SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 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 Consent 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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 14th Floor
Colorado Springs, Colorado 80903
August ___, 2000
Dear Depositary Stockholder:
I am writing on behalf of the Board of Directors of Westmoreland Coal
Company to inform you that a small group of dissident stockholders has commenced
a consent solicitation. This dissident group is seeking to remove from the
Company's Board of Directors the two individuals that you and the other
depositary stockholders elected on June 9, 2000.
The dissident group is made up of three persons, two of whom launched a
costly and disruptive proxy contest against your Company at last year's
stockholders' meeting. At that meeting, the Company's stockholders elected the
candidates endorsed by your Board of Directors and rejected the dissidents'
slate. Notwithstanding the results of the last two stockholders' meetings, one
only eight weeks ago, the dissidents are again attempting to take control of two
seats on the Board.
Your Board of Directors is once again requesting your support. For all of
the reasons discussed in the materials included with this letter, your Board of
Directors unanimously recommends that you REJECT THE DISSIDENTS' PROPOSALS and
that you NOT RETURN ANY CONSENTS sent to you by the dissident group.
Under the direction of your Board of Directors, the Company has been saved
from liquidation and is now implementing a growth strategy intended to create
additional value for you. Through two tender offers in 1999, the Company
distributed over $27.8 million to holders of Depositary Shares - a clear
demonstration of faithfulness to stockholders. In part because of those two
tender offers, the Company cannot now use its cash on hand to pay off the
accumulated preferred dividend: the Company is constrained from doing so by
provisions of Delaware law that limit a corporation's ability to pay dividends
and by the need to remain in compliance with the financial ratios in the
Contingent Promissory Note that the Company executed as part of the dismissal of
its bankruptcy case. For this reason, the implementation of the Company's
growth strategy is vital to the Company's ability to pay accumulated preferred
dividends and resume payment of preferred dividends.
Your Board urges you to send a message to the dissidents - that you want
the Company to focus on sustainable value and growth - by not returning any
consent cards to them. We ask you to support your duly-elected Board and
management by signing, dating, and mailing the Company's WHITE Consent
Revocation Card, enclosed.
Even if you have previously signed the dissidents' consent card, you have
every right to revoke your consent by signing, dating, and mailing the Company's
WHITE Consent Revocation Card. Instructions for doing so are found in this
Consent Revocation Statement. You can also contact Diane Jones of the Company
at (719) 442-2600 or Morrow & Co., Inc., toll free at (800) 662-5200, for
assistance.
Thank you for your continuing support and encouragement.
Very truly yours,
Christopher K. Seglem
Chairman of the Board, President and CEO
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IMPORTANT
If you have any questions or need further assistance, please contact:
Diane Jones, Westmoreland Coal Company Morrow & Co., Inc.
(719) 442-2600 (800) 662-5200 (toll free)
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This Consent Revocation Statement and the enclosed WHITE Consent Revocation
Card were first sent to holders of Depositary Shares on or about August ___,
2000.
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Questions and Answers about this Request for Consent Revocations
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Q: Who is making the request for revocations?
A: This request is being made by your duly elected Board of Directors.
Q: What are we asking you to do? How can you support the Company?
A: We are asking you to oppose the solicitation made by Frank E. Williams, Jr.,
Guy O. Dove III, and Stephen D. Rosenbaum ("Dissidents"). They are seeking
to remove the two directors just elected by the holders of the Company's
Depositary Shares and replace them with Mr. Williams and Mr. Dove. To oppose
the Dissidents, you can simply not return any consent cards to this group,
or, if you have already sent them a consent card, you can revoke it by
returning the Company's WHITE Consent Revocation Card, enclosed.
Q: Why are we asking you to oppose the Dissidents' solicitation?
A: We are asking you to oppose the Dissidents' solicitation because we do not
believe that it is in the best interest of the Company or you. Having saved
the Company from liquidation and preserved 100% of stockholders' ownership
interests in the Company, your Board and management have developed and are
implementing a strategic plan that we believe will unlock the value of the
Company's tax assets and increase the value of the Company for its
stockholders. This is vital to the Company's ability to pay not just
accumulated preferred dividends, but future preferred dividends as well. By
contrast, the Dissidents admit in their filings with the SEC that they have
no plan or proposal of any sort for the Company. We note, however, that in
1999 Mr. Williams and Mr. Dove conducted a proxy contest in which they
advocated liquidating all the Company's independent power projects, and in
1998 Mr. Williams, as part of a committee established during the Company's
bankruptcy case, advocated a complete liquidation of the Company. In both
cases, Mr. Williams was thwarted.
Q: Who is entitled to consent, withhold consent, or revoke a previously given
consent with respect to the Dissidents' proposals?
A: Only the record holders of the Company's Depositary Shares on July 19, 2000
are entitled to consent, withhold consent, or revoke a previously given
consent with respect to the Dissidents' proposals.
Q: Who can revoke a previously given consent?
A: If you owned Depositary Shares on July 19, 2000, you have the right to send
in the Company's WHITE Consent Revocation Card.
Q: How many Depositary Shares must be voted in favor of the Dissidents'
proposals to implement them?
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A: The Dissidents must receive valid, unrevoked consents from the holders of
417,417 Depositary Shares for their proposals to be adopted. At the
Company's Annual Meeting of Stockholders on June 9, 2000, the holders of
575,193 Depositary Shares voted in favor of the two directors the Dissidents
are now trying to replace, while the holders of 187,018 Depositary Shares
withheld authority to vote for these directors. (834,833 Depositary Shares
are outstanding.)
Q: What should you do to revoke a consent?
A: Please sign, date, and return the enclosed WHITE Consent Revocation Card
TODAY to Morrow & Co., Inc. in the postage paid envelope provided.
Q: Who do you call if you have questions about the consent revocation?
A: Please call Diane Jones of the Company at (719) 442-2600 or Morrow & Co.,
Inc., toll free at (800) 662-5200.
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WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 14th Floor
Colorado Springs, Colorado 80903
August ___, 2000
CONSENT REVOCATION STATEMENT
General Information
This Consent Revocation Statement and the accompanying WHITE Consent
Revocation Card are being furnished by the Board of Directors of Westmoreland
Coal Company, a Delaware corporation ("Company"), to holders of the Company's
depositary shares ("Depositary Shares"), each representing one-quarter of a
share of the Company's Series A Convertible Exchangeable Preferred Stock, par
value $1.00 per share ("Preferred Stock"), in opposition to a consent
solicitation initiated by Frank E. Williams, Jr., Guy O. Dove III, and Stephen
D. Rosenbaum (collectively, the "Dissidents").
The Company's Board consists of seven directors. Five directors, the
"Common Stock Directors," are elected exclusively by the holders of the
Company's common stock, par value $2.50 per share ("Common Stock"). Two
directors, the "Depositary Stock Directors," are elected exclusively by the
holders of Depositary Shares.
The Dissidents are soliciting consents to:
. Remove Robert E. Killen and James W. Sight, the two Depositary Stock
Directors elected just two months ago at our annual meeting, from the
Company's Board; and
. Elect two of the Dissidents, Mr. Williams and Mr. Dove, to the
Company's Board as Depositary Stock Directors.
The Company's Board of Directors unanimously recommends that you REJECT the
Dissidents' proposals and that you NOT sign any consent card furnished by the
Dissidents.
Background to the Dissidents' Consent Solicitation
On March 9, 1999, Messrs. Williams, Dove, and R. Bentley Offut, and the
Wynnefield Funds (the "Wynnefield Funds" are Wynnefield Partners Small Cap
Value, L.P., Wynnefield Partners Small Cap Value, L.P. I, and Wynnefield Small
Cap Value Offshore Fund, Ltd.) filed a Schedule 13D (the "Original Schedule
13D") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Original Schedule 13D stated that, among other things, the filing
persons had formed a "group" under the Exchange Act and that the group "[sought]
to remove the present Board of Directors and to replace some or all [sic] that
Board with nominees to be chosen by the Group." The group subsequently proposed
its own slate of nominees for the Company's Board of Directors and launched a
proxy contest to elect its nominees and defeat the nominees proposed by the
Company's Board of Directors.
At the Company's 1999 Special Meeting of Stockholders (the "1999 Meeting"),
the Company's stockholders elected each of the nominees proposed by the
Company's Board of Directors and defeated each of the nominees proposed by the
opposing group. (During the 1999 proxy contest, Institutional Shareholder
Services ("ISS"), the country's leading independent provider of proxy voting and
corporate governance advisory services for institutional investors, recommended
that the Company's shareholders support the nominees proposed by the Company's
Board of Directors.)/1/
On March 3, 2000, Messrs. Williams and Dove and the Wynnefield Funds filed
an amended Schedule 13D reporting that Mr. Offut had ceased to be a member of
this group. On May 26, 2000, the Wynnefield Funds filed a Schedule 13D reporting
that they too had withdrawn from the group.
On June 9, 2000, at the Company's Annual Meeting, the Company's
stockholders again elected each of the nominees to the Company's Board of
Directors proposed by the Board. Neither the Dissidents nor any other person or
group challenged the election of the nominees proposed by the Board. The
nominees proposed by the Board for election as Common Stock Directors received
the favorable votes of the holders of approximately 5.9 million shares of Common
Stock, or approximately 87% of the shares of Common Stock voting at the meeting.
Mr. Killen and Mr. Sight, the nominees proposed by the Board for election as
Depositary Stock Directors, received the favorable votes of the holders of
575,193 Depositary Shares - approximately 75% of the Depositary Shares voting at
the meeting - while the holders of 187,018 Depositary Shares withheld authority
to vote for Mr. Killen and Mr. Sight. 834,833 Depositary Shares are outstanding.
On June 13, 2000, Messrs. Williams, Dove, and Rosenbaum filed an amended
Schedule 13D under the Exchange Act. The amended Schedule 13D confirmed that the
Wynnefield Funds had withdrawn from the group, stated that Mr. Rosenbaum had
joined the group, and indicated that the Dissidents had "decided to work
together to take such steps as they may deem necessary or helpful in the
interests of the Company's shareholders, and, in particular, the interests of
Depositary Shareholders." On July 26, 2000, almost two weeks after the
Dissidents filed their preliminary consent solicitation materials, the
Dissidents amended their Schedule 13D once again, to admit that they intended to
solicit consents to replace the Company's Depositary Stock Directors. The
Dissidents' consent solicitation followed.
________________________
/1/ Consent for the use herein of statements taken from the ISS Report has not
been sought.
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Recommendation of the Company's Board of Directors
The Company's duly elected Board of Directors unanimously recommends that
you REJECT the Dissidents' solicitation, that you NOT return any consent cards,
and that you return the Company's WHITE Consent Revocation Card.
The Company's Reasons for Opposing the Dissidents' Consent Solicitation
The Company opposes the Dissidents' consent solicitation because we believe
that the Dissidents' proposals are not in the best interest of, you, the
stockholders, or the Company.
The Company has a Strategic Plan
In the 1999 proxy contest, your Board pledged, "Our highest priority will
continue to be increasing value for all shareholders." In keeping with that
goal, the Board undertook an intense strategic review and planning effort
promptly after the 1999 Meeting. The result is a strategic vision for rebuilding
the Company that emphasizes two of our country's most important goals:
affordable energy and a clean environment. That effort, certain strategic issues
relevant to the Company's competitive position, and Westmoreland's business plan
are described in the letter to shareholders that accompanied the most recent
annual report. (If you would like another copy of the Company's annual report,
please contact Diane Jones of the Company or Morrow & Co., Inc. at the telephone
numbers on the front of this Consent Revocation Statement and one will be
provided for you free of charge.)
Among the issues the Board considered in the course of its strategic
planning process were:
. The market for energy in the United States, including forecasts under
various economic assumptions about levels of demand for different
sources of power, forecasts about levels of supply for different
sources of power, and forecasts as to cost and price data.
. The continuing impact of de-regulation on the energy market.
. The continuing impact of laws and regulations designed to protect the
environment on the supply of and demand for power produced from
different sources, and the opportunities that presently exist and that
may arise to balance the country's desire for affordable energy and a
clean environment.
. The business opportunities that presently exist and that the Board of
Directors believes will arise in the energy sector.
. The Company's possession of over $200 million in net operating loss
carryforwards ("NOLs"), which shield the Company's future profits from
federal income taxation and thereby increase the return the Company
receives from profitable investments (as compared with the return an
entity that cannot shield its income from federal income tax would
receive), and which the Board believes make the Company an especially
attractive vehicle for investment, growth, and stockholder value.
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. Paths to optimize the value of the Company's assets, including through
sales of assets, if the price is favorable to the Company, recognizing
that the Company's current assets deliver tax-shielded cash flow to
the Company and are burdened by the Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"), both of which make these assets more
valuable to the Company than to potential tax-paying buyers.
. Potential sources of additional cash that might become available to
the Company, including (1) reimbursement of the Company's expenditures
to repair the dragline at Westmoreland Resources, Inc., (2) recoveries
from Virginia Power in connection with the ROVA "forced outage" issue,
which is described in more detail in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 (the "1999 10-K"), and
(3) the other potential sources described in the "Liquidity Outlook"
section of Management's Discussion and Analysis of Financial Condition
and Results of Operation from the 1999 10-K.
. The financial effect of possible legislative developments, such as a
prescription drug program that could substantially reduce the
Company's obligations under the Coal Act since over 50% of the
Company's post-retirement medical costs are for retiree prescription
drug benefits.
. The importance of properly prioritizing and sequencing the Company's
efforts, given the fact that the Company does not currently have
sufficient cash to meet all of its different strategic business
objectives, including the tax-advantaged expansion of the Company
through acquisitions, and the ability to pay accumulated and future
Preferred Stock dividends.
The result of the Company's strategic planning effort is a growth strategy
predicated on expanding the Company's existing core operations and acquiring new
businesses in the rapidly changing energy sector. (The prompt acquisition of
profitable, tax-paying businesses will allow the Company to use its NOLs to
shield the returns from those businesses from federal income tax, generating
additional cash flow for the Company.) The Company is seeking to do this in
niche markets that will minimize exposure to competition and maximize
opportunities for superior cash flows. The Company is also seeking
opportunities where the tension between the cost of power and the environment
can be effectively addressed and where responsive, efficient power production
can be rewarded with greater volumes and higher returns. The Company is
actively pursuing opportunities in coal, oil and gas, and power production.
The Company is Implementing its Strategic Plan
Consistent with the Company's strategy, on June 9, 2000, the Company
confirmed that it had entered into negotiations on an exclusive basis with Knife
River Corporation ("Knife River"), a subsidiary of MDU Resources Group, Inc. and
an affiliate of Montana-Dakota Utilities, for the acquisition of certain of
Knife River's assets. The parties are discussing the purchase and sale of Knife
River's active coal mines (including the Beulah and Savage mines) and Knife
River's coal sale agreements, coal reserves, and mining equipment. The Beulah
mine in Beulah, North Dakota and the Savage mine near Sidney, Montana, together
produced approximately 3.1 million tons of lignite coal in 1999. Formal due
diligence is continuing.
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The Company is now pursuing several other specific acquisition
opportunities.
On June 28, 2000, the Company reported that it had retained Rothschild Inc.
and NM Rothschild & Sons (Washington) LLC (collectively, "Rothschild") as
financial advisor to the Company in support of certain acquisition
opportunities, including the Company's negotiations to purchase Knife River's
coal operations. Rothschild is a world leader in providing financial advisory
services to the mining industry in connection with mergers and acquisitions,
structured finance, and capital raising.
The members of your Board of Directors have devoted substantial time to the
Company's business and have a good understanding of the existing emerging energy
sector. Under their guidance, the Company has developed a strategic plan that
they believe has placed the Company again on a path to renewed growth. The
Company believes that the persons best able to supervise the implementation of
that plan are the directors who oversaw its development and are committed to its
successful implementation.
Your Board believes that the execution of this growth strategy is vital not
only to the Company's ability to pay accumulated dividends on the Preferred
Stock, but also to the Company's ability to sustain Preferred Stock dividend
payments in the future.
What is the Dissidents' Plan?
By contrast, the Dissidents have admitted in their filings with the
Securities and Exchange Commission that they have no plans or proposals for the
Company if they are elected. Why are they running?
The Company believes that it is reasonable to suspect that the Dissidents'
plans for the Company may be similar to their past proposals because the
Dissidents' consent solicitation refers to Mr. Williams' experience as a member
of the Official Committee of Equity Security Holders (the "Equity Committee") in
1998 and 1999.
During the Company's bankruptcy case, the Equity Committee proposed that
the Company be liquidated. If the Equity Committee had been successful, all of
the Company's assets would have been sold. The proceeds would have been paid
first to creditors, including the United Mine Workers of America Health and
Benefit Funds ("Funds"), which had asserted priority claims of over $260 million
against the Company. Remaining cash, if any, would have been distributed first
to holders of Depositary Shares and, after the satisfaction of their claims, to
holders of Common Stock. (Your Board resisted the Equity Committee's proposal
because, among other things, the Board believed that, based on the amount of the
claims allowed by the bankruptcy court, little if anything would have been
distributed to holders of the Company's Depositary Shares and Common Stock.)
During the 1999 proxy contest, the group that included Messrs. Williams and
Dove proposed that the Company sell all of its independent power projects
("IPPs") as soon as practicable. The Board believed that this proposal was not
sound because (1) it did not take account of the potential impact of the Coal
Act and (2) it did not recognize that returns on the Company's IPPs are limited
by the amount each IPP can expect to receive in payment under the
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long term, fixed rate power purchase contract to which it is a party. In the
1999 proxy contest, ISS concluded that "the dissident plan to sell the IPPs
carries a high degree of risk."
The Dissidents may tell you that they intend to pay off the accumulated
Preferred Stock dividends. As disclosed in the Company's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 2000, at June 30, 2000, accumulated
Preferred Stock dividends aggregated $________, or approximately $______ per
Depositary Share.
. Ask the Dissidents how they intend to comply with Delaware law, the
law of the state in which the Company is incorporated. Under Delaware
law, the Company is permitted to pay Preferred Stock dividends only:
(1) out of surplus, surplus being the amount of shareholders' equity
in excess of the par value of the Company's two classes of stock; or
(2) in the event there is no surplus, out of net profits for the
fiscal year in which a Preferred Stock dividend is declared (and/or
out of net profits for the preceding fiscal year), but only to the
extent that shareholders' equity exceeds the par value of the
Preferred Stock ($208,708). The Company had shareholders' equity at
June 30, 2000 of $________________.
. Ask the Dissidents how they intend to comply with the financial ratios
in the Contingent Promissory Note ("Note") that the Company signed as
part of the dismissal of its bankruptcy case. (The Equity Committee
approved the Company's execution of the Note in connection with the
settlement and dismissal of the bankruptcy case, and the Note was
filed February 5, 1999 as Exhibit 99.3 to the Company's Current Report
on Form 8-K.) The Note is payable only in the event that the Company
does not meet its obligations under the Coal Act, fails to meet the
financial tests specified in the Note, fails to maintain the required
balance in the escrow account established in connection with the
dismissal, or fails to comply with certain covenants set forth in a
security agreement executed in connection with the dismissal. The
original principal amount of the Note is $12 million; the principal
amount of the Note declines to $6 million in 2002 and terminates in
2005. The financial ratios in the Note require the Company to meet
tests involving (1) the ratio of consolidated current assets to
consolidated current liabilities, (2) net cash flow from operating
activities, and (3) debt coverage.
Compare the Dissidents' "Plans" and Record with those of Your Board and
Management
Compare the Dissidents' record and lack of a plan with the record and plan
of your Board and management:
. In the bankruptcy, your Board successfully resisted the efforts of the
Equity Committee to liquidate the Company, and of the UMWA Funds to
have ownership of the Company transferred to a trust for the benefit
of the Funds. Your Board preserved the Company as a going concern and
maintained 100% of the ownership interests of the Company's
stockholders, undiluted. During the bankruptcy, the Depositary Shares
and Common Stock traded at prices as low as $2.00 and $0.50 per share,
respectively, as reported by the National Quotation Bureau. On August
2, 2000, the last reported sales price of the Depositary Shares was
$16 5/8 per share, and the last
6
reported sales price of the Common Stock was $3.00 per share, on the
American Stock Exchange.
. Seven years ago, when current management assumed office, the Company
confronted a liquidity crisis and faced growing problems in what were
then its core businesses. Large losses had been posted in previous
years, and the Company incurred a further operating loss of $95.2
million in 1993, when new accounting standards first required
recognition of post-retirement benefit expenses for financial
statement purposes. Since that time, your Board and management have
turned the Company around: the Company has had cumulative operating
profits of $59 million over the last three years.
. In an effort to address the concerns of the holders of Depositary
Shares, in 1999 the Company paid over $27.8 million to holders of
Depositary Shares in connection with its two tender offers for those
shares. Your Board of Directors decided to conduct these tender offers
after weighing the interests of all parties, the Company's strategic
situation, and the alternative uses for the Company's cash.
. Your Board oversaw the development of the Company's current growth
strategy and is committed to its successful implementation.
FOR ALL OF THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU REJECT THE DISSIDENTS' SOLICITATION. PLEASE DO NOT RETURN
ANY CONSENT CARDS TO THE DISSIDENTS. PLEASE SIGN, DATE, AND RETURN THE
COMPANY'S WHITE CONSENT REVOCATION CARD.
How You Can Revoke a Previously Given Consent
Any holder of Depositary Shares on the record date has the right to revoke
a previously given consent. You can revoke a consent by signing and dating the
Company's WHITE Consent Revocation Card and mailing it in the postage-paid
envelope enclosed. In order to revoke a prior consent, you must either mark the
"Revoke Consent" boxes on the WHITE Consent Revocation Card or sign, date, and
mail the WHITE Consent Revocation Card without marking any boxes. If the WHITE
Consent Revocation Card is signed, dated, and returned, any previously executed
consent will be revoked unless the "Do Not Revoke Consent" box is marked.
If your Depositary Shares are held in the name of a bank, broker, or other
nominee, only your bank, broker, or nominee can execute a revocation of consent
for your Depositary Shares, and only pursuant to your specific instructions.
Accordingly, you are urged to support your Board and management and reject the
Dissidents, by signing, dating, and returning the enclosed WHITE Consent
Revocation Card promptly, using the accompanying postage paid envelope provided
by your bank, broker, or nominee.
Any holder of Depositary Shares may revoke a consent revocation by signing,
dating, and returning a consent dated later than the consent revocation.
7
The Consent Procedure
Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, any corporate action that may be taken by stockholders may be
taken without a meeting, without prior notice, and without a vote, if (1) a
written consent or consents, setting forth the action so taken, are signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize such action at a meeting at which all
shares entitled to vote thereon were present and voted, and (2) such written
consent or consents are delivered to the corporation at the time and in the
manner provided by statute. Under the Company's Certificate of Incorporation,
only the holders of Depositary Shares are entitled to vote on the election of
the Depositary Stock Directors. On the record date (as such term is defined
below), 834,833 Depositary Shares were outstanding. Thus, pursuant to the DGCL
and the Company's Certificate of Incorporation, in order for the Dissidents'
proposals to be effective, valid, unrevoked written consents signed by the
holders of 417,417 Depositary Shares must be delivered to the Company within the
time provided by law. Abstentions, failures to sign and return the Dissidents'
consent card, and broker non-votes will have the same practical effect as a vote
against the Dissidents' proposals.
Pursuant to the Delaware General Corporation Law ("DGCL") and the Company's
Bylaws, the Board of Directors has set a record date of July 19, 2000 ("record
date") with respect to this consent solicitation. Accordingly, only holders of
Depositary Shares at the close of business on July 19, 2000 are entitled to
consent, withhold consent, or revoke their consent to the Dissidents' proposals.
On ____________, 2000, a consent in the form proposed by the Dissidents was
delivered to the Company. Under Delaware law, no written consent shall be
effective to take the action described therein unless written consents signed by
the holders of the requisite number of shares are delivered to the corporation
within 60 days of the earliest dated consent delivered to the corporation.
Thus, the Dissidents' consent solicitation will not be effective unless the
Dissidents deliver to the Company valid, unrevoked consents executed by the
holders of the requisite number of Depositary Shares by __________, 2000. The
Dissidents' consent card states that consent cards will be delivered to the
depositary for the Depositary Shares no later than September 14, 2000.
Under the Company's Certificate of Incorporation, each Depositary Share is
entitled to one vote on all matters on which the holders of Depositary Shares
vote as a separate class.
8
The Depositary Stock Directors
The Dissidents seek to replace the Company's two incumbent Depositary Stock
Directors. These two incumbents were re-elected as Depositary Stock Directors
at the Company's 2000 Annual Meeting with the favorable votes of the holders of
approximately 575,000 Depositary Shares, or approximately 75% of the Depositary
Shares present at the meeting. (Under the Company's Certificate of
Incorporation, the holders of Depositary Shares are entitled to elect two
directors if there are six or more accumulated but unpaid Preferred Stock
dividends. Mr. Sight was originally appointed as a director by the Board of
Directors in 1995, at the request of the institution that was then the largest
holder of Depositary Shares, 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, and Mr. Killen was elected, to the Board by the holders of the
Depositary Shares at a special meeting in September 1996, after six dividends
had accumulated.) The following chart provides information relating to the
incumbent Depositary Stock Directors.
Business Experience During Past Five Director Committee
Name Years and Other Directorships Age Since Memberships/(1)/
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James W. Sight/(2)/ Director of United Recycling Industries 44 1995 Audit; Corporate
(since January 1995); Director of Mining Governance
Services International Corp. (since April
2000); and private investor.
Robert E. Killen/(2)/ Chairman of the Board and Chief Executive 59 1996 Compensation and
Officer of The Killen Group, Inc. (since Benefits; Corporate
April 1996); Chairman of the Board of Governance;
Berwyn Financial Services (since October Executive
1991); and President of The Killen Group,
Inc. (from September 1982 - April 1996).
(1) See "Information About the Board and Committees" in Exhibit A to this
Consent Revocation Statement.
(2) 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. Messrs. Killen and Sight were directors at the time
of the Bankruptcy Filing.
9
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 July 30, 2000:
Number of Shares and Nature of Beneficial Ownership/(1)/
--------------------------------------------------------
Name and Address of Beneficial Common Percentage of Depositary Percentage of
Owner Stock Common Stock Shares Depositary Shares
- -----------------------------------------------------------------------------------------------------------------------
The Killen Group, Inc. 754,251/(2)/ 10.6% 750/(3)/ *
1189 Lancaster Avenue
Berwyn, PA 19312
Jeffrey L. Gendell 513,000 7.3% - -
200 Park Avenue
Suite 3900
New York, NY 10166
Wynnefield Partners Small Cap Value, 745,000/(4)/ 10.5% 71,300/(5)/ 8.5%
L.P., Wynnefield Partners Small Cap
Value, L.P. I, and Wynnefield Small
Cap Value Offshore Fund, Ltd.
c/o Wynnefield Capital, Inc.
One Penn Plaza, Suite 4720
New York, NY 10119
Frank E. Williams, Jr., 475,900/(6)/ 6.7% 118,381/(7)/ 14.2%
Guy Orlando Dove, III,
and Stephen D. Rosenbaum
c/o 2789-B Hartland Road
Falls Church, VA 22043
(1) Based solely on information contained in Schedules 13D, 13G, and 14A filed
by the beneficial owners with the Securities and Exchange Commission
("SEC") 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. Percentages of less than 1% are
indicated by an asterisk.
(2) Includes 29,184 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. Killen and his spouse are general
10
partners, and 39,500 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 754,241 shares of Common Stock
reported in the table, would represent 10.6% of the total shares of Common
Stock outstanding. See Notes (1) and (2).
(4) According to a Schedule 13D filed July 26, 2000 with the SEC, Wynnefield
Partners Small Cap Value, L.P. ("Wynnefield") owns 260,853 shares of Common
Stock, Wynnefield Partners Small Cap Value, L.P. I ("Wynnefield I") owns
343,547 shares of Common Stock, and Wynnefield Small Cap Value Offshore
Fund, Ltd. ("Wynnefield Offshore") owns 140,600 shares of Common Stock.
(5) According to a Schedule 13D filed July 26, 2000 with the SEC, Wynnefield
owns 27,400 Depositary Shares, Wynnefield I owns 31,300 Depositary Shares,
and Wynnefield Offshore owns 12,600 Depositary Shares. These Depositary
Shares are convertible into 121,780 shares of Common Stock, which shares of
Common Stock, together with the 745,000 shares of Common Stock reported in
the table, would represent 12.0% of the total shares of Common Stock
outstanding. See Notes (1) and (4).
(6) According to a Schedule 14A dated July 28, 2000 filed with the SEC, Mr.
Williams beneficially owns 255,400 shares of Common Stock (representing
3.6% of the Common Stock), Mr. Dove beneficially owns 220,500 shares of
Common Stock (representing 3.1% of the Common Stock), and Mr. Rosenbaum
owns no shares of Common Stock.
(7) According to a Schedule 14A dated July 31, 2000 filed with the SEC, Mr.
Williams owns 19,458 Depositary Shares (representing 2.3% of the Depositary
Shares), Mr. Dove owns 18,923 Depositary Shares (representing 2.3% of the
Depositary Shares), and Mr. Rosenbaum owns 80,000 Depositary Shares
(representing 9.6% of the Depositary Shares). These Depositary Shares are
convertible into a total of 202,195 shares of Common Stock, which shares of
Common Stock, together with the 475,900 shares of Common Stock reported in
the table, would represent 9.3% of the total shares of Common Stock
outstanding. See Notes (1) and (6).
11
The following table sets forth information as of July 30, 2000 concerning
stock ownership of individual directors and named executive officers, and of the
executive officers and directors of the Company as a group (information about
the Company's named executive officers and the Common Stock Directors is set
forth in Exhibit A to this Consent Revocation Solicitation):
Number of Shares and Nature of Beneficial Ownership/(1)/
--------------------------------------------------------
Name of Directors, Named Percentage of
Executive Officers and Persons Common Percentage of Depositary Depositary
as a Group Stock Common Stock Shares Shares
- -----------------------------------------------------------------------------------------------------------------
Thomas J. Coffey - - - -
Pemberton Hutchinson 50,600/(2)/ * - -
Robert J. Jaeger 20,000/(3)/ * - -
Robert E. Killen 754,251/(4)/ 10.6% 750/(5)/ *
William R. Klaus 59,214/(6)/ * - -
W. Michael Lepchitz 42,441/(7)/ * 25 *
Thomas W. Ostrander 50,323/(8)/ * - -
Christopher K. Seglem 232,886/(9)/ 3.2% 1,181/(10)/ *
James W. Sight 318,000/(11/ 4.5% - -
Directors and Executive Officers
of the Company as a Group (9
persons) 1,527,715 20.3% 1,956 *
__________
(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 July 19,
2000.
12
(2) Includes 44,000 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").
(3) Includes 18,000 shares of Common Stock which may be purchased upon exercise
of options under the 1995 Long-Term Incentive Stock Option Plan (the "1995
Plan").
(4) 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 29,184 shares held by
Mr. Killen as a personal investment. Also includes 39,500 shares of Common
Stock which may be purchased upon exercise of options under the 1991 Plan
and the 1996 Plan.
(5) Includes 750 Depositary Shares held by Mr. Killen as a personal investment.
(6) Includes 48,500 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(7) Includes 941 shares of Common Stock 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.
(8) Includes 41,000 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
(9) Includes 9,786 shares of Common Stock held by Mellon Bank, as trustee of
the 401(k) Plan. Also includes 218,000 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"), the 1995
Plan, and the 1996 Plan.
(10) Includes 81 Depositary Shares held by Mellon Bank, as trustee of the 401(k)
Plan.
(11) Includes 41,000 shares of Common Stock which may be purchased upon exercise
of options under the 1991 Plan and the 1996 Plan.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially owned by
a person includes shares of Common Stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of August __, 2000.
The shares issuable pursuant to these options are deemed outstanding for
computing the percentage ownership of the person holding these options but are
not deemed outstanding for the purposes of computing the percentage ownership of
any other person.
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
13
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.
Additional Information
Rules promulgated by the Securities and Exchange Commission require the
Company to disclose information about the Common Stock Directors, executive
officers, executive compensation, and certain other matters. That information
is set forth in Exhibit A to this Consent Revocation Statement. Much of that
information is identical to the information that appeared in the proxy statement
for the Company's 2000 Annual Meeting of Stockholders, and under applicable
rules, is required to describe developments that occurred in 1999.
Solicitation of Proxies
The Company will bear the entire cost of soliciting revocations of
consents. Revocations may be solicited in person or by mail, telephone,
facsimile, and other means, and may be solicited personally by directors,
officers, or employees of the Company who will not receive special compensation
for such services. The Company will reimburse brokers, dealers, banks, and
trustees, or their nominees, for reasonable expenses incurred by them in
forwarding solicitation material to beneficial owners of Depositary Shares. The
Company has retained Morrow & Co., Inc. ("Morrow") for solicitation services in
connection with the solicitation.
Morrow will receive a fee estimated at $40,000, together with reimbursement
for its reasonable out-of-pocket expenses. The Company has agreed to indemnify
Morrow against certain liabilities and expenses. It is anticipated that Morrow
will employ approximately 25 persons to solicit revocations of consents. Costs
incidental to the solicitation of revocations of consent include expenditures
for printing, postage, legal, accounting, public relations, soliciting,
advertising, and related expenses and are expected to be approximately
$________, in addition to the fees of Morrow described above. Total costs
incurred to date for, in furtherance of, or in connection with these
solicitations are approximately $________.
Certain information about the directors, executive officers, and certain
employees of the Company who may also solicit proxies is set forth in Exhibit B.
Exhibit C sets forth certain information relating to shares of Common Stock and
Depositary Shares owned by such parties and certain transactions between any of
them and the Company and its subsidiaries.
By order of the Board of Directors,
Paul W. Durham
Secretary
14
Exhibit A
---------
Certain Additional Information
------------------------------
The Common Stock Directors
The five persons named below were elected as the Common Stock Directors for
a one-year term at the Company's 2000 Annual Meeting of Stockholders. The
Dissidents do not propose to remove or replace any of these directors.
Business Experience During Past Five Director Current
Name Years and Other Directorships Age Since Committees/(1)/
- -----------------------------------------------------------------------------------------------------------------------
Thomas J. Coffey Vice President-Finance, Global Network 47 2000 Audit (Chairman);
Services (since July 1999) and Vice Corporate Governance
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 Compensation and
1992 - June 1996); Chief Executive Officer Benefits; Executive
(January 1989 - June 1993); and President of
the Company (June 1981 - June 1992); Director
of Mellon Financial Corporation and Teleflex
Incorporated.
William R. Klaus Chairman Emeritus, Pepper Hamilton LLP, 74 1973 Compensation and
attorneys, and former Chairman, Commercial Benefits (Chairman);
Practice Dept. and Merger and Acquisition Audit; Executive
Practice Group (retired 1996); Director, The
Fidelity Bank (May 1973 - April 1992);
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., 50 1995 Corporate Governance
investment banking firm (and predecessor (Chairman); Audit;
firms) (since 1989). Compensation and
Benefits
Christopher K. Seglem Chairman of the Board of Directors (since June 53 1992 Executive (Chairman)
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.
A-1
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.
Information about the Board and Committees
The Audit Committee of the Board of Directors is comprised of Messrs.
Coffey (Chairman), Klaus, Ostrander and Sight. 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. In 1999, the
Audit Committee was comprised of Messrs. Edwin E. Tuttle (chairman), Klaus,
Ostrander and Sight. (Mr. Tuttle did not stand for reelection as a director at
the Company's 2000 Annual Meeting of Stockholders.) The Audit Committee met
twice during 1999.
The Compensation and Benefits Committee of the Board of Directors is
comprised of Messrs. Klaus (Chairman), Hutchinson, Killen, and Ostrander. 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. In 1999, the Compensation and Benefits Committee of
the Board of Directors was comprised of Messrs. Klaus (Chairman), Hutchinson,
and Tuttle, and met three times.
The Executive Committee of the Board of Directors is comprised of Messrs.
Seglem (Chairman), Hutchinson, Killen, and Klaus. 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. In 1999, the Executive Committee of the Board of Directors was
comprised of Messrs. Hutchinson (Chairman), Klaus, Seglem, and Tuttle, and did
not meet.
The Corporate Governance Committee is comprised of Messrs. Ostrander
(Chairman), Coffey, Killen, and Sight. This Committee is authorized to review
issues related to corporate governance and structure and to make recommendations
to the Board of Directors. In 1999, the Corporate Governance Committee was
comprised of Messrs. Ostrander (Chairman) and Sight, and did not meet.
The Board of Directors does not have a standing nominating committee.
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.
A-2
Executive Officers
The following sets forth certain information with respect to the executive
officers of the Company as of July 30, 2000.
Name Age Position
- ---- --- --------
Christopher K. Seglem/(1)/ 53 Chairman of the Board, President and Chief
Executive Officer
Robert J. Jaeger/(2)/ 52 Senior Vice President - Finance and
Treasurer
W. Michael Lepchitz/(3)/ 47 Vice President and General Counsel;
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. 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.
(3) 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.
A-3
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 the
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 Restricted Stock Other
Annual Stock Options (# Compen-
Name and Compen- Award(s)/(2)/ Common sation/(3)/
Principal Positions Year Salary Bonus(1) sation ($) Shares) ($)
- --------------------------------------------------------------------------------------------------------------------------
Christopher K. Seglem, 1999 334,802 667,000 19,304 - - 26,178
Chief Executive 1998 334,802 - - - - 25,445
Officer and President 1997 334,802 - - - - 21,655
Theodore E. Worcester, 1999 186,830 300,000 4,181 - - 9,663
Senior Vice President 1998 183,181 - - - - 9,663
of Law and Administration 1997 179,644 - - - - 11,356
and General Counsel(4)
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.(5)
Robert J. Jaeger, Vice 1999 186,830 300,000 59,640 - - 5,400
President of Finance, 1998 177,112 - - - - 5,342
Treasurer and 1997 161,805 - - - - 5,011
Controller
W. Michael Lepchitz, 1999 125,400 200,000 18,711 46,000 15,000 4,480
President, 1998 119,612 - - - - 4,480
Westmoreland 1997 110,310 - - - - 3,158
Energy, 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.
(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
A-4
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 $1,600 for Messrs. Seglem, Jaeger and
Worcester, respectively.
(4) Mr. Worcester resigned the positions shown in the table to become Of
Counsel to the Company effective April 1, 2000.
(5) Mr. Henley retired effective March 31, 2000.
The following table represents information regarding options to purchase
common shares granted to the named executive officers in 1999:
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rate of Stock
Price Appreciation for Option
Individual Grants Term
- ------------------------------------------------------------------------------------------------------------------------
Number of
Securities Percent of total
Underlying options granted Exercise or
Options to employees in base price Expiration
Name Granted fiscal year per share date 5% ($) 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 of Securities Underlying Value of Unexercised
Number of Unexercised Options at December In-the-Money Options at
Shares Acquired Value 31, 1999 December 31, 1999
Name on Exercise Realized 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- -
- --------------------------------------------------------------------------------------------------------------------------------
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.
A-5
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
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.
A-6
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 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
A-7
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.
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.
A-8
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 and Benefits Committee Report on Executive Compensation
The Compensation and 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 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
A-9
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 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
A-10
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 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
A-11
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 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
2000 Long-Term Incentive Stock Plan; 2000 Performance Unit Plan
At the Company's 2000 Annual Meeting of Stockholders, the Company's
stockholders approved the adoption of the 2000 Long-Term Incentive Plan ("2000
Plan") by a vote of
A-12
6,268,452 in favor and 1,221,921 opposed, with 40,537 abstentions. The
Compensation and Benefits Committee of the Board of Directors has granted
options to purchase shares of Common Stock under the 2000 Plan, including
options to purchase 196,500 shares of Common Stock to the following executive
officers: Christopher K. Seglem, options to purchase 117,200 shares of Common
Stock; Robert J. Jaeger, options to purchase 46,700 shares of Common Stock; W.
Michael Lepchitz, options to purchase 32,600 shares of Common Stock.
In order to better align the interests of the Company's employees with the
interests of the Company's stockholders, the Compensation and Benefits Committee
adopted the 2000 Performance Unit Plan and awarded performance units to the
following executive officers in the following amounts: Christopher K. Seglem,
166,449 performance units; Robert J. Jaeger, 66,357 performance units; and W.
Michael Lepchitz, 46,307 performance units. These performance units vest in
equal one-third portions on the first, second, and third anniversaries of the
date of grant. (For purposes of the plan, the three-year period commencing with
the date of grant is referred to as the "performance period.") For each
performance unit, the holder thereof is entitled to receive an amount in cash or
Common Stock equal in value to the amount of the increase, if any, from (x) the
average price of the Common Stock for the one-month period immediately preceding
the date of grant to (y) the average price of the Common Stock for the one-month
period immediately preceding the end of the performance period. If the price of
the Common Stock does not increase in value during the performance period, a
holder of performance units would not receive any payment in stock or cash in
respect thereof.
The Compensation and Benefits Committee also made the following awards to
the named executive officers under the 1995 Long-Term Incentive Stock Plan
("1995 Plan") in 2000: to Christopher K. Seglem, 15,000 shares of restricted
stock; to Robert J. Jaeger, 5,000 shares of restricted stock and options to
purchase 15,000 shares of Common Stock; and to W. Michael Lepchitz, options to
purchase 10,000 shares of Common Stock. All options granted under the 1995 Plan
are incentive stock options, and all shares of restricted stock granted under
the 1995 Plan are shares of Common Stock.
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 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.
A-13
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
- -------------------------------------------------------------------------------
WESTMORELAND 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
- -------------------------------------------------------------------------------
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 Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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
("SEC"). 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 SEC in 1999 were timely filed.
A-14
Exhibit B
---------
Information Concerning the Directors, Executive Officers,
and Certain Employees of the Company and its Subsidiaries
---------------------------------------------------------
The following table sets forth the name and the present occupation or
employment (except with respect to the directors and executive officers, whose
principal occupation is set forth in the Consent Revocation Statement), and the
name, principal business, and address of any corporation or other organization
in which such employment is carried on, of (1) the directors and executive
officers of the Company and (2) certain employees of the Company who may assist
in soliciting proxies from stockholders of the Company. Unless otherwise
indicated below, the principal business address of each such person is 2 North
Cascade Avenue, 14th Floor, Colorado Springs, Colorado 80903 and such person is
an employee of the Company. Directors are indicated by an asterisk.
Directors and Executive Officers of the Company
Name and Principal
Business Address
- ----------------
Thomas J. Coffey*
5 Brampton Road
Malvern, PA 19355
Pemberton Hutchinson*
Robert J. Jaeger
Robert E. Killen*
The Killen Group, Inc.
1189 Lancaster Avenue
Berwyn, PA 19312
William R. Klaus*
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
W. Michael Lepchitz
Thomas W. Ostrander*
Salomon Smith Barney Inc.
Seven World Trade Center - 32nd Floor
New York, NY 10048
B-1
Christopher K. Seglem*
James W. Sight*
8500 College Blvd.
Overland Park, KS 66210
Certain Employees of the Company
Who May Also Solicit Revocations of Consents
Name and Principal Present Office or Other Principal
Business Address Occupation or Employment
- ----------------------------------- ----------------------------------------
Paul W. Durham.................... Assistant General Counsel and Secretary
Diane S. Jones.................... Vice President, Corporate Business
Development & Corporate Relations
B-2
Exhibit C
---------
Shares Held by Directors, Executive Officers, and Certain
Employees of the Company and its Subsidiaries and Certain
Transactions between any of them and the Company and its Subsidiaries
---------------------------------------------------------------------
Ownership of Shares
The shares of Common Stock and Depositary Shares held by directors and
executive officers of the Company are set forth in the Consent Revocation
Statement. The following officers and employees of the Company beneficially own
the following shares of Common Stock or Depositary Shares as of July 30, 2000:
Name of Shares of Common Stock Depositary Shares
Beneficial Owner Beneficially Owned Beneficially Owned
- ------------------------ ------------------------ ---------------------
Paul W. Durham.......... -- --
Diane S. Jones.......... 5 --
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially owned by a
person includes shares of Common Stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of August __, 2000.
The shares issuable pursuant to these options are deemed outstanding for
computing the percentage ownership of the person holding these options but are
not deemed outstanding for the purposes of computing the percentage ownership of
any other person.
Purchases and Sales of Securities
The following table sets forth information concerning all purchases and
sales of securities of the Company by directors, executive officers, and certain
employees since August ____, 1998:
Number of
Date of Nature of Number of Shares Depositary
Name Transaction Transaction of Common Stock Shares
- --------------------------------------------------------------------------------------------------------------------
Directors:
Pemberton Hutchinson.......... 04/07/99 (1) 2,000
10/26/99 (1) 1,200
01/25/00 Purchase 5,000
Robert E. Killen.............. 03/12/99 (2) 10,184
04/07/99 (1) 1,250
06/29/99 Purchase 5,000
08/03/99 Purchase 5,000
08/06/99 Purchase 1,500
08/13/99 Purchase 2,000
08/24/99 Purchase 3,000
C-1
09/30/99 Purchase 5,000
12/13/99 (2) 2,000
06/27/00 Purchase 5,000
William R. Klaus.............. 03/12/99 (2) 1,714
07/08/99 Purchase 7,000
12/13/99 (2) 2,000
Thomas W. Ostrander........... 03/12/99 (2) 5,142
12/13/99 (2) 2,000
Christopher K. Seglem......... 04/07/99 (1) 15
04/16/99 Purchase 100
04/16/99 Purchase 100
06/01/99 Purchase 5,000
06/01/99 Purchase 1,000
James W. Sight................ 06/03/99 Purchase 10,000
06/28/00 Purchase 2,000
Executive Officers:
Robert J. Jaeger.............. 04/03/00 (3) 2,000
W. Michael Lepchitz........... 03/19/99 (4) 11,500
03/22/99 (3) 15,000
Certain Employees:
Paul W. Durham................ 07/28/99 Purchase 1,900
03/27/00 Sale 1,900
Diane S. Jones................ 04/07/99 (1) 2
10/26/99 (1) 7
_________
(1) Depositary Shares sold pursuant to the Company's two tender offers, the
first of which commenced March 10, 1999 and closed April 7, 1999 for up to
1,052,631 Depositary Shares, and the second of which commenced September
16, 1999 and closed October 26, 1999 for up to 631,000 Depositary Shares.
In the case of Mr. Seglem and Ms. Jones the Depositary Shares sold were
held in and sold through the 401(k) Plan.
(2) Restricted shares issued in lieu of cash payments for a portion of the
director's annual retainer fee.
(3) Shares purchased upon exercise of options under the 1995 Plan.
(4) Restricted shares granted under the 1995 Plan.
Other Transactions and Relationships
Except as disclosed in this Exhibit or in the Consent Revocation Statement,
to the knowledge of the Company, none of the Company, any of its directors,
executive officers, or the employees of the Company and its subsidiaries named
in Exhibit B owns any securities of the Company or any subsidiary of the
Company, beneficially or of record, has purchased or sold any of such securities
within the past two years, or is or was within the past year a party to any
contract, arrangement, or understanding with any person with respect to any such
securities. Except as disclosed in this Exhibit or in the Consent Revocation
Statement, to the knowledge of the Company, its directors, and executive
officers or the employees of the Company and its
C-2
subsidiaries named in Exhibit B, none of their associates beneficially owns,
directly or indirectly, any securities of the Company. Except as disclosed in
this Exhibit or in the Consent Revocation Statement, to the knowledge of the
Company, none of the purchase price or market value of any of the securities
owned by the Company, any of its directors or executive officers, or any of the
employees of the Company and its subsidiaries named in Exhibit B is represented
by funds borrowed or otherwise obtained for the purpose of acquiring or holding
such securities. The Company owns, directly or indirectly, all of the common
stock of its subsidiaries Westmoreland Coal Sales Company, Westmoreland Energy,
Inc., Westmoreland Terminal Company, Kentucky Criterion Coal Company, Pine
Branch Mining Co., WEI-Fort Lupton, Inc., WEI Rensselaer, Inc., WEI Roanoke
Valley, Inc., Westmoreland-Altavista, Inc., Westmoreland-Fort Drum, Inc.,
Westmoreland Franklin, Inc., Westmoreland-Hopewell, Inc., Westmoreland Technical
Service, Inc., Cleancoal Terminal Co., Criterion Coal Co., Deane Processing Co.
and Eastern Coal and Coke Co. The Company also owns 80% of the common stock of
Westmoreland Resources, Inc.
Other than as disclosed in this Exhibit and in the Consent Revocation
Statement, to the knowledge of the Company, none of the Company, any of its
directors, executive officers or the employees of the Company and its
subsidiaries named in Exhibit B has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted upon
pursuant to the consent solicitation.
Other than as disclosed in this Exhibit and in the Consent Revocation
Statement, to the knowledge of the Company, none of the Company, any of its
directors, executive officers or the employees of the Company and its
subsidiaries named in Exhibit B is, or has been within the past year, a party to
any contract, arrangement or understanding with any person with respect to any
securities of the Company, including, but not limited to, joint ventures, loan
or option arrangements, puts or calls, guarantees against loss or guarantees of
profit, division of losses or profits, or the giving or withholding of proxies.
Other than as set forth in this Exhibit or in the Consent Revocation
Statement, to the knowledge of the Company, none of the Company, any of its
directors, executive officers or the employees of the Company and it
subsidiaries named in Exhibit B, or any of their associates, has had or will
have a direct or indirect material interest in any transaction or series of
similar transactions since the beginning of the Company's last fiscal year or
any currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party in which the
amount involved exceeds $60,000.
Other than as set forth in this Exhibit and in the Consent Revocation
Statement, to the knowledge of the Company, none of the Company, any of its
directors, executive officers or the employees of the Company and its
subsidiaries named in Exhibit B, or any of their associates, has any
arrangements or understandings with any person with respect to any future
employment by the Company or its affiliates or with respect to any future
transactions to which the Company or any of its affiliates or with respect to
any future transactions to which the Company or any of its affiliates will or
may be a party.
C-3
IMPORTANT
Your vote is important. No matter how many Depositary Shares you own,
please support the Company by signing, dating and returning the Company's WHITE
Consent Revocation Card today in the postage prepaid envelope provided.
If any of your Depositary Shares are held in the name of a brokerage firm,
bank, bank nominee, or other institution, only it can vote such shares and only
upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and
instruct that person to execute the Company's WHITE Consent Revocation Card as
soon as possible.
If you have any questions or require any additional information or
assistance, please contact:
MORROW & CO., INC.
Call Toll Free (800) 662-5200
[FORM OF CONSENT REVOCATION CARD]
WESTMORELAND COAL COMPANY
White Consent Revocation Card
This revocation of consent is solicited on behalf of the Board of Directors of
Westmoreland Coal Company ("Westmoreland") in opposition to the consent
solicitation by Frank E. Williams, Jr., Guy O. Dove III, and Stephen D.
Rosenbaum (the "Dissidents").
The undersigned, a holder of depositary shares ("Depositary Shares"), each
representing one-quarter of a share of Series A Convertible Exchangeable
Preferred Stock, par value $1.00 per share, of Westmoreland, is acting with
respect to all the Depositary Shares held by the undersigned, and hereby revokes
any and all consents that the undersigned may have given in respect of the
following proposals submitted by the Dissidents:
The Board of Directors of Westmoreland unanimously recommends that you vote
"Revoke Consent" on each proposal set forth below.
Please sign, date, and mail this Consent Revocation Card today.
1. Remove Robert E. Killen and James W. Sight, the two directors elected by
the holders of Depositary Shares.
[_] Revoke Consent [_] Do Not Revoke Consent
Instructions: To revoke consent or withhold revocation of consent to the
removal of all the persons named in the above proposal, check the
appropriate box. If you wish to revoke the consent to the removal of
certain of the persons named above, but not all of them, check the
"Revoke Consent" box and write the name of each such person as to whom
you do not wish to revoke consent (i.e., the persons you want removed)
in the following space:_______________________________________________.
2. Elect Frank E. Williams, Jr. and Guy O. Dove, III as Depositary Stock
Directors.
[_] Revoke Consent [_] Do Not Revoke Consent
Instructions: To revoke consent or withhold revocation of consent to the
election of all the persons named in the above proposal, check the
appropriate box. If you wish to revoke the consent to the election of
certain of the persons named above, but not all of them, check the
"Revoke Consent" box and write the name of each such person as to whom
you do not wish to revoke consent (i.e., the persons you want elected)
in the following space:_________________________________________________
________.
If no direction is made with respect to one or more of the foregoing proposals,
or if you mark the "Revoke Consent" box with respect to one or more of the
foregoing proposals, this revocation of consent will revoke all previously
executed consents with respect to such proposals.
If you do not mark any box for any one or more of the foregoing proposals and
you sign and return this card, you will be deemed to have revoked any previously
signed consent to any proposal you did not mark. If the WHITE Consent Revocation
Card is signed, dated, and returned, any previously executed consent will be
revoked unless you mark the "do not revoke consent" boxes above.
Dated: _______________, 2000
______________________________
Signature
______________________________
Signature, if held jointly
______________________________
Title of Authority
Please sign exactly as your name appears hereon. If shares are held jointly,
each stockholder should sign. When signing as attorney, executor, administrator,
trustee, guardian, corporate officer, etc., give full title as such. Please
sign, date, and mail this Consent Revocation Card promptly in the enclosed
postage-paid envelope.
2