 300,000
Shares that the Company is offering to purchase represent approximately 19.2% of
the outstanding Shares (approximately 18.4% assuming the exercise of all
outstanding Options).

The Shares are listed and traded on the New York Stock Exchange, Inc.
("NYSE") under the symbol "HWG." On April 30, 1997, the closing per Share sales
price as reported on the NYSE Composite Tape was $24.50. THE COMPANY URGES
STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS ON THE MARKET PRICE OF THE SHARES.

Contemporaneously with this Offer, the Company is offering to purchase
certain of its 13.5% Subordinated Debenture due July 31, 2009, from the holders
thereof. The terms and conditions of such offer are described in the Company's
Offer to Purchase dated May 8, 1997, relating to such debentures.

THE OFFER

1. NUMBER OF SHARES; PRORATION

Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 300,000 Shares or such lesser number
of Shares as are validly tendered before the Expiration Date (and not withdrawn
in accordance with Section 4) at a net cash price (determined in the manner set
forth below) of $27.50 per Share. The term "Expiration Date" means 5:00 p.m.
Denver time, on Monday, June 16, 1997, unless and until the Company in its sole
discretion shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by the Company, shall expire. See
Section 15 for a description of the Company's right to extend the time during
which the Offer is open and to delay, terminate or amend the Offer. Subject to
Section 2, if the Offer is oversubscribed, Shares tendered on or before the
Expiration Date will be eligible for proration. The proration period also
expires on the Expiration Date.

The Company reserves the right, in its sole discretion, to purchase more
than 300,000 Shares pursuant to the Offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission (the
"Commission"), the Company may purchase pursuant to the Offer an additional
amount of Shares not to exceed 2% of the outstanding Shares without amending or
extending the Offer. If (i) the Company increases or decreases the price to be
paid for Shares, the Company increases the number of Shares being sought and
such increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or the Company decreases the number of Shares being sought and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given in the manner
specified in Section 15, the Offer will be extended until the expiration of such
period of ten business days. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 A.M. through 12:00 Midnight, New York City time.

THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.

The Company will pay the Purchase Price for all Shares validly tendered on
or before the Expiration Date and not withdrawn, upon the terms and subject to
the conditions of the Offer. All Shares not purchased pursuant to the Offer
will be returned to the tendering stockholders at the Company's expense as
promptly as practicable following the Expiration Date.

If the number of Shares validly tendered and not withdrawn on or prior to
the Expiration Date is less than or equal to 300,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer),
the Company will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price all Shares so tendered.

PRIORITY. Upon the terms and subject to the conditions of the Offer, in
the event that on or prior to the Expiration Date more than 300,000 Shares (or
such greater number of Shares as the Company may elect to purchase pursuant to
the Offer) are validly tendered and not withdrawn, the Company will purchase
such validly tendered Shares in the following order of priority:

(i) all Shares validly tendered and not withdrawn on or prior to the
Expiration Date by any Odd Lot Owner (as defined in Section 2) who:

(a) tenders all Shares beneficially owned by such Odd Lot Owner
(partial tenders will not qualify for this preference); and

(b) completes the box captioned "Odd Lots" in the Letter of
Transmittal; and

(ii) after purchase of all of the foregoing Shares, all other Shares
validly tendered and not withdrawn on or prior to the Expiration Date on a
pro rata basis.

PRORATION. In the event that proration of tendered Shares is required, the
Company will determine the final proration factor as promptly as practicable
after the Expiration Date. Proration for each stockholder tendering Shares
(other than Odd Lot Owners) shall be based on the ratio of the number of Shares
tendered by such stockholder to the total number of Shares tendered by all
stockholders (other than Odd Lot Owners). This ratio will be applied to
stockholders tendering Shares (other than Odd Lot Owners) to determine the
number of Shares that will be purchased from each such stockholder pursuant to
the Offer. Although the Company does not expect to be able to announce the
final results of such proration until approximately seven business days after
the Expiration Date, it will announce preliminary results of proration by press
release as promptly as practicable after the Expiration Date. Stockholders can
obtain such preliminary information from the Information Agent and may be able
to obtain such information from their brokers.

As described in Section 14, the number of Shares that the Company will
purchase from a stockholder may affect the United States federal income tax
consequences to the stockholder of such purchase and therefore may be relevant
to a stockholder's decision whether to tender Shares. The Letter of Transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which Shares tendered are to be purchased in the event of proration.

This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares as of May 1, 1997 (the "Record Date") and will be
furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the Company's stockholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.

2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES

The Company, upon the terms and subject to the conditions of the Offer,
will accept for purchase, without proration, all Shares validly tendered and not
withdrawn on or prior to the Expiration Date by or on behalf of stockholders who
beneficially owned as of the close of business on the Record Date and continue
to beneficially own as of the Expiration Date, an aggregate of fewer than 100
Shares ("Odd Lot Owners"). See Section 1. To avoid proration, however, an Odd
Lot Owner must validly tender all such Shares that such Odd Lot Owner
beneficially owns; partial tenders will not qualify for this preference. This
preference is not available to partial tenders or to owners of 100 or more
Shares in the aggregate, even if such owners have separate stock certificates
for fewer than 100 such Shares. Any Odd Lot Owner wishing to tender all such
Shares beneficially owned by such stockholder pursuant to this Offer must
complete the box captioned "Odd Lots" in the Letter of Transmittal. See Section
3. Stockholders owning an aggregate of less than 100 Shares whose Shares are
purchased pursuant to the Offer will avoid both the payment of brokerage
commissions and any applicable odd lot discounts payable on a sale of their
Shares in transactions on a stock exchange, including the NYSE.

The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any stockholder who, as a result of proration, would
then beneficially own an aggregate of fewer than 100 Shares. If the Company
exercises this right, it will increase the number of Shares that it is offering
to purchase in the Offer by the number of Shares purchased through the exercise
of such right.

3. PROCEDURE FOR TENDERING SHARES

PROPER TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer, the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature guarantees, and
any other documents required by the Letter of Transmittal, must be received
prior to 5:00 p.m. Denver time, on the Expiration Date by the Depositary at its
address set forth on the back cover of this Offer to Purchase.

In addition, Odd Lot Owners who tender all Shares must complete the section
entitled "Odd Lots" on the Letter of Transmittal, in order to qualify for the
preferential treatment available to Odd Lot Owners as set forth in Section 2.

SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is signed
by the registered holder of the Shares (which term, for purposes of this
Section, includes any participant in The Depository Trust Company or the
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities")
whose name appears on a security position listing as the holder of the Shares)
tendered therewith and payment and delivery are to be made directly to such
registered holder, or (ii) if Shares are tendered for the account of a firm or
other entity that is a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). In all other cases,
all signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 1 of the Letter of Transmittal. If a certificate
representing Shares is registered in the name of a person other than the signer
of a Letter of Transmittal, or if payment is to be made, or Shares not purchased
or tendered are to be issued, to a person other than the registered holder, the
Letter of Transmittal must be guaranteed, in either case signed exactly as the
name of the registered holder appears on the certificate. In all cases, payment
for Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of certificates for such Shares (or
a timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities as described
below), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.

THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.

BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the Shares by causing such facility to
transfer such Shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof), with any required signature
guarantees and other required documents must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date must be followed.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO ONE OF
THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.

BACKUP FEDERAL INCOME TAX WITHHOLDING. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Treasury, unless the stockholder or other payee provides
such person's taxpayer identification number (employer identification number or
social security number) to the Depositary and certifies under penalties of
perjury that such number is correct. Therefore, each tendering stockholder
should complete and sign the Substitute Form W-9 Certification included as part
of the Letter of Transmittal so as to provide the information and certification
necessary to avoid backup withholding, unless such stockholder otherwise
establishes to the satisfaction of the Depositary that the stockholder is not
subject to backup withholding. Certain stockholders (including, among others,
all corporations and certain foreign stockholders (in addition to foreign
corporations)) are not subject to these backup withholding and reporting
requirements. In order for a foreign stockholder to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that stockholder's exempt
status. Such statements can be obtained from the Depositary. See Instructions 8
and 9 of the Letter of Transmittal.

TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE TO STOCKHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH
STOCKHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING
MUST PROVIDE THE DEPOSITARY WITH THE STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION

NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE SUBSTITUTE
FORM W-9 CERTIFICATION INCLUDED WITH THE LETTER OF TRANSMITTAL.

For a discussion of certain United States federal income tax consequences
to tendering stockholders, see Section 14.

WITHHOLDING FOR FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold United States federal income taxes equal to 30% of the gross
payments payable to a foreign stockholder or his or her agent unless the
Depositary determines that a reduced rate of withholding is available pursuant
to a tax treaty or that an exemption from withholding is applicable. See
"Certain United States Federal Income Tax Consequences-Withholding for Non-U.S.
Holders," Section 14.

TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person
acting alone or in concert with others, directly or indirectly, to tender Shares
for such person's own account unless at the time of tender and at the Expiration
Date such person has a "net long position" equal to or greater than the amount
tendered in (a) the Shares and will deliver or cause to be delivered such Shares
for the purpose of tender to the Company within the period specified in the
Offer, or (b) other securities immediately convertible into, exercisable for or
exchangeable into Shares ("Equivalent Securities") and, upon the acceptance of
such tender, will acquire such Shares by conversion, exchange or exercise of
such Equivalent Securities to the extent required by the terms of the Offer and
will deliver or cause to be delivered such Shares so acquired for the purpose of
tender to the Company within the period specified in the Offer. Rule 14e-4 also
provides a similar restriction applicable to the tender or guarantee of a tender
on behalf of another person. A tender of Shares made pursuant to any method of
delivery set forth herein will constitute the tendering stockholder's
representation and warranty to the Company that (a) such stockholder has a "net
long position" in Shares or Equivalent Securities being tendered within the
meaning of Rule 14e-4, and (b) such tender of Shares complies with Rule 14e-4.
The Company's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Company upon the terms and subject to the conditions of the Offer.

DETERMINATIONS OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Company, in its sole discretion, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance of or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares or any particular stockholder. No tender of
Shares will be deemed to be properly made until all defects or irregularities
have been cured or waived. Neither of the Company nor the
Depositary/Information Agent or any other person is or will be obligated to give
notice of any defects or irregularities in tenders, and none of them will incur
any liability for failure to give any such notice.

CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE VALIDLY TENDERED.

4. WITHDRAWAL RIGHTS

Shares tendered pursuant to the Offer may be withdrawn at any time before
the Expiration Date and, unless accepted for payment by the Company as provided
in this Offer to Purchase, may also be withdrawn after 5:00 p.m. Denver time on
Wednesday, July 9, 1997.

For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in writing prior to acceptance. Such notice of withdrawal must
specify the

name of the person who tendered the Shares to be withdrawn, the number of
Shares tendered, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If the certificates have been delivered or otherwise identified to
the Depositary, then, prior to the release of such certificates, the
tendering stockholder must submit the request in writing and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution
(except in the case of Shares tendered by an Eligible Institution). If
Shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 3, the notice of withdrawal must specify the name and
the number of the account at the applicable Book-Entry Transfer Facility to
be credited with the withdrawn Shares and otherwise comply with the
procedures of such facility. All questions as to the form and validity,
including time of receipt of notices of withdrawal will be determined by the
Company, in its sole discretion, which determination shall be final and
binding on all parties. None of the Company, the Depositary, the Information
Agent or any other person is or will be obligated to give any notice of any
defects or irregularities in any notice of withdrawal, and none of them will
incur any liability for failure to give any such notice. Withdrawals may not
be rescinded, and any Shares properly withdrawn will thereafter be deemed not
tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered before the Expiration Date by again following any of the
procedures described in Section 3.

If the Company extends the Offer or is delayed in its purchase of Shares
then, without prejudice to the Company's rights under the Offer, the Depositary
may, subject to applicable law, retain on behalf of the Company all tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in this Section 4.

5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE

The Company will, upon the terms and subject to the conditions of the
Offer, accept for payment and pay for (and thereby purchase) Shares validly
tendered and not withdrawn as soon as practicable after the Expiration Date.
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and therefore purchased), subject to proration, Shares that are validly
tendered and not withdrawn when, as and if it gives oral or written notice to
the Depositary of its acceptance of such Shares for payment pursuant to the
Offer.

Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for all of the Shares
accepted for payment pursuant to the Offer as soon as practicable after the
Expiration Date. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made promptly (subject to possible delay
in the event of proration) but only after timely receipt by the Depositary of
certificates for Shares (or of a timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other required documents.

Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from the Company and transmitting payment to the tendering stockholders. In the
event of proration, the Company will determine the proration factor and pay for
those tendered Shares accepted for payment as soon as practicable after the
Expiration Date. However, the Company does not expect to be able to announce the
final results of any such proration until approximately seven business days
after the Expiration Date. Under no circumstances will the Company pay interest
on the Purchase Price including, without limitation, by reason of any delay in
making payment. Certificates for all Shares not purchased, including Shares not
purchased due to proration, will be returned (or, in the case of Shares tendered
by book-entry transfer, such Shares will be credited to the account maintained
with one of the Book-Entry Transfer Facilities by the participant who so
delivered such Shares) as promptly as practicable following the Expiration Date
or termination of the Offer without expense to the tendering stockholder. In
addition, if certain events occur, the Company may not be obligated to purchase
Shares pursuant to the Offer. See Section 6.

ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 CERTIFICATION INCLUDED WITH
THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE
PURSUANT TO THE OFFER. SEE SECTION 3. SEE SECTION 14 REGARDING FEDERAL INCOME
TAX CONSEQUENCES FOR FOREIGN STOCKHOLDERS.

6. CERTAIN CONDITIONS OF THE OFFER

Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
promulgated under the Exchange Act, if at any time on or after May 12, 1997 and
on or prior to the Expiration Date, any of the following events shall have
occurred (or shall have been determined by the Company to have occurred) that,
in the Company's judgment in any such case and regardless of the circumstances
giving rise thereto (including any action or omission to act by the Company),
makes it inadvisable to proceed with the Offer or with such acceptance for
payment or payment:

(a) there shall have been threatened, instituted or be pending before
any court, agency, authority or other tribunal any action, suit or
proceeding by any government or governmental, regulatory or administrative
agency or authority or by any other person, domestic or foreign, or any
judgment, order or injunction entered, enforced or deemed applicable by any
such court, authority, agency or tribunal, which (i) challenges or seeks to
make illegal, or to delay or otherwise directly or indirectly to restrain,
prohibit or otherwise affect the making of the Offer, the acquisition of
Shares pursuant to the Offer or is otherwise related in any manner to, or
otherwise affects, the Offer; or (ii) could, in the sole judgment of the
Company, materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company and its subsidiaries, taken
as a whole, or materially impair the Offer's contemplated benefits to the
Company; or

(b) there shall have been any action threatened or taken, or any
approval withheld, or any statute, rule or regulation invoked, proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Company or any of its subsidiaries, by any
government or governmental, regulatory or administrative authority or
agency or tribunal, domestic or foreign, which, in the sole judgment of the
Company, would or might directly or indirectly result in any of the
consequences referred to in clause (i) or (ii) of paragraph (a) above; or

(c) there shall have occurred (i) the declaration of any banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory); (ii) any general suspension of trading
in, or limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market; (iii) the
commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event which, in
the sole judgment of the Company might materially affect, the extension of
credit by banks or other lending institutions in the United States; (v) any
significant decrease in the market price of the Shares or in the market
prices of equity securities generally in the United States or any change in
the general political, market, economic or financial conditions in the
United States or abroad that could have in the sole judgment of the Company
a material adverse effect on the business, condition (financial or
otherwise), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or on the trading in the Shares; (vi) in
the case of any of the foregoing existing at the time of the announcement
of the Offer, a material acceleration or worsening thereof; or (vii) any
decline in either the Dow Xxxxx Industrial Average or the S&P 500 Composite
Index by an amount in excess of 10% measured from the close of business on
May 1, 1997; or

(d) any change shall occur or be threatened in the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, which in the sole judgment
of the Company is or may be material to the Company and its subsidiaries
taken as a whole; or

(e) it shall have been publicly disclosed or the Company shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding Shares whether
through the acquisition of stock, the formation of a group, the grant of
any option or right, or otherwise (other than as disclosed in a Schedule
13D

or 13G on file with the Commission on April 30, 1997 or (ii) any such
person or group that on or prior to April 30, 1997 had filed such a
Schedule with the Commission thereafter shall have acquired or shall
propose to acquire whether through the acquisition of stock, the formation
of a group, the grant of any option or right, or otherwise, beneficial
ownership of additional Shares representing 2% or more of the outstanding
Shares; or

(f) any person or group shall have filed a Notification and Report
Form under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
reflecting an intent to acquire the Company or any of its Shares.

The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time. In certain circumstances, if the Company waives any
of the foregoing conditions, it may be required to extend the Expiration Date of
the Offer. Any determination by the Company concerning the events described
above and any related judgment or decision by the Company regarding the
inadvisability of proceeding with the purchase of or payment for any Shares
tendered will be final and binding on all parties.

7. PRICE RANGE OF SHARES; DIVIDENDS

The Shares are listed and traded on the NYSE. The high and low closing
sales prices per Share on the NYSE Composite Tape as compiled from published
financial sources for the periods indicated are listed below:

HIGH LOW
-------- -------
1995:

1st Quarter. . . . . . . . . . . . . . . . . . . . . $14 $ 7

2nd Quarter. . . . . . . . . . . . . . . . . . . . . 13 11

3rd Quarter. . . . . . . . . . . . . . . . . . . . . 10 1/2 10

4th Quarter. . . . . . . . . . . . . . . . . . . . . 10 3/8 7 3/4

1996:

1st Quarter. . . . . . . . . . . . . . . . . . . . . 14 3/8 9 1/8

2nd Quarter. . . . . . . . . . . . . . . . . . . . . 14 5/8 13 1/4

3rd Quarter. . . . . . . . . . . . . . . . . . . . . 14 1/4 11 3/8

4th Quarter. . . . . . . . . . . . . . . . . . . . . 15 7/8 13 1/2

1997:

1st Quarter. . . . . . . . . . . . . . . . . . . . . 28 3/4 16 3/8

2nd Quarter (through April 30) . . . . . . . . . . . 27 3/8 24 3/8

The Company has not paid cash dividends since fiscal 1989 and, at present,
does not intend to pay cash dividends in the foreseeable future.

The closing per Share sales price as reported on the NYSE on April 30, 1997
was $24.50. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE
MARKET PRICE OF THE SHARES.

8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER

The following discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, the matters discussed
below as well as the factors described in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.

The Board of Directors believes that, given the Company's business, assets
and prospects, the purchase of the Shares pursuant to the Offer is an attractive
investment that will benefit the Company and its remaining stockholders. The
Offer provides stockholders who are considering a sale of all or a portion of
their Shares the opportunity, if any such Shares are purchased pursuant to the
Offer, to sell those Shares for cash to the Company without the usual costs
associated with a market sale. The Offer would also allow Odd Lot Owners whose
Shares are purchased pursuant to the Offer to avoid both the payment of
brokerage commissions and any applicable odd lot discounts payable on sales of
odd lots on a securities exchange. To the extent the purchase of Shares in the
Offer results in a reduction in the number of stockholders of record, the costs
to the Company for services to stockholders should be reduced. The Offer also
allows stockholders to sell a portion of their Shares while retaining a
continuing equity interest in the Company if they so desire. Stockholders who
determine not to accept the Offer will increase their proportionate interest in
the Company's equity, and therefore in the Company's future earnings and assets,
subject to the Company's right to issue additional Shares and other equity
securities in the future.

The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, make this an attractive time to repurchase a significant
portion of the outstanding Shares, taking into account the potential earnings
from the money required to fund the Offer in other investments. In the view of
the Board of Directors, the Offer represents an attractive investment and use of
the Company's cash that should benefit the Company and its stockholders over the
long term. In particular, the Board of Directors believes that the purchase of
Shares at this time is consistent with the Company's long term corporate goal of
seeking to increase stockholder value.

THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING
OF THE OFFER. HOWEVER, STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR
ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER
TO TENDER OR REFRAIN FROM TENDERING SHARES AND NEITHER THE COMPANY NOR ITS BOARD
OF DIRECTORS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. THE
COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.

As of April 30, 1997, except as follows, no person was known by the Company
to be the beneficial owner of more than 5% of the outstanding Shares: Alpha
Trust and Epsilon Trust (collectively, the "Trusts") have filed Schedules 13D
with the Company indicating that they own 29.2% and 19.5%, respectively, of the
outstanding Shares. Xx. Xxxxxxx X. Xxxxxxxx, Chairman and Chief Executive
Officer of the Company, has the power to designate and replace the trustees of
the Trusts. Xx. Xxxxxxxx and his family are among the discretionary
beneficiaries of Alpha Trust and Xx. Xxxxx X. Xxxxx, President and Chief
Operating Officer of the Company, and his family are among the discretionary
beneficiaries of Epsilon Trust. If the Company purchases 300,000 Shares
pursuant to the Offer, assuming no Shares of the Trusts are tendered in the
Offer, Shares beneficially owned by Alpha Trust and Epsilon Trust would
represent 36.2% and 24.1%, respectively, of the outstanding Shares (34.3% and
22.9%, respectively, assuming the exercise of all outstanding Options). The
Company may in the future purchase Shares in the open market, in private

transactions, through tender offers or otherwise. However, Rule 13e-4 under the
Exchange Act prohibits the Company from making any purchases of Shares until 10
business days after the Expiration Date, other than pursuant to the Offer. Any
Share purchases the Company may choose to make may be on the same terms as, or
on terms more or less favorable to stockholders than, the terms of the Offer.
Any possible future purchases by the Company will depend on numerous factors,
including the market price of the Shares, the results of the Offer, the
Company's business and financial condition and general economic and market
conditions.

Shares the Company acquires pursuant to the Offer will be retained as
treasury stock (unless and until the Company determines to retire such Shares)
and be available for issue without further stockholder action (except as
required by applicable law or, if retired, the rules of any securities exchange
on which Shares are listed) for purposes including, but not limited to, the
acquisition of other businesses, raising of additional capital for use in the
Company's businesses, and satisfaction of obligations under existing or future
employee benefit plans. The Company has no current plan for issuance of Shares
repurchased pursuant to the Offer. Except as disclosed in this Offer to
Purchase, the Company currently has no plans or proposals that relate to or
would result in (a) the acquisition by any person of additional securities of
the Company or the disposition of securities of the Company; (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any or all of its subsidiaries; (c) a sale
or transfer of a material amount of assets of the Company or any of its
subsidiaries; (d) any change in the present Board of Directors or management of
the Company; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company; (f) any other material change in
the Company's corporate structure or business; (g) any material change in the
Company's Certificate of Incorporation or By-Laws or any actions which may
impede the acquisition of control of the Company by any person; (h) a class of
equity security of the Company being delisted from a national securities
exchange; (i) a class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(j) the suspension of the Company's obligation to file reports pursuant to
Section 15(d) of the Exchange Act.

9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES

As of March 21, 1997, there were 1,566,294 Shares outstanding. As of March
21, 1997, there were 68,000 Shares issuable upon the exercise of all outstanding
Options (on May 7, 1997, the stockholders authorized an amendment to the
Company's 1995 stock option plan increasing the number of common shares issuable
under the Plan from 68,000 to 136,000). As of March 21, 1997, the Company's
directors and executive officers as a group (7 persons) beneficially owned
72,031 Shares (including 64,500 Shares issuable upon the exercise of Options
exercisable within 60 days of such date), which constituted approximately 4.4%
of the outstanding Shares (including Shares issuable if Options held by the
Company's directors and executive officers exercisable within 60 days of such
date were exercised) at such time. If the Company purchases 300,000 Shares
pursuant to the Offer (approximately 19.2% of the outstanding Shares as of March
21, 1997) and no director or executive officer tenders Shares pursuant to the
Offer (as is intended by the directors and executive officers), then after the
purchase of Shares pursuant to the Offer, the Company's directors and executive
officers as a group would beneficially own approximately 5.7% of the outstanding
Shares (including Shares issuable if Options held by the Company's directors and
executive officers exercisable within 60 days of such date were exercised). As
of March 21, 1997, no director or executive officer had beneficial ownership of
more than 1% of the outstanding Shares, except Messrs. Xxxxxxxx and Xxxxx, whose
beneficial ownership was approximately 1.8% and 1.2%, respectively, of the
outstanding Shares (including Shares issuable if Options held by the Company's
directors and executive officers exercisable within 60 days of such date were
exercised). If the Company purchases 300,000 Shares pursuant to the Offer,
assuming no Shares beneficially owned by Messrs. Xxxxxxxx or Xxxxx are tendered
in the Offer (as is intended by Messrs. Xxxxxxxx and Xxxxx), Shares beneficially
owned by Messrs. Xxxxxxxx and Xxxxx would represent approximately 2.2% and 1.5%,
respectively, of the outstanding Shares (including Shares issuable if Options
held by the Company's directors and executive officers exercisable within 60
days of such date were exercised).

Except as set forth in Section 8 hereof or in Schedule I hereto, based on
the Company's records and information provided to the Company by its directors,
executive officers, associates and subsidiaries, neither the Company nor any of
its associates or subsidiaries or persons controlling the Company nor, to the
best of the Company's knowledge, any of the directors or executive officers of
the Company or any of its subsidiaries, nor any associates or subsidiaries of
any of the foregoing, has effected any transactions in the Shares during the 40
business days prior to the date hereof.

Except as set forth in this Offer to Purchase, neither the Company or any
person controlling the Company nor, to the Company's knowledge, any of its
directors or executive officers, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to the Offer with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations).

10. SOURCE AND AMOUNT OF FUNDS

Assuming that the Company purchases 300,000 Shares pursuant to the Offer at
$27.50 per Share, the Company expects the maximum aggregate cost, including all
fees and expenses applicable to the Offer, to be approximately $8,500,000. The
Company intends to fund the Offer through its cash on hand, which exceeds such
amount.

11. CERTAIN INFORMATION ABOUT THE COMPANY

The Company was incorporated in the State of Delaware in 1981. Upon its
formation, the Company became engaged in the ownership, operation and management
of the real estate portfolios of its corporate predecessors and in the merchant
banking business, specializing in assisting troubled companies to implement
plans of financial restructuring. After 1981, the Company disposed of a
substantial portion of its initial real estate portfolio and significantly
expanded the range of its merchant banking activities. As a result of such
merchant banking activities, the Company has acquired substantial investment
positions in a number of previously unaffiliated enterprises and has thereby
become a diversified holding company engaged in three principal activities:
asset management, operating subsidiaries and investments in associated
companies. At December 31, 1996, the Company, its operating subsidiaries and
associated company were engaged in the commercial and industrial real estate,
energy, textile products, hotel and restaurant businesses. For financial
reporting purposes, the Company considers itself to operate in five business
segments: real estate, energy, textile products, hotels and restaurants. The
Company is no longer engaged in the merchant banking business, other than in
connection with the businesses in which its operating subsidiaries are engaged.
The Company is no longer engaged in the restaurant business, as the entire
investment was sold in March 1997 through a secondary public offering by its
associated Company, ShowBiz Pizza Time, Inc. Financial information for each
industry segment in which the Company operates is set forth in Note 18 to the
Company's consolidated financial statements for the year ended December 31, 1996
incorporated herein by reference.

HISTORICAL FINANCIAL INFORMATION. In October 1995, the Company changed its
year end from July 31 to December 31, effective December 31, 1995. The
following table sets forth summary certain historical consolidated financial
information of the Company and its subsidiaries. The historical financial
information for fiscal years 1995 and 1996 (other than the ratios of earnings to
fixed charges) has been derived from, and should be read in conjunction with,
the audited consolidated financial statements of the Company as reported in the
Company's Annual Reports on Form 10-K for the fiscal years ended December 31,
1996 and July 31, 1995 and the financial statements for the transitional period
from August 1, 1995 through December 31, 1995 reported on Transition Form 10-Q
and is hereby incorporated herein by reference. The summary historical
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, the audited and unaudited financial statements and
the related notes thereto from which it has been derived. Copies of reports may
be inspected or obtained from the Commission or the Company in the manner
specified in "-- Additional Information" below.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

Five Months
Year Ended Ended Years Ended July 31,
December 31, December 31, ------------------------
1996 1995 1995 1994
------------ ------------ -------- --------
(dollars in thousands, except ratios and per share amounts)

STATEMENT OF OPERATIONS DATA:
Revenue $115,401 $40,807 $113,226 $106,702

Net income (loss) 6,523 (3,265) (4,804) (4,390)

Net income (loss) per share 4.87 (2.45) (3.50) (3.20)

Weighted average shares outstanding 1,329 1,331 1,374 1,372

Ratio of earnings to fixed charges(1) 1.20:1 0.06:1 0.56:1 0.73:1

------------------
(1) The ratio of earnings to fixed charges was computed by dividing pre-tax
income before fixed charges by fixed charges. Earnings consist of pre-tax
income to which fixed charges have been added. Fixed charges consist of
interest and debt expense and one-third rent expense, which approximates
the interest factor.

YEAR ENDED DECEMBER 31,
------------------------
1996 1995
-------- -------
(dollars in thousands,
except per share amounts)

BALANCE SHEET DATA:

Total assets $116,796 $98,233

Subordinated debentures 50,564 48,324

Loans payable 37,342 24,794

Redeemable preferred stock 1,000 1,000

Common stockholders' equity (deficit) 5,784 (391)

Book value per common share $ 4.45 $ (0.30)

ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxx 0000, Xxxxxxxxxx,
X.X. 00000; at its regional offices located at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000-2511; and 7 World Trade Center, New York, New York
10048. Copies of such material may also be obtained by mail, upon payment of
the Commission's customary charges, from the Public Reference Section of the
Commission at Judiciary Plaza, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx X.X. 00000.
The Commission also maintains a Web site on the World Wide Web at
xxxx://xxx.xxx.xxx that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy statements and

other information concerning the Company also can be inspected at the offices
of the NYSE, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on which the Shares
are listed. In addition, the Company will furnish without charge to each
person to whom this Offer is delivered a copy of the Company's Form 10-K as
of December 31, 1996 upon request to Xxxx Xxxxx, Vice President - Investor
Relations, The Hallwood Group Incorporated, 0000 Xxxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000-4236.

12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT

The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of stockholders. Nonetheless, the Company believes that there will still
be a sufficient number of Shares outstanding and publicly traded following the
Offer to ensure a continued trading market in the Shares. Based on the
published guidelines of the NYSE, the Company believes that its purchase of
Shares pursuant to the Offer may cause its remaining Shares to be delisted from
such exchange. However, based on published guidelines of the American Stock
Exchange and NASDAQ, the Company believes that after its purchase of the Shares,
it will qualify for listing with either the American Stock Exchange or NASDAQ
and intends to apply for listing on one of them, if the Company is delisted from
the NYSE.

The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the purchase of Shares pursuant to the Offer, the Shares will continue
to be "margin securities" for purposes of the Federal Reserve Board's margin
regulations.

The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.

13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS

The Company is not aware of any license or regulatory permit material to
its business that might be adversely affected by its acquisition of Shares as
contemplated in the Offer or of any approval or other action by any government
or governmental, administrative or regulatory authority or agency, domestic or
foreign, that would be required for the Company's acquisition or ownership of
Shares as contemplated by the Offer. Should any such approval or other action be
required, the Company currently contemplates that it will seek such approval or
other action. The Company cannot predict whether it may determine that it is
required to delay the acceptance for payment of, or payment for, Shares tendered
pursuant to the Offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that the failure to
obtain any such approval or other action might not result in adverse
consequences to the Company's business. The Company's obligations under the
Offer to accept for payment and pay for Shares are subject to certain
conditions. See Section 6.

The consent of certain financial institutions under credit agreements with
the Company was required to permit the making of the Offer; such consents were
obtained prior to the date hereof.

14. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

GENERAL. The following discussion is a summary of certain anticipated
United States federal income tax consequences of an exchange of Shares for cash
pursuant to the Offer. This discussion is general in nature, and does not
discuss all aspects of federal income taxation that may be relevant to a
particular investor in light of the investor's particular circumstances, or to
certain types of investors subject to special treatment under federal income tax
laws (such as individual retirement accounts, insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers, foreign entities,
taxpayers that are neither citizens nor residents of the United States or
persons who hold Shares as a position in a "straddle" or as a part of a
"hedging" or "conversion" transaction for United States federal income tax
purposes). In particular, the discussion of the consequences of an exchange of
Shares for cash pursuant to the Offer

applies only to a United States Holder. For purposes of this summary, a
"United States Holder" is a holder of Shares that is (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States, any state or
any political subdivision thereof, or (c) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. This discussion does not address the tax consequences to foreign
stockholders who will be subject to United States federal income tax on a net
basis on the proceeds of their exchange of Shares for cash pursuant to the
Offer because such income is effectively connected with the conduct of a
trade or business within the United States. Such stockholders are generally
taxed in a manner similar to United States Holders; however, certain special
rules apply. The summary may not be applicable with respect to Shares
acquired as compensation (including Shares acquired upon the exercise of
options or which were or are subject to forfeiture restrictions). The
summary also does not address any state, local, foreign or other tax laws, or
any United States tax consequences other than United States federal income
tax (e.g., estate or gift tax) consequences, that may be applicable to
particular investors.

The summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed regulations thereunder, Internal Revenue Service
("IRS") rulings and pronouncements, reports of congressional committees,
judicial decisions and current administrative rulings and practice, all as in
effect on the date hereof, all of which are subject to change or differing
interpretations at any time, and any such change may be applied retroactively in
a manner that could adversely affect a Stockholder who exchanges his Shares for
cash pursuant to the Offer. For purposes of this discussion, Stockholders are
presumed to hold their Shares as "capital assets" within the meaning of Section
1221 of the Code.

No rulings from the IRS have been or will be requested with respect to any
of the tax issues discussed herein. Accordingly, there can be no assurance that
the IRS will not take a different position concerning the tax consequences
described herein and that any such position would not be sustained. ALL
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH STOCKHOLDERS OF THE EXCHANGE OF THEIR SHARES FOR CASH
PURSUANT TO THE OFFER, INCLUDING THE APPLICATION OF STATE, LOCAL, AND FOREIGN
TAX LAWS.

UNITED STATES HOLDERS WHO RECEIVE CASH PURSUANT TO THE OFFER. An exchange
of Shares for cash pursuant to the Offer by a United States Holder will be a
taxable transaction for United States federal income tax purposes, and will be
governed by the "redemption" rules of Section 302 of the Code.

Under Section 302 of the Code, a United States Holder whose Shares are
exchanged for cash pursuant to the Offer will be treated as having sold such
holder's Shares, and accordingly will recognize gain or loss if the exchange (a)
results in a "complete termination" of such holder's equity interest in the
Company, (b) is "substantially disproportionate" with respect to such holder or
(c) is "not essentially equivalent to a dividend" with respect to the holder,
each as discussed below. Under Section 318 of the Code, a United States Holder
will be treated as owning Shares actually or constructively owned by certain
related individuals and entities, as well as Shares which that holder or certain
related individuals and entities have an option or other right to acquire. Due
to the complexity of the constructive ownership rules of Section 318, United
States Holders should consult their tax advisors concerning the application of
the constructive ownership rules to their specific circumstances.

In addition, if a United States Holder sells Shares to persons other than
the Company at or about the time such holder also sells Shares to the Company
pursuant to the Offer, and the various sales effected by the holder are part of
an overall plan to reduce or terminate such holder's proportionate interest in
the Company, then the sales to persons other than the Company may, for United
States federal income tax purposes, be integrated with the holder's sale of
Shares pursuant to the Offer and, if integrated, should be taken into account in
determining whether the holder satisfies any of the three tests described below.

A United States Holder who exchanges Shares for cash pursuant to the Offer
will satisfy the "complete termination" test mentioned above if, immediately
after the exchange, such United States Holder does not actually or
constructively own any Shares. If a United States Xxxxxx would otherwise
satisfy the complete termination test but for his constructive ownership of
Shares held by family members, under certain circumstances the United States
Holder may be entitled to disregard such constructive ownership.

A United States Holder who exchanges Shares for cash pursuant to the Offer
will satisfy the "substantially disproportionate" test mentioned above, if
immediately after the exchange: (i) such holder actually and constructively
owns less than 50% of the total combined voting power of all classes of
outstanding stock of the Company entitled to vote; (ii) such holder's percentage
of the total outstanding voting stock of the Company immediately after the
exchange is less than 80% of his percentage of ownership of such stock
immediately before the exchange; and (iii) such holder's percentage of
outstanding common stock (voting or nonvoting) after the exchange is less than
80% of such holder's percentage of ownership before the exchange.

A United States Holder will satisfy the "not essentially equivalent to a
dividend" test if the reduction is such holder's proportionate interest in the
Company constitutes a "meaningful reduction" given such holder's particular
facts and circumstances. The IRS has indicated in a published ruling that even
a small reduction in the percentage interest of a small minority shareholder in
a publicly held corporation who exercises no control over corporate affairs
might constitute such a "meaningful reduction."

If the exchange of a United States Xxxxxx's Shares for cash pursuant to the
Offer is treated as a sale or exchange under Section 302, and such holder held
his Shares as a capital asset, such holder will recognize capital gain or loss
equal to the difference between the amount of cash received and such holder's
cost or other tax basis in the Shares exchanged. Any such capital gain or loss
will be long-term capital gain or loss if the holding period of the Shares
exceeds one year as of the Effective Date of the exchange.

If a United States Holder who exchanges Shares pursuant to the Offer is not
treated under Section 302 as having sold such holder's Shares for cash, the
entire amount of the cash received by such holder will be treated as a dividend
to the extent of the Company's current and accumulated earnings and profits,
which the Company anticipates will be sufficient to cover the amount of any such
dividend and will be includible in such holder's gross income as ordinary income
in its entirety, without reduction for the tax basis of the Shares exchanged.
No loss will be recognized. The United States Xxxxxx's tax basis in the Shares
exchanged generally will be added to such holder's tax basis in such holder's
remaining Shares. To the extent that cash received in exchange for Shares is
treated as a dividend to a corporate United States Holder, such holder will be
(i) eligible for a dividends-received deduction (subject to applicable
limitations) and (ii) subject to the "extraordinary dividend" provisions of the
Code. To the extent, if any, that the cash receive by a United States Holder
exceeds the Company's current and accumulated earnings and profits, it will be
treated first as a tax-free return of such holder's tax basis in the Shares and
thereafter as capital gain.

WITHHOLDING FOR NON-U.S. HOLDERS. In addition to the possible
application of back-up withholding (see FEDERAL INCOME TAX BACKUP WITHHOLDING
below), a Non-U.S. Holder that exchanges their Shares for cash pursuant to
the Offer may be subject to withholding tax at a rate of thirty percent (30%)
with respect to the gross proceeds from such exchange. For purposes of
determining whether the applicability of this withholding rule, a Non-U.S.
Holder is a holder that is not (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision
thereof or (iii) any estate or trust the income of which is subject to
United States federal income taxation regardless of the source of such income.

An exchange of Shares for cash pursuant to the Offer by a Non-U.S. Holder
will be a characterized as either a dividend or a sale or exchange for United
States federal income tax purposes by the "redemption" rules of Section 302 of
the Code, as described immediately above. See "--UNITED STATES HOLDERS WHO
RECEIVE CASH PURSUANT TO THE OFFER."

If the exchange is characterized as a dividend for United States federal
income tax purposes, a Non-U.S. Holder who receives a dividend will be subject
to United States withholding tax at a thirty percent (30%) rate (or a lower rate
prescribed by an applicable tax treaty) unless the dividends are effectively
connected with a trade or business carried on by the Non-U.S. Holder within the
United States (and are attributable to a United States permanent establishment
of such Holder, if an applicable income tax treaty so requires as a condition
for the Non-United States Holder to be subject to United States income taxes on
a net income basis in respect of such dividends). Dividends effectively
connected with such trade or business or attributable to such permanent
establishment will generally be subject to United States Federal income tax at
regular rates and, in the case of a Non-U.S. Holder which is a corporation, may
be subject to the branch profits tax. To determine the applicability of a tax
treaty providing for a lower rate of withholding,

dividends paid to an address in a foreign country are presumed under current
Treasury regulations to be paid to a resident of that country.

If the exchange is characterized as a sale or exchange for United States
Federal Income tax purposes, a Non-U.S. Holder who recognizes a gain on a sale
of their Shares pursuant to the Offer will generally not be subject to United
States Federal income taxes with respect to such gain or loss provided that (i)
such gain is not effectively connected with a trade or business of the Non-U.S.
Holder, (ii) subject to the exception discussed below, the Company is not or has
not been a "United States real property holding corporation" (a "USRPHC") within
the meaning of Section 897(c)(2) of the Code at any time within the shorter of
the five-year period preceding the Effective Date of such exchange or such
non-U.S. Holder's holding period; (iii) in the case of a Non-U.S. Holder that is
an individual, such Non-U.S. Holder was not present in the United States for 183
or more days in the taxable year of the sale of the Shares and does not have a
'tax home' (as defined in section 911(d)(3) of the Code) in the U.S. and (iv)
required certification of the non-U.S. status of the Non-U.S. Holder is provided
to the Depositary.

A gain that is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder will be
subject to the United States Federal income tax on net income on the same basis
that applies to United States persons generally (and, with respect to corporate
holders, under certain circumstances, the branch profits tax) but will not be
subject to withholding. Non-United States Holders should consult their own tax
advisors concerning any applicable treaties that may provide for different
rules.

Under the Foreign Investment in Real Property Tax Act (" FIRPTA" ), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax. A
"United States real property interest" generally includes any interest (other
than an interest solely as a creditor) in a United States corporation unless it
is established under specific procedures that the corporation is not (and was
not for the prior five-year period) a USRPHC. The Company does not believe that
it is a USRPHC as of the date hereof or for the five year period immediately
preceding the Effective Date of the exchange of Shares for cash pursuant to the
Offer. If it is not established that the Company is not a USRPHC, then, unless
an exemption applies, Shares exchanged for cash pursuant to the Offer would be
treated as United States real property interests. As discussed below, however,
an exemption should apply to the Shares exchanged except with respect to a
Non-U.S. Holder whose beneficial ownership of the Company's Common Stock exceeds
5% of the total fair market value of the Company's Common Stock.

An interest in a United States corporation generally will not be treated as
a United States real property interest if, at any time during the calendar year,
any class of stock of the corporation is "regularly traded" on an established
securities market (the "regularly-traded exemption"). The Company believes that,
the Company's Common Stock is regularly traded on an established securities
market within the meaning of the applicable regulations. The remainder of this
discussion assumes that the Company's Common Stock is and will remain regularly
traded on an established securities market.

The regularly-traded exemption is not available to a regularly traded
interest (such as the Company's Common Stock) if such interest is owned by a
person who beneficially owns (actually or constructively) more than 5% of the
total fair market value of that class of interests at any time during the
five-year period ending on the date of disposition of such interest or other
applicable determination date. Accordingly, except with respect to a sale or
other disposition of the Company's Common Stock by a Non-United States Holder
whose aggregate beneficial ownership has exceeded that 5% threshold, no
withholding or income taxation under the FIRPTA rules should be required with
respect to an exchange of Shares for cash pursuant to the Offer by a Non-U.S.
Holder.

Any Non-U.S. Holder that may approach or exceed 5% ownership, either alone
or in conjunction with related persons, should consult their own tax advisor
concerning the United States tax consequences that may result.

In order for the Depositary to determine a stockholder's status as a
Non-U.S. Holder and eligibility for a reduced rate of, or an exemption from,
withholding, a Non-U.S. Holder must deliver to the Depositary before the
payment of the sales proceeds a properly completed and executed IRS Form
1001. In order to obtain an exemption from

withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a Non-U.S. Holder must deliver to the Depositary a properly
completed and executed IRS Form 4224. The Depositary will determine a
stockholder's status as a Non-U.S. Holder and eligibility for a reduced rate
of, or exemption from, withholding by reference to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless
facts and circumstances indicate that such reliance is not warranted. A
Non-U.S. Holder may be eligible to obtain a refund of all or a portion of any
tax withheld if such Non-U.S. Holder meets the "complete redemption",
"substantially disproportionate" or "not essentially equivalent to a
dividend" test described in UNITED STATES HOLDERS WHO RECEIVE CASH PURSUANT
TO THE OFFER above, or is otherwise able to establish that no tax or a
reduced amount of tax is due. Back-up withholding generally will not apply to
amounts subject to the 30% or a treaty-reduced rate of withholding. Non-U.S.
Holders are urged to consult their own tax advisors regarding the application
of United States federal income tax withholding, including the eligibility
for a withholding tax reduction or exemption, and the refund procedure. See
Instructions 8 and 9 of the Letter of Transmittal.

FEDERAL INCOME TAX BACKUP WITHHOLDING. A United States Holder that sells
their Shares for cash pursuant to the Offer may be subject to backup withholding
at the rate of 31% with respect to the gross proceeds from such sale, if such
holder (i) fails to furnish a social security or other taxpayer identification
number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that such Stockholder failed to report dividends or
(iv) under certain circumstances, fails to provide a certified statement, signed
under penalty of perjury, that the TIN provided is the correct number and that
the Stockholder is not subject to backup withholding. Corporations and certain
other exempt categories may be exempt from backup withholding if they
demonstrate that fact to the Depositary. Accordingly, each tendering
stockholder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal so as to provide the information and certification
necessary to avoid backup withholding, unless such Stockholder otherwise
establishes to the satisfaction of the Depositary that the stockholder is not
subject to backup withholding.

Exempt foreign persons must submit a Form W-8 or a Substitute Form
W-8, signed under penalty of perjury, attesting to that stockholder's exempt
status in order to avoid backup withholding. Generally, for purposes of
filing a Form W-8 or a Substitute Form W-8, an exempt foreign person is (i)
an individual that is neither a U.S. citizen nor a U.S. resident and has not
been physically present in the United States for a period of 183 days during
the tax year in which the Bonds are sold; (2) a foreign corporation, (3) a
foreign partnership; or (4) a foreign estate or foreign trust. Form W-8 or
Substitute Form W-8 can be obtained from the Depositary. See Instructions 8
and 9 of the Letter of Transmittal.

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.

15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS

The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. The Company also expressly reserves the right, in its
sole discretion, to terminate the Offer and not accept for payment or pay for
any Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of the
conditions specified in Section 6 hereof by giving oral or written notice of
such termination or postponement to the Depositary and making a public
announcement thereof. Additionally, in certain circumstances, if the Company
waives any of the conditions of the Offer set forth in Section 6, it may be
required to extend the Expiration Date of the Offer. The Company's reservation
of the right to delay payment for Shares that it has accepted for payment is
limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires
that the Company must pay the consideration offered or return the Shares
tendered promptly after termination or withdrawal of a tender offer. Subject to
compliance with applicable

law, the Company further reserves the right, in its sole discretion, and
regardless of whether any of the events set forth in Section 6 shall have
occurred or shall be deemed by the Company to have occurred, to amend the
Offer in any respect (including, without limitation, by decreasing or
increasing the consideration offered in the Offer to holders of Shares or by
decreasing or increasing the number of Shares being sought in the Offer).
Amendments to the Offer may be made at any time and from time to time
effected by public announcement thereof, such announcement, in the case of an
extension, to be issued no later than 9:00 A.M., Denver time, on the next
business day after the last previously scheduled or announced Expiration
Date. Any public announcement made pursuant to the Offer will be disseminated
promptly to stockholders in a manner reasonably designated to inform
stockholders of such change. Without limiting the manner in which the
Company may choose to make any public announcement, except as provided by
applicable law (including Rule 13e-4(e)(2) promulgated under the Exchange
Act), the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to
the Dow Xxxxx News Service.

If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require
that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price or a change in percentage of securities sought)
will depend upon the facts and circumstances, including the relative materiality
of such terms or information. If (i) the Company increases or decreases the
price to be paid for Shares, the Company increases the number of Shares being
sought and such increase in the number of Shares being sought exceeds 2% of the
outstanding Shares, or the Company decreases the number of Shares being sought,
and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that notice of such increase or decrease is first published, sent or given,
the Offer will be extended until the expiration of such period of ten business
days.

16. FEES AND EXPENSES

The Company has used The Hallwood Group Incorporated Investor Relations as
Information Agent and Depositary in connection with the Offer. The Information
Agent/Depositary will receive reasonable and customary compensation for its
services. The Company will also reimburse the Information Agent/Depositary for
out-of-pocket expenses, including reasonable attorneys' fees, and has agreed to
indemnify the Information Agent/Depositary against certain liabilities in
connection with the Offer, including certain liabilities under the federal
securities laws. The Information Agent may contact stockholders by mail,
telephone, telex, telegraph and personal interviews, and may request brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners. The Information Agent/Depositary has not been
retained or directed to make solicitations or recommendations in connection with
the Offer.

The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting any Shares
pursuant to the Offer. The Company will, however, on request, reimburse such
persons for customary handling and mailing expenses incurred in forwarding
materials in respect of the Offer to the beneficial owners for which they act as
nominees. No such broker, dealer, commercial bank or trust company has been
authorized to act as the Company's agent for purposes of the Offer. The Company
will not reimburse any stockholder for any fees charged by brokers, dealers,
commercial banks or any other financial institution.

17. MISCELLANEOUS

The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. In any jurisdiction
the securities or blue sky laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on the Company's behalf by
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.

Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has
filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4
(the "Schedule 13E-4") which contains additional information with respect to the
Offer. The Schedule 13E-4, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 11 with respect to information concerning the
Company.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.

THE HALLWOOD GROUP INCORPORATED

May 12, 1997 By: Xxxxxx X. Xxxxx
Vice President and Secretary

SCHEDULE I

CERTAIN TRANSACTIONS INVOLVING SHARES

Except as set forth below, based upon the Company's records and upon
information provided to the Company by its directors, executive officers,
associates and subsidiaries, neither the Company nor any of its associates or
subsidiaries or persons controlling the Company (of which the Company believes
there are none) nor, to the best of the Company's knowledge, any of the
directors or executive officers of the Company or any of its subsidiaries, nor
any associates or subsidiary of any of the foregoing, has effected any
transactions in the Shares during the 40 business days prior to May 12, 1997.

1. On January 3, 1997, the Board of Directors of the Company authorized
the issuance of additional shares of the Company's common stock to the
Alpha and Epsilon Trusts in exchange for the contribution to the
Company by those trusts of shares of ShowBiz. The Board authorized
the issuance of a total of 267,709 shares of common stock of the
Company in exchange for the contribution by the trusts of 219,194
shares of common stock of ShowBiz, of which 87,678 shares were
contributed by the Alpha Trust in exchange for 160,625 shares of the
Company. For purposes of the exchange, the shares of both companies
were valued at their average closing price for the month of December
1996. Upon receipt of regulatory approval, the exchange was completed
on March 13, 1997. Xx. Xxxxxxx X. Xxxxxxxx has the power to designate
and replace the trustees of Alpha Trust. Xx. Xxxxxxxx and his family
are among the discretionary beneficiaries of this Trust.

2. On January 3, 1997, the Board of Directors of the Company authorized
the issuance of additional shares of the Company's common stock to the
Alpha and Epsilon Trusts in exchange for the contribution to the
Company by those trusts of shares of ShowBiz. The Board authorized
the issuance of a total of 267,709 shares of common stock of the
Company in exchange for the contribution by the trusts of 219,194
shares of common stock of ShowBiz, of which 131,516 shares were
contributed by the Epsilon Trust in exchange for 107,084 shares of the
Company. For purposes of the exchange, the shares of both companies
were valued at their average closing price for the month of December
1996. Upon receipt of regulatory approval, the exchange was completed
on March 13, 1997. Xx. Xxxxxxxx has the power to designate and replace
the trustees of Epsilon Trust. Xx. Xxxxx X. Xxxxx, and his family are
among the discretionary beneficiaries of this Trust.

Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for the Shares and any
other required documents should be sent or delivered by each stockholder or such
stockholder's broker, dealer, commercial bank, trust company or other nominee
and any questions or requests for assistance or for additional copies of this
Offer to Purchase or the Letter of Transmittal may be directed to the
Depositary/Information Agent at its address set forth below. Stockholders may
also contact their broker, dealer, commercial bank or trust company for
assistance concerning the Offer.

THE DEPOSITARY/INFORMATION AGENT FOR THE OFFER IS:

THE HALLWOOD GROUP INCORPORATED INVESTOR RELATIONS

Delivery Address:

BY MAIL: BY HAND OR
BY OVERNIGHT COURIER

P.O. Box 378111 Suite 1700
Denver, Colorado 80237 0000 Xxxxx Xxxxxx Xxxxxx Xxxxxxx
Xxxxxx, Xxxxxxxx 00000

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