UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
WESTMORELAND COAL COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
WESTMORELAND COAL COMPANY
14th Floor - Holly Sugar Building
2 North Cascade Avenue
Colorado Springs, Colorado 80903
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Westmoreland Coal Company will be
held at The Antlers Adam's Mark Hotel, Summit Ballrooms I and II, 4 South
Cascade Avenue, Colorado Springs, Colorado, on Friday, June 9, 2000 at 10:00
a.m. Mountain Daylight Time, for the following purposes:
1. The election by the holders of Common Stock of five directors to the Board
of Directors to serve for a one-year term; and
2. The election by the holders of Depositary Shares of the Company (each
representing one-quarter of a share of the Company's Series A Convertible
Exchangeable Preferred Stock) of two additional directors to the Board of
Directors to serve for a one-year term; and
3. To approve and adopt the 2000 Long-Term Incentive Stock Plan; and
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on April 10, 2000 will
be entitled to notice of and to vote at the meeting. The proxy statement which
follows contains more detailed information as to the actions proposed to be
taken .
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON.
/s/ Paul W. Durham
Paul W. Durham
Corporate Secretary
April 20, 2000
WESTMORELAND COAL COMPANY
14th Floor - Holly Sugar Building
2 North Cascade Avenue
Colorado Springs, Colorado 80903
April 20, 2000
PROXY STATEMENT
General Information
The enclosed proxy is solicited on behalf of the Board of Directors of
Westmoreland Coal Company, a Delaware corporation ("Company") for use at the
Annual Meeting of Stockholders to be held on June 9, 2000. The proxy may be
revoked by a stockholder at any time before its exercise by written notice to
the Secretary of the Company, by executing and delivering a proxy with a later
date or by voting in person at the meeting. The expense of this solicitation
will be paid by the Company. This proxy statement and the enclosed proxy were
first sent to stockholders of the Company on or about April 24, 2000.
Stockholders of record at the close of business on April 10, 2000 ("record
date") will be entitled to vote at the meeting. On the record date, the Company
had outstanding 7,069,663 shares of Common Stock with a par value of $2.50 and
834,833 Depositary Shares (each of which represents one quarter of a share of
Series A Convertible Exchangeable Preferred Stock with a par value of $1.00).
The Common Stock and the Depositary Shares constitute all of the Company's
voting securities. Each outstanding share of Common Stock and each outstanding
Depositary Share will entitle the holder to one vote for each nominee as
director; provided, however, that of the seven nominees for the Board of
Directors of the Company, five of such nominees (the "Common Stockholder
Nominees") will be elected solely by the holders of Common Stock ("Proposal 1 -
Common") and two of such nominees (the "Depositary Stockholder Nominees") will
be elected solely by the holders of Depositary Shares ("Proposal 1 -
Depositary"). ACCORDINGLY, ONLY HOLDERS OF COMMON STOCK WILL BE ENTITLED TO VOTE
ON PROPOSAL 1 - COMMON, AND ONLY HOLDERS OF DEPOSITARY SHARES WILL BE ENTITLED
TO VOTE ON PROPOSAL 1 - DEPOSITARY.
Separate proxy cards are being sent to holders of Common Stock and to the
holders of Depositary Shares. If you only hold shares of Common Stock, you will
only be sent the proxy card for holders of Common Stock. If you only hold
Depositary Shares, you will only be sent the proxy card for holders of
Depositary Shares. If you own both Common Stock and Depositary Shares, you will
be sent both proxy cards and you should complete both proxy cards if you wish to
vote your respective interests in both the Common Stock and Depositary Shares.
A stockholder may, with respect to the election of directors for which such
stockholder is entitled to vote: (i) vote for the election of all named director
nominees, (ii) withhold authority to vote for all named director nominees or
(iii) vote for the election of all named director nominees other than any
nominee(s) with respect to whom the stockholder withholds authority to vote by
so indicating in the appropriate space on the proxy card. Duly executed and
unrevoked proxies received by the Company prior to the Annual Meeting will be
voted in accordance with the stockholders' specifications marked thereon. In the
absence of a specific direction from the stockholder, the proxies will be voted
for the election of all named director nominees.
A stockholder may, with respect to the proposal to approve and adopt the
2000 Long-Term Incentive Stock Option Plan ("Proposal 2"): (i) vote for
approval, (ii) vote against approval or (iii) abstain from voting on the
proposal. An abstention from voting on the proposal has the effect of a vote
against adoption of the proposal. In the absence of a specific direction from
the stockholder, proxies will be voted for the adoption of the proposal.
A quorum is necessary to hold a valid meeting of stockholders. If
stockholders entitled to cast at least a majority of the shares entitled to vote
at the Annual Meeting are present in person or by proxy, a quorum will exist for
purposes of electing the nominees for the Board of Directors. Any shares owned
by the Company are not voted and do not count for quorum purposes. In order to
assure the presence of a quorum at the Annual Meeting, please vote your shares
by completing, signing and dating the enclosed proxy card and returning it
promptly in the enclosed postage-paid envelope, even if you plan to attend the
Annual Meeting in person. Abstentions are counted as present, and broker non-
votes may be counted as present, to establish a quorum.
The Company's bylaws provide that directors shall be elected by the
affirmative votes of a plurality of the votes of the shares present in person or
by proxy at a meeting of stockholders at which a quorum is present and entitled
to vote on the election of directors. As a result, withholding authority to
vote for a director nominee and broker non-votes with respect to the election of
directors will not affect the outcome of the election of directors. The
Company's bylaws provide that, for all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
by proxy at a meeting of stockholders at which a quorum is present and entitled
to vote on the subject matter shall be the act of the stockholders. Approval of
the 2000 Long-Term Incentive Stock Option Plan requires such a majority vote.
An abstention will have the same effect as a vote against the 2000 Long-Term
Incentive Stock Option Plan, while broker non-votes will have no effect since
under Delaware law they are not considered shares entitled to vote for this
purpose.
2
PROPOSAL 1 - COMMON
COMMON STOCKHOLDER NOMINEES FOR ELECTION AS DIRECTORS
The five persons named below, all but one of whom are now directors of the
Company, have been designated as the Common Stockholder Nominees for election to
the Board of Directors for a one-year term. Four of these directors were elected
by the stockholders of the Company at the 1999 Special Meeting of Stockholders.
Thomas J. Coffey, the fifth nominee, was nominated to stand for election as a
Common Stockholder Nominee by the Board of Directors on April 14, 2000. The
persons named in the proxy card intend to vote for the election of these Common
Stockholder Nominees. Each Common Stockholder Nominee has consented to being
named and to serve if elected. If any Common Stockholder Nominee should decline
or be unable to serve, the persons named in the proxy will vote for the election
of such substitute nominee as shall have been designated by the Board of
Directors. The Company has no reason to believe that any Common Stockholder
Nominee will decline or be unable to serve. In addition, two Depositary
Stockholder Nominees have been nominated by the Company and will be submitted to
a vote of the holders of the Depositary Shares. See "Proposal 1 - Depositary -
Depositary Stockholder Nominees for Election as Directors" below. The holders of
the Company's Depositary Shares are not entitled to vote on this Proposal 1 -
Common.
THE BOARD OF DIRECTORS URGES HOLDERS OF COMMON STOCK TO VOTE
"FOR" THE COMMON STOCKHOLDER NOMINEES.
Business Experience During Past Five Years and Director Current
Name Other Directorships Age Since Committees/(1)/
- ------------------------------------------------------------------------------------------------------------------
Thomas J. Coffey Vice President-Finance, Global Network Services 47 ----- -----
(since July 1999) and Vice President-Operations
Analysis (April 1998 - July 1999) of Unisys
Corporation; Senior Vice President, Chief
Financial Officer and Treasurer of Intelligent
Electronics, Inc. (July 1995 - September 1997);
and Partner of KPMG Peat Marwick, Philadelphia,
PA (1985-1995)
Pemberton Hutchinson Chairman of the Board of the Company (January 69 1977 Executive
1992 - June 1996); Chief Executive Officer (Chairman);
(January 1989 - June 1993); and President of Compensation
the Company (June 1981 - June 1992); Director and Benefits
of Mellon Financial Corporation and Teleflex
Incorporated.
3
Business Experience During Past Five Years and Director Current
Name Other Directorships Age Since Committees/(1)/
- ------------------------------------------------------------------------------------------------------------------
William R. Klaus Chairman Emeritus, Pepper Hamilton LLP, 74 1973 Executive;
attorneys, and former Chairman, Commercial Compensation
Practice Dept. and Merger and Acquisition and Benefits
Practice Group (retired 1996); Director, The (Chairman);
Fidelity Bank (May 1973 - April 1992); Audit
Director, Pennsylvania Warehousing & Safe
Deposit Company, Inc. (since February 1968);
Director, Hyder Engineering & Consultants, Inc.
(subsidiary of Hyder plc, a U.K. company)
(since January 1990).
Thomas W. Ostrander Managing Director, Salomon Smith Barney Inc., 49 1995 Audit; Corp.
investment banking firm (and predecessor firms) Governance
(since 1989). (Chairman)
Christopher K. Seglem Chairman of the Board of Directors (since June 53 1992 Executive
1996) and Chief Executive Officer of the
Company (since June 1993); President of the
Company (since June 1992); Chief Operating
Officer of the Company (June 1992 - June 1993);
and Executive Vice President of the Company
(December 1990 - June 1992).
(1) See "Information About the Board and Committees" below.
The Company filed a voluntary petition for reorganization under Chapter 11
on December 23, 1996 (the "Bankruptcy Filing"). The Company successfully emerged
from bankruptcy on January 4, 1999 pursuant to the terms of a consensual
dismissal. Mr. Seglem was a Director and held the executive offices indicated at
and within two years before the Bankruptcy Filing. In addition, Messrs.
Hutchinson, Klaus and Ostrander were Directors of the Company at and within two
years before the Bankruptcy Filing, and each of the executive officers named
under "Executive Officers" below, except Mr. Lepchitz, was an executive officer
of the Company at and within two years before the Bankruptcy Filing.
4
PROPOSAL 1 - DEPOSITARY
DEPOSITARY SHAREHOLDER NOMINEES FOR ELECTION AS DIRECTORS
The holders of the Depositary Shares will be entitled to elect two
directors at the Annual Meeting. Each Depositary Share represents one-quarter of
a share of the Company's Series A Convertible Exchangeable Preferred Stock, the
terms of which entitle the holders thereof to elect two directors if there are
six or more accumulated but unpaid Preferred Stock dividends. There are six or
more such dividends, and the Board of Directors accordingly has nominated two
persons for election as directors.
The persons named in the following table have been designated as the
Depositary Shareholder Nominees for election to the Board of Directors for a
one-year term. These nominees were brought to the Company's attention as
candidates by holders of Depositary Shares and were elected to the Board of
Directors in September 1996, at a Special Meeting of the holders of Depositary
Shares and re-elected at the 1999 Special Meeting of Stockholders. James W.
Sight was originally appointed by the Board of Directors in 1995 to ensure the
Board of Directors' attentiveness to the concerns of the holders of Depositary
Shares after the Company had suspended payment of Preferred Stock dividends but
before six dividends had accumulated. He was reelected by the holders of the
Depositary Shares in June 1996, as one of the two directors elected by such
holders. The persons named in the proxy card intend to vote for the election of
the Depositary Stockholder Nominees named below, each of whom has consented to
being named and to serve if elected. If any Depositary Shareholder Nominee
should decline or be unable to serve, the persons named in the proxy will vote
for the election of such substitute nominee as shall have been designated by the
Board of Directors. The Company has no reason to believe that any Depositary
Shareholder Nominee will decline or be unable to serve. The holders of the
Company's Common Stock are not entitled to vote on this Proposal 1 - Depositary.
THE BOARD OF DIRECTORS URGES HOLDERS OF DEPOSITORY SHARES TO VOTE "FOR" THE
DEPOSITARY SHAREHOLDER NOMINEES.
Business Experience During Past Five Years Director Committee
Name and Other Directorships Age Since Memberships/(1)/
- --------------------------------------------------------------------------------------------------------------------
James W. Sight/(2)/ Director of United Recycling Industries 44 1995 Audit; Corp.
(since January 1995); Director of U.S. Home Governance
Corp. (since June 1993); and private investor.
Robert E. Killen/(2)/ Chairman of the Board and Chief Executive 59 1996
Officer of The Killen Group, Inc. (since
April 1996); Chairman of the Board of Berwyn
Financial Services (since October 1991); and
President of The Killen Group, Inc. (from
September 1982 - April 1996).
(1) See "Information About the Board and Committees" below.
(2) Messrs. Killen and Sight were directors at the time of the Bankruptcy
Filing.
5
Information About the Board and Committees
The Board of Directors held 12 meetings during 1999. Each director attended
more than 75% of the aggregate of the total number of meetings of the Board of
Directors and of the total number of meetings held by all committees on which he
served during the time he was in office.
The Audit Committee of the Board of Directors comprised of Edwin E. Tuttle
(Chairman), and Messrs. Klaus, Ostrander and Sight, met twice during the year.
(Mr. Tuttle will not stand for reelection as a director at the Annual Meeting of
Stockholders.) Following the Annual Meeting, the Board of Directors intends to
nominate Mr. Coffey to be Chairman of this committee if he is elected as a
director. This Committee, which reports to the Board of Directors, reviews the
adequacy of the Company's internal accounting controls and oversees the
implementation of management recommendations. It also reviews with the Company's
independent auditors the audit plan for the Company, the internal accounting
controls, the financial statements and management letter. In addition, it
recommends to the Board of Directors the selection of independent auditors for
the Company.
The Compensation and Benefits Committee of the Board of Directors,
comprised of Messrs. Klaus (Chairman), Hutchinson and Tuttle, met three times
during 1999. This Committee reviews and administers the Company's and its
subsidiaries' employee benefit programs and management compensation, and it
reports its recommendations to the Board of Directors.
The Executive Committee of the Board of Directors, comprised of Messrs.
Hutchinson (Chairman), Klaus, Seglem and Tuttle, did not meet during 1999. To
the extent permitted by law, this Committee is authorized to exercise the power
of the Board of Directors with respect to the management of the business and
affairs of the Company.
The Corporate Governance Committee, comprised of Messrs. Ostrander
(Chairman) and Sight, did not meet during 1999. This Committee is authorized to
review issues related to corporate governance and structure and to make
recommendations to the Board of Directors.
The Board of Directors does not have a standing nominating committee.
6
BENEFICIAL OWNERSHIP OF SECURITIES
Except as set forth in the following table, no person or entity known to
the Company beneficially owned more than 5% of the Company's voting securities
as of April 1, 2000:
Number of Shares and Nature of Beneficial Ownership (1)
---------------------------------------------------
Name and Address of Common Percentage of Depositary Percentage of
Beneficial Owner Stock Common Stock Shares Depositary Shares
- ---------------------------------------------------------------------------------------------------------------------
The Killen Group, Inc. 759,251(2) 10.7% 750(3) -
1189 Lancaster Avenue
Berwyn, PA 19312
Jeffrey L. Gendell 408,300 5.8% - -
200 Park Avenue
Suite 3900
New York, NY 10166
Stephen D. Rosenbaum - - 80,000(4) 9.6%
817 N. Calvert Street
Baltimore, MD 21202
Frank E. Williams, Jr., 1,179,500(5) 16.7% 28,431(6) 5.8%
Guy Orlando Dove, III,
and entities managed by
Wynnefield Capital
Management, LLC
c/o 2789-B Hartland Road
Falls Church, VA 22043
(1) Based solely on information contained in Schedules 13D and 13G filed by the
beneficial owners with the Securities and Exchange Commission or
information furnished to the Company. Except as indicated below, the
respective beneficial owners have reported that they have sole voting power
and sole dispositive power with respect to the securities set forth
opposite their names. For ease of analysis, the Common Stock information in
the table and the related footnotes does not include the number of shares
of Common Stock into which the Depositary Shares may be converted. A holder
of Depositary Shares may convert such Depositary Shares into shares of
Common Stock at any time at a conversion ratio of 1.708 shares of Common
Stock for each Depositary Share. Consequently, a holder of Depositary
Shares is deemed to beneficially own all of the shares of Common Stock into
which such holder's Depositary Shares may be converted. However, for so
long as the Company is in arrears on six or more preferred stock dividends,
holders of Depositary Shares are not entitled to vote for the election of
directors to be elected by holders of the Common Stock unless such
Depositary Shares are actually converted prior to the record date for the
Annual Meeting.
(2) Includes 19,184 shares of Common Stock owned by Mr. Killen as a personal
investment, 624,067 shares of Common Stock owned by The Killen Group, Inc.
("The Killen Group"), of which Mr. Killen is the Chairman, Chief Executive
Officer and sole stockholder, 61,500 shares of Common Stock held by a
limited partnership of which Mr.
7
Killen and his spouse are general partners and 54,500 shares of Common
Stock which may be purchased upon exercise of options under the 1991 Non-
Qualified Stock Option Plan for Non-Employee Directors and the 1996
Directors' Stock Option Plan. Of the 624,067 shares of Common Stock, The
Killen Group reports that it has sole voting power with respect to 470,350
shares. See Notes (1) and (3).
(3) Includes 750 Depositary Shares held as a personal investment. These
Depositary Shares are convertible into 1,281 shares of Common Stock, which
shares of Common Stock, together with the 704,751 shares of Common Stock
reported in the table, would represent 10% of the total shares of Common
Stock outstanding. See Notes (1) and (2).
(4) The Depositary Shares are convertible into 136,640 shares of Common Stock
which would represent 1.9% of the total shares of Common Stock outstanding.
(5) According to a Schedule 13D dated March 1, 2000 filed with the Securities
and Exchange Commission, Messrs. Frank E. Williams, Guy Orlando Dove, III,
and entities managed by Wynnefield Capital Management, LLC and controlled
by Mr. Nelson Obus are a group for the purpose of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended. Of the aggregate reported
shares, Mr. Williams beneficially owns 245,500 shares of Common Stock
(representing 3.5% of the Common Stock). Mr. Dove beneficially owns
234,000 shares of Common Stock (representing 3.3% of the Common Stock) and
Mr. Obus, through three limited partnerships of which Wynnefield Capital
Management, LLC is general partner, beneficially owns 700,000 shares of
Common Stock (representing 9.9% of the Common Stock). Of the 245,500 shares
of Common Stock beneficially owned by Mr. Dove, 10,000 are owned by his
adult children with whom Mr. Dove has shared voting power. Of the 700,000
shares of Common Stock beneficially owned by Mr. Obus, 244,453 shares
(representing 3.4% of the Common Stock) are owned by Wynnefield Partners
Small Cap Value L.P., 322,847 shares (representing 4.6% of the Common
Stock) are owned by Wynnefield Partners Small Cap Value L.P. I and 132,700
shares (representing 1.9% of the Common Stock) are owned by Wynnefield
Small Cap Value Offshore Fund Ltd. (Wynnefield Partners Small Cap Value
L.P., Wynnefield Partners Small Cap Value L.P. I and Wynnefield Small Cap
Value Offshore Fund Ltd. are referred to collectively as the "Wynnefield
Funds").
According to a Schedule 13D dated March 8, 1999, this group previously
included R. Bentley Offutt, who at that date reported beneficial ownership
of 199,400 shares of Common Stock. Mr. Offut is no longer listed as a
member of this group. The amount of Common Stock beneficially owned by this
group has decreased from 1,268,028 shares (18.1% of outstanding Common
Stock), as reported in the Company's Proxy Statement dated April 14, 1999
("1999 Proxy Statement"), to 1,179,500 shares (16.7% of outstanding Common
Stock), as shown above. The amount of Depositary Shares beneficially owned
by this group has decreased from 114,400 shares, as reported in the 1999
Proxy Statement, to 28,431 shares, as shown above. This represents a
relative increase from 5.0%, as reported in the 1999 Proxy Statement, to
5.8%, as shown above, due to the reduction in the total number of
Depositary Shares outstanding as a result of tender offers by the Company
during 1999 for a substantial portion of the then outstanding Depositary
Shares. See Notes (1) and (6).
(6) Of the aggregate reported shares, Mr. Williams owns 15,308 Depositary
Shares (representing 1.8% of Depositary Shares), Mr. Dove owns 13,123
Depositary Shares (representing 1.6% of Depositary Shares) and neither Mr.
Obus nor any Wynnefield Fund owns Depositary Shares any longer. These
Depositary Shares are convertible into a total of 48,560 shares of Common
Stock, which shares of Common Stock, together with the 1,179,500 shares of
Common Stock reported in the table, would represent 17.4% of the total
shares of Common Stock outstanding. See Notes (1) and (5).
8
The following table sets forth information as of April 10, 2000 concerning
stock ownership of individual directors and named executive officers, and of the
executive officers and directors of the Company as a group:
Number of Shares and Nature of Beneficial Ownership (1)
---------------------------------------------------
Percentage of
Name of Directors, Named Executive Percentage of Depositary Depositary
Officers and Persons as a Group Common Stock Common Stock Shares Shares
- ---------------------------------------------------------------------------------------------------------------
Thomas J. Coffey - - - -
R. Page Henley 56,440/(2)/ * - -
Pemberton Hutchinson 65,600/(3)/ * - -
Robert J. Jaeger 20,000/(4)/ * - -
Robert E. Killen 759,251/(5)/ 10.7% 750/(6)/ *
William R. Klaus 74,214/(7)/ 1.0% - -
W. Michael Lepchitz 41,756/(8)/ * 25 *
Thomas W. Ostrander 65,323/(9)/ * - -
Christopher K. Seglem 240,766/(10)/ 3.3% 1,181/(11)/ *
James W. Sight 331,000/(12)/ 4.7% - -
Edwin E. Tuttle 103,415/(13)/ 1.5% - -
Theodore E. Worcester 71,762/(14)/ * - -
Directors and Executive Officers
of the Company as a Group (12
persons) 1,829,527 23.5% 3,181 *
_________
(1) This information is based on information known to the Company or furnished
to the Company by directors and executive officers. Except as indicated
below, the Company is informed that the respective beneficial owners have
sole voting power and sole dispositive power with respect to all of the
shares set forth opposite their names. Percentages of less than 1% are
indicated by an asterisk. For ease of analysis, the Common Stock
information in the table and the related footnotes do not include the
number of shares of Common Stock into which the Depositary Shares may be
converted. A holder of Depositary Shares may convert such Depositary Shares
into shares of Common Stock at any time at a conversion ratio of 1.708
shares of Common Stock for each Depositary Share. Consequently, a holder of
Depositary Shares is deemed to beneficially own all of the shares of Common
Stock into which such holder's Depositary Shares may be converted. However,
for so long as the Company is in arrears on six or more preferred stock
dividends, holders of Depositary Shares are not entitled to vote for the
election of directors to be elected by holders of the Common Stock unless
such Depositary Shares are actually converted prior to the record date for
the Annual Meeting. Also, shares which may be purchased under option plans
are reflected in the table but are not entitled to vote unless exercised
prior to the record date for the Annual Meeting. The Westmoreland Coal
Company and Affiliated Companies Employees' Savings/Retirement Plan (the
"401(k) Plan") provides investment alternatives which include a Common
Stock Fund and a Depositary Share Fund. All amounts included herein held
through the 401(k) Plan are as of December 31, 1999.
9
(2) The amount in the table for Mr. Henley includes 2,930 shares of Common
Stock held by the Mellon Bank, as trustee of the 401(k) Plan. The amount
also includes 28,500 shares of Common Stock which may be purchased upon
exercise of options under the 1985 Westmoreland Incentive Stock Option and
Stock Appreciation Rights Plan (the "1985 Plan") and the 1995 Long-Term
Incentive Stock Plan (the "1995 Plan"). Mr. Henley retired effective March
31, 2000.
(3) Includes 59,000 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Non-Qualified Stock Option Plan for Non-Employee
Directors (the "1991 Plan") and the 1996 Directors' Stock Option Plan (the
"1996 Plan").
(4) Includes 18,000 shares of Common Stock which may be purchased upon exercise
of options under the 1995 Plan.
(5) Includes 624,067 shares of Common Stock held by The Killen Group Inc., of
which Mr. Killen is the Chairman, Chief Executive Officer and sole
stockholder, 61,500 shares held by a limited partnership of which Mr.
Killen and his spouse are the general partners, and 19,184 shares held by
Mr. Killen as a personal investment. Also includes 54,500 shares of Common
Stock which may be purchased upon exercise of options under the 1991 Plan
and the 1996 Plan.
(6) Includes 750 Depositary Shares held by Mr. Killen as a personal investment.
(7) Includes 63,500 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(8) Includes 256 shares of Common Stock and 25 Depositary Shares held by the
Mellon Bank, as trustee of the 401(k) Plan. Also includes 15,000 shares of
Common Stock which may be purchased upon exercise of options under the 1995
Plan.
(9) Includes 56,000 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(10) Includes 2,666 shares of Common Stock held by Mellon Bank, as trustee of
the 401(k) Plan. Also includes 233,000 shares of Common Stock which may be
purchased upon exercise of options under the 1985 Plan, the 1995 Plan and
the 1996 Plan.
(11) Includes 81 Depositary Shares held by Mellon Bank, as trustee of the 401(k)
Plan.
(12) Includes 56,000 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(13) Includes 63,500 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(14) Includes 6,762 shares of Common Stock held by Mellon Bank, as trustee of
the 401(k) Plan. Also includes 65,000 shares of Common Stock which may be
purchased upon exercise of options under the 1985 Plan and the 1995 Plan.
10
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officers of the Company as of December 31, 1999.
Name Age Position
---- --- --------
Christopher K. Seglem/(1)/ 53 Chairman of the Board, President and Chief
Executive Officer
R. Page Henley, Jr. /(2)/ 65 Senior Vice President - Acquisitions and
Development, and Government Affairs; President,
Westmoreland Coal Sales Company
Robert J. Jaeger/(3)/ 51 Senior Vice President - Finance and Treasurer
Theodore E. Worcester/(4)/ 59 Senior Vice President of Law and Administration,
General Counsel and Assistant Secretary
W. Michael Lepchitz/(5)/ 46 President and General Counsel, Westmoreland
Energy, Inc.
_________
(1) Mr. Seglem was elected President and Chief Operating Officer of the Company
in June 1992, and a Director of the Company in December 1992. In June 1993,
he was elected Chief Executive Officer, and relinquished the position of
Chief Operating Officer. In June 1996, he was elected Chairman of the
Board. He is a member of the bar of Pennsylvania.
(2) Mr. Henley was elected Senior Vice President--Government Affairs in June
1992. In 1993, he was elected Vice President, General Counsel and Secretary
of Westmoreland Energy, Inc. ("WEI"), a subsidiary of the Company. In 1994,
Mr. Henley relinquished the position of General Counsel for WEI and was
elected Senior Vice President--Development of the Company. In 1995, he was
elected President of Westmoreland Coal Sales Company and retained the
position of Vice President with WEI. In 1997, Mr. Henley's duties with the
Company were expanded to include acquisitions, and his title was revised
accordingly. He is a member of the bars of West Virginia and Virginia. Mr.
Henley retired effective March 31, 2000.
(3) Mr. Jaeger held various financial positions at Penn Virginia Corporation
from 1976 and was Vice President and Chief Financial Officer when he left
in March 1995. He joined Westmoreland Energy, Inc. in April 1995 as Vice
President--Finance. He was elected Vice President--Finance, Treasurer and
Controller of the Company in September 1995. He was elected Senior Vice
President--Finance, Treasurer and Controller in February 1996 and
relinquished the position of Controller in January 1998. Mr. Jaeger is a
certified public accountant.
(4) Mr. Worcester was elected Vice President and General Counsel in 1990. He
was elected Senior Vice President in June 1992 while remaining General
Counsel of the Company. In 1995, he was elected Senior Vice President of
Law and Administration and in 1996, Corporate Secretary, in addition to his
General Counsel position. He is a
11
member of the bar of Colorado. Mr. Worcester relinquished the title of
Corporate Secretary as of January 1999. He resigned the positions shown in
the table to become Of Counsel to the Company effective April 1, 2000.
(5) Mr. Lepchitz became General Counsel to Westmoreland Energy, Inc. in
December 1994. He became Vice President and General Counsel in 1995, and in
March 1996, while retaining his position as General Counsel, was elected
President of Westmoreland Energy, Inc. He became Vice President and General
Counsel of the Company effective April 1, 2000. He is a member of the bar
of Virginia.
12
EXECUTIVE COMPENSATION
The following table sets forth information for 1999, 1998 and 1997 as to
the person who held the position of Chief Executive Officer during 1999 and
other four most highly compensated executive officers at the end of 1999, whose
total salary and bonus for 1999 exceeded $100,000.
Summary Compensation Table
Long Term Compensation
Annual Compensation ($) Awards
------------------------------------------------------------------------ All
Other Annual Restricted Stock Options (# Other
Name and Compen-sation Stock Common Shares) Compen-sation
Principal Positions Award(s) (3)
Year Salary Bonus(1) (2) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------
Christopher K. 1999 334,802 667,000 19,304 - - 26,178
Seglem, Chief 1998 334,802 - - - - 25,445
Executive Officer 1997 334,802 - - - - 21,655
and President
Theodore E. 1999 186,830 300,000 4,181 - - 9,663
Worcester, Senior 1998 183,181 - - - - 9,663
Vice President of 1997 179,644 - - - - 11,356
Law and
Administration and
General Counsel
R. Page Henley, 1999 182,000 100,000 - 80,000 10,000 10,253
President, 1998 178,446 - - - - 10,235
Westmoreland Coal 1997 175,000 - - - - 39,834
Sales Company, Inc.
Robert J. Jaeger, 1999 186,830 300,000 59,640 - - 5,400
Vice President of 1998 177,112 - - - - 5,342
Finance, Treasurer 1997 161,805 - - - - 5,011
and Controller
W. Michael Lepchitz, 1999 125,400 200,000 18,711 46,000 15,000 4,480
President, 1998 119,612 - - - - 4,480
Westmoreland Energy, 1997 110,310 - - - - 3,158
Inc.
(1) These bonuses were earned in 1999 on the basis of performance from 1996
through early 1999, and were paid in connection with the Company's
successful emergence from bankruptcy.
13
(2) Mr. Henley and Mr. Lepchitz were granted 20,000 and 11,500 shares of
restricted stock respectively, under the Westmoreland Coal Company 1995
Long-Term Incentive Stock Plan. These shares are valued in the table at
the closing price of the Company's Common Stock on the date of grant,
January 26, 1999.
(3) All Other Compensation for the named executive officers in 1999 consisted
of directors' fees (for Mr. Seglem), Company contributions to the 401(k)
Plan, and insurance premiums and financial planning fees paid by the
Company. Mr. Seglem received directors' fees of $16,983 in 1999.
Westmoreland has ended its historical practice of paying meeting fees to
employee directors, and as a result, Mr. Seglem ceased receiving such fees
after 1999. The Company contributed $4,000 to the 401(k) Plan during 1999
on behalf of each of Messrs. Seglem, Henley, Jaeger, Worcester and
Lepchitz. In 1999 the Company paid life insurance premiums of $4,747,
$6,253, $800, $4,063 and $480 for Messrs. Seglem, Henley, Jaeger, Worcester
and Lepchitz, respectively, and paid financial planning fees of $448, $600
and $1,600 for Messrs, Seglem, Jaeger and Worcester, respectively.
14
The following table represents information regarding options to purchase
common shares granted to the named executive officers in 1999:
Option/SAR Grants in Last Fiscal Year
- ---------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Individual Grants Annual Rate of Stock
Price Appreciation
for Option Term
- ---------------------------------------------------------------------------------------------------------------
Number of
Securities Percent of total Exercise
Underlying options granted or base
Options to employees in price per Expiration
Name Granted fiscal year share date 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------
R. Page Henley, Jr. 10,000 15.4% $4.00 1/26/09 25,156 63,748
W. Michael Lepchitz 15,000 23.1% $4.00 1/26/09 37,734 95,622
- ---------------------------------------------------------------------------------------------------------------
The following table presents information regarding stock option exercises
by the named executive officers in 1999 and the number of unexercised options to
purchase Common Stock held by them at December 31, 1999:
Aggregated Option/SAR Exercises in the last Fiscal Year and FY-End Option/SAR
Values
- ------------------------------------------------------------------------------------------------------------------------
Number Number of Securities Value of
of Shares Underlying Unexercised Unexercised
Acquired Value Options at In-the-Money Options at
on Realized December 31, 1999 December 31, 1999
Exercise
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
Christopher K. Seglem - - 205,500 27,500 $52,500 $6,875
Theodore E. Worcester - - 65,000 - $12,500 -
R. Page Henley, Jr. - - 28,500 - -0- -
Robert J. Jaeger - - 20,000 - $12,500 -
W. Michael Lepchitz 15,000 $34,453 15,000 - -0- -
- ------------------------------------------------------------------------------------------------------------------------
There are no outstanding stock appreciation rights.
Pension Plan
The Company sponsors a Pension Plan (the "Plan") for eligible employees of
the Company and its subsidiaries to which employees make no contributions. All
employees whose terms and conditions of employment are not subject to collective
bargaining and who work 1,000 or more hours per year are eligible for
participation in the Plan. Eligible employees become fully vested after five
years of service, or in any event, upon attaining age 65.
15
The Plan was adopted effective December 1, 1997 as a qualified replacement
plan for a previous plan (the "Previous Plan"), which was terminated effective
November 30, 1996 (the "Previous Plan Termination Date"). In general, the Plan
provides for payment of annual retirement benefits to eligible employees equal
to 1.2% of any employee's average annual salaried compensation (over the sixty
most highly compensated consecutive months of employment) plus 0.5% of such
average annual compensation in excess of the employee's pay used to determine
Social Security retirement benefits ("covered compensation") for each year of
service to a maximum of 30 years, less the benefit, if any, provided to the
participants under the Previous Plan. The Plan also provides for disability
benefits and for reduced benefits upon retirement prior to the normal retirement
age of 65. For the purpose of benefit calculation under the Plan, credited
service under the Previous Plan is included with credited service under the Plan
and a benefit amount is calculated using the above formula. The amount of the
accrued benefit under the Previous Plan, calculated as of the Previous Plan
Termination Date, is then subtracted to arrive at the benefit amount payable
under the Plan.
No amounts are included in the Salary column of the Summary Compensation
Table above in respect of Plan contributions by the Company and its subsidiaries
because the Plan is a qualified defined benefit plan. No contribution is
required or permitted to this Plan for 1999, due to the full funding limitations
imposed under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The basis upon which benefits are computed is a straight-life
annuity; payments are available in other forms on an actuarially reduced basis
equivalent to a straight-life annuity. Benefit amounts set forth in the table
below are not subject to any deduction for Social Security benefits or other
offset amounts, except as noted below for the amount of the accrued benefit
under the Previous Plan.
The following table shows estimated annual retirement benefits, which are
representative of an employee currently age 65 whose salary remained unchanged
during his or her last five years of employment and whose benefit will be paid
for the life of the employee:
Years of Service
- -------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ----------------- ----------- ----------- ----------- ----------- -----------
$125,000 $ 29,540 $ 39,387 $ 49,234 $ 59,081 $ 59,081
150,000 35,915 47,887 59,859 71,831 71,831
175,000 42,290 56,387 70,484 84,581 84,581
200,000 48,665 64,887 81,109 97,331 97,331
225,000 55,040 73,387 91,734 110,081 110,081
250,000 61,415 81,887 102,359 122,831 122,831
300,000 74,165 98,887 123,609 148,331 148,331
350,000 86,915 115,887 144,859 173,831 173,831
400,000 99,665 132,887 166,109 199,331 199,331
450,000 112,415 149,887 187,359 224,831 224,831
500,000 125,165 166,887 208,609 250,331 250,331
16
The amounts shown in the above table would be reduced by the amount of
accrued benefit under the Previous Plan. The amount of reduction from the annual
benefit for the following individuals are: Mr. Seglem--$38,162; Mr. Henley--
$25,335; Mr. Worcester--$9,197; Mr. Jaeger--$2,619 and Mr. Lepchitz--$3,594.
Three years and one month of service has been credited under the Plan
subsequent to the Previous Plan Termination Date for each of Messrs. Seglem,
Worcester, Henley, Jaeger and Lepchitz. Years of credited service under the
Previous Plan as of the Previous Plan Termination Date for the following
individuals and the amounts received by them from the Previous Plan in December
1997 in connection with the plan termination were: Mr. Seglem--16 years, three
months, $174,424; Mr. Worcester--five years, 11 months; $71,993, Mr. Henley--12
years, 10 months, $261,589; Mr. Jaeger--one year, seven months, $10,603 and Mr.
Lepchitz--five years.
The current compensation covered by the Plan for any executive officer in
the Summary Compensation Table is that amount reported in the Salary column,
subject to limitations imposed by the Internal Revenue Code of 1986, as amended
(the "Code").
The Code limits the amount of compensation that may be taken into account
for the purpose of determining the retirement benefit payable under retirement
plans (such as the Plan) that are qualified under ERISA. So that the Company may
provide retirement income to its senior executives and other key individuals
that is commensurate as a percentage of preretirement income with that paid to
other Company employees, the Company established a nonqualified Supplemental
Executive Retirement Plan (the "SERP"), effective January 1, 1992, which
currently covers all the executive officers listed in the Summary Compensation
Table. The annual benefit presented in the above table includes the portion of
retirement benefits payable through the SERP.
To become vested in the SERP, a participant must attain age 55 and
generally complete 10 years of service. Bonus amounts are included in a
participant's compensation under the SERP, although excluded under the Plan.
Benefits are payable out of the Company's general assets, and shall commence and
be payable at the same time and in the same form as the Plan.
Severance Arrangements
The Company has an Executive Severance Policy (the "Policy") which covers
designated executive officers named above, and provides that an executive
officer will be entitled to a severance award in the event of certain
terminations of such person's employment with the Company or its subsidiaries.
For purposes of the Policy, a termination is deemed to have occurred and
severance will be granted at any and all times for the following reasons: (i)
discharge for unacceptable job performance (other than that resulting from gross
or willful misconduct, which is defined as an act or acts constituting larceny,
fraud, gross negligence, crime or crimes, moral turpitude in the course of
employment, or willful and material misrepresentation to the Company's directors
or officers); (ii) discharge due to recognition of a mistake in the recruiting
process, as determined by management; (iii) a significant reduction, or increase
without adequate compensation, in the nature or scope of such executive's
authority or duties; (iv) a relocation of such executive from Colorado Springs,
Colorado to any location, or a reduction in such executive's base
17
compensation, a material reduction of the value of the aggregate of employee
benefits as described in the Policy, or cessation of eligibility for incentive
bonus payments; or (v) in the event of a change in control of the Company, as
defined in the Policy. This award will include an amount equal to twice the
executive officer's annual average cash compensation, defined as the greater of
the annualized base salary at the time of severance plus the amount of bonus
awarded (including amount deferred) in that year or the annual average of the
executive officer's most recent five calendar years of base salary and bonus
awarded (including amounts deferred), including the year of termination. The
severance award will be paid in approximately equal monthly installments over a
period of 24 months following the date of termination, unless the executive
officer elects to receive the present value of his total severance, including
the present value of executive benefits (such as life and health insurance,
stock options, and financial planning and outplacement services), in a lump sum
cash distribution at the time of termination.
A change in control of the Company is defined in the Policy as: (i) a
transaction, acquisition, merger, other event or series of events ("events")
which results in any individual, person, entity or group acting in concert
("person") having beneficial ownership of 20% or more of the Company's Common
Stock or voting preferred stock or any combination thereof, that will give that
person ownership or control of 20% or more of the combined voting power of all
stock generally entitled to vote for the election of directors; or where such
person prior to a transaction, acquisition, merger, other event or series of
events holds a 20% or more voting power, as defined therein, an event which
increases that person's interest by 5% or more; unless a majority of those
members of the Board of Directors who were in office prior to the occurrence of
the event determines at the next regularly scheduled Board meeting that the
event was not hostile or adverse; or (ii) a change in the membership of the
Board of Directors when, in less than two years, the directors prior to the
change cease to constitute a majority, unless the new directors were designated
as nominees or were elected to fill a vacancy on the Board by two-thirds of the
incumbent directors at the time; or (iii) a consolidation or merger as a result
of which the Company is not the surviving or continuing corporation or where the
Company's stock is converted into cash, securities or other property; or any
sale, lease, exchange or other transfer of all or substantially all of the
assets of the Company; or an adoption of any plan or proposal for the
liquidation or dissolution of the Company.
Compensation of Directors
In 1999, the attendance fee for the Chairman of the Board of Directors and
for each committee chairman attending a Board or committee meeting was $1,250.
The attendance fee for all other directors and committee members was $1,000 per
meeting. The attendance fees paid to Mr. Seglem are included in the "All Other
Compensation" column of the Summary Compensation Table. In addition, under the
1991 Plan, each non-employee director of the Company is entitled to receive on
September 1 of each year through 2000 options to purchase 1,500 shares of Common
Stock. Likewise, under the 1996 Directors' Stock Option Plan, each director is
entitled to receive, as an initial grant, options to purchase 20,000 shares of
Common Stock, and options to purchase 10,000 shares of Common Stock annually
thereafter. No further options are presently available for issuance under this
plan. In 1999, the annual retainer fee to each outside director was $15,000,
$9,000 of which was paid in cash, and the remaining $6,000 of which directors
could elect to receive in cash or in Common Stock of the Company.
18
Mr. Hutchinson retired as an employee of the Company as of December 31,
1993. Mr. Hutchinson is entitled to receive benefit payments from the Company's
SERP of $3,708 a month. These payments were not made while the Company was
subject to bankruptcy court jurisdiction. A catch-up payment, including interest
at the rate of 5.45% per annum, of $93,986 was made to Mr. Hutchinson after the
dismissal of the Bankruptcy Filing in January 1999.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Messrs. Klaus (Chairman), Tuttle and Hutchinson served on the Compensation
and Benefits Committee during 1999.
No member of this Committee was an officer or employee of the Company
during 1999. One member of this Committee, Mr. Hutchinson, was formerly an
officer of the Company. No executive officer of the Company served either as a
member of the compensation committee or as a director of a company, one of whose
executive officers served on the Company's Compensation and Benefits Committee,
or as a member of the compensation committee of a company, one of whose
executive officers served as a director of the Company.
Compensation & Benefits Committee Report on Executive Compensation
The Compensation & Benefits Committee is responsible for setting the
salaries and incentive compensation of the Company's executive officers. The
Committee's objective is to attract, retain and motivate highly qualified
executive officers and to reinforce their incentive to perform at the highest
level, increase the Company's long-term profitability and increase shareholder
value. The Committee is composed solely of directors who are not employees of
the Company.
In 1999, the Company retained the nationally recognized consulting firm
William M. Mercer, Incorporated ("Mercer"), to conduct a review of
Westmoreland's compensation package for senior executives and directors and to
assist it in developing a compensation strategy based on the compensation paid
to executives of companies comparable to Westmoreland and the Company's
strategic situation. According to Mercer, Westmoreland senior executives' total
annual cash compensation (base salary plus annual incentive compensation) is
slightly below the median, but the lack of long-term incentives has caused the
Company's senior executives to be compensated significantly below the median for
total compensation, in each case by comparison with the companies Mercer
considered comparable to the Company.
The Committee met in December 1998, twice in March 1999, in December 1999
and in April 2000 to review compensation.
The Committee has not increased the salary of Christopher K. Seglem, the
Company's Chairman of the Board, President and Chief Executive Officer, since
January 1996. Prior to that, his last salary increase had been in June 1993. Mr.
Seglem's salary has remained fixed since January 1996 in light of the Company's
need to conserve its capital resources both during and after its recent
bankruptcy, as a gesture of good faith to the Company's creditors and
shareholders and as an expression of confidence in
19
the future success of the Company. At its meeting in December 1999, the
Committee accepted Mr. Seglem's recommendation to continue this freeze on his
salary.
The decision not to increase Mr. Seglem's salary was made notwithstanding
the Committee's consideration of quantitative and qualitative factors which, in
the Committee's view, would have supported a salary increase. Quantitative
factors considered included (i) the successful conclusion of the Company's
bankruptcy cases on terms which reflected its greatly improved financial health
and preserved 100% of the interests of equity security holders and creditors,
(ii) the completion of tender offers for a substantial portion of the Company's
Depositary Shares (representing preferred stock) in April and October resulting
in substantial premiums over market value being realized by tendering holders of
Depositary Shares but at prices very favorable to the Company and remaining
shareholders due to the total reduction of unpaid preferred stock dividends from
$22.0 million to $9.3 million and a reduction of the Company's quarterly
preferred stock dividend obligation from $1.2 million to $444,000, (iii) the
reinstatement without interruption of health benefits to retired miners and
their families under the Company's individual employer health benefit plan that
was suspended as part of the bankruptcy, (iv) the diligent management of retiree
health care costs within the constraints of the Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"), (v) the disciplined management of the
Company's operations in 1999 including cost reduction and organizational
improvement initiatives ranging across the Company's operations and corporate
headquarters, (vi) the achievement of strong operating earnings and realization
in 1999 of net proceeds in excess of $33 million from the sale of the Company's
remaining interest in the Rensselaer independent power project, (vii) the
aggressive protection of the Company's interests, including through litigation
where necessary, and (viii) the development of the Company's post-bankruptcy
strategic plan for growth.
The qualitative factors considered by the Committee included uncontrollable
factors affecting the Company's performance, Mr. Seglem's vision for the
Company, his knowledge of and experience with the Company's business operations,
his leadership qualities affecting the Company's relationships with
stockholders, customers, suppliers, employees, collective bargaining
organizations and the communities within which the Company has operations, his
overall management abilities, initiatives and strategic planning for the future
and his extraordinary efforts put forth by means of diligence, hard work and
exceptionally long hours. These strengths and qualities are particularly
valuable to the Company as it enters its renewal phase.
Comparative factors considered were compensation paid to chief executive
officers of companies comparable to the Company. Such companies were identified
by Mercer and considered to be energy, coal and general mining companies as well
as companies in a turnaround or renewal phase of the business cycle. An analysis
of salaries, annual incentive compensation and long-term incentive compensation
at such companies was prepared at the Committee's direction and considered by
the Committee at its meetings in December 1999 and April 2000. This analysis
showed Mr. Seglem to be 8% below the median for total annual cash compensation
when the post-bankruptcy catch-up bonus paid to senior executives was annualized
to determine the appropriate 1999 compensation for comparison purposes. Mr.
Seglem's compensation was substantially below the median (i.e., it was only 38%
of the
20
median) when long-term incentive compensation, which is usually in the form of
stock options or restricted stock, was also considered. For this reason,
pursuant to the 1995 Long-Term Incentive Stock Plan (the "1995 Employees'
Plan"), the Company awarded Mr. Seglem 15,000 shares of restricted stock
(subject to delayed vesting over a three-year period conditioned on his
voluntarily remaining with the Company) on April 13, 2000 and included him in
the catch-up stock option awards under the 1996 Directors' Stock Incentive Plan
pursuant to the terms of that Plan. Based on the recommendation of Mercer as to
best practice, Mr. Seglem will not be included in any future Directors' awards
but will be included in awards under employee incentive plans. Likewise,
Westmoreland has ended its historical practice of paying meeting fees to
employee directors, and as a result, Mr. Seglem ceased receiving such fees after
1999. The survey information underscored the need, in the Committee's view, for
a new incentive stock option plan for employees such as the plan proposed for
stockholder approval and described elsewhere in this proxy statement. The
limited amount of stock available to the Company for awards under a new
incentive stock option plan for employees, however, will likely prevent the
Company from providing long-term incentive compensation to Mr. Seglem that is
fully comparable with that of his peers.
The Committee's determination that Mr. Seglem deserved a salary increase
was based not only on the quantitative, qualitative and comparative factors
described above but also on the Committee's good faith business judgement of his
performance as it related to results in 1999, the actions he had taken to
preserve and enhance shareholder value and the long-term positioning of the
Company. The Committee did not apply a specific formula or attach specific
weights to the foregoing factors, but in general the Committee attached more
significance to the Company's overall financial and management performance, the
progress in positioning the Company for growth and the importance of Mr. Seglem
to these accomplishments.
With respect to the other executive officers, the Committee considered the
quantitative and comparative factors mentioned above, Mr. Seglem's
recommendation regarding these officers and the fact that the corporate
headquarters performs the same functions as it did prior to the Company's
restructuring plan begun in 1993 with a substantial reduction in personnel which
continued in 1999. The Committee supported Mr. Seglem's recommendation that,
although the reasons cited above also support salary increases for these
officers, in the absence of promotions or significant changes in job
responsibilities, none of which occurred for these officers during 1999, their
salaries would also remain frozen at the present time in order to control costs
and maximize cash available for investment. The Committee noted that it may
reconsider the salaries of Mr. Seglem and the other senior executive officers at
a later date as the Company's strategic plan is implemented.
Prior to the Chapter 11 cases, and as part of the Company's restructuring
plan commenced in 1993, the Company had instituted a bonus incentive program
designed to compensate the Company's executive officers for the Company's
strategic performance and financial results which placed a substantial portion
of their total compensation package "at risk" by deferring payment of that
portion until the accomplishment of certain signal events related to restoration
of the Company's financial health. The deferred portions of bonuses for 1994 and
1995 became payable during the Chapter 11 cases but, due to
21
restrictions imposed by bankruptcy law, were not paid until after the cases were
dismissed in January 1999. During the bankruptcy, the Committee did not award
bonuses, and hence no bonuses for 1996, 1997 or 1998 were paid. The Committee
believes that this decision was appropriate in light of the sacrifices the
Company's other constituents, such as creditors and stockholders, could have
been called upon to make in connection with the Chapter 11 cases. Bonuses were
paid to the Company's executive officers in January 1999 following the
consensual dismissal of the bankruptcy. These bonuses were earned in 1999 on the
basis of performance from 1996 through early 1999, and were paid in connection
with the Company's successful emergence from bankruptcy. At its meeting in
December 1999, the Committee elected not to award additional annual cash
incentive bonuses to Mr. Seglem or the other senior executive officers for the
period after early 1999 as a further effort to control costs and maximize cash
available for investment. Pursuant to the Mercer Report, the Company intends to
include annual cash incentive compensation in its executive and key employee
compensation package for 2000 based on the accomplishment of key strategic
criteria. Because current salaries for senior executives are below market median
levels, targeted awards are also below the market median.
In addition, the Committee believes that stock options and restricted stock
awards are an important feature of executive compensation. Stock option awards
made to executive officers are designed to align the interests of management
more closely with those of the stockholders of the Company by increasing stock
ownership by management. Accordingly, options and restricted stock had been
awarded to executive officers for 1995 and previous years, but for the reasons
given above, no stock options or shares of restricted stock were awarded to
executive officers during or with respect to 1996, 1997 or 1998. In January
1999, incentive stock options and restricted stock were awarded to Messrs.
Henley and Lepchitz and certain other salaried employees, but not to the other
senior executive officers, and in April 2000, such awards were made to the
Company's senior executive officers and certain other salaried employees.
Following this grant, no shares are presently available for awards of options or
restricted stock under the 1995 Plan. To permit the Company to provide long-term
incentive compensation in the future to its executive officers and other
employees, it has proposed the 2000 Long-Term Incentive Stock Plan for
stockholder approval at the upcoming Annual Meeting of Stockholders. (See "2000
Long-Term Incentive Stock Plan" below.) If such approval is received, the
Committee will consider long-term incentive grants to the Company's senior
executive officers and other employees following such approval.
The Committee has considered the issue of compliance with Section 162(m) of the
Internal Revenue Code of 1986, as amended, which deals with the annual
deductibility of executive compensation in excess of $1 million for the named
executive officers of the Company. The Committee attempts to administer its
compensation programs so as to optimize their financial impact and motivational
and retentive value, as well as the tax deductibility of compensation. While the
Committee will seek to utilize deductible forms of compensation to the extent
practical, the Committee does not believe that compensation decisions should be
made solely to maintain the deductibility of compensation, particularly
considering the small present likelihood of compensation for the named
executives exceeding $1 million dollars in a given year. In addition, the
Company uses Incentive Stock Options as its primary long-term employee incentive
vehicle (which do not normally afford the Company a deduction for gain realized
by the executive). The Committee will continue to monitor changes in the
Company's
22
business situation as well as its compensation programs, to determine if changes
to this position are necessary to continue to optimize shareholder interests.
William R. Klaus, Chairman
Pemberton Hutchinson
Edwin E. Tuttle
Performance Graph
The following Performance Graph compares the cumulative total stockholder
return on the Company's Common Stock for the five-year period December 31, 1994
through December 31, 1999 with the cumulative total return over the same period
of the AMEX Market Index and the Dow Jones Coal Index, which is comprised of the
following companies: Arch Coal Inc., Penn Virginia Corporation and Yanzhou Coal
Mining. These comparisons assume an initial investment of $100 and reinvestment
of dividends. The Common Stock and Depositary Shares traded on the New York
Stock Exchange until December 23, 1996, when trading was halted in connection
with the 1996 Bankruptcy Filing. Public trading for the Common Stock and
Depositary Shares resumed in February 1997 on the Over the Counter Bulletin
Board. After the Company emerged from bankruptcy in January 1999, it applied to
list the Common Stock and the Depositary Shares on the American Stock Exchange.
On April 16, 1999 the Common Stock and Depositary Shares began trading on the
AMEX.
COMPARISON OF CUMULATIVE TOTAL RETURN
Among Westmoreland Coal Company, AMEX
Market Index and Dow Jones Coal Index
[GRAPH APPEARS HERE]
- -------------------------------------------------------------------------------
12/30/94 12/29/95 12/23/96 12/31/97 12/31/98 12/31/99
- -------------------------------------------------------------------------------
RELAND 100.00 38.89 14.81 21.30 56.48 48.15
- -------------------------------------------------------------------------------
GROUP 1 100.00 84.15 113.66 130.22 83.51 76.82
- -------------------------------------------------------------------------------
MARKET 100.00 128.90 136.01 163.66 161.44 201.27
- -------------------------------------------------------------------------------
23
CERTAIN TRANSACTIONS
Westmoreland Resources, Inc. ("WRI"), an 80% owned subsidiary, has a coal
mining contract with Morrison Knudsen Company, Inc. ("MK"), one of its
stockholders, pursuant to which MK mines the coal and delivers it to WRI. The
contract term extends for the life of the economically recoverable coal reserves
on the land presently leased from the Crow Tribe. Mining costs are incurred by
WRI under the contract and were $19,445,000, $22,654,000 and $24,295,000 in
1999, 1998 and 1997, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, all statements of beneficial ownership required
to be filed with the Securities and Exchange Commission in 1999 were timely
filed.
PROPOSAL 2
2000 LONG-TERM INCENTIVE STOCK PLAN
The Board of Directors proposes the 2000 Long-Term Incentive Stock Plan
(the "Incentive Plan") for approval and adoption by the Company's stockholders.
The Board of Directors believes that the Incentive Plan will help the Company to
attract and retain qualified officers and other key salaried employees and will
help to align the interests of Incentive Plan participants with the Company's
stockholders.
The decision of the Board of Directors to propose the Incentive Plan was
also based on the recommendations of its nationally recognized independent
compensation consultant, William M. Mercer, Incorporated. Mercer advised the
Board that it is typical for companies in a turnaround or renewal phase to
emphasize long-term incentives as a percentage of total compensation for
executives and key employees. Mercer compared the Company's current compensation
position for its senior executives to that of other companies considered by
Mercer to be comparable for compensation purposes. Mercer reported that
Westmoreland's total compensation of these senior executives was approximately
36% of the median (below the 25th percentile), among the companies Mercer
considered comparable, due to its relative lack of long-term incentives.
The full text of the Incentive Plan is set forth in Annex A to this Proxy
Statement, and the description of the Incentive Plan set forth herein is
qualified in its entirety by reference to the text of such plan.
The Incentive Plan provides for the grant of three types of incentive
awards: incentive stock options ("ISOs"), non-qualified stock options ("NQSOs")
and stock awards (collectively, the "awards"). Options
24
give the participant the right to purchase from the Company a specified number
of shares of the Company's Common Stock for a specified price during a specified
period. Options may be either ISOs, which are entitled to favorable tax
treatment under provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), or NQSOs. Stock awards are awards payable in shares of Common Stock,
which may be subject to risk of forfeiture if the employee ceases to be employed
by the Company or designated subsidiaries of the Company during a specified
period, or if specified performance criteria are not met.
Under the Incentive Plan, awards will be granted by a committee or sub-
committee of the Company's Board of Directors (the "Committee"), composed of two
or more directors, each of whom is a "disinterested person" within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. The total
number of shares of the Company's Common Stock reserved and available for awards
under the Incentive Plan will be 350,000, of which no more than one-third may be
granted in the form of stock awards. Executives, managers and key employees of
the Company and designated subsidiaries of the Company who are also salaried
employees are eligible to participate in the Incentive Plan. The Company had
approximately 15 such employees as of April 14, 2000.
The Committee will select the employees to whom awards are granted and the
number of shares subject to each award. Awards under the Incentive Plan are
generally for no consideration other than services as an employee. The Committee
has the discretion to determine whether to grant ISOs, NQSOs and/or stock awards
to a participant and the terms and conditions of each award. In the event that
the Committee determines that a stock dividend, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, spin-off,
combination or other similar corporate transaction may affect the rights of
participants, the Committee may adjust the awards outstanding, or to be granted,
and the conditions thereof, as well as the maximum number of awards issuable
under the Incentive Plan.
The Incentive Plan may be amended by the Board of Directors, but material
amendments to the Incentive Plan, such as amendments that would materially
increase the benefits or number of awards issuable under the Incentive Plan or
materially modify the requirements for eligibility to participate in the
Incentive Plan, would require stockholder approval.
Furthermore, any amendment, alteration, suspension, discontinuance or
termination of the Incentive Plan which would impair the rights of any
participant to whom an award has been granted will require the consent of the
participant.
ISOs granted under the Incentive Plan may not have an exercise price less
than the fair market value of a share of Common Stock on the date of grant of
such option; however, the exercise price for ISOs granted to ten percent
stockholders may not be less than 110 percent of the fair market value of a
share on the date it was granted. ISOs and NQSOs shall expire not later than ten
years after the date of grant; however, ISOs granted to a ten percent
stockholder shall expire not later than five years after the date of grant.
Stock awards may be granted subject to such restrictions, if any, as the
Committee may impose. Such stock will cease to be subject to forfeiture at the
end of any restriction period if the participant remains an employee throughout
the restriction
25
period, and if any performance criteria are met during the restriction period,
although the Committee may determine in any instance to waive restrictions or
forfeiture conditions in whole or in part.
ISO's granted under the Incentive Plan are not transferable except by will
or by the laws of descent and distribution and are exercisable during the life
of the participant only by him, or his guardian or legal representative. NQSO's
and non-vested restricted stock granted under the Incentive Plan may be
transferred only to certain family members and certain family trusts and
partnerships to the extent specifically permitted by the Committee in an
applicable award agreement.
In the event of a change of control (as defined in the Incentive Plan) of
the Company, all stock awards with delayed vesting conditions will be deemed
fully vested, and any option that was not previously exercisable and vested will
become fully exercisable and vested.
The Committee has full and final authority to administer the Incentive
Plan, including but not limited to (i) determining the terms and conditions of
any award granted, (ii) identifying employees who are "executives, managers or
key employees" for the purpose of their eligibility to participate in the
Incentive Plan, (iii) designating the subsidiaries of the Company whose
employees are eligible to participate in the Incentive Plan, (iv) determining
the form of award agreement, which need not be identical for each person, (v)
correcting any defect or supplying any omission or reconciling any inconsistency
in the Incentive Plan and construing and interpreting the Incentive Plan and any
award, rules and regulations, award agreement or other instrument thereunder,
and (vi) making all other decisions and determinations required under the
Incentive Plan or as it may deem necessary or advisable.
No awards have been granted under the Incentive Plan, nor will there be
until the Incentive Plan has been approved by the stockholders. Following
stockholder approval, it is the Board's intention to grant awards at annual
intervals.
Within a reasonable time after approval of the Incentive Plan by
stockholders, it is the intention to register the 350,000 shares of Common Stock
issuable under the Incentive Plan, pursuant to the Securities Act of 1933, as
amended.
The Company has been advised by counsel that under present federal tax
laws, the federal income tax consequences of ISOs, NQSOs and restricted stock
are as follows:
Incentive Stock Options. A participant recognizes no income and the Company
-----------------------
receives no deduction for federal income tax purposes when an ISO is granted or
exercised. If a participant holds the shares acquired on exercise of an ISO for
more than two years after the date the ISO is granted and more than one year
after the date the shares are issued to the participant pursuant to the exercise
of the ISO, any gain or loss, measured by the difference between the exercise
price and the sale price, realized on the subsequent sale of the shares, will be
long-term capital gain or loss. The Company will not be entitled to take a
deduction as a result of such exercise or sale. At the time of exercise, the
excess of the fair market value of the shares over the exercise price is treated
as an addition to the participant's "alternative minimum taxable income" for
purposes of the alternative minimum tax (AMT); this excess is not taxed again
for AMT purposes when the shares are later sold. If the participant sells the
shares before the
26
holding periods have elapsed, he will generally have ordinary income in the year
of sale equal to the excess of the fair market value of the shares at the time
he exercised the ISO over the exercise price. The Company may then be entitled
to a deduction in the amount of ordinary income recognized by the participant.
The gain, if any, in excess of the amount of ordinary income recognized by the
participant will be short-term or long-term capital gain, depending upon the
length of time the shares were held.
Non-Qualified Stock Options. A participant recognizes no income and the
---------------------------
Company receives no deduction upon the grant of a NQSO. Upon exercise of a NQSO,
a participant must include as ordinary income the excess of the fair market
value of the stock on the date of exercise over the exercise price, and the
Company will receive a deduction at the same time and in the same amount. The
Company will be required to withhold federal income taxes and other taxes. The
holding period for capital gain or loss treatment will begin to run at that
time. The gain or loss on any subsequent sale of the shares will be measured by
the difference between the sale price and the fair market value of the shares on
the date of exercise, and if such shares have been held for more than one year,
the participant will be entitled to long-term capital gain treatment.
Stock Awards. A participant recognizes income and the Company receives a
------------
corresponding compensation deduction at the time that any substantial risk of
forfeiture lapses or at the time of the award if it is made without a delayed
vesting condition. At such time, the participant is subject to withholding
requirements and the Company's deduction would be in the amount of the then fair
market value of the stock.
The value of a share of the Company's Common Stock, as defined in the
Incentive Plan, was $3-1/4 on April 14, 2000.
The Incentive Plan will terminate on April 14, 2010, unless sooner
terminated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF THE 2000 LONG-TERM INCENTIVE STOCK PLAN.
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, independent public
accountants, as the independent auditors of the Company for the fiscal year
ending December 31, 2000. The Company expects that a representative of that firm
will be present at the Annual Meeting and will have the opportunity to make a
statement and to respond to appropriate questions from the stockholders.
27
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials
for the 2001 Annual Meeting of Stockholders, a stockholder proposal must be
received by the Corporate Secretary no later than December 21, 2000. A
stockholder proposal intended to be brought before the 2001 Annual Meeting
without inclusion in the Company's proxy materials must be received by the
Corporate Secretary no earlier than February 9, 2001 and no later than March 11,
2001, which is not less than 90 nor more than 120 days prior to the anniversary
date of the preceding year's Annual Meeting of Stockholders (or special meeting
in lieu of an annual meeting). All proposals should be addressed to Westmoreland
Coal Company, 2 North Cascade Avenue, 14th Floor, Colorado Springs, Colorado
80903, Attention: Corporate Secretary. The Company reserves the right to reject,
rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements, including
conditions established by the Securities and Exchange Commission.
* * *
Upon the written request of any person who on the record date was a record owner
of Company stock, or who represents in good faith that he or she was on such
date a beneficial owner of such stock entitled to vote at the Annual Meeting,
the Company will send such person, without charge, a copy of its Annual Report
on Form 10-K for 1999, as filed with the Securities and Exchange Commission.
Requests for this Report should be directed to Westmoreland Coal Company, 14th
Floor - Holly Sugar Building, 2 North Cascade Avenue, Colorado Springs, Colorado
80903.
OTHER BUSINESS
The Board of Directors has no present intention of bringing any other
business before the meeting and has not been informed of any other matters that
are to be presented to the meeting. If any other matters properly come before
the meeting, however, the persons named in the enclosed proxy will vote in
accordance with their best judgment.
By order of the Board of Directors
/s/ Paul W. Durham
Paul W. Durham
Corporate Secretary
28
ANNEX A
WESTMORELAND COAL COMPANY
2000 LONG-TERM INCENTIVE STOCK PLAN
SECTION 1. Purpose. The purpose of the 2000 Long-Term Incentive Stock
Plan (the "Plan") of the Company is (a) to align the interests of shareholders
and employees of the Company by encouraging and creating ownership of Common
Stock of Westmoreland Coal Company by officers and other key salaried employees
of the Company; (b) to enable the Company to attract and retain qualified
officers and employees who contribute to the Company's success by their ability,
dedication and ingenuity; and (c) to provide meaningful long-term incentive
opportunities for officers and other key salaried employees who are responsible
for the success of the Company and who are in a position to make significant
contributions toward its objectives.
SECTION 2. Definitions. In addition to the terms defined elsewhere in the
Plan, the following shall be defined terms under the Plan:
2.01. "Award" means any Option, Stock Award or any other right or
interest relating to Shares, granted under the Plan.
2.02. "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
2.03. "Board" means the Board of Directors of Westmoreland Coal
Company.
2.04. "Change of Control" and related terms are defined in Section 9.
2.05. "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
2.06. "Committee" means the Compensation and Benefits Committee of
the Board of Directors, or such other Board committee as may be designated by
the Board to administer the Plan, or any subcommittee of either; provided,
however, that such Committee or subcommittee shall consist of two or more
directors, each of whom is a "Nonemployee Director" within the meaning of Rule
16b-3.
2.07. "Company" means Westmoreland Coal Company and each of its
Subsidiaries, together with any successor thereto.
2.08. "Date of Grant" means the date on which an Award is granted.
2.09. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include successor provisions thereto and regulations thereunder.
2.10. "Fair Market Value" means, with respect to Shares or Awards, on
a given date (i) the mean between the highest and lowest reported sales prices
for the Shares on that date (or, if there were no such sales on that date, on
the next most recent date on which there were such sales) as reported by the
American Stock Exchange (or, if the Shares are not then listed on the American
Stock Exchange, such other national securities exchange on which the Shares are
then listed), (ii) if the Shares are not
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then listed on a national securities exchange, the mean between the closing bid
and asked price quotations for the Shares on that date (or if none on that date,
on the next most recent date) as reported by the NASDAQ National Market or any
successor thereto, or (iii) if the Shares are not then listed on a national
securities exchange or The NASDAQ National Market, the mean between the closing
bid and asked price quotations for the Shares on that date (or if none on that
date, on the next most recent date) as reported by the National Association of
Securities Dealers Automatic Quotation System or any successor thereto.
2.11. "Incentive Stock Option" means an Option that is intended by
the Committee to meet the requirements of Section 422 of the Code.
2.12. "Non-Qualified Stock Option" means an Option that is not
intended by the Committee to be an Incentive Stock Option, and is designated as
such, or represents that part of an Option in excess of the amount qualifying as
an Incentive Stock Option, under provisions of the Code.
2.13. "Option" means a right, granted to an individual who meets the
eligibility requirements under Section 5, to purchase Shares at a specified
price during specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option, but unless specified otherwise, shall be
an Incentive Stock Option.
2.14. "Participant" means a person who has been granted an Award
under the Plan.
2.15. "Plan" is defined in Section 1.
2.16. "Stock Award" means an Award, payable in Shares, that may be
granted subject to a risk of forfeiture if the Participant ceases to be employed
by the Company during a specified period (the "restriction period"), or if
performance criteria, if any, specified by the Committee are not met. A
Restricted Stock Award may provide a vesting schedule under which vesting could
occur at an earlier date than otherwise established if specified performance
criteria are met before the end of the restriction period. The restriction
period and the vesting schedule, if any, shall be determined by the Committee in
its discretion.
2.17. "Rule 16b-3" means Rule 16b-3, as from time to time amended,
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act.
2.18. "Shares" means the Common Stock, $2.50 par value, of
Westmoreland Coal Company and such other securities of Westmoreland Coal Company
as may be substituted for Shares or such other securities pursuant to Section
10.
2.19. "Subsidiary" means any corporation with respect to which the
Company owns, directly or indirectly, 50 percent or more of the total combined
voting power of all classes of stock, but excluding any corporation determined
by the Board or the Committee not to be a Subsidiary for the purpose of this
definition. In addition, any other related entity may be designated by the Board
or the Committee as a Subsidiary.
2.20. "Ten Percent Shareholder" means a person who on the Date of
Grant owns, either directly or within the meaning of the attribution rules in
Section 425(d) of the Code, stock possessing more than 10 percent of the total
combined voting power of all classes of stock of his or her employer
A-2
corporation or of its parent or subsidiary corporations, as defined respectively
in sections 425(e) and 425(f) of the Code.
SECTION 3. Administration
3.01. Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions and any other necessary actions in administering the Plan,
unless precluded in this document:
(i) to select and designate persons to whom Awards shall be
granted;
(ii) to designate Subsidiaries;
(iii) to determine the type or types of Awards to be granted to
each person eligible under Section 5;
(iv) to identify the salaried employees who are "executives,
managers or key employees" for the purpose of their eligibility pursuant to
Section 5 to participate in the Plan.
(v) to determine the number of Awards to be granted, the number
of Shares to which an Award will relate, the terms and conditions of any Award
granted under the Plan (including, but not limited to, any exercise price, grant
price, or purchase price, any restriction or condition, any schedule for lapse
of restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or accelerations thereof,
and waiver of performance or other conditions relating to an Award, based in
each case on such considerations as the Committee shall determine), and all
other matters to be determined in connection with an Award;
(vi) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award may be
paid, in cash, Shares, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(viii) to adopt, amend, suspend, waive, and rescind rules and
regulations relating to the Plan and appoint such agents as the Committee may
deem necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any Award,
rules and regulations, Award Agreement, or other instrument hereunder; and
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
3.02. Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, or applicable
law, the Committee shall have sole discretion in exercising such authority under
the Plan. Any action of the Committee with respect to the Plan shall be final,
conclusive and binding on all persons, including the Company, Subsidiaries,
Participants, any person claiming any rights under the Plan from or through any
Participant, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee,
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shall not be construed as limiting any power or authority of the Committee. A
memorandum signed by all members of the Committee shall constitute the act of
the Committee without the necessity, in such event, to hold a meeting. The
Committee may delegate to officers or managers of the Company the authority,
subject to such terms as the Committee shall determine, to perform
administrative functions under the Plan.
3.03. Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or by a
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf, shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
SECTION 4. Shares Subject to the Plan. Subject to adjustment as provided
in Section 10, the total number of Shares reserved and available for Awards
under the Plan shall be 350,000, but no more than one-third can be granted in
the form of Stock Awards. If any Shares to which an Award relates are forfeited
or the Award is terminated without distribution of Shares, any Shares counted
against the number of Shares reserved and available under the Plan with respect
to such Award shall, to the extent of any such forfeiture or termination, again
be available for Awards under the Plan; provided, however, that such Shares
shall be available for issuance only to the extent permitted under Rule 16b-3.
SECTION 5. Eligibility. Awards may be granted only to executives, managers
or key employees who are also salaried employees (including employees who are
also directors) of the Company. The composition of the class of employees who
meet this eligibility requirement shall be determined and may be changed from
time to time in the sole discretion of the Committee. No Award shall be granted
to any non-employee director. An Incentive Stock Option shall not be granted to
a Ten Percent Shareholder except on such terms concerning the option price and
conditions of exercise as described in Section 6.03 with respect to such person.
SECTION 6. Specific Terms of Awards.
6.01. General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter, such additional terms
and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including without limitation the acceleration of
vesting of any Awards or terms requiring forfeiture of Awards in the event of
termination of employment by the Participant.
6.02. Stock Awards. The Committee is authorized to grant Restricted Stock
to persons eligible under Section 5 on the following terms and conditions:
(i) Issuance and Restrictions. Stock Awards shall be subject to
such restrictions, if any, as the Committee may impose, which restrictions may
lapse separately or in combination at such times, under such circumstances, in
such installments, or otherwise as the Committee shall determine.
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(ii) Vesting Conditions. Stock Awards shall cease to be subject to
forfeiture at the end of any restriction period if the Participant remains an
employee of the Company throughout the restriction period, and if applicable,
any performance criteria specified by the Committee are met during the
restriction period (or, if the Committee so provides, vesting could occur at an
earlier date than otherwise established if the preestablished performance
criteria are met at an earlier date). Notwithstanding the aforesaid, the
Committee may determine in any individual case, that restrictions or forfeiture
conditions relating to Stock Awards will be waived in whole or in part in the
event of terminations resulting from specified causes.
(iii) Certificates of Shares. Stock Awards granted under the Plan
may be evidenced in such manner, as the Committee shall determine. As soon as
reasonably possible after vesting has occurred, the Company will cause a
certificate of shares registered in the name of the Participant to be issued and
delivered to the Participant.
(iv) Rights of Shareholders. A Participant shall have no right as
a shareholder (including the right to vote, or to receive dividends) until the
Stock Award has vested and certificates of shares are registered in his or her
name.
6.03. Options. The Committee is authorized to grant Options to persons
eligible under Section 5 on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable
under an Option shall be determined by the Committee; provided, however, that
such exercise price for an Incentive Stock Option shall be not less than the
Fair Market Value of a Share on the Date of Grant of such Option. Additionally,
the exercise price per Share of any Incentive Stock Option granted to a Ten
Percent Shareholder shall not be less than 110 percent of the Fair Market Value
of a Share on the Date of Grant of such Option.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid, the form
of such payment, including, without limitation, cash, Shares, other Awards or
awards issued under other Company plans, or other property (including notes or
other contractual obligations of Participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements), and the methods by
which Shares will be delivered or deemed to be delivered to Participants.
Options shall expire not later than ten years after the date of grant. Incentive
Stock Options granted to a Ten Percent Shareholder shall expire not later than
five years after the Date of Grant.
(iii) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code, including but not limited to the requirements that
no Incentive Stock Option shall be granted more than ten years after the
effective date of the Plan. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended, or altered, not shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code.
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SECTION 7. Certain Provisions Applicable to Awards.
7.01. Terms of Awards. The term of each Award shall be for such period as
may be determined by the Committee, subject to Section 6.03; provided, however,
that in no event shall the term of any Award granted exceed a period of ten
years from the Date of Grant.
SECTION 8. General Restrictions Applicable to Awards.
8.01. Restrictions Under Rule 16b-3.
8.01.1. Nontransferability. Awards which constitute derivative
securities (including any option or other award in the nature of a right) shall
not be transferable by a Participant except by will or the laws of descent and
distribution or, if then permitted under Rule 16b-3, pursuant to a qualified
domestic relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
Incentive Stock Options and, if then required by Rule 16b-3, any other
derivative security granted under the Plan, shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative. Notwithstanding the foregoing, the Committee may set forth in an
Award Agreement at the time of grant or thereafter, and a transfer may occur
pursuant hereto only if so set forth, that the options (other than Incentive
Stock Options) or nonvested Stock Awards may be transferred to members of the
recipient participant's immediate family, to trusts solely for the benefit of
such immediate family members and to partnerships in which such family members
and/or trusts are the only partners. For this purpose, immediate family means
the recipient participant's spouse, parents, children, stepchildren,
grandchildren and legal dependants. Any transfer of options or nonvested Stock
Awards made under this provision will not be effective until notice of such
transfer is delivered to the Company.
8.01.2. Compliance with Rule 16b-3. It is the intent of the
Company that this Plan comply in all respects with Rule 16b-3 in connection with
any Award granted to a person who is subject to Section 16 of the Exchange Act.
Accordingly, if any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 as then applicable to any such
person, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such person.
8.02. Share Certificates. All certificates for Shares delivered under the
Plan pursuant to any Award or the exercise thereof shall be subject to such
stop-transfer order and other restrictions as the Committee may deem advisable
under applicable federal or state laws, rules and regulations thereunder, and
the rules of any national securities exchange on which Shares are listed. The
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions or any other restrictions that
may be applicable to Shares, including under the terms of the Plan or any Award
Agreement. In addition, during any period in which Awards or Shares are subject
to restrictions under the terms of the Plan or any Award Agreement, the
Committee may require the Participant to enter into an agreement providing that
certificates representing Shares issuable or issued pursuant to an Award shall
remain in the physical custody of the Company or such other person as the
Committee may designate.
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SECTION 9. Change of Control Provisions. Notwithstanding any other
provision of the Plan, the following acceleration and valuation provisions shall
apply in the event of a "Change in Control" as defined in this Section 9:
9.01. Acceleration and Cash-Out Rights. In the event of a "Change in
Control," as defined in Section 9.02, automatically in the case of Participants
subject to Section 16 of the Exchange Act, and unless otherwise determined by
the Board in writing at or after grant but prior to the occurrence of the Change
of Control in the case of Participants not subject to Section 16 of the Exchange
Act:
(i) All Stock Awards shall be deemed fully vested; and
(ii) Any Option that was not previously exercisable and vested
shall become fully exercisable and vested.
9.02. Change of Control. For purposes of Section 9.01, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20 percent or more of either (i) the then outstanding shares of Common Stock
of the Company (the "Outstanding Company Common Stock") or (ii) combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by the Company or any of its
subsidiaries, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its subsidiaries or
(iii) any acquisition by any corporation with respect to which, following such
acquisition, more than 75 percent of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially
the same proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(b) Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened solicitation to
which Rule 14a-11 of Regulation 14A promulgated under the Exchange Act applies
or other actual threatened solicitation of proxies or consents; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities
A-7
who were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 75
percent of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such reorganization,
merger or consolidation of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be.
SECTION 10. Adjustment Provisions. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of Shares which may thereafter be
issued in connection with Awards, (ii) the limit on the number of Shares subject
to Option Grants for any Participant, (iii) the number and kind of Shares issued
or issuable in respect of outstanding Awards, and (iv) the exercise price, grant
price, or purchase price relating to any Award or, if deemed appropriate, make
provision for a cash payment with respect to any outstanding Award; provided,
however, in each case, that, with respect to Incentive Stock Options, no such
adjustment shall be authorized to the extent that such authority would cause the
Plan to violate Section 422(b)(1) of the Code. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Company or the financial statements of the Company, or in response to changes in
applicable laws, regulations, or accounting principals.
SECTION 11. Change to the Plan and Awards.
11.01. Changes to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that, without the consent
of an affected Participant, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may impair the rights of such
Participant under any Award theretofore granted to him.
SECTION 12. General Provisions.
12.01. No Rights to Awards. No Participant or employee shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants and employees.
12.02. No Shareholder Rights. No Award shall confer on any Participant
any of the rights of a shareholder of the Company unless and until Shares are
duly issued or transferred to the Participant in accordance with the terms of
the Award.
A-8
12.03. Tax Withholding. The Company is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a
distribution of Shares, or any payroll or other payment to a Participant,
amounts for withholding and other taxes due with respect thereto, its exercise,
or any payment thereunder, and to take such other action as the Committee may
deem necessary or advisable to enable the Company and Participants to satisfy
obligations for the payment of withholding taxes and other tax liabilities
relating to any Award. This authority shall include authority to withhold or
receive Shares or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations.
12.04. No Right to Employment. Nothing contained in the Plan or any Award
Agreement shall confer, and no grant of an Award shall be construed as
conferring, upon any employee any right to continue in the employ of the Company
or to interfere in any way with the right of the Company to terminate his
employment at any time or increase or decrease his compensation from the rate in
existence at the time of granting of an Award.
12.05. Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided, however, that
the Committee may authorize the creation of trusts or make other arrangements to
meet the Company's obligations under the Plan to deliver cash, Shares, other
Awards, or other property pursuant to any award, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant.
12.06. Other Compensatory Arrangements. The Company shall be permitted to
adopt other or additional compensation arrangements (which may include
arrangements which relate to Awards), and such arrangements may be either
generally applicable or applicable only in specific cases.
12.07. Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
12.08. Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
SECTION 13. Effective Date. The Plan shall become effective on April 14,
2000; provided, however, that within one year after such date, the Plan shall
have been approved by the affirmative vote of the holders of a majority of the
Shares present or represented and entitled to vote at a meeting of the Company's
shareholders, or any adjournment thereof. The termination date of the Plan
shall be April 14, 2010.
A-9
[_] COMMON
P WESTMORELAND COAL COMPANY
R Proxy for COMMON SHARES Only
O Solicited on Behalf of the Board of Directors
X Annual Meeting - June 9, 2000
Y
The undersigned hereby constitutes and appoints Christopher K. Seglem, W.
Michael Lepchitz and Paul W. Durham and each of them, as true and lawful agents
and proxies with power of substitution, to represent the undersigned and to vote
all common shares of stock held by the undersigned at the annual meeting of
shareholders to be held at the Antlers Adam's Mark Hotel, Colorado Springs, CO
on Friday, June 9, 2000 at 10:00 a.m. (mountain time), and at any adjournments
thereof, on all matters coming before said meeting as noted on the reverse side
of this card.
Election of Directors by the holders of common shares, Nominees:
Pemberton Hutchinson, William R. Klaus, Christopher K. Seglem
Thomas W. Ostrander and Thomas J. Coffey
SEE REVERSE
SIDE
Fold and Detach Here
- ------------------------------------------------------------------------
1
- ------------------------------------------------------------------------
Please mark your
X votes as in this
example. 1283
- ------------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner directed herein.
If no directions are given, this proxy will be voted for the election of
directors, and FOR proposal 2.
The Board of Directors recommends a vote FOR
- ------------------------------------------------------------------------
1. Election of Directors
(see reverse)
FOR [ ] WITHHELD [ ]
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------------------------
2. Proposal to approve adoption of 2000 Long-Term Incentive Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Special Action
Will Attend Annual Meeting
RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED APRIL 20,
2000 ARE HEREBY ACKNOWLEDGED.
SIGNATURE (S)___________________________ DATE__________________2000
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- ------------------------------------------------------------------------
Fold and Detach Here
2
[_] DEPOSITARY
P WESTMORELAND COAL COMPANY
R Proxy for DEPOSITARY SHARES Only
O Solicited on Behalf of the Board of Directors
X Annual Meeting - June 9, 2000
Y
The undersigned hereby constitutes and appoints Christopher K. Seglem, W.
Michael Lepchitz and Paul W. Durham and each of them, as true and lawful agents
and proxies with power of substitution, to represent the undersigned and to vote
all depositary shares of stock held by the undersigned at the annual meeting of
shareholders to be held at the Antlers Adam's Mark Hotel, Colorado Springs, CO
on Friday, June 9, 2000 at 10:00 a.m. (mountain time), and at any adjournments
thereof, on all matters coming before said meeting as noted on the reverse side
of this card.
Election of Directors by the holders of depositary shares, Nominees:
Robert E. Killen and James W. Sight
SEE REVERSE
SIDE
Fold and Detach Here
- ------------------------------------------------------------------------
3
- ------------------------------------------------------------------------
Please mark your
X votes as in this
example. 7191
- ------------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner directed herein.
If no directions are given, this proxy will be voted for the election of
directors, and FOR proposal 2.
The Board of Directors recommends a vote for
- ------------------------------------------------------------------------
1. Election of Directors
(see reverse)
FOR [ ] WITHHELD [ ]
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------------------------
2. Proposal to approve adoption of 2000 Long-Term Incentive Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Special Action
[ ] Will Attend Annual Meeting
RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT DATED
APRIL 20, 2000 ARE HEREBY ACKNOWLEDGED.
SIGNATURE (S)_____________________________ DATE__________________________ 2000
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- ------------------------------------------------------------------------
Fold and Detach Here
4