o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
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o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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1. | The election of |
2. | Advisory approval of Westmoreland Coal Company’s executive compensation; |
3. | To approve the amendments to the Amended and Restated 2007 Equity Incentive Plan for Employees and Non-Employee Directors; |
4. | The ratification of the appointment |
5. | To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 22, 2012. This notice, the accompanying proxy statement and Westmoreland Coal Company’s annual report to stockholders for the fiscal year ended December 31, 2011 are available at www.proxyvote.com. |
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● | Via the Internet at www.proxyvote.com; |
● | By phone at 1-800-690-6903; or |
● | By completing and mailing in a paper proxy card. |
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● | If you vote online, you may sign up for electronic delivery at that time; or | ||
● | You may sign up at any time by visiting http://enroll.icsdelivery.com/ |
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Director/ Executive | ||||||||
Name | Age | Officer Since | Position | |||||
Keith E. Alessi | 56 | 2007 | Director; President and Chief Executive Officer | |||||
Thomas J. Coffey | 58 | 2000 | Director —Independent | |||||
Michael R. D’Appolonia | 62 | 2008 | Director— Independent | |||||
Gail E. Hamilton | 61 | 2011 | Director —Independent | |||||
Richard M. Klingaman | 75 | 2006 | Director— Independent | |||||
Jan B. Packwood | 67 | 2011 | Director— Independent | |||||
Robert C. Scharp | 64 | 2011 | Director— Independent | |||||
Kevin A. Paprzycki | 40 | 2008 | Chief Financial Officer and Treasurer | |||||
Douglas P. Kathol | 58 | 2010 | Executive Vice President | |||||
Jennifer S. Grafton | 35 | 2011 | General Counsel — Compliance and Corporate Governance and Secretary | |||||
Morris W. Kegley | 63 | 2007 | General Counsel — Mining Operations |
Name | Age | Director/ Executive Officer Since | Position |
Keith E. Alessi | 57 | 2007 | Director; Chief Executive Officer |
Michael R. D’Appolonia | 63 | 2008 | Director – Independent |
Gail E. Hamilton | 62 | 2011 | Director – Independent |
Richard M. Klingaman | 76 | 2006 | Director – Independent; Chairman of the Board |
Jan B. Packwood | 68 | 2011 | Director – Independent |
Robert C. Scharp | 65 | 2011 | Director – Independent |
Jennifer S. Grafton | 36 | 2011 | General Counsel and Secretary |
Douglas P. Kathol | 59 | 2010 | Executive Vice President |
Robert P. King | 59 | 2012 | President and Chief Operating Officer |
Joseph E. Micheletti | 46 | 2011 | Senior Vice President – Coal Operations |
Kevin A. Paprzycki | 41 | 2008 | Chief Financial Officer and Treasurer |
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Nominating | ||||||||
Compensation | and | |||||||
Name of Director | Audit | and Benefits | Corporate Governance | Executive | ||||
Non-Employee Directors: | ||||||||
Thomas J. Coffey | Chair | Member | ||||||
Michael R. D’Appolonia | Chair | Member | Member | |||||
Gail E. Hamilton | Member | Member | ||||||
Richard M. Klingaman | Member | |||||||
Jan B. Packwood | Member | Chair | ||||||
Robert C. Scharp | Member | Member | ||||||
Employee Director: | ||||||||
Keith E. Alessi | Chair | |||||||
Number of Meetings in 2010 | 4 | 6 | 4 | 1 |
Name of Director | Audit | Compensation and Benefits | Nominating and Corporate Governance | Executive | |||||
Non-Employee Directors: | |||||||||
Thomas J. Coffey | Chair | Member | |||||||
Michael R. D’Appolonia | Chair | Member | Member | ||||||
Gail E. Hamilton | Member | Member | |||||||
Richard M. Klingaman | Member | ||||||||
Jan B. Packwood | Member | Chair | |||||||
Robert C. Scharp | Member | Member | |||||||
Employee Director: | |||||||||
Keith E. Alessi | Chair | ||||||||
Number of Meetings in 2011 | 5 | 4 | 3 | 2 |
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Type of Compensation | Amount | |||
Annual Cash Retainer | $35,000 | |||
Annual Stock | $ value on date of grant | |||
Annual Retainer for Chairman | $35,000 | |||
Annual Retainer for Committee | Chair: | |||
Audit Committee | $7,000 | |||
Compensation and Benefits Committee | $5,000 | |||
Nominating and Corporate Governance Committee | $3,000 | |||
Annual Retainer for Serving on the Audit, C&B or N&CG Committees | $5,000 per committee | |||
Attendance at Board or Committee Meeting (in-person) | $1,500 per meeting | |||
Attendance at Board or Committee Meeting (telephonic) | $1,000 per meeting |
Fees Earned Or | Stock | Total Compensation | ||||||||||||||||||||||
Name(1) | Paid In Cash($) | Awards($)(2) | ($) | Fees Earned Or Paid In Cash($) | Grant Date Fair Value of Stock Awards($)(2) | Total Compensation ($) | ||||||||||||||||||
Thomas J. Coffey | 70,500 | 29,996 | 100,496 | 75,500 | 50,009 | 125,509 | ||||||||||||||||||
Michael R. D’Appolonia | 60,600 | 29,996 | 90,596 | 73,500 | 50,009 | 123,509 | ||||||||||||||||||
Gail E. Hamilton | 61,375 | 50,009 | 111,384 | |||||||||||||||||||||
Richard M. Klingaman | 103,500 | 29,996 | 133,496 | 85,000 | 50,009 | 135,009 | ||||||||||||||||||
Jan B. Packwood | 65,067 | 50,009 | 115,076 | |||||||||||||||||||||
Robert C. Scharp | 63,375 | 50,009 | 113,384 | |||||||||||||||||||||
Former Directors(3) | ||||||||||||||||||||||||
William M. Stern | 56,500 | 29,996 | 86,496 | 5,667 | — | 5,667 | ||||||||||||||||||
Frank T. Vicino, Jr. | 33,462 | 29,996 | 63,458 | 4,889 | — | 4,889 |
(1) | Mr. Alessi, who is our Chief Executive Officer, | |
(2) | 2,940 restricted stock units were awarded to each non-employee director elected to the Board in May | |
(3) | Messrs. Stern and Vicino were serving as our preferred directors in early 2011. Upon the repayment of the outstanding preferred dividends in early February 2011, the preferred director positions were eliminated. |
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Option Awards | ||||||||||||||||
Option | ||||||||||||||||
Securities Underlying | Securities Underlying | Exercise | Option | |||||||||||||
Unexercised Options (#) | Unexercised Options (#) | Price | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | ||||||||||||
Thomas J. Coffey | 10,000 | 0 | 18.01 | 5/31/11 | ||||||||||||
5,000 | 0 | 15.31 | 5/24/12 | |||||||||||||
1,762 | 0 | 25.14 | 6/23/16 | |||||||||||||
Richard M. Klingaman | 3,733 | 0 | 23.99 | 2/27/16 | ||||||||||||
William M. Stern | 5,000 | 0 | 18.01 | 5/31/11 | ||||||||||||
5,000 | 0 | 15.31 | 5/24/12 | |||||||||||||
1,762 | 0 | 25.14 | 6/23/16 |
Option Awards | ||||||||||||||||
Name | Securities Underlying Unexercised Options (#) Exercisable | Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||
Thomas J. Coffey | 5,000 | 0 | 15.31 | 5/24/12 | ||||||||||||
1,762 | 0 | 25.14 | 6/23/16 | |||||||||||||
Richard M. Klingaman | 3,733 | 0 | 23.99 | 2/2716 |
Common | % of | Depositary | % of | |||||||||||||
Name of Beneficial Owner | Stock | Common | Shares | Depositary | ||||||||||||
5% or Greater Equity Holders | ||||||||||||||||
Jeffrey L. Gendell (1) | 3,288,025 | 25.10 | % | 3,700 | * | |||||||||||
Frank Vicino Jr. (2) | 188,612 | 1.42 | % | 108,730 | 16.98 | % | ||||||||||
Stephen D. Rosenbaum (3) | 131,404 | 1.00 | % | 60,000 | 9.37 | % | ||||||||||
T. Rowe Price (4) | 757,320 | 5.79 | % | — | — | |||||||||||
Officers and Directors | ||||||||||||||||
Thomas J. Coffey (5) | 51,696 | * | — | — | ||||||||||||
Michael R. D’Appolonia (6) | 9,448 | * | — | — | ||||||||||||
Gail E. Hamilton | — | — | — | — | ||||||||||||
Richard M. Klingaman (7) | 10,343 | * | — | — | ||||||||||||
Jan B. Packwood | — | — | — | — | ||||||||||||
Robert C. Scharp | — | — | — | — | ||||||||||||
Keith E. Alessi (8) | 81,789 | * | — | — | ||||||||||||
Kevin A. Paprzycki (9) | 8,593 | * | — | — | ||||||||||||
Douglas P. Kathol (10) | 40,867 | * | — | — | ||||||||||||
John V. O’Laughlin (11) | 53,377 | * | — | — | ||||||||||||
Morris W. Kegley (12) | 9,297 | * | — | — | ||||||||||||
Directors and Executive Officers as a Group (11 persons) | 213,511 | 1.62 | % | — | — |
Name of Beneficial Owner | Common Stock | % of Common | Depositary Shares | % of Depositary Shares | ||||||||||||
5% or Greater Equity Holders | ||||||||||||||||
Jeffrey L. Gendell (1) | 3,071,144 | 22.12 | % | 3,700 | * | |||||||||||
Frank Vicino, Jr. (2) | 188,574 | 1.34 | % | 108,730 | 16.99 | % | ||||||||||
Stephen D. Rosenbaum (3) | 131,404 | * | 60,000 | 9.38 | % | |||||||||||
T. Rowe Price (4) | 774,320 | 5.58 | % | — | — | |||||||||||
Officers and Directors | ||||||||||||||||
Thomas J. Coffey (5) | 41,696 | * | — | — | ||||||||||||
Michael R. D’Appolonia | 9,448 | * | — | — | ||||||||||||
Gail E. Hamilton | 0 | * | — | — | ||||||||||||
Richard M. Klingaman | 10,343 | * | — | — | ||||||||||||
Jan B. Packwood | 0 | * | — | — | ||||||||||||
Robert C. Scharp | 0 | * | — | — | ||||||||||||
Keith E. Alessi (6) | 153,895 | 1.10 | % | — | — | |||||||||||
Kevin A. Paprzycki (7) | 17,953 | * | — | — | ||||||||||||
Douglas P. Kathol (8) | 42,067 | * | ||||||||||||||
Joseph E. Micheletti (9) | 8,232 | * | — | — | ||||||||||||
Morris W. Kegley (10) | 17,255 | * | — | — | ||||||||||||
John V. O’Laughlin (11) | 42,884 | * | — | — | ||||||||||||
Directors and Executive Officers as a Group (11 persons) | 287,984 | 2.05 | % | — | — |
* | Percentages of less than 1% are indicated by an | ||
asterisk | |||
(1) | The total for Mr. Gendell includes shares of common stock, as well as shares of common stock issuable upon conversion of depositary shares. According to a Schedule 13D/A filed | ||
(2) | According to a Schedule 13D/A filed on February 19, 2010, Mr. Frank Vicino Jr. beneficially owns 108,730 depositary shares of which he has sole voting and sole dispositive power for 86,750 shares, and shared voting and dispositive power over 21,980 shares. The common stock total for Mr. Vicino includes |
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3) | The total for Mr. Rosenbaum includes shares of common stock, as well as shares of common stock issuable upon conversion of depositary shares. The depositary shares are convertible into | |
(4) | According to a Schedule 13G/A filed on February | |
(5) | Includes | |
(6) | Includes |
(7) | Includes 4,419 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland’s 401(k) plan, 7,000 shares of common stock that may be purchased upon exercise of options under our 2007 Plan and 1,911 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2012. | |
(8) | Includes 5,215 shares of common stock held by Prudential Retirement, as trustee of the | |
(9) | Includes | |
(10) | Includes | |
(11) | Includes 6,828 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland’s 401(k) plan, 12,000 shares of common stock that may be purchased upon exercise of options under our 2002 Plan, 15,000 shares of common stock which may be purchased upon exercise of options under our 2007 |
Number of Securities | ||||||||||||||||||||||||
Remaining Available for Future | ||||||||||||||||||||||||
Number of Securities to | Weighted Average | Issuance Under Equity | ||||||||||||||||||||||
be Issued Upon Exercise | Exercise Price | Compensation Plans (Excluding | ||||||||||||||||||||||
of Outstanding Options | of Outstanding Options | Securities Reflected in Column (a)) | ||||||||||||||||||||||
Plan Category | (a) | (b) | (c) | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | Weighted Average Exercise Price of Outstanding Options (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | ||||||||||||||||||
Equity plans approved by security holders | 243,590 | (1) | $ | 19.96 | 288,261 | (3) | 199,606 | (1) | $ | 20.98 | 80,566 | (3) | ||||||||||||
Equity plans not approved by security holders | 75,000 | (2) | $ | 15.85 | 0 | 30,000 | (2) | $ | 15.31 | 0 | ||||||||||||||
Total | 318,590 | $ | 18.99 | 288,261 | 229,606 | $ | 20.24 | 80,566 |
(1) | Excludes SARs to acquire | |
(2) | Excludes SARs to acquire 16,067 shares of common stock with exercise prices above | |
(3) | Number of securities remaining available for future issuance reflects the reservation of |
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● | Design a program that aligns with long-term stockholder interests through the use of equity awards; |
● | Target compensation is at median of peer group, with the long-term goal of bringing lower compensated executives to target levels as they continue to gain experience; |
● | Link pay to performance by making a substantial portion of total executive compensation variable or “at risk” over the long-term; and |
● | Provide a compensation program that emphasizes direct compensation as opposed to perquisites and other benefits. |
Executive Level | Multiple of Base | |||
Salary | ||||
CEO | 3.0 | x | ||
COO | 2.0 | x | ||
CFO, EVP and SVP | 1.5 | x | ||
Other | 1.0 | x |
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Name | FY 2010 Net Income in Millions ($) | FY 2010 Revenues in Millions ($) | ||||||
Atwood Oceanics | 272 | 645 | ||||||
Calgon Carbon Corp. | 35 | 482 | ||||||
Drew Industries Inc. | 28 | 573 | ||||||
Dril-Quip Inc. | 102 | 566 | ||||||
Forward Air Corp. | 32 | 484 | ||||||
Genessee & Wyoming Inc. | 79 | 630 | ||||||
Gulf Island Fabrication Inc. | 13 | 248 | ||||||
Hecla Mining Co. | 49 | 419 | ||||||
Heico Corp. | 55 | 617 | ||||||
Hornbeck Offshore Services Inc. | 36 | 421 | ||||||
Horsehead Holding Corp. | 25 | 382 | ||||||
James River Coal Co. | 78 | 701 | ||||||
Pioneer Drilling Co. | -33 | 487 | ||||||
Stillwater Mining Co. | 50 | 556 | ||||||
Superior Well Services Inc. | -80 | 399 | ||||||
Union Drilling Inc. | -16 | 193 | ||||||
Unit Corp. | 146 | 872 | ||||||
Westmoreland Coal Company | 0 | 506 |
Name | FY 2009 Net Income in Millions ($) | FY 2009 Revenues in Millions ($) | ||||||
Atwood Oceanics | 256 | 650 | ||||||
Calgon Carbon Corp. | 39 | 412 | ||||||
Drew Industries Inc. | -24 | 398 | ||||||
Dril-Quip Inc. | 105 | 540 | ||||||
Forward Air Corp. | 10 | 417 | ||||||
Genessee & Wyoming Inc. | 60 | 545 | ||||||
Gulf Island Fabrication Inc. | 21 | 311 | ||||||
Hecla Mining Co. | 68 | 312 | ||||||
Heico Corp. | 45 | 538 | ||||||
Hornbeck Offshore Services Inc. | 50 | 386 | ||||||
Horsehead Holding Corp. | -27 | 216 | ||||||
James River Coal Co. | 51 | 681 | ||||||
Pioneer Drilling Co. | -23 | 325 | ||||||
Stillwater Mining Co. | -9 | 394 | ||||||
Superior Well Services Inc. | -80 | 399 | ||||||
Union Drilling Inc. | -12 | 169 | ||||||
Unit Corp. | -55 | 703 | ||||||
Westmoreland Coal Company | -29 | 443 |
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2011 Base Salaries for Named Executive Officers | ||||
Name | Position | Base Salary | ||
Keith E. Alessi | CEO and President | $ | ||
Douglas P. Kathol | Executive Vice President | $ | ||
Kevin A. Paprzycki | Chief Financial Officer and Treasurer | $ | ||
Senior Vice President | $ | |||
Morris W. Kegley | General Counsel – Mining and Operations | $ |
John V. O’Laughlin(2) | ||
$225,508 |
(1) | Mr. | |
as General Manager of the Jewett mine. In May of 2011, Mr. | ||
John O’Laughlin served as our Senior Vice President – Coal Operations through February 21, 2011. Effective as of February 21, 2011, Mr. |
GOAL | COMPONENTS | PERCENT OF TOTAL | ||||
Financial | Goal: Depending on the executive, annual budgeted operating income and free cash flow of ● 50% payout upon meeting 80% of goal (threshold) ● 100% payout upon meeting 100% of goal (target) ● 200% payout upon meeting 120% of goal (maximum) | ● 40% for mine operational executives ● 60% for corporate office executives | ||||
Safety | Goal: Annual National Mine Safety and Health Administration (MSHA) average for reportable incident rate for surface mines in the coal industry ● 50% payout upon meeting 100% of goal (threshold) ● 100% payout upon meeting 125% of goal (target) ● 200% payout upon meeting 150% of goal (maximum) | ● 30% for mine operational executives ● Not applicable for corporate executives | ||||
Individual | The percentage payout is evaluated on achievement of certain individual goals established between the executive and the CEO (or, in the case of the CEO, between him and the Board) and will be based on the executive’s overall performance. An executive may receive greater than 100% payout for the individual goal based on exemplary performance, as approved by the Compensation and Benefits Committee, or in the case of the CEO, by the Board. The Board has great flexibility in exercising discretion relating to the individual AIP component and has the ability to reward executives based on the results of the year, notwithstanding that a particular executive did not meet the specific goal laid out at the beginning of the year. For example, for 2011 AIP payout, the Board took into account exemplary work on the Kemmerer transaction that was not part of the individual goals that were set in early 2011. | ● 30% for mine operational executives ● 40% for corporate office executives |
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Percentage of Target | Percentage of | Percentage of | ||||||||||||||||||||||
Percentage of Total | Target Total Cash | Individual Bonus | Target Financial | Target Safety | ||||||||||||||||||||
Name | Compensation | Incentive Bonus | Approved | Bonus Approved3 | Bonus Approved4 | Total Cash Bonus | ||||||||||||||||||
Keith E. Alessi | 70%/100 | %1 | $ | 404,614 | 235 | % | 135 | % | NA | $ | 882,240 | |||||||||||||
Douglas Kathol | 40%/50 | %2 | $ | 113,106 | 100 | % | 135 | % | NA | $ | 134,805 | |||||||||||||
Kevin A. Paprzycki | 40 | % | $ | 85,568 | 100 | % | 135 | % | NA | $ | 101,994 | |||||||||||||
Morris W. Kegley | 40 | % | $ | 78,700 | 100 | % | 135 | % | NA | $ | 93,799 | |||||||||||||
John V. O’Laughlin | 50 | % | $ | 112,119 | 0 | % | 63 | % | 114 | % | $ | 66,465 |
Target vs. Actual Annual Incentive Bonuses Paid for 2011 Performance for Named Executive Officers | |||||||||||||||||||||||
Name | Percentage of Base Salary Earned in 2011 | Target Total Cash Incentive Bonus | Percentage of Target Individual Bonus Approved | Percentage of Target Financial Bonus Approved(2) | Percentage of Target Safety Bonus Approved(3) | Total Cash Bonus | |||||||||||||||||
Keith E. Alessi | 100 | % | $ | 588,460 | 134 | % | 100 | % | NA | $ | 668,460 | ||||||||||||
Douglas Kathol | 40 | % | $ | 109,577 | 214 | % | 100 | % | NA | $ | 159,577 | ||||||||||||
Kevin A. Paprzycki | 35 | % | $ | 83,202 | 250 | % | 100 | % | NA | $ | 133,202 | ||||||||||||
Joseph E. Micheletti(1) | 30%/ 35 | % | $ | 63,578 | 362 | % | 116 | % | 94%/ 189% | $ | 128,546 | ||||||||||||
Morris W. Kegley | 30 | % | $ | 65,448 | 151 | % | 113 | % | NA | $ | 81,425 | ||||||||||||
John V. O’Laughlin(4) | 30 | % | $ | 66,351 | 85 | % | 113 | % | NA | $ | 64,524 |
(1) | In | |
In | ||
(3) | In | |
(4) | Mr. O’Laughlin’s Target Total Cash Incentive Bonus is based on both actual earnings and earnings through our short-term disability program. |
Long-Term Incentive Awards for Named Executive Officers for 2011 | Long-Term Incentive Awards for Named Executive Officers for 2011 | |||||||||||||||||||||||||||
Name | Long-Term Incentive Tier | Number of RSUs | Grant Date Fair Value of RSUs | Percentage of Base Salary | Number of Time-Based RSUs | Number of Performance-Based RSUs | Grant Date Fair Value of RSUs | |||||||||||||||||||||
Keith E. Alessi | 125 | % | 59,775 | $ | 484,775 | 150 | % | 30,081 | 30,080 | $ | 900,009 | |||||||||||||||||
Douglas P. Kathol | 45 | % | 14,796 | $ | 119,996 | 80 | % | 7,500 | 7,500 | $ | 224,400 | |||||||||||||||||
Kevin A. Paprzycki | 34 | % | 8,916 | $ | 72,309 | 70 | % | 5,733 | 5,732 | $ | 171,516 | |||||||||||||||||
Joseph E. Micheletti | 40 | %(1) | 2,010 | 2,010 | $ | 60,139 | ||||||||||||||||||||||
Morris W. Kegley | 60 | % | 4,500 | 4,498 | $ | 134,610 | ||||||||||||||||||||||
John V. O’Laughlin | 31 | % | 9,852 | $ | 79,900 | 60 | % | 4,524 | 4,522 | $ | 135,328 | |||||||||||||||||
Morris W. Kegley | 22 | % | 6,570 | $ | 53,283 |
(1) | Mr. Micheletti’s long-term incentive award was based on his role as mine manager of the Jewett mine. In 2012, his long-term incentive award will be based on this current position as Senior Vice President – Coal Operations and will represent 70% of his base salary. |
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Targeted | Targeted Total | |||||||||||||||||
Name | Position | Base Salary | Targeted AIP | LTIP | Compensation | |||||||||||||
Keith E. Alessi | CEO and President | $ | 600,000 | 100 | % | 150 | % | $ | 2,100,000 | |||||||||
Douglas P. Kathol | Executive Vice President | $ | 280,500 | 40 | % | 80 | % | $ | 617,100 | |||||||||
Kevin A. Paprzycki | Chief Financial Officer and Treasurer | $ | 245,000 | 35 | % | 70 | % | $ | 502,300 | |||||||||
Vacant | Senior Vice President | TBD | 35 | % | 70 | % | $ | TBD | ||||||||||
Morris W. Kegley | General Counsel | $ | 224,300 | 30 | % | 60 | % | $ | 426,200 |
Name | Position | Base Salary | Targeted AIP | Targeted LTIP | Targeted Total Compensation | |||||||||||||
Keith E. Alessi | CEO | $ | 700,000 | 100 | % | 150 | % | $ | 2,450,000 | |||||||||
Robert P. King | President and COO | $ | 425,000 | 100 | % | 100 | % | $ | 1,275,00 | |||||||||
Douglas P. Kathol | Executive Vice President | $ | 287,513 | 40 | % | 80 | % | $ | 632,528 | |||||||||
Kevin A. Paprzycki | CFO and Treasurer | $ | 260,000 | 35 | % | 70 | % | $ | 533,000 | |||||||||
Joseph E. Micheletti | SVP – Coal Operations | $ | 231,750 | 35 | % | 70 | % | $ | 475,088 |
Total Cash Received | # of RSUs / Grant Date Fair | |||||||||||
for 2010 | 2010 Base Salary | Bonus for 2010 | Value of 2010 RSUs | |||||||||
$974,544 | $600,000/$400,0001 | $ | 882,240 | 2 | 59,775 RSUs/ $484,775 |
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Total Cash Received for 2011 | 2011 Base Salary | Bonus for 2011 | # of RSUs / Grant Date Fair Value of 2011 RSUs | |||
$1,256,920 | $600,000 | $668,460 | 60,161 RSUs/ $900,009 |
Douglas Kathol:
Base Salary For 2012, the Compensation and Benefits Committee Annual Incentive Compensation Financial Component: The financial component was based on budgeted operating income and free cash flow at the consolidated corporate level. Individual Component: Management proposed and the Committee approved a Safety Component: Not applicable.
Long-Term Incentive Compensation For fiscal year Relocation Mr. Kathol was offered a relocation package when the corporate office relocated from Colorado Springs to South Denver due to the distance from his house to the new office location. The Company paid $59,943 in 2011 primarily towards final moving expenses, transportation of household goods, temporary living expenses, and a miscellaneous allowance of one-month’s salary. Kevin A. Paprzycki: Chief Financial Officer and Treasurer
Base Salary The Compensation and Benefits Committee approved Mr. Paprzycki’s new base salary for Annual Incentive Compensation Financial Component: The financial component was based on budgeted operating income and free cash flow at the consolidated corporate level. Individual Component: Management proposed and the Compensation and Benefits Committee approved a Safety Component: Not applicable. Long-Term Incentive Compensation For fiscal year Joseph E. Micheletti: Senior Vice President
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Base Salary For 2012, the Compensation and Benefits Committee increased Mr. Micheletti’s base salary to $231,750 effective April 1, 2012, which puts this component of compensation below the 25% of the peer group, but commensurate with his limited time in Annual Incentive Compensation Financial Component:
Individual Component: Management proposed and the Compensation and Benefits Committee approved a 362% individual performance payout for Mr. Micheletti. The Committee Safety Component: Mr. Micheletti’s safety component was based partially on his time as President and General Manager of the Long-Term Incentive Compensation For fiscal year Relocation Mr. Micheletti was offered a relocation package as part of his promotion to Senior Vice President – Coal Operations to cover his move from Texas to Montana. The Company paid $27,122 in 2011 primarily towards a home finding trip (up to a maximum of six days), temporary living expenses, and a miscellaneous allowance of one-month’s salary. Mr. Micheletti will incur additional expenses in 2012 to include his final moving expenses, transportation of household goods, and home purchase closing costs. Morris W. Kegley: General Counsel – Mining and Operations
Change in Role On February 29, 2012, the Annual Incentive Compensation Financial Component: The financial component for Mr. Kegley was based 30% on budgeted operating income and free cash flow at the consolidated corporate Individual Component: Management proposed and the Compensation and Benefits Committee approved a Safety Component: Not applicable. Long-Term Incentive Compensation For fiscal year
John V. O’Laughlin: Former Senior Vice President – Coal Operations
Change in Role On February 21, 2011, Mr. O’Laughlin accepted a new position with us as Vice President – Strategic Sourcing and Asset Management. The Board determined that the roles and responsibilities of Mr. O’Laughlin in this new position no longer require that he be considered an executive officer of the Company for reporting purposes under the rules and regulations of the Securities and Exchange Commission. Annual Incentive Compensation Financial Component: The financial component for Mr. O’Laughlin was based 30% on budgeted operating income and free cash flow at the consolidated corporate level and 40% on the four major mines maximizing contract incentives and/or operating income. The weighted actual performance for the corporate financial goals was 100%, resulting in 100% financial payout for that portion, while the mine-level goal paid out at 123%. Individual Component: Management proposed and the Compensation and Benefits Committee approved a 85% individual performance payout for Mr. O’Laughlin. Long-Term Incentive Compensation For fiscal year 2011, the Committee awarded Mr. O’Laughlin 9,046 restricted stock units based on his placement in the 60% long-term incentive tier, as discussed above. EXECUTIVE COMPENSATION FOR Summary Compensation Table The following
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Components of Total Compensation We believe in compensating our executive officers with a mix of both base salary and at risk compensation made up of cash and equity. For a thorough discussion of our compensation components and the percentage of at risk compensation, see “Components of the Executive Compensation Program for 2011” in the Compensation Discussion and Analysis section above. Non-Equity Incentive Plan Compensation Non-equity incentive plan compensation amounts are annual cash incentives under our Annual Incentive Plan (“AIP”). The AIP is funded based on various components, which are unique to each named executive officer, and may include our annual budgeted operating income performance, annual budgeted free cash flow, maximizing contract incentives at specific mines, MSHA average for reportable incident rate for surface mines in the coal industry, and individual performance goals, all of which are discussed above in “Compensation Discussion and Analysis.” Equity Awards Values for stock grants in the summary compensation table and numbers included in the grants of plan-based awards table relate to restricted stock and restricted stock units granted to the named executive officers under our stockholder-approved 2007 plan. The plan is administered by the Compensation and Benefits Committee, which has retained the exclusive authority to make awards under the plan. The committee approves all long-term incentive grants to executive officers other than the CEO, whose grants are approved by the Board. The committee also approves the overall grant pool for all other participants. The primary purpose of the long-term incentive plan is to link compensation with the long-term interests of stockholders.
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2011 Outstanding Equity Awards at Fiscal Year-End
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Stock Vested in
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2011 Pension Benefits
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Effective July 1, 2009, the Board froze all structures of our pension plan for non-union employees, including our named executive officers, resulting in no future benefits accruing under these plans. Prior to July 2009, each of the named executive officers participated in one of the same defined benefit pension plan structures offered to other non-union employees. Eligible employees become fully vested after five years of vested service. The Messrs. Paprzycki, Kathol, Micheletti, Kegley and Mr. Paprzycki is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr. Paprzycki are first payable on September 1, 2035. Mr. Paprzycki currently is not eligible for early retirement benefits.
Mr. Kathol is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr. Kathol are first payable on December 1, 2017. Mr. Kathol currently is not eligible for early retirement benefits.
Mr. Micheletti is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr.
Mr. Kegley is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr. Kegley are first payable on July 1, 2012. Mr. Kegley currently is not eligible for early retirement benefits.
Mr. O’Laughlin is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse).
Potential Payments upon Termination or Change-in-Control Our named executive officers are not entitled to any additional payments or benefits relating to termination of employment other than the retirement benefits described in the preceding compensation tables and participation in a severance policy that is generally available to all our employees. Our severance policy covers virtually all our employees, although the amount of the severance benefit depends upon employee of payment, which typically occurs in March of the following year. All incentive payouts are forfeited should a named executive officer leave our employment for any reason, unless otherwise expressly agreed to by the Compensation and Benefits Committee. The following table represents full walk-away amounts for each of our named executive officers upon the occurrence of certain events, assuming in each case that the event in question occurred as of December 31,
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CERTAIN TRANSACTIONS Policies and Procedures for Related Person Transactions Our Board has adopted written policies and procedures for the review of any transaction, arrangement, or relationship in which Westmoreland Coal Company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest. If a related person proposes to enter into a related person transaction, the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our Audit Committee. Whenever practicable, the reporting, review, and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the Chairman of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually. As appropriate for the circumstances, the Audit Committee will review and consider:
The Board has determined that certain transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of the policy, such as compensation to an executive officer if the compensation has been approved, or recommended to the Board for approval by the Compensation and Benefits Committee or an arrangement that is specifically contemplated by provisions of our certificate of incorporation or bylaws, such as the exculpation, indemnification, and directors’ and officers’ insurance arrangements contemplated by the certificate of incorporation and bylaws.
Certain Relationships and Related Transactions Tontine Note Transaction On March 4, 2008, we completed the sale of $15 million of senior secured convertible notes to Tontine Partners, L.P. and Tontine Capital Partners, L.P. pursuant to a Senior Secured Convertible Note Purchase Agreement dated as of March 4, 2008 among us, the Tontine partnerships, and Tontine Capital Associates, L.P., as collateral agent. The senior notes bore interest at a rate of 9% (which increased to 10% per annum in July 2010), payable in cash or in kind at our option, and were payable in full on March 4, 2013. In 2010, we paid the Tontine entities $1,236,438 of in kind interest and $462,363 in cash. On February 4, 2011, at the closing of a note transaction, Tontine Partners L.P. and Tontine Capital Partners, L.P. each converted $15,962,541 in principal amount of the senior secured convertible notes into common stock of Westmoreland at a conversion price of $8.50 per share. This conversion, coupled with the cash payment made on the closing date of the note transaction, resulted in full satisfaction of these senior secured convertible notes. Mr. Jeffrey Gendell, who is either a managing member of, or a managing member of the general partner of, the Tontine partnerships is deemed to beneficially own greater than 20% of our outstanding common stock. Diane Kathol Severance Payout Doug Kathol, our Executive Vice President and a named executive officer, is married to Diane Kathol who served as our Vice President OVERVIEW OF PROPOSALS This proxy statement contains four proposals requiring stockholder action. Proposal No. 1 requests the election of six directors to the Board, Proposal No. 2 requests advisory approval of the Company’s executive compensation, Proposal No. 3 requests the approval of amendments to the Amended and Restated 2007 Equity Incentive Plan, and Proposal No. 4 requests the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2012. Each of the proposals is discussed in more detail below. Proposal 1 – Election of Directors The Board has nominated directors Alessi, D’Appolonia, Hamilton, Klingaman, Packwood and Scharp to be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. On March 12, 2012, Mr. Coffey notified us that he will retire from the Board effective at the Annual Meeting after 12 years of dedicated service. As such, the Board decreased the size of the Board to six directors effective as of the Annual Meeting. While Tontine Capital Partners, L.P. and Tontine Partners, L.P. have the right to designate two individuals for election to our Board as directors pursuant to the Secured Convertible Note Purchase Agreement dated March 4, 2008, they have not so designated any directors at this time. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the six nominees named in this Proxy Statement. Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, for the election of the Board’s six nominees. Vote Required The six nominees receiving the highest number of affirmative votes of the shares entitled to be voted for them, up to the six directors to be elected by those shares, will be elected as directors to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. Recommendation of the Board The Board of Directors recommends you vote “FOR” the election of directors Alessi, D’Appolonia, Hamilton, Klingaman, Packwood and Scharp. Proposal 2 - Advisory Approval of the Company’s Executive Compensation The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory or nonbinding basis, the compensation of
In addition, compensation and governance practices implemented in recent years include the following:
Compensation Philosophy and Approach Westmoreland’s compensation philosophy for its named executive officers is designed to achieve several key objectives, including: focusing decision-making and behavior on goals that are consistent with the overall business strategy; creating a pay-for-performance culture, and allowing us to attract and retain employees with the skills critical to our long-term success. To achieve these objectives, Westmoreland uses a mix of base pay and incentive opportunities (short and long-term), while concentrating a majority of the executives’ reward opportunities in at-risk incentive pay. The design of the compensation program is intended to support our overall business objectives and to increase long-term stockholder value. In 2011, greater than 50% of target total compensation for each named executive officer was We considered the most recent stockholder advisory vote on executive compensation required by the proxy rules in reassessing these compensation policies and our compensation decisions and, based on the 99.2% favorable vote cast in 2011, believe stockholders support our approach and actions. The Compensation and Benefits Committee made no material changes to 2012 compensation packages given the overwhelming stockholder support. We intend to continue to seek stockholder guidance on executive compensation through an annual say-on-pay vote. We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” Proposal 2 approving, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement. The say-on-pay vote is advisory, and therefore not binding on us, the Compensation and Benefits Committee or our Board of Directors. Our Board of Directors and our Compensation and Benefits Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation and Benefits Committee will evaluate whether any actions are necessary to address those concerns. The Board has adopted a policy providing for annual say-on-pay advisory votes. Unless the Board modifies this policy, the next say-on-pay advisory vote will be held at our 2013 Annual Meeting. Vote Required Approval of Proposal 2 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting. Recommendation of the Board The Board of Directors recommends a vote FOR Proposal 2. Proposal 3 – Amendments to the Amended and Restated 2007 Equity Incentive Plan for Employees and Non-Employee Directors Reason for the Proposed Amendments The Board of Directors approved the 2007 Equity Incentive Plan for Employees and Non-Employee Directors (the “2007 Plan”) on March 9, 2007, and established the number of shares to be reserved for issuance under this plan at 700,000. On August 16, 2007, the Company’s stockholders approved the 2007 Plan. Currently, the 2007 Plan has only 55,655 shares available for issuance to employees and directors. After the issuance of approximately 35,000 shares to the director at the Annual Meeting, we will have 20,655 shares available for issuance. On February 29, 2012, the Board approved the Amended and Restated 2007 Equity Incentive Plan for Employees and Non-Employee Directors (the “Amended 2007 Plan”), which increases the share reserve by 700,000 shares. After giving effect to grants previously made under the 2007 Plan, the aggregate number of shares that would be available for issuance under the Amended 2007 Plan, assuming stockholder approval of the amendment to add an additional 700,000 shares for issuance thereunder, would be approximately 720,655 shares as of the date of this proxy statement. This number does not include the effect of forfeitures, if any, of outstanding awards. The Board believes that this amendment is in our best interests and our stockholders and is consistent with the compensation philosophy described in this proxy statement. Summary of Proposed Amendments In addition to the increased share reserve, the Board is also asking stockholders to approve additional amendments to the 2007 Plan, which include the following:
Amended and Restated 2007 Plan Summary The following is a brief summary description of the Amended 2007 Plan, which is qualified in its entirety by reference to the provisions of the Amended 2007 Plan itself, which is attached as Appendix A to this Proxy Statement.
The Amended 2007 Plan provides for the grant of incentive stock options intended to qualify under Internal Revenue Code Section 422, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards as described below (collectively, “Awards”).
Optionees receive the right to purchase a specified number of shares of common stock at a specified option price and subject to such other terms and conditions as are specified in connection with the option grant. Options may not be granted at an exercise price less than 100% of the fair market value of the common stock on the date of grant or for a term in excess of ten years. The Amended 2007 Plan permits the following forms of payment of the exercise price of options: (i) payment by cash, check or in connection with a “cashless exercise” through a broker, (ii) subject to certain conditions, surrender to the Company of shares of common stock, (iii) by means of a “net exercise” procedure; (iv) any other lawful means, or (v) any combination of these forms of payment. Unless approved by the Company’s stockholders, (i) no outstanding option may be amended to provide an exercise price less than the then-current exercise price of such option, and (ii) no option may be issued under the 2007 Plan in substitution for any outstanding option to purchase shares of common stock if the exercise price of such option is less than the then-current exercise price of the cancelled option.
A stock appreciation right, or SAR, is an award entitling the holder, upon exercise, to receive an amount in common stock or cash or a combination thereof determined by reference to appreciation, from and after the date of grant,
Restricted stock awards entitle recipients to acquire shares of common stock, subject to the right of the Company to repurchase all or part of such shares from the recipient in the event that the conditions specified in the applicable Award are not satisfied prior to the end of the applicable restriction period established for such Award.
Restricted stock unit awards entitle the recipient to receive
Under the Amended 2007 Plan, the Board of Directors has the right to grant other Awards based upon the common stock having such terms and conditions as the Board of Directors may determine, including the grant of shares based upon certain conditions, the grant of Awards that are valued in
The Compensation and Benefits Committee may determine, at the time of grant, that a restricted stock award, restricted stock unit award or other stock-based award granted to an employee will vest solely upon the achievement of specified performance criteria designed to qualify for deduction under Section 162(m) of the Code. The performance criteria for each such Award will be based on one or more of the following measures: (a) earnings before interest, taxes, depreciation and/or amortization, (b) earnings before operating income or profit, (c) operating efficiencies, (d) return on equity, assets, capital, capital employed, or investment, (e) after tax operating income, (f) net income, (g) earnings or book value per share, (h) cash flow(s), (i) total sales or revenues or sales or revenues per employee, (j) production, (k) stock price or total stockholder return, (l) dividends, (m) strategic business objectives consisting of one or more objectives based on meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or (n) except in the case of individuals who are “covered employees” under Section 162(m) of the Code, any other performance criteria established by the Compensation and Benefits Committee. These performance measures may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. Such performance goals may be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, and (v) charges for restructuring and rationalization programs. Such performance goals (i) may vary by employee and may be different for different Awards; (ii) may be particular to a employee or the department, branch, line of business, subsidiary, division or other unit in which
The Amended 2007 Plan provides for the automatic grant of Awards to members of the Board of Directors who are not employees of the Company (“Non-Employee Directors”). On the commencement of service on the Board, each Non-Employee Director will receive an Award with a value determined in a manner deemed appropriate by the Board, in an amount determined in the Board’s discretion. In addition, on the date of each annual meeting of stockholders, each Non-Employee Director who is both serving as a Amended 2007 Plan. Awards automatically granted to Non-Employee Directors will (i) have an exercise or base price equal to 100% of the fair market value of the common stock on the date of grant, (ii) vest according to the schedule specified in the Award, (iii) expire at the time specified in the Award, which in the case of Options will be the earlier of 10 years from the date of grant or three months following cessation of service on the Board, and (iv) contain such other terms and conditions as the Board determines. If a Non-Employee Director’s service terminates for any reason other than a Reorganization Event or Change in
Except as the Board of Directors may otherwise determine or provide in an Award, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an incentive stock option, pursuant to a qualified domestic relations order, and during the life of the grantee, will be exercisable only by the grantee.
Employees, officers, and directors of the Company and its subsidiaries and of other business ventures in which the Company has a controlling interest are eligible to be granted Awards under the Amended 2007 Plan. Under present law, however, incentive stock options may only be granted to employees of the Company and its subsidiaries.
All of the Company’s employees, officers and directors are eligible to receive Awards under the Amended 2007 Plan. Key Corporate Governance Practices in the Stock Plan The Amended 2007 Plan includes a number of provisions that we believe promote good corporate governance practices and reinforce the alignment between our equity compensation arrangements and the
Key Information If stockholders approve the Amended 2007 Plan, the total number of shares available for issuance will be approximately 720,655. If stockholders do not approve the Amended 2007 Plan, we will not have an adequate number of shares available for future equity awards and may not be able to effectively recruit new employees, motivate current employees or operate our equity compensation program. We manage our use of equity incentive awards carefully and maintained a reasonable “burn rate,” which we define as the number of shares subject to equity awards issued in a fiscal year, with double weighting put on full value restricted stock awards, as a percentage of our weighted average shares outstanding. Westmoreland’s three-year average burn rate of 2.67% is lower than the 4.02% burn rate used by Institutional Shareholders Services (ISS) to assess companies like ours in the energy industry. The ISS burn rate calculation is similar but not identical to our burn rate calculation. The following table shows the number of outstanding and available shares, by plan, before and after stockholder approval (assuming a total of 720,655 shares are available for issuance after approval, which reflects the 30,000 share issuance to the non-employee directors) and the total overhang as of the
Federal Income Tax Consequences The following tax discussion is a general summary as of the date of this proxy statement of the U.S. federal income tax consequences to the Company and the participants in the Amended 2007 Plan. The discussion is intended solely for general information of stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the Amended 2007 Plan. The discussion does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. Different tax rules may apply to specific participants and transactions under the 2007 Plan, particularly in jurisdictions outside the United States. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the 2007 Plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences. The grant of an option or restricted stock unit will create no tax consequences for the participant or the Company. A participant will have no taxable income upon exercise of an incentive stock option, except that the alternative minimum tax may apply. Upon exercise of an option other than an incentive stock option, a participant generally must recognize ordinary income equal to the fair market value of the shares acquired minus the exercise price. Upon a disposition of shares acquired by exercise of an incentive stock option before the end of the applicable incentive stock option holding periods, the participant generally must recognize ordinary income equal to the lesser of (1) the fair market value of the shares at the date of exercise minus the exercise price or (2) the amount realized upon the disposition of the incentive stock option shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock option holding periods are met) generally will result in only capital gain or loss. Other awards under the 2007 Plan (including restricted stock units, both time-based and performance-based) generally will result in ordinary income to the participant at the later of the time of delivery of cash, shares, or other awards, or the time that either the risk of forfeiture or restriction on transferability lapses on previously delivered cash, shares, or other awards. Except as discussed below, the Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an option, restricted stock unit award, or other awards, but will be entitled to no tax deduction relating to amounts that represent a capital gain to a participant. Thus, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods. Section 162(m) generally allows the Company to obtain tax deductions without limit for performance-based compensation. The Company intends that options and performance-based restricted stock unit awards granted under the 2007 Plan will continue to qualify as performance-based compensation not subject to Section 162(m)’s $1 million deductibility cap. A number of requirements must be met in order for particular compensation to so qualify, however, so there can be no assurance that such compensation under the 2007 Plan will be fully deductible under all circumstances. In addition, other awards under the 2007 Plan may not qualify as performance-based compensation under Section 162(m), and therefore compensation paid to executive officers in connection with such awards may not be deductible. Vote Required Approval of Proposal 4 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting. If stockholders approve the Amended 2007 Plan, it will replace the existing 2007 Plan. Recommendation of the Board The Board of Directors recommends a vote FOR Proposal 4. Proposal 4 – Ratification of Principal Independent Auditor The Audit Committee has appointed Ernst & Young LLP as the Company’s independent registered public accounting firm and as auditors of our consolidated financial statements for fiscal year
Auditor’s Fees The following table summarizes the fees of Ernst & Young LLP for fiscal years
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Pre-Approval Policy and Procedures The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our registered public accounting firm. This policy generally provides that we will not engage our registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures. From time-to-time, the Audit Committee may approve specified types of services that are expected to be provided to us by our registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. The Audit Committee has delegated to the Chairman of the Audit Committee the authority to approve any audit or non-audit services to be provided to us by our registered public accounting firm. Any approval of services by the Chairman of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee. All fees paid to Ernst & Young in
At the Annual Meeting, the stockholders are being asked to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for Vote Required Approval of Proposal Recommendation of the Board The Board of Directors recommends you vote “FOR” Proposal
Upon the written request of any person who on the record date was a record owner of our stock, or who represents in good faith that he or she was on such date a beneficial owner of such stock entitled to vote at the The Board has no present intention of bringing any other business before the March
Appendix A WESTMORELAND COAL COMPANY AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN FOR EMPLOYEES AND NON-EMPLOYEE DIRECTORS
The
All of the Company’s employees, officers and directors are eligible to be granted options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the Plan is deemed a “Participant”. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as
(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”), or any officer of the Company. All references in the Plan to the “Board” shall mean the Board or any such Committee or officer to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officer.
(a) Number of Shares. (1) Subject to adjustment under Section 10, Awards may be made under the Plan for up to 1,400,000 shares of common stock, $2.50 par value per share, of the Company (the “Common Stock”). (2) If any Award expires; is terminated, surrendered or canceled without having been fully exercised; is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right); or otherwise results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock otherwise held by a Participant and tendered to the (3) Shares tendered in payment of an option for a cashless, net or similar exercise, shares withheld for taxes, and shares attributable to cash-settled Awards shall not be again available for the grant of Awards under the Plan. (4) Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) Section 162(m) Per-Participant Limit. The maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 200,000 per calendar year. For purposes of the foregoing limit, the combination of an Option in tandem with a SAR (as each is hereafter defined) shall be treated as a single Award. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder (“Section 162(m)”). (c) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in - 2 - Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.
(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option.” (b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company, any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option. (c) Exercise Price; Fair Market Value. (1) The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement. The exercise price shall be not less than 100% of the Fair Market Value (as defined below) of a share of Common Stock on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value of a share of Common Stock on such future date. (2) The “Fair Market Value” of a share of Common Stock for purposes of the Plan shall be determined as follows: (A) if the Common Stock trades on a national securities exchange, the closing sale price (for the primary trading session) in the principal U.S. market for the Common Stock on the date of grant; or (B) if the Common Stock does not trade on any such exchange, the average of the closing bid and asked prices as reported by an authorized OTCBB market data vendor as listed on the OTCBB website (otcbb.com) on the date of grant; or (C) if the Common Stock is not publicly traded, the Board will determine the Fair Market Value for purposes of the Plan using any measure of value it determines to be appropriate (including, as it considers appropriate, relying on appraisals) in a manner consistent with the valuation principles under - 3 - Section 409A of the Code, except as the Board or Committee may expressly determine otherwise; or (D) for any date that is not a trading day, the Fair Market Value of a share of Common Stock for such date will be determined by using the closing sale price or average of the closing bid and asked prices, as appropriate, for the immediately preceding trading day and with the timing in the formulas above adjusted accordingly. The Board may substitute a particular time of day or other measure of “closing sale price” or “closing bid and asked prices” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Section 409A of the Code. The Board has sole discretion to determine the Fair Market Value for purposes of this Plan, and all Awards are conditioned on the Participants’ agreement that the Board’s determination is conclusive and binding even though others might make a different determination. (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement, provided, however, that no Option will be granted for a term in excess of 10 years. (e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the (f) Payment Upon Exercise. Common Stock purchased upon the exercise of (1) in cash or by check, payable to the order of the Company; (2) except as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding; (3) to the extent provided for in the applicable option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if - 4 - any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements; (4) to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Board in its sole discretion, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive (A) the number of shares of Common Stock underlying the Option so exercised reduced by (B) the number of shares of Common Stock equal to the aggregate exercise price of the Option divided by the Fair Market Value on the date of exercise; (5) to the extent provided for in the applicable Incentive Stock Option agreement or approved by the Board in its sole discretion, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive the number of shares of Common Stock underlying the Option so exercised reduced by the number of shares of Common Stock equal to the aggregate exercise price of the Option divided by the Fair Market Value on the date of exercise; provided, however, that such provision shall only be operative in an Incentive Stock Option agreement to the extent that the inclusion of the provision will not cause the Option to fail to qualify as an Incentive Stock Option under the applicable Code rules; (6) payment of such other lawful consideration as the Board may determine; or (7) by any combination of the above permitted forms of payment.
(a) General. The Board may grant Awards consisting of a stock appreciation right (“SAR”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be (b) Grants. SARs may be granted in tandem with, or independently of, Options granted under the Plan. (c) Grant or Base Price. The grant or base price or exercise price of an SAR shall not be less than 100% of the Fair Market Value per share of Common Stock on the (d) Term. The term of an SAR shall not be more than 10 years from the date of grant. (e) Exercise. SARs may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with any other documents required by the Board. - 5 -
(a) General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. (b) Terms and Conditions. (1) General. The Board shall determine the terms and conditions of an Award of Restricted Stock, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. (2) Dividends. Participants holding shares of Restricted Stock will be
(a) General. The Board may grant Awards entitling the recipient to receive shares of Common Stock to be delivered at the time such shares of Common Stock vest (“Restricted Stock Units”). (b) Terms and Conditions. (1) In General. The Board shall determine the terms and conditions of a Restricted Stock Unit Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. (2) Settlement. Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Award agreement. The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred in a manner consistent with Section 409A, on a mandatory basis or at the election of the Participant. (3) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units. (4) Dividend Equivalents. To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of - 6 - outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cash and/or shares of Common Stock and may be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board in its sole discretion, subject in each case to such terms and conditions as the Board shall establish, in each case to be set forth in the applicable Award agreement.
Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.
(a) Initial Grant. Upon the commencement of service on the Board by any individual who is not then an employee of the Company or any subsidiary of the Company, the Company may elect to grant to such person an Award with a value determined in a manner deemed appropriate by the Board, with such award being made in the Board’s sole discretion. (b) Annual Grant. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each member of the Board of Directors of the Company who is serving as a director of the Company immediately following such annual meeting and who is not then an employee of the Company or any of its subsidiaries, an Award with a value equal to $70,000 (rounded up to the nearest whole share) based on the Fair Market Value of the Company’s common stock. (c) Grant or Base Price. The grant or base price or exercise price of an Award granted under this Section 6 shall not be less than 100% of the Fair Market Value per share of Common Stock on the date of grant of the Award. (d) Terms of Director Awards. (1) If a Participant’s service as a director terminates for any reason other than a Reorganization Event or a Change in Control Event, and if the Participant has served as a director for three years or more, then such Participant’s Awards shall vest and become fully exercisable on the date such Participant ceases to be a director. If a Participant’s service as a director terminates for any reason other than a Reorganization Event or a Change in Control Event, and such Participant has served as a director for less than three years, then all of the Participant’s unvested Awards shall expire on the date such Participant ceases to be a director; provided, however, that the Board may in its sole discretion provide for the vesting of any - 7 - unvested Award if the Participant’s service as a director terminates by reason of death or disability. (2) Awards granted under this Section 10 shall expire at the time specified in the relevant Award, which in the case of Options shall be the earlier of 10 years from the date of grant or three months following cessation of Board service. (e) Board Discretion. This Plan is not intended to limit the Board’s ability to revise the incentive compensation payable to the directors, and the Board retains the specific authority to from time to time increase or decrease the dollar values specified in paragraph (b) and to amend the terms of director Awards as otherwise permitted by this Plan.
(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the sub-limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share of each outstanding Option, (iv) the share- and per-share provisions and the grant or base price of each outstanding SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding Award of Restricted Stock or RSUs, (vi) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, and (vii) the terms and conditions of each Award issuable under Section 6, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner (b) Reorganization Events. (1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction or (c) any liquidation or dissolution of the Company. (2) Consequences of a Reorganization Event on Awards Other than Restricted Stock. In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted - 8 - Stock on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that the Participant’s unexercised Options or other unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to a Participant equal to the excess, if any, of (A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the Acquisition Price) over (B) the aggregate exercise price of all such outstanding Options or other Awards and any applicable tax withholdings, in exchange for the termination of such Options or other Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under this paragraph (2), the Board shall not be obligated by the Plan to treat all Awards, or all Awards of the same type, identically. For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. (3) Consequences of a Reorganization Event on Restricted Stock. Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding share of Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Restricted Stock. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Award of Restricted Stock or any other agreement between a Participant and the Company, all restrictions and - 9 - conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied. (c) Change in Control Events. (1) Definition. A “Change in Control Event” shall mean: (A) (I) except as provided in clause (A)(II) below, the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (A), the following acquisitions shall not constitute a Change in Control Event: (i) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iii) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (C) of this definition; and provided, further, that if any person beneficially owns 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, but notwithstanding such ownership, a Change in Control Event has not occurred because the Person’s acquisition of all or a portion of such Person’s shares is or was an acquisition described in clause (i) of the preceding proviso, then the acquisition by that Person of any additional shares of Common Stock other than pursuant to a stock split, stock dividend, or other similar event shall constitute a Change in Control Event; or (II) notwithstanding the foregoing clause (A)(I), the acquisition of 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities shall not be a Change of Control Event if the Person acquiring such interest in the Company’s outstanding securities does not thereby become an “Acquiring Person” under the terms of the Rights Agreement (defined below) in effect on the date of the shareholder approval of this Plan; provided, however, that if such Person would become an “Acquiring Person” under the terms of the Rights Agreement upon the acquisition of a specified percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities greater than 20% (the “Modified Ownership Threshold”), then it shall be a Change of Control Event under this Plan if such Person acquires a beneficial interest in the Outstanding Company - 10 - Common Stock or the Outstanding Company Voting Securities at or above the Modified Ownership Threshold, thereby making such Person an “Acquiring Person” under the terms of the Rights Agreement. The “Rights Agreement” referred to in this clause (A)(II) means the Amended and Restated Rights Agreement, dated as of February 7, 2003, between the Company and Computershare Trust Company, N.A. (formerly known as EquiServe Trust Company, N.A.), as rights agent, as amended by the First Amendment to the Amended and Restated Rights Agreement, dated as of May 2, 2007. (B) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of this Plan by the Board or (y) who was nominated pursuant to the terms of the Standby Purchase Agreement, dated as of May 2, 2007 between the Company and Tontine Capital Partners, L.P. or (z) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or (C) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common - 11 - stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or (D) the liquidation or dissolution of the Company. (2) Effect on Awards. Unless specifically provided to the contrary in the instrument evidencing any Award or any other agreement between a Participant and the Company, upon a Change of Control Event, unvested Awards will automatically become vested or exercisable, and all restrictions and conditions on Restricted Stock shall automatically be deemed terminated or satisfied: (a) if the Participant is an employee and is Terminated within 12 months following such Change of Control; or (b) if the Participant is a director and is removed from the Board within 12 months of the Change of Control, or, if a regular meeting of shareholders occurs within 12 months of the Change of Control, such director is not nominated for re-election at such meeting after he or she expresses a desire to be so nominated. For purposes of the foregoing, “Terminated” means involuntary dismissal or a material change in the employee’s level of total compensation or a material change in his or her level of responsibility which, in either such case, causes the employee to voluntarily terminate his or her employment.
(a) Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a domestic relations order acceptable to the Company its sole discretion, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if, with respect to such proposed transferee, the Company would be eligible to use a Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Such written instrument may be in the form of an agreement signed by the Company and the Participant or a written confirming memorandum to the Participant from the Company. Each Award may contain terms and conditions in addition to those set forth in the Plan. - 12 - (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. (d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award. (e) Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. (f) Amendment of Award. Subject to Section 5(g), the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 10 hereof. Notwithstanding the foregoing, the Board may amend an Award to comply with Section 954 of the Dodd Frank Act (the “clawback” requirements) without Participant consent. (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company - 13 - such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. (i) Limitation on Repricing; Buyout. Unless such action is approved by the Company’s stockholders: (i) no (j) Performance Awards. (1) Grants. Restricted Stock, RSUs and Other Stock-Based Awards under the Plan may be made subject to the achievement of performance goals pursuant to this Section 11(i) (“Performance Awards”), subject to the limit in Section 4(b) on shares covered by such grants. (2) Committee. Grants of Performance Awards to any Covered Employee intended to qualify as “performance-based compensation” under Section 162(m) (“Performance- Based Compensation”) shall be made only by a Committee (or subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committee making Awards qualifying as “performance-based compensation” under Section 162(m). In the case of such Awards granted to Covered Employees, references to the Board or to a Committee shall be deemed to be references to such Committee or subcommittee. “Covered Employee” shall mean any person who is a “covered employee” under Section 162(m)(3) of the Code. (3) Performance Measures. For any Award that is intended to qualify as Performance-Based Compensation, the Committee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or more objective performance measures established by the Committee, which shall be based on the relative or absolute attainment of specified levels of one or any combination of the following: (A) earnings before interest, taxes, depreciation and/or amortization, (B) earnings before operating income or profit, (C) operating efficiencies, (D) return on equity, assets, capital, capital employed, or investment, (E) after tax operating income, - 14 - (F) net income, (G) earnings or book value per share, (H) cash flow(s), (I) total sales or revenues or sales or revenues per employee, (J) production (separate work units or SWUs), (K) stock price or total stockholder return, (L) dividends, (M) strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or (N) except in the case of a Covered Employee, any other performance criteria established by the Committee, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. Such performance measures may be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, and (v) charges for restructuring and rationalization programs. Such performance measures: (i) may vary by Participant and may be different for different Awards; (ii) may be particular to a Participant or the department, branch, line of business, subsidiary, division, operating unit, or other unit in which the Participant works and may cover such period as may be specified by the Committee; and (iii) shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m). Awards that are (4) Adjustments. Notwithstanding any provision of the Plan, with respect to any Performance Award that is intended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance measures except in the case of the death or disability of the Participant or a change in control of the Company. (5) Other. The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation. - 15 -
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. (c) Effective Date and Term of Plan. This amended and restated version of the Plan shall become effective on the date the Plan is approved by the Company’s stockholders (the “Effective Date”). No Awards shall be granted under the Plan after the expiration of 10 years from the Effective Date, but Awards previously granted may extend beyond that date. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)); (ii) no amendment that would require stockholder approval under the rules of American Stock Exchange (“AMEX”) may be made effective unless and until such amendment shall have been approved by the Company’s stockholders; and (iii) if the AMEX amends its corporate governance rules so that such rules no longer require stockholder approval of “material amendments” to equity compensation plans, then, from and after the effective date of such amendment to the AMEX rules, no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 4(c) or 10), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants eligible to participate in the Plan shall be effective unless stockholder approval is obtained. In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this - 16 - (e) Compliance with Code Section 409A. No Award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A is not so exempt or compliant or for any action taken by the Board. To the extent any Award constitutes deferred compensation subject to 409A that is payable to a specified employee on separation from service, payment of the Award will be (f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the - 17 - |