As filed with the Securities and Exchange Commission on April 30, 2002

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10

Amendment No. 2

GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

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Westwood Holdings Group, Inc.
(Exact name of registrant as specified in its charter)

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Delaware                 75-2969997
(State or other          (I.R.S. Employer
jurisdiction of         Identification No.)
incorporation or
organization)

300 Crescent Court, Suite 1300
Dallas, Texas 75201
(214) 756-6900
(Address, including zip code, and telephone number, including area code, of
principal executive offices)

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Securities to be registered pursuant to Section 12(b) of the Act:

Name of exchange on which each
Title of each class to be so registered   class is to be registered
---------------------------------------   -------------------------
Common Stock, $0.01 par value         New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act:    None

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Copies of Communications Sent To:

David G. McLane              John B. McKnight
Gardere Wynne Sewell LLP      Locke Liddell & Sapp LLP
1601 Elm Street, Suite 3000  2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-4761         Dallas, Texas 75201
Telephone: (214) 999-3000     Telephone: (214) 740-8000

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EXPLANATORY NOTE: THIS REGISTRATION STATEMENT HAS BEEN PREPARED ON A
PROSPECTIVE BASIS ON THE ASSUMPTION THAT, AMONG OTHER THINGS, THE SPIN-OFF (AS
DESCRIBED IN THE INFORMATION STATEMENT WHICH IS A PART OF THIS REGISTRATION
STATEMENT) AND THE RELATED TRANSACTIONS CONTEMPLATED TO OCCUR PRIOR TO OR
CONTEMPORANEOUSLY WITH THE SPIN-OFF WILL BE CONSUMMATED AS CONTEMPLATED BY THE
INFORMATION STATEMENT. THERE CAN BE NO ASSURANCE, HOWEVER, THAT ANY OR ALL OF
SUCH TRANSACTIONS WILL OCCUR OR WILL OCCUR AS SO CONTEMPLATED. ANY SIGNIFICANT
MODIFICATIONS OR VARIATIONS IN THE TRANSACTIONS CONTEMPLATED WILL BE REFLECTED
IN AN AMENDMENT OR SUPPLEMENT TO THIS REGISTRATION STATEMENT.

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WESTWOOD HOLDINGS GROUP, INC.

I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10 BY
REFERENCE

CROSS-REFERENCE SHEET BETWEEN
INFORMATION STATEMENT AND ITEMS OF FORM 10

Item No. Item Caption                                  Location in Information Statement
-------- ------------                                  ---------------------------------

Item 1.  Business                          "Summary," (pg. 1) "Risk Factors," (pg. 6) "Relationship
Between SWS and Westwood After the Spin-off,"
(pg. 23) "Management's Discussion and Analysis of
Financial Condition and Results of Operations," (pg. 31)
"Business" (pg. 37)
Item 2.  Financial Information             "Selected Consolidated Financial Data," (pg. 29)
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" (pg. 31)
Item 3.  Properties                        "Business - Properties" (pg. 43)
Item 4.  Security Ownership of Certain     "Principal Stockholders" (pg. 52)
Beneficial Owners and
Management
Item 5.  Directors and Executive Officers  "Management" (pg. 44)
Item 6.  Executive Compensation            "Management" (pg. 44)
Item 7.  Certain Relationships and Related "Relationship Between SWS and Westwood After the Spin-
Transactions                      off," (pg. 23) "Certain Relationships and Related
Transactions" (pg. 54)
Item 8.  Legal Proceedings                 "Business - Legal Proceedings" (pg. 43)
Item 9.  Market Price and Dividends on the "Summary," (pg. 1) "Risk Factors," (pg. 6) "The Spin-off,"
Registrant's Common Equity        (pg. 14) "Dividend Policy," (pg. 28) "Description of
and Related Stockholder           Capital Stock" (pg. 55)
Matters
Item 11. Description of Registrant's       "Description of Capital Stock" (pg. 55)
Securities to be Registered
Item 12. Indemnification of Directors and  "Description of Capital Stock - Liability and
Officers                          Indemnification of Directors and Officers" (pg. 57)
Item 13. Financial Statements and          "Selected Consolidated Financial Data," (pg. 29)
Supplementary Data                "Consolidated Financial Statements" (pg. F-1)
Item 15. Financial Statements and Exhibits "Index to Consolidated Financial Statements" (pg. F-1)

II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT

Item 10.  Recent Sales of Unregistered Securities

On December 14, 2001, in connection with the incorporation of Westwood
Holdings Group, Inc. ("Westwood"), Westwood issued 5,372,310 shares of its
common stock to SWS Group, Inc. in return for the contribution of all of the
issued and outstanding capital stock of Westwood Management Corporation and
Westwood Trust to Westwood. The exemption from registration was pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated under the Securities Act on the basis that the
transaction did not involve a public offering.

Item 14.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

Item 15.  Financial Statements and Exhibits

(b) Exhibits:

Exhibit
Number                                           Description
------                                           -----------

2.1  Form of Distribution Agreement between SWS Group, Inc. and Westwood Holdings Group, Inc.**

3.1  Amended and Restated Certificate of Incorporation of Westwood Holdings Group, Inc.*

3.2  Amended and Restated Bylaws of Westwood Holdings Group, Inc.*

4.1  Form of Common Stock Certificate of Westwood Holdings Group, Inc.*

8.1  Tax Opinion from Gardere Wynne Sewell LLP*

10.1  Westwood Holdings Group, Inc. Stock Incentive Plan*

10.2  Westwood Holdings Group, Inc. Deferred Compensation Plan**

10.3  Form of Tax Separation Agreement between SWS Group, Inc. and Westwood Holdings Group,
Inc.**

10.4  Form of Transition Services Agreement between SWS Group, Inc., Westwood Management
Corporation and Westwood Trust**

10.5  Promissory Note and Pledge Agreement between Susan Byrne and Westwood Holdings Group,
Inc.**

10.6  Promissory Note and Pledge Agreement between Brian Casey and Westwood Holdings Group,
Inc.**

10.7  Promissory Note and Pledge Agreement between Patricia Fraze and Westwood Holdings
Group, Inc.**

10.8  Promissory Note and Pledge Agreement between Lynda Calkin and Westwood Holdings
Group, Inc.**

10.9  Promissory Note and Pledge Agreement between Joyce Schaer and Westwood Holdings
Group, Inc.**

10.10  Office Lease between Westwood Management Corporation and Crescent Real Estate Funding I, L.P.,
dated as of April 4, 1990, and amendment thereto**

10.11  Software License Agreement between Infovisa and Westwood Trust, dated as of December 1,
2001**

10.12  Software License and Support Agreement between Advent Software, Inc. and Westwood
Management Corporation, dated as of December 30, 1996**

21.1  Subsidiaries**

23.1  Consent of Gardere Wynne Sewell LLP (included in Exhibit 8.1)*

99.1  Information Statement of SWS Group, Inc.*

--------

*  Filed herewith.

** Previously filed.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.

WESTWOOD HOLDINGS GROUP, INC.

By:      /s/  SUSAN M. BYRNE
-----------------------------
Susan M. Byrne, Chief
Executive Officer

Dated April 29, 2002

Exhibit 3.1

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WESTWOOD HOLDINGS GROUP, INC.

This Amended and Restated Certificate of Incorporation amends and
restates in its entirety the Certificate of Incorporation of Westwood Holdings
Group, Inc., which was originally incorporated in Delaware on December 12, 2001.
This Amended and Restated Certificate of Incorporation has been duly adopted
pursuant to Section 245 of the Delaware General Corporation Law.

Section 1. The name of the Corporation is Westwood Holdings Group, Inc.

Section 2. The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Corporation Trust Center, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.

Section 3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

Section 4. The Corporation shall have the authority to issue 10,000,000 shares
of Common Stock with a par value of $0.01 per share. The Board of Directors of
the Corporation has the authority, without further action by the stockholders,
to issue 1,000,000 shares of Preferred Stock, par value $0.01 per share, in one
or more series and to fix the rights, preferences, privileges and restrictions
thereof, including without limitation dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such series,
without any further vote or action by the stockholders.

At every annual or special meeting of stockholders of the Corporation,
every holder of Common Stock shall be entitled to one vote, in person or by
proxy, for each share of Common Stock standing in such holder's name on the
books of the Corporation, subject to the rights of the holders of Preferred
Stock. Subject to the rights of the holders of the Preferred Stock, the Common
Stock shall be entitled to dividends out of funds legally available therefore,
when, as and if declared and paid to the holders of Common Stock, and upon
liquidation, dissolution or winding up of the Corporation, to share ratably in
the assets of the Corporation. The Common Stock shall not be redeemable.

Section 5. The number of directors of the Corporation shall be fixed in the
manner provided in the Bylaws of the Corporation.

Section 6. Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation,

disqualification or removal may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders
and until such director's successor shall have been duly elected and qualified.

Section 7. In furtherance and not in limitation of the powers conferred by
statute, the Bylaws of the Corporation may be altered, amended, or repealed or
new Bylaws may be adopted by the Board of Directors at any regular or special
meeting of the Board, subject to the stockholders' right to adopt, amend or
repeal these Bylaws or adopt new Bylaws. Notwithstanding the foregoing and
anything contained in the Bylaws to the contrary, the Bylaws shall not be
amended or repealed by the stockholders, and no provision inconsistent therewith
shall be adopted by the stockholders, without the affirmative vote of the
holders of at least two-thirds (2/3) of the voting power of all shares of the
Corporation entitled to vote generally in the election of directors voting
together as a single class.

Section 8. Any director or the entire Board of Directors may be removed only for
cause and only by the vote of the holders of two-thirds (2/3) of the securities
of the Corporation then entitled to vote at an election of directors voting
together as a single class.

Section 9. Cumulative voting in the election of directors or otherwise is hereby
expressly prohibited. No stockholder shall have, as a stockholder of the
Corporation, any preemptive right to acquire, purchase or subscribe for the
purchase of any or all additional issues of stock of the Corporation or any or
all classes or series thereof, or for any securities convertible into such
stock, whether now or hereafter authorized. Nothing in this Article will
prohibit the Corporation from granting by contract preemptive rights or other
rights to purchase stock of the Corporation.

Section 10. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.

Section 11. A director or former director of the Corporation shall not, to the
fullest extent permitted by the Delaware General Corporation Law as the same
exists or may hereafter be amended, be liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty to the
Corporation or its stockholders.

Section 12. To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, the Corporation shall
indemnify any and all of its directors, officers, employees or agents of the
Corporation or former directors and officers, or any person who is or was
serving at the Corporation's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, limited liability company or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's

status as such, whether or not the Corporation would have the power to indemnify
such person against such liability.

No amendment nor repeal of this Article, nor the adoption of any
provision of this Corporation's Certificate of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article, in respect
of any matter occurring, or any action or proceeding accruing or arising or
that, but for this Article, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.

Section 13. Any action required or permitted to be taken at any annual or
special meeting of stockholders may only be taken upon the vote of the
stockholders at an annual or special meeting duly called and may not be taken by
written consent of the stockholders. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called at any time only by the
Chairman of the Board or the Chief Executive Officer of the Corporation or a
majority of the Board of Directors.

Section 14. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation. In addition to any affirmative
vote required by applicable law or any other provision of this Certificate of
Incorporation or specified in any agreement, the affirmative vote of the holders
of not less than two-thirds (2/3) of the voting power of all securities of the
Corporation entitled to vote generally in the election of directors shall be
required to amend, add, alter, change, repeal or adopt any provisions
inconsistent with Sections 6, 8, 9, 13 or this Section 14 of this Certificate of
Incorporation.

The undersigned, being an authorized officer of the Corporation, does
make this certificate, hereby declaring and certifying that this is his act and
deed and the facts herein stated are true, and accordingly has hereunto set his
hand this   day of May, 2002.

By: /s/ Brian Casey
--------------------------------------
Brian Casey, President

Exhibit 3.2

BYLAWS
Of

WESTWOOD HOLDINGS GROUP, INC.

(A DELAWARE CORPORATION)

TABLE OF CONTENTS

ARTICLE I   OFFICES .......................................................... 1
Section 1.  Registered Office ................................................ 1
Section 2.  Other Offices .................................................... 1

ARTICLE II  MEETINGS OF STOCKHOLDERS ......................................... 1
Section 1.  Time and Place of Meetings ....................................... 1
Section 2.  Annual Meetings .................................................. 1
Section 3.  Notice of Annual Meetings ........................................ 1
Section 4.  Special Meetings ................................................. 1
Section 5.  Notice of Special Meetings ....................................... 1
Section 6.  Quorum ........................................................... 2
Section 7.  Organization ..................................................... 2
Section 8.  Voting ........................................................... 2
Section 9.  List of Stockholders ............................................. 3
Section 10. Inspectors of Votes .............................................. 3
Section 11. Actions Without a Meeting ........................................ 3

ARTICLE III BOARD OF DIRECTORS ............................................... 3
Section 1.  Powers ........................................................... 3
Section 2.  Number, Qualification and Term of Office ......................... 4
Section 3.  Resignations ..................................................... 4
Section 4.  Removal of Directors ............................................. 4
Section 5.  Vacancies ........................................................ 4
Section 6.  Place of Meetings ................................................ 4
Section 7.  Annual Meetings .................................................. 4
Section 8.  Regular Meetings ................................................. 5
Section 9.  Special Meetings: Notice ......................................... 5
Section 10. Quorum and Manner of Acting ...................................... 5
Section 11. Interested Directors ............................................. 5
Section 12. Remuneration ..................................................... 6
Section 13. Executive Committee; How Constituted and Powers .................. 6
Section 14. Organization ..................................................... 6
Section 15. Meetings ......................................................... 6
Section 16. Quorum and Manner of Acting ...................................... 7
Section 17. Other Committees ................................................. 7
Section 18. Alternate Members of Committees .................................. 7
Section

19. Minutes of Committees ............................................ 8
Section 20. Actions Without a Meeting ........................................ 8
Section 21. Presence at Meetings by Means of Communications Equipment ........ 8

ARTICLE IV  NOTICES .......................................................... 8
Section 1.  Type of Notice ................................................... 8
Section 2.  Waiver of Notice ................................................. 8

i

ARTICLE V   OFFICERS ..........................................................8
Section 1.  Elected and Appointed Officers ....................................8
Section 2.  Time of Election or Appointment ...................................9
Section 3.  Salaries of Elected Officers ......................................9
Section 4.  Term ..............................................................9
Section 5.  Duties of the Chairman of the Board ...............................9
Section 6.  Duties of the President ...........................................9
Section 7.  Duties of Vice Presidents ........................................10
Section 8.  Duties of Assistant Vice Presidents ..............................10
Section 9.  Duties of the Secretary ..........................................10
Section 10. Duties of Assistant Secretaries ..................................10
Section 11. Duties of the Treasurer ..........................................10
Section 12. Duties of Assistant Treasurers ...................................11
Section 13. Duties of the Controller .........................................11
Section 14. Duties of Assistant Controllers ..................................11

ARTICLE VI  INDEMNIFICATION ..................................................11
Section 1.  Actions Other than by or in the Right of the Corporation .........11
Section 2.  Actions by or in the Right of the Corporation ....................12
Section 3.  Determination of Right to Indemnification ........................13
Section 4.  Right to Indemnification .........................................13
Section 5.  Prepaid Expenses .................................................13
Section 6.  Indemnification Upon Application: Procedure upon Application .....13
Section 7.  Other Rights and Remedies ........................................14
Section 8.  Insurance ........................................................14
Section 9.  Savings Provision ................................................15

ARTICLE VII CERTIFICATES REPRESENTING STOCK ..................................15
Section 1.  Right to Certificate .............................................15
Section 2.  Facsimile Signatures .............................................15
Section 3.  New Certificates .................................................15
Section 4.  Transfers ........................................................16
Section 5.  Transfer Agents and Registrars ...................................16
Section 6.  Record Date ......................................................16
Section 7.  Registered Stockholders ..........................................16
Section 8.  Voting Agreements ................................................17

ARTICLE VIII GENERAL PROVISIONS ..............................................17
Section 1.  Dividends ........................................................17
Section 2.  Reserves .........................................................17
Section 3.  Annual Statement .................................................17
Section 4.  Checks ...........................................................17
Section 5.  Fiscal Year ......................................................17
Section 6.  Corporate Seal ...................................................18

ARTICLE IX  RESTRICTIONS ON TRANSFER OF STOCK ................................18
Section 1.  Securities Laws ..................................................18

ii

ARTICLE X   AMENDMENTS .......................................................18

iii

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of the Corporation shall be
-----------------
in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices. The Corporation may also have offices at such other
-------------
place or places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Time and Place of Meetings. All meetings of the stockholders for the
--------------------------
election of directors shall be held at such time and place, either within or
without the State of Delaware, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.

Section 2. Annual Meetings. Annual meetings of stockholders shall be held on
---------------
such date and at such time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which meeting the
stockholders shall elect by a plurality vote a Board of Directors and transact
such other business as may properly be brought before the meeting.

Section 3. Notice of Annual Meetings. Written notice of the annual meeting,
-------------------------
stating the place, date, and hour of the meeting, shall be given to each
stockholder of record entitled to vote at such meeting not less than 10 or more
than 60 days before the date of the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the stockholder at his address as it appears on the stock transfer books of the
Corporation with postage thereon prepaid.

Section 4. Special Meetings. Special meetings of the stockholders for any
----------------
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called only by the Chairman of the Board,
the Chief Executive Officer, or a majority of the members of the Board of
Directors then in office. Such request shall state the purpose or purposes of
the proposed special meeting. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.

Section 5. Notice of Special Meetings. Written notice of a special meeting,
--------------------------
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given to each stockholder of record
entitled to vote at such meeting not less than 10 or more than 60 days before
the date of the meeting. If mailed, such notice shall be deemed

to be delivered when deposited in the United States mail, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation with postage thereon prepaid.

Section 6. Quorum. Except as otherwise provided by statute or the Certificate of
------
Incorporation, the holders of stock having a majority of the voting power of the
stock entitled to be voted thereat, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at all meetings of the
stockholders. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time without notice (other than announcement at the meeting
at which the adjournment is taken of the time and place of the adjourned
meeting) until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. if the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting.

Section 7. Organization. At each meeting of the stockholders, the Chairman of
------------
the Board or the President, determined as provided in Article V of these Bylaws,
or if those officers shall be absent therefrom, another officer of the
Corporation chosen as chairman present in person or by proxy and entitled to
vote thereat, or if all the officers of the Corporation shall be absent
therefrom, a stockholder holding of record shares of stock of the Corporation so
chosen, shall act as chairman of the meeting and preside thereat. The Secretary,
or if he shall be absent from such meeting or shall be required pursuant to the
provisions of this Section 7 to act as chairman of such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present
thereat) whom the chairman of such meeting shall appoint, shall act as secretary
of such meeting and keep the minutes thereof.

Section 8. Voting. Except as otherwise provided in the Certificate of
------
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of Article
VII of these Bylaws as the record date for the determination of stockholders who
shall be entitled to notice of and to vote at such meeting. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held directly or indirectly by the Corporation, shall not be
entitled to vote. Any vote by stock of the Corporation may be given at any
meeting of the stockholders by the stockholder entitled thereto, in person or by
his proxy appointed by an instrument in writing subscribed by such stockholder
or by his attorney thereunto duly authorized and delivered to the Secretary of
the Corporation or to the secretary of the meeting; provided, however, that no
proxy shall be voted or acted upon after three years from its date, unless said
proxy shall provide for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law. At all meetings of the stockholders all matters, except
where other provision is made by law, the Certificate of Incorporation, or these
Bylaws, shall be decided by the vote of a majority of the votes cast by the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by a stockholder of the Corporation
present in person

2

or by proxy at any meeting of the stockholders and entitled to vote thereat, or
so directed by the chairman of the meeting, the vote thereat on any question
other than the election or removal of directors need not be by written ballot.
Upon a demand of any such stockholder for a vote by written ballot on any
question or at the direction of such chairman that a vote by written ballot be
taken on any question, such vote shall be taken by written ballot. On a vote by
written ballot, each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of shares voted.

Section 9. List of Stockholders. It shall be the duty of the Secretary or other
--------------------
officer of the Corporation who shall have charge of its stock ledger, either
directly or through another officer of the Corporation designated by him or
through a transfer agent appointed by the Board of Directors, to prepare and
make, at least 10 days before every meeting of the stockholders, a complete list
of the stockholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days before said meeting, either at
a place within the city where said meeting is, to be held, which place shall be
specified in the notice of said meeting, or, if not so specified, at the place
where said meeting is to be held. The list shall also be produced and kept at
the time and place of said meeting during the whole time thereof, and may be
inspected by any stockholder of record who shall be present thereat. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, such list or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.

Section 10. Inspectors of Votes. At each meeting of the stockholders,, the
-------------------
chairman of such meeting may appoint two Inspectors of Votes to act thereat,
unless the Board of Directors shall have theretofore made such appointments.
Each Inspector of Votes so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Votes, if any, shall take charge of the ballots, if any, at such
meeting and, after the balloting thereat on any question, shall count the
ballots cast thereon and shall make a report in writing to the secretary of such
meeting of the results thereof. An Inspector of Votes need not be a stockholder
of the Corporation, and any officer of the Corporation may be an Inspector of
Votes on any question other than a vote for or against his election to any
position with the Corporation or on any other question in which he may be
directly interested.

Section 11. Actions Without a Meeting. Any action required or permitted to be
-------------------------
taken at any annual or special meeting of the stockholders may only be taken
upon the vote of the stockholders at an annual or special meeting called and may
not be taken by written consent of the stockholders.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Powers. The business and affairs of the Corporation shall be managed
------
by its Board of Directors, which shall have and may exercise all such powers of
the Corporation and

3

do all such lawful acts and things as are not by statute, the Certificate of
Incorporation, or these Bylaws directed or required to be exercised or done by
the stockholders.

Section 2. Number, Qualification and Term of Office. The number of directors
----------------------------------------
which shall constitute the whole Board of Directors shall not be less than three
(3) nor more than eleven (11). Within the limits above specified, the number of
directors which shall constitute the whole Board of Directors shall be
determined by resolution of the Board of Directors or by the stockholders at any
annual or special meeting or otherwise pursuant to action of the stockholders.
Directors need not be stockholders. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Sections 4 and 5 of this
Article III, and each director elected shall hold office until the annual
meeting next after his election and until his successor is duly elected and
qualified, or until his death or retirement or until he resigns or is removed in
the manner hereinafter provided, but no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of directors
at any annual or special meeting of stockholders. Such election shall be by
written ballot.

Section 3. Resignations. Any director may resign at any time by giving written
------------
notice of his resignation to the Corporation. Any such resignation shall take
effect at the time specified therein, or if the time when it shall become
effective shall not be specified therein, then it shall take effect immediately
upon its receipt by the Secretary. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.

Section 4. Removal of Directors. At any meeting of stockholders called expressly
--------------------
for the purpose of removing a director or directors, any director or the entire
Board of Directors may be removed, only for cause, by a vote of the holders of
two-thirds of the shares then entitled to vote at an election of directors.

Section 5. Vacancies. Vacancies and newly created directorships resulting from
---------
any increase in the authorized number of directors may be filled by a majority
of the directors then in office though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the
annual meeting next after their election and until their successors are elected
and qualified, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.

MEETINGS OF THE BOARD OF DIRECTORS

Section 6. Place of Meetings. The Board of Directors of the Corporation may hold
-----------------
meetings, both regular and special, either within or without the State of
Delaware.

Section 7. Annual Meetings. The first meeting of each newly elected Board of
---------------
Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event such meeting is not held immediately following the
annual meeting of stockholders, the meeting may be held at such time and place
as

4

shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.

Section 8. Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.

Section 9. Special Meetings: Notice. Special meetings of the Board of Directors
------------------------
may be called by the Chairman of the Board, the President, or the Secretary on
24 hours' notice to each director, either personally or by telephone or by mail,
telegraph, telex, cable, wireless, or other form of recorded communication;
special meetings shall be called by the Chairman of the Board, the President, or
the Secretary in like manner and on like notice on the written request of two
directors. Notice of any such meeting need not be given to any director,
however, if waived by him in writing or by telegraph, telex, cable, wireless, or
other form of recorded communication, or if he shall be present at such meeting.
Neither the business to be transacted at, nor the purpose of, any special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.

Section 10. Quorum and Manner of Acting. At all meetings of the Board of
---------------------------
Directors, a majority of the directors at the time in office (but not less than
one-third of the whole Board of Directors) shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.

Section 11. Interested Directors. No contract or transaction between the
--------------------
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one (1) or more of the Corporation's directors or officers
or have a financial interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof that authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:

(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or

(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or

5

(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.

(d) Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee that authorizes
the contract or transaction.

Section 12. Remuneration. Unless otherwise expressly provided by resolution
------------
adopted by the Board of Directors, none of the directors shall, as such, receive
any stated remuneration for his services; but the Board of Directors may at any
time and from time to time by resolution provide that a specified sum shall be
paid to any director of the Corporation, either as his annual remuneration as
such director or member of any committee of the Board of Directors or as
remuneration for his attendance at each meeting of the Board of Directors or any
such committee. The Board of Directors may also likewise provide that the
Corporation shall reimburse each director for any expenses paid by him on
account of his attendance at any meeting. Nothing in this Section 12 shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving remuneration therefore.

COMMITTEES OF DIRECTORS

Section 13. Executive Committee; How Constituted and Powers. The Board of
-----------------------------------------------
Directors may in its discretion, by resolution passed by a majority of the whole
Board of Directors, designate an Executive Committee consisting of one or more
of the directors of the Corporation. Subject to the provisions of Section 141 of
the General Corporation Law of the State of Delaware, the Certificate of
Incorporation, and these Bylaws, the Executive Committee shall have and may
exercise, when the Board of Directors is not in session, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it; but the
Executive Committee shall not have the power to fill vacancies in the Board of
Directors, the Executive Committee, or any other committee of directors or to
elect or approve officers of the Corporation. The Executive Committee shall have
the power and authority to authorize the issuance of common stock and grant and
authorize options and other rights with respect to such issuance. The Board of
Directors shall have the power at any time, by resolution passed by a majority
of the whole Board of Directors, to change the membership of the Executive
Committee, to fill all vacancies in it, or to dissolve it, either with or
without cause.

Section 14. Organization. The Chairman of the Executive Committee, to be
------------
selected by the Board of Directors, shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Executive Committee of the Chairman of the
Executive Committee or the Secretary, the Executive Committee may appoint a
chairman or secretary, as the case may be, of the meeting.

Section 15. Meetings. Regular meetings of the Executive Committee, of which no
--------
notice shall be necessary, may be held on such days and at such places, within
or without the State of Delaware, as shall be fixed by resolution adopted by a
majority of the Executive Committee and communicated in writing to all its
members. Special meetings of the Executive

6

Committee shall be held whenever called by the Chairman of the Executive
Committee or a majority of the members of the Executive Committee then in
office. Notice of each special meeting of the Executive Committee shall be given
by mail, telegraph, telex, cable, wireless, or other form of recorded
communication or be delivered personally or by telephone to each member of the
Executive Committee not later than the day before the day on which such meeting
is to be held. Notice of any such meeting need not be given to any member of the
Executive Committee, however, if waived by him in writing or by telegraph,
telex, cable, wireless, or other form of recorded communication, or if he shall
be present at such meeting; and any meeting of the Executive Committee shall be
a legal meeting without any notice thereof having been given, if all the members
of the Executive Committee shall be present thereat. Subject to the provisions
of this Article III, the Executive Committee, by resolution adopted by a
majority of the whole Executive Committee, shall fix its own rules of procedure.

Section 16. Quorum and Manner of Acting. A majority of the Executive Committee
---------------------------
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at a meeting thereof at which a quorum is present
shall be the act of the Executive Committee.

Section 17. Other Committees. The Board of Directors may, by resolution or
----------------
resolutions passed by a majority of the whole Board of Directors, designate one
or more other committees consisting of one or more directors of the Corporation,
which, to the extent provided in said resolution or resolutions, shall have and
may exercise, subject to the provisions of Section 141 of the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, and
these Bylaws, the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have the
power to authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power to fill vacancies in
the Board of Directors, the Executive Committee, or any other committee or in
their respective membership, to appoint or remove officers of the Corporation,
or to authorize the issuance of shares of the capital stock of the Corporation,
except that such a committee may, to the extent provided in said resolutions,
grant and authorize options and other rights with respect to the common stock of
the Corporation pursuant to and in accordance with any plan approved by the
Board of Directors. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors. A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings and specify what notice
thereof, if any, shall be given, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power to change the members of any
such committee at any time to fill vacancies, and to discharge any such
committee, either with or without cause, at any time.

Section 18. Alternate Members of Committees. The Board of Directors may
-------------------------------
designate one or more directors as alternate members of the Executive Committee
or any other committee, who may replace any absent or disqualified member at any
meeting of the committee, or if none be so appointed, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.

7

Section 19. Minutes of Committees. Each committee shall keep regular minutes of
---------------------
its meetings and proceedings and report the same to the Board of Directors at
the next meeting thereof.

GENERAL

Section 20. Actions Without a Meeting. Unless otherwise restricted by the
-------------------------
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee.

Section 21. Presence at Meetings by Means of Communications Equipment. Members
---------------------------------------------------------
of the Board of Directors, or of any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting conducted pursuant to this Section 21 shall
constitute presence in person at such meeting.

ARTICLE IV

NOTICES

Section 1. Type of Notice. Whenever, under the provisions of any applicable
--------------
statute, the Certificate of Incorporation, or these Bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, in person or by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given in any manner permitted by
Article III hereof and shall be deemed to be given at the time when first
transmitted by the method of communication selected.

Section 2. Waiver of Notice. Whenever any notice is required to be given under
----------------
the provisions of any applicable permitted statute, the Certificate of
Incorporation, or these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a waiver
of notice by a director or stockholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.

ARTICLE V

OFFICERS

Section 1. Elected and Appointed Officers. The elected officers of the
------------------------------
Corporation shall be a President, one or more Vice Presidents, with or without
such descriptive titles as the Board of Directors shall deem appropriate, a
Secretary, and a Treasurer, and, if the Board of

8

Directors so elects, a Chairman of the Board (who shall be a director), and a
Controller. The Board of Directors or the Executive Committee of the Board of
Directors by resolution also may appoint one or more Assistant Vice Presidents,
Assistant Treasurers, Assistant Secretaries, Assistant Controllers, and such
other officers and agents as from time to time may appear to be necessary or
advisable in the conduct of the affairs of the Corporation.

Section 2. Time of Election or Appointment. The Board of Directors at its annual
-------------------------------
meeting shall elect or appoint, as the case may be, the officers to fill the
positions designated in or pursuant to Section 1 of this Article V. Officers of
the Corporation may also be elected or appointed, as the case may be, at any
other time.

Section 3. Salaries of Elected Officers. The salaries of all elected officers of
----------------------------
the Corporation shall be fixed by the Board of Directors.

Section 4. Term. Each officer of the Corporation shall hold his office until his
----
successor is duly elected or appointed and qualified or until his earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Any officer elected or appointed by the Board of Directors
or the Executive Committee may be removed at any time by the affirmative vote of
a majority of the whole Board of Directors. Any vacancy occurring in any office
of the Corporation by death, resignation, removal, or otherwise may be filled by
the Board of Directors or the appropriate committee thereof.

Section 5. Duties of the Chairman of the Board. The Chairman of the Board shall
-----------------------------------
be the Chief Executive Officer of the Corporation, and shall have, subject to
the provisions of these Bylaws, general supervision of the affairs of the
Corporation and general and active control of all its business. He shall preside
at all meetings of stockholders and, in the absence of any other person
designated thereto by these Bylaws, at all meetings of the Board of Directors.
He shall see that all orders and resolutions of the Board of Directors and the
stockholders are carried into effect. He shall have general authority to execute
bonds, deeds, and contracts in the name of the Corporation and affix the
corporate seal thereto; to sign stock certificates; to cause the employment or
appointment of such employees and agents of the Corporation as the proper
conduct of operations may require, and to fix their compensation, subject to the
provisions of these Bylaws; to remove or suspend any employee or agent who shall
have been employed or appointed under his authority or under authority of an
officer subordinate to him; to suspend for cause, pending final action by the
authority which shall have elected or appointed him, any officer subordinate to
the Chairman of the Board; and, in general, to exercise all the powers and
authority usually appertaining to the chief executive officer of a corporation,
except as otherwise provided in these Bylaws.

Section 6. Duties of the President. The President shall be the Chief Operating
-----------------------
Officer of the Corporation, shall in the absence or disability of the Chairman
of the Board perform the duties and exercise the powers of the Chief Executive
Officer, and shall have, subject to review and approval of the Chairman of the
Board, responsibility for the general day-to-day operations of the Corporation's
properties and facilities and such other duties and responsibilities as (i) are
customarily possessed by a chief operating officer of a corporation similar in
size and line of business as the Corporation and (ii) may be delegated to him
from time to time by the Board of Directors of the Corporation.

9

Section 7. Duties of Vice Presidents. In the absence of the President or in the
-------------------------
event of his inability or refusal to act, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and, when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.

Section 8. Duties of Assistant Vice Presidents. In the absence of a Vice
-----------------------------------
President or in the event of his inability or refusal to act, the Assistant Vice
President (or in the event there shall be more than one, the Assistant Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties and exercise the powers of that Vice President, and shall perform such
other duties and have such other powers as the Board of Directors, the
President, or the Vice President under whose supervision he is appointed may
from time to time prescribe.

Section 9. Duties of the Secretary. The Secretary shall attend all meetings the
-----------------------
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
Executive Committee or other standing committees when required. He shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or the President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation, and he, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it, and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary shall
keep and account for all books, documents, papers, and records of the
Corporation, except those for which some other officer or agent is properly
accountable. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of the
secretary of a corporation.

Section 10. Duties of Assistant Secretaries. In the absence of the Secretary or
-------------------------------
in the event of his inability or refusal to act, the Assistant Secretary (or, if
there shall be more than one, the Assistant Secretaries in the order designated
by the Board of Directors, or in the absence of any designation, then in the
order of their appointment) shall perform the duties and exercise the powers of
the Secretary and shall perform such other duties and have such other powers as
the Board of Directors, the President, or the Secretary may from time to time
prescribe.

Section 11. Duties of the Treasurer. The Treasurer shall have the custody of the
-----------------------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial

10

condition of the Corporation. If required by the Board of Directors, he shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money, and other
property of whatever kind in his possession or under his control belonging to
the Corporation. The Treasurer shall be under the supervision of the Vice
President in charge of finance, if one is so designated, and he shall perform
such other duties as may be prescribed by the Board of Directors, the President,
or any such Vice President in charge of finance.

Section 12. Duties of Assistant Treasurers. The Assistant Treasurer or Assistant
------------------------------
Treasurers shall assist the Treasurer, and in the absence of the Treasurer or in
the event of his inability or refusal to act, the Assistant Treasurer (or in the
event there shall be more than one, the Assistant Treasurers in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their appointment) shall perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors, the President, or the Treasurer may from time
to time prescribe.

Section 13. Duties of the Controller. The Controller, if one is appointed, shall
------------------------
have supervision of the accounting practices of the Corporation and shall
prescribe the duties and powers of any other accounting personnel of the
Corporation. He shall cause to be maintained an adequate system of financial
control through a program of budgets and interpretive reports. He shall initiate
and enforce measures and procedures whereby the business of the Corporation
shall be conducted with the maximum efficiency and economy. If required, he
shall prepare a monthly report covering the operating results of the
Corporation. The Controller shall be under the supervision of the Vice President
in charge of finance, if one is so designated, and he shall perform such other
duties as may be prescribed by the Board of Directors, the President, or any
such Vice President in charge of finance.

Section 14. Duties of Assistant Controllers. The Assistant Controller or
-------------------------------
Assistant Controllers shall assist the Controller, and in the absence of the
Controller or in the event of his inability or refusal to act, the Assistant
Controller (or, if there shall be more than one, the Assistant Controllers in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Controller and perform such other duties and have
such other powers as the Board of Directors, the President, or the Controller
may from time to time prescribe.

ARTICLE VI

INDEMNIFICATION

Section 1. Actions Other than by or in the Right of the Corporation. The
--------------------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened; pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action, suit, or proceeding by or in the right of the Corporation)
(collectively referred to in this Section 1 as an "Action"), by reason of the
fact that he is or was a director or officer of the Corporation, against
expenses (including, without

11

limitation, attorneys' fees), judgments, fines, and amounts paid in settlement
(collectively, "Expenses") actually and reasonably incurred by him in connection
with such Action if (i) he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests if the Corporation, (ii)
the Action does not relate (even in part) to his service or the performance of
his duties as a director, officer, employee, or agent of another corporation.
partnership, joint venture, trust, or other enterprise (whether or not he was so
serving at the request of the Corporation), and (iii) with respect to any
criminal Action, had no reasonable cause to believe his conduct was unlawful.
The Corporation may indemnify any person who was or is a party or is threatened
to be made a party to any Action by reason of the fact that he is or was an
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (each such person being
hereinafter referred to in this Article VI as a "Corporate Functionary"),
against Expenses actually and reasonably incurred by him in connection with such
Action. if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation and, with respect to
any criminal Action, had no reasonable cause to believe his conduct was
unlawful. The termination of any Action by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation or, with respect to any criminal Action, that he
had reasonable cause to believe that his conduct was unlawful. In this Article
VI, an "other enterprise" includes, without limitation, an employee benefit
plan, and a fine includes, without limitation, any excise tax imposed with
respect to an employee benefit plan.

Section 2. Actions by or in the Right of the Corporation. The Corporation shall
---------------------------------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation against expenses
(including, without limitation, attorneys' fees) actually and reasonable
incurred by him in connection with the defense or settlement of such action,
suit, or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that (i) no indemnification shall be made in respect of any claim, issue,
or matter as to which such person shall have been adjudged to be liable to the
Corporation, unless and to the extent that the Court of Chancery or the Court in
which such action, suit, or proceeding has been brought, shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper, and (ii) the Corporation shall not be required to (but, to
the extent permitted by the preceding part of this sentence, may indemnify any
such person in respect of any claim, issue, or matter relating to his employee,
or any of another corporation, partnership, joint venture, trust, or other
enterprise (whether or not he was so serving at the request of the Corporation).
The Corporation may indemnify any person who was or is a party or is threatened
to be made a part, to any threatens depending, or completed action, suit, or
proceeding by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was a Corporate Functionary against
expenses (including, without limitation, attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action, suit, or proceeding, if he acted in good faith and in a manner he

12

reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such Corporate Functionary shall have been
adjudged to be liable to the Corporation, unless and only to the extent that the
Court of Chancery or the court in which such action, suit, or proceeding has
brought shall determine upon application that despite the adjudication of
liability but in view of all the circumstances of the case, such Corporate
Functionary is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery, or such other court shall deem proper.

Section 3. Determination of Right to Indemnification. Any indemnification under
-----------------------------------------
Section 1 or Section 2 of this Article VI (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer or of the
Corporate Functionary is proper in the circumstances because such person has met
the applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VI. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, or (ii) if such a quorum is not obtainable, or even
if obtainable if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.

Section 4. Right to Indemnification. Notwithstanding the other provisions of
------------------------
this Article VI, to the extent that a director, officer, or Corporate
Functionary has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in Section 1 or Section 2 of this
Article VI (including, without limitation, the dismissal of an action. suit. or
proceeding without prejudice or the settlement of an action, suit, or proceeding
without admission of liability), or in defense of any claim, issue, or matter
therein, the Corporation shall indemnify him against expenses (including,
without limitation, attorneys' fees) actually and reasonably incurred by him in
connection therewith.

Section 5. Prepaid Expenses. Expenses incurred by a director or officer of the
----------------
Corporation in defending a civil or criminal action, suit, or proceeding shall
be paid by the Corporation upon receipt of an undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined he is not
entitled to be indemnified by the Corporation as authorized in this Article VI.
Expenses incurred by a Corporate Functionary in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit, or proceeding, upon (i) receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined he is not entitled to be indemnified by the Corporation
as authorized in this Article VI and (ii) such other terms and conditions, if
any, as the Board of Directors deems appropriate.

Section 6. Indemnification Upon Application: Procedure upon Application.
------------------------------------------------------------

(a) Any indemnification of a director or officer of the Corporation under
Sections 1, and 4, or any advance to a director or officer of the Corporation
under Section 5, of this Article VI shall be made promptly upon, and in any
event within 60 days after, the written request of the director or officer. The
right to indemnification or an advance of expenses granted by this Article VI
shall be enforceable by the director or officer of the Corporation in any Court
of competent jurisdiction if his claim is not paid in full within 60 days. The
expenses of the director or officer incurred in connection with successfully
establishing his right to

13

indemnification or an advance of expenses, in whole or in part, in any such
proceeding shall also be indemnified by the Corporation.

(b) Within 60 days after receipt of a written application by any Corporate
Functionary for indemnification in his capacity as such under any of Sections 1,
2, and 4, or any advance under Section 5, of this Article VI (i) a determination
as to whether indemnification shall be made under Section 3 of this Article VI,
or (ii) if the request is for an advance of expenses, the Board of Directors, by
majority vote of a quorum consisting of disinterested directors, shall determine
whether such advance shall be made. In the case described in clause (ii) of the
preceding sentence, if no quorum of disinterested directors is obtainable, the
Board of Directors shall promptly direct independent legal counsel to decide
whether the requested indemnification or advance shall be made. The expenses of
the Corporate Functionary incurred in connection with successfully requesting
indemnification or advancement of expenses in any such proceeding shall be
reimbursed by the Corporation, but no such expenses in connection with an
unsuccessful or only partially successful request shall be reimbursed.

(c) In any suit brought by the director, officer or Corporate Functionary
to enforce a right to indemnification under this Article VI (but not in a suit
brought to enforce a right to an advance of expenses), it shall be a defense
that the director, officer or Corporate Functionary has not met the applicable
standard of conduct for indemnification under Section 1 or Section 2 of this
Article VI. In any suit by the Corporation to recover expenses advanced to the
director, officer or Corporate Functionary pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover those expenses upon a
final adjudication that the director, officer or Corporate Functionary has not
met the applicable standard of conduct for indemnification under Section 1 or
Section 2 of this Article VI. In any suit by the director, officer or Corporate
Functionary to enforce a right to indemnification or to an advance of expenses
under this Article VI, or by the Corporation to recover expenses advanced
pursuant to the terms of an undertaking, the burden of proof shall be on the
Corporation.

Section 7. Other Rights and Remedies. The indemnification and advancement of
-------------------------
expenses provided by or granted pursuant to this Article VI shall not be deemed
exclusive of any other rights to which any person seeking indemnification and
advancement of expenses or may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer of the
Corporation or a Corporate Functionary and shall inure to the benefit of the
heirs, executors, and administrators of such a person. Any repeal or
modification of these Bylaws or relevant provisions of the Delaware General
Corporation Law and other applicable law, if any, shall not affect any then
existing rights of a director or officer of the Corporation of a Corporate
Functionary to indemnification or advancement of expenses.

Section 8. Insurance. Upon resolution passed by the Board of Directors, the
---------
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against him and incurred by him in

14

any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.

Section 9. Savings Provision. If this Article VI or any portion hereof shall be
-----------------
invalidated on any ground by a court of competent jurisdiction, the Corporation
shall nevertheless indemnify each director or officer of the Corporation, and
may indemnify each Corporate Functionary, as to expense (including attorneys'
fees), judgments, fines, and amounts paid in settlement with respect to any
action, suit, proceeding, or investigation, whether civil, criminal, or
administrative, including a grand jury proceeding or action or suit brought by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article VI that shall not have been invalidated.

ARTICLE VII

CERTIFICATES REPRESENTING STOCK

Section 1. Right to Certificate. Every holder of stock in the Corporation shall
--------------------
be entitled to have a certificate, signed by, or in the name of the Corporation
by, the Chairman of the Board, the President, or a Vice President and by the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. If the Corporation shall be authorized
to issue more than one class of stock or more than one series of any class, the
powers, designations, preferences, and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations, or restrictions of such preferences or rights shall
be set forth in full or summarized on the face or back of the certificate which
the Corporation shall issue to that, except as represent such class or series of
Stock; provided, that, except as otherwise provided in Section 202 of the
General Corporation Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences, and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations, or restrictions of such
preferences or rights.

Section 2. Facsimile Signatures. Any of or all the signatures on the certificate
--------------------
may be facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.

Section 3. New Certificates. The Board of Directors may direct a new certificate
----------------
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation and alleged to have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen, or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
or to give the Corporation a bond in such sum as it may direct as

15

indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of such new certificate.

Section 4. Transfers. Upon surrender to the Corporation or the transfer agent of
---------
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation, or authority to transfer, it shall
be the duty of the Corporation, subject to any proper restrictions on transfer,
to issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction upon its books.

Section 5. Transfer Agents and Registrars. The Board of Directors may appoint,
------------------------------
or authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars.

Section 6. Record Date. The Board of Directors may fix in advance a date, not
-----------
preceding the date on which the resolution fixing the record date is adopted,
and

(i)   not more than 60 days nor less than 10 days preceding the date of
any meeting of stockholders, as a record date for the
determination of the stockholders entitled to notice of, and to
vote at, any such meeting and any adjournment thereof,

(ii)  not more than 10 days after the date on which the resolution
fixing the record date is adopted, as a record date in connection
with obtaining a consent of the stockholders in writing to
corporate action without a meeting, or

(iii) not more than 60 days before the date for payment of any dividend
or distribution, or the date for the allotment of rights, or the
date when any change, or conversion or exchange of capital stock
shall go into effect, or the date on which any other lawful
action shall be taken, as the record date for determining the
stockholders entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or
exchange of capital stock or other lawful action of the
Corporation,

and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, any such meeting and any adjournment thereof (provided, however,
that the Board of Directors may fix a new record date for an adjourned meeting),
or to give such consent, or to receive payment of such dividend or distribution,
or to receive such allotment of rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.

Section 7. Registered Stockholders. The Corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable

16

or other claim to or interest in such share or shares on the part of any other
person, whether or not provided by the laws of the State of Delaware.

Section 8. Voting Agreements. A written counterpart of any voting agreement
-----------------
entered into among any number of stockholders of the Corporation, or any number
of stockholders of the Corporation and the Corporation itself, for the purpose
of providing that shares of the Corporation shall be voted in the manner
prescribed in the agreement shall be deposited with the Corporation at its
registered office in Delaware and shall be subject to the inspection by any
stockholder of the Corporation or any beneficiary of the agreement daily during
business hours. In addition, certificates of stock or uncertificated stock shall
be issued to the person or persons, or corporation or corporations authorized to
act as trustee for purposes of vesting in such person or persons, corporation or
corporations, the right to vote such shares, to represent any stock of an
original issue so deposited with him or them, and any certificates of stock or
uncertificated stock so transferred to the voting trustee or trustees shall be
surrendered and cancelled and new certificates or uncertificated stock shall be
issued therefore to the voting trustee or trustees. In the certificate so
issued, if any, it shall be stated that it is issued pursuant to such agreement,
and that fact shall also be stated in the stock ledger of the Corporation.

ARTICLE VIII

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the Corporation, if
---------
any, subject to the provisions of the Certificate of Incorporation, may be
declared by the Board of Directors (but not any committee thereof) at any
regular meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.

Section 2. Reserves. Before payment of any dividend, there may be set aside out
--------
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute discretion, thinks
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.

Section 3. Annual Statement. The Board of Directors shall present at each annual
----------------
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.

Section 4. Checks. All checks or demands for money and promissory notes of the
------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time prescribe.

Section 5. Fiscal Year. The fiscal year of the Corporation shall be determined
-----------
by the Board of Directors.

17

Section 6. Corporate Seal. The corporate seal shall have inscribed thereon the
--------------
name of the Corporation, the year of its organization, and the word "Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced, or otherwise.

ARTICLE IX

RESTRICTIONS ON TRANSFER OF STOCK

Section 1. Securities Laws. Shares of capital stock of the Corporation that have
---------------
been issued by the Corporation without registration under the Securities Act of
1933, as amended from time to time, and any other applicable securities laws
shall not be offered for sale, sold, assigned, transferred, or pledged by the
holder thereof unless they have been duly registered under the applicable
securities laws or unless the Corporation shall have received advice of counsel
to the Corporation or an opinion of other counsel satisfactory to the
Corporation to the effect that the proposed transfer would not be in violation
of said laws, and (in addition to the legends set forth in Section 3 of this
Article IX) a restrictive legend substantially in the form of that set forth
below may be placed conspicuously on the certificate for any such shares:

"The shares represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or under any other
applicable securities laws. The shares may not be offered for sale,
sold, assigned, transferred or pledged without registration under the
Act and any other applicable securities laws or without an opinion of
counsel satisfactory to the Corporation that registration is not
required."

ARTICLE X

AMENDMENTS

These Bylaws may be altered, amended, or repealed or new Bylaws
may be adopted by the Board of Directors at any regular or special meeting of
the Board, subject to the stockholders' right to adopt, amend or repeal these
Bylaws or adopt new Bylaws. Notwithstanding the foregoing and anything contained
in the Bylaws to the contrary, the Bylaws shall not be amended or repealed by
the stockholders, and no provision inconsistent therewith shall be adopted by
the stockholders, without the affirmative vote of the holders of at least
two-thirds (2/3) of the voting power of all shares of the Corporation entitled
to vote generally in the election of directors voting together as a single
class.

18

Exhibit 4.1
[LOGO]
American Bank Note Company

INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE

COMMON STOCK
--------------------                                    ----------------------
NUMBER                                                SHARES
C
--------------------                                    ----------------------
PAR VALUE $0.01 PER SHARE

THIS CERTIFICATE IS TRANSFERABLE
IN NEW YORK, NY AND DENVER, CO

[LOGO]

CUSIP 961765 10 4
SEE REVERSE FOR CERTAIN RESTRICTIONS

WESTWOOD HOLDINGS GROUP, INC.

THIS CERTIFIES THAT

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

Westwood Holdings Group, Inc.(the "Corporation") transferable on the books of
the Corporation by the holder hereof in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject to all the
provisions of the Certificate of Incorporation and the Bylaws of the
Corporation, and all amendments thereto, to all of which the holder, by
acceptance hereof, consents. This Certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated

/s/ Susan M Byrne             [SEAL]                  /s/ Bill Casey
CHAIRMAN OF THE BOARD                                     SECRETARY

COUNTERSIGNED AND REGISTERED:
COMPUTERSHARE TRUST COMPANY, INC.
P.O. Box 1596
Denver, Colorado 80201
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE

WESTWOOD HOLDINGS GROUP, INC.

The Corporation will furnish, without charge, to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -- as tenants in common                     UNIF GIFT MIN ACT- __________ Custodian ___________
TEN ENT -- as tenants by the entireties                                  (Cust)               (Minor)
JT TEN  -- as joint tenants with right of                              under Uniform Gifts to Minors
survivorship and not as tenants                             Act ____________________________
in common                                                                 (State)

Additional abbreviations may also be used though not in the above list.

For value received, ____________________________________ hereby sell,
assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------------

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

________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE
________________________________________________________________________________

________________________________________________________________________________

_________________________________________________________________________ Shares
of the capital stock of the Corporation represented by the within Certificate,

and do hereby irrevocably constitute and appoint _______________________________

________________________________________________________________________________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.

Dated, ____________________

X____________________________
(SIGNATURE)

NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.

X____________________________
(SIGNATURE)

-----------------------------
THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS,
SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
-----------------------------
SIGNATURE(S) GUARANTEED BY:

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

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

AMERICAN BANK NOTE COMPANY           PRODUCTION COORDINATOR: BELINDA BECK: 215-764-8619
55TH STREET AT SANSOM STREET                        PROOF OF MARCH 8, 2002
PHILADELPHIA, PA 19139                                  WESTWOOD
(215) 764-8600                                      H72515bk
-----------------------------------------------------------------------------------------
SALES: M. GARRETT: 214-823-270                 OPERATOR:                    HJ/JW/eg
-----------------------------------------------------------------------------------------
NET/BANKNOTE/HOME 23/MAC 6/WESTWOOD 72515                      Rev. 2
-----------------------------------------------------------------------------------------

EXHIBIT 8.1

[GARDERE WYNNE SEWELL LLP LETTERHEAD]

April 9, 2002

SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas

Ladies and Gentlemen:

You have requested our opinion with respect to material federal income tax
consequences arising out of the proposed distribution by SWS Group, Inc.
("SWS"), a Delaware corporation, to its stockholders of the shares of Westwood
Holdings Group, Inc., a Delaware corporation ("Westwood"), owned by SWS (the
"Spin-off"). Unless otherwise defined herein or the context hereof otherwise
requires, each term used herein with its initial letter capitalized has the
meaning given to such term in the Registration Statement on Form 10, as filed on
March 21, 2002, under the Securities Exchange Act of 1934, as amended (the
"Registration Statement").

In connection with the delivery of our opinion, we have examined, are
familiar with and are relying upon the following:

(i)   the Registration Statement;

(ii)  the Distribution Agreement, dated as of April 8, 2002, between
SWS and Westwood (the "Distribution Agreement");

(iii) the Tax Separation Agreement, dated as of April 8, 2002,
between SWS and Westwood (the "Tax Agreement");

(iv)  certificates of officers or other representative of SWS and Westwood;
and

(v)   such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for our opinion set forth below.

In rendering the opinion set forth below, we have assumed the truth and
accuracy, at all relevant times, of all information and representations
contained in each of those documents. We have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the

April 9, 2002
Page 2

conformity to original documents of all documents submitted to us as copies, the
authenticity of the originals of such copies and the accuracy and completeness
of all information submitted to us. We have assumed that the Registration
Statement when declared effective will not contain revisions that would have a
material effect on the tax consequences of the Spin-off. As to various facts
material to this opinion letter, we have relied upon statements and
representations of SWS and Westwood and their respective officers and other
representatives, set forth in certificates delivered to us, without
independently verifying the accuracy of the information contained therein.

In connection with rendering our opinion, we have considered applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Department of Treasury Regulations promulgated under the Code (whether proposed,
temporary, or final) now in effect (collectively, "Treasury Regulations"),
pertinent judicial authorities regarding applicable provisions of the Code and
Treasury Regulations, interpretative rulings of the Internal Revenue Service
("IRS") and such other federal tax-related authorities as we have considered
relevant.

Based on the foregoing and subject to the assumptions, exceptions,
qualifications and limitations set forth herein, we are of the opinion that the
Spin-off will, under current law, constitute a tax-free transaction under Code
ss. 355, with the following results:

(a)  except for cash received in lieu of fractional shares, if any, the
holders of shares of SWS common stock, $0.10 par value per share (the
"SWS Common Stock"), will not recognize any income, gain or loss as a
result of the receipt of shares of Westwood common stock, $0.01 par
value per share (the "Westwood Common Stock"), in the Spin-off;

(b)  after the Spin-off, each holder of SWS Common Stock will have an
aggregate tax basis in the shares of Westwood Common Stock received in
the Spin-off and the shares of SWS Common Stock held immediately
following the Spin-off equal to the basis in the shares of SWS Common
Stock held immediately prior to the Spin-off. This aggregate basis
will be allocated between the shares of Westwood Common Stock and SWS
Common Stock in proportion to each of their fair market values on the
Spin-off date. The stockholder will assign basis to each share of
Westwood Common stock on a pro-rata basis. If a stockholder has
multiple blocks of SWS Common Stock, the stockholder will then
allocate the SWS basis (as determined above) back to a specific block
of SWS Common Stock in the amount of the total basis attributable to
SWS Common Stock multiplied by a fraction, the numerator of which is
the pre Spin-off basis attributable to that block of SWS Common Stock
and the denominator of which is the pre Spin-off basis of all of the
stockholder's SWS Common Stock. After the total basis for each block
has been determined, the stockholder will assign basis to the shares
within each block on a pro-rata basis;

(c)  the holding period of the shares of Westwood Common Stock received in
the Spin-off will include the holding period for the shares of SWS

April 9, 2002
Page 3

Common Stock held at the time of the Spin-off (assuming the
stockholder held the SWS Common Stock as a capital asset on the
Spin-off date). If a stockholder has multiple blocks of SWS Common
Stock, the stockholder will take multiple holding periods for each
share of Westwood Common Stock, allocated on the basis of the fair
market value of the SWS Common Stock in each block (assuming the
stockholder held the SWS Common Stock as a capital asset on the
Spin-off date);

(d)  each stockholder who receives cash in lieu of fractional shares will
be treated as if such fractional share had been received by the
stockholder as part of the Spin-off and then sold by the stockholder.
This gain or loss, if any, will be capital gain or loss (assuming the
stockholder holds the SWS Common Stock as a capital asset on the
Spin-off date); and

(e)  except for gain attributable to the recognition of previously deferred
intercompany transactions, if any, and gain that may result from
application of Code ss. 355(e), if any, neither SWS nor Westwood will
recognize any gain or loss as a result of the Spin-off.

The opinion herein is also subject to the following exceptions, limitations
and qualifications:

A. No opinion is expressed (i) as to any transaction other than the
Spin-off as described in the Registration Statement, (ii) as to any transaction,
including the Spin-off, if the transactions described in the Registration
Statement are not consummated or (iii) if the representations, warranties,
statements and assumptions upon which we have relied are not true and accurate
in all material respects at all relevant times. If any one of the
representations, warranties, statements or assumptions upon which we have relied
to issue this opinion is incorrect in any material respect, our opinion might be
adversely affected and may not be relied upon.

B. This opinion letter is as of the date hereof, and we undertake no
obligation, and expressly disclaim any obligation, to advise SWS or any other
person or entity of any change in any matter set forth herein.

C. This opinion letter is limited to the matters expressly stated, and no
opinion other than upon the matters so expressly stated is implied or may be
inferred.

This opinion letter is delivered to SWS solely for use in connection with
the Spin-off and may not be used or relied upon for any other purpose.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the discussion regarding our firm and this opinion
in the Registration Statement.

April 9, 2002
Page 4

Very truly yours,

Gardere Wynne Sewell LLP

By:  /s/ Neil J. O'Brien
-------------------------------
Neil J. O'Brien, Partner

EXHIBIT 10.1

WESTWOOD HOLDINGS GROUP, INC.
STOCK INCENTIVE PLAN
--------------------

1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
---------------------------------------

1.1  Establishment. This Westwood Holdings Group, Inc. Stock Incentive Plan
(the "Plan") is hereby established effective as of February 1, 2002.

1.2  Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an
incentive to attract and retain persons performing services for the
Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating
Company Group.

1.3  Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of
Stock available for issuance under the Plan have been issued and all
restrictions on such shares (if any) under the terms of the Plan and
the agreements evidencing the Awards granted under the Plan have
lapsed. However, all Awards shall be granted, if at all, within ten
(10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the stockholders of the
Company.

2.   DEFINITIONS AND CONSTRUCTION.
----------------------------

2.1  Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:

(a)  "Acquiring Corporation" has the meaning given to it in Section
13.2.

(b)  "Annual Incentive Award" has the meaning given to it in Section
11.1.

(c)  "Award" means any form of incentive or performance award granted
under the Plan, whether singly or in combination, to a
Participant by the Board pursuant to such terms, conditions,
restrictions and/or limitations (if any) as the Board may
establish. Awards granted under the Plan may include:

(i)   Options awarded pursuant to Sections 6-8;

(ii)  Restricted Stock awarded pursuant to Section 9;

(iii) Purchase Rights awarded pursuant to Section 10;

Page 1

(iv) Annual Incentive Awards awarded pursuant to Section 11; and

(v)  Performance-Based Awards awarded pursuant to Section 12.

(d)  "Award Certificate" has the meaning given to it in Section 12.3.

(e)  "Board" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer
the Plan, "Board" also means such Committee(s).

(f)  "Cashless Exercise" has the meaning given to it in Section
6.3(a).

(g)  "Cause" shall mean any of the following: (i) the Participant's
theft of a Participating Company's property or falsification of
any Participating Company documents or records; (ii) the
Participant's improper use or disclosure of a Participating
Company's confidential or proprietary information; (iii) any
action by the Participant which has a detrimental effect on a
Participating Company's reputation or business; (iv) the
Participant's failure or inability to perform any reasonable
assigned duties after written notice from the Participating
Company Group or any Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material
breach by the Participant of any employment agreement between the
Participant and the Participating Company Group or any
Participating Company, which breach is not cured pursuant to the
terms of such agreement; or (vi) the Participant's conviction
(including any plea of guilty or nolo contendere) of any felony
or any other criminal act which impairs the Participant's ability
to perform his or her duties with the Participating Company Group
or any Participating Company.

(h)  "Change in Control" has the meaning given to it in Section 13.1.

(i)  "Code" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.

(j)  "Committee" means the Compensation Committee or other committee
of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers
of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.

(k)  "Company" means Westwood Holdings Group, Inc., a Delaware
corporation, or any successor corporation thereto.

(l)  "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a
Participating

Page 2

Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided
would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on
either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act, registration
on a Form S-8 Registration Statement under the Securities Act.

(m)  "Deferred Compensation Plan" means that certain Westwood Holdings
Group, Inc. Deferred Compensation Plan, effective February 1,
2002.

(n)  "Director" means a member of the Board or of the board of
directors of any other Participating Company.

(o)  "Disability" means the permanent and total disability of the
Participant within the meaning of Section 22(e)(3) of the Code.

(p)  "Employee" means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee
for purposes of Section 422 of the Code; provided, however, that
neither service as a Director nor payment of a director's fee
shall be sufficient to constitute employment for purposes of the
Plan.

(q)  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(r)  "Exercise Period" has the meaning given to it in Section 10.1.

(s)  "Fair Market Value" means, as of any date, the value of a share
of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein,
subject to the following:

(i)  If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair
Market Value of a share of Stock shall be the closing price
of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, the Nasdaq
SmallCap Market or such other national or regional
securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street
---------------
Journal or such other source as the Company deems reliable.
-------
If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so
traded prior to the relevant date, or

Page 3

such other appropriate day as shall be determined by the
Board, in its discretion.

(ii) If, on such date, the Stock is not listed on a national or
regional securities exchange or market system, the Fair
Market Value of a share of Stock shall be as determined by
the Board in good faith without regard to any restriction
other than a restriction which, by its terms, will never
lapse.

(t)  "Good Reason" means (i) a resignation occurring within ninety
(90) days following a Change in Control; (ii) the relocation of
the principal place of business of the Participating Company for
which the Participant renders Service to a location more than 100
miles from its location as of the date of the Change in Control
without the Participant's consent; or (iii) a material reduction
in the Participant's salary or bonus opportunity, or the
Participant's responsibilities.

(u)  "Incentive Stock Option" means an Option intended to be (as set
forth in the Option Agreement), and which qualifies as, an
incentive stock option within the meaning of Section 422(b) of
the Code.

(v)  "Insider" means an officer or a Director of the Company or any
other person whose transactions in Stock are subject to Section
16 of the Exchange Act.

(w)  "Non-Employee Director" has the meaning given to it in Article 8.

(x)  "Nonstatutory Stock Option" means an Option not intended to be
(as set forth in the Option Agreement), or which does not qualify
as, an Incentive Stock Option.

(y)  "Option" means a right to purchase Stock (subject to adjustment
as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or
a Nonstatutory Stock Option.

(z)  "Option Agreement" means a written agreement between the Company
and a Participant setting forth the terms, conditions and
restrictions of the Option granted to the Participant and any
shares acquired upon the exercise thereof. An Option Agreement
may consist of a form of "Notice of Grant of Stock Option" and a
form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve
from time to time

(aa) "Option Expiration Date" has the meaning given to it in Section
6.6(a)(i).

(bb) "Ownership Change Event" has the meaning given to it in Section
13.1.

Page 4

(cc) "Parent" means (i) any "parent corporation" as defined in Section
424(e) of the Code and any successor provisions; (ii) any other
entity that is taxed as a corporation under Section 7701(a)(3) of
the Code and is a member of the "affiliated group" as defined in
Section 1504(a) of the Code of which the Company is a common
subsidiary corporation, and (iii) any other entity as may be
permitted from time to time by the Code or the Internal Revenue
Service to be an employer of employees to whom Options may be
granted; provided, however, that in each case the Company must be
consolidated in the Parent's financial statements.

(dd) "Participant" means a person who has been granted one or more
awards pursuant to the terms and conditions of the Plan.

(ee) "Participating Company" means the Company or any Parent or
Subsidiary.

(ff) "Participating Company Group" means, at any point in time, all
corporations or other entities collectively which are then
Participating Companies.

(gg) "Performance Cycle" means (i) with respect to any Annual
Incentive Award, the twelve (12) month period beginning on
January 1, 2002 and each January 1 thereafter, and (ii) with
respect to any Performance-Based Award, the period determined by
the Committee over which the Company's level of attainment of a
Performance Measure shall be determined.

(hh) "Performance Goals" means, with respect to any Annual Incentive
Award or Performance-Based Award, one or more targets, goals or
levels of attainment required to be achieved in terms of the
specified Performance Measure during a fiscal year or specified
Performance Cycle, as applicable.

(ii) "Performance Measure" means, with respect to any Annual Incentive
Award or Performance-Based Award, the business criteria
established by the Committee to measure the level of performance
of the Company during the fiscal year or Performance Cycle, as
applicable. The Committee may select as the Performance Measure
any one or combination of financial measures, as interpreted by
the Committee, which (to the extent applicable) can be determined
either on a pro forma or GAAP basis, and either pre-tax or
after-tax, such as: earnings per share, return on equity, return
on invested capital, relative total shareholder return, revenue
growth, Stock performance, net income, return on sales, return on
assets, economic value added, cash flow and net operating income.

(jj) "Performance-Based Award" has the meaning given to it in Section
12.1.

Page 5

(kk)    "Permitted Transferees" has the meaning given to it in Section
6.7.

(ll)    "Plan" has the meaning given to it in Section 1.1.

(mm)    "Purchase Right" means the right to purchase Stock in
accordance with the provisions of Section 10.

(nn)    "Restricted Period" has the meaning given to it in Section
9.1.

(oo)    "Restricted Stock" means an award of Stock made under Section
9, which is subject to vesting provisions.

(pp)    "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or
regulation.

(qq)    "Securities Act" means the Securities Act of 1933, as amended.

(rr)    "Service" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. A Participant's Service
shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the
Participating Company for which the Participant renders such
Service, provided that there is no interruption or termination
of the Participant's Service. Furthermore, a Participant's
Service with the Participating Company Group shall not be
deemed to have terminated if the Participant takes any
military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if
any such leave exceeds ninety (90) days, on the ninety-first
(91st) day of such leave the Participant's Service shall be
deemed to have terminated unless the Participant's right to
return to Service with the Participating Company Group is
guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under any Option
Agreement. The Participant's Service shall be deemed to have
terminated either upon an actual termination of Service or
upon the corporation for which the Participant performs
Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine
whether the Participant's Service has terminated and the
effective date of such termination.

(ss)    "Spin-off Date" means the date on which SWS Group, Inc., a
Delaware corporation, distributes all of the Stock that it
then holds to its stockholders.

(tt)    "Stock" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

Page 6

(uu)    "Subsidiary" means (i) any "subsidiary corporation" of the
Company, as defined in Section 424(f) of the Code and any
successor provisions, (ii) any other entity that is taxed as a
corporation under Section 7701(a)(3) of the Code and is a
member of the "affiliated group" as defined in Section 1504(a)
of the Code of which the Company is a common parent
corporation, and (iii) any other entity as may be permitted
from time to time by the Code or the Internal Revenue Service
to be an employer of employees to whom Options may be granted;
provided, however, that in each case the subsidiary
corporation must be consolidated in the Company's financial
statements.

(vv)    "Ten Percent Owner Participant" means a Participant who, at
the time an Option is granted to the Participant, owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of a Participating
Company within the meaning of Section 422(b)(6) of the Code.

(ww)    "Termination After Change in Control" shall mean either of the
following events occurring within twelve (12) months after (or
as a result of) a Change in Control:

(i)   termination by the Participating Company Group of the
Participant's Service with the Participating Company
Group for any reason other than for Cause; or

(ii)  the Participant's resignation for Good Reason from
Service with the Participating Company Group within a
reasonable period of time following the event
constituting Good Reason.

Notwithstanding any provision herein to the contrary, Termination
After Change in Control shall not include any termination of the
Participant's Service with the Participating Company Group which (1)
is for Cause; (2) is a result of the Participant's death or
Disability; (3) is a result of the Participant's voluntary termination
of Service other than for Good Reason; or (4) occurs prior to the
effectiveness of a Change in Control (and is not directly related to a
Change in Control).

2.2  Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context,
the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless
the context clearly requires otherwise.

3.   ADMINISTRATION.
--------------

3.1  Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Award
shall be determined by the

Page 7

Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan.

3.2  Authority of Officers. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.

3.3  Powers of the Board. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Board shall have
the full and final power and authority, in its discretion:

(a)  to determine the persons to whom, and the time or times at which,
Awards shall be granted and, if applicable, the number of shares
of Stock to be subject thereto;

(b)  to designate Options as Incentive Stock Options or Nonstatutory
Stock Options;

(c)  to determine the Fair Market Value of shares of Stock or other
property;

(d)  to determine the terms, conditions and restrictions applicable to
each Award (which need not be identical) and, if applicable, any
shares acquired upon the exercise thereof, including, without
limitation, (i) the exercise price of an Option or Purchase
Right, (ii) the method of payment for shares purchased upon the
exercise of the Option or Purchase Right, (iii) the method for
satisfaction of any tax withholding obligation arising in
connection with the Award or such shares of Stock issued or cash
provided thereunder, including by the withholding or delivery of
shares of Stock or cash, (iv) the timing, terms and conditions of
the exercisability of the Award or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the
expiration of the Award, (vi) the effect of the Participant's
termination of Service with the Participating Company Group on
any of the foregoing, and (vii) all other terms, conditions and
restrictions applicable to the Award not inconsistent with the
terms of the Plan;

(e)  to approve one or more forms of Option Agreement or Award
Certificate;

(f)  to amend, modify, extend, cancel or renew any Award, or to waive
any restrictions or conditions applicable to any Award or any
shares of Stock acquired upon the exercise thereof;

(g)  to accelerate, continue, extend or defer the exercisability of
any Award or the vesting of any shares acquired upon the exercise
thereof, including with respect to the period following a
Participant's termination of Service with the Participating
Company Group;

Page 8

(h)  to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or
to accommodate the tax policy or custom of, foreign jurisdictions
whose citizens may be granted Options; and

(i)  to correct any defect, supply any omission or reconcile any
inconsistency in the Plan, any Option Agreement or any Award
Certificate and to make all other determinations and take such
other actions with respect to the Plan or any Option as the Board
may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

3.4  Administration with Respect to Insiders. With respect to participation
by Insiders in the Plan, at any time that any class of equity security
of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.

3.5  Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of
the Participating Company Group, members of the Board and any officers
or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by
the Company against all reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan,
or any right granted hereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the
same.

4.   SHARES SUBJECT TO PLAN.
----------------------

4.1  Maximum Number of Shares Issuable. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be 948,100 shares, and shall
consist of authorized but unissued or reacquired shares of Stock or
any combination thereof. If an outstanding Award for any reason
expires or is terminated or canceled or if shares of Stock are
acquired upon the exercise of an Award or otherwise subject to a
Company repurchase option and are repurchased by the Company at the
Participant's exercise price, or if shares of Restricted Stock are
forfeited unvested, the shares of Stock shall again be available for
issuance under the Plan. Subject

Page 9

to adjustment as provided in Section 4.2, the maximum aggregate number
of Options for shares of Stock that may be awarded in any year to any
Participant may not exceed 316,033 shares.

4.2  Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital
structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and to any outstanding
Awards (if applicable) and in the exercise price per share of any
outstanding Awards (if applicable). If a majority of the shares which
are of the same class as the shares that are subject to outstanding
Awards are exchanged for, converted into, or otherwise become (whether
or not pursuant to an Ownership Change Event, as defined in Section
13.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Awards to provide that such Awards
are exercisable for New Shares. In the event of any such amendment,
the number of shares subject to, and the exercise price per share of,
the outstanding Awards shall be adjusted in a fair and equitable
manner as determined by the Board, in its discretion. Notwithstanding
the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the exercise price of any Award be
decreased to an amount less than the par value, if any, of the stock
subject to the Award. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.

5.   ELIGIBILITY AND OPTION LIMITATIONS.
----------------------------------

5.1  Persons Eligible for Awards. Awards may be granted pursuant to this
Plan only to Employees, Consultants, and Directors. For purposes of
the foregoing sentence, "Employees," "Consultants" and "Directors"
shall include prospective Employees, prospective Consultants and
prospective Directors to whom Awards are granted in connection with
written offers of an employment or other service relationship with the
Participating Company Group. Eligible persons may be granted more than
one (1) Award.

5.2  Option Grant Restrictions. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to
a prospective Employee upon the condition that such person become an
Employee shall be deemed granted effective on the date such person
commences Service with a Participating Company, with an exercise price
determined as of such date in accordance with Section 6.1.

5.3  Fair Market Value Limitation. To the extent that Options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by
a Participant for the first time during any calendar year for Stock
having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such Options

Page 10

which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as
Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of Stock
shall be determined as of the time the Option with respect to
such Stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3,
such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code. If an Option
is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 5.3, the Participant may designate which
portion of such Option the Participant is exercising. In the
absence of such designation, the Participant shall be deemed to
have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall
be issued upon the exercise of the Option.

6.    TERMS AND CONDITIONS OF OPTIONS.
-------------------------------

Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

6.1      Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however,
that (a) the exercise price per share for an Option shall be not
less than the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (b) no Incentive Stock
Option granted to a Ten Percent Owner Participant shall have an
exercise price per share less than one hundred ten percent (110%)
of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a
manner qualifying under the provisions of Section 424(a) of the
Code.

6.2      Exercisability and Term of Options. Options shall be exercisable
at such time or times, or upon such event or events, and subject
to such terms, conditions, performance criteria and restrictions
as shall be determined by the Board and set forth in the Option
Agreement evidencing such Option; provided, however, that (a) no
Option shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner Participant
shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on
which such person commences Service

Page 11

with a Participating Company. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option, any
Option granted hereunder shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated
in accordance with its provisions.

6.3      Payment of Exercise Price.

(a)  Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number
of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check or cash equivalent, (ii)
by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair
Market Value (as determined by the Company without regard to
any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements
with an underwriter for the Company) not less than the
exercise price, (iii) by delivery of a properly executed
notice together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds
of a sale or loan with respect to some or all of the shares
being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a
"Cashless Exercise"), (iv) provided that the Participant is
an Employee and in the Company's sole discretion at the time
the Option is exercised, by delivery of the Participant's
promissory note in a form approved by the Company for the
aggregate exercise price, provided that, if the Company is
incorporated in the State of Texas, the Participant shall
pay in cash that portion of the aggregate exercise price not
less than the par value of the shares being acquired, (v) by
such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law,
or (vi) by any combination thereof. The Board may at any
time or from time to time, by approval of or by amendment to
the standard forms of Option Agreement described in Section
7, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict
one or more forms of consideration.

(b)  Limitations on Forms of Consideration.

(i)   Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company,
or attestation to the ownership, of shares of Stock to
the extent such tender or attestation would constitute
a violation of the provisions of any law, regulation
or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the
Board, an Option may not be by tender to the Company,
or attestation to the ownership, of shares of Stock
unless such shares

Page 12

either have been owned by the Participant for more
than six (6) months or were not acquired, directly or
indirectly, from the Company.

(ii)   Cashless Exercise.  The Company reserves, at any and
all times, the right, in the Company's sole and
absolute discretion, to establish, decline to approve
or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

(iii)   Payment by Promissory Note.  No promissory note shall
be permitted if the exercise of an Option using a
promissory note would be a violation of any law.  Any
permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is
granted.  The Board shall have the authority to
permit or require the Participant to secure any
promissory note used to exercise an Option with the
shares of Stock acquired upon the exercise of the
Option or with other collateral acceptable to the
Company.  Unless otherwise provided by the Board, if
the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity
affecting the extension of credit in connection with
the Company's securities, any promissory note shall
comply with such applicable regulations, and the
Participant shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply
with such applicable regulations.

6.4   Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Participant the tender
of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the federal,
state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to such Option or the
shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to
require the Participant, through payroll withholding, cash payment or
otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such tax withholding obligations of the
Participating Company Group arising in connection with the Option or
the shares acquired upon the exercise thereof the Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates, the Company shall have
no obligation to deliver shares of Stock or to release shares of Stock
from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been
satisfied by the Participant.

Page 13

6.5      Repurchase Rights. Shares issued under the Plan may be subject to a
right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its
discretion at the time the Option is granted. The Company shall have
the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on
such certificates of appropriate legends evidencing any such transfer
restrictions.

6.6      Effect of Termination of Service.

(a)  Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided
by the Board in the grant of an Option and set forth in the
Option Agreement, an Option shall be exercisable after a
Participant's termination of Service only during the applicable
time period determined in accordance with this Section 6.6 and
thereafter shall terminate:

(i)       Disability. If the Participant's Service with the
Participating Company Group terminates because of the
Disability of the Participant, the Option, to the
Disability exercisable on the date on which the
Disability terminated, may be exercised by the
Participant (or the Participant's guardian or legal
to the expiration of one (1) year (or such other period
of time as determined by the Board, in its discretion)
after the date on which the Participant's Service
terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the
Option Agreement evidencing such Option (the
"Option Expiration Date").

(ii)       Death.  If the Participant's Service with the
Participating Company Group terminates because of the
death of the Participant, the Option, to the extent
unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by
legal representative or other person who acquired the
right to exercise the Option by reason of the
Participant's death at any time prior to the expiration
of one (1) year (or such other period of time as
determined by the Board, in its discretion) after the
date on which the Participant'sService terminated, but
in any event no later than the Option Expiration Date.
The Participant's Service shall be deemed to have
terminated on account of death if theParticipant dies
within three (3) months (or such otherperiod of time as
determined by the Board, in its discretion) after the
Participant's termination of Service.

Page 14

(iii)     Cause. If the Participant's Service with the
Participating Company Group is terminated for Cause,
the Option shall terminate and cease to be exercisable
immediately upon such termination of Service.

(iv)      Termination After Change in Control.  Except as
otherwise specified in an Option Agreement, if the
Participant's Service with the Participating Company
Group ceases as a result of Termination After Change
in Control, then (1) the Option, to the extent
unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by
the Participant (or the Participant's guardian or
legal representative) at any time prior to the
expiration of three (3) months (or such longer period
of time as determined by the Board, in its sole
discretion) after the date on which the Participant's
Service terminated, but in any event no later than the
Option Expiration Date, and (2) any unexercisable or
unvested portion of the Option shall become fully
vested and exercisable as of the date on which the
Participant's Service terminated.

(v)       Termination of Service. If the Participant's Service
with the Participating Company Group terminates for
any reason, except Disability, death or Cause, the
Option, to the extent unexercised and exercisable by
the Participant on the date on which the Participant's
Service terminated, may be exercised by the
Participant at any time prior to the expiration of
three (3) months (or such other period of time as
determined by the Board, in its discretion) after  the
date on which the Participant's Service terminated,
but in any event no later than the Option Expiration
Date.

(b)     Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable
time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 16 below, the Option shall remain
exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the
date the Participant is notified by the Company that the Option
is exercisable, but in any event no later than the Option
Expiration Date.

(c)     Extension if Participant Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable
time periods set forth in Section 6.6(a) of shares acquired upon
the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by
the Participant would no longer be subject to such suit, (ii)
the one hundred and ninetieth

Page 15

(190/th/) day after the Participant's termination of Service, or
(iii) the Option Expiration Date.

6.7  Transferability of Options. Incentive Stock Options granted under the
Plan shall not be transferable otherwise than by will or the laws of
descent and distribution, or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. Incentive Stock Options shall be exercisable during the
lifetime of the Participant only by the Participant or by the
Participant's guardian or legal representative (unless such exercise
would disqualify an Option as an Incentive Stock Option). With the
approval of the Board, the Option Agreement (other than an Incentive
Stock Option) may provide that such Option may be transferred without
consideration to one or more Permitted Transferees. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an
Option or other award contrary to the provisions hereof, or the levy
of any execution, attachment or similar process upon an Option or
other award shall be null and void and without effect. As used herein,
"Permitted Transferees" means a member of a Participant's immediate
family, trusts for the exclusive benefit of such Participant and/or
such Participant's immediate family members, and partnerships or other
entities in which the Participant and/or such immediate family members
are the only partners, provided that no consideration is provided for
the transfer. Immediate family members shall include a Participant's
spouse, descendants (children, grandchildren and more remote
descendants), spouses of descendants, and shall include step-children
and relationships arising from legal adoption.

7.   STANDARD FORMS OF OPTION AGREEMENT.
----------------------------------

7.1  Option Agreement. Unless otherwise provided by the Board at the time
the Option is granted, an Option shall comply with and be subject to
the terms and conditions set forth in the form of Option Agreement
approved by the Board concurrently with its adoption of the Plan and
as amended from time to time.

7.2  Authority to Vary Terms. The Board shall have the authority from time
to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard
form or forms of Option Agreement are not inconsistent with the terms
of the Plan.

8.   AWARD AND DELIVERY OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
-------------------------------------------------------

Notwithstanding any other provision of the Plan, each Director who is not
an Employee (a "Non-Employee Director") shall, shortly following the Spin-off
Date and upon each date of election or re-election as a Board member, be granted
a Nonstatutory Stock Option for 2,500 shares of Stock. The exercise price for
any Options awarded pursuant to this Article 8

Page 16

shall be equal to one hundred percent (100%) of the Fair Market Value of the
shares on the date of grant. Each such Option shall fully vest at the expiration
of twelve (12) months from the date of the grant. Each Non-Employee Director
Option shall have a term of ten (10) years. Expiration of a Non-Employee
Director's term of office shall not affect a Non-Employee Director's right to
exercise its Option to the extent such Option is vested at any time prior to the
expiration of the Director's term.

9.   AWARD AND DELIVERY OF RESTRICTED STOCK.
--------------------------------------

9.1  Restricted Period. At the time an award of Restricted Stock is made,
the Committee shall establish a period or periods of time (each a
"Restricted Period") or such other restrictions on the vesting of the
Restricted Stock as it shall deem appropriate or applicable to such
award. Each award of Restricted Stock may have a different Restricted
Period or Restricted Periods. The Committee may, in its sole
discretion, at the time an award is made, provide for the incremental
lapse of Restricted Periods with respect to a portion or portions of
the Restricted Stock awarded, and for the lapse or termination of
restrictions upon all or any portion of the Restricted Stock upon the
satisfaction of other conditions in addition to or other than the
expiration of the applicable Restricted Period. The Committee may
also, in its sole discretion, shorten or terminate a Restricted Period
or waive any conditions for the lapse or termination of restrictions
with respect to all or any portion of the Restricted Stock.

9.2  Rights and Privileges. At the time a grant of Restricted Stock is made
to a Participant, a stock certificate representing a number of shares
of the Company's common stock equal to the number of shares of such
Restricted Stock shall be registered in the Participant's name but
shall be held in custody by the Company for such Participant's
account. The Participant shall generally have the rights and
privileges of a stockholder as to such Restricted Stock, including,
without limitation, the right to vote the Restricted Stock, except
that, subject to the earlier lapse or termination of restrictions as
herein provided, the following restrictions shall apply: (i) the
Participant shall not be entitled to delivery of the stock certificate
evidencing Restricted Stock until the expiration or termination of the
Restricted Period applicable to such shares and the satisfaction of
any other conditions prescribed by the Committee; (ii) none of the
shares then subject to a Restricted Period shall be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the
Restricted Period applicable to such shares and until the satisfaction
of any other conditions prescribed by the Committee; and (iii) all of
the shares then subject to a Restricted Period shall be forfeited and
all rights of the Participant to such Restricted Stock shall terminate
without further obligation on the part of the Company if the
Participant ceases to be an Employee, Consultant or Director of the
Company or any of its subsidiaries before the expiration or
termination of such Restricted Period and the satisfaction of any
other conditions prescribed by the Committee applicable to such
Restricted Stock. Dividends on Restricted Stock shall be currently
paid; provided, however,
--------  -------

Page 17

that in lieu of paying currently a dividend of shares of Common Stock
in respect of Restricted Stock, the Committee may, in its sole
discretion, register in the name of a Participant a stock certificate
representing such shares of Common Stock issued as a dividend on
Restricted Stock, and may cause the Company to hold such certificate
in custody for the Participant's account subject to the same terms and
conditions as such Restricted Stock. Upon the forfeiture of any
Restricted Stock, such forfeited Restricted Stock shall be transferred
to the Company without further action by the Participant.

9.3  Expiration of Restricted Period. Upon the expiration or termination of
the Restricted Period applicable to Restricted Stock and the
satisfaction of any other conditions prescribed by the Committee or at
such earlier time as provided for herein, the restrictions applicable
to the Restricted Stock to such Restricted Period shall lapse and a
certificate for a number of shares of Common Stock equal to the number
of shares of Restricted Stock with respect to which the restrictions
have expired or terminated shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the
Participant. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay to the Participant, in
lieu thereof, the product of (i) the Fair Market Value per share
(determined as of the date the restrictions expire or terminate) and
(ii) the fraction of a share to which such Participant would otherwise
be entitled.

10.  AWARD AND DELIVERY OF PURCHASE RIGHTS.
-------------------------------------

10.1 Purchase Rights. At the time an award of Purchase Rights is made, the
Committee shall establish a period or periods of time during which the
Purchase Right may be exercised (each an "Exercise Period") or such
other restrictions as it shall deem appropriate and applicable to such
award. Each award of Purchase Rights may have a different Exercise
Period or Exercise Periods. Each award shall specify the method of
payment (which may include promissory notes) to purchase Stock and
shall set forth any repurchase rights or calls applicable to the
purchased Stock.

11.  ANNUAL INCENTIVE AWARDS.
-----------------------

11.1 Annual Incentive Awards. The Committee may grant annual incentive
awards of Stock or cash (each an "Annual Incentive Award") to such
Participants as the Committee may from time to time recommend, in such
amounts and subject to such terms and conditions as the Committee in
its discretion may determine. The Committee shall establish the
maximum amount of Annual Incentive Awards that may be granted for each
Performance Cycle. Notwithstanding the foregoing, all Annual Incentive
Awards shall be subject to the provisions of paragraphs (a) through
(e) below:

(a)  Annual Incentive Awards shall be granted in connection with a
12-month Performance Cycle, which shall be the fiscal year of the
Company. The

Page 18

first Performance Cycle under the Plan shall commence on January 1,
2002.

(b)  Subject to Section 4.1, within ninety (90) days after the commencement
of a Performance Cycle, the Committee shall determine the Participants
who shall be eligible to receive an Annual Incentive Award for such
Performance Cycle.

(c)  Within ninety (90) days after the commencement of a Performance Cycle,
the Committee shall fix and establish, in writing, (A) the Performance
Measure(s) that shall apply to such Performance Cycle, (B) an
objective formula for computing the amount of the Annual Incentive
Awards for such Performance Cycle, where the amount shall be based
upon the attainment of various Performance Goals for the applicable
Performance Measure(s). Notwithstanding anything to the contrary, the
Committee may, on a case by case basis and in its sole discretion,
reduce, but not increase, the Annual Incentive Award payable to any
Participant with respect to any given Performance Cycle (unless the
Participant has a vested right under applicable employment law to
receive the full Annual Incentive Award), provided, however, that no
--------  -------
such reduction shall result in an  increase to any other Participant.

(d)  No Annual Incentive Award shall be paid to a Participant under this
Section 11 unless and until the Committee certifies in writing the
level of attainment of the applicable Performance Goals for the
applicable Performance Cycle and Participants shall not have any right
or claim whatsoever for payment of any Annual Incentive Award until
the Committee has made such certification in writing.

(e)  Annual Incentive Awards shall be paid in the form of cash, Stock
(including Restricted Stock) or any combination thereof; provided,
--------
however, that the Committee shall determine the form of payment of any
-------
Annual Incentive Awarded to a Participant within ninety (90) days
after the commencement of the applicable Performance Cycle. A portion
of any payments made in connection with an Annual Incentive Award may,
at the election of the Participant, be deferred pursuant to the
provisions of the Deferred Compensation Plan.

12.  PERFORMANCE-BASED AWARDS.
------------------------

12.1 Performance-Based Awards. The Committee may grant to officers and
other key Employees of either the Company or any Subsidiary the prospective
contingent right, expressed in Units, to receive payments of Stock, cash or
any combination thereof, with each Unit equivalent in value to one share of
Stock, or equivalent to such other value or monetary amount as may be
designated or established by the Committee ("Performance-Based Awards").
Performance-Based Awards shall be earned by Participants only if

Page 19

specified Performance Goals are satisfied in the applicable Performance
Cycle. The Committee shall, in its sole discretion, determine the officers
and other key Employees eligible to receive Performance-Based Awards. At
the time each grant of a Performance-Based Award is made, the Committee
shall establish the applicable Performance Cycle, the Performance Measure
and Performance Goals in respect of such Performance-Based Award. The
number of shares of Stock and/or the amount of cash earned and payable in
settlement of a Performance-Based Award shall be determined by the
Committee at the end of the Performance Cycle.

12.2 The Committee may grant Performance-Based Awards to a Participant in
such amounts as the Committee may determine, subject to the limitations set
forth in Section 4.1.

12.3 A certificate (an "Award Certificate") for each Performance-Based
Award shall provide that, in order for a Participant to earn all or a
portion of the Units subject to such Performance-Based Award, the Company
must achieve certain Performance Goals over a designated Performance Cycle
having a minimum duration of one year. The Performance Goals and
Performance Cycle shall be established by the Committee in its sole
discretion. The Committee shall establish a Performance Measure for each
Performance Cycle for determining the portion of the Performance-Based
Award, which will be earned or forfeited, based on the extent to which the
Performance Goals are achieved or exceeded. Performance Goals may include
minimum, maximum and target levels of performance, with the size of the
Performance-Based Award based on the level attained. Once established by
the Committee and specified in the Award Certificate, and if and to the
extent provided in or required by the Award Certificate, the Performance
Goals and the Performance Measure in respect of any Performance-Based Award
shall not be changed. The Committee may, in its discretion, eliminate or
reduce (but not increase) the amount of any Performance-Based Award that
otherwise would be payable to a Participant upon attainment of the
Performance Goal(s) unless the Participant has a vested right under
applicable employment law to receive the full Performance-Based Award.

12.4 Performance-Based Awards may be made on such terms and conditions not
inconsistent with the Plan, and in such form or forms, as the Committee may
from time to time approve. Performance-Based Awards may be made alone, in
addition to in tandem with, or independent of other grants and awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant
made to a Participant and the Committee may impose different terms and
conditions on any particular Performance-Based Award made to any
Participant. The Performance Goals, the Performance Cycle and the
Performance Measure applicable to a Performance Grant shall be set forth in
the relevant Award Certificate.

12.5 Each Participant shall be entitled to receive payment in an amount
equal to the aggregate Fair Market Value (if the Unit is equivalent to a
share of Stock), or such other value as the Committee shall specify, of the
Units earned in respect of such Performance Award. Payment in settlement of
a Performance-Based Award may be made in Stock, in cash, or in any
combination of Stock and cash, and at such time or times, as the

Page 20

Committee, in its discretion, shall determine. A portion of any
payments made in connection with a Performance-Based Award may, at the
election of the Participant, be deferred pursuant to the provisions of
the Deferred Compensation Plan.

13.  CHANGE IN CONTROL.
-----------------

13.1 Definitions.

(a)  An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the
Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of
all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.

(b)  A "Change in Control" shall mean (i) a merger or
consolidation of the Company with or into another
corporation in which the Company shall not be the surviving
corporation (other than a merger undertaken solely in order
to reincorporate in another state) (for purposes hereof, the
Company shall not be deemed the surviving corporation in any
such transaction if, as the result thereof, it becomes a
wholly-owned subsidiary of another corporation), (ii) a
dissolution of the Company, (iii) a transfer of all or
substantially all of the assets of the Company in one
transaction or a series of related transactions to one or
more other persons or entities, (iv) a transaction or series
of transactions that results in any entity, "Person" or
"Group" (as defined below), becoming the beneficial owner,
directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of
the Company's then outstanding securities, or (v) during any
period of two (2) consecutive years commencing on or after
January 1, 2002, individuals who at the beginning of the
period constituted the Company's Board of Directors cease
for any reason to constitute at least a majority, unless the
election of each director who was not a director at the
beginning of the period has been approved in advance by
directors representing at least two-thirds (2/3) of the
directors then in office who were directors at the beginning
of the period; provided, however, that a "Change in Control"
shall not be deemed to have occurred if the ownership of 50%
or more of the combined voting power of the surviving
corporation, asset transferee or Company (as the case may
be), after giving effect to the transaction or series of
transactions, is directly or indirectly held by (A) a
trustee or other fiduciary under an employee benefit plan
maintained by the Company, (B) one or more of the "executive
officers" of the Company that held such positions prior to
the transaction or series of transactions, or any entity,
Person or Group under their control. As used herein,
"Person" and "Group" shall have the meanings set forth in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange
Act of 1934,

Page 21

as amended, and "executive officer" shall have the meaning set
forth in Rule 3b-7 promulgated under such Act .

13.2 Effect of Change in Control on Awards. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing
corporation or Parent thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations
under outstanding Awards or substitute for outstanding Awards
substantially equivalent awards, including awards for the Acquiring
Corporation's stock, if applicable. For purposes of this Section 13.2,
an Award shall be deemed assumed if, following the Change in Control,
the Award confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether
stock, cash or other securities or property) to which a holder of a
share of Stock on the effective date of the Change in Control was
entitled. In the event the Acquiring Corporation elects not to assume
or substitute for outstanding Awards in connection with a Change in
Control, the exercisability and vesting of each outstanding Award
shall be accelerated for 12 months as of the date ten (10) days prior
to the date of the Change in Control, provided that the Participant's
Service has not terminated prior to such date. The exercise or vesting
of any Award that was permissible solely by reason of this Section
13.2 shall be conditioned upon the consummation of the Change in
Control. Any Award which is neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor
exercised as of the date of the Change in Control shall terminate and
cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise
of an Award prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares
shall continue to be subject to all applicable provisions of the
applicable Option Agreement, Award Certificate or Stock Purchase
Agreement, except as otherwise provided therein. Furthermore,
notwithstanding the foregoing, if the Change in Control results from
an Ownership Change Event described in Section 13.1(a)(i) and the
Company is the surviving or continuing corporation and immediately
after such Change in Control less than fifty percent (50%) of the
total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard
to the provisions of Section 1504(b) of the Code, the outstanding
Awards shall not terminate unless the Board otherwise provides in its
discretion.

14.  PROVISION OF INFORMATION.
------------------------

Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company's
common stockholders.

Page 22

15.  COMPLIANCE WITH SECURITIES LAW.
------------------------------

The grant of an Award and the issuance of shares of Stock upon exercise of
an Award, if applicable, shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
An Award may not be exercised for shares of Stock if the issuance of such shares
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Award may be exercised for shares of Stock unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Award be
in effect with respect to the shares of Stock issuable upon exercise of the
Award or (b) in the opinion of legal counsel to the Company, the shares of Stock
issuable upon exercise of the Award may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares of Stock hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares of Stock as to which such requisite authority shall not have been
obtained. As a condition to the exercise of any Award, the Company may require
the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.

16.  TERMINATION OR AMENDMENT OF PLAN.
--------------------------------

The Board may terminate or amend the Plan at any time. However, subject to
changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
stockholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Award without the consent of the
Participant, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option or is necessary to comply with any applicable law, regulation or rule.

17.  STOCKHOLDER APPROVAL.
--------------------

Both the Plan and any increase in the maximum aggregate number of shares of
Stock issuable thereunder as provided in Section 4.1 (the "Authorized Shares")
shall be approved by the stockholders of the Company within twelve (12) months
of the date of adoption thereof by the Board. Awards granted prior to
stockholder approval of the Plan or in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.

Page 23

PLAN HISTORY
------------

February 1, 2002        Board adopts Plan, with an initial reserve of 948,100
shares.

February 8, 2002        Stockholders approve Plan, with an initial reserve of
948,100 shares.

Page 24

Exhibit 99.1
PRELIMINARY COPY
SUBJECT TO COMPLETION OR AMENDMENT

INFORMATION STATEMENT OF SWS GROUP, INC.

Dear SWS Group, Inc. Stockholder:

On April 8, 2002, the Board of Directors of SWS Group, Inc. ("SWS") approved
plans to spin-off its Westwood asset management business to SWS stockholders.
SWS will accomplish the spin-off by distributing all of the common stock of
Westwood Holdings Group, Inc. ("Westwood") that it holds to SWS stockholders.
As a holder of SWS common stock, you will receive one share of Westwood common
stock for every four shares of SWS common stock that you own at the close of
business on May   , 2002, the record date for the spin-off. We are sending you
this information statement to describe the spin-off of Westwood from SWS. The
spin-off is intended to be tax-free to SWS stockholders, except for cash
received for any fractional shares. We expect the spin-off to occur on or about
May   , 2002. Immediately after the spin-off is completed, SWS will not own any
shares of Westwood common stock, and Westwood will be an independent public
company.

A STOCKHOLDER VOTE IS NOT REQUIRED FOR THE SPIN-OFF TO OCCUR. WE ARE NOT
ASKING YOU FOR A PROXY, AND WE REQUEST THAT YOU DO NOT SEND US A PROXY. In
addition, you do not need to pay any cash or other consideration for the shares
of Westwood common stock that you receive in the spin-off, nor will you be
required to surrender or exchange shares of SWS common stock, or take any other
action in order to receive Westwood common stock. The number of shares of SWS
common stock that you currently own will not change as a result of the spin-off.

SWS has contributed 100% of the issued and outstanding capital stock of
Westwood Management Corporation ("Westwood Management") and Westwood Trust to
Westwood, a newly formed corporation controlled by SWS. Westwood is a holding
company and its principal assets consist of all of the outstanding capital
stock of Westwood Management and Westwood Trust. Westwood Management and
Westwood Trust are continuing to operate as wholly owned subsidiaries of
Westwood. Following the spin-off, SWS will continue to own brokerage and
banking businesses, including SWS Securities, Inc.; SWS Financial Services,
Inc.; Mydiscountbroker.com, Inc.; May Financial Corporation; Southwest Clearing
Corp.; O'Connor & Company Securities, Inc.; First Savings Bank, FSB; FSBF,
L.L.C.; and FSB Development, L.L.C., as well as other businesses and operations.

There has been no trading market for Westwood common stock. However, we
expect that a limited market for Westwood common stock, commonly known as a
"when issued" trading market, will develop on or shortly before the record date
for the spin-off. The New York Stock Exchange has authorized the listing of
Westwood's common stock under the ticker symbol "WHG."

This information statement contains information about the spin-off of
Westwood and about its business, management and financial performance. We
encourage you to read it in its entirety.

Sincerely,

SWS GROUP, INC.
Don A. Buchholz
Chief Executive Officer

As you review this information statement, you should carefully consider the
matters described in "Risk Factors" beginning on page 6 in evaluating the
benefits and risks of holding or disposing of shares of Westwood common stock
that you will receive in the spin-off.

This information statement does not constitute an offer to sell or the
solicitation of an offer to buy any securities.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this information statement is truthful or complete. Any representation to the
contrary is a criminal offense.

The date of this information statement is April   , 2002, and it is being
mailed to SWS stockholders on or about April   , 2002.

TABLE OF CONTENTS

Page
----

SUMMARY................................................................   1
RISK FACTORS...........................................................   6
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS..........................  13
THE SPIN-OFF...........................................................  14
Background and Reasons for the Spin-Off.............................  14
Description of the Spin-off.........................................  17
Results of the Spin-off.............................................  18
Material U.S. Federal Income Tax Consequences of the Spin-off.......  18
Listing and Trading of Westwood Common Stock........................  22

RELATIONSHIP BETWEEN SWS AND WESTWOOD AFTER THE SPIN-OFF...............  23
Distribution Agreement..............................................  23
Transition Services Agreement.......................................  26
Tax Separation Agreement............................................  27

DIVIDEND POLICY........................................................  28
SELECTED CONSOLIDATED FINANCIAL DATA...................................  29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..........................................................  31
Overview............................................................  31
Results of Operations...............................................  33
Liquidity and Capital Resources.....................................  35
Quantitative and Qualitative Disclosures About Market Risk..........  36

BUSINESS...............................................................  37
General.............................................................  37
Westwood Management Corporation.....................................  37
Westwood Trust......................................................  40
Growth Strategy.....................................................  40
Competition.........................................................  41
Regulation..........................................................  42
Employees...........................................................  43
Properties..........................................................  43
Legal Proceedings...................................................  43

MANAGEMENT.............................................................  44
Board Committees....................................................  45
Director Compensation...............................................  46
Compensation of Executive Officers..................................  47
Compensation Committee Interlocks and Insider Participation.........  51

PRINCIPAL STOCKHOLDERS.................................................  52
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................  54
DESCRIPTION OF CAPITAL STOCK...........................................  55
WHERE YOU CAN FIND MORE INFORMATION....................................  59
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................. F-1

i

SUMMARY

This summary highlights selected information from this document but does not
contain all details concerning the spin-off of Westwood, including information
that may be important to you. To better understand the spin-off and Westwood,
you should carefully read this entire document. References in this document to
"we," "our," "us" or "Westwood" mean Westwood Holdings Group, Inc. and its
subsidiaries, Westwood Management Corporation and Westwood Trust.

On May   , 2002, we will effect a stock split in the form of a stock
dividend in order to provide the number of shares required for the spin-off. As
of April 1, 2002, SWS had 17,230,566 shares of common stock outstanding
(excluding treasury shares). Assuming no change to the number of SWS shares
outstanding on the record date for the spin-off, our stock split ratio would be
998.68483 shares of our common stock for every one share of our common stock
held, which would result in an estimated 5,372,310 shares of our common stock
outstanding immediately following the spin-off. Share numbers and some other
numbers based on share numbers that are presented in this information statement
reflect this assumed stock split ratio. To the extent that the number of SWS
shares outstanding on the record date for the spin-off is different than the
number outstanding on April 1, 2002, our actual stock split ratio and the
actual number of our shares outstanding immediately following the spin-off will
be somewhat different.

Who We Are

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at December 31, 2001, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.1 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

The Spin-off

SWS will accomplish the spin-off by distributing all of the shares of our
common stock that it holds to SWS's stockholders. SWS currently holds 80.18% of
our outstanding common stock. Some members of our management currently hold
19.82% of our outstanding common stock, and such shares will not be distributed
to SWS's stockholders. On April 8, 2002, the SWS Board of Directors formally
approved the spin-off. Each SWS stockholder as of the close of business on May
, 2002, which is the record date for the spin-off, will receive shares of our
common stock. Those SWS stockholders will receive one share of our common stock
for every four shares of SWS common stock held as of the record date. Our Board
of Directors has approved a stock split in the form of a stock dividend to be
effective as of May   , 2002 in order to provide the number of shares required
for the spin-off. SWS and we expect that the spin-off will take place on or
about May   , 2002, although completion of the spin-off is contingent upon the
satisfaction of conditions described in a distribution agreement. Based on the
assumed stock split ratio, SWS executive officers and directors will own
685,819 (or approximately 12.8%) of our outstanding shares, and our executive
officers and directors will own 1,143,687 (or approximately 21.3%) of our
outstanding shares following the spin-off. Common board members' holdings are
included in the foregoing figures. See "Relationship Between SWS and Westwood
After the Spin-off."

As soon as practicable on or about the spin-off date, SWS will deliver to
the distribution agent, Computershare Trust Company, Inc., certificates
representing the shares of our common stock that it holds. The distribution
agent will then make distributions in book-entry form to each holder of SWS
common stock, unless such holder requests the delivery of a certificate.

Questions and Answers About the Spin-off and Westwood

Q:  Why is SWS separating its businesses?

A:  SWS's Board of Directors has determined that the separation of its Westwood
asset management business from its other businesses, which include brokerage
and banking services, is in the best interests of its stockholders. SWS's Board
of Directors believes that the Westwood asset management business has distinct
financial and operating characteristics from SWS's other businesses and that
separating it will:

.  provide Westwood's management the ability to focus their efforts and
financial resources on its core business, thus enabling it to compete more
effectively in its own markets;

.  provide Westwood a platform to enhance client service by better aligning
Westwood's performance on behalf of its clients with the compensation of
its employees;

.  provide Westwood the ability to better retain and recruit high quality
employees by providing employee compensation and benefit programs more
closely tied to its performance, including stock-based and other incentive
programs that reward employees based on their contribution to its success;

.  provide Westwood the ability to operate independently without the capital
resource allocation issues present within the combined SWS, which in the
near term will allow Westwood to invest in additional technology, such as
an enhanced website and more efficient client reporting systems;

.  provide Westwood additional operating flexibility and allow it to achieve
improved cost structures and operating efficiencies;

.  enable Westwood to avoid any perception that a conflict of interest exists
because it is a subsidiary of SWS, as SWS is a large securities clearing
firm;

.  enable Westwood to attract business from competitors of SWS; and

.  enable the financial community and investors to better measure the
performance of both SWS and Westwood against comparable companies in
similar businesses and make investment decisions based on the separate
operations of the companies.

Q:  Why is the separation of the two companies structured as a spin-off?

A:  SWS's Board of Directors believes that a tax-free distribution of its
shares of Westwood offers SWS and its stockholders the greatest long-term value
and is the most tax efficient way to separate the companies.

Q:  Should I send in my SWS stock certificates for exchange?

A:  No. Holders of SWS common stock should not send stock certificates to SWS,
Westwood or the distribution agent.

Q:  How will fractional shares be treated?

A:  On or after the spin-off date, our distribution agent will aggregate all
fractional shares, sell them on the open market at prevailing market prices and
distribute the aggregate proceeds ratably to those SWS stockholders otherwise
entitled to those fractional shares. As a result, each holder of SWS common
stock who would otherwise be entitled to receive a fractional share will
receive cash for those fractional shares less applicable taxes and a pro rata
portion of the aggregate brokerage commission payable in connection with the
sale of the fractional shares.

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Q:  What do stockholders need to do to participate in the spin-off?

A:  Nothing. On the spin-off date, SWS will provide for the distribution of the
shares of our common stock that it holds by the distribution agent.

Q:  Will the spin-off change the number of shares I own in SWS?

A:  No. The spin-off will not change the number of SWS common shares that you
own. Immediately after the spin-off, SWS's stockholders will continue to own
their respective proportionate interests in SWS and Westwood. However,
stockholders will now own their interests in these businesses through their
ownership of stock in each of two independent public companies.

Q:  Are there risks to continuing to own Westwood common stock?

A:  Yes. Our business is subject to both general and specific business risks
relating to our operations. In addition, our separation from SWS presents risks
relating to our being an independent public company for the first time, as well
as risks relating to the nature of the spin-off transaction itself. Many of
these risks are described in the "Risk Factors" section beginning on page 6. We
encourage you to read that section carefully.

Q:  Will Westwood common stock be publicly traded?

A:  The New York Stock Exchange has authorized the listing of our common stock
on the NYSE under the ticker symbol "WHG." We expect that regular trading will
begin on or about the spin-off date.

Before regular trading begins, we expect that a limited market for shares of
our common stock, commonly known as a "when issued" trading market, will
develop on or shortly before the record date for the spin-off. The term
"when-issued" means that shares can be traded prior to the time certificates
are actually available or issued. Even though when-issued trading may develop,
none of these trades will settle prior to the effective date of the spin-off,
and if the spin-off does not occur, all when-issued trading will be null and
void.

Q.  Will the spin-off affect the trading price of my SWS common stock?

A:  Probably. After the spin-off, SWS common stock will continue to be listed
on the NYSE under the symbol "SWS," and the trading price of SWS common stock
will likely be lower than the trading price immediately prior to the spin-off.
Moreover, until the market has evaluated the operations of SWS without our
operations, the trading price of SWS common stock may fluctuate significantly.

Q.  What is likely to be the initial trading price range of Westwood common
stock?

A.  There can be no reliable prediction as to the prices at which Westwood
common stock will trade after completion of the spin-off. You should know,
however, that the SWS Board of Directors obtained a valuation report in
December 2001 that concluded as of September 30, 2001, after applying a
discount for lack of marketability to reflect the fact that Westwood was
privately held on that date, that the aggregate fair market value of a 19.9%
interest in Westwood common stock was $4,115,000, or $3.85 per share. In
February 2002 the SWS Board of Directors concluded that the distribution ratio
of one share of Westwood common stock for every four shares of SWS common stock
would likely result in an initial trading price for Westwood common stock of at
least $10.00 per share. This conclusion was reached based on the many years of
experience of SWS Board members in stock valuation and trading matters, and all
available information regarding the valuation of asset management companies at
that time. The SWS Board particularly noted that the market valuation of other
publicly held asset management companies had risen in recent months and that by
virtue of SWS having sold a portion of its ownership interest in Westwood to
Westwood management, that the value of Westwood was likely enhanced because key
members of Westwood management were incentivized to remain with Westwood and to
seek to increase the value of their ownership interest in Westwood. We do not
believe that investors should utilize either the September 30, 2001 valuation
or the conclusion of the SWS Board of Directors in February

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2002 in making any determination as to an appropriate value or an appropriate
initial trading range for Westwood common stock following completion of the
spin-off. Neither SWS nor Westwood can provide any assurance as to an
appropriate value or initial trading range for Westwood common stock. The
valuation of an equity security is very subjective, and different investors
will have different opinions of value and will apply varying valuation
methodologies. The market for Westwood common stock will ultimately value
Westwood common stock based on the composite of valuation expectations of all
market participants. Neither the valuations set forth in the valuation report
nor the SWS Board of Directors' conclusion as to the likely minimum initial
trading price reflects the valuation that a diverse pool of investors would
collectively assign to Westwood common stock. See "Risk Factors--Risks Relating
to the Spin-Off--There has been no prior market for our common stock, and it is
difficult to predict the prices at which our common stock might trade" and "The
Spin-Off--Background and Reasons for the Spin-Off."

Q:  What if I want to sell my SWS common stock or Westwood common stock?

A:  Unless you are an affiliate of SWS or Westwood, you are free to sell your
shares of SWS common stock or Westwood common stock. However, you should
consult with your financial and tax advisors as to the implications of any
sales. Neither SWS nor Westwood are making any recommendations on the purchase,
retention or sale of shares of SWS common stock or Westwood common stock. If
you do decide to sell any shares, you should make sure your broker, bank or
other nominee understands whether you want to sell your SWS common stock, your
Westwood common stock or both.

Q:  Will SWS And Westwood be related in any way after the spin-off?

A:  Immediately following the spin-off, SWS's significant stockholders will be
significant Westwood stockholders. However, SWS will not own any shares of our
common stock after the spin-off, and we will not own any shares of SWS common
stock after the spin-off. Although SWS will no longer have any ownership
interest in us after the spin-off, SWS and Westwood will have two common Board
members, Frederick R. Meyer and Jon L. Mosle, Jr. Based on the number of shares
of SWS common stock owned by SWS executive officers and directors as of April
1, 2002, they will directly or indirectly own 685,819 (or approximately 12.8%)
of our outstanding shares immediately following the spin-off. Further, as of
April 1, 2002, our executive officers and directors directly or indirectly
owned 418,403 (or approximately 2.4%) of the outstanding shares of SWS common
stock and, based on the assumed stock split, will own 1,143, 687 (or
approximately 21.3%) of our outstanding shares following the spin-off. The
common Board members' holdings are included in the foregoing SWS common stock
and Westwood common stock figures. Additionally, SWS and we have entered into
various agreements to define our continuing business relationships. See
"Relationship Between SWS and Westwood After the Spin-off."

Q:  What are the conditions to the spin-off becoming effective?

A:  The completion of the spin-off depends upon satisfaction of a number of
conditions, including:

.  the Securities and Exchange Commission must have declared our registration
statement on Form 10 effective under the Securities Exchange Act of 1934;

.  the NYSE must have approved the listing of our common stock, subject to
official notice of issuance;

.  SWS's Board of Directors must be satisfied that the spin-off will be made
out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;

.  SWS's Board of Directors must have approved the spin-off and must not have
abandoned, deferred or modified the spin-off at any time before the
completion of the spin-off;

.  our Certificate of Incorporation and Bylaws, in substantially the forms
filed as exhibits to the Form 10 and as described in this information
statement, must be in effect;

.  we must receive approval of the change of control of Westwood Trust from
the Texas Banking Commissioner or confirmation that a change of control of
Westwood Trust has not occurred as a result of the spin-off; and

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.  SWS and we must have executed and delivered the various ancillary
agreements described in this information statement.

Q:  Can SWS decide not to go through with the spin-off?

A:  Yes. SWS can cancel the spin-off for any reason at any time before it is
completed.

Q:  Will SWS, Westwood or I be taxed on the spin-off under U.S. federal tax
laws?

A:  Based on an opinion received from Gardere Wynne Sewell LLP, SWS expects
that the spin-off will qualify as tax-free to its stockholders for federal
income tax purposes, except for cash received in lieu of fractional shares.
However, you should consult your tax advisor as to the particular tax
consequences to you of the spin-off. You should also review the discussion of
the risks relating to the tax-free qualification of the spin-off that begins on
page 7 of this document and the discussion under "The Spin-Off -- Material U.S.
Federal Income Tax Consequences of the Spin-off" that begins on page 18 of this
document.

Even if the spin-off otherwise qualifies as a tax-free distribution to SWS's
stockholders, a corporate level federal income tax would be payable by SWS if
either SWS or Westwood experiences a change-in-control, as determined under
Section 355(e) of the Internal Revenue Code of 1986, as amended. We have agreed
to indemnify SWS for any such taxes that arise if we are responsible for
triggering a change-in-control. Otherwise, there are no direct or indirect
corporate tax consequences to us as a result of the spin-off.

Q:  Who is acting as the distribution agent?

A:  Computershare Trust Company, Inc.
350 Indiana Street, Suite 800
Golden, Colorado 80401
Telephone: 303-262-0600

Q:  Where can SWS stockholders get more information?

A:  You may direct questions to SWS's Investor Relations Department, 1201 Elm
Street, Suite 3500, Dallas, Texas 75270, telephone number: 214-859-1800; or you
may contact the distribution agent for the spin-off at 303-262-0600.

5

RISK FACTORS

You should carefully consider each of the following risks, which we believe
are the principal risks that we face, and all of the other information in this
information statement. Some of the following risks relate to our spin-off from
SWS. Other risks relate to our business, the securities markets and ownership
of our common stock. Our business may also be adversely affected by risks and
uncertainties not presently known to us or that we currently believe are
immaterial. If any of the following risks and uncertainties develop into actual
events, this could have a material adverse effect on our business, financial
condition or results of operations. If this occurs, the trading price of our
common stock could decline, and you may lose all or part of your investment.

Risks Relating to the Spin-Off

We have no operating history as an independent public company and may be
unable to operate profitably as a stand-alone company.

There can be no assurance that, as an independent company, we will continue
to be profitable following the spin-off. SWS has owned our business for many
years and has operated that business as a part of its overall financial
services business. As part of SWS's business, we have been able to rely, to
some degree, on the cash flow and other resources of SWS, including
administrative services, as well as on fees related to our management of the
SWS cash reserve funds, which we will continue to manage for at least one year
following the spin-off. Following the spin-off, we will need to obtain from
third parties those resources previously provided by SWS, although SWS has
agreed to provide to us for a limited time certain equipment and human
resources services. See "Relationship Between SWS and Westwood After the
Spin-off" and "Business." The terms extended to us by third parties may not be
as favorable as the terms provided by SWS.

Our historical financial information may not be indicative of our future
performance because, in part, we expect to have higher expenses.

Our historical financial information included in this information statement
may not be indicative of our future performance and does not necessarily
reflect our financial position, results of operations and cash flows had we
operated as an independent public company during each of the periods presented.
Our expenses have been allocated from SWS on the basis of our relative number
of employees, relative revenues and other allocation bases. These allocated
expenses represent services provided by SWS, including human resources,
accounting, internal audit, income tax, legal, insurance and information
technology. Had we been an independent public company in 2001, we estimate that
our total expenses would have been approximately $800,000 higher than those
reflected in the consolidated financial statements. The increase in expenses
includes, without limitation, increased public company compliance costs,
employee compensation, insurance costs, legal expenses, and accounting and
payroll costs. The foregoing estimate of higher expenses is not necessarily an
accurate measure of what our stand-alone expenses would have been in 2001 or
will be in the future, and our expenses could be higher. The costs we actually
incur in the future will depend on the market for these services when they are
actually purchased and the size and nature of our future operations. The
financial information included herein does not reflect any changes that may
occur in our financial condition and operations as a result of the spin-off.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements.

There has been no prior market for our common stock, and it is difficult to
predict the prices at which our common stock might trade.

There has been no established trading market for our common stock, and there
can be no reliable prediction as to the prices at which it will trade after
completion of the spin-off. While it is expected that a limited market for
shares of our common stock, commonly known as a "when-issued" trading market,
will develop near the record date, until our common stock is fully distributed
and an orderly trading market develops, the prices at

6

which trading in our common stock occurs may fluctuate significantly. The term
"when-issued" means that shares can be traded prior to the time certificates
are actually available or issued. Even though when-issued trading may develop,
none of these trades will settle prior to the effective date of the spin-off.
Trading in our common stock on a "when-issued" basis exposes traders to a risk
of loss if the spin-off does not occur. See "The Spin-off -- Listing and
Trading of Westwood Common Stock." The SWS Board of Directors obtained a
valuation report in December 2001 that concluded as of September 30, 2001,
after applying a discount for lack of marketability to reflect the fact that
Westwood was privately held on that date, that the aggregate fair market value
of a 19.9% interest in Westwood common stock was $4,115,000, or $3.85 per
share. In February 2002 the SWS Board of Directors concluded that the
distribution ratio of one share of Westwood common stock for every four shares
of SWS common stock would likely result in an initial trading price for
Westwood common stock of at least $10.00 per share. We do not believe that
investors should utilize either the September 30, 2001 valuation or the
conclusion of the SWS Board of Directors in February 2002 in making any
determination as to an appropriate value or an appropriate initial trading
range for Westwood common stock following completion of the spin-off. Neither
SWS nor Westwood can provide any assurance as to an appropriate value or
initial trading range for Westwood common stock. The valuation of an equity
security is very subjective, and different investors will have different
opinions of value and will apply varying valuation methodologies. The prices at
which shares of our common stock trade will be determined based on the
composite of valuation expectations of all market participants and may be
influenced by many factors, including, among others, our performance and
prospects, the depth and liquidity of the market for our common stock, investor
perception of us, our business and the industry in which we operate, our
dividend policy, general financial and other market conditions, domestic and
international economic conditions, and the impact of factors described in this
"Risk Factors" section. See "The Spin-off -- Background and Reasons for the
Spin-off" and "-- Listing and Trading of Westwood Common Stock."

If the spin-off is taxable, you could be required to pay tax on the fair
market value of the shares of Westwood common stock you receive in the
spin-off, and SWS could incur a corporate tax liability for which Westwood
could be responsible under some circumstances.

Based on an opinion received from Gardere Wynne Sewell LLP, SWS expects that
the spin-off will qualify as tax-free to SWS and its stockholders for U.S.
federal income tax purposes, except for cash received in lieu of fractional
shares. However, Gardere's opinion is not binding on the courts or the IRS.
Whether a spin-off qualifies as tax-free depends in part upon the reasons for
the spin-off and satisfaction of numerous other fact-based requirements. If the
spin-off fails to qualify as a tax-free distribution for U.S. federal income
tax purposes, SWS stockholders who receive shares of our common stock in the
spin-off would be treated as if they had received a taxable distribution in an
amount equal to the fair market value of our common stock received. The amount
of the taxable distribution would be taxed as a dividend. If the spin-off fails
to qualify as a tax-free distribution for U.S. federal income tax purposes to
SWS stockholders, then, in general, a corporate income tax could also be
payable on the difference between the fair market value of the stock and SWS's
adjusted tax basis in the stock at the time of the spin-off by the combined tax
group of which SWS is the common parent. Even if the spin-off qualifies as a
tax-free distribution to SWS stockholders, it may be subject to corporate
income tax under Section 355(e) of the Internal Revenue Code of 1986, as
amended, if one or more persons acquire a 50% or greater interest in SWS or
Westwood as part of a plan or series of related transactions that included the
spin-off. Any acquisition that occurs during the four-year period beginning two
years before the spin-off will be presumed to be part of a plan or a series of
transactions relating to the spin-off. SWS or Westwood, whichever is
responsible for triggering a change-in-control resulting in the application of
Section 355(e) of the Code, will bear any related taxes that arise. Even if the
application of Section 355(e) resulted in the imposition of corporate income
tax liability, this alone would not affect the tax-free nature of the
distribution to SWS stockholders. See "The Spin-off -- Material U.S. Federal
Income Tax Consequences of the Spin-off" and "Relationship Between SWS and
Westwood After the Spin-off -- Tax Separation Agreement."

The trading price of SWS common stock may decline after the spin-off.

After the spin-off, SWS common stock will continue to be listed for trading
on the NYSE under the symbol "SWS." As a result of the spin-off, absent other
action, the trading price of SWS common stock immediately

7

following the spin-off is expected to be lower than the trading price of SWS
common stock immediately prior to the spin-off.

We will not be able to rely on SWS to fund future capital requirements.

In the past, some of our capital needs have been satisfied or guaranteed by
SWS. However, following the spin-off, SWS will no longer provide funds to
finance our working capital or other cash requirements. We cannot be certain
that financing, if needed, will be available on favorable terms, if at all. We
believe that our capital requirements will vary greatly from quarter to quarter
depending on, among other things, capital expenditures, fluctuations in our
operating results and financing activities. We believe that our current cash
and cash equivalents and cash flows from operations after the spin-off will be
sufficient to satisfy our cash requirements for the foreseeable future.
However, if future financing is necessary, we may or may not be able to obtain
financing with interest rates as favorable as those historically enjoyed by
SWS, if at all. Further, any future equity financings could dilute the relative
percentage ownership of the then existing holders of our common stock, and any
future debt financings could involve restrictive covenants that limit our
ability to take certain actions.

Substantial sales of our common stock following the spin-off, or the
perception that such sales might occur, could depress the market price of our
common stock.

All of the shares of our common stock distributed in the spin-off will be
eligible for immediate resale in the public market, except for shares held by
our affiliates. Any sales of substantial amounts of our common stock in the
public market, or the perception that such sales might occur, whether as a
result of the spin-off or otherwise, could depress the market price of our
common stock. We are unable to predict whether substantial amounts of our
common stock will be sold in the open market following the spin-off. See "The
Spin-off -- Listing and Trading of Westwood Common Stock."

The distribution agreement and the tax separation agreement contain
indemnification obligations for SWS and us that neither party may be able to
satisfy, which could result in increased expenses and liabilities for us.

The distribution agreement and the tax separation agreement allocate
responsibility between SWS and us for various liabilities and obligations.
However, the availability of such indemnities will depend upon the future
financial strength of SWS and ourselves. SWS or we may not be in a financial
position to fund such indemnities if they should arise, which could result in
increased expenses and liabilities for us. The distribution agreement provides
that each party will indemnify the other against claims arising out of the
distribution agreement and claims arising out of their respective businesses
before and after the spin-off. Additionally, the distribution agreement
provides that SWS will indemnify us for any liabilities or expenses in excess
of $500,000 that relate to our representation as the corporate trustee for the
Richard A. Boykin, Jr. Family Trust. The tax separation agreement provides that
each party will indemnify the other with respect to some taxes attributable to
their respective businesses arising before or after the spin-off. The tax
separation agreement also allocates responsibility between SWS and us with
respect to any corporate income taxes for which SWS becomes liable by reason of
a change-in-control of SWS or us resulting in the application of Section 355(e)
of the Code. If this occurs as a result of our actions, we would be liable to
pay SWS the amount of taxes for which SWS becomes liable solely by reason of
application of Section 355(e) of the Code and without consideration of any
other tax attribute of SWS. See "Relationship Between SWS and Westwood After
the Spin-off."

Some provisions may discourage a third party from acquiring control of
Westwood.

It could be difficult for a potential bidder to acquire us because our
Certificate of Incorporation and Bylaws contain provisions that may discourage
takeover attempts. In particular, our Certificate of Incorporation and Bylaws
permit our Board of Directors to issue, without stockholder approval, preferred
stock with such terms as the Board may determine. Additionally, our directors
may only be removed for cause by a vote of the holders of at least two-thirds
of the shares of stock entitled to vote, and stockholders cannot act by written
consent. We have

8

also elected to not exclude ourselves from the restrictions of Section 203 of
the Delaware General Corporation Law, which makes it more difficult for a
person who is an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. Also, the tax
separation agreement provides that if, as a result of our actions, a
change-in-control of SWS or us triggers application of Section 355(e) of the
Code, we would be liable to pay SWS the amount of any corporate income taxes
for which SWS becomes liable solely by reason of application of Section 355(e)
of the Code and without consideration of any other tax attribute of SWS. These
provisions may increase the cost or difficulty for a third party to acquire
control of us or may discourage acquisition bids altogether. See "Description
of Capital Stock -- Provisions That May Have an Anti-Takeover Effect."

Risks Related to our Business

Some members of our management are critical to our success, and our inability
to attract and retain key employees could compromise our future success.

We believe that our future success will depend to a significant extent upon
the services of our executive officers, particularly Susan M. Byrne, our
Chairman of the Board and Chief Executive Officer, and Brian O. Casey, our
President and Chief Operating Officer. We do not have employment agreements
with any of our key employees, including Ms. Byrne or Mr. Casey. The loss of
the services of one or more of our key employees or our failure to attract,
retain and motivate qualified personnel could negatively impact our business,
financial condition, results of operations and future prospects. As with other
asset management businesses, our future performance depends to a significant
degree upon the continued contributions of certain officers, portfolio managers
and other key marketing, client service and management personnel. There is
substantial competition for these types of skilled personnel.

Some executive officers have substantial influence over our investment
policies.

Susan M. Byrne, our chief investment officer, establishes and implements
policy with respect to our investment advisory activity. Ms. Byrne and Mr.
Casey decide on any changes in management philosophy, style or approach with
respect to our investment advisory policies.

Negative performance of the securities markets could reduce our revenues.

Our results of operations are affected by many economic factors, including
the performance of the securities markets. Negative performance in the
securities markets or certain segments of those markets or short-term
volatility in the securities markets or segments thereof could result in
investors withdrawing assets from the markets or decreasing their rate of
investment, either of which could reduce our revenues. Because most of our
revenues are based on the value of assets under management, a decline in the
value of those assets would also adversely affect our revenues and results of
operations. Favorable performance by the securities markets prior to 2001
attracted a substantial increase in investments in these markets. Partly as a
result of this financial environment, the assets under our management increased
significantly and levels of profitability grew. The growth rate of our assets
under management has varied from year to year, and our growth rate could
decline significantly. In addition, in periods of slowing growth or declining
revenues, profits and profit margins are adversely affected because certain
expenses remain relatively fixed.

For example, more than two-thirds of our assets under management are
invested in equity securities of companies with a large market capitalization.
As a consequence, we are particularly susceptible to the volatility associated
with changes in the market for large capitalization stocks. Due to this
concentration, any change or reduction in such markets, including a shift of
Westwood Management clients' and potential clients' preference from investments
in equity securities of large capitalization stocks to other equity or fixed
income securities could have a significant negative impact on our revenues and
results of operations. This negative impact could occur due to the depreciation
in value of our assets under management and/or the election by clients to
select other firms to manage their assets, either of which events would result
in decreased assets under management and therefore reduced revenues and a
decline in results of operations.

9

Poor investment performance of the assets managed by us could adversely
affect our results of operations.

Because we compete with many other asset management firms on the basis of
asset classes offered and the investment performance of those asset classes,
our success is dependent to a significant extent on the investment performance
of the assets that we manage. During 2001 the asset classes comprising the bulk
of assets under our management performed below the median within their peer
groups. This relative underperformance could adversely affect our results of
operations, especially if it continues. Good performance stimulates new client
accounts, which results in higher revenues for us. Conversely, poor performance
tends to result in the loss or reduction of client accounts, with corresponding
decreases in revenues.

Our business is dependent on investment advisory, subadvisory and trust
agreements that are subject to termination or non-renewal; therefore, we
could lose any of our clients on very short notice.

Substantially all of our revenues are derived pursuant to investment
advisory, subadvisory and trust agreements with our clients. Any termination of
or failure to renew these agreements could have a material adverse impact on
us. In general, either party may terminate these agreements upon 30-days
notice. Investment advisory and subadvisory agreements are terminated in the
event of an "assignment" (as defined in the Investment Company Act of 1940, as
amended). Generally, any change of control would constitute an "assignment"
under the 1940 Act. The spin-off is not expected to result in a change of
control and therefore under the applicable rules of the SEC would not
constitute such an assignment.

A small number of clients account for a substantial portion of our business.
As such, the reduction or loss of business with any of these clients could
have an adverse impact on our business, financial condition and results of
operations.

Our largest four clients accounted for 22.2% of total revenues for the
twelve months ended December 31, 2001, and we are therefore dependent to a
significant degree on our ability to maintain our existing relationships with
these clients. There can be no assurance that we will be successful in
maintaining our existing client relationships or in securing additional
clients. Any failure by us to retain one or more of our large clients or
establish profitable relationships with additional clients could have a
material adverse effect on our business, financial condition and results of
operations.

Any event that negatively affects the asset management industry could have a
material adverse effect on us.

Any event affecting the asset management industry that results in a general
decrease in assets under management or a significant general decline in the
number of advisory clients or accounts could negatively impact our revenues.
Our future growth and success depends in part upon the continued growth of the
asset management industry, which experienced significant growth prior to 2001.

Due to the substantial cost and time required to introduce new asset classes
in our industry, we may not be able to successfully introduce new asset
classes in a timely manner, or at all.

The development and marketing of new asset classes in our industry is
extremely costly and requires a substantial amount of time. Our ability to
successfully market and sell a new asset class depends on our financial
resources, the asset class's performance results, the timing of the offering
and our marketing strategies. Once an asset class is developed, whether through
acquisition or development internally, we need to be able to effectively market
the asset class to our existing and prospective clients. This entails incurring
significant financial expenses related to research on the target assets and the
demand for such asset class in the market, as well as costs related to doing
road shows, sponsoring conferences and attending trade shows. In addition, our
ability to sell new asset classes to our existing and potential clients depends
on our ability to meet or exceed the performance of our competitors who offer
the same or similar asset classes. We may not be able to profitably manage the
assets within a given asset class. Moreover, it may take years before we are
able to produce the level of results that will enable us to attract clients. If
we are unable to capitalize on the costs and expenses incurred in developing
new asset classes, we may experience losses as a result of our management of
these asset classes, and our ability to introduce further new asset classes and
compete in our industry may be hampered.

10

If we are unable to successfully and timely expand our asset classes, we may
not be able to maintain our competitive position in the asset management
industry.

Our ability to remain competitive will depend, in part, on our ability to
expand our asset classes under management. We are continually looking for
opportunities to expand our asset classes, both in terms of growing our
existing asset classes and developing new asset classes focusing on investment
areas that we do not currently cover. We intend to grow our asset classes
either internally or by acquiring asset classes from third parties. It may be
costly and time consuming for us to develop these new assets internally.
Moreover, we may not be able to find asset classes that are consistent with our
growth strategies or acquire asset classes from third parties on terms
acceptable to us, if at all. If we are unable to expand our asset classes or be
able to do so in a timely manner, we may lose clients to other asset management
firms, which would have an adverse affect on our business, financial condition
and results of operations.

Our business is subject to pervasive regulation with attendant costs of
compliance and serious consequences for violations.

Virtually all aspects of our business are subject to various laws and
regulations. Violations of such laws or regulations could subject us and/or our
employees to disciplinary proceedings or civil or criminal liability, including
revocation of licenses, censures, fines or temporary suspension, permanent bar
from the conduct of business, conservatorship or closure. Any such proceeding
or liability could have a material adverse effect upon our business, financial
condition, results of operations and business prospects. These laws and
regulations generally grant regulatory agencies and bodies broad administrative
powers, including, in some cases, the power to limit or restrict us from
operating our business and, in other cases, the powers to place us under
conservatorship or closure, in the event we fail to comply with such laws and
regulations. Due to the extensive regulations and laws to which we are subject,
our management is required to devote substantial time and effort to legal and
regulatory compliance issues. In addition, the regulatory environment in which
we operate is subject to change. We may be adversely affected as a result of
new or revised legislation or regulations or by changes in the interpretation
or enforcement of existing laws and regulations. See "Business -- Regulation."

Potential misuse of assets and information in the possession of our portfolio
managers and employees could result in costly litigation and liability for us
and our clients.

Our portfolio managers handle a significant amount of assets, financial and
personal information for our clients. Although we have implemented a system of
controls to minimize the risk of fraudulent taking or misuse of assets and
information, there can be no assurance that our controls will be adequate to
prevent taking or misuse by our portfolio managers or employees. If our
controls are ineffective in preventing the fraudulent taking or misuse of
assets and information, we could be subject to costly litigation, which could
consume a substantial amount of our resources and distract our management from
the operation of Westwood and could also result in regulatory sanctions.
Additionally, any such fraudulent actions could adversely affect some of our
clients in other ways, and these clients could seek redress against us.

Acquisitions, which are part of our long-term business strategy, involve
inherent risks that could compromise the success of the combined business and
dilute the holdings of current stockholders.

As part of our long-term business strategy, we intend to consider
acquisitions of similar or complementary businesses. See "Business -- Growth
Strategy." If we are not correct when we assess the value, strengths,
weaknesses, liabilities and potential profitability of acquisition candidates
or if we are not successful in integrating the operations of the acquired
businesses, the success of the combined business could be compromised. Any
future acquisitions will be accompanied by the risks commonly associated with
acquisitions. These risks include, among others, potential exposure to unknown
liabilities of acquired companies and to acquisition costs and expenses, the
difficulty and expense of integrating the operations and personnel of the
acquired companies, the potential disruption to the business of the combined
company and potential diversion of

11

management's time and attention, the impairment of relationships with and the
possible loss of key employees and clients as a result of the changes in
management, the occurrence of amortization expenses in connection with
acquisitions and dilution to the stockholders of the combined company if the
acquisition is made for stock of the combined company. In addition, asset
classes, technologies or businesses of acquired companies may not be
effectively assimilated into our business or have a positive effect on the
combined company's revenues or earnings. The combined company may also incur
significant expense to complete acquisitions and to support the acquired asset
classes and businesses. Further, any such acquisitions may be funded with cash,
debt or equity, which could have the effect of diluting the holdings or
limiting the rights of stockholders. Finally, we may not be successful in
identifying attractive acquisition candidates or completing acquisitions on
favorable terms.

Various factors may hinder the declaration and payment of dividends following
the spin-off.

Our payment of dividends is subject to the discretion of our Board of
Directors, and various factors may prevent us from paying dividends. Such
factors include our financial position, capital requirements and liquidity, the
existence of a stock repurchase program, any loan agreement restrictions, state
corporate and banking law restrictions, results of operations and such other
factors as our Board of Directors may consider relevant. In addition, as a
holding company, our ability to pay dividends is dependent on the dividends and
income we receive from our subsidiaries. At the present time our primary source
of cash is dividends that may be received from Westwood Management or Westwood
Trust. The payment of dividends by Westwood Management or Westwood Trust is
subject to the discretion of their Boards of Directors and compliance with
applicable laws, including, in particular, the provisions of the Texas Finance
Code applicable to Westwood Trust. See "Dividend Policy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our business is vulnerable to systems failures that could have a material
adverse effect on our business, financial condition and results of operations.

Any delays or inaccuracies in securities pricing information or information
processing could give rise to claims against us, which could have a material
adverse effect on our business, financial condition and results of operations.
We are highly dependent on communications and information systems and on third
party vendors for securities pricing information and updates from certain
software. We may suffer a systems failure or interruption, whether caused by an
earthquake, fire, other natural disaster, power or telecommunications failure,
unauthorized access, act of God, act of war or otherwise, and our back-up
procedures and capabilities may not be adequate or sufficient to eliminate the
risk of extended interruptions in operations.

Members of our Board of Directors and executive management may have conflicts
of interest after the spin-off due to their relationships with SWS.

Two members of our Board of Directors, Frederick R. Meyer and Jon L. Mosle,
Jr., also serve on the SWS Board of Directors. In addition, all of the members
of our Board of Directors and executive management will own shares of both SWS
and Westwood common stock after the spin-off. These circumstances could create,
or appear to create, potential conflicts of interest when our directors and
management are faced with decisions that could have different implications for
SWS and Westwood. Examples of these types of decisions might include the
resolution of disputes arising out of the agreements governing the relationship
between SWS and Westwood following the spin-off and SWS's continued use of
Westwood to act as manager of its cash reserve funds. Also, the appearance of
conflicts, even if such conflicts do not materialize, might adversely affect
the public's perception of us following the spin-off. See "Relationship Between
SWS and Westwood After the Spin-Off."

12

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this information statement
including, without limitation, in the sections entitled "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," that are based on our management's
beliefs and assumptions and on information currently available to our
management. Forward-looking statements include the information concerning our
possible or assumed future results of operations, business strategies, need for
financing, competitive position, potential growth opportunities, potential
operating performance improvements, ability to retain and recruit personnel,
benefits resulting from our spin-off from SWS, the effects of competition and
the effects of future legislation or regulations. Forward-looking statements
include all statements that are not historical facts and can be identified by
the use of forward-looking terminology such as the words "believe," "expect,"
"plan," "intend," "anticipate," "estimate," "predict," "potential," "continue,"
"may," "will," "should" or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any
forward-looking statements. Except as required under the federal securities
laws and the rules and regulations of the SEC, we do not have any intention or
obligation to update publicly any forward-looking statements after we
distribute this information statement.

The risk factors discussed in "Risk Factors" could cause our results to
differ materially from those expressed in forward-looking statements. There may
also be other risks and uncertainties that we are unable to predict at this
time or which we do not now expect to have a material adverse impact on our
business.

13

THE SPIN-OFF

Background and Reasons for the Spin-Off

In May 2001, SWS management informed the SWS Board of Directors that asset
management companies similar to Westwood were being sold and purchased for
attractive values. At that time, the SWS Board authorized SWS management to
investigate a potential sale or spin-off of Westwood. After considering these
types of transactions and having discussions with Westwood management, SWS
management reported to the SWS Board that, primarily for federal income tax
reasons, a spin-off appeared to be more favorable to SWS and its stockholders
than a sale of Westwood.

At its August 2001 meeting, the SWS Board considered the spin-off and sale
alternatives. During the 90 days preceding that meeting, the average ratio of
the SWS trading price to the SWS book value per share was 1.15. Based on
industry sources available at that time, the SWS Board noted that the ratios
for asset management companies were approximately double the ratios for
broker/dealers. Therefore, the Board considered that $1.00 of book value
transferred out of SWS to the SWS stockholders in the form of Westwood stock
would, in theory, increase in value from $1.15 to $2.30, or theoretically
increase the total value of Westwood from $18.1 million to $36.1 million based
on Westwood's unaudited and non-adjusted book value as of June 30, 2001. The
SWS Board did not make this analysis in an effort to value Westwood, but rather
as support for the proposition that spinning off Westwood would generate
enhanced value for SWS stockholders.

The Board also considered that if Westwood were sold, SWS would have a tax
liability on the gain from the sale. In addition, SWS stockholders would have a
tax liability on any cash dividend paid from the proceeds of a sale. Based on
these considerations, the SWS Board determined that a spin-off would increase
stockholder value and should avoid tax liability for SWS and its stockholders.
Additionally, the Board determined that a spin-off was in the best interest of
SWS and its stockholders because the spin-off would create two independent
public companies that would be better positioned to adopt strategies and pursue
objectives appropriate to their respective needs. SWS's brokerage and banking
businesses and the Westwood business each have different operating objectives
and growth opportunities. By separating the operations, SWS and Westwood could
focus their attention and financial resources on their own core businesses and
on exploring and implementing the most appropriate business opportunities.
Thereafter, SWS engaged Gardere Wynne Sewell LLP to provide advice regarding
tax issues, structure and other issues related to the spin-off.

While SWS would continue to focus on the brokerage and banking businesses,
we would focus on providing our customers with quality, innovative asset
management and related services. The expected benefits of the spin-off include:

.  provide our management the ability to focus their efforts and financial
resources on our core business, thus enabling us to compete more
effectively in our own markets;

.  provide us a platform to enhance client service by better aligning our
performance on behalf of our clients with the compensation of our
employees;

.  provide us the ability to better retain and recruit high quality employees
by providing employee compensation and benefit programs more closely tied
to our performance, including stock-based and other incentive programs
that reward employees based on their contribution to our success;

.  provide us the ability to operate independently without the capital
resource allocation issues present within the combined SWS, which in the
near term will allow us to invest in additional technology, such as an
enhanced website and more efficient client reporting systems;

.  provide us additional operating flexibility and allow us to achieve
improved cost structures and operating efficiencies;

.  enable us to avoid any perception that a conflict of interest exists
because we are a subsidiary of SWS, as SWS is a large securities clearing
firm;

.  enable us to attract business from competitors of SWS; and

14

.  enable the financial community and investors to better measure the
performance of both SWS and Westwood against comparable companies in
similar businesses and make investment decisions based on the separate
operations of the companies.

During September and October 2001, SWS management and members of the SWS
Board of Directors engaged in extensive discussions with Westwood management
regarding the implementation of the proposed spin-off. In November 2001, the
SWS Board of Directors authorized the formation of Westwood Holdings Group,
Inc. and approved the contribution of the capital stock of Westwood Management
and Westwood Trust to Westwood Holdings Group, Inc. In December 2001, the SWS
Board of Directors preliminarily approved the terms of the proposed spin-off
and directed SWS management to prepare the necessary regulatory filings.

In addition, during September and October 2001, SWS management and members
of the SWS Board of Directors engaged in discussions with Westwood management
regarding the terms upon which SWS might agree to sell approximately 19.9% of
Westwood common stock to Westwood management. An understanding was reached in
October 2001 that SWS would sell an approximately 19.9% interest in Westwood
common stock to Westwood management based upon the value of that interest at
September 30, 2001, as determined on the basis of an independent valuation. SWS
retained the services of an independent financial advisor to provide such a
valuation. On December 13, 2001 the requested valuation report was delivered,
which concluded that based on and subject to the facts, limiting conditions and
assumptions presented in the valuation report and the exhibits attached
thereto, $4,115,000 reasonably represented the aggregate fair market value as
of September 30, 2001 of a 19.9% interest in Westwood. In determining the
aggregate fair market value of the indicated interest, the valuation report
identified several salient valuation factors that were considered, as follows:

. Westwood's assets under management are primarily for ERISA clients rather
than high net worth individuals, the former of which it was noted tended
to be more performance-oriented and volatile, although ERISA clients tend
to have long investment horizons and thus are less subject to market fads
than are individual investors.

. Ms. Byrne and Mr. Casey have key roles with Westwood, but have no
ownership interest in Westwood and have no employment or non-compete
agreements with Westwood. The valuation report further noted that if Ms.
Byrne or Mr. Casey were to obtain an ownership interest in Westwood that
this might be a mitigating factor that would reduce the risk to Westwood
of either of their departures.

. Peer group asset managers have stock ownership, in contrast to the absence
of any direct stock ownership by Westwood management.

. Ms. Byrne's high media profile benefits Westwood and, correspondingly, her
departure could negatively impact Westwood.

. While on a long term basis Westwood has performed toward the upper
quartile in its peer groups, Westwood performed toward the lowest quartile
when considering the results of 2001 alone.

. Westwood has a relatively high customer concentration.

. Westwood has experienced consistent growth in both assets under management
and investment advisory fees, and has been consistently profitable in
recent years.

The valuation report noted that there are three general ways of determining
value, but focused on the income and market approaches because an asset-based
approach would not account for Westwood's intangible assets. It was noted that
the market approach could include several different possible methods, and the
report focused on the guideline company method, the external transaction method
and the internal transaction method. In applying the income approach, a
capitalization of benefits method was selected. The results of the several
valuation techniques applied to arrive at a marketable, minority value for the
Westwood common stock are as follows:

Market Approach--Guideline Company Method......... $38,200,000
Market Approach--External Transaction Method...... $25,000,000
Market Approach--Internal Transaction Method...... $28,000,000
Income Approach--Capitalization of Benefits Method $36,000,000

15

Each of the above approaches was given equal weight in determining the fair
market value of Westwood's common stock on a minority, marketable basis, which
was estimated to be $31,800,000. After applying a 35% discount for lack of
marketability due to the illiquid nature of an investment in Westwood at that
time, an aggregate fair market value of $20,670,000 was derived, which equated
to a value of $4,115,000 for a 19.9% interest in Westwood common stock. Based
on this valuation report, on December 14, 2001 SWS sold a 19.82% interest in
Westwood common stock to Westwood's management for an aggregate price of
$4,093,000, or $3.85 per share.

In February 2002, the SWS Board of Directors held a special meeting to
establish a preliminary spin-off distribution ratio, and preliminarily
authorized a distribution of one share of Westwood common stock for every four
shares of SWS common stock held on the record date. In order to determine the
appropriate distribution ratio, the SWS Board of Directors considered both the
number of round lot holders that would be necessary in order for Westwood
common stock to comply with the listing standards of the NYSE, as well as a
desirable trading range for Westwood common stock. Based on the number of
400-share round lot holders of SWS common stock in February 2002, the SWS board
concluded that a one-for-four distribution ratio would satisfy the NYSE's
minimum round lot holder requirement. The SWS Board concluded that this
distribution ratio would likely result in an initial trading price for Westwood
common stock of at least $10.00 per share. This conclusion was reached based on
the many years of experience of SWS Board members in stock valuation and
trading matters, and all available information regarding the valuation of asset
management companies at that time. The SWS Board particularly noted that the
market valuation of other publicly held asset management companies had risen in
recent months and that by virtue of SWS having sold a portion of its ownership
interest in Westwood to Westwood management, that the value of Westwood was
likely enhanced because key members of Westwood management were incentivized to
remain with Westwood and to seek to increase the value of their ownership
interest in Westwood.

We do not believe that investors should utilize either the September 30,
2001 valuation or the conclusion of the SWS Board of Directors in February 2002
in making any determination as to an appropriate value or an appropriate
initial trading range for Westwood common stock following completion of the
spin-off. Neither SWS nor Westwood can provide any assurance as to an
appropriate value or initial trading range for Westwood common stock. The
valuation of an equity security is very subjective, and different investors
will have different opinions of value and will apply varying valuation
methodologies. The market for Westwood common stock will ultimately value
Westwood common stock based on the composite of valuation expectations of all
market participants. Neither the valuations set forth in the valuation report
nor the SWS Board of Directors' conclusion as to the likely minimum initial
trading price reflects the valuation that a diverse pool of investors would
collectively assign to Westwood common stock. See "Risk Factors--Risks Relating
to the Spin-Off--There has been no prior market for our common stock, and it is
difficult to predict the prices at which our common stock might trade."

16

Description of the Spin-off

SWS will accomplish the spin-off by distributing all of the shares of our
common stock that it holds to SWS's stockholders. SWS currently holds 80.18% of
our outstanding common stock. The following diagram illustrates the current
structure of Westwood and the distribution from SWS to its stockholders:

[GRAPHIC]

Westwood Graph

On April 8, 2002, the SWS Board of Directors formally approved the spin-off.
Each SWS stockholder as of the close of business on May   , 2002, which is the
record date for the spin-off, will receive shares of our common stock. Those
SWS stockholders will receive one share of our common stock for every four
shares of SWS common stock held as of the record date. Our Board of Directors
has approved a stock split in the form of a stock dividend to be effective as
of May   , 2002 in order to provide the number of shares required for the
spin-off. SWS and Westwood expect that the spin-off will take place on or about
May   , 2002, although completion of the spin-off is contingent upon the
satisfaction of conditions described in the distribution agreement. See
"Relationship Between SWS and Westwood After the Spin-off."

As soon as practicable on or about the spin-off date, SWS will deliver to
the distribution agent, Computershare Trust Company, Inc., certificates
representing the shares of Westwood common stock that it holds. The
distribution agent will make distributions in book-entry form to each holder of
SWS common stock. Upon written request by a stockholder, the distribution agent
will deliver a certificate. SWS's shares of our common stock are duly
authorized, validly issued, fully paid and nonassessable, and the holders of
these shares will not be entitled to preemptive rights. See "Description of
Capital Stock."

We will not issue any fractional shares as part of the spin-off. Instead,
each holder of SWS common stock who would otherwise be entitled to receive a
fractional share will receive cash for those fractional shares less

17

applicable taxes and a pro rata portion of the aggregate brokerage commission
payable in connection with the sale of the fractional shares. On or after the
spin-off date, the distribution agent will aggregate all fractional shares,
sell them on the open market at prevailing market prices and distribute the
aggregate proceeds ratably to those SWS stockholders otherwise entitled to
those fractional shares. See "--Material U.S. Federal Income Tax Consequences
of the Spin-off" for a discussion of the United States federal income tax
treatment of proceeds from fractional share interests. The distribution agent
will act in its sole discretion, without influence from SWS or Westwood, in
effecting these sales. The distribution agent will independently determine all
aspects of the sales. Neither the distribution agent nor the broker-dealers it
uses are affiliates of SWS or Westwood. None of SWS, Westwood or the
distribution agent can guarantee any minimum sale price for the fractional
shares of our common stock. Neither SWS or Westwood will pay any interest on
the proceeds from the sale of aggregated fractional shares.

No vote of SWS stockholders is required or sought in connection with the
spin-off, and SWS stockholders will have no appraisal rights in connection with
the spin-off.

Options granted to Westwood employees under the SWS Securities, Inc. Stock
Option Plan and the SWS Securities, Inc. 1997 Stock Plan will become fully
vested as of the date of the spin-off, and Westwood will be substituted for SWS
as the employer of these employees. In addition, to the extent that SWS makes
any adjustments to its outstanding options as a result of the spin-off, similar
adjustments will be made to the SWS options held by Westwood employees.

No SWS stockholder will be required to pay cash or other consideration for
any shares of our common stock received in the spin-off, or to surrender or
exchange shares of SWS common stock to receive our common stock.

Results of the Spin-off

After the spin-off, we will be a separate public company, independent from
SWS. Except with respect to shares currently held by some members of our
management, which represent 19.82% of our outstanding common stock prior to the
spin-off, the number and identity of our stockholders immediately after the
spin-off generally will be the same as the number and identity of stockholders
of SWS immediately prior to the spin-off. As a result of the spin-off, we
expect to have approximately 150 holders of record and an estimated 5,372,310
shares of our common stock outstanding, based on the number of SWS record
stockholders, the distribution ratio, the assumed stock split ratio for our
common stock, and the number of outstanding shares of SWS common stock as of
the close of business on April 1, 2002. The actual number of shares of our
common stock to be distributed will be determined as of the record date. The
spin-off will not affect the number of outstanding shares of SWS common stock
or the rights of SWS stockholders.

Material U.S. Federal Income Tax Consequences of the Spin-off

General

The following is a summary description of the material federal income tax
consequences of the spin-off. This summary is not intended as a complete
description of all of the tax consequences of the spin-off and does not discuss
tax consequences under the laws of state, local or foreign governments or any
other jurisdiction. Moreover, the following discussion may not apply to
particular categories of holders subject to special tax treatment under the
federal income tax laws, including, without limitation, insurance companies,
financial institutions, broker-dealers, estates, trusts, tax-exempt
organizations, real estate investment trusts, regulated investment companies,
non-United States holders, or persons that will hold their shares of our common
stock as a position in a straddle, as part of a synthetic security or hedge, or
as part of a conversion transaction or other integrated investment, other than
a capital asset. This summary does not address the tax consequences to current
stockholders of Westwood. Further, it does not include a description of any
alternative minimum tax consequences that may be applicable to the receipt of
our shares pursuant to the spin-off. This summary assumes that you hold your
shares of our common stock as a capital asset within the meaning of section
1221 of the Internal Revenue Code of 1986, as amended, or the "Code." In this
regard, special rules not discussed in this summary may apply to some of SWS's
stockholders.

18

The following discussion is based on currently existing provisions of the
Code, existing, proposed and temporary Treasury Department regulations
promulgated under the Code and current administrative rulings and court
decisions. All of the foregoing are subject to change, which may or may not be
retroactive, and any of these changes could affect the validity of the
following discussion.

We urge you to consult your tax advisor as to the particular tax
consequences to you of the spin-off described herein, including the
applicability and effect of any state, local or foreign tax laws, and the
possible effects of changes in applicable tax laws.

Consequences if the Spin-off is Tax-free

SWS has received an opinion from Gardere Wynne Sewell LLP to the effect
that, among other things, the spin-off will qualify as a tax-free distribution
under Section 355 of the Code. The opinion of Gardere Wynne Sewell LLP will
rely on representations made by SWS and us and factual assumptions. If any of
the factual assumptions or representations relied upon in the opinion are
inaccurate, the opinion may not accurately describe the tax treatment to you as
a result of the receipt of our common stock pursuant to the spin-off. In
addition, a tax opinion is not binding on the Internal Revenue Service, and we
do not intend to request a ruling from the Internal Revenue Services with
respect to these matters. Furthermore, there is no assurance that the Internal
Revenue Service would agree with the conclusions set forth in the opinion or
this discussion.

Assuming that the spin-off qualifies as a tax-free distribution:

.  except in connection with cash received in lieu of fractional shares, as
described below, no stockholder of SWS will recognize any income, gain or
loss as a result of the receipt of shares of our common stock;

.  each stockholder of SWS have an aggregate tax basis in the shares of our
common stock received in the spin-off and the shares of SWS common stock
held immediately following the spin-off equal to the tax basis in the
shares SWS common stock held immediately prior to the spin-off. This
aggregate tax basis will be allocated between the shares of our common
stock and SWS common stock in proportion to each of their fair market
values on the date of the spin-off. Each stockholder will assign tax basis
to each share of our common stock on a pro-rata basis. If a stockholder
has multiple blocks of SWS common stock, the stockholder will then
allocate the SWS tax basis (as determined above) back to a specific block
of SWS common stock in the amount of the total basis attributable to SWS
common stock multiplied by a fraction, the numerator of which is the
pre-spin-off tax basis attributable to that block of SWS common stock and
the denominator of which is the pre-spin-off tax basis of all of the
stockholder's SWS common stock. After the total tax basis for each block
has been determined, the stockholder will assign tax basis to the shares
within each block on a pro-rata basis;

.  the holding period for each stockholder of SWS for shares of our common
stock received in the spin-off will include the holding period for the
shares of SWS common stock held at the time of the spin-off (assuming the
stockholder held the SWS common stock as a capital asset on the date of
the spin-off). If a stockholder has multiple blocks of SWS common stock,
the stockholder will take multiple holding periods for each share of our
common stock, allocated on the basis of the fair market value of the SWS
common stock in each block (assuming the stockholder held the SWS common
stock as a capital asset on the date of the spin-off);

.  each stockholder who receives cash as a result of the sale of fractional
shares of our stock by the distribution agent will be treated as if such
fractional share had been received by the stockholder as part of the
distribution and then sold by the stockholder. Accordingly, the
stockholder will recognize gain or loss equal to the difference between
the cash so received and the portion of the tax basis in our stock that is
allocable to the fractional share. This gain or loss will be capital gain
or loss, provided that the fractional share was held by the stockholder as
a capital asset at the time of the distribution; and

.  SWS will not recognize any gain or loss on its distribution of our common
stock to SWS stockholders pursuant to the spin-off.

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Current Treasury Department regulations require each stockholder of SWS who
receives a distribution of our common stock in the spin-off to attach to his,
her or its federal income tax return for the year in which the distribution
occurs a statement setting forth information as may be appropriate in order to
show the applicability of Section 355 of the Code to the spin-off. Such
statement shall include a description of the stock received and the names and
addresses of all the corporations involved in the transaction. SWS has agreed
it will provide each SWS stockholder as of the record date the information
necessary to comply with this requirement.

Consequences if the Spin-off is Taxable

If the spin-off fails to qualify as a tax-free distribution under Section
355 of the Code, then each stockholder of SWS receiving shares of our common
stock in the spin-off generally would be treated as if the stockholder received
a taxable distribution in an amount equal to the fair market value of our
common stock received, which would result in:

(a) a dividend taxable at ordinary income rates to the extent paid out of
SWS's current and accumulated earnings and profits; then

(b) a reduction in the stockholder's adjusted tax basis in his, her or its
SWS common stock to the extent the amount received exceeds the amount
referenced in clause (a) and does not exceed the stockholder's adjusted
tax basis in the stock; and then

(c) gain from the sale or exchange of the stockholder's SWS common stock to
the extent the amount received exceeds the sum of the amounts referenced
in clauses (a) and (b).

Each stockholder's initial tax basis in the Westwood common stock received
by the stockholder would be equal to the fair market value of such stock at the
time of the spin-off.

If the spin-off fails to qualify as a tax-free distribution under Section
355 of the Code, then the consolidated group of which SWS is the common parent
would be required to recognize taxable gain or loss equal to the difference
between the fair market value of the our common stock at the time of the
distribution and SWS's adjusted tax basis in such stock.

Consequences of Certain Ownership Changes after the Spin-off

Even if the spin-off otherwise qualifies as a tax-free distribution under
Section 355 of the Code, a corporate level federal income tax would be payable
by SWS if either SWS or Westwood experiences a prohibited change-in-control as
determined under Section 355(e) of the Code.

Section 355(e) of the Code generally provides that a corporation that
distributes shares of a subsidiary in a spin-off that is otherwise tax-free
will incur federal income tax liability if 50% or more, by vote or value, of
the capital stock of either the corporation making the distribution or the
spun-off subsidiary is acquired by one or more persons pursuant to a plan or
series of related transactions that includes the spin-off. This provision can
be triggered by certain reorganizations involving the acquisition of the assets
or stock of the corporation making the distribution or of the spun-off
subsidiary, or by issuances or redemptions of the stock of the distributing
corporation or of the spun-off subsidiary. There is a presumption that any
acquisition or issuance that occurs within two years before or after the
spin-off is part of a plan relating to the spin-off and one or more of such
stock acquisitions or issuances could produce a prohibited 50% acquisition.
However, the presumption may be rebutted by establishing that the spin-off and
the acquisitions are not part of a plan or series of related transactions.

In April 2002, temporary Treasury Department regulations were issued that
clarify when a spin-off is part of a plan, or series of related transactions,
where one or more persons acquire stock of the distributing or spun-off

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subsidiary resulting in a 50% acquisition. The regulations rely on a variety of
factors to determine the existence of such a plan or series of related
transactions, including the following:

.  the business purpose or purposes for the distribution;

.  the intentions of the parties;

.  the existence of discussions, agreements, understandings, arrangements or
substantial negotiations relating to acquisitions;

.  the timing of transactions or acquisitions;

.  the causal connection or relationship between the spin-off and the
acquisitions; and

.  the occurrence of unexpected changes in market or business conditions.

These temporary Treasury Department regulations apply to this spin-off. The
Treasury Department has stated that it will continue to devote significant
resources towards developing additional guidance regarding what facts and
arrangements result in a prohibited 50% acquisition and that it will publish
more guidance on this issue in the near future. It is not known whether future
rules and regulations would apply to the spin-off.

If the spin-off is taxable solely under Section 355(e) of the Code, SWS will
recognize gain equal to the difference between the fair market value of our
common stock at the time of the distribution and SWS's adjusted tax basis in
the stock. However, holders of SWS common stock who receive our common stock in
the spin-off would not recognize any income, gain or loss as a result of the
receipt of shares of our common stock if the spin-off is taxable solely by
reason of Section 355(e) of the Code.

The tax separation agreement between SWS and us allocates responsibility for
the possible corporate tax burden resulting from the spin-off, as well as other
tax items. For example, if the spin-off is taxable under Section 355(e) of the
Code as a result of a 50% acquisition of either SWS or Westwood, then the
resulting tax burden imposed on SWS will be borne by the party responsible for
triggering the change-in-control. See "Relationship Between SWS and Westwood
After the Spin-off -- Tax Separation Agreement."

Back-up Withholding Requirements

SWS is required to withhold federal income tax at a rate of 30% with respect
to payments such as dividends, interest or proceeds from the sale of stock made
to (a) persons who do not have a social security number or taxpayer
identification number, (b) persons that the IRS has determined have a history
of evading federal income tax or (c) persons who have refused to furnish SWS
with information sufficient to enable it to comply with its applicable federal
income tax information reporting obligations. Such withholding is known as
backup withholding. Backup withholding is not an additional tax and may be
refunded (or credited against the stockholder's U.S. federal income tax
liability, if any), provided that required information is furnished to SWS.
United States information reporting requirements and backup withholding may
apply to our stockholders with respect to dividends paid on, and proceeds from
the taxable sale, exchange or other disposition of, our common stock unless the
stockholder:

.  is a corporation or comes within certain other exempt categories, and,
when required, demonstrates these facts; or

.  provides a correct taxpayer identification number, certifies that there
has been no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules.

You may be subject to penalties imposed by the IRS if you do not supply SWS
with your correct taxpayer identification number. You should consult your tax
advisor as to your qualification for exemption from backup withholding and the
procedure for obtaining such an exemption. If information-reporting
requirements apply to you, the amount of dividends paid with respect to your
shares will be reported annually to the IRS and to you.

21

Listing and Trading of Westwood Common Stock

There has been no public market for our common stock. An active trading
market may not develop or be sustained in the future. However, we expect that a
limited market for shares of our common stock, commonly known as a "when
issued" trading market, will develop on or shortly before the record date for
the spin-off. The term "when-issued" means that shares can be traded prior to
the time certificates are actually available or issued. Even though when-issued
trading may develop, none of these trades would settle prior to the effective
date of the spin-off, and if the spin-off does not occur, all when-issued
trading will be null and void. The NYSE has authorized the listing of our
common stock on the NYSE under the ticker symbol "WHG." Beginning on the first
NYSE trading day after the spin-off, we expect that our common stock will trade
on a "regular" basis. The term "regular" refers to trading after a security has
been issued and typically involves a transaction that settles on the third full
business day following the date of a transaction.

We cannot predict the prices at which our common stock may trade before the
spin-off on a "when issued" basis or after the spin-off on a "regular" basis.
These prices will be determined by the marketplace and may be significantly
below the book value per share of our common stock. Until our common stock is
fully distributed, an orderly trading market develops, and the market has fully
analyzed our operations, prices at which trading in shares of our common stock
occurs may fluctuate significantly. These prices may be influenced by many
factors, including quarter to quarter variations in our actual or anticipated
financial results or those of other companies in the industries or the markets
that we serve, investor perception of our company and the asset management
industry, and general economic and market conditions. In addition, the stock
market in general has experienced extreme price and volume fluctuations that
have affected the market price of many stocks and that have often been
unrelated or disproportionate to the operating performance of these companies.
These are just some factors that may adversely affect the market price of our
common stock. See "Risk Factors--There has been no prior market for our common
stock, and it is difficult to predict the prices at which our common stock
might trade."

Substantially all of the shares of our common stock that will be distributed
in the spin-off will be eligible for immediate resale. In transactions similar
to the spin-off, it is not unusual for a significant redistribution of shares
to occur during the first few weeks or even months following completion of the
transaction because of the differing objectives and strategies of investors who
acquire shares of our common stock in the transaction. We are not able to
predict whether substantial amounts of our common stock will be sold in the
open market following the spin-off or what effect these sales may have on
prices at which our common stock may trade. Sales of substantial amounts of our
common stock in the public market during this period, the perception that any
redistribution has not been completed or the prospect of our having to
undertake a public offering of our common stock following the spin-off could
materially affect the market price of our common stock.

Shares of our common stock received in the spin-off by "affiliates" (as
defined under Rule 144 under the Securities Act of 1933, as amended) will not
be freely transferable. Persons who can be considered our affiliates after the
spin-off generally include individuals or entities that directly, or indirectly
through one or more intermediaries, control, are controlled by, or are under
common control with, us, and include some of our officers and directors. Our
affiliates may only sell common stock received in the spin-off:

.  under a registration statement that the SEC has declared effective under
the Securities Act; or

.  under an exemption from registration under the Securities Act, such as the
exemption afforded by Rule 144, which limit sales by affiliates based on
the average four-week trading volume or 1% of the outstanding common stock.

Similarly, the shares of our common stock purchased by our executive
officers from SWS in December 2001 cannot be resold unless the resale is
registered with the SEC or an exemption from registration is available, such as
the exemption pursuant to Rule 144. In the event these executive officers were
to seek to sell the shares that they purchased from SWS pursuant to Rule 144,
the one-year holding period requirement would apply.

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It is expected that shortly following the completion of the spin-off that
the compensation committee of our Board of Directors will award options
covering approximately 200,000 to 250,000 shares of our common stock at an
exercise price equal to the closing price per share as reported by the NYSE on
the grant date. These options will vest over four years with the initial
portion of such options vesting one year after the date of grant. These options
will be granted under the Westwood Holdings Group, Inc. Stock Incentive Plan.
See "Management--Compensation of Executive Officers--Compensatory Plans and
Arrangements--Westwood Stock Incentive Plan." Shares of our common stock issued
upon exercise of these options will be registered on Form S-8 under the
Securities Act and will, therefore, be freely transferable under the securities
laws, except by affiliates as described above.

SWS expects that its common stock will meet the continued listing standards
of the NYSE and that its common stock will continue to trade on a regular basis
under the symbol "SWS" following the spin-off. SWS common stock may also trade
on a when-issued basis, reflecting an assumed post-spin-off value for SWS
common stock. When-issued trading in SWS common stock, if available, could last
from on or about the record date through the effective date of the spin-off. If
when-issued trading in SWS common stock is available, SWS stockholders may
trade their existing SWS common stock prior to the effective date of the
spin-off in either the when-issued market or in the regular market for SWS
common stock. If a stockholder trades in the when-issued market, he will have
no obligation to transfer to a purchaser of SWS common stock the Westwood
common stock such stockholder receives in the spin-off. If a stockholder trades
in the regular market, the shares of SWS common stock traded will be
accompanied by due bills representing the Westwood common stock to be
distributed in the spin-off. If when-issued trading in SWS common stock is not
available, neither the SWS common stock nor the due bills may be purchased or
sold separately during the period from the record date through the effective
date of the spin-off.

If a when-issued market for SWS common stock develops, an additional listing
for SWS common stock will appear on the NYSE. Differences may exist between the
combined value of when-issued Westwood common stock plus when-issued SWS common
stock and the price of SWS common stock during this period. Until the market
has fully analyzed the operations of SWS without the operations of Westwood,
the prices at which SWS common stock trades may fluctuate significantly.

You should consider consulting your financial and tax advisors prior to
making any decisions with respect to the purchase, retention or sale of shares
of SWS common stock or Westwood common stock. Neither SWS nor Westwood makes
recommendations on the purchase, retention or sale of your shares of SWS common
stock or Westwood common stock.

RELATIONSHIP BETWEEN SWS AND WESTWOOD AFTER THE SPIN-OFF

This section of the information statement summarizes material agreements,
including certain transition services, indemnification, tax and other matters,
relating to the spin-off between SWS and us that will govern the ongoing
relationships between the two companies after the spin-off and will provide for
an orderly transition to our status as a separate, independent company.
Additional or modified agreements, arrangements and transactions, which will be
negotiated at arm's length, may be entered into between SWS and us after the
spin-off. Our business consists of the businesses previously conducted by the
Westwood asset management business of SWS. On an overall basis, our business
will constitute substantially the same business as that previously conducted by
the Westwood asset management business of SWS. You should also read the
agreements, forms of which have been filed as exhibits to the registration
statement on Form 10 of which this information statement forms a part.

Distribution Agreement

The distribution agreement provides for:

.  the principal corporate transactions and procedures required to effect the
spin-off; and

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.  certain other agreements relating to the continuing relationship between
SWS and us after the spin-off, as described below.

Conditions to the Spin-Off

The distribution agreement provides that the following conditions must be
satisfied or waived before or as of the date of the spin-off for the spin-off
to occur:

.  the SEC must have declared our registration statement on Form 10 effective
under the Securities Exchange Act;

.  the NYSE must have approved the listing of our common stock, subject to
official notice of issuance;

.  SWS's Board of Directors must be satisfied that the spin-off will be made
out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;

.  SWS's Board of Directors must have approved the spin-off and must not have
abandoned, deferred or modified the spin-off at any time before the
completion of the spin-off;

.  our Certificate of Incorporation and Bylaws, in substantially the forms
filed as exhibits to the Form 10 and as described in this information
statement, must be in effect;

.  we must receive approval of the change of control of Westwood Trust from
the Texas Banking Commissioner or confirmation that a change of control of
Westwood Trust has not occurred as a result of the spin-off; and

.  SWS and we must have executed and delivered the various ancillary
agreements described in this section.

Cross-Indemnification

We and SWS have agreed to indemnify each other against certain liabilities
with respect to which a claim is made within two years of the spin-off date. We
have agreed to indemnify SWS and parties related to SWS from and against:

.  any and all damage, loss, liability and expense arising out of, or due to,
our failure to discharge any of our obligations under the distribution
agreement;

.  any and all damage, loss, liability and expense expressly assumed by us in
the distribution agreement;

.  any and all damage, loss, liability and expense, whether arising before,
on or after the spin-off, relating to us or arising from or in connection
with the conduct of our business or the ownership or use of our assets in
connection with our business;

.  any and all past and future liabilities or expenses up to $500,000 arising
from or in connection with the Richard A. Boykin, Jr. Family Trust, for
which we currently serve as trustee (such expenses to include unpaid
trustee fees owed to us at the time of the spin-off but not thereafter);
and

.  any and all damage, loss, liability and expense caused by any untrue
statement or alleged untrue statement contained in this information
statement or the registration statement of which it is a part or caused by
any omission or alleged omission to state a material fact necessary to
make the statements therein not misleading, if, and only to the extent
that, such untrue statement or omission arises out of information provided
by us for inclusion in this information statement or registration
statement.

SWS has agreed to indemnify us and parties related to us from and against:

.  any and all damage, loss, liability and expense arising out of, or due to,
SWS's failure to discharge any of its obligations under the distribution
agreement;

.  any and all damage, loss, liability and expense, whether arising before,
on or after the spin-off, relating to SWS or arising from or in connection
with the conduct of its business or the ownership or use of its assets in
connection with its business (other than the business of Westwood);

24

.  any and all damage, loss, liability and expense arising out of, or due to,
SWS's failure to discharge any of its obligations under the distribution
agreement and the transition services agreement;

.  any and all past and future liabilities or expenses in excess of $500,000
arising from or in connection with the Richard A. Boykin, Jr. Family
Trust, for which we currently serve as trustee (such expenses to include
unpaid trustee fees owed to us at the time of the spin-off but not
thereafter); and

.  any and all damage, loss, liability and expense caused by any untrue
statement or alleged untrue statement contained in this information
statement or the registration statement of which it is a part or caused by
any omission or alleged omission to state a material fact necessary to
make the statements therein not misleading, if, and only to the extent
that, such untrue statement or omission arises out of information provided
by SWS for inclusion in this information statement or registration
statement.

We have acted as corporate trustee for the Boykin Trust for several years.
As corporate trustee, we recently filed a voluntary petition for bankruptcy on
behalf of the Boykin Trust because it is subject to various pending legal
actions, outstanding judgments and owes money to numerous creditors, including
trustee fees and other amounts advanced by us that are owed to us in connection
with our representation. The petition seeks the liquidation of the Boykin
Trust's assets and seeks to maximize the distribution to the Boykin Trust's
creditors on an equitable basis. The Boykin Trust's only asset with value is a
large block of land that has been listed with a real estate broker. If we are
successful in selling the land, it is uncertain whether such sale will provide
enough proceeds to pay off the creditors of the Boykin Trust. If we acted with
gross negligence or in bad faith while serving as the corporate trustee of the
Boykin Trust, those creditors or other persons could assert actions against us.

None of these indemnities applies to indemnification for income tax
liabilities, which are addressed in the tax separation agreement described
below under "Tax Separation Agreement." The distribution agreement also
includes procedures for notice and payment of indemnification claims and
generally provides that the indemnifying party may assume the defense of a
claim or suit brought by a third party. Any indemnification amount paid under
the indemnities will be paid net of the amount of any insurance or other
amounts that would be payable by any third party to the indemnified party in
the absence of the indemnity. In addition, the distribution agreement provides
that if indemnification is unavailable or insufficient to hold the indemnified
party harmless, the indemnifying party will contribute to the amount paid or
payable in a manner appropriate to reflect all relevant equitable
considerations.

Employee Benefits

The distribution agreement includes the following provisions relating to
employee matters:

Treatment of Employees and Plans in General.  At the time of completion of
the spin-off, SWS will retain responsibility for all its current employees
(other than Westwood employees), whom we refer to as SWS employees, and we will
retain responsibility for all of our employees (including persons absent from
active service by reason of disability or otherwise), whom we collectively
refer to as our employees or Westwood employees. At the time of completion of
the spin-off, our employees will no longer be deemed employees of SWS. In
connection with the spin-off, we will adopt employee benefit plans that will be
substantially similar to certain plans provided to our employees by SWS, such
as the SWS 401(k), medical, dental, disability and life insurance plans. Since
the SWS plans provided to our employees will terminate as to those employees as
of the spin-off, we expect our plans to be effective as of the date of the
spin-off.

Our active employees who participate in the SWS 401(k) Profit Sharing Plan
(the "SWS 401(k) Plan") will cease active participation in that plan and will
be given the opportunity to participate in the new Westwood 401(k) Profit
Sharing Plan (the "Westwood 401(k) Plan"). At the time of the spin-off,
Westwood employees will become 100% vested in their accounts in the SWS 401(k)
Plan, and as soon as practicable following the spin-off, trustees for the SWS
401(k) Plan will transfer account balances under the SWS 401(k) Plan to the
Westwood 401(k) Plan without forfeiture of any portion of the Westwood
employees' account balances.

25

Additionally, our active employees who participated in the SWS Deferred
Compensation Plan ceased active participation in that plan and are being given
the opportunity to participate in the new Westwood Deferred Compensation Plan.
As soon as practicable following the spin-off, the trustee of the SWS Deferred
Compensation Plan will transfer the accounts of the Westwood employees to the
trustee of the Westwood Deferred Compensation Plan. Contemporaneously with the
transfers of the assets to the Westwood Deferred Compensation Plan, SWS will
transfer the related liability and unrealized holding gain accounts.

Equity-Based Compensation.  In connection with the spin-off and effective as
of the completion of the spin-off, options granted to Westwood employees under
the SWS Securities, Inc. Stock Option Plan and the SWS Securities, Inc. 1997
Stock Option Plan will become fully vested as of the date of the spin-off, and
Westwood will be substituted for SWS as the employer of these employees. In
addition, to the extent that SWS makes any adjustments to its outstanding
options as a result of the spin-off, similar adjustments will be made to the
SWS options held by Westwood employees.

Restriction on Solicitation or Employment of Employees

For a period of one year after the spin-off, we and SWS will agree not to,
and to cause our subsidiaries not to, directly or indirectly:

.  solicit or otherwise attempt to induce or influence any employee of the
other party or a subsidiary to leave employment with his or her
then-current employer; or

.  employ any employee of the other party or a subsidiary of the other party,
in each case without the consent of the other party.

However, if an employee of SWS or Westwood is terminated or terminates
employment within such one year period, the terminated employee shall be
eligible to be hired by SWS or Westwood, as the case may be, at any time after
90 days following such employee's termination; provided that such solicitation
or hiring is for a bona fide reason not intended to circumvent the
non-solicitation provisions noted above.

Access to Information; Provision of Witnesses; Confidentiality

Under the distribution agreement, we and SWS will allow the other party and
their specified representatives reasonable access to all records in our or its
possession relating to the business and affairs of the other party as
reasonably required. Access will be allowed for such purposes as audit,
accounting, litigation, disclosure reporting and regulatory compliance. Each
party will also use reasonable efforts to make available to the other party and
its accountants, counsel and other designated representatives, upon written
request, its directors, officers, employees and representatives as witnesses
and will otherwise cooperate with the other party in connection with any
proceeding arising out of its or the other party's business and operations
before the spin-off. Subject to limited exceptions, we, SWS and our respective
directors, officers, employees, agents, consultants and advisors will hold in
strict confidence all information in our, its or their possession concerning
the other party.

Transaction Expenses

The distribution agreement provides for each of SWS and us to pay our own
expenses in connection with the spin-off.

Transition Services Agreement

The transition services agreement provides for the continued provision of
certain services by SWS to us, on a transitional basis, consistent with the
historical provision of these services and the other terms of the transition
services agreement. These services consist of human resources services and
information technology and equipment services, such as Internet access and
email; data lines; SOHO/VPN connections; desktop, server and

26

application support; ILX or other equity quote services; equipment rental;
website hosting and maintenance; and disaster recovery. SWS will provide the
human resources services for $95/hour for the first 15 hours in any calendar
week and $125/hour for any hours in excess of 15 in any calendar week. SWS will
provide the information services at prices consistent with those charged to
other SWS customers and the equipment services based on SWS's current lease
payment for such equipment. In each case, SWS will provide such services
effective as of the spin-off date to the extent that they are identified or
described in the transition services agreement. SWS has agreed to provide human
resources services for six months following the spin-off, information
technology services for one year following the spin-off, and equipment services
until the expiration of the lease relating to such equipment. We may terminate
SWS's provision of any or all services under the transition services agreement
upon 30 days' prior written notice to SWS. Upon the termination or expiration
of that agreement, we will need to determine whether we will seek to continue
the arrangement set forth in the agreement (subject to SWS's consent),
internally develop the provision of services provided thereunder or seek to
obtain such services from a third party. At this time we have not yet
determined which of these options we will pursue.

The transition services agreement also provides that SWS will retain us for
a term of not less than one year to provide investment management and custodial
services with respect to the SWS cash reserve funds. Following such one-year
period, SWS may, at its option, upon no less than 30 days' prior written notice
to Westwood, terminate such services.

Tax Separation Agreement

We will be included in SWS's U.S. federal consolidated income tax group and
any other consolidated, combined or unitary foreign, state and local tax group
of SWS for all tax periods preceding the spin-off. Pursuant to a tax separation
agreement with SWS, we are required to pay to SWS the portion of any taxes
reported on the consolidated, combined or unitary tax returns filed by SWS for
the 2002 tax year that are attributable to our business. For this purpose, the
tax attributable to our business will be determined using SWS's historical
method of computations as if we were not, and never were, a part of any
consolidated group of SWS. We shall also be responsible for any increase (and
will receive the benefit of any decrease) in any tax reported on these
consolidated, combined or unitary tax returns that results from an audit by a
tax authority (or other tax adjustment) of a tax attribute of us.

SWS will be responsible for the preparation and filing of all
non-consolidated tax returns relating to us, and the payment of any taxes
relating to these returns, for all tax periods ending on or before the
spin-off. With respect to any non-consolidated tax returns relating to us for
tax periods that begin on or before, but end after, the spin-off ("straddle
periods"), elections will be made to close the tax periods on the date of the
spin-off if permissible under applicable law. With respect to any straddle
period for which an election cannot be made, we shall be responsible for the
preparation and filing of all non-consolidated returns relating to us, and the
remittance of any taxes relating to these returns. SWS will indemnify us for
the portion of any of these non-consolidated taxes that relate to the portion
of the straddle period prior to the spin-off.

We will be responsible for the preparation and filing of all tax returns
(both consolidated and non-consolidated) relating to us, and the payment of any
taxes relating to these returns, for all tax periods beginning after the
spin-off.

The tax separation agreement allocates responsibility between SWS and us
with respect to any corporate income taxes for which SWS becomes liable by
reason of a change-in-control of SWS or us resulting in the application of
Section 355(e) of the Code. The party responsible for triggering a
change-in-control will bear any taxes that arise from the application of
Section 355(e) of the Code in connection with the spin-off.

27

DIVIDEND POLICY

The declaration and payment of dividends is subject to the discretion of our
Board of Directors. Any determination as to the payment of dividends, as well
as the type and amount of such dividends, will depend on, among other things,
general economic and business conditions, our strategic plans, our financial
results and condition, and contractual, legal and regulatory restrictions on
the payment of dividends by us. We are a holding company and, as such, our
ability to pay dividends is subject to the ability of our subsidiaries to
provide us with cash. We cannot provide any assurance that dividends will be
declared and paid in the future.

Westwood Trust is limited under applicable Texas law in the payment of
dividends to undivided profits: that part of equity capital equal to the
balance of net profits, income, gains, and losses since its formation date
minus subsequent distributions to stockholders and transfers to surplus or
capital under share dividends or appropriate Board resolutions. At December 31,
2001, Westwood Trust had undivided profits of approximately $385,000.

28

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth the selected consolidated financial data of
Westwood, which with respect to each of the three years in the period ended
December 31, 2001, and as of December 31, 2001 and 2000, is derived from the
audited consolidated financial statements of Westwood and should be read in
conjunction with those statements, which are included in this information
statement. The selected consolidated financial data for each of the two years
in the period ended December 31, 1998, and as of December 1999, 1998 and 1997,
is derived from the unaudited consolidated financial statements of Westwood.
The data reflects Westwood's results as it has historically been operated as a
part of SWS, and these results may not be indicative of Westwood's future
performance as an independent company following the spin-off. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this information statement.

Years ended December 31,
(in thousands, except per share amounts)
----------------------------------------
2001(1)   2000    1999    1998    1997
-------  ------- ------- ------- -------

Statements of Income Data:
Total revenues................... $19,587  $16,136 $11,336 $10,085 $ 6,585
Total expenses...................  15,229    9,524   7,933   7,000   5,582
Income before income taxes.......   4,358    6,612   3,403   3,085   1,003
Provision for income tax expense.   3,097    2,628   1,469   1,294     452
Net income....................... $ 1,261  $ 3,984 $ 1,934 $ 1,791 $   551
Earnings per share (2)........... $234.68  $741.45 $359.90 $333.34 $102.51

As of December 31,
(in thousands, except per share amounts)
----------------------------------------
2001     2000    1999    1998    1997
-------  -------  ------- ------- ------

Balance Sheet Data:
Cash and money market accounts..... $12,097  $ 9,572  $ 2,148 $ 3,264 $  864
Total assets.......................  21,053   18,100   11,711  10,227  7,133
Stockholders' equity...............  14,032   12,802    8,590   6,681  4,889
Tangible book value per share (3).. $ 2,183  $ 1,940  $ 1,143 $   774 $  427
Assets Under Management (in millions): $ 4,120  $ 3,601  $ 2,373 $ 2,083 $1,688

--------
(1) Total expenses include a $4.0 million equity based compensation charge,
reflecting (i) the difference in value of $3.4 million between the amount
paid by our executive officers to SWS for shares of our common stock
purchased by them and the value for financial reporting purposes of the
shares on December 14, 2001 and (ii) the below market interest rate
associated with the loans made by Westwood to the executive officers to
enable them to purchase such shares. Total expenses would have been
approximately $11,253,000 and net income would have been approximately
$5,027,000 without the compensation charge.

(2) Reflects earnings per share based on the actual number of shares of our
common stock outstanding on December 31, 2001. Our Board of Directors has
approved a stock split in the form of a stock dividend to be effective as
of May   , 2002 based on a formula that will cause our common stock held by
SWS to equal one-fourth the number of shares of SWS common stock
outstanding on May   , 2002. Were the stock split effective as of April 1,
2002, based on the number of shares of SWS common stock outstanding at that
date, earnings per share would have been the following pro forma amounts:

2001    2000    1999    1998    1997
------- ------- ------- ------- -------

Earnings per share--
As reported -- basic.. $234.68 $741.45 $359.90 $333.34 $102.51
As reported -- diluted  234.68  741.45  359.90  333.34  102.51
Pro forma -- basic....    0.23    0.74    0.36    0.33    0.10
Pro forma -- diluted..    0.23    0.74    0.36    0.33    0.10

However, excluding the $4.0 million equity based compensation charge
discussed in note (1) above and including an additional $800,000 of expenses
we have estimated we would have incurred in 2001 had we

29

been a stand-alone public company, pro forma earnings per share for 2001
would have been $0.84 on both a basic and diluted basis. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a more detailed discussion
of the additional estimated public company-related expenses.

(3) Calculated by dividing, at period end, stockholders' equity less goodwill
by the number of common shares outstanding.

30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in the forward looking statements as a result of various factors,
including those set forth under "Risk Factors," elsewhere in this information
statement. You should read the following discussion and analysis in conjunction
with our consolidated financial statements and related notes thereto appearing
elsewhere in this document.

Overview

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at December 31, 2001, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.1 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

Revenues

We derive our revenues from investment advisory fees, trust fees and other
revenues. Our advisory fees are generated by Westwood Management, which manages
its clients' accounts under investment advisory and subadvisory agreements.
Advisory fees are calculated based on a percentage of assets under management,
and are paid in accordance with the terms of the agreements. Most of Westwood
Management's advisory fees are paid quarterly in advance based on the assets
under management on the last day of the preceding quarter. However, some fees
are paid quarterly in arrears or are based on a daily or monthly analysis of
assets under management for the stated period. Westwood Management recognizes
revenues as services are rendered.

Our trust fees are generated by Westwood Trust pursuant to trust or
custodial agreements. Trust fees are separately negotiated with each client and
are generally based on a percentage of assets under management, which in turn
is influenced by the complexity of the operations of the trust and the services
provided. Westwood Trust also provides trust services to a small number of
clients on a fixed fee basis. Similar to advisory fees generated by Westwood
Management, most trust fees are paid quarterly in advance and are recognized as
services are rendered.

Our other revenues generally consist of interest income, investment income
and consulting fees. We invest most of our cash in money market funds, although
we do invest smaller amounts in bonds and equity instruments. The most
significant component of our other revenues is consulting fees paid to us by
Gabelli Advisers, Inc.

Assets Under Management

Assets under management increased $511 million, or 14.4%, to $4.1 billion at
December 31, 2001, compared with $3.6 billion at December 31, 2000. The growth
in assets under management was principally attributable to assets from new
clients. Assets under management increased $1.2 billion, or 51.8%, to $3.6
billion at December 31, 2000, compared with $2.4 billion at December 31, 1999.
The growth in assets under management was principally attributable to
additional assets from new and existing clients, as well as market appreciation
of assets under management.

31

As of December 31,(1)
(in millions)              % Change
--------------------- --------------------------
2001    2000   1999  2001 vs. 2000 2000 vs. 1999
------  ------ ------ ------------- -------------

Westwood Management Corporation
Separate Accounts................... $2,185  $1,776 $1,295      23.0%         37.2%
Subadvisory.........................    678     825    316     (17.8)        161.6
Gabelli Westwood Funds..............    501     429    377      16.7          13.8
Managed Accounts....................    119      91     --      31.9           N/A
------  ------ ------     -----         -----
Total...........................  3,483   3,121  1,988      11.6          57.0

Westwood Trust
Commingled Funds....................    477     353    261      35.1          35.2
Private Accounts....................     77      59     58      30.5           1.7
Agency/Custody Accounts.............     83      68     66      22.1           3.0
------  ------ ------     -----         -----
Total...........................    637     480    385      32.7          24.7

Total Assets Under Management.......... $4,120  $3,601 $2,373      14.4%         51.8%
======  ====== ======     =====         =====

--------
(1) The above table excludes the SWS cash reserve funds for which Westwood
Management serves as investment advisor and Westwood Trust serves as
custodian. The SWS cash reserve funds were $500 million, $263 million and
$187 million as of December 31, 2001, 2000 and 1999, respectively. This
account is noted separately due to its unique nature in our business and
because it can experience significant fluctuations on a weekly basis.

Westwood Management.  In the above table, "Separate Accounts" represent
corporate pension and profit sharing plans, public employee retirement
accounts, Taft Hartley plans, endowments, foundations and individuals.
"Subadvisory" represents relationships where Westwood Management provides
investment management services for funds offered by other financial
institutions. "Gabelli Westwood Funds" represent the family of mutual funds for
which Westwood Management serves as subadvisor. "Managed Accounts" represent
relationships with brokerage firms and other registered investment advisors who
offer Westwood Management's products to their customers.

Westwood Trust.  In the above table, "Commingled Funds" are established to
facilitate investment of fiduciary funds of multiple clients by combining
assets into a single trust for taxable and tax-exempt entities. "Private
Accounts" represent discretionary accounts where Westwood Trust acts as trustee
or agent and has full investment discretion. "Agency/Custody Accounts"
represent non-discretionary accounts in which Westwood Trust provides agent or
custodial services for a fee, but does not act in an advisory capacity.

Matters Involving SWS Group, Inc.

We were incorporated under the laws of the State of Delaware on December 12,
2001, as a subsidiary of SWS. Our principal assets consist of the capital stock
of Westwood Management and Westwood Trust. After the spin-off, we will be an
independent public company, with SWS having no continuing ownership interest in
us. We have entered into various agreements with SWS that address the
allocation of certain rights and obligations and that define our relationship
with SWS after the spin-off, including a distribution agreement, a tax
separation agreement and a transition services agreement. See "Relationship
Between SWS and Westwood After the Spin-off."

On December 14, 2001, SWS sold 1,064,668 shares of Westwood common stock,
constituting 19.82% of Westwood's outstanding common stock, to five Westwood
executive officers for an aggregate of $4.1 million, or $3.85 per share.
Westwood's 2001 results of operations include a non-cash compensation expense
of $4.0 million, reflecting (i) the difference in value of $3.4 million between
the amount paid by the executive officers to

32

SWS for the shares of Westwood common stock and the value for financial
reporting purposes of the shares on December 14, 2001 and (ii) the below market
interest rate associated with the loans made by Westwood to the executive
officers to enable them to purchase such shares. The purchase price for the
shares sold by SWS to these executives was premised upon an understanding
reached in October 2001 that SWS would sell the shares of Westwood common stock
based on their value at September 30, 2001, and was based on a valuation as of
September 30, 2001, covering the shares sold, which valuation was delivered to
the SWS Board in December 2001 and took into account the fact that the shares
represented a minority interest in closely held, non-marketable securities.

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, and reflect our
historical financial position, results of operations and cash flows as a part
of SWS. The financial information included in this information statement is not
necessarily indicative of what our financial position, results of operations or
cash flows would have been had we operated as an independent public company
during the periods presented, nor is it necessarily indicative of our future
performance as an independent public company. Our expenses have been allocated
from SWS on the basis of our relative number of employees, relative revenues
and other allocation bases. These allocated expenses represent services
provided by SWS, including human resources, accounting, internal audit, income
tax, legal, insurance and information technology.

Results of Operations

The following table and discussion of our results of operations for the
fiscal years ended December 31, 2001, 2000 and 1999 is based upon data derived
from the consolidated statements of income contained in the audited
consolidated financial statements and should be read in conjunction with these
statements, which are included elsewhere in this information statement.

Years ended December 31,
(in thousands)               % Change
------------------------ --------------------------
2001    2000    1999   2001 vs. 2000 2000 vs. 1999
-------  ------- ------- ------------- -------------

Revenues
Advisory fees....................... $14,918  $12,038 $ 8,650      23.9%         39.2%
Trust fees..........................   3,755    3,079   2,282      22.0          34.9
Other revenues......................     914    1,019     404     (10.3)        152.2
-------  ------- -------     -----         -----
Total revenues..................  19,587   16,136  11,336      21.4          42.3

Expenses
Employee compensation and benefits..   8,042    6,890   5,345      16.7          28.9
Equity based compensation charge....   3,976       --      --       N/A           N/A
Sales and marketing.................     485      452     425       7.3           6.4
Information technology..............     818      730     748      12.1          (2.4)
Professional services...............     702      281     239     149.8          17.6
General and administrative..........   1,206    1,171   1,176       3.0          (0.4)
-------  ------- -------     -----         -----
Total expenses..................  15,229    9,524   7,933      59.9          20.1

Income before income taxes.............   4,358    6,612   3,403     (34.1)         94.3
Provision for income tax expense.......   3,097    2,628   1,469      17.8          78.9
-------  ------- -------     -----         -----

Net income............................. $ 1,261  $ 3,984 $ 1,934     (68.3)%       106.0%
=======  ======= =======     =====         =====

33

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Total Revenues.  Our total revenues increased by 21.4% to $19.6 million in
2001 from $16.1 million in 2000. Advisory fees increased by 23.9% to $14.9
million in 2001 from $12.0 million in 2000 primarily as a result of increased
assets under management derived from new clients. Trust fees increased by 22%
to $3.8 million in 2001 from $3.1 million in 2000 primarily due to increased
trust assets under management. Other revenues, which generally consists of
interest and investment income and consulting fees, decreased by 10.3% to
$914,000 in 2001 from $1.0 million in 2000. Other revenues decreased primarily
as a result of mark-to-market losses on investments.

Employee Compensation and Benefits.  Employee compensation and benefits
costs generally consist of salaries, benefits and incentive compensation.
Employee compensation and benefits increased by 16.7% to $8.0 million in 2001
from $6.9 million in 2000. This increase resulted primarily from increased
incentive compensation, which increase was largely based on growth in income
before income taxes (excluding the equity based compensation charge) and also
an increase in the number of investment professionals and other personnel.

Equity Based Compensation Charge.  The $4.0 million equity based
compensation charge in 2001 relates to the sale of a minority interest in
Westwood to our executive officers by SWS and reflects (i) the difference in
value of $3.4 million between the amount paid by our executive officers to SWS
for shares of our common stock purchased by them and the value for financial
reporting purposes of the shares on December 14, 2001 and (ii) the below market
interest rate associated with the loans made by Westwood to the executive
officers to enable them to purchase such shares.

Sales and Marketing.  Sales and marketing costs generally consist of costs
associated with our marketing efforts, including travel and advertising costs.
Sales and marketing costs increased by 7.3% to $485,000 in 2001 from $452,000
in 2000. The increase in these expenses is the primarily the result of expanded
business development activities.

Information Technology.  Information technology expenses generally consist
of costs associated with computing hardware and software licenses, maintenance
and support, telecommunications, proprietary investment research tools and
other related costs. Information technology costs increased by 12.1% to
$818,000 in 2001 from $730,000 in 2000. The increase in these expenses is
primarily due to additional expenditures for new proprietary investment
research tools, as well as a dedicated effort to enhance the automation and
efficiency of our back office operations.

Professional Services.  Professional services expenses generally consist of
costs associated with legal, audit and other professional services.
Professional services expenses increased by 149.8% to $702,000 in 2001 from
$281,000 in 2000. The increase in these expenses is primarily the result of
legal and accounting costs associated with the spin-off from SWS, as well as
legal expenses associated with the Boykin Trust litigation and bankruptcy
proceedings. See "Relationship Between SWS and Westwood After the Spin-off --
Distribution Agreement." We expect that our professional services expenses for
2002 will be somewhat higher than our expenses for 2001 largely due to expenses
associated with the spin-off, the Boykin Trust matters and other compliance
matters related to our being an independent, public company. We anticipate that
our professional services expenses for 2003 will approximate or perhaps be
somewhat lower than our 2001 professional services expenses.

General and Administrative.  General and administrative expenses generally
consist of costs associated with the lease of our office space, depreciation
and amortization, insurance, office supplies and other miscellaneous expenses.
General and administrative expenses increased by 3.0% to $1.2 million in 2001.
The increase in these expenses is primarily the result of increased usage of
office supplies and higher custody fees related to our international fund.

34

Provision for Income Tax Expense.  Provision for income tax expense
increased by 17.8% to $3.1 million in 2001 from $2.6 million in 2000,
reflecting an effective tax rate of 71.1% and 39.7% for 2001 and 2000,
respectively. The increase in the effective tax rate resulted from the
non-deductibility of most of the equity based compensation charge incurred in
2001.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Total Revenues.  Our total revenues increased by 42.3% to $16.1 million in
2000 from $11.3 million in 1999. Advisory fees increased by 39.2% to $12.0
million in 2000 from $8.7 million in 1999 primarily as a result of increased
assets under management, which in turn was attributable to new assets from new
and existing clients as well as market appreciation in assets under management.
Trust fees increased by 34.9% to $3.1 million in 2000 from $2.3 million in 1999
as a result of increased trust assets under management. Other revenues
increased by 152.2% to $1.0 million in 2000 from $404,000 in 1999. Other
revenues increased primarily as a result of higher interest income and
mark-to-market gains on investments.

Employee Compensation and Benefits.  Employee compensation and benefits
costs increased by 28.9% to $6.9 million in 2000 from $5.3 million in 1999.
This increase resulted primarily from increased incentive compensation, which
increase was largely based on growth in income before income taxes as well as
an increase in the number of personnel.

Sales and Marketing.  Sales and marketing costs increased by 6.4% to
$452,000 in 2000 from $425,000 in 1999. The increase in these expenses is the
result of expanded business development activities.

Information Technology.  Information technology expenses decreased by 2.4%
to $730,000 in 2000 from $748,000 in 1999. These expenses remained relatively
constant year to year.

Professional Services.  Professional services expenses increased by 17.6% to
$281,000 in 2000 from $239,000 in 1999. The increase in these expenses is
primarily a function of a higher need for professional services commensurate
with the growth in our assets under management and new accounts.

General and Administrative.  General and administrative expenses decreased
by 0.4% to $1.2 million in 2000. These expenses remained relatively constant
from year to year.

Provision for Income Tax Expense.  Provision for income tax expense
increased by 78.9% to $2.6 million in 2000 from $1.5 million in 1999,
reflecting an effective tax rate of 39.7% and 43.2% for 2000 and 1999,
respectively. A decrease in the effective tax rate is due to the fact that we
were no longer subject to New York state and city income taxes in 2000.

Liquidity and Capital Resources

In general, we have not historically relied on SWS to provide us with
capital to fund the operations of our business. We have funded our operations
and cash requirements with cash generated from operating activities. As a
result, we do not believe that the additional expenses associated with the
spin-off and our being an independent public company will have a material
effect on our liquidity and capital resources in the near term. However, had we
been an independent public company in 2001, we estimate that our total expenses
would have been approximately $800,000 higher than those reflected in the
consolidated financial statements. The increase in expenses includes, without
limitation, increased public company compliance costs, employee compensation,
insurance costs, legal expenses, and accounting and payroll costs. The
foregoing estimate of higher expenses is not necessarily an accurate measure of
what our stand-alone expenses would have been in 2001 or will be in the future,
and our expenses could be higher. The costs we actually incur in the future
will depend on the market for these services when they are actually purchased
and the size and nature of our future operations.

As of December 31, 2001, we had no long-term debt. The changes in net cash
provided by operating activities generally reflect the changes in earnings plus
the effect of non-cash items and changes in working

35

capital. Changes in working capital, especially accounts receivable and
accounts payable, are generally the result of timing differences between
collection of fees billed and payment of operating expenses.

During 2001, we generated cash flow from operating activities, principally
our investment advisory business, of $7.3 million. During 2000, we generated
$5.5 million of cash flow from operating activities. At December 31, 2001 and
2000, we had working capital of $11.2 million and $10.1 million, respectively.

Cash used in investing activities during 2001 was $7.4 million, and was
primarily related to the investment of excess cash balances. Cash used in
investing activities during 2000 was $1.8 million, and was primarily related to
the investment of excess cash balances.

Cash used in financing activities during 2001 was $4.1 million and was
related to the funding of loans used to enable our executive officers to
purchase shares of our common stock from SWS. The loans bear interest at the
rate of 3.93% per annum, payable annually, with the principal payable at
maturity on the ninth anniversary of the date of the loans. There were no
financing activities during 2000.

We had cash and money market funds of $12.1 million at December 31, 2001, as
compared to $9.6 million at December 31, 2000. The increase in our liquidity
was principally due to an increase in money market funds of $6.7 million,
offset by a decrease in cash of $4.1 million. The decrease in cash was
primarily due to our funding of loans of $4.1 million in 2001 to our executive
officers to enable them to purchase shares of our common stock from SWS. We had
no liabilities for borrowed money at either December 31, 2001 or December 31,
2000, and our accounts payable were paid in the ordinary course of business in
both years.

Our future liquidity and capital requirements will depend upon numerous
factors. We believe that current cash and short-term investment balances and
cash generated from operations will be sufficient to meet the operating and
capital requirements of our ordinary business operations through at least the
next twelve months. However, there can be no assurance that we will not require
additional financing within this time frame. Our forecast of the period of time
through which our financial resources will be adequate to support our
operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary. The failure to raise needed
capital on attractive terms, if at all, could have a material adverse effect on
our business, financial condition and results of operations.

Quantitative and Qualitative Disclosures About Market Risk

Westwood utilizes various financial instruments, which entail certain
inherent market risks. We do not currently participate in any hedging
activities, nor do we currently utilize any derivative financial instruments.
The following information describes the key aspects of certain financial
instruments that have market risks.

Interest Rate

Our cash equivalents and other investment instruments are exposed to
financial market risk due to fluctuation in interest rates, which may affect
our interest income. These instruments are not entered into for trading
purposes. We do not expect our interest income to be significantly affected by
a sudden change in market interest rates. However, the value of assets under
management is affected by changes in interest rates. Since we derive a
substantial portion of our revenues from investment advisory and trust fees
based on the value of assets under management, our revenues may be adversely
affected by changing interest rates.

Inflation

Most of our revenues are based on the value of assets under management.
There is no predictable relationship between the rate of inflation and the
value of assets under management, except that inflation may affect interest
rates. We do not believe inflation will significantly affect our compensation
costs as they are substantially variable in nature. However, inflation may
affect our expenses, such as information technology and occupancy costs. To the
extent inflation results in rising interest rates and has other effects upon
the securities markets, it may adversely affect our results of operations by
reducing our assets under management.

36

BUSINESS

General

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at December 31, 2001, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.1 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

The core of our business is dependent on our client relationships. We
believe that in addition to investment performance, client service is paramount
in the asset management business. As such, a major focus of our business
strategy is to continue building strong relationships with clients to better
enable us to anticipate their needs and to satisfy their investment objectives.
Our team approach ensures efficient, responsive service for our clients. Our
future success will depend to a significant degree on both investment
performance and our ability to provide responsive client service.

The NYSE has authorized the listing of our common stock on the NYSE under
the ticker symbol "WHG." We maintain a website at www.westwoodgroup.com.
Information found on our website is not a part of this information statement.

Westwood Management Corporation

General

Westwood Management provides investment advisory services to large
institutions, including corporate pension funds, public retirement plans,
endowments, foundations and mutual funds, having at least $25 million in assets.

Our overall investment philosophy is determined by Susan M. Byrne and, with
respect to the bulk of assets under management, is focused on achieving a
superior, risk-adjusted return by investing in companies that are positioned
for growth but are not fully recognized in the marketplace. This investment
approach is designed to preserve capital in unfavorable periods and to provide
superior real returns over the long term. Ms. Byrne has worked in the
investment arena for more than 30 years. Westwood Management's investment
advisory team also includes 15 additional portfolio managers, trading and
research professionals, all of whom have substantial investment management
experience. The continuity of the team and its years of experience are critical
elements in successfully managing investments.

Managed Asset Classes

Asset Management.  We provide clients with a broad range of investment asset
classes designed to meet varying investment objectives. This affords our
clients the opportunity to meet their investment objective through the use of
one management advisor. More than half of our assets under management are
invested in our Large Cap Equity asset class, although the portion of assets
under management in other asset classes has been growing. The following sets
forth the various asset classes currently managed by Westwood Management:

LargeCap Equity:  Investments in equity securities of approximately 40
well-seasoned companies with market capitalizations generally over $10
billion. Our strategy for this portfolio is to focus on investing in
companies that provide earnings through operational improvements and can be
purchased inexpensively.

37

SMidCap Equity:  Investments in equity securities of approximately 35-45
companies with market capitalizations of $250 million to $7.5 billion.
Similar to the LargeCap Equity asset class, we seek to discover the same
kinds of operational improvements but within mid-size companies, which offer
attractive risk/return profiles.

SmallCap Equity:  Investments in approximately 65 growth companies with
market capitalizations between $100 million and $1.5 billion at the time of
purchase. Our approach to growth investing is more conservative than many
managers of growth portfolios. We focus on small companies whose earnings
are accelerating and are positioned for sustainable future growth.

Balanced:  Investments in a combination of equity and fixed income
securities, which are designed to provide both growth opportunities and
income, while also placing emphasis upon asset preservation in "down"
markets. Westwood Management applies its expertise in dynamic asset
allocation and security selection in carrying out this balanced strategy
approach.

Real Estate Investment Trusts (or REITs):  Investments in the publicly
traded equity securities of approximately 50 real estate investment trusts.
Our investment process incorporates a quantitative ranking system where each
real estate sector and related stocks are evaluated. Westwood Management
then makes investment selection based on qualitative research of the
top-ranked REITS within our proprietary ranking system.

Fourth Wave:  Investments in equity securities of approximately 30-50
companies with varying market capitalizations. The fund focuses on
identifying innovative companies with the highest potential for revenue and
earnings growth. The fund invests in the higher growth segments of the
economy, including the technology, healthcare and capital equipment sectors.

Fixed Income Core/Intermediate Bonds:  Investments in high-grade,
intermediate term, corporate and government bonds. We seek to add value to
client portfolios through yield curve positioning and investment in
improving credit quality.

Each asset class is a portfolio of equity and/or fixed income securities
determined by Westwood Management's portfolio managers to best provide the long
term returns consistent with Westwood Management's investment philosophy. Our
portfolio managers make decisions for all of Westwood Management's asset
classes in accordance with the investment objectives and policies of such
classes, including determining when and which securities to purchase and sell.

We employ various strategies, including a value-oriented approach as well as
others that are more closely correlated to growth investing, in managing our
asset classes. The common thread that permeates through our investment
strategies is our focus on a disciplined approach to controlling risk and
preserving the core value of the assets under management whenever possible. The
LargeCap Equity asset class has a greater emphasis on identifying companies
where earnings result from actual operational improvements and not manufactured
improvements occurring through financial statement adjustments. Our desire to
prevent the loss of the core value of the assets under management is the
overriding objective of this strategy, even if the cost is the loss of
opportunity for potentially higher earnings. The growth strategy seeks to
primarily invest in companies that are leaders in their industry or sector and
are worthy of paying a slight premium relative to their growth rate. However,
the growth strategy incorporates an element of risk control through investments
in steady and stable growth companies, thus controlling downside losses in the
total portfolio. Whether through investments in leaders of industry or in
companies that provide steady and stable growth, Westwood Management seeks to
consistently demonstrate superior performance relative to industry peers and
the broad market.

More than two-thirds of our assets under management are invested in equity
securities of companies with a large market capitalization. As a consequence,
we are particularly susceptible to the volatility associated with changes in
the market for large capitalization stocks. Due to this concentration, any
change or reduction in such markets, including a shift of Westwood Management
clients' and potential clients' preference from investments in equity
securities of large capitalization stocks to other equity or fixed income
securities could have a significant negative impact on our business.

38

When measured over multi-year periods, Westwood Management's principal asset
classes have consistently ranked above the median within their peer groups in
performance according to recognized industry sources, including Morningstar,
Inc. For the ten-year period ending on December 31, 2001, our LargeCap Equity,
Balanced and Fixed Income asset classes have ranked in the top quartile in
their peer groups. However, it should be noted that when considering the
results of 2001 alone, the asset classes comprising the bulk of assets under
management performed below the median within their peer groups.

Our assets under management have grown 73.3% from December 31, 1999 through
December 31, 2001. Our ability to obtain such growth is a result of our
competitive long-term performance record and our strong relationship with
consulting firms throughout the nation. We are continually looking for
opportunities to expand our asset classes in terms of growing our existing
asset classes and developing new portfolios focusing on investment areas that
are not currently part of our asset classes under management. We intend to grow
our asset classes either internally or by acquiring new asset classes from
third parties, as discussed under "--Growth Strategies" below. Our growth
strategy not only provides our clients more investment opportunities, but also
diversifies our assets under management, thereby reducing our risk in any one
area of investment and increasing our competitive ability to attract new
clients.

Cash Management.  Westwood Management also provides cash management and
custodial services for the SWS cash reserve funds. The SWS cash reserve funds
totaled $500 million at December 31, 2001. Westwood Management charges a fee
based on the total amount of cash assets under management. Following the
spin-off, Westwood Management will continue to provide cash management and
custodial services with respect to the SWS cash reserve funds for a term of not
less than one year for a fee mutually agreed to by the parties. See
"Relationship Between SWS and Westwood After the Spin-off -- Transition
Services Agreement."

Advisory and Subadvisory Service Agreements

Westwood Management manages accounts of its clients under investment
advisory and subadvisory agreements. These agreements are usually terminable
upon short notice and provide for compensation based on the market value of the
client's assets under management. Our fees are generally payable in advance on
a calendar quarterly basis. Pursuant to these agreements, Westwood Management
provides overall investment management services, including providing advice and
recommendations concerning investments and reinvestments in conformity with the
investment objectives and restrictions posed by the clients. Unless otherwise
directed in writing by our client, Westwood Management has the authority to
vote all proxies with respect to client's assets.

Westwood Management is also a party to subadvisory agreements with other
investment companies under which it performs substantially the same services as
it does under its advisory agreements. However, the investment strategy adopted
for a particular client is subject to supervision and review by the client. Our
fees are computed daily based upon the daily net assets of the client and are
payable on a monthly basis. As with our advisory agreements, these agreements
are terminable upon short notice.

Under our subadvisory agreement with Gabelli Advisers, Inc., Westwood
Management provides investment advisory services to the Gabelli Westwood family
of funds. The Gabelli Westwood Equity Fund is a large cap fund with assets
consisting of securities valued at approximately $291 million as of December
31, 2001. As of that date, Morningstar, Inc. awarded the Gabelli Westwood
Equity Fund a four star rating. Westwood Management owns shares of Class A
Common Stock representing an 18.8% economic interest in Gabelli Advisers, Inc.

Our four largest clients accounted for approximately 22.2% of total revenues
for the twelve months ended December 31, 2001, and we are therefore dependent
to a significant degree on our ability to maintain our existing relationships
with these clients. There can be no assurance that we will be successful in
maintaining our existing client relationships or in securing additional clients.

39

Westwood Trust

General

Westwood Trust provides to institutions and high net worth individuals
having at least $1 million in assets under management trust and custodial
services and participation in common trust funds that it sponsors. Westwood
Trust seeks to define and improve the risk/return profile of the client's
investment portfolio by complementing or enhancing existing investment
strategies. Westwood Trust also provides back office services to its clients,
including tax reporting, distribution of income to beneficiaries, preparation
of trust and account statements and attending to the special needs of
particular trusts. Westwood Trust serves as trustee for tax and estate-planning
purposes, as well as for special needs trusts. Westwood Trust is chartered and
regulated by the Texas Banking Commissioner.

Westwood Trust primarily provides services for employee benefit trusts and
personal trusts. Employee benefit trusts include retirement plans of businesses
to benefit their employees, such as defined contribution plans, pensions and
401(k) plans. Westwood Trust may be appointed trustee and provide
administrative support for these plans, as well as investment advisory and
custodial services. Personal trusts are developed to achieve a number of
different objectives, and Westwood Trust acts as trustee to these trusts and
assists in developing tax advantaged trust portfolios for them. The fees
charged by Westwood Trust are separately negotiated with each client and are
based on the complexity of the operations of the trust and the amount of assets
under management.

Services

Westwood Trust undertakes a fiduciary responsibility toward the management
of each client's financial affairs and utilizes a consultative asset allocation
approach. This approach involves Westwood Trust examining the client's
financial affairs, including the client's portfolio of investments, and
advising the client on ways in which it can enhance its investment returns and
financial position. Westwood Trust also provides custodial services, which
includes advising clients on the investment and reinvestment of their assets,
and providing safekeeping and accounting services.

Common Trust Funds

Westwood Trust sponsors a number of common trust funds in which we commingle
clients' assets to achieve economies of scale. Our common trust funds fall
within two basic categories: personal trust and employee benefit trust. We
sponsor common trust funds for most of the asset classes managed by Westwood
Management. We also engage third party subadvisors to supplement the management
services provided by Westwood Management for some of our common trust funds,
such as our International Equity and High Yield Bond common trust funds.

Growth Strategy

We believe that we have established a strong platform to support future
growth, deriving our strength in large part from the experience and
capabilities of our management team and skilled investment professionals. We
believe that assembling this focused, stable team has contributed in large part
to our solid investment performance results, quality customer service and a
growing array of asset classes under management. Opportunities for our future
growth are expected to come from existing and new clients, strategic
acquisitions and alliances and the continued strengthening of our brand name.

Generate growth from new and existing clients.  As our primary business
objective, we intend to maintain and enhance existing client relationships by
continuing to provide solid investment performance results and a high level of
quality service to existing clients. Additionally, we will pursue growth from
new clients through targeted sales and marketing efforts that emphasize our
performance results and client services.

40

Attract and retain key employees.  In order to achieve our client
relationship objectives, we must be able to retain and attract talented
investment professionals. We believe that we have created a workplace
environment in which intense, client-oriented individuals thrive. Following the
completion of the spin-off, we will be able to offer to our key employees a
compensation program that includes strong equity incentives so that the success
of our clients will be closely tied to the success of our key employees. We
believe this is a critical ingredient to continuing to build a stable,
client-focused environment.

Pursue strategic acquisitions and alliances.  While we will not initially
seek new alliances, we will evaluate strategic acquisition, joint venture and
alliance opportunities over time. We may, in time, have an interest in pursuing
asset management firms or trust companies that have assets with respect to
which we have expertise or those that appear appropriate as a means of
expanding the range of our asset classes. By acquiring investment firms that
successfully manage asset classes in which we do not specialize, we could
attract new clients and provide our existing clients with a more diversified
range of asset classes.

Continue strengthening our brand name.  We believe that the strength of our
brand name has been a key ingredient to our long-term tenure in the investment
industry and will be instrumental to our future success. We have developed our
strong brand name largely through high profile coverage in various investment
publications and electronic media. In particular, Ms. Byrne enjoys a highly
visible presence in print and electronic media, which also enhances our brand
name. We will continue to find creative ways to strengthen our brand name, as
well as continue our successful marketing practices.

Competition

We are subject to substantial and growing competition in all aspects of our
business. Barriers to entry to the asset management business are relatively
low, and our management anticipates that we will face a growing number of
competitors. Although no one company dominates the asset management industry,
many companies are larger, better known and have greater resources than us.

Further, we compete with other asset management firms on the basis of asset
classes offered, the investment performance of those asset classes in absolute
terms and relative to peer group performance, quality of service, fees charged,
the level and type of compensation offered to key employees, and the manner in
which asset classes are marketed. Many of our competitors have more asset
classes and services and may also have substantially greater assets under
management.

We compete against an ever-increasing number of investment dealers, banks,
insurance companies and others that sell equity funds, taxable income funds,
tax-free investments and other investment products. Also, the allocation by
many clients of assets away from active equity investment to index funds, fixed
income or similar asset classes has enhanced the ability of firms offering
non-equity asset classes and passive equity management to effectively compete
with us. In short, the competitive landscape in which we operate is both
intense and dynamic, and there can be no assurance that we will be able to
compete effectively in the future as an independent company.

Additionally, most prospective clients perform a thorough review of an
investment manager's background, investment policies and performance before
committing assets to that manager. In many cases, prospective clients invite a
number of competing firms to make presentations. The process of obtaining a new
client typically takes twelve to eighteen months from the time of the initial
contact. While we have achieved a degree of success in competing successfully
for new clients, it is a process to which we must dedicate significant
resources over an extended period, with no certainty of success.

41

Regulation

Westwood Management

Virtually all aspects of our business are subject to various federal and
state laws and regulations. These laws and regulations are primarily intended
to protect investment advisory clients and stockholders of registered
investment companies. Under such laws and regulations, agencies that regulate
investment advisers, such as ourselves, have broad administrative powers,
including the power to limit, restrict or prohibit such an adviser from
carrying on its business in the event that it fails to comply with such laws
and regulations. In such event, the possible sanctions that may be imposed
include the suspension of individual employees, limitations on engaging in
certain lines of business for specified periods of time, revocation of
investment adviser and other registrations, censures and fines. We believe that
we are in substantial compliance with all material laws and regulations.

Our business is subject to regulation at both the federal and state level by
the SEC and other regulatory bodies. Westwood Management is registered with the
Commission under the Investment Advisers Act of 1940 and under the laws of
various states. As a registered investment adviser, Westwood Management is
regulated and subject to examination by the SEC. The Investment Advisers Act
imposes numerous obligations on registered investment advisers, including
fiduciary duties, record keeping requirements, operational requirements,
marketing requirements and disclosure obligations. Under the rules and
regulations of the SEC promulgated pursuant to the federal securities laws, we
are subject to periodic examination by the SEC and the National Association of
Securities Dealers, Inc. The SEC is authorized to institute proceedings and
impose sanctions for violations of the Investment Advisers Act, ranging from
censure to termination of an investment adviser's registration. In addition,
the NASD, as a self-regulatory organization, is authorized to institute
proceedings and impose sanctions against members for violations of its rules
and guidelines, which may include censure, suspension, expulsion, limitation of
activities, functions and operations, or any other appropriate sanction. The
failure of Westwood Management to comply with the requirements of the SEC or
the NASD could have a material adverse effect on Westwood. We believe that we
are in substantial compliance with the requirements of the regulations under
the Investment Advisers Act and with the rules and guidelines established by
the NASD.

We derive a substantial amount of our revenues from investment advisory
services through our investment management agreements. Under the Investment
Advisers Act, our investment management agreements terminate automatically if
assigned without the client's consent. Under the Investment Company Act,
advisory agreements with registered investment companies, such as the mutual
funds for which we act as subadvisor, terminate automatically upon assignment.
The term "assignment" is broadly defined and includes direct assignments as
well as assignments that may be deemed to occur, under certain circumstances,
upon the transfer, directly or indirectly, of a controlling interest in us or
Westwood Management. We do not believe that the spin-off will constitute an
assignment under any such investment management or advisory agreements.

Various regulations also cover certain investment strategies that may be
used by Westwood Management for hedging purposes. To the extent that Westwood
Management purchases futures contracts, Westwood Management may be subject to
the commodities and futures regulations of the Commodity Futures Trading
Commission.

Westwood Trust

Westwood Trust also operates in a highly regulated environment and is
subject to extensive supervision and examination. As a Texas chartered trust
company, Westwood Trust is subject to the Texas Finance Code, the rules and
regulations promulgated under that act and supervision by the Texas Banking
Commissioner. These laws are intended primarily for the protection of Westwood
Trust's clients and creditors, rather than for the benefit of investors. The
Finance Code provides for and regulates a variety of matters, such as:

.  minimum capital maintenance requirements;

.  restrictions on dividends;

42

.  restrictions on investments of restricted capital;

.  lending and borrowing limitations;

.  prohibitions against engaging in certain activities;

.  periodic examinations by the office of the Commissioner;

.  furnishing periodic financial statements to the Commissioner;

.  fiduciary record-keeping requirements;

.  bonding requirements for the protection of clients; and

.  prior regulatory approval for certain corporate events (for example,
mergers, sale/purchase of all or substantially all of the assets and
transactions transferring control of a trust company).

The Finance Code also gives the Commissioner broad regulatory powers
(including penalties and civil and administrative actions) if the trust company
violates certain provisions of the Finance Code or conservatorship or closure
if Westwood Trust is determined to be in a "hazardous condition" (as the law
defines that term).

As required by the Finance Code, Westwood Trust maintains minimum restricted
capital of $1 million; however, the Finance Code permits the Commissioner to
require trust companies on a case-by case basis to maintain additional capital.
In addition, under Texas law, Westwood Trust generally cannot have liabilities,
which exceed five times its restricted capital. At December 31, 2001, Westwood
Trust had total liabilities of approximately $552,000.

Westwood Trust is limited by the Finance Code in the payment of dividends to
undivided profits: that part of equity capital equal to the balance of net
profits, income, gains, and losses since its formation date minus subsequent
distributions to stockholders and transfers to surplus or capital under share
dividends or appropriate Board resolutions. At December 31, 2001, Westwood
Trust had undivided profits of approximately $385,000.

We are subject to the Employee Retirement Income Security Act of 1974, as
amended, and to the related regulations, insofar we are a "fiduciary" under
ERISA with respect to some of our clients. ERISA and applicable provisions of
the Code impose certain duties on persons who are fiduciaries under ERISA or
who provide services to ERISA plan clients and prohibit certain transactions
involving ERISA plan clients. Our failure to comply with these requirements
could have a material adverse effect on us.

Employees

At December 31, 2001, we had 42 full-time employees, 16 of whom are
portfolio managers, trading and research professionals, 13 of whom are
marketing and client service professionals and 13 of whom are administrative
and reporting personnel. None of our employees are represented by a labor
union, and we consider our employee relations to be good.

Properties

We conduct our principal operations through a leased property with
approximately 13,500 square feet located in Dallas, Texas. The lease agreement
expires in July 2004. We believe that our facilities are adequate to serve our
currently anticipated business needs.

Legal Proceedings

We are subject from time to time to certain claims and legal proceedings
arising in the ordinary course of our business.

43

MANAGEMENT

The following table sets forth information regarding our current executive
officers and directors. We currently have five directors. Each of the directors
below has been elected to serve until the next annual meeting of stockholders
and his or her successor has been elected and has been qualified, or until the
director's earlier death, resignation or removal.

Name                      Age                Principal Position
----                      ---                ------------------

Susan M. Byrne................ 55  Chairman of the Board of Directors, Chief
Executive Officer, Treasurer and Director

Brian O. Casey................ 39  President, Chief Operating Officer, Secretary and
Director

Patricia R. Fraze............. 58  Executive Vice President and Director of
Westwood Management and Director of
Westwood Trust

Lynda J. Calkin............... 50  Senior Vice President and Director of Westwood
Management

Joyce A. Schaer............... 36  Senior Vice President and Director of Westwood
Management

Frederick R. Meyer (1)(2)..... 74  Director

Jon L. Mosle, Jr. (1)(2)...... 72  Director

Raymond E. Wooldridge (1)..... 63  Director

--------
(1) Audit committee member.
(2) Compensation committee member; it is expected that Mr. Wooldridge will
become a member of the compensation committee after the spin-off.

Susan M. Byrne has served as Chairman of the Board of Directors, Chief
Executive Officer and director of Westwood since its inception in December
2001. Ms. Byrne is the founder of Westwood Management and has served as its
Chairman of the Board, President and Chief Investment Officer since 1983. She
served as a director of Westwood Trust from 1996 to 1999. Ms. Byrne serves as a
member of the Board of the University of Texas Investment Management Company.
She also serves as the Vice-chair of the Board of Trustees for the City of
Dallas Employees Retirement Fund and Chair of the Investment Committee for The
First Presbyterian Church of Dallas Foundation.

Brian O. Casey has served as President, Chief Operating Officer and director
of Westwood since its inception in December 2001. Mr. Casey has served as
Executive Vice President and Chief Operating Officer of Westwood Management
since 2000 and as the President and as a director of Westwood Trust since 1996.
Prior to his appointment to those positions, Mr. Casey served as the Vice
President of Marketing and Client Services of Westwood Management from 1992 to
1996.

Patricia R. Fraze has served as Executive Vice President of Westwood
Management since 1995 and as Director, Client Services, since 2000. Ms. Fraze
serves as a director of Westwood Management and Westwood Trust. Ms. Fraze
joined Westwood in 1990 as Vice President and fixed income analyst and
subsequently served as Portfolio Manager for fixed income and balanced
portfolios. Prior to joining Westwood, Ms. Fraze was Vice President, Portfolio
Strategies and Fixed Income Research at Drexel Burnham Lambert and also spent
twenty-two years in mathematics education at both the secondary and graduate
level.

44

Lynda J. Calkin, CFA, has served as Senior Vice President and Portfolio
Manager for Westwood Management since 1993. Ms. Calkin serves as a director of
Westwood Management. Prior to joining Westwood, Ms. Calkin was a Vice President
and Portfolio Manager at Hourglass Capital Management from 1989 to 1993. Ms.
Calkin also served as an equity analyst at MSecurities from 1984 to 1989.

Joyce A. Schaer has served as Director of Marketing for Westwood Management
since 1997 and was promoted to Senior Vice President in 2000. Ms. Schaer serves
as a director of Westwood Management. Ms. Schaer has held other marketing
positions at Westwood including Vice President-Marketing for the Eastern Region
of the United States from 1994 to 1996. Ms. Schaer joined the firm in 1989 and
has held various positions in the trading, portfolio management and client
services areas.

Frederick R. Meyer has served as a director of Westwood since its inception
in December 2001. He has served as a director of SWS since 1991. Since 1985, he
has served as the Chairman of the Board of Aladdin Industries, LLC, a
diversified company. He served as Aladdin Industries, LLC's President between
1987 and 1994 and as its Chief Executive Officer from 1995 to January 1999 and
again from November 2000 to present. He also served as President and Chief
Operating Officer of Tyler Corporation, a diversified manufacturing
corporation, from 1983 to 1986 and acted as a consultant to Tyler Corporation
from 1986 to 1989. He currently serves as a director of Aladdin Industries, LLC
and Palm Harbor Homes, Inc., a marketer of manufactured homes.

Jon L. Mosle, Jr. has served as a director of Westwood since its inception
in December 2001. He has served as director of SWS since 1991. He served as
Director of Private Capital Management for Ameritrust Texas Corporation from
1984 to 1992. From 1954 to 1984, he was affiliated with Rotan Mosle, Inc., a
regional NYSE member firm, which was acquired by PaineWebber Incorporated in
1983. His roles at Rotan Mosle, Inc. included supervisory responsibility for
both over-the-counter trading and municipal departments, as well as
participating in corporate finance activities. He served as branch manager,
regional manager, Vice Chairman of the Board and member of Rotan Mosle, Inc.'s
operating committee.

Raymond E. Wooldridge has served as a director of Westwood since its
inception in December 2001. He is a director of CEC Entertainment, Inc., a
Dallas-based NYSE company that operates a chain of pizza and children's
entertainment restaurants, D. A. Davidson & Company, Inc., an investment firm
located in the Pacific Northwest, and its subsidiary Davidson Trust Company,
and Security Bank, a Texas-based regional bank. From 1986 to 1999, he was a
director of SWS; from 1996 to 1999, he served as the Vice Chairman and Chairman
of the Executive Committee of SWS; from 1993 to 1996, he served as Chief
Executive Officer of SWS; and from 1986 to 1993, he served as President and
Chief Operating Officer of SWS. He is a past Chairman of the National
Securities Clearing Corporation, a national clearing agency registered with the
SEC and past Vice Chairman of the Board of Governors of the National
Association of Securities Dealers.

Board Committees

We have established two committees of the Board of Directors--an audit
committee and a compensation committee. The Board of Directors may also
establish such other committees as it deems appropriate, in accordance with
applicable Delaware law and our Bylaws.

Audit Committee.  The audit committee operates pursuant to a charter
approved by our Board of Directors, which the audit committee reviews annually
to determine if revisions are necessary or appropriate. The audit committee
oversees the preparation of our financial statements and our independent
auditors. The audit committee considers and recommends the employment of an
independent accounting firm to conduct the annual audit, determines the
independence of our independent accountants and recommends actions to our Board
of Directors to ensure their independence. The audit committee is responsible
for reviewing reports from our management and internal auditors relating to our
financial condition and other matters that may have a material impact on our
financial statements and compliance policies. The audit committee is also
responsible for inquiring of our management and independent auditors regarding
the appropriateness of the accounting principles we

45

follow, changes in accounting principles and their impact on our financial
statements and reviewing the internal audit program in terms of scope of audits
conducted or scheduled to be conducted. The audit committee is responsible for
preparing a report stating among other things whether our audited financial
statements be included in our Annual Report.

Compensation Committee.  The compensation committee authorizes and
determines all salaries for our officers and supervisory employees, administers
our incentive compensation plans in accordance with the powers and authority
granted in such plans, determines any incentive allowances to be made to our
officers and staff, administers all of our stock option plans and other equity
ownership, compensation, retirement and benefit plans, approves the
performance-based compensation of individuals pursuant to Code Section 162(m)
and administers other matters relating to compensation or benefits.

Director Compensation

Each non-employee member of our Board of Directors shall receive $1,500 for
each meeting of the Board of Directors attended by the member, up to a maximum
of $6,000 per year. Each non-employee member of our Board of Directors shall
receive an additional $2,500 per year if the member serves on one or more
committees of our Board of Directors. Additionally, shortly following the
spin-off and upon each date of election or reelection as a member of our Board
of Directors, each non-employee director shall be awarded non-statutory stock
options for 2,500 shares of our common stock, which shall vest at the
expiration of twelve months from the date of grant and shall have a term of ten
years. See "Compensation of Executive Officers--Westwood Stock Incentive
Plan--Options to Non-Employee Directors." We will review our compensation
arrangement for directors from time to time.

46

Compensation of Executive Officers

The following compensation table sets forth the compensation paid by SWS to
our Chief Executive Officer and our four mostly highly compensated executive
officers during the year ending December 31, 2001. References to "restricted
stock" and "stock options" mean restricted shares of SWS common stock and
options to purchase SWS common stock.

The compensation described below does not reflect the compensation such
executive officers will receive following the spin-off. Our compensation
committee determines the annual base salaries of, and annual and long-term
incentive opportunities for, our executive officers.

Summary Compensation Table

Long-Term Compensation
-------------------------------
Annual Compensation        Awards
---------------------------- -----------
Securities
Underlying       All Other
Name and Principal Position             Year Salary ($) Bonus ($)(1) Options (#) Compensation ($)(2)
---------------------------             ---- ---------- ------------ ----------- -------------------

Susan M. Byrne.............................. 2001  496,000    1,500,000      8,000          22,100
Chief Executive Officer and Treasurer

Brian O. Casey.............................. 2001  236,500      550,000      7,000          22,100
President, Chief Operating Officer and
Secretary

Patricia R. Fraze........................... 2001  192,500      275,000      2,000          22,100
Executive Vice President of Westwood
Management and Director of
Westwood Trust

Lynda J. Calkin............................. 2001  215,000      300,000      1,500          22,100
Senior Vice President of Westwood
Management

Joyce A. Schaer............................. 2001  180,000      315,000      3,000          17,000
Senior Vice President of Westwood
Management

--------
(1) The bonuses reflect amounts accrued in 2001, but actually paid to each
executive officer in 2002.
(2) Includes SWS's annual profit sharing contributions and 401(k) matching
contributions to the SWS 401(k) Plan.

47

Stock Options

Options Granted in Last Year.  The following table sets forth information
regarding options to acquire SWS common stock that SWS granted to the executive
officers for the year ended December 31, 2001.

Number of  % of Total                            Potential Realizable
Securities  Options/                               Value at Assumed
Underlying    SARs                              Annual Rates of Stock
Options/   Granted                             Price Appreciation for
SARs        to                                   Option Term(1)
Granted   Employees  Exercise Price Expiration ----------------------
Name                 (#)      in Year     ($/Share)       Date        5%         10%
----              ---------- ---------- -------------- ----------  -------    --------

Susan M. Byrne......   8,000       2.0%        $18.99      9/10/11   $95,542    $242,121
Brian O. Casey......   7,000       1.8%        $18.99      9/10/11   $83,599    $211,856
Patricia R. Fraze...   2,000         *         $18.99      9/10/11   $23,885    $ 60,530
Lynda J. Calkin.....   1,500         *         $18.99      9/10/11   $17,914    $ 45,398
Joyce A. Schaer.....   3,000         *         $18.99      9/10/11   $35,828    $ 90,796

--------
*  Less than 1%
(1) Pursuant to the rules promulgated by the SEC, the amounts under these
columns reflect calculations at assumed 5% and 10% appreciation rates and,
therefore, are not intended to forecast further appreciation, if any, of
the respective underlying common stock. The potential realizable value to
the optionees was computed as the difference between the appreciated value
at the expiration date of the stock options of the applicable underlying
common stock obtainable upon exercise of such stock options over the
aggregate exercise price of such stock options.

Aggregated Option Exercises in Last Year and Year End Option Values.  The
following table sets forth information concerning the exercise of SWS stock
options during the year ended December 31, 2001 by the executive officers and
the number and aggregate value of unexercised in-the-money options for SWS's
stock options at December 31, 2001. The actual amount, if any, realized on
exercise of stock options will depend on the amount by which the market price
of our common stock on the date of exercise exceeds the exercise price, as
adjusted. The actual value realized on the exercise of unexercised in-the-money
stock options (whether exercisable or unexercisable) may be higher or lower
than the values reflected in this table. In connection with the spin-off, these
options will become fully vested at the time of the spin-off, and Westwood will
be substituted for SWS as the employer. In addition, to the extent that SWS
makes any adjustments to its outstanding options as a result of the spin-off,
similar adjustments will be made to the SWS options held by Westwood employees.
See "Relationship Between SWS and Westwood After the Spin-off--Distribution
Agreement--Employee Benefits."

Number of Securities      Value of Unexercised
Underlying Unexercised         In-The-Money
Options/ SARs             Options/SARs
Shares                        at Year End           at Year-End ($)(1)
Acquired on     Value     ------------------------- -------------------------
Name          Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----          ------------ ------------ ----------- ------------- ----------- -------------

Susan M. Byrne...      --           --        11,601       14,582       $77,832      $63,545
Brian O. Casey...      --           --         8,391       12,701       $52,886      $55,399
Patricia R. Fraze      --           --         4,981        4,850       $33,155      $18,004
Lynda J. Calkin..      --           --         6,689        5,438       $44,227      $16,471
Joyce A. Schaer..      --           --         5,989        6,938       $38,245      $16,471

--------
(1) Values are stated based upon the closing price of $25.45 per share of SWS
common stock on the NYSE on December 31, 2001, the last trading day of 2001.

48

Compensatory Plans and Arrangements

Prior to and in connection with the spin-off, we will enter into a
distribution agreement with SWS, which will include provisions relating to
employee matters as summarized above in "Relationship between SWS and Westwood
After the Spin-off--Distribution Agreement--Employee Benefits." Summarized
below are certain benefit arrangements, other than arrangements applicable to
all employees generally, that have been established for the benefit of our
directors, executive officers and employees following the spin-off.

Westwood Stock Incentive Plan.  We recently adopted the Westwood Holdings
Group, Inc. Stock Incentive Plan. We believe that the stock incentive plan will
encourage eligible participants, through their individual efforts, to improve
our overall performance and to promote profitability by providing them an
opportunity to participate in the increased value they help create. There will
be approximately 948,100 shares of our common stock reserved for issuance under
the stock incentive plan. Our officers, directors, employees and consultants
are eligible to receive awards under the stock incentive plan, which is
administered by the compensation committee of our Board of Directors. Our Board
of Directors may terminate or amend the stock incentive plan at any time
without stockholder approval, provided that no termination or amendment of the
stock incentive plan shall adversely affect any then outstanding option,
purchase right or other award without the consent of the holder, unless such
termination or amendment is required to enable an option designated as an
incentive stock option to qualify as an incentive stock option or is necessary
to comply with any applicable law, regulation or rule. The stock incentive plan
will terminate in 2012 unless terminated earlier by our Board of Directors.

Options.  Options granted under the stock incentive plan may be in the
form of incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options. Only our employees are eligible to receive
incentive stock options. In general, all options granted under the stock
incentive plan will lapse no more than ten years from the date of grant (five
years in the case of an incentive stock option granted to a 10% stockholder of
us or one of our subsidiaries). The exercise price of any option will be
determined by the compensation committee at the time the option is granted and
will not be less than 100% of the fair market value per share of our common
stock on the date the option is granted (110% in the case of an incentive stock
option granted to a 10% stockholder of us or one of our subsidiaries). The
aggregate fair market value on the date of grant of the common stock for which
incentive stock options are exercisable by an optionee during any calendar year
may not exceed $100,000. Any options granted pursuant to the terms of the stock
incentive plan shall be evidenced by an option agreement specifying the number
of shares of our stock covered thereby and other terms and conditions as are
determined by the compensation committee.

Shortly following the completion of the spin-off, the compensation committee
of our Board of Directors expects to award options covering approximately
200,000 to 250,000 shares of our common stock at an exercise price equal to the
closing price per share as reported by the NYSE on the date of grant. These
options will vest over four years with the initial portion of such options
vesting one year after the date of grant.

Options to Non-Employee Directors.  Pursuant to the stock incentive
plan, each of our non-employee directors shall, shortly after the date of the
spin-off and on the date of election or re-election as a member of our Board of
Directors, be granted a non-statutory stock option for 2,500 shares of our
common stock at an exercise price equal to the closing price per share as
reported by the NYSE on the date of grant, in the case of the initial
directors, and on the date of election or reelection, in the case of any new or
reelected director subsequent to the spin-off. Each non-statutory stock option
granted to our non-employee directors shall vest at the expiration of twelve
months from the date of the grant and shall have a term of ten years.
Expiration of a non-employee director's term of office shall not affect a
non-employee director's right to exercise its option to the extent such option
is vested at any time prior to the expiration of the director's term.

Restricted Stock Awards.  The compensation committee of our Board of
Directors may also make awards of restricted shares of our stock. The vesting
and number of restricted shares of our stock may be conditioned upon the lapse
of time or the satisfaction of other factors determined by the compensation

49

committee. The recipient of restricted shares will generally have the rights
and privileges of a stockholder with respect to the right to receive dividends
and the right to vote the shares. None of the restricted shares may be sold,
transferred or pledged during the restricted period, and all restricted shares
shall be forfeited, and all rights to the shares will terminate, if the
recipient ceases to be an employee, consultant or director of us or any of our
subsidiaries before the expiration or termination of the restricted period and
satisfaction of any other conditions prescribed by us with respect to the
shares.

Purchase Rights.  The compensation committee of our Board of Directors
may also make awards of stock purchase rights, which entitle the holder to
purchase a specified number of shares of our common stock during the period of
time, and subject to the terms and conditions, as the compensation committee
determines. Each award of purchase rights may have a different exercise period
or periods, shall specify the method of payment (which may include promissory
notes) to purchase our stock and shall set forth any repurchase rights or calls
applicable to the purchased stock.

Annual Incentive Awards.  The compensation committee of our Board of
Directors may also grant annual incentive awards of stock, cash or any
combination of stock and cash, to our employees, in such amounts and subject to
such terms and conditions as the compensation committee may determine. The
compensation committee shall establish the maximum level of annual incentive
awards that may be granted for each year. Within 90 days after the commencement
of each year, the compensation committee shall determine which employees shall
be eligible to receive an annual incentive award for such year and determine an
objective formula for computing the annual incentive award for such year based
upon the attainment of various performance goals. The committee may, in its
sole discretion, reduce, but not increase, the annual incentive award payable
to any participating employee during a year.

Performance-Based Awards.  The compensation committee of our Board of
Directors may also grant performance-based awards of the right, expressed in
units, to receive stock, cash or any combination of stock and cash, to eligible
officers or other key employees as determined by the compensation committee in
its sole discretion. At the time of each grant of a performance-based award,
the compensation committee shall establish an objective formula for computing
the award based upon the attainment of various performance goals over a
performance cycle of at least one year. Performance goals may include minimum,
maximum and target levels of performance, with the size of the award based on
the level of performance attained. The number of shares of stock and/or the
amount of cash payable in settlement of a performance-based award shall be
determined by the committee at the end of the performance cycle. The
compensation committee may, in its discretion, eliminate or reduce the amount
of any performance-based award that otherwise would be payable to a
participating officer or other employee unless the participant has a vested
right under applicable employment law to receive the full performance-based
award. Performance-based awards may be made alone, or in addition to, other
grants and awards under the stock incentive plan.

Westwood Deferred Compensation Plan.  Recently, we adopted the Westwood
Holdings Group, Inc. Deferred Compensation Plan. We believe that the deferred
compensation plan will increase retention of our executive officers and senior
management as well as increase stock ownership among participants in the
deferred compensation plan. Under its terms, the deferred compensation plan
allows eligible employees to defer a certain portion of each bonus and to
invest such amounts in various investment alternatives including our stock. We
match a portion of the deferrals in cash, which will equal 25% of the eligible
employee's annual deferral amount, but will not exceed $10,000. Our
compensation committee believes that programs such as the deferred compensation
plan will further align the executive officers' long-term financial and
strategic interests with those of our stockholders. Our employees who
participated in the SWS Deferred Compensation Plan will have their account
balances under the SWS Deferred Compensation Plan transferred to the Westwood
Deferred Compensation Plan without forfeiting any portion of their existing
account balance.

50

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is a current or former officer or
employee of Westwood or its subsidiaries or has had a relationship requiring
disclosure by Westwood under applicable federal securities regulations. No
executive officer of Westwood served as a director or member of the
compensation committee of any entity that has one or more executive officers
serving as a member of our Board of Directors or compensation committee.

51

PRINCIPAL STOCKHOLDERS

On December 14, 2001, we issued to SWS 5,372,310 shares of our common stock,
and on that same date SWS sold 1,064,668 shares of our common stock to our
executive officers. To the extent our executive officers or directors own
shares of SWS common stock at the time of the spin-off, they will share in the
spin-off on the same terms as other holders of SWS common stock.

The following table sets forth the number of shares of SWS common stock and
Westwood common stock that is beneficially owned as of April 1, 2002 and the
approximate number and percentage of shares of Westwood common stock that will
be beneficially owned immediately following the spin-off date, based on the
number of outstanding shares of SWS common stock as of April 1, 2002, the
assumed stock split ratio of our common stock and a distribution of one share
of our common stock for every four shares of SWS common stock as of the record
date, by each of our executive officers and directors, individually and as a
group. As a result of the application of the foregoing assumptions, we would
expect to have an estimated 5,372,310 shares of our common stock outstanding
immediately after completion of the spin-off, although the actual number of
shares that will be outstanding will not be determinable until the record date.
Except as otherwise noted, each person and entity named in the tables below has
sole voting and investment power with respect to all shares of our common stock
beneficially owned.

Number of Shares of Number of Shares of Number of Shares of   Percentage of
SWS Common Stock     Westwood Common     Westwood Common    Westwood Common
Owned on         Stock Owned on     Stock Owned After  Stock Owned After
Name                April 1, 2002(1)      April 1, 2002      the Spin-off(1)     the Spin-off
----               ------------------- ------------------- ------------------- -----------------

SWS Group, Inc........            --            4,307,642                  --              --
Susan M. Byrne........       166,922(2)           719,774             754,958            14.1%
Brian O. Casey........        22,542(3)           239,925             240,287             4.5%
Patricia R. Fraze.....        24,332(4)            24,993              28,618               *
Lynda J. Calkin.......        14,725(5)            39,988              40,637               *
Joyce A. Schaer.......        13,229(6)            39,988              40,063               *
Frederick R. Meyer....        78,999(7)                --              17,230               *
Jon L. Mosle, Jr......        28,038(8)                --               4,490               *
Raymond E. Wooldridge.        69,616                   --              17,404               *
Executive officers and
directors as a group
(8 persons).........       418,403(9)         1,064,668           1,143,687            21.3%

--------
*  less than 1%

(1) Includes shares subject to options that may be acquired within 60 days
after completion of the spin-off. Such shares are deemed to be outstanding
and to be beneficially owned by the person or group holding the options for
the purpose of computing the percentage ownership of such person or group,
but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person or group.
(2) Includes 26,183 shares of SWS common stock issuable upon exercise of stock
options.
(3) Includes 21,092 shares of SWS common stock issuable upon exercise of stock
options.
(4) Includes 9,831 shares of SWS common stock issuable upon exercise of stock
options.
(5) Includes 12,127 shares of SWS common stock issuable upon exercise of stock
options.
(6) Includes 12,927 shares of SWS common stock issuable upon exercise of stock
options.
(7) Includes 10,077 shares of SWS common stock issuable upon exercise of stock
options.
(8) Includes 10,077 shares of SWS common stock issuable upon exercise of stock
options.
(9) Includes 102,314 shares of SWS common stock issuable upon exercise of stock
options.

The following table sets forth, to our knowledge, based on their current
reported ownership of SWS common stock, the number and percentage of shares of
Westwood common stock that will be owned immediately following the spin-off
date by each person (other than executive officers and directors) who will

52

beneficially own 5% or more of Westwood common stock.

Number of Shares of Number of Shares of   Percentage of
SWS Common Stock     Westwood Common    Westwood Common
Owned on        Stock Owned After  Stock Owned After
Name                     December 31, 2001     the Spin-off       the Spin-off
----                    ------------------- ------------------- -----------------

Don A. Buchholz.............      1,655,957(1)         413,989              7.7%
1201 Elm Street, Suite 3500
Dallas, Texas 75270

Martin J. Whitman...........      1,346,654(2)         336,663              6.3%
767 Third Avenue
New York, NY 10017-2023

EQSF Advisers, Inc..........      1,235,050(2)         308,762              5.7%
767 Third Avenue
New York, NY 10017-2023

--------

(1) Includes 999,247 shares held by Buchholz Arlington Banshares, Ltd. and
550,000 shares owned by Buchholz Family Holdings, Ltd. Excludes 64,409
shares held by Buchholz Investments, which is a general partnership, the
partners of which are Don A. Buchholz, his wife, adult son and adult
daughter. Pursuant to the terms of the partnership agreement governing
Buchholz Investments, Mr. Buchholz's adult son has voting power and
investment power with regard to the shares owned by the partnership. The
partnership agreement also provides that any partner may withdraw from the
partnership upon 30 days' notice and, unless the partnership is liquidated,
that partner shall receive the value of his or her capital account. Don A.
Buchholz and his wife own one-third of Buchholz Investments.
(2) This information is based on a Schedule 13G filing made with the SEC on
January 17, 2002. Includes 1,235,050 shares owned by EQSF Advisers, Inc.
and 111,604 shares owned by M. J. Whitman Advisers, Inc., both of which are
controlled by Martin J. Whitman. Mr. Whitman is the Chief Executive Officer
of EQSF Advisers, Inc. and the Chief Investment Officer of M. J. Whitman
Advisers, Inc. Mr. Whitman disclaims beneficial ownership of all shares.

53

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 14, 2001, we issued to SWS 5,372,310 shares of our common stock,
and on that same date, SWS sold 1,064,668 shares of the Westwood common stock
to our executive officers for an aggregate of $4.1 million, or $3.85 per share,
pursuant to a stock purchase agreement. The purchase price for the shares sold
by SWS to our executive officers was premised upon an understanding reached in
October 2001 that SWS would sell the shares of Westwood common stock based on
their value at September 30, 2001, and was based on a valuation as of September
30, 2001, covering the shares sold, which valuation was delivered to the SWS
Board in December 2001 and took into account the fact that the shares
represented a minority interest in closely held, non-marketable securities. The
issuance of shares to SWS and the resale of those shares to the executive
officers were effected in reliance on private placement exemptions from the
registration requirements of the Securities Act.

Each executive officer received a loan from us pursuant to a promissory note
to pay for their shares of our common stock purchased from SWS. The loans
totalled $4.1 million and are full recourse loans, secured by a pledge of the
shares purchased by each executive officer. The loans can be fully or partially
prepaid, and in the event of a partial prepayment, the number of shares subject
to the related pledge would be released on a pro rata basis. The loans bear
interest at the rate of 3.93% per annum, payable annually, with the principal
payable at maturity on the ninth anniversary of the date of the loans. If an
executive officer's employment is terminated for cause, or an executive officer
terminates his or her employment without good reason, his or her loan will
accelerate and become payable in full within 90 days following termination of
employment.

The table below identifies each executive officer who purchased shares of
Westwood common stock from SWS, the number of shares each executive officer
purchased and the amount of the promissory note executed by each executive
officer.

Name of Executive Officer No. of Shares Purchased from SWS Amount of Promissory Note
------------------------- -------------------------------- -------------------------

Susan M.Byrne                     719,774                     $2,766,960
Brian O. Casey                    239,925                     $  922,320
Patricia R.Fraze                   24,993                     $   96,075
Lynda J. Calkin                    39,988                     $  153,720
Joyce A. Schaer                    39,988                     $  153,720

We have managed the SWS cash reserve funds since 1993 and have served as
trustee of the SWS Deferred Compensation Plan since 1999. We charge SWS a fee
based on assets under management. In the years ended December 31, 2001, 2000
and 1999, SWS has paid to us advisory and trustee fees in the amount of
approximately $675,000, $496,000 and $378,000, respectively. Following the
spin-off, we will continue to manage the cash reserve funds for SWS for a
period of at least one year. In addition, SWS will provide us with certain
transitional services on a limited basis pursuant to various agreements. See
"Relationship Between SWS and Westwood After the Spin-off."

All future material transactions involving affiliated parties will be
subject to approval by a majority of Westwood's disinterested directors.

54

DESCRIPTION OF CAPITAL STOCK

Introduction

We have amended and restated our Certificate of Incorporation and Bylaws,
and the following descriptions of our common stock assume that such Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
Amended and Restated Bylaws (the "Bylaws") are fully in effect.

Our authorized capital stock consists of 10,000,000 million shares of common
stock, $0.01 par value per share, and 1,000,000 million shares of preferred
stock, $0.01 par value per share. On May   , 2002, we will effect a stock split
in the form of a stock dividend of our common stock in order to provide a
sufficient number of shares for the spin-off. The stock split ratio will be
based on the distribution ratio and the number of SWS shares outstanding on the
record date. Based on the assumed stock split ratio, on the spin-off date and
following the distribution of our common stock held by SWS to its stockholders,
we will have an estimated 5,372,310 shares of our common stock outstanding and
approximately 150 holders of record. No shares of our preferred stock are
currently outstanding.

The following description of our capital stock is intended as a summary and
is qualified in its entirety by reference to our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws filed as exhibits
to the registration statement on Form 10, of which this information statement
forms a part, and to Delaware corporate law.

Common Stock

Voting Rights

The holders of our common stock are entitled to one vote per share on all
matters to be voted on by stockholders. Holders of our common stock are not
entitled to cumulate their votes in the election of directors. Generally, all
matters on which stockholders vote must be approved by a majority of the votes
entitled to be cast by all shares of common stock present in person or
represented by proxy, subject to any voting rights granted to holders of any
preferred stock. Except as otherwise provided by law, and subject to any voting
rights granted to holders of any outstanding preferred stock, amendments to our
Certificate of Incorporation must be approved by holders of a majority of all
outstanding shares of common stock.

Dividends

Holders of common stock will share ratably in any dividend declared by our
Board of Directors, subject to any preferential rights of any outstanding
preferred stock.

Other Rights

In the event of any merger or consolidation of Westwood with or into another
company in connection with which shares of common stock are converted into or
exchangeable for shares of stock, other securities or property (including
cash), all holders of common stock will be entitled to receive the same kind
and amount of shares of stock and other securities and property (including
cash).

If we are liquidated, dissolved or wound up, we will pay the full amounts
required to be paid to holders of shares of any outstanding preferred stock
before we make any payments to holders of shares of our common stock. All
holders of shares of our common stock are entitled to share ratably in any
assets available for distribution to these holders, after all of our other
creditors have been satisfied.

No shares of our common stock may be redeemed. Holders of shares of our
common stock do not have any preemptive rights to purchase additional shares of
our common stock.

55

Preferred Stock

We may issue up to 1,000,000 shares of preferred stock in one or more
classes or series and with the terms of each class or series stated in our
Board of Director's resolutions providing for the designation and issue of that
class or series. Our Certificate of Incorporation authorizes our Board of
Directors to determine the dividend, voting, conversion, redemption and
liquidation preferences, rights, privileges and limitations pertaining to each
class or series of preferred stock that we issue.

We believe that the ability of our Board of Directors to issue one or more
series of our preferred stock will provide us with flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs which might arise. The authorized shares of our preferred stock, as well
as authorized shares of our common stock, will be available for issuance
without further action by our stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which our securities may be listed or traded. The NYSE currently requires
stockholder approval in several instances, including where the present or
potential issuance of shares could result in an increase in the number of
shares of common stock, or in the amount of voting securities, outstanding of
at least 20%. If the approval of our stockholders is not required for the
issuance of shares of our preferred stock or our common stock, our Board of
Directors may determine not to seek stockholder approval.

Provisions That May Have an Anti-Takeover Effect

Some provisions of our Certificate of Incorporation, Bylaws and the tax
separation agreement summarized below may be deemed to have an anti-takeover
effect and may delay, deter or prevent a tender offer or takeover attempt that
some, or a majority, of our stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then-current market price of such stock.

Board of Directors.  Our Bylaws provide that, subject to any rights of
holders of preferred stock to elect additional directors under specified
circumstances, the number of directors of Westwood shall be fixed from time to
time by resolution adopted by the affirmative vote of a majority of the Board
of Directors or pursuant to the action of the stockholders and shall not be
less than three nor more than eleven. In addition, our Certificate of
Incorporation and Bylaws provide that newly created directorships resulting
from any increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation, disqualification or
removal may be filled only by a majority vote of the directors then in office.
Our Certificate of Incorporation provides that directors may be removed only
for cause upon the vote of at least two-thirds of the securities entitled to
vote in the election of directors.

No Stockholder Action by Written Consent; Limitations on Calling Special
Meetings.  Our Certificate of Incorporation and Bylaws also provide that all
actions taken by stockholders must be taken at an annual or special meeting of
stockholders and that stockholders may not take actions by written consent.
Special meetings of stockholders may be called only by specified officers of
Westwood or by the Board of Directors.

Amendments to the Certificate of Incorporation and Bylaws.  Our Certificate
of Incorporation generally provides that the Bylaws and certain provisions of
our Certificate of Incorporation may be altered, amended or repealed by the
affirmative vote of the holders of at least two-thirds of our securities
entitled to vote in the election of directors. However, our Bylaws may be
altered, amended or repealed by a majority vote of our Board of Directors.

Preferred Stock.  Our Board of Directors could issue a series of preferred
stock that could, depending on the terms of such series, delay, defer or
prevent a change in control of Westwood. Our Board of Directors will make any
determination to issue such shares based on its judgment as to the best
interests of Westwood and its stockholders. Our Board of Directors, in so
acting, could issue preferred stock having terms that could discourage an
acquisition attempt through which an acquiror may be able to change the
composition of our Board of

56

Directors, including a tender offer or other transaction that some, or a
majority, of our stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the
then-current market price of such stock.

Delaware Business Combination Statute.  Section 203 of the Delaware General
Corporation Law applies to us. Section 203 provides that, except for
transactions specified in Section 203, a corporation will not engage in any
"business combination" with any "interested stockholder" for a three-year
period after the date that the stockholder became an interested stockholder
unless:

.  before the date that the stockholder became an interested stockholder, the
Board approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;

.  upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding, shares owned by:

--persons who are both directors and officers; or

--employee stock plans in some circumstances; or

.  on or after the date that the stockholder became an interested
stockholder, the business combination is approved by the Board of the
corporation and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.

A "business combination" includes a merger, consolidation, asset sale or
other transaction resulting in a financial benefit to an interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's outstanding voting stock.

Section 203 makes it more difficult under some circumstances for an
interested stockholder to effect a business combination with us for a
three-year period, although our stockholders may elect to exclude us from the
restrictions imposed under Section 203.

The restrictions imposed by Section 203 will not apply to a corporation in
some circumstances, including if:

.  the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203; or

.  twelve months have passed after the corporation, by action of its
stockholders holding a majority of the shares entitled to vote, amends its
certificate of incorporation expressly electing not to be governed by
Section 203.

We have not elected to opt out of Section 203. Thus, the restrictions
imposed by Section 203 will apply to us.

Tax Indemnification Exposure.  The tax separation agreement between SWS and
us provides that if, as a result of our actions, a change-in-control of us
triggers application of Section 355(e) of the Code, we would be liable to pay
SWS the amount of any corporate income taxes for which SWS becomes liable
solely by reason of application of Section 355(e) of the Code and without
consideration of any other tax attribute of SWS. This provision may have an
anti-takeover effect. See "Relationship Between SWS and Westwood After the
Spin-off -- Tax Separation Agreement."

Liability and Indemnification of Directors and Officers

Delaware General Corporation Law, our Certificate of Incorporation and our
Bylaws contain provisions relating to the limitation of liability and
indemnification of our directors and officers.

Our Certificate of Incorporation provides that our directors are not
personally liable to us or our stockholders for monetary damages for breach of
their fiduciary duties as directors to the fullest extent permitted

57

by Delaware law. Existing Delaware law permits the elimination or limitation of
directors' personal liability to us or our stockholders for monetary damages
for breach of their fiduciary duties as directors, except liability for:

.  any breach of a director's duty of loyalty to us or our stockholders;

.  acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law;

.  any transaction from which a director derived improper personal benefit;

.  the unlawful payment of dividends; and

.  unlawful stock repurchases or redemptions.

Because of these exculpation provisions, stockholders may be unable to
recover monetary damages against directors for actions taken by them that
constitute negligence or that otherwise violate their fiduciary duties as
directors, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. If equitable remedies are not available to
stockholders, stockholders may not have an effective remedy against a director
in connection with the director's conduct.

Our Certificate of Incorporation also provides that we will indemnify and
hold harmless any person who was or is a party or is threatened to be made a
party to, or is involved in, any threatened, pending or completed civil,
criminal, administrative or investigative action, suit or proceeding to the
fullest extent permitted by Delaware law by reason of the fact that the person
is or was (i) one of our directors or officers or (ii) serving at our request
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. We may also pay the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware law.

Additionally, we will seek to obtain directors and officers liability
insurance prior to the spin-off.

Transfer Agent

The transfer agent and registrar for our common stock is Computershare Trust
Company, Inc. The contact information for the transfer agent and registrar is:

350 Indiana Street, Suite 800
Golden, Colorado 80401
Telephone: 303-262-0600

58

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Form 10 with respect to the shares of our
common stock that SWS's stockholders will receive in the spin-off. This
information statement does not contain all of the information contained in the
Form 10 and the exhibits and schedules to the Form 10. Some items are omitted
in accordance with the rules and regulations of the SEC. For additional
information relating to us and the spin-off, reference is made to the Form 10
and the exhibits to the Form 10, which are on file at the offices of the SEC.
Statements contained in this information statement as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance, if the contract or document is filed as an exhibit, reference is made
to the copy of the contract or other documents filed as an exhibit to the Form
10. Each statement is qualified in all respects by the relevant reference.

You may inspect and copy the Form 10 and the exhibits to the Form 10 that we
have filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. In addition, the SEC maintains an
Internet site at http://www.sec.gov, from which you can electronically access
the Form 10, including the exhibits and schedules to the Form 10.

After the spin-off, we will be required to comply with the reporting
requirements of the Exchange Act and to file with the SEC reports, proxy
statements and other information as required by the Exchange Act. Additionally,
we will be required to provide annual reports containing audited financial
statements to our stockholders in connection with our annual meetings of
stockholders. After the spin-off, these reports, proxy statements and other
information will be available to be inspected and copied at the public
reference facilities of the SEC or obtained by mail or over the Internet from
the SEC, as described above. We expect to receive approval, subject to official
notice of issuance, to have our common stock listed on the NYSE under the
symbol "WHG." When our common stock commences trading on the NYSE, such
reports, proxy statements and other information will be available for
inspection at the offices of the NYSE, 11 Wall Street, New York, New York 10005.

59

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Public Accountants.................................. F-2

Consolidated Balance Sheets............................................... F-3

Consolidated Statements of Income......................................... F-4

Consolidated Statements of Stockholders' Equity........................... F-5

Consolidated Statements of Cash Flows..................................... F-6

Notes to Consolidated Financial Statements................................ F-7

F-1

Report of Independent Public Accountants

The Board of Directors and Stockholders
Westwood Holdings Group, Inc.:

We have audited the accompanying consolidated balance sheets of Westwood
Holdings Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Westwood Holdings Group,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

/s/ Arthur Andersen LLP
Dallas, Texas,

February 1, 2002, except with respect to the

matter discussed in Note 15, as to which

the date is April 8, 2002

F-2

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of December 31, 2001 and 2000
(in thousands, except par values and share amounts)

2001     2000
-------  -------

ASSETS
------
Current Assets:
Cash and cash equivalents........................................................ $   149  $ 4,283
Accounts receivable..............................................................   2,397    2,760
Investments, at market value.....................................................  15,571    8,236
-------  -------
Total current assets.........................................................  18,117   15,279
-------  -------
Goodwill, net of accumulated amortization of $640 in 2001 and $567 in 2000.......   2,302    2,375
Other Assets, net...................................................................     634      446
-------  -------
Total assets................................................................. $21,053  $18,100
=======  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities......................................... $   876  $   532
Compensation and benefits payable................................................   3,986    3,162
Income taxes payable.............................................................   2,028    1,479
-------  -------
Total current liabilities....................................................   6,890    5,173
Other Liabilities...................................................................     131      125
-------  -------
Total liabilities............................................................   7,021    5,298
Stockholders' Equity:
Common stock of Westwood Holdings Group, Inc. $0.01 par value, authorized 20,000
shares, issued and outstanding 5,374 shares at December 31, 2001...............      --       --
Common stock of Westwood Management Corporation, $0.10 par value, authorized
100,000 shares, issued and outstanding 6,862 shares at December 31, 2000.......      --        1
Common stock of Westwood Trust, $0.10 par value, authorized 1,700,000 shares,
issued and outstanding 1,655,500 shares at December 31, 2000...................      --      165
Additional paid-in capital.......................................................   9,469    5,798
Notes receivable from stockholders...............................................  (3,536)      --
Retained earnings................................................................   8,099    6,838
-------  -------
Total stockholders' equity...................................................  14,032   12,802
-------  -------
$21,053  $18,100
=======  =======

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands, except per share amounts)

2001    2000    1999
------- ------- -------

Advisory fees........................................... $14,918 $12,038 $ 8,650
Trust fees..............................................   3,755   3,079   2,282
Other revenues..........................................     914   1,019     404
------- ------- -------
Total revenues...................................  19,587  16,136  11,336
------- ------- -------
Employee compensation and benefits......................   8,042   6,890   5,345
Equity based compensation charge........................   3,976      --      --
Sales and marketing.....................................     485     452     425
Information technology..................................     818     730     748
Professional services...................................     702     281     239
General and administrative..............................   1,206   1,171   1,176
------- ------- -------
Total expenses...................................  15,229   9,524   7,933
------- ------- -------
Income before income taxes..............................   4,358   6,612   3,403
Provision for income tax expense........................   3,097   2,628   1,469
------- ------- -------
Net income.............................................. $ 1,261 $ 3,984 $ 1,934
======= ======= =======
Earnings per share:
Earnings per share--basic*........................... $234.68 $741.45 $359.90
======= ======= =======
Earnings per share--diluted*......................... $234.68 $741.45 $359.90
======= ======= =======

--------

*  Earnings per share have not been adjusted for a stock split with a record
date of May   , 2002. See Note 15 for disclosure of what EPS would have been
had the stock split been effective as of April 1, 2002.

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands)

Westwood    Westwood
Holdings   Management   Westwood                Notes
Group, Inc. Corporation   Trust    Additional  Receivable
Common      Common      Common    Paid-In       from     Retained Stockholders'
Stock, PAR  Stock, PAR  Stock, PAR  Capital   Shareholders Earnings    Equity
----------- ----------- ---------- ---------- ------------ -------- -------------

BALANCE, December 31, 1998....................    $ --        $  1       $ 165      $5,386     $    --     $  920     $ 6,472
Net income.................................      --          --          --          --          --      1,934       1,934
Noncash contributions......................      --          --          --         184          --         --         184
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 1999....................      --           1         165       5,570          --      2,854       8,590
Net income.................................      --          --          --          --          --      3,984       3,984
Noncash contributions......................      --          --          --         228          --         --         228
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 2000....................      --           1         165       5,798                  6,838      12,802
Formation of Westwood Holdings Group, Inc..      --          (1)       (165)        166          --         --          --
Net income.................................      --          --          --          --          --      1,261       1,261
Notes issued to shareholders (Note 12).....      --          --          --          --      (3,536)        --      (3,536)
Noncash contributions (Note 12)............      --          --          --       3,505          --         --       3,505
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 2001....................    $ --        $ --       $  --      $9,469     $(3,536)    $8,099     $14,032
====        ====       =====      ======     =======     ======     =======

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands)

2001      2000      1999
--------  --------  --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $  1,261  $  3,984  $  1,934
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................      157       167       175
SWS expense allocations not reimbursed by the Company...............       85       228       184
Equity based compensation charge....................................    3,976        --        --
Purchases of investments............................................   (1,493)   (3,955)  (17,059)
Sales of investments................................................      817     5,826    14,367
Change in operating assets and liabilities--
Increase in accounts receivable...................................      (37)   (1,088)     (245)
Decrease in other assets..........................................      181        68       247
Increase (decrease) in accounts payable and accrued liabilities...      344       223      (316)
Increase in compensation and benefits payable.....................      824     1,120       136
Increase (decrease) in income taxes payable.......................      549       876      (430)
Increase (decrease) in other liabilities..........................        6       (41)      (71)
--------  --------  --------
Net cash provided by operating activities.......................    6,670     7,408    (1,078)
--------  --------  --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of money market funds.......................................  (19,159)  (16,643)   (3,942)
Sales of money market funds...........................................   12,500    12,942     3,959
Purchase of fixed assets..............................................      (52)       (6)      (67)
--------  --------  --------
Net cash used in investing activities...........................   (6,711)   (3,707)      (50)
--------  --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note receivable.......................................................   (4,093)       --        --
--------  --------  --------
Net cash used in financing activities...........................   (4,093)       --        --
--------  --------  --------
NET INCREASE (DECREASE) IN CASH                                           (4,134)    3,701    (1,128)
Cash, beginning of year................................................    4,283       582     1,710
--------  --------  --------
Cash, end of year...................................................... $    149  $  4,283  $    582
========  ========  ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  DESCRIPTION OF THE BUSINESS:

Formation of Westwood Holdings Group, Inc. (the "Company")

On December 12, 2001, the Company was formed by SWS Group, Inc. ("SWS") to
be a holding company for two of the businesses that substantially comprised the
asset management segment of SWS. Prior to December 14, 2001, the Company had no
assets or operations. On December 14, 2001, SWS contributed all of the issued
and outstanding common stock of two wholly owned subsidiaries, Westwood
Management Corporation ("Management") and Westwood Trust ("Trust") to the
Company and announced its intention to spin the Company off to SWS's
shareholders. For financial statement purposes, the Company accounted for the
contribution of Management and Trust to the Company as a reorganization of
entities under common control at historical cost.

Accordingly, the accompanying financial statements of the Company include
the financial statements of Management and Trust on a combined basis for
periods prior to their contribution to the Company and on a consolidated basis
for the period on and after their contribution to the Company.

On December 14, 2001, five of the Company's executive officers acquired from
SWS 19.82% of the Company's issued and outstanding common stock (Note 12).

Nature of Operations

The Company manages investment assets and provides services for its clients
through two subsidiaries, Management and Trust. Management provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, mutual funds and clients of Trust. Trust provides
to institutions and high net worth individuals trust and custodial services and
participation in common trust funds that it sponsors. Revenue is largely
dependent on the total value and composition of assets under management
("AUM"). Accordingly, fluctuations in financial markets and in the composition
of AUM impact revenue and results of operations.

Management is a registered investment advisor under the Investment Advisors
Act of 1940. Trust is chartered and regulated by the Texas Banking Commissioner.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying consolidated financial statements are presented using the
accrual basis of accounting. All significant intercompany balances and
transactions have been eliminated.

Since the Company was operated as a part of SWS during the periods
presented, the accompanying financial information may not necessarily reflect
what the results of operations, financial position, or cash flows of the
Company would have been if the Company had been a separate, independent company
during those periods. Within these consolidated financial statements and
accompanying notes historical transactions and events involving Management and
Trust are discussed as if the Company were the entity involved in the
transaction or event unless the context indicates otherwise.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported

F-7

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Revenue Recognition

Investment advisory and trust fees are recognized as services are provided.
These fees are determined in accordance with contracts between the Company's
subsidiaries and their clients and are generally based on a percentage of AUM.

Cash and Cash Equivalents

Cash and cash equivalents consist of short-term, highly liquid investments
with maturities of three months or less at acquisition and are recorded at
cost, which approximates market value.

Investments

Marketable securities are classified as "trading" and carried at quoted
market value. Net unrealized holding gains or losses on these investments are
reflected as a component of other revenues.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation,
and have been included in Other Assets in the accompanying consolidated balance
sheets. Depreciation of furniture and equipment is provided over the estimated
useful lives of the assets (from 3 to 7 years), and depreciation on leasehold
improvements is provided over the lease term, which ends in 2004, using the
straight-line method.

Goodwill

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired when SWS purchased Management and Trust in 1993, is
amortized on a straight-line basis over forty years. In June 2001, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives will no longer be amortized, but will be
tested for impairment at least annually. The statement also provides specific
guidance for impairment testing. Provisions of this statement are required to
be applied starting with fiscal years beginning after December 15, 2001. SFAS
No. 142 is required to be applied at the beginning of an entity's fiscal year
to all goodwill and other intangible assets recognized in the financial
statements at that date. Therefore, the Company will apply the provisions of
SFAS No. 142 in the first quarter of fiscal 2002. Under the new standard, the
Company will cease amortizing its goodwill, and will review the remaining
goodwill for impairment in accordance with guidelines set forth in the
standard. Amortization expense was approximately $73,000 in each of 2001, 2000
and 1999.

The Company estimates that the adoption of SFAS No 142 will not have a
material impact on the consolidated financial statements.

Federal Income Taxes

Prior to the Spin-off, the Company was and will join with SWS and its other
subsidiaries in filing a consolidated Federal income tax return. SWS's
consolidated Federal income tax expense was allocated to the Company as if the
Company filed a separate consolidated Federal income tax return, assuming the
utilization of

F-8

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

tax-planning strategies consistent with those utilized by SWS. Upon completion
of the Spin-off, the Company will cease to be a member of the SWS consolidated
affiliated group and, as a result, will discontinue filing a consolidated
Federal income tax return with SWS.

Deferred income tax assets and liabilities are determined based on the
differences between the financial statement and income tax bases of assets and
liabilities as measured at enacted income tax rates that will be in effect when
these differences reverse, and are included in Other Assets in the accompanying
consolidated balance sheets. Deferred income tax expense is generally the
result of changes in the deferred tax assets and liabilities.

Stock-Based Compensation

Prior to the Spin-off, employees of the Company were granted options to
acquire SWS common stock by SWS. At Spin-off, these options will become fully
vested. The Company accounts for employee stock-based compensation using the
intrinsic value method of accounting prescribed by Accounting Principles
Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". In
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company provides pro forma disclosures of net income and earnings per share for
stock option grants as if the fair value based method had been applied (Note 7).

Fair Value of Financial Instruments

The estimated fair values of the Company's financial instruments have been
determined by the Company using available information. The fair value amounts
discussed in Note 4 are not necessarily indicative of either the amounts the
Company would realize upon disposition of these instruments or the Company's
intent or ability to dispose of these assets. The estimated fair value of cash
and cash equivalents, as well as accounts receivable and payable, approximates
their carrying value due to their short-term maturities. The carrying amount of
investments designated as "trading" equals their fair value which is equal to
prices quoted in active markets.

3.  ACCOUNTS RECEIVABLE:

The Company's trade accounts receivable balances do not include any
allowance for doubtful accounts nor has any bad debt expense attributable to
trade receivables been recorded for the years ended December 31, 1999 through
2001. The majority of the balances are advisory and trust fees receivable from
customers.

F-9

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4.  INVESTMENTS:

Investments held as trading securities and investments held as available for
sale securities are as follows (in thousands):

Gross      Gross    Gross
Unrealized Unrealized Market
Cost     Gains      Losses   Value
------- ---------- ---------- -------

December 31, 2001:
U.S. Government and Government agency obligations. $ 1,550    $26        $ --    $ 1,576
Funds:
Money market..................................  11,948     --          --     11,948
Equity........................................     901     --         106        795
Bond..........................................   1,210     42          --      1,252
-------    ---        ----    -------
Marketable securities...................... $15,609    $68        $106    $15,571
=======    ===        ====    =======
December 31, 2000:
U.S. Government and Government agency obligations. $ 1,151    $ 8        $ --    $ 1,159
Funds:
Money market..................................   5,289     --          --      5,289
Equity........................................     400     --          --        400
Bond..........................................   1,153     14          --      1,167
Real estate investment trusts ("REIT")............     200     21          --        221
-------    ---        ----    -------
Marketable securities...................... $ 8,193    $43        $ --    $ 8,236
=======    ===        ====    =======

All of these investments are carried at market value. The money market funds
are available for sale securities. The other investments are trading securities.

F-10

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5.  INCOME TAXES:

Income tax expense for the years ended December 31, 2001, 2000 and 1999
(effective rate of 71.1% in 2001, 39.7% in 2000 and 43.2% in 1999) differs from
the amount that would otherwise have been calculated by applying the Federal
corporate tax rate (34% in 2001, 2000 and 1999) to income before income taxes.
The Company's tax expense was calculated based on SWS's federal corporate tax
rate of 35% in 2001, 2000 and 1999. The difference between the Federal
corporate tax rate of 34% and the effective tax rate is comprised of the
following (in thousands):

2001   2000   1999
------ ------ ------

Income tax expense at the statutory rate.... $1,482 $2,248 $1,157
State franchise and income taxes............    336    274    237
Nondeductible equity-based compensation.....  1,197     --     --
Other, net..................................     82    106     75
------ ------ ------
$3,097 $2,628 $1,469
====== ====== ======

Income taxes as set forth in the consolidated statements of income consisted
of the following components (in thousands):

2001   2000    1999
------ ------  ------

State - current............................. $  490 $  425  $  363
State - deferred............................     27     (4)      1
Federal - current...........................  2,369  2,235   1,097
Federal - deferred..........................    211    (28)      8
------ ------  ------
Provision for income tax expense............ $3,097 $2,628  $1,469
====== ======  ======

The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities as of December 31, 2001 and 2000 are
presented below (in thousands):

2001 2000
---- ----

Difference between tax basis and value of note receivable from stockholders $214 $ --
Depreciation at rates different for tax than for financial reporting.......   34   19
Other......................................................................   10    1
---- ----
Total deferred tax assets - included in other assets on the consolidated
balance sheets........................................................... $258 $ 20
==== ====

As a result of the Company's history of taxable income and the nature of the
items from which deferred tax assets are derived, management believes that it
is more likely than not that the Company will realize the benefit of the
deferred tax assets.

Cash paid for income taxes was approximately $2,270,000, $1,643,000, and
$1,964,000 in 2001, 2000, and 1999, respectively.

6.  REGULATORY CAPITAL REQUIREMENTS:

Trust is subject to the capital requirements of the Texas Banking
Commissioner, and has a minimum capital requirement of $1 million. Trust had
total stockholders' equity of approximately $3.7 million, which is $2.7 million
in excess of its minimum capital requirement at December 31, 2001.

Trust is limited under applicable Texas law in the payment of dividends to
undivided profits: that part of equity capital equal to the balance of net
profits, income, gains, and losses since its formation date minus subsequent
distributions to stockholders and transfers to surplus or capital under share
dividends or appropriate Board resolutions. At December 31, 2001, Trust had
undivided profits of approximately $385,000.

F-11

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7.  EMPLOYEE BENEFITS:

Stock Option Plan

At December 31, 2001, 2000 and 1999, the Company's employees participated in
the SWS Stock Option Plan (the "1996 Plan"). The 1996 Plan reserves shares of
the SWS common stock for issuance to eligible employees of SWS or its
subsidiaries. Shares reserved under this option plan reflect all stock
dividends issued by SWS. Options granted under the 1996 Plan have a maximum
ten-year term, and the vesting period is determined on an individual basis by
the Stock Option Committee of SWS's Board of Directors.

A summary of the status of SWS's outstanding stock options issued to
employees of the Company as of December 31, 2001, 2000 and 1999 is presented
below:

2001                2000                1999
------------------- ------------------- -------------------
Weighted            Weighted            Weighted
Average             Average             Average
Underlying Exercise Underlying Exercise Underlying Exercise
Shares    Price     Shares    Price     Shares    Price
---------- -------- ---------- -------- ---------- --------

Outstanding, beginning of period......    83,033   $24.41    56,854    $24.49    33,200    $19.35
Granted............................    31,000    18.99    30,950     28.75    22,350     32.02
Exercised..........................    (1,103)   15.26    (2,065)    15.99    (1,842)    18.46
Forfeited..........................    (3,472)   29.40    (8,149)    26.89        --        --
Adjustment for stock dividends.....     8,132       --     5,443        --     3,146        --
--------            -------             -------
Outstanding, end of period............   117,590   $22.92    83,033    $24.41    56,854    $24.49
========            =======             =======
Exercisable, end of period.........    49,283             25,717              12,199

Weighted-average fair value of options
granted during fiscal year..........  $  10.52            $ 23.08             $ 26.31

The following table summarizes information for the stock options outstanding
at December 31, 2001:

Options Outstanding            Options Exercisable
-------------------------------------- ---------------------
Weighted-             Weighted-
Weighted-Average  Average               Average
Range of Exercise     Number       Remaining     Exercise    Number    Exercise
Prices              Outstanding Contractual Life   Price   Exercisable   Price
------              ----------- ---------------- --------- ----------- ---------

$15.26 - 18.99       66,677      7.8 years      $17.38     30,516     $16.11
28.75 - 32.02       50,913      8.2             30.17     18,767      30.72
-------------      -------      ---------      ------     ------     ------
$15.26 - 32.02      117,590      8.0            $22.92     49,283     $21.67

F-12

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company applies APB 25 and related interpretations in accounting for its
option plans. Accordingly, no compensation cost has been recognized for its
stock options. Had compensation cost been determined valuing the options using
the Black-Scholes option pricing model as provided in SFAS No. 123, the
Company's net income and earnings per share would have been the pro forma
amounts indicated below for the years ended December 31, 2001, 2000 and 1999
(See Note 15):

2001    2000    1999
------- ------- -------

Net income (in thousands)-
As reported................................... $ 1,261 $ 3,984 $ 1,934
Pro forma.....................................     852   3,712   1,819

Earnings per share-
As reported - basic...........................  234.68  741.45  359.90
As reported - diluted.........................  234.68  741.45  359.90
Pro forma - basic.............................  158.53  690.68  338.44
Pro forma - diluted...........................  158.53  690.68  338.44

The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for 2001,
2000 and 1999:

2001          2000          1999
------------- ------------- -------------

Expected volatility..........      56%           81%          100%
Risk-free interest rate......     4.85%         5.72%         5.82%
Expected dividend yield......     1.77%         0.89%         0.68%
Expected life................ 5 to 10 years 5 to 10 years 5 to 10 years

As of December 31, 2001, there have been no options granted to acquire the
common stock of the Company or either of its subsidiaries.

Profit Sharing/401(k) Plan

SWS has a defined contribution profit sharing/401(k) plan that covers
substantially all of the Company's employees. SWS provided profit sharing plan
benefits become fully vested after six years of service by the participant.
Profit sharing contributions were accrued and funded at SWS's discretion.
Profit sharing expense related to the Company's employees for 2001, 2000 and
1999 was approximately $38,000, $251,000 and $353,000, respectively. The 401(k)
portion of the plan began in January 2000, and SWS provides a match of up to 4%
of eligible compensation. SWS's matching contributions vest immediately and the
expense totaled approximately $127,000 in 2001 and $117,000 in 2000.

8.  EARNINGS PER SHARE:

A reconciliation between the weighted average shares outstanding used in the
basic and diluted EPS computations is as follows (in thousands, except share
and per share amounts) (See Note 15):

2001    2000    1999
------- ------- -------

Net income.................................. $ 1,261 $ 3,984 $ 1,934
Weighted average shares outstanding - basic
and diluted...............................   5,374   5,374   5,374
Earnings per share - basic..................  234.68  741.45  359.90
Earnings per share - diluted................  234.68  741.45  359.90

The Company has no outstanding options, warrants, convertible securities, or
other potential common shares that were antidilutive or excluded from the
diluted EPS calculations.

F-13

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.  COMMITMENTS AND CONTINGENCIES:

The Company leases its offices under noncancelable operating lease
agreements. Rental expense for facilities and equipment leases for fiscal years
2001, 2000 and 1999 aggregated approximately $591,000, $601,000 and $645,000,
respectively, and is included in General and Administrative expenses in the
accompanying consolidated statements of income.

At December 31, 2001, the future rental payments for the noncancelable
operating leases for each of the following three years and thereafter follow
(in thousands):

Year ending:
2002.......................................... $  498
2003..........................................    477
2004..........................................    264
Thereafter.......................................     --
------
Total payments due........................ $1,239
======

In the normal course of business, the Company has been named as a defendant
in a lawsuit. Management believes that resolution of this claim will not result
in any material adverse effect on the Company's consolidated financial position
or results of operations.

10.  AFFILIATE TRANSACTIONS:

SWS, through its principal subsidiary, SWS Securities, Inc., provided
accounting, technology and administrative services for the Company in 2001,
2000 and 1999. Management serves as investment advisor for the SWS cash reserve
funds, and Trust serves as custodian for the SWS cash reserve funds and as
trustee for the assets of the SWS Deferred Compensation Plan.

The accompanying financial statements include the following revenues (in
thousands) from transactions with SWS and its subsidiaries other than
Management and Trust:

2001 2000 1999
---- ---- ----

Advisory fees.................................... $441 $329 $263
Trust fees.......................................  234  167  115
==== ==== ====

The accompanying financial statements include the following expenses (in
thousands) for charges from SWS and its subsidiaries other than Management and
Trust.

2001 2000 1999
---- ---- ----

Employee benefits................................ $190 $169 $169
Information technology...........................  269  232  228
Professional services............................   34   35   34
General and administrative.......................   62   55   52
---- ---- ----
$555 $491 $483
==== ==== ====

These expenses have been allocated from SWS on the basis of the Company's
relative number of employees, relative revenues, or other allocation bases.
These allocated expenses represent services provided by SWS including human
resources, accounting, internal audit, income tax, legal, insurance, and
information technology. Including the allocation of SWS expenses, the expenses
in these consolidated financial statements include all of the costs
attributable to the Company's operations. However, because the Company operated
as a subsidiary of SWS and because the expenses included in these consolidated
financial statements include allocations of SWS's expenses, the expenses
included in these consolidated statements do not purport to be the expenses
that the Company would have incurred had it been an independent company.

F-14

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Had the Company been an independent public company in 2001, management
estimates that total expenses would have been approximately $800,000 higher
than those reflected in these consolidated financial statements. The principal
reasons for the increase in expenses are increased public company compliance
costs, employee compensation, insurance costs, legal expenses, and accounting
and payroll costs.

The foregoing estimate of higher expenses is not necessarily an accurate
measure of what the Company's stand-alone expenses would have been in 2001 or
will be in the future, and the Company's expenses could be higher. The costs
incurred by the Company in the future will depend on the market for these
services when they are actually purchased and the size and nature of the
Company's future operations. Following a transition period, the Company expects
to stop acquiring services from SWS and to independently purchase all services
currently being provided by SWS.

If one or more persons acquire a 50% or greater interest in SWS or the
Company as part of a plan or series of related transactions that included the
spin-off, SWS would be taxed on the spin-off as if the spin-off had been a
sale. Any acquisition that occurs during the four-year period beginning two
years before the spin-off will be presumed to be a part of a plan or a series
of transactions that included the spin-off. SWS or the Company, whichever is
responsible for triggering a change-in-control, will bear any related taxes
that arise.

11.  SEGMENT REPORTING:

The Company operates two segments: the Management segment and the Trust
segment. Such segments are managed separately based on types of products and
services offered and their related client bases. The Company evaluates the
performance of its segments based primarily on income before income taxes.

Management

The Management segment is composed of Management, which provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, and investment subadvisory services to mutual funds
and clients of Trust.

Trust

The Trust segment is composed of Trust, which provides to institutions and
high net worth individuals trust and custodial services and participation in
common trust funds that Trust sponsors.

Corporate

Westwood Holdings Group, Inc. has no operations.

F-15

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

All accounting policies are the same as those described in the summary of
significant accounting policies. Intersegment balances that eliminate in
consolidation have been applied to the appropriate segment.

Management Trust  Corporate Eliminations Consolidated
---------- ------ --------- ------------ ------------
(in thousands)

December 31, 2001
Net revenues from external sources.  $15,663   $3,917  $     7    $     --     $19,587
Net intersegment revenues..........    1,187       --    4,994      (6,181)         --
Net interest revenue...............      432      184        7          --         623
Depreciation and amortization......      127       30       --          --         157
Income (loss) before income taxes..    7,776      550    1,026      (4,994)      4,358
Segment assets.....................   17,306    4,208   13,797     (14,258)     21,053
Expenditures for long-lived assets.       48        4       --          --          52

December 31, 2000
Net revenues from external sources.  $12,832   $3,304  $    --    $     --     $16,136
Net intersegment revenues..........      921       --       --        (921)         --
Net interest revenue...............      341      149       --          --         490
Depreciation and amortization......      137       30       --          --         167
Income (loss) before income taxes..    6,073      539       --          --       6,612
Segment assets.....................   14,934    3,692       --        (526)     18,100
Expenditures for long-lived assets.        4        2       --          --           6

December 31, 1999
Net revenues from external sources.  $ 9,030   $2,306  $    --    $     --     $11,336
Net intersegment revenues..........      578       --       --        (578)         --
Net interest revenue...............      103      120       --          --         223
Depreciation and amortization......      145       30       --          --         175
Income (loss) before income taxes..    3,229      174       --          --       3,403
Segment assets.....................    9,041    3,153       --        (483)     11,711
Expenditures for long-lived assets.       67       --       --          --          67

12.  EQUITY-BASED COMPENSATION:

On December 14, 2001, SWS sold 1,065 shares of the Company's common stock
(without giving effect to the stock split discussed in Note 15), constituting
19.82% of the Company's outstanding common stock, to five of the Company's
executive officers for cash consideration of $4,093,000, a price premised upon
an understanding reached in October 2001 that SWS would sell the shares of the
Company's common stock based on their value at September 30, 2001, after
applying appropriate valuation discounts. The Company loaned the executive
officers $4,093,000 on a full-recourse basis, evidenced by notes secured by the
stock, payable in nine years and bearing interest at 3.93%.

Because the notes are receivable in connection with the sale of the
Company's common stock, they were recorded at their fair value of $3,536,000 as
an offset to stockholders' equity. The difference between the face amount of
the notes and their fair value is due to the difference between the stated
interest rate and an estimated market interest rate of 6.0%.

The difference between the fair value for financial reporting purposes of
the stock on December 14, 2001, $7,512,000, and the fair value of the note,
$3,536,000, was recorded as an equity-based compensation charge of $3,976,000.
The difference between the value of the stock, $7,512,000, and the cash
consideration paid to SWS of $4,093,000, is an expense incurred by SWS for the
Company and is reflected as an equity-based compensation

F-16

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

expense with the offset as a contribution to the Company's additional paid-in
capital. The remainder of the equity-based compensation expense is the
difference between the face and fair value of the notes, $557,000.

The difference between the $4,093,000 paid for the stock and the fair value
of the stock for financial reporting purposes on December 14, 2001, is
attributable to an increase in assets under management and the common stock
prices of comparable public companies between September 30, 2001 and December
14, 2001. The amount of assets under management, which is a factor in
determining the Company's revenues, and the common stock prices of comparable
public companies are significant considerations in estimating the value of the
Company. In addition, the $4,093,000 valuation included a 35% discount for lack
of marketability. For financial accounting purposes, no discount for lack of
marketability was recorded, which accounts for $2,204,000 of the difference
between $7,512,000 and $4,093,000.

13.  CONCENTRATION:

During the year ended December 31, 1999, one customer accounted for
approximately 10% of the Company's revenues.

14.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

At December 31, 2001 and 2000, Accounts Payable and Accrued Liabilities
included accrued franchise taxes of approximately $492,000 and $371,000,
respectively.

15.  STOCK SPLIT - SUBSEQUENT EVENT

The Board of Directors has approved a stock dividend that will be accounted
for as a stock split to be effective as of May   , 2002 based on a formula that
will cause the Company's common stock held by SWS to equal one-fourth the
number of shares of SWS common stock outstanding on May   , 2002. The Board of
Directors also approved and recommended to the Company's stockholders
amendments to the Company's certificate of incorporation that would increase
the number of authorized common shares to 10,000,000 and also authorize
1,000,000 preferred shares.

Were the stock dividend effective as of April 1, 2002, based on the number
of shares of SWS common stock outstanding at that date, earnings per share
would have been the following pro forma amounts:

2001    2000    1999
------- ------- -------

Earnings per share-
As reported -- basic.. $234.68 $741.45 $359.90
As reported -- diluted $234.68 $741.45 $359.90
Pro forma -- basic.... $  0.23 $  0.74 $  0.36
Pro forma -- diluted.. $  0.23 $  0.74 $  0.36

F-17