IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 22, 2012. | | April 14, 2009 | www.westmoreland.comThis 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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WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 2nd Floor
9540 S. Maroon Circle, Suite 200 Englewood, Colorado Springs, Colorado 8090380112 PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held May 14, 2009 22, 2012 GENERAL INFORMATION
GENERAL INFORMATION ABOUT THE 2012 ANNUAL MEETING OF STOCKHOLDERS This proxy statement is being furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors (the “Board”) of Westmoreland Coal Company a Delaware corporation (“we,” “us,” or(the “Company”) to holders of our common stock and depositary shares in connection with the “Company”), for usesolicitation by the Board of Directors of proxies to be voted at ourthe Annual Meeting of Stockholders of Westmoreland Coal Company to be held at our corporate officesThe Crowne Plaza Hotel located at 227 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado,27th Street, Billings, Montana 59101 on Thursday,Tuesday, May 14, 200922, 2012 at 8:30 a.m., Mountain Daylight Time, (MDT),for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders (the “Annual Meeting”) and at any and all postponements or adjournments thereof (collectively referred to herein as the “Meeting”). this proxy statement. This proxy statement the accompanying form of proxy and the Notice ofenclosed proxy voter card relating to the Annual Meeting will beof Stockholders are first being mailed or given to our stockholders on or about April 14, 2009.9, 2012. As of March 26, 2012, the record date, members of the Company’s senior management and directors are the record and beneficial owners of a total of 316,444 shares (approximately 2.3%) of the Company’s outstanding common stock and have no ownership in the Company’s outstanding depositary shares. It is management’s intention to vote all of its shares in the manner recommended by the Board for each matter to be considered by the stockholders.
QUESTIONS AND ANSWERS ABOUT THE 20092012 ANNUAL MEETING OF STOCKHOLDERS
What is being voted on at the Meeting?
The Board is asking stockholders to vote on the election of directors to serve for a one-year term.
Who can vote at the Meeting?meeting?
The Board set the close of business on April 1, 2009 as the record date for the Meeting. Only persons holding shares of record ofstockholders who owned our common stock $2.50 par value (“common stock”), and ouror depositary shares, each of which represents one quarter of a share of Series A Convertible Exchangeable Preferred Stock, $1.00 par value (“depositary shares”), of record at the close of business on April 1, 2009 are entitled to receive notice of and to vote at the Meeting. Under the Certificate of Designation governing the Series A Preferred Stock, the holders of the Series A Preferred Stock are entitled to vote on any matter on which the holders of common stockMarch 26, 2012 are entitled to vote. However, when six or more quarterly dividends are accumulated and unpaid, asEach holder of common stock is presently the case, the holdersentitled to one vote per share. Each holder of the Series A Preferred Stockdepositary shares is entitled to one vote separately from the common stockholders to elect two directors. As such, only common stockholders will vote on Proposal 1 and only Series A Preferred Stockholders will vote on Proposal 2. At the close of business on April 1, 2009, thereper share. There were 9,641,77313,899,965 shares of common stock outstanding and entitled to vote on Proposal 1 and 640,515639,840 depositary shares outstanding and entitled to vote on Proposal 2.March 26, 2012.
What constitutes a quorum for the Meeting?meeting?
The holders of a majority of the aggregate voting power of the common stock and depositary shares outstanding on the record date, present in person or by proxy at the Annual Meeting, shall constitute a quorum to conduct business at the Annual Meeting. Abstentions and “broker non-votes” (shares held by a broker non-votes will be treated as presentor nominee that does not have discretionary authority to vote on a particular matter and has not received voting instructions from its client) are counted for purposes of determining the presence or absence of a quorum.quorum for the transaction of business at the Annual Meeting.
| ● | Via the Internet at www.proxyvote.com; |
| ● | By phone at 1-800-690-6903; or |
| ● | By completing and mailing in a paper proxy card. |
If your shares are registered directly in your name with Computershare Trust Company, our transfer agent, you completeare considered a stockholder of record with respect to those shares and properly sign the accompanying proxy card and return itvoting instructions have been sent directly to us, it will be voted as you direct, unless you later revoke the proxy.Unless instructions to the contrary are marked, or if no instructions are specified, shares represented by a proxy card will be voted in favor of the proposals set forth on the proxy card , and in the discretion of the persons named as proxies on such other matters as may properly come before the Meeting.Broadridge Financial Solutions, Inc. If, you hold shares in your name in the records of our transfer agent, and you attend the Meeting, you may deliver your completed proxy card in person. Iflike most stockholders, you hold your shares in
“street “street name” through a stockbroker, bank or other nominee rather than directly in your own name,” that is, if you holdmay not vote your shares through a brokerin person at the Annual Meeting without obtaining authorization from your stockbroker, bank or other nominee, and you wishneed to submit voting instructions to your stockbroker, bank or other nominee in order to cast your vote. Generally, you will receive instructions from your stockbroker, bank or other nominee that you must follow in order to have your shares voted.
We encourage you to register your vote via the Internet. If you attend the Annual Meeting, you may also submit your vote in person and any votes that you previously submitted – whether via the Internet, by phone or by mail – will be superseded by the vote that you cast at the Annual Meeting. Whether your proxy is submitted by the Internet, by phone or by mail, if it is properly completed and submitted and if you do not revoke it prior to the Annual Meeting, you will need to obtain a proxy card from the institution that holds your shares. Separate proxy cards are being sent to common stockholders and to holders of depositary shares. If you hold only shares of common stock or only depositary shares, you will be sent onlyvoted at the proxy card relevant to your type of equity ownership. However,Annual Meeting as specified by you or, if you own both common stock and depositary shares, you will be sent bothdo not specify a choice as to a particular matter, in the manner set forth in this proxy cards and you should complete both proxy cards if you wish to vote your respective interests on Proposals 1 and 2.statement.
With respect to Proposal 2, the depositary shareholders will instruct the depositary to either vote the Series A Preferred Stock for director nominees or to withhold votes from director nominees. Because each share of Series A Preferred Stock is entitled to four votes, and because each share of Series A Preferred Stock is represented by four depositary shares, in theory, each depositary share represents one vote.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy card, you may change your vote at any time before the proxy is exercised by either filing with theour Secretary of the Company a written notice of revocation or a duly executed proxy card bearing a later date or by voting in person at the Annual Meeting. The powers of the proxy holders will be suspended if you attend the Annual Meeting in person and so request. However, attendance at the Annual Meeting will not, by itself, revoke a previously granted proxy. If you want to change or revoke your proxy and you hold your shares in “street name,” contact your broker or the nominee that holds your shares. Any written notice of revocation sent to us must include the stockholder’s name and must be received prior to the Annual Meeting to be effective.
What vote is required to approve each item? TheOur directors are elected by plurality vote, which means that, with respect to Proposal 1, the nominees who receive the largest number of “FOR” votes cast will be elected. Neither broker non-votes nor abstentions will have any effect on the election of directors. Approval of Proposals 2, 3 and 4 requires the affirmative vote of a pluralitymajority of the votes cast is required for the election of directors. Cumulative voting is not permitted in the election of directors. As a result, withholding authorityshares present or represented by proxy and entitled to vote for a director nomineeat the Annual Meeting. Broker non-votes will have no effect with respect to any non-routine matter for which a broker does not have authority to vote. Abstentions will have the same effect as a vote against the proposals, other than Proposal 1.
Which ballot measures are considered “routine” or “non-routine”? The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2012 (Proposal 4) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore broker non-votes are not expected in connection with Proposal 4. The election of directors will not affect the outcome(Proposal 1), advisory approval of the electionCompany’s executive compensation (Proposal 2), and the approval of directors. Howthe amendments to the Company’s Amended and Restated 2007 Equity Incentive Plan for Employees and Non-Employee Directors (Proposal 3) are matters considered non-routine under applicable rules. A broker non-votes and abstentions treated?
Under the rules applicable to broker-dealers, the proposal for the election of a director is considered to be a routine matter upon which brokerage firms mayor other nominee cannot vote in their discretion on behalf of their clients if such clients have not furnished voting instructions. A “broker non-vote” occurs when a broker’s customer does not provide the broker with votingwithout instructions on non-routine matters, for shares owned by the customer, but held in the name of the broker. For such non-routine matters, theand therefore there may be broker cannot vote either waynon-votes on Proposals 1, 2 and reports the number of such shares as “non-votes.” Because all matters to be voted upon at the Meeting are routine matters and give brokers discretionary voting powers, there will not be any broker non-votes.3.
Abstentions are counted in tabulations of the votes cast on proposals presented to stockholders. However, for the election of directors, abstentions will not affect the outcome.
How are you handling solicitation of votes?
The accompanying proxy is solicited on behalf of our Board.Board and the cost of solicitation borne by us. In addition to solicitations by mail, the Company’sour directors, officers, and employees may solicit proxies by telephone,e-mail facsimile, and personal interview, but will receive no additional compensation for doing so. The CompanyWe will also request brokerage houses, custodians, nominees, and fiduciaries to forward copies of the proxy material to those persons for whom they hold shares and request instructions for voting the proxies. The CompanyWe will reimburse those brokerage houses and other persons for their reasonable expenses for such services.
Do I have any rights of appraisal?
Under Delaware law, stockholders are not entitled to dissenters’ rights on any proposal referred to herein.
Where can I find the voting results of the Annual Meeting?
We will announce preliminary general voting results at the Annual Meeting and publish final detailed voting results on a Form 8-K that we will file within four business days after the Annual Meeting.
How do I submit a stockholder proposal for the 2013 Annual Meeting?
Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement and proxy card for the 2013 Annual Meeting of Stockholders (the “2013 Annual Meeting”) must be submitted to the Secretary at our offices, 9540 S. Maroon Circle, Suite 200, Englewood, Colorado 80112, no later than November 28, 2012. In addition, such proposals must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934.
If a stockholder wishes to present a proposal before the 2013 Annual Meeting, without having the proposal included in our proxy statement and proxy card, such stockholder must give written notice to the Secretary at the address noted above. The Secretary must receive such notice no earlier than January 22, 2013 and no later than February 21, 2013, and the stockholder must comply with the provisions of Sections 2.5 or 2.6, as applicable, of our bylaws. Only proposals included in the proxy statement or that comply with our advance notice bylaw requirements will be considered properly brought before the Annual Meeting.
Does the Company offer an opportunity to receive future proxy materials electronically?
Yes. If you are a stockholder of record or a member of the 401(k) plan, you may, if you wish, receive future proxy statements and annual reports online rather than receiving proxy materials in paper form. If you elect this feature, you will receive an e-mail message notifying you when the materials are available, along with a web address for viewing the materials and instructions for voting by telephone or on the Internet. If you have more than one account, you may receive separate e-mail notifications for each account. You may sign up for electronic delivery in two ways:
| ● | 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/wlb. |
If you received this proxy statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future. If you hold your shares in a brokerage account, you may also have the opportunity to receive proxy materials electronically. Please follow the instructions of your broker.
How can I get electronic access to the proxy materials and the annual report?
This proxy statement and our 20082011 Annual Report are available at www.edocumentview.com/WLB.
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www.proxyvote.com; reference your ballot materials for access information. PROPOSAL 1
Will I receive a separate proxy statement if I share the same address and last name as another stockholder? ELECTION OF DIRECTORS BY THE HOLDERS OF COMMON STOCK
The Nominating and Corporate Governance Committee has recommended thatNo. If you are the three individuals named below be nominated for election as directors (the “Common Stockholder Nominees”). The Board has approved such recommendation and directed thatbeneficial owner, but not the three individuals named below be designated as nominees for the Board. Eachrecord holder, of the nominees is now a director of the Company. Each person elected at the Meeting shall hold office until the next annual meeting of stockholders, or until his death, resignation, or removal, if earlier.
In March 2008, we sold $15 million of Senior Secured Convertible Notes (the “Senior Notes”) to Tontine Capital Partners, L.P. and Tontine Partners, L.P. (together with their affiliates, “Tontine”). Pursuant to the Senior Secured Convertible Note Purchase Agreement dated March 4, 2008, as long as Tontine owns at least 10% of the outstanding shares of Common Stock (including the shares issuable upon conversion of the Senior Notes on an as-converted basis), Tontine has the right to designate two individuals for election to our Board who are reasonably acceptable to the Board. As of the datestock, your broker, bank or other nominee may only deliver one copy of this proxy statement Tontineand our Annual Report to multiple stockholders who share an address, unless that nominee has not designated any individualsreceived contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement and our Annual Report to serve on our Board.a stockholder at a shared address to which a single copy of the documents was delivered. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.
| 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 |
Director Information The persons named onBoard has fixed the proxy card intendnumber of directors following the Annual Meeting at six. All our directors bring to voteour Board a wealth of leadership experience derived from their service as executives of corporations. Certain individual qualifications and skills of our directors that contribute to the Board’s effectiveness as a whole are described in the following paragraphs. Keith E. Alessi serves as a Director and our Chief Executive Officer. Since he began working for us in 2007, he has assumed various roles including Executive Chairman, President and other various interim roles. Prior to Westmoreland, Mr. Alessi was an adjunct lecturer at the electionRoss School of Business at the University of Michigan from 2001 to 2010 and was an Adjunct Professor at The Washington and Lee University Law School from 1999 to 2007. He previously served as Chief Executive Officer, Chief Operating Officer or Chief Financial Officer of a number of public and private companies from 1982 to 2000. Mr. Alessi currently serves as a member of the Common Stockholder Nomineesboard of directors of Town Sports International Holdings, Inc. and MWI Veterinary Supply, Inc.
Mr. Alessi has over 30 years of turnaround management experience gained in senior executive capacity. This has given him unique insights into the hurdles, challenges and opportunities facing Westmoreland and provides him the necessary leadership experience to lead the Company.
Michael R. D’Appolonia most recently served as President and Chief Executive Officer of Kinetic Systems, Inc., a global provider of process and mechanical solutions to the electronics, solar and biopharmaceutical industries. From 1986 to 2006, Mr. D’Appolonia was an executive and Principal of Nightingale & Associates, LLC, and its predecessor company Nightingale & Associates, Inc., a global management consulting firm providing financial and operational restructuring services to mid-market companies in the US and overseas. From January 2002 through June 2006, Mr. D’Appolonia served as Nightingale’s President. Mr. D’Appolonia is a member of the board of directors of Exide Technologies, Inc. In addition, he was a member of the board of directors of The Washington Group International, Inc. from 2001 to 2007.
Mr. D’Appolonia’s experience as a Chief Executive Officer of a large global organization, along with his public company board experience, brings to our Board the perspective of a leader facing a similar set of current external economic, social and governance issues.
Gail E. Hamilton most recently served as Executive Vice President of Symantec Corporation, an infrastructure software and services provider, retiring in 2005. Previously, she served as the General Manager of the Communications Division of Compaq Computer Corporation and as the General Manager of the Telecom Platform Division for Hewlett-Packard Company. She is currently a director of Arrow Electronics Inc., OpenText Corp., and Ixia. In the last five years, Ms. Hamilton has also served as a director of Washington Group International and Surgient, Inc.
Ms. Hamilton is a former senior executive with business and operational experience at a public technology company, whose strategic planning and business development experience are invaluable in guiding the development and progression of our information technology infrastructure and programs. In addition, Ms. Hamilton’s extensive public and private board experience will bring further professionalism and insight to the board room.
Richard M. Klingaman has been a consultant to the natural resources and energy industries since May 1992. Prior to consulting, Mr. Klingaman was a senior executive with Penn Virginia Corporation, a natural resources company specializing in coal, oil, natural gas, timber, lime and limestone.
Mr. Klingaman’s extensive experience in the mining and energy industries, including as Senior Vice President of a large natural resources company, provides him with an intimate knowledge of our operations and our industry.
Jan B. Packwood was the President and Chief Executive Officer of IDACORP, Inc. (NYSE: IDA), a holding company whose main subsidiary, Idaho Power Company, is an electric utility engaged in the generation, transmission, distribution, sale and purchase of electric energy, from 1999 to 2006. Prior to such time, Mr. Packwood served in various executive-level capacities of Idaho Power Company beginning in the 1980s. He currently serves as a director of IDACORP, Inc. and of various IDACORP, Inc. subsidiaries, including Idaho Power Company, IDACORP Financial Services, Inc. and Ida-West Energy Company.
As the former President and Chief Executive Officer of an electric utility involved in the mining and use of coal in the Pacific Northwest, Mr. Packwood brings to the Board a vast knowledge of our and our main customers’ business, including an understanding of the risks faced by our own power plant and the power plants we supply. This expertise will be invaluable in directing the future of our power plant operations, as well as providing insight into potential growth and expansion activities in our mining segment. Robert C. Scharp was previously the Chief Executive Officer of Shell Coal Pty Ltd from 1997 to 2000 and then Chief Executive Officer of Anglo Coal Australia from 2000 to 2001. He served as the Chairman of the Shell Canada Energy Mining Advisory Council from 2005 to 2010. He had a 22 year career with Kerr McGee Corporation including serving as President - Kerr McGee Coal Corporation and Senior Vice President - Oil and Gas Production. Mr. Scharp was a director of Bucyrus International from 2005 to 2011 and was a director of Foundation Coal Holdings from 2005 to 2009. Mr. Scharp is also a retired Army National Guard colonel.
Mr. Scharp brings a wealth of coal mining industry experience to the Board, including invaluable chief executive operational oversight of coal mine operations. Mr. Scharp’s vast industry experience will assist the Board in driving future operational mining excellence and evaluating potential growth and expansion opportunities.
Executive Officer Information
Keith E. Alessi, our Chief Executive Officer, is discussed above under “Director Information.”
Jennifer S. Grafton joined Westmoreland as Associate General Counsel in December 2008 and was named below. Each Common Stockholder NomineeGeneral Counsel and Secretary in February 2011. Prior to Westmoreland, Ms. Grafton worked in the corporate group of various Denver-based and national law firms focusing her practice on securities and corporate governance. She is a member of the Colorado bar.
Douglas P. Kathol joined Westmoreland in 2003 as Vice President – Development, adding additional responsibility as Treasurer in 2008. In 2010, Mr. Kathol was named Executive Vice President. Prior to Westmoreland, Mr. Kathol spent almost twenty years in various positions, including Senior Vice President of Norwest Corporation, a consulting firm providing expertise to the energy, mining, and natural resources industries.
Robert P. King joined Westmoreland in March 2012 as President and Chief Operating Officer. From 2006 through 2012, Mr. King held various executive leadership roles at Consol Energy, Inc., including Executive Vice President – Business Advancement and Support Services from 2009 through March 2012. Mr. King has consentedover 30 years experience in the coal industry, both underground and surface mines.
Joseph E. Micheletti joined Westmoreland in 2001 and has held a series of positions with Westmoreland since such time, including President and General Manager of our Jewett Mine. In June 2011, Mr. Micheletti was named Senior Vice President – Coal Operations. Mr. Micheletti has worked in the production, maintenance, processing, and engineering disciplines of the mining industry for 24 years and sits as a Director of the Rocky Mountain Coal Mining Institute.
Kevin A. Paprzycki joined Westmoreland as Controller and Principal Accounting Officer in June 2006 and was named Chief Financial Officer in April 2008. In June 2010, he was also named Treasurer. Prior to being namedWestmoreland, Mr. Paprzycki was Corporate Controller at Applied Films Corporation from 2005 to 2006. Mr. Paprzycki became a certified public accountant in 1994 and a certified financial manager and certified management accountant in 2004.
We are committed to serve if elected. If any Common Stockholder Nominee should decline or be unablemaintaining the highest standards of business conduct and corporate governance, which we believe are essential to serve,running our business efficiently, serving our stockholders and maintaining our integrity in the persons named onmarketplace. The Code of Conduct Handbook for directors, officers and employees, in conjunction with the proxy card will vote for the electionCertificate of such substitute nominee as shall have been recommended by the NominatingIncorporation, Bylaws, Board committee charters and Corporate Governance Committee and designated byGuidelines, form the Board. The Company has no reason to believe that any Common Stockholder Nominee will decline or be unable to serve. The size of the Board is fixed at six directors, although only five director nominees have been recommended for election by the Board. The vacancy occurred when Delbert L. Lobb resigned from the Board in January 2009. The Board is considering its options for addressing the vacancy, including the nomination of additional directors at such time as qualified candidates are identified, or reducing the size of the Board to five. The proxies cannot be voted for a greater number of nominees than the number of nominees named.
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Information about the Common Stockholder Nominees follows:
| | | | | | | | | | | | | | | | | Business Experience During Past Five Years and
| | | | Director
| | | Name | | Other Directorships | | Age | | Since | | Current Committees | | | | Keith E. Alessi | | Executive Chairman of the Company (May 2008 to present); President and Chief Executive Officer of the Company (August 2007 to April 2008 and January 2009 to present); Interim President and Interim Chief Executive Office of the Company (May 2007 to August 2007); Adjunct lecturer at the Ross School of Business at the University of Michigan (March 2002 to present); Chief Executive Officer of Lifestyle Improvement Centers, LLC (April 2003 to May 2006); and member of the Board of Directors of Town Sports International Holdings, Inc. (April 1997 to present), H&E Equipment Services, Inc. (November 2002 to present) and MWI Veterinary Supply, Inc. (2003 to present). | | | 54 | | | | 2007 | | | Executive (Chairman) | | Thomas J. Coffey | | Partner, B2B CFO Partners, LLC, a professional services organization (December 2005 to present); Vice President-Finance, Global Infrastructure Services (July 1999 to May 2005) and Vice President-Operations Analysis (April 1998 to July 1999) of Unisys Corporation, a technology services company; Senior Vice President, Chief Financial Officer and Treasurer of Intelligent Electronics, Inc., a technology distribution company (1995 to September 1997); and Partner of KPMG (1985 to 1995). | | | 56 | | | | 2000 | | | Audit (Chairman), Compensation and Benefits, Nominating and Corporate Governance | | Michael R. D’Appolonia | | President and Chief Executive Officer, Kinetic Systems, Inc., a global provider of process and mechanical solutions to the electronics, solar and biopharmaceutical industries (April 2006 to present); President of Nightingale & Associates, LLC, a global management consulting firm providing financial and operational restructuring services (July 1986 to April 2006); Former executive officer of Cone Mills Corporation, Moll Industries, Inc., McCulloch Corporation, Ametech, Inc., Halston Borghese, Inc. and Simmons Upholstered Furniture Inc.; Member of the Board of Directors of Kinetic Systems Inc. (April 2006 to present); Member of the Board of Directors of The Washington Group International, Inc. (May 2001 to November 2007), and Exide Technologies, Inc. (April 2005 to present). | | | 60 | | | | 2008 | | | Executive, Compensation and Benefits |
The Board of Directors recommends that holders of Common Stock vote “FOR”
the election of the Common Stockholder Nominees.
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PROPOSAL 2
ELECTION OF DIRECTORS BY THE HOLDERS OF SERIES A PREFERRED STOCK
The holders of the Company’s Series A Preferred Stock are entitled to elect two members of the Company’s Board. The Nominating and Corporate Governance Committee has recommended that the individuals named below (the “Depositary Stockholder Nominees”) be nominated for election as directors. The Board has approved such recommendation and directed that the individuals named below be designated as nomineesframework for the Board.
Each person elected at the Meeting shall hold office until the next annual meetinggovernance of stockholders, or until his death, resignation, or removal, if earlier. In addition, if the special voting rightsWestmoreland. All of the Series A Preferred Stock terminate, the terms of office of the directors elected by the holders of the Series A Preferred Stock will immediately terminate. The special voting rights of the Series A Preferred Stock would terminate if, for example, the Company were to redeem all of the outstanding Series A Preferred Stock.
The persons named on the proxy card intend to vote for the election of the Depositary Stockholder Nominees named below. Each Depositary Stockholder Nominee has consented to being named and to serve if elected. If any Depositary Stockholder Nominee should decline or be unable to serve, the persons named on the proxy card will vote for the election of such substitute nominee as shall have been recommended by the Nominating and Corporate Governance Committee and designated by the Board. The Company has no reason to believe that any Depositary Stockholder Nominee will decline or be unable to serve.
Information about the Depositary Stockholder Nominees follows:
| | | | | | | | | | | | | | | | | Business Experience During Past Five Years and
| | | | Director
| | | Name | | Other Directorships | | Age | | Since | | Current Committees | | | | Richard M. Klingaman | | Consultant, natural resources and energy (May 1992 to present); Senior Vice President, Penn Virginia Corporation, a natural resources company specializing in coal, oil, natural gas, timber, lime and limestone (1977 to 1992); and Director of Westmoreland Resources, Inc. (1980 to 1993). | | | 74 | | | | 2006 | | | Executive, Audit Compensation and Benefits (Chairman) | | William M. Stern | | Executive Vice President, Stern Brothers & Company, a broker-dealer (1999 to present); Vice President, Mercantile Bank Capital Markets Group, a banking company (1998 to 1999); and Senior Vice President, Mark Twain Capital Markets Group, a banking company (1983 to 1998). | | | 63 | | | | 2000 | | | Audit, Nominating and Corporate Governance (Chairman) |
The Board of Directors recommends that holders of Depositary Shares vote “FOR”
the election of the Depositary Stockholder Nominees.
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CORPORATE GOVERNANCE
Our Board believes that good corporate governance is important to ensure that the Company is managed for the long-term benefit of stockholders. This section describes key corporate governance guidelines and practices that our Board has adopted. Complete copies of our committee charters and code of business conductthese documents are available on the Investor Relations section of our website at www.westmoreland.com. Alternatively, youOn an annual basis, all directors, officers and employees sign an acknowledgement that they have received and reviewed the guidelines provided in the Code of Conduct Handbook. We will post on this website any amendments to the Code of Conduct Handbook or waivers of the Code of Conduct Handbook for directors and executive officers. You can request a copy of any of these documents by writing to the Vice President, Corporate Relations,Secretary, Westmoreland Coal Company, 2 North Cascade Ave., 2nd Floor,9540 S. Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903.80112.
Information about the Board Structure and CommitteesRisk Oversight
The Board held fifteenseparated the positions of Chairman of the Board and Chief Executive Officer in May 2009 and elected Richard M. Klingaman, an independent director, as our Chairman, and Keith E. Alessi as our Chief Executive Officer. Separating these positions allows our CEO to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board recognizes the time, effort, and energy that the CEO is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as the Board’s oversight responsibilities continue to grow. The Board believes this leadership structure has enhanced the Board’s oversight of risk and independence from our management, the ability of the Board to carry out its roles and responsibilities on behalf of our stockholders, and our overall corporate governance.
Risk is inherent with every business, and how well a business manages risk can ultimately influence its success. We face a number of risks, including economic risks, operational risks, environmental and regulatory risks, and others, such as the impact of competition, weather conditions and pressures from competing fuel sources. Management is responsible for the day-to-day management of risks that we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The Board believes that establishing the right “tone at the top” and full and open communication between management and the Board are essential for effective risk management and oversight. Our Chairman talks regularly with our CEO to discuss strategy and the risks we face. The executive management team attends the quarterly board meetings during 2008, including four meetings held jointlyand is available to address any questions or concerns raised by the Board on risk management-related matters. Each quarter, the Board receives presentations from senior management on strategic matters involving our operations and is provided extensive materials that highlight the various factors that could lead to risk in our organization. The Board holds a strategic planning session with the management team on an annual basis to discuss strategies, key challenges, and risks and opportunities for us. Further, the Board is empowered to hire its own advisors without management approval to assist it in fulfilling its duties.
While the Board is ultimately responsible for our risk oversight, our committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and one meeting held jointlycompliance with thelegal and regulatory requirements. The Compensation and Benefits Audit,Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Corporate Governance Committees. All director nominees attendedCommittee is tasked with overseeing succession planning for our 2008directors and executive officers. On an annual meetingbasis, pursuant to such committee’s charters, the committees assess risk and have specific conversations with senior management regarding the risks faced.
Committees of stockholders. Resolutionsthe Board of Directors
As of the date of this proxy statement, our Board has seven directors and the following four committees: (1) Audit; (2) Compensation and Benefits; (3) Nominating and Corporate Governance; and (4) Executive. From time-to-time, the Board will form a Pricing Committee to address specific transactions such as debt or equity issuances. The Board has set the number of directors following the Annual Meeting at six. The current committee membership, the number of meetings during 2011 and the function of each of the committees are described below. Each of the committees operates under a written charter adopted by the Board. All of the committee charters are available on our website at www.westmoreland.com. During 2011, the Board provideheld nine meetings plus a two-day strategic planning session. Each director serving during 2011 attended 100% of the aggregate of all Board and applicable committee meetings held during the period that directorshe or she served as a director. Directors are expected to attend the annual meetingAnnual Meeting of stockholders. No director, during his periodStockholders. All directors attended the last Annual Meeting of service, attended fewer than 75% of the total number of meetings of the Board and committees on which he served.Stockholders.
| 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 | |
Audit Committee The Audit Committee met eight times during 2008, including four meetings held jointly withprovides oversight of the Boardquality and one meeting held jointly with the Compensationintegrity of our accounting, auditing and Benefits, Nominatingfinancial reporting practices and Corporate Governance Committeesis responsible for retaining and the Board.terminating our independent accounts. The committee is comprisedexercises its oversight obligations through regular meetings with management, the Director of Messrs. Coffey (Chairman), SternInternal Audit and Klingaman. The Audit Committee approves the appointment of our independent registered public accounting firm, monitors the independence and directs the performanceErnst & Young LLP. The Audit Committee is also responsible for oversight of our independent registered publicrisks relating to accounting firm, and monitors the integrity of ourmatters, financial reporting process and systems of internal controls regarding finance, accounting, and legalregulatory compliance. It also reviewsTo satisfy these oversight responsibilities, the committee separately meets with our Chief Financial Officer, the Director of Internal Audit, Ernst & Young LLP and management. The committee also receives periodic reports regarding issues such as the status and findings of audits being conducted by the internal and independent registered publicauditors, the status of material litigation, accounting firm the audit plan for the Company, our internal accounting controls,changes that could affect our financial statements and the independent registered public accounting firm’s report to the Audit Committee.proposed audit adjustments. The Board has determined that Thomas J. Coffey isMichael D’Appolonia, Jan Packwood and Bob Scharp qualify as an “audit committee financial expert” as defined in Item 407(d)(5) ofRegulation S-K. The Board has also determined that each member of Audit Committee Report
Under its charter, the Audit Committee including Mr. Coffey,assists the Board of Directors in fulfilling the Board’s responsibility for oversight of Westmoreland’s financial reporting process and practices, and its internal control over financial reporting. Management is “independent” underprimarily responsible for our financial statements, the NYSE Amex listing standards, Section 10Areporting process and assurance for the adequacy of the Exchange Actinternal control over financial reporting. Our independent registered public accounting firm, Ernst & Young LLP, is responsible for performing an independent audit of 1934,Westmoreland’s financial statements and internal control over financial reporting, and for expressing an opinion on the conformity of our audited financial statements to generally accepted accounting principles used in the United States and the adequacy of our internal control over financial reporting.
The Audit Committee has reviewed and discussed with Ernst & Young LLP Westmoreland’s audited consolidated financial statements and internal control over financial reporting. The Audit Committee has discussed with Ernst & Young LLP, during the 2011 fiscal year, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended or(Communication with Audit Committees) as adopted by the Exchange Act,Public Company Accounting Oversight Board. The Audit Committee has received andRule 10A-3 thereunder. A copy reviewed the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding such firm’s communications with the Audit Committee Charter can be found inconcerning independence, and has discussed with the Investor Relations sectionindependent accountants their independence.
The Audit Committee discussed with our internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of its examinations, the evaluations of our website at www.westmoreland.com.internal controls and the overall quality of our financial reporting. The Audit Committee also has reviewed and discussed the audited financial statements with management.
Based on the reviews and discussions described above, the Audit Committee recommended to the Board that the audited financial statements and assessment of internal controls over financial reporting be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012.
Thomas J. Coffey, Chairman Gail E. Hamilton Jan B. Packwood Robert C. Scharp
Compensation and Benefits Committee
The Compensation and Benefits Committee met five times during 2008 including one meeting held jointly with the Audit and Nominating and Corporate Governance Committees and Board. The committee is comprised of Messrs. Klingaman (Chairman), Coffey and D’Appolonia. Each member of the Compensation and Benefits Committee is “independent” under the NYSE Amex listing standards. This committee is responsible for assuring that the Board, various committee chairpersons and committee members, our Executive Chairman, Chief Executive Officer, other executive officers, and our key management are compensated appropriately and in a manner consistent with our approved compensation strategy, internal equity considerations, competitive practice, and any relevant laws or regulations. The processesIn addition, the committee reviews our compensation programs to ensure that our programs are not promoting imprudent risk-taking. In accordance with its charter, the committee may retain and procedures followed by our terminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, form and delegate authority to subcommittees and delegate authority to one or more designated members of the committee. To assist it in satisfying its oversight responsibilities, the committee chose in February 2011 to continue its relationship with Buck Consulting, which began in February 2010, and meets regularly with management to understand the financial, human resources and stockholder implications of compensation decisions being made. Compensation and Benefits Committee Risk Assessment
On an annual basis, the committee reviews and discusses the structure of our compensation program to assess whether any aspect of the program could potentially be expected to provide an incentive to our executive officers or other employees to take any unnecessary or inappropriate risks that could threaten our operating results, financial condition or impact long-term stockholder value. To assist the committee in consideringtheir review in February 2012, the committee engaged Buck Consulting to conduct a risk assessment of our incentive-based compensation plans (including the annual and determininglong-term incentive programs) and our compensation practices.
Based on the findings of Buck Consulting, our internal controls, policies and risk-mitigating components in our incentive arrangements as well as the committee’s formal review and discussion, the committee believes our compensation programs represent an appropriate balance of short-term and long-term compensation and do not encourage executive officers or other employees to take on unnecessary or excessive risks that are reasonably likely to have a material adverse effect on us.
Our incentive compensation is designed to reward bonus-eligible employees for committing to and directorachieving goals that are intended to be challenging yet provide them a reasonable opportunity to reach the threshold amount, while requiring meaningful growth to reach the target level and substantial growth to reach the maximum level. The amount of growth required to reach the maximum level of compensation is developed within the context of the normal business planning cycle and, while difficult to achieve, is not viewed to be at such an aggressive level that it would induce bonus-eligible employees to take inappropriate risks that could threaten our financial or operating stability. In addition, the annual bonus program contains a cap on the maximum financial payout to employees as a whole.
Our executive compensation program includes the following features to help minimize risk.
Compensation Mix. We allocate compensation between fixed and contingent components, between annual cash incentives and long-term time-based equity incentives, based in part on an employee’s position and level of responsibility within the organization. We believe our mix of compensation elements helps to ensure that executives and other employees who are described below undereligible for incentive compensation do not focus on achieving short-term results at the heading “— Executiveexpense of the long-term growth and Director Compensation Processes.” A copysustainability of the Company. None of our employees receives compensation that is primarily derived from commissions.
Base salary is the only assured portion of compensation that we provide to our executives and other employees. Consequently, our incentive compensation arrangements are intended to reward performance.
The annual incentive plan establishes cash-based award opportunities that are payable if, and only to the extent that, pre-established corporate financial and individual performance objectives are achieved, subject to the discretion of the committee to exclude certain events outside our direct control and to reward exemplary performance.
The equity-based component of the executive compensation program consists of grants of time-vested and performance-based restricted stock units. The use of both time-based and performance-based restricted stock units for fiscal 2012 balances our desire to drive long-term stock price growth with the retention pressures we face from our direct peers, as well as from emerging and evolving competitors.
Stock Ownership Guidelines. We have established stock ownership guidelines to ensure that our executives’ interests are aligned with those of stockholders. These guidelines also help ensure that the decisions our executives implement to achieve our financial and strategic objectives are focused on our long-term growth and health. We believe that this policy effectively mitigates the possibility that our executives would make business decisions to influence stock price increases in the short-term that cannot be sustained over the long-term or would liquidate their equity holdings to capture short-term fluctuations in our stock price.
Board Approval of Transactions. Management must obtain approval from the Board for significant transactions (i.e., mergers, acquisitions, dividends, etc.) that could impact the achievement of previously approved financial performance targets used in the executive compensation program, and the Compensation and BenefitsBenefit Committee Charter may be found onretains the Investor Relations sectiondiscretion to ignore the impact of our website at www.westmoreland.com.certain factors over which management has no control (such as accounting changes or force majeure events) for purposes of determining whether pre-established performance targets have been met. The Nominating and Corporate Governance Committee met once during 2008 to review the qualifications of potential candidates to serve as nominees for election to the Board. The committee is comprised of Messrs. Stern (Chairman) and Coffey. Each member of the Nominating and Corporate Governance Committee is “independent” under the NYSE Amex listing standards. This committee identifies and recommends individuals qualified to be nominated as members of the Board. The process followed by the Nominating and Corporate Governance Committee to identify and evaluate director candidates is discussed below under “— Director Candidate Nomination Process.” The Nominating and Corporate Governance Committee is also authorized to provide oversight on matters related to corporate governance and structure and to make recommendations to the Board. This committee also provides for the evaluation of Board, committee, and
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individual director performance and recommends individuals qualified to be nominated as members of the Board. A copy of the Nominating and Corporate Governance Committee Charter can be found on the Investor Relations section of the Company’s website at www.westmoreland.com.
The Executive Committee of the Board did not meet during 2008. The committee is comprised of Messrs. Alessi (Chairman), Klingaman and D’Appolonia.
Compensation and Benefits Committee Interlocks and Insider Participation
During 2008,2011, each of Messrs. Robert E. Killen (who served as a director until May 2008), Klingaman, Stern, Coffey and D’Appolonia and Ms. Hamilton served on our Compensation and Benefits Committee. None of these directors was a current or former officer or employee of the Company, and none had any related personparty transaction involving the Company.Company that is disclosable under Item 404 of Regulation S-K. During 2008,2011, none of our executive officers served on the board of directors of any entity that had one or more executive officers serving on our Board.
Director Candidate Nomination ProcessCompensation and Benefits Committee Report
The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the Compensation and Benefits Committee recommended to the Board that the Compensation Discussion and Analysis, provided below, be included in this proxy statement.
Michael R. D’Appolonia, Chairman Thomas J. Coffey Gail E. Hamilton
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee identifies and recommends individuals qualified to be nominated as members of the Board and considers director candidates brought to the Board by stockholders. The committee also provides oversight on corporate governance matters and provides for the evaluation of Board, committee, and individual director performance, as well as provides oversight on succession planning.
The committee regularly assesses the mix of skills and industry experience currently represented on the Board, whether any vacancies on the Board are expected due to retirement or otherwise, the skills represented by retiring directors, and additional skills highlighted during the Board self-assessment process followed bythat could improve the overall quality and ability of the Board to carry out its functions. In the event vacancies are anticipated, or arise, the Nominating and Corporate Governance Committee to identify and evaluate director candidates when a vacancy exists or is anticipated includes invitations to Board members for recommendations, the collection of information about individuals recommended, meetings to evaluate biographical information and background material relating toconsiders various potential candidates for director and interviews of selectedemploys the same process for evaluating all candidates, including those submitted by membersstockholders. The committee is responsible for ensuring all director nominees undergo a thorough background check prior to nomination or appointment as a director and to review any adverse findings prior to such nomination or appointment. Candidates may come to the attention of the committee andthrough current Board members, professional search firms, stockholders or other persons. In late 2010, we utilized the services of the National Association of Corporate Directors to help identify potential director candidates for election to the Board.
The committee initially evaluates a candidate based on publicly available information and any additional information supplied by the party recommending the candidate. If the candidate appears to satisfy the selection criteria and the committee’s initial evaluation is favorable, the candidate is contacted by the chairman of the committee for an interview to determine the mutual levels of interest in pursuing the candidacy. The committee is tasked with considering whether the candidate is (i) independent pursuant to the requirements of The NASDAQ Stock Market, (ii) accomplished in his or her field and has a reputation, both personal and professional, that is consistent with our ideals and integrity, (iii) able to read and understand basic financial statements, (iv) knowledgeable as to us and the issues affecting our business, (v) committed to enhancing stockholder value, (vi) able to understand fully the legal responsibilities of a director and the governance processes of a public company, (vii) able to develop a good working relationship with other Board members and senior management and (viii) able to suggest business opportunities to us. If these discussions and considerations are favorable, the committee makes a final recommendation to the Board to nominate the candidate for election.
In considering whether to recommend any particular candidate, including incumbent directors, for inclusion in the Board’s slate of recommended director nominees, the Nominating and Corporate Governance Committee takes into consideration a number of criteria which include the candidate’s integrity,include: professional work experience; skills; expertise; diversity; personal and professional integrity; character; temperament; business acumen, knowledgejudgment; time availability in light of our business and industry, maturity, experience, diligence, potentialother commitments; dedication; conflicts of interest, willingness to serve as a directorinterest; and regularly attend and participate in Board meetings, and the ability to act in the interests of all stockholders.public company experience. The committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. The committee focuses on issues of diversity, such as diversity of education, professional experience and differences in viewpoints and skills. The committee does not have a formal policy with respect to diversity; however, the Board and the committee believe that it is essential that the Board members represent diverse viewpoints and strives to ensure that the slate of nominees represents a wide breadth of diverse backgrounds and skill sets to adequately represent the needs of the stockholders. With respect to the nomination of continuing directors for re-election, the individual’s contributions to the Board are also considered. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of skills, experience, and knowledge that will assure that the Board can continue to fulfill its responsibilities.
The Board’s retirement policy mandates that directors elected to the Board at our annual meeting retire from the Board at the first annual meeting of stockholders following the director’s 75th birthday. The Board grandfathered all directors then serving as a director at the time the policy was adopted in November 2010, making the new retirement policy only applicable to current and future directors who will turn 75 after May 2010.
Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the Nominating and Corporate Governance Committee,c/o Corporate Secretary, Westmoreland Coal Company, 2 North Cascade Avenue, 2nd Floor,9540 South Maroon Circle, Suite 200, Englewood, Colorado Springs, CO 80903.80112. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in our proxy statement for the next annual meeting.
Stockholders also have the right under our bylaws to nominate director candidates directly, without any action or recommendation on the part of the Corporate Governance and Nominating Committeecommittee or the Board, by following the procedures set forth in Section 2.6, “Advance Notice of Nominees,” in our bylaws. Among other things, a stockholder wishing to nominate a director candidate for election as a director must give notice to us within the specified time period specified in such section, and the notice must includethat includes the information about the stockholder and the proposed nominee required inby the bylaws. Any stockholder wishing to nominate a candidate for election to the Board without any action or recommendation ofpursuant to the Nominating and Corporate Governance Committee or the Boardbylaw provision must strictly comply with the procedures specified in Section 2.6 of the bylaws. Candidates nominated by stockholders in accordance with these procedures could be presented by the procedures set forth innominating stockholder from the bylaws willfloor of the annual meeting, but would not be included in our proxy statement for the next annual meeting.meeting, unless the Board made its own determination to include such candidate.
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Other Committees
During 2011, the Board had two other committees in addition to the committees set forth above: the Executive Committee and the Pricing Committee. Pursuant to its charter adopted by the Board in February 2012, the Executive Committee is authorized to act on behalf of the Board during periods between Board meetings. During 2011, the Executive Committee held two meetings. The Pricing Committee acts in the event of offerings of the Company’s securities with respect to matters such as determining the price and terms at which such securities shall be sold to underwriters and the public. During 2011, the Pricing Committee held no meetings, but acted by unanimous written consent on several occasions with respect to the contribution of shares to our pension plans and with respect to the issuance of debt in February 2011.
Director Independence
NASDAQ Marketplace Rules require that a majority of the Board be independent. No director qualifies as independent unless the Board determines that the director has no direct or indirect relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the independence of its members, the Board examined the commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships of each member. The Board's inquiry extended to both direct and indirect relationships with the Company. Based upon both detailed written submissions by its members and discussions regarding the facts and circumstances pertaining to each member, considered in the context of applicable NASDAQ Marketplace Rules, the Board has determined that all of the directors nominated for election, other than Mr. Alessi, are independent. The independent directors meet during most Board meetings in separate executive session without management present. The Chairman of the Board, who is an independent director, presides over these meetings. Each member of the Audit Committee must, in addition to the independence requirements of the NASDAQ Marketplace Rules, meet the heightened independence standards required for audit committee members under the NASDAQ Marketplace Rules listing standards, Section 10A of the Securities Exchange Act of 1934, and Rule 10A-3 thereunder. The Board determined that Messrs. Coffey, Packwood and Scharp and Ms. Hamilton, the 2011 Audit Committee members, each met such heightened independence standards. Communicating with the Board The Board has provided a process that permits stockholders to communicate directly with the Board. Stockholders wishing to communicate with us, including the Board, generally are asked to contact the Vice President-Corporate Relations and Secretary, Diane S. Jones, at Westmoreland Coal Company, 2 North Cascade Ave., 2nd Floor, Colorado Springs, Colorado 80903, diane.jones@westmoreland.com,(719) 442-2600, who is primarily responsible for receiving, managing, monitoring, and responding to stockholder communications.
Stockholders who wish to write directly to the Board on any topic should address communications to the Board of Directors in care of the Chairman, Westmoreland Coal Company Board of Directors, Westmoreland Coal Company, 2 North Cascade Ave., 2nd Floor,9540 S. Maroon Circle, Suite 200 Englewood, Colorado Springs, Colorado 80903. 80112. Our Chairman will report on stockholder communications to the Board and provide copies or specific summaries to directors on matters deemed to be of appropriate importance. In general, communications from stockholders relating to corporate governance will be forwarded to the Board unless they are frivolous, obscene, or repeat the same information contained in earlier communications, or failfails to identify the author. Director IndependenceDIRECTOR COMPENSATIONOur Board has determined that none of Messrs. Coffey, D’Appolonia, Klingaman, and Stern has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined by the NYSE Amex Company Guide Section 803(A).
Executive and Director Compensation Process
The Compensation and Benefits Committee is responsible for setting the salaries and incentive compensationelements of our executive officers. The committee’s objective2012 director compensation are reflected in the table below. We believe that it is important to overseeattract and administerretain outstanding non-employee directors and target compensation programs that attract, retain, reward, and motivate highly qualified executive officers to perform their duties in a competent and efficient manner, increaseat the median of our long-term profitability, and build stockholder value. The Compensation and Benefits Committee establishes our overall compensation strategy to ensure that our executives are rewarded appropriately and that executive compensation supports our business strategy and objectives. peer group. In discharging its duties,February 2012, the Compensation and Benefits Committee reviews and approves the compensation, including base salaries, annual incentives, long-term incentives, and other benefits, of our Chief Executive Officer (except as described below), our Chief Financial Officer,recommended and the three most highly-compensated executive officers other than our Chief Executive Officer and Chief Financial Officer. We refer to these officers, plus our former Chief Financial Officer, as our “named executive officers”Board approved the below compensation structure for purposes of this proxy statement. The Compensation and Benefits Committee also reviews and approvesfiscal year 2012. All non-employee directors receive the compensation for other key executives who are not identified in this report. In 2008, our Board determined the CEO compensation. Mr. Alessi transitioned from President and CEO to Executive Chairman at the time Mr. Lobb joined the Company. As a result, compensation arrangements for Mr. Alessi in his new role were determined by members of the Board other than himself. Compensation for Mr. Lobb, who served as our Chief Executive Officer and Director from April 2008 to January 2009, was determined by the Board in advance of his employment and election to the Board. Following Mr. Lobb’s resignation in 2009, Mr. Alessi resumed duties as President and CEO“Annual Cash Retainer” in addition to Executive Chairman. Mr. Alessi’s compensation remains determined byany other retainers they may be entitled for service as the full Board, other than himself.Chairman or as the Chair of a committee.
| Type of Compensation | | Amount | | Annual Cash Retainer | | $35,000 | Annual Stock Award Retainer (restricted stock units with one-year vest) | | $70,000 valued at fair market 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) | | $1,000 per meeting |
2011 Non-Employee Director Compensation | | | | | | | | | | | Name(1) | | Fees Earned Or Paid In Cash($) | | | Grant Date Fair Value of Stock Awards($)(2) | | | Total Compensation ($) | | | Thomas J. Coffey | | | 75,500 | | | | 50,009 | | | | 125,509 | | | Michael R. D’Appolonia | | | 73,500 | | | | 50,009 | | | | 123,509 | | | Gail E. Hamilton | | | 61,375 | | | | 50,009 | | | | 111,384 | | | Richard M. Klingaman | | | 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 | | | 5,667 | | | | — | | | | 5,667 | | | Frank T. Vicino, Jr. | | | 4,889 | | | | — | | | | 4,889 | |
__________ | (1) | Mr. Alessi, who is our Chief Executive Officer, does not receive any additional compensation for his services as a director. | | (2) | 2,940 restricted stock units were awarded to each non-employee director elected to the Board in May 2011. The restricted stock units vest on May 24, 2012. The grant date fair value of these awards was $17.01 per share. | | (3) | Messrs. Stern and Vicino were serving as our preferred directors in early 2011. Upon the repayment of the outstanding preferred dividends in early February 2011, the preferred director positions were eliminated. |
Non-Employee Director Stock Ownership Guidelines
In March 2011, the Board adopted stock ownership guidelines for non-employee directors under which the directors are expected to own Westmoreland equity equal in value to three times the annual cash retainer, with a five-year timetable to comply.
2011 Outstanding Equity Awards at Fiscal Year-End for Directors
| Option Awards | | | Name | | Securities Underlying Unexercised Options (#) Exercisable | | | Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | 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 | |
The Compensation and Benefits Committee has the authority to retain consultants directly. In recent years, but excluding 2007 and 2008, the committee has engaged a nationally recognized executive compensation consultant to assist in performing its duties. The compensation consultant has assisted with the developmentfollowing table sets forth information, as of March 1, 2012, concerning beneficial ownership by: holders of more than 5% of any class of our compensation strategy, which was specifically designed to support our business strategy, with an expectation that changes to the Company would affect pay delivery programs. In 2008, the
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Compensation and Benefits Committee, through human resources management, obtained survey information from an executive compensation consulting firm, the Hay Group, for executives in the mining industry. This survey data, together with a review of the proxy data from companies in similar industry and size, will be studied by management and the Compensation and Benefits Committee during 2009 and be used as the basis for future compensation review.
Our compensation planning process, including business and succession planning, evaluation of our executive officers’ performance, and consideration of our business environment is ongoing throughout the year.
Our Chief Executive Officer and members of management, including human resources management, work with the Chairman of the Compensation and Benefits Committee to establish the agenda for Compensation and Benefits Committee meetings and in the preparation of meeting information. We seek the input of our management and our human resources staff in making executive compensation decisions. Our Chief Executive Officer also participates in Compensation and Benefits Committee meetings at its request to provide background information on the Company’s strategic objectives, his evaluation of the performancevoting securities; directors; each of the named executive officers listed in the Summary Compensation Table; and compensation recommendations as to seniorall directors and executive officers (other than himself).
The Compensation and Benefits Committee has implemented an annual performance review program for our executives, under which annual performance goals are determined and set each calendar year for the Company as a whole, and forgroup. The information provided in the power segment and each mining operation. The corporate goals target the achievement of specific financial milestones. Individual mine and power segment goals are proposed by each mine manager or senior power executive and approved by our Chief Executive Officer. Annual salary increases, annual bonuses, and annual long-term incentive awards, including any stock option, SAR, performance unit, and restricted stock awards granted to our executives are tied to the achievement of performance goals and to individual accomplishments.
During the first calendar quarter of each year, we evaluate performance against the goals and individual accomplishments for the recently completed year. Generally, each executive’s evaluation begins with a self-assessment, which is submitted in writing or discussed with our Chief Executive Officer. Our Chief Executive Officer then formulates an evaluation based on the executive’s self-assessment, the Chief Executive Officer’s own evaluation, and input from others within the Company. This process leads to a recommendation by the Chief Executive Officer for annual executive salary increases, annual incentive bonuses, and annual long-term incentive awards, if any, which is then reviewed and approved by the Compensation and Benefits Committee. For all executives, annual incentive bonuses, to the extent granted, are awarded during the first calendar quarter of the year. We typically implement increases in annual base salaries at the beginning of the second calendar quarter of the year, and we typically grant long-term incentive awards, including stock options and restricted stock awards, at the end of the second calendar quarter of the year. The timing of any increase or grant depends on business conditions.
The compensation of our directors is determined by the full Board andtable is based on recommendations fromour records, information filed with the CompensationSEC and Benefits Committee,information provided to us, except where otherwise noted. The number of shares beneficially owned by each entity or individual is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which considers information from our Executive Chairman, Chief Executive Officer, our human resources department,the entity or individual has sole or shared voting power or investment power and also any consultants retained byshares that the committee in formulating its recommendation. The Compensationentity or individual has the right to acquire within 60 days of March 1, 2012 through the exercise of any stock options, the conversion of depositary shares at a conversion ratio of 1.708 shares of common stock for each depositary share, the vesting of restricted stock or upon the exercise or conversion of other rights. Unless otherwise indicated, each person has sole voting and Benefits Committee generally reviews director compensation every other year. In 2006 and prior years, the Company engaged Mercer to assist in its evaluation of director compensation. As part of its analysis, Mercer used the Mercer General Industry Survey and a review of proxy data from a peer group of companies. At the request of the Compensation and Benefits Committee, Mercer updated its 2005 report in 2006 and provided an additional report regarding director compensation in December 2006. Also in 2006, our human resources department provided the committee with information based on the National Association of Corporate Directors’ 2006 report on directors’ compensation. In 2008, the human resources department obtained survey data for executive compensation within the mining industry from the Hay Group. This survey data will serve as the foundation for the Compensation and Benefits Committee to use in 2009, along with proxy data from applicable competitors.
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain informationinvestment power with respect to persons known by the managementshares set forth in the table. The percentage calculations set forth in the table are based on 13,879,458 shares of the Company to own beneficially more than five percent (5%) of any class of the voting securities of the Company as ofcommon stock outstanding and 639,840 depositary shares outstanding on March 31, 2009.1, 2012.
| | | | | | | | | | | | | | | | | | Name and Address
| | | | Percentage of
| | | | Percentage of
| of Beneficial Owner | | Common Stock | | Common Stock | | Depositary Shares | | Depositary Shares | | | | Alan A. Blase, et al | | | — | | | | — | | | | 157,900 | (2) | | | 24.6 | % | c/o Frank T. Vicino, Jr.
3312 NE 40th Street | | | | | | | | | | | | | | | | | | Ft. Lauderdale, FL 33308 | | | | | | | | | | | | | | | | | | Barclays Global Investors, NA | | | 690,340 | (3) | | | 7.2 | % | | | — | | | | — | | 400 Howard Street
San Francisco, CA 94105 | | | | | | | | | | | | | | | | | | Jeffrey L. Gendell | | | 3,165,311 | (4) | | | 28.1 | % | | | 4,300 | (5) | | | * | | 55 Railroad Avenue
Greenwich, CT 06830 | | | | | | | | | | | | | | | | | | Stephen D. Rosenbaum | | | 28,924 | | | | * | | | | 60,000 | (6) | | | 9.4 | % | 817 N. Calvert Street
Baltimore, MD 21202 | | | | | | | | | | | | | | | | | | T. Rowe Price | | | 755,600 | (7) | | | 7.8 | % | | | — | | | | — | | 100 East Pratt St.
Baltimore, Maryland 21289 | | | | | | | | | | | | | | | | |
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 | % | | | — | | | | — | |
_________ | | | (1) | | Information in this table is as of March 31, 2009, unless otherwise indicated, and is based solely on information contained in Schedules 13D, Schedules 13G, and Section 16 Forms filed by the beneficial owners with the Securities and Exchange Commission, or the SEC, or information furnished to us. Except as indicated below, the respective beneficial owners have reported that they have sole voting power and sole dispositive power with respect to the securities set forth opposite their names. For ease of analysis, the common stock information in the table and the related footnotes does not include the number of shares of common stock into which the depositary shares may be converted. A holder of depositary shares may convert such depositary shares into shares of common stock at any time at a conversion ratio of 1.708 shares of common stock for each depositary share. Consequently, a holder of depositary shares is deemed to beneficially own all of the shares of common stock into which such holder’s depositary shares may be converted. However, for so long as we are in arrears on six or more preferred stock dividends, holders of depositary shares are not entitled to vote for the election of directors to be elected by holders of the common stock unless such depositary shares are actually converted prior to the record date for the annual meeting. * Percentages of less than 1% are indicated by an asterisk.asterisk | | (2) | | According to a Schedule 13D/A filed on March 31, 2009, Mr. Alan Blase beneficially owns 157,900 depositary shares of which he has sole voting and sole dispositive power for 820 shares he personally owns, and shared dispositive power over 157,080 shares. Mr. Blase serves as account manager for the Vicino Group, which is comprised of a total of ten individual investors, partnerships or other investment entities identified in the Schedule 13D/A. The shares for which Mr. Blase has shared dispositive power include 34,170 shares owned personally by Frank Vicino Sr., and 86,250 depositary shares held personally by Frank T. Vicino Jr. In addition to shares owned personally, Mr. Frank Vicino Sr. has dispositive power over an additional 3,400 shares for a total beneficial ownership of 37,570 depositary shares. All of these shares are included in the amounts beneficially held by Mr. Blase shown above. In addition to shares owned personally, Mr. Frank T. Vicino Jr. has shared dispositive power over an additional 21,980 depositary shares for a total beneficial ownership of 108,230 depositary shares. All of these shares are included in the amounts beneficially held by Mr. Blase shown above. No other member of the group has |
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| | | | | more than 5% sole ownership. The depositary shares are convertible into 269,693 shares of common stock, which would represent 2.7% of the total shares of common stock outstanding. See Note (1). | | (3) | | According to a Form 13G filed February 5, 2009 with the SEC, Barclays Global Investors, NA, a bank as defined in section 3(a)(6) of the Exchange Act, beneficially owns 458,821 shares of common stock of which it has sole voting power over 407,030 shares and sole dispositive power over all 458,821 shares. The remaining shares of the 690,340 shares of common stock reported in the table above are held by Barclays Global Fund Advisors, an investment adviser, of which it has sole voting and dispositive power. The Form 13G reports that the reported shares are held in trust accounts for the economic benefit of the beneficiaries of those accounts. See Note (1). | | (4) | | The total for Mr. Gendell includes shares of common stock, as well as shares of common stock issuable upon conversion of (i) depositary shares and (ii) the senior secured convertible notes issued March 4, 2008.shares. According to a Schedule 13D/A filed November 10, 2008 with the SEC,January 6, 2012, Mr. Gendell owns 549,000 shares of common stock of which he has sole voting and dispositive power. In addition, Tontine Capital Partners, L.P. and other limited partnerships and limited liability companies that are affiliates of Tontine Capital Partners, L.P. (collectively with Mr. Gendell, “Reporting Persons”) own 994,600 shares of common stock, depositary shares which are convertible into 7,3432,515,826 shares of common stock and senior secured convertible notes which3,700 depositary shares that are convertible into 1,614,3686,318 shares of common stock. Mr. Gendell is either a managing member of, or a managing member of the general partner of, these limited partnerships and limited liability companies and has shared voting and dispositive power over these shares. BecauseAll of the foregoing shares may be deemed to be beneficially owned by Mr. Gendell. Mr. Gendell disclaims beneficial ownership of these shares for purposes of Section 16(a) under the Exchange Act, or otherwise, except as to shares directly owned by Mr. Gendell or representing Mr. Gendell’s relationship with Tontine Capital Partners, L.P.,pro rata interest in, and interest in the profits of, these limited partnerships and limited liability companies. The address for Mr. Gendell is 55 Railroad Avenue, Greenwich, CT 06830. | | (2) | According to a Schedule 13D/A filed on February 19, 2010, Mr. Frank Vicino Jr. beneficially owns 108,730 depositary shares owned by Tontine Capital Partners, L.P.of which he has sole voting and its affiliatessole dispositive power for 86,750 shares, and theshared voting and dispositive power over 21,980 shares. The common stock total for Mr. Vicino includes 185,673 common shares that may be acquired by themissuable upon conversion of the depositary shares and the senior secured convertible notes are attributed to Mr. Gendell for purposes of calculating the beneficial ownership of our securities. The Schedule 13D/A also reported that the Reporting Persons will begin to explore alternatives for the disposition of their holdings in the Company, which alternatives may include, without limitation: (a) dispositions through open market sales, underwritten offerings and/or privately negotiated sales by the Reporting Persons, (b) a sale of the Company, or (c) distributions by the Reporting Persons of their interests in the Company to their respective investors. The Schedule 13D/A also reported that the disposition of the holdings is expected to be effected over time and in an orderly fashion. See Note (1). | | (5) | | According to a Form 3/A filed December 9, 2003, Tontine Partners, L.P., an affiliate of Mr. Gendell and Tontine Capital Partners, L.P., owns 4,300 depositary shares. These depositary shares are convertible into 7,343The address for Mr. Vicino is 3312 NE 40th Street, Fort Lauderdale, Fl 33308. |
| 3) | The total for Mr. Rosenbaum includes shares of common stock, whichas well as shares of common stock are included in the 3,165,311 share total for Mr. Gendell reported in the table. See Notes (1) and (4). | | (6) | | issuable upon conversion of depositary shares. The depositary shares are convertible into 102,480102,459 shares of common stock, which together with the 28,924 shares of common stock reported in the table, would represent 1.4% of the total shares of common stock outstanding. See Note (1).stock. The address for Mr. Rosenbaum is 817 N. Calvert Street, Baltimore, MD 21202. | | (7) | (4) | According to a Schedule 13G/A filed on February 13, 2009,2012, these securities are owned by various individual and institutional investors, including 591,800 shares held by T. Rowe Price Small-Cap Stock Fund, Inc., for which T. Rowe Price Associates, Inc. (Price Associates) serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates may beis deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. |
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The following table sets forth information as of March 31, 2009 concerning stock ownership of individual directors and our named executive officers, and all of our executive officers and directors as a group.
Number of Shares and Nature of Beneficial Ownership(1)
| | | | | | | | | | | | | | | | | | | | | | | | Percentage of
| | | | | | Percentage of
| | Name of Directors, Named Executive Officers and Persons as a Group(2) | | Common Stock | | | Common Stock | | | Depositary Shares | | | Depositary Shares | | | | | Keith E. Alessi | | | 32,412 | (3) | | | | * | | | — | | | | — | | | Thomas J. Coffey | | | 45,164 | (4) | | | | * | | | — | | | | — | | | Michael R. D’Appolonia | | | 2,916 | (5) | | | | * | | | — | | | | — | | | Morris W. Kegley | | | 951 | (6) | | | | * | | | — | | | | — | | | Richard M. Klingaman | | | 3,811 | (7) | | | | * | | | — | | | | — | | | Todd A. Myers | | | 32,725 | (8) | | | | * | | | — | | | | — | | | John V. O’Laughlin | | | 38,893 | (9) | | | | * | | | — | | | | — | | | Kevin A. Paprzycki | | | 853 | (10) | | | | * | | | — | | | | — | | | William M. Stern | | | 50,414 | (11) | | | | * | | | 7,850 | (12) | | | 1.2 | % | | Delbert L. Lobb | | | 348 | (13) | | | | * | | | — | | | | — | | | David J. Blair | | | 947 | (14) | | | | * | | | — | | | | — | | | Directors and Executive Officers as a Group (9 persons) | | | 208,139 | | | | 2.1 | % | | | 7,850 | | | | 1.2 | % |
| | The principal business address of T. Rowe Price is 100 East Pratt St., Baltimore, Maryland 21202. | (1)(5) | | This information is based on information known to us or furnished to us by our directors and executive officers. Except as indicated below, we are informed that the respective beneficial owners have sole voting power and sole dispositive power with respect to all of the shares set forth opposite their names. Percentages of less than 1% are indicated by an asterisk. For ease of analysis, theIncludes 5,000 common stock information in the table and the related footnotes does not include the number of shares of common stock into which the depositary shares may be converted. A holder of depositary shares may convert such depositary share into shares of common stock at any time at a conversion ratio of 1.708 shares of common stock for each depositary share. Consequently, a holder of depositary shares is deemed to beneficially own all of the shares of common stock into which such holder’s depositary shares may be converted. However, for so long as we are in arrears on six or more preferred stock dividends, holders of depositary shares are not entitled to vote for the election of directors to be elected by holders of common stock unless such depositary shares are actually converted prior to the record date for the Annual Meeting. Also, shares that may be purchased upon exercise of options under equity incentive plans are reflected in the table but are not entitled to vote unless exercised prior to the record date for the Annual Meeting.2000 Non Employee Director Stock Incentive Plan. | | (2) | | Mr. Lobb, our former President and Chief Executive Officer, and Mr. Blair, our former Chief Financial Officer, are “Named Executive Officers,” but are not included in “Directors and Executive Officers as a Group.” | | (3) | (6) | Includes 1,8565,959 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland’s 401(k) plan, 30,556 shares of common stock that may be purchased upon the exercise of options under our 2002 Plan, 60,000 shares of common stock that may be purchase upon the exercise of options under our 2007 Plan and 30,55610,027 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2012. |
| (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 Westmoreland’s 401(k) plan, 7,500 shares of common stock that may be purchased upon exercise of options under our 2002 Plan, 7,000 shares of common stock which may be purchased upon exercise of options under our 2002 Plan.2007 Plan and 2,500 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2012. In addition, beneficial ownership includes 13,878 shares of common stock owned by Mr. Kathol's wife. Mr. Kathol expressly disclaims beneficial ownership of these securities, and this disclosure shall not be an admission that the reporting person is the beneficial owner of such securities for purposes of Section 16 or for any other purpose. | | (9) | Includes 953 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland’s 401(k) plan, 5,000 shares of common stock that may be purchased upon exercise of options under our 2007 Plan and 670 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2012. | (4) | (10) | Includes 4,671 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 1,500 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2012. | | (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 2000 Directors’2007 Plan and 1,756 shares of common stock for which sale is restricted until May 2009. | | (5) | | Includes 2,9161,508 shares of restricted common stock subject to vesting and forfeiture. | | (6) | | Includes 951 shares of common stock held by Prudential Retirement, as trustee of the 401(k) plan. | | (7) | | Includes 1,756 shares of common stock for which sale is restricted until May 2009. | | (8) | | Includes 2,875 shares of common stock held by Prudential Retirement, as trustee of the 401(k) plan. Also includes 23,300 shares of common stock which may be purchased upon exercise of optionsissued under the 1995our 2007 Plan the 2000 Plan, and the 2002 Plan.that will vest on April 1, 2012. |
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| | | (9) | | Includes 2,993 shares of common stock held by Prudential Retirement, as trustee of the 401(k) Plan. Also includes 34,300 shares of common stock which may be purchased upon exercise of options under the 1995 Plan, the 2000 Employees’ Plan, and the 2002 Plan. | | (10) | | Includes 853 shares of common stock held by Prudential Retirement, as trustee of the 401(k) plan. | | (11) | | Includes 10,000 shares of common stock which may be purchased upon exercise of options under the 2000 Directors’ Plan and 1,756 shares of common stock for which sale is restricted until May 2009. | | (12) | | Includes 2,800 depositary shares held in trust for which Mr. Stern is a trustee and beneficiary, 3,000 shares held by a trust for which Mr. Stern is sole trustee, and 2,050 shares held in trust for which Mr. Stern is sole trustee and beneficiary. The depositary shares are convertible into 13,407 shares of common stock, which together with the 50,414 shares of common stock reported in the table, would represent less than 1% of the total shares of common stock outstanding. See Note (1). | | (13) | | Reported shares represent the number of shares owned as of the last date of Mr. Lobb’s employment, including 348 shares of common stock held by Prudential Retirement, as trustee of the 401(k) plan. | | (14) | | Reported shares represent number of shares owned as of the last date of Mr. Blair’s employment, including 947 shares of common stock held by Prudential Retirement, as trustee of the 401(k) Plan. |
Beneficial ownership is determined in accordance with the rules of the SEC. The number of shares beneficially owned by a person includes shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of April 14, 2009. The shares to be issued pursuant to these options are not deemed outstanding for the purposes of computing the percentage ownership of any other person.
SECTIONSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sour executive officers and directors and persons who own more than ten percent of a registered class of the Company’sour equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE Amex. Officers, directors, and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.The NASDAQ Stock Market. To the knowledge of management, based solely on its review of such reports, furnished tono person who at any time during the Company, all Section 16(a) filing requirements applicable to the Company’s officers, directors, and greater than ten percent beneficial owners were complied with during thefiscal year ended December 31, 2008. However,2011, was a director, executive officer, or beneficial owner of more than ten percent ownerof any class of equity securities of the Company’s depositary shares has notified us that it hasCompany failed to file on a timely filebasis reports required by Section 16 reports for16(a) of the year ended December 31, 2008. While we anticipate such late reports to be filed soon, they have not been filed to date.
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Securities Exchange Act of 1934 during the most recent fiscal year.
EQUITY COMPENSATION PLAN INFORMATION
As ofAt December 31, 2008, the Company2011, we had stock options and stock appreciation rights (“SARs”) outstanding from threetwo stockholder-approved stock plans for employees that were approved by stockholders and one stock incentive plan for non-employee directors that was not approved by stockholders. The Company also had options outstanding from one stockholder-approved stock plan for employees and non-employee directors. The 2000 Nonemployee Directors’ Stock Incentive Plan is the only plan not approved by stockholders and it has been superseded by the stockholder approved 2007 Equity Incentive Plan for Employees and Non-Employee Directors. The 2000 Nonemployee Directors’ Stock Incentive Plan provided for the grant of stock options to non-employee directors at the time they were first elected to the Board and at the time of each subsequent re-election to the Board. In October 2009, the Board terminated the 2000 Nonemployee Directors’ Stock Incentive Plan and several other stock-holder approved plans. The termination of these plans does not impair the rights of any participant under any award granted pursuant to the plans. All new equity issuances, whether to directors or officers, are made out of our stockholder-approved 2007 plan.
The following table presents information regarding equity compensation plans as of December 31, 2008 and depicts the total number of securities to be issued upon the exercise of outstanding options and SARs (if settled based on the price of the Common Stock on December 31, 2008), the weighted average exercise prices of the options and the number of securities available for future issuance.| Plan Category | | 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 | | | 199,606 | (1) | | $ | 20.98 | | | | 80,566 | (3) | | Equity plans not approved by security holders | | | 30,000 | (2) | | $ | 15.31 | | | | 0 | | | Total | | | 229,606 | | | $ | 20.24 | | | | 80,566 | |
__________ 2008 EQUITY COMPENSATION PLAN INFORMATION
| | | | | | | | | | | | | | | | | | | | | Number of
| | | | | | | | Securities
| | | | | | | | Remaining Available
| | | | Number of
| | | | for Future Issuance
| | | | Securities to be
| | | | Under Equity
| | | | Issued Upon
| | | | Compensation Plans
| | | | Exercise of
| | Weighted Average
| | (Excluding
| | | | Outstanding
| | Exercise Price
| | Securities
| | | | Options, Warrants
| | of Outstanding Options,
| | Reflected
| | | | and Rights
| | Warrants and Rights
| | in Column (a))
| Plan Category | | (a) | | (b) | | (c) | | | | Equity compensation plans approved by security holders | | | 312,724 | (1)(2) | | $ | 19.62 | (1) | | | 600,147 | (1)(2) | | Equity compensation plans not approved by security holders | | | 75,000 | | | $ | 15.85 | | | | 19,176 | | | Total | | | 387,724 | (1)(2) | | $ | 18.89 | (1) | | | 619,323 | (1)(2) |
| | | | (1) | | Includes noExcludes SARs to acquire 100,100 shares of common stock to be issuedwith exercise prices above $12.75, the closing price of a share of our common stock as reported on settlement of SARs outstanding atThe NASDAQ Stock Market on December 31, 2008, because no SARs werein-the-money as of that date.30, 2011. At December 31, 2008, 191,0002011, 100,100 SARs were outstanding under the employee plans of which 176,895 were vested; those SARs hadwith base prices between $19.365$19.37 and $29.48. | | (2) | Excludes SARs to acquire 16,067 shares of common stock with exercise prices above $12.75, the closing price of a share of our common stock as reported on The NASDAQ Stock market on December 30, 2011. At December 31, 2008,2011, 16,067 SARs were outstanding under the director plans, of which 8,026 were vested; those SARs hadwith base prices between $23.985 and $25.14. The base prices of the SARs are not reflected in column (b) of this table but are described in this note. | | (2)(3) | | The maximum number of shares of common stock the Company could be required to issue to settle the SARs outstanding under the employee plans at December 31, 2008 is 191,000 if one share of stock is required for each SAR outstanding. Similarly, the maximum number of shares of common stock the Company could be required to issue to settle the SARs outstanding under the director plans at December 31, 2008 is 16,067 if one share of stock is required for each SAR outstanding. (No director or employee SARs werein-the-money at December 31, 2008.) If the Company were required to issue this total number of shares in settlement of its SARs, the total numberNumber of securities remaining available for future issuance reflects the reservation of 302,033 shares for issuance to be issuedcertain employees upon the exercisecompletion of outstanding options, warrantscertain time-based vesting restrictions related to restricted stock units issued on July 1, 2009, July 1, 2010, and rights (column (a)) would be 594,791.April 1, 2011.
|
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EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive officers | | | | | | | Name
| | Age
| | Position
| | Keith E. Alessi | | | 54 | | | Executive Chairman,
President and Chief Executive Officer | Kevin A. Paprzycki | | | 38 | | | Chief Financial Officer | John V. O’Laughlin | | | 57 | | | Vice President, Coal Operations | Todd A. Myers | | | 45 | | | Vice President, Coal Sales | Morris W. Kegley | | | 61 | | | General Counsel and Assistant Secretary |
Throughout its history, including over recent years, Westmoreland Coal Company has experienced major changes, requiring redefinition of our business model. Originally focused on underground mining in the Appalachian Basin, we have since divested ourselves of all eastern mining properties and assets, moved our headquarters to Colorado and purchased six surface coal mining operations. Since 2001, we have focused on niche coal markets where we can take advantage of long-term coal contracts and rail transportation advantages. To understand our company and the way in which we compensate our executives, it is important to understand the business environment we have operated in over the past several years, the challenges that we have faced, and the progress we have made towards returning the company to profitability. This understanding will provide insight into our past compensation practices and the steps we are taking to align the pay of our executives with creating long-term stockholder value.
Historical Business Environment
Our business has a high proportion of revenues, and therefore cash flows, set or limited by long-term supply contracts with a small number of customers. While these contracts provide certain long term visibility and stability, their exclusivity and terms significantly restrict our ability to react financially if there is an event which negatively impacts our customers’ ability to buy coal. We also have ongoing responsibility for substantial post-retirement health care liabilities associated with our discontinued Appalachian Basin underground mining operations. We had been challenged during recent history with generating sufficient cash at our operating subsidiaries to fund both the increasing costs of corporate overhead and these post-retirement liabilities. In 2007, we hired Mr. Keith E. Alessi was electedas Chief Executive Officer and President effective as of January 27, 2009. In addition, Mr. Alessi currently serves as(“CEO”) at a director and Chairman of the Board. From May to Augustdifficult time in our history. Since 2007, Mr. Alessi served ashas led efforts which have successfully standardized our operations, reduced corporate overhead and post retirement costs, stabilized cash flow, provided meaningful liquidity to our balance sheet and set a new, focused strategic vision. This new vision led to the Company’s interim Chief Executive Officeracquisition of the Kemmerer mine in January of 2012.
Fiscal 2011 – The Year in Review
Fiscal year 2011 was a year in which we improved liquidity, successfully weathered several external challenges that impacted our customers, relocated our corporate offices and Presidentultimately announced a major acquisition. Our business model relies primarily upon long term, cost plus contracts, with a small number of large customers. During 2011, the Pacific Northwest experienced unprecedented amounts of snow that led to a prolonged hydroelectric power season. This negatively impacted our largest customer well into the summer period. In addition, flooding associated with the high snow pack disrupted rail transportation and served as its Chief Executive Officermining production, which resulted in a further reduction in coal sales across our northern tier mining operations. Lastly, an explosion and Presidentfire at one of our major customers in November resulted in further loss of revenue. Despite these large interruptions in our operations in 2011, we ended the year within 10% of our record adjusted EBITDA from August 2007fiscal year 2010 due to April 2008. Mr. Alessi was also Chief Executive Officer of Lifestyle Improvement Centers, LLC from April 2003 to May 2006. Since 2002, Mr. Alessi has been an adjunct lecturer at the Ross School of Business at the University of Michigan. Mr. Alessi currently serves on the board of directors of H&E Equipment Services, Inc., Town Sports International Holdings, Inc.timely reaction and MWI Veterinary Supply, Inc.stringent cost management. Mr. Paprzycki joined Westmoreland as ControllerIn February, we issued $150 million in senior secured bonds in order to refinance existing debt and Principal Accounting Officer in June 2006 and was named Chief Financial Officer in April 2008. Prior to joining Westmoreland, he held positions at Applied Films Corporation as Corporate Controllerprovide ourselves additional liquidity. This, combined with favorable financial results from November 20052010, led to June 2006. From June 2004 to November 2005, Mr. Paprzycki was Chief Financial Officer at Evans and Sutherland Computer Corporation and Director of Finance from June 2001 to November 2004. Mr. Paprzycki became a certified public accountant in 1994, and a certified financial manager and a certified management accountant in 2004.
Mr. O’Laughlin joined Westmoreland in February 2001 as Vice President, Mining, and was named President and General Manager of Dakota Westmoreland Corporation in March 2001. He later became President and General Manager of Western Energy Company, President of Texas Westmoreland Coal Company and was promoted to Vice President of Coal Operations for Westmoreland Coal Company in May 2005. Prior to joining Westmoreland, Mr. O’Laughlin was with Morrison Knudsen Corporation’s mining group for twenty-eight years, most recently as Vice President of Mine Operations, which included responsibility for the contract mining services at the Absaloka Mine.
Mr. Myers rejoined Westmoreland in January 2000 as Vice President, Marketing and Business Development and in 2002 became Vice President, Sales and Marketing, now called Vice President, Coal Sales. He originally joined Westmoreland in 1989 as a Market Analyst and was promoted in 1991 to Manager of the Contract Administration Department. He left Westmoreland in 1994. Between 1994 and 2000, Mr. Myers was Senior Consultant and Manager of the environmental consulting groupelimination of a nationally recognized energy consulting firm, specializinggoing-concern audit opinion in coal markets, independent power development, and environmental regulation.
Mr. Kegley joined Westmoreland in October 2005 as Assistant General Counsel and was named General Counsel in August 2007. Prior to joining Westmoreland, he held legal positions with Peabody Energy Company from February 2004 to October 2005, AngloGold North America from June 2001 to February 2004, Kennecott Energy Company from August 1998 to June 2001, and Amax Coal Company and Cyprus Amax Minerals Company from February 1981 to July 1998. He is a memberour financial statements. In December, we bolstered our reserves through the acquisition of the bar of Indiana, Illinois, Wyoming, and Colorado.
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COMPENSATION DISCUSSION AND ANALYSIS
Business Context
We are a U.S. energy company that produces approximately 30158 million tons of coal and generates 1.6 million megawatt hours of electric power annually. We also broker coal for others. Between 1992 and 2001, we transitioned from primarily underground coal production, most of whichat our Absaloka mine. This acquisition was in the Eastern United States, to current production from surface mines in Montana, North Dakota,line with our strategic objective of increasing coal reserves and Texas. Working in combination with others, we also diversified into the productionextending mine lives at all of independent power. Our only power production facility today is in North Carolina. We employ approximately 1,125 people in six states and are ranked as the tenth largest coal producer in the country based on estimates of coal mined in 2008.our operations.
In November 2011, the management team successfully relocated the corporate offices from Colorado Springs to south Denver. This move not only cut overhead costs through a reduction in office rent, lowered travel expenses and decreased consulting costs, but broadened the available pool of talent from which to draw new employees and executives and brought us geographically closer to our key business partners. By designing an office from scratch, we were able to build a new environment that reflects the core values of the company, with all offices identical in size, including the executive officers’ offices, and no executive has a corner office. The new office atmosphere supports our overall compensation philosophy of limited perquisites and encourages a team environment. Finally, we moved to diversify and grow the business through the execution of a Purchase and Sale Agreement with Chevron Mining Inc. for the purchase of the Kemmerer mine in Kemmerer, Wyoming. Both of these activities demonstrated the management team’s keen attention to fulfilling the strategic plan and growth model set out by the Board of Directors in early 2011. We announced this transaction in December 2011 and was successfully closed in January 2012. General Compensation Practices and Philosophy Based on a holistic review and overhaul of the compensation program in 2010, our philosophy for total compensation packages for fiscal year 2012 is consistent with fiscal year 2011, but significantly different than in prior periods. Our prior approach was reflective of the state of the company and the need to incent management to bring the company through the difficult period of turning around its financial performance. The new compensation philosophy is forward-looking in nature and is intended to more closely align the performance of the company to that of enhancing stockholder value. Westmoreland now bases its total compensation strategy on a moderate growth model. As a moderate growth company, Westmoreland seeks to maintain salaries at or near peer group medians, shifts a portion of short-term incentive to long-term incentive and increases the percentage of long-term incentives as a percentage of total compensation. Our named executive officers remain at-will employees and do not have high levels of debt.employment agreements, including the CEO. The Westmoreland benefits philosophy is to provide executive officers with protection and security through health and welfare, retirement, disability insurance and life insurance programs. During fiscal year 2011, the CEO and other executive officers were eligible to receive the same benefits that are generally available to other Westmoreland employees. In addition our post-retirement medical and pension obligations requireto the company-wide benefits, the Board elected to provide executive physical examinations to executive officers starting in fiscal year 2012, for which we cover the costs that are not otherwise covered under each executive officer’s chosen health plan. We believe that the executive physical is a significant outlay of cash on an annual basis. As a result, we have been cash constrained. Successful executionprudent measure to help ensure the health of our strategic plan has been predicated on attractingexecutives. The executive physical benefit is a benefit generally provided by our peer companies and retainingis available at a talentedreasonable cost to Westmoreland.
Our compensation program is intended to retain and highly motivated executive team with a deep technical and operational knowledge of the energy markets. The skill sets, educational requirements, experience and personal qualities ofreward our executives are in demand by many of our competitors. At the same time, we have had to address the financial constraints imposed on us in transforming the Company from a mature, but struggling enterprise to a more financially stable one. Our executive compensation program has been designed to support our long-term strategic objectives, as well as address the realities of the competitive market for talent. Compensation Principles and Objectives
Our executive compensation program has been designed to provide a total compensation package that allows us to attract, retain and motivate executives with the business and technical knowledge necessary to capably manage our business.
Our executive compensation program is guided by several key principles:
| | | | | • ● | Design a program that is simple, understandable, and effective in providing incentive while alignedaligns with long-term stockholder interests;interests through the use of equity awards; | |
| | • ● | Target compensation levels that areis at least at the median of our industry, andpeer group, with the markets in which we compete for executive talent;long-term goal of bringing lower compensated executives to target levels as they continue to gain experience; | |
| | • | Structure executive compensation to reflect our business situation; | | | • ● | Link pay to performance by making a substantial percentageportion of total executive compensation variable or “at risk,” by relying on annualrisk” over the long-term; and long-term incentive compensation programs; | |
| | • | Use equity awards to align executive compensation with stockholder interests; and | | | • ● | Provide a total compensation program that emphasizes direct compensation over indirect compensation such as opposed to perquisites and other benefits. |
Establishing the Executive Compensation Program
OurStock Ownership Guidelines and Clawback Policies
In order to better align the interests of our executive compensation program takes into considerationmanagement team with the interests of our business situation,stockholders and to promote our commitment to sound corporate governance, the marketplace for similar positions, our past practices, and the experience and talents that each individual executive brings to the Company. Our Compensation and Benefits Committee consistsapproved stock ownership guidelines in 2011. The executive management team is expected to be in compliance with these guidelines within five years of three independent directors who administerbecoming subject to the policy. The ownership requirement for our executive officers is calculated as a multiple of base salary as follows: | Executive Level | | Multiple of Base Salary | | | CEO | | | 3.0 | x | | COO | | | 2.0 | x | | CFO, EVP and SVP | | | 1.5 | x | | Other executive officers | | | 1.0 | x |
At this time, the Committee has not adopted a clawback policy for the executive management team. While in full support of such a policy, the Compensation and Benefits Committee is waiting for more formal guidance from the Securities and Exchange Commission in response to the recent Dodd Frank legislation before adoption and implementation of a formal policy.
Compensation Methodology
Peer Comparisons and Survey Data
Our peer group is based on criteria that represent the characteristics that define the markets in which we compete for talent, rather than simply the markets in which we compete for business. In creating our peer group, we noted that there are very few comparably-sized publicly-traded coal companies to align ourselves with for comparative purposes. In addition, a third of our executive team comes from segments other than mining. With these and other factors in mind, we identified two characteristics that we believe would have the greatest influence on how we perform, as well as on the leadership talent that we need to drive outstanding performance. First, we are capital-intensive and second, we maintain long-term contracts as part of the business relationship that is established with customers. Based on such characteristics, we identified the below peer group for 2011 with the assistance of the compensation program. consultant engaged by the Compensation and Benefits Committee. The companies included in the peer group differ from those listed in the indices used to prepare our stock price performance graph, which can be found in our 2011 Annual Report to Stockholders. We believe that the peer group listed below, when used in conjunction with third-party compensation survey information, enables us to provide an accurate assessment of market practices for the compensation of our executive management team.
| 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 | |
In 2011, we used Economic Research Institute and CompAnalyst market data as additional comparison points. Total market data was compared with individual pay for each position, and “compra-ratios” were determined. Compra-ratios are an individual’s current salary divided by the reference point of the market data. For example, if an individual’s salary is $125,000 and the mid-point of the market data for that position was $100,000, the compra-ratio for that individual would be 125%, meaning such person is earning 25% more than the average of the market. Internal Pay Equity
The Committee considers internal pay equity when making compensation decisions for the executive management team. However, the Committee does not use a fixed ratio or formula when comparing compensation among executive officers. Our CEO is compensated at a higher level than other executive officers due to his significantly greater level of experience, accountability and responsibility. Mr. Alessi’s total cash compensation was 3.5 times greater than the average of our four other named executive officers in 2011. We feel that Mr. Alessi’s cash compensation for 2011 as compared to the other named executive officers is appropriate based on his significant role in leading the team to meet the Board’s strategic objectives for 2011. Our next highest paid named executive officer makes 1.45 times our lowest paid named executive officer. We believe such internal pay equity highlights the reasonableness of the dispersion of pay to our named executive officers.
Compensation Administration and the Role of Management in Determining Executive Compensation
The Compensation and Benefits Committee establishes our overall compensation strategy to ensure that our executives are rewarded appropriately and that executive compensation supports our business strategy and objectives.
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Setting Compensation Targets
In making At the beginning of the calendar year, each executive compensation decisions, wesets personal performance goals, which are guidedapproved by the compensation principles described above. However, fulfillment of these objectives has been limitedCEO for the executive team and by our cash constraintsthe Compensation and Benefits Committee for the relatively small pool of shares available for stock options and grants priorCEO, targeted to approvalpositively influence stockholder value. At the end of the 2007 Equity Incentive Plancalendar year, performance is evaluated by the CEO, for Employeesthe other named executive officers, and Non-employee Directors, known asby the 2007 plan. Going forward, we also expect to consider historicalBoard, for the CEO, against the established goals and individual accomplishments during the year. The Compensation and Benefits Committee reviews and approves the compensation, levels, competitive pay practices noted in the broad-based survey data ofincluding base salaries, annual incentives, long-term incentives, and other applicable companies, and the relative compensation levelsbenefits, of our named executive officers. We mayThe Compensation and Benefits Committee also consider industry conditions, industry life cycle, corporate performance as compared to internal goalsreviews and approves the overall effectivenesscompensation for other key executives who are not identified in this report. The annual incentive bonuses are paid out during the first quarter of the compensation program in achieving desired results.calendar year while increases to base
Our program offers our named executive officers the opportunity to be compensated above or below target, depending upon various measures As targeted total compensation levelssalaries occur at the beginning of the second quarter. Long-term equity incentives, which are determined,based on management tiers, were awarded on April 1, 2011.
While the Compensation and Benefits Committee has the responsibility to monitor and approve all compensation for our named executive officers, management also determinesplays an important role in determining executive compensation. At the portion of total compensation that will be contingent, performance-based pay. Performance-based pay generally includes cash bonuses under the annual incentive plan primarily for achievement of specifiedCompensation and Benefits Committee’s request, management recommends appropriate company-wide and mine and power financial and non-financial performance objectives,goals. After review and stock-based or similar incentive compensation whose value is dependent upon long-term appreciation in our stock price. Going forward,discussion, the Compensation and Benefits Committee expects to evaluateadopts performance goals for the effectiveness of our compensation program in obtaining desired results by comparing our practices against industry best standards and comparing our retention rate of key executives to that of similarly situated companies.
The Compensation-Setting Process
The compensation-setting process is described in more detail above under “Corporate Governance — Executive and Director Compensation Processes.”
Peer Comparisons
In 2007,coming year. Management works with the Compensation and Benefits Committee workedto establish the agenda and prepare information for each Compensation and Benefits Committee meeting. In addition, the CEO assists the Compensation and Benefits Committee by providing his evaluation of the performance of the executive officers who report directly to him, and recommending compensation levels for such officers. The Compensation and Benefits Committee also has a process for soliciting from the CEO an assessment of his own performance, which in conjunction with Mr. Alessieach director’s independent analysis of the CEO’s performance, is used to evaluateassist the Compensation and Benefits Committee and the Board in their evaluation of the CEO’s performance. The CEO is not present during the Compensation and Benefits Committee and Board review and assessment of the CEO’s performance evaluation.
Role of Compensation Consultants
The Compensation and Benefits Committee originally retained Buck Consulting in February 2010 to serve as the Compensation and Benefits Committee’s compensation consultant to assist the Compensation and Benefits Committee in thoroughly reviewing our internal compensation structure and did not use a comparative peer group. In 2008, management, working with the committee, participated in and purchased the results of an executive compensation and benefits survey specificprogram for future periods. Buck Consulting continued to provide guidance to the mining industry as well as a survey of companies of comparative revenueCompensation and employee base. The committee did not use a comparative peer group. During 2009, it is the committee’s intent to use the executive compensationBenefits Committee in 2011 and benefits survey and to review proxy data of a meaningful peer group for comparative analyses so that they may benchmark our executives’ compensation against peers from companies of similar industry, employee base and revenue. Given the changing nature of our business and industry, the companies includedearly 2012 in the peer group may vary from year to year. Our historic benchmarking peer group has consisted of other mining and energy companies, with a focus on size based on revenues. The committee believes revenue is an appropriate reference point for determining the composition of the peer group because it provides a reasonable basistotal compensation packages for comparing like positions and scope of responsibility.executive management.
Components of the Executive Compensation Program for 2011
Throughout this Compensation Discussion and Analysis, the individuals who served as Chief Executive Officer and Chief Financial Officer during fiscal year 2011, as well as the other individuals included in the “Summary Compensation Table” on page 27 of this proxy statement, are referred to as the “named executive officers.” They are (i) Keith Alessi, our President and Chief Executive Officer, (ii) Kevin Paprzycki, our Chief Financial Officer and Treasurer, (iii) Doug Kathol, our Executive Vice President, (iv) Joseph Micheletti, our Senior Vice President – Coal Operations, (v) Mike Kegley, our General Counsel – Mining and Operations, and (vi) John O’Laughlin, our former Senior Vice President – Coal Operations. Effective as of February 21, 2011, John O’Laughlin accepted a new position with us as Vice President – Strategic Sourcing and Asset Management. This new role is not an executive officer position. All of our named executive officers are compensated under anOur executive compensation program which consists of three main elements:
| | | | • | Base salary; | | | • | Annual incentive compensation; and | | | • | Long-term incentive compensation. |
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Base Salary
Base salary is designed to compensate our named executive officers at a fixed level of compensation that serves as a retention tool throughout the executive’s career. Salary
In determining base salaries, each executive’s role and responsibility, applicable experience, unique skills, past performance, future potential with us, and peer group data are considered. In addition, the Compensation and Benefits Committee considers each executive’s role and responsibility, unique skills, future potential with the Company,compra-ratios, which are salary levelsdata for similar positions in the same pay grade, allowing the Compensation and Benefits Committee to evaluate internal equity. A matrix, which is utilized for all employees and includes our target market,named executive officers, allows the Compensation and internalBenefits Committee to approve recommended base pay equity. Our compensation philosophy isincreases out of the available merit pool, which was set at 3.0% for 2012. For example, an outstanding performing executive who has a low compra-ratio, such as 75%, would be eligible for a 4.5% merit increase, while, conversely, a lower performing executive with a high compra-ratio, such as 125%, would generally not be eligible for a merit increase. The Compensation and Benefits Committee has the discretion to target base salaries at market levels, based ongrant salary adjustments above the executive compensation and benefits surveys obtainedpercentage recommended by the Company, for each named executive officer. In general,matrix to take into account external peer group data. Individual increases to base salary is intended to represent approximately 30% of the overall compensation package, assuming that we are achieving targeted performance levels for our incentive programs.
After 18 months with no internal equity or merit adjustments to base salaries for executives due to cash constraints, salariesnot guaranteed for our named executive officers except for Mr. Alessi and Mr. Kegley, were adjusted by 5% effective January 1, 2008. Mr. Alessi’s compensation is determinedare provided only at the discretion of the Board. His initial salary was adjusted from $40,000 per month during his interim appointment as PresidentCompensation and CEO, to $50,000 per month upon his being named PresidentBenefits Committee after a review of an individual’s performance and CEO in August 2007. In May 2008, his salary was adjusted from $50,000 per month to $25,000 per month as he relinquished the role of President and CEO and assumed the role of Executive Chairman. It was increased back to $50,000 per month in January 2009 when he resumed the role of President and CEO. Mr. Lobb began his employment in April 2008 as the CEO at a base salary of $41,667 per month. Mr. Lobb also received an additional cash award of $200,000 at the end of 2008 as an employment incentive and as specified under his offer of employment. Mr. Kegley received a 2.75% salary increase in January 2008 following a salary increase in August 2007 at the time he was named General Counsel. Mr. Paprzycki’s salary was increased to $200,000 in April 2008 at the time he was named CFO to reflect the importance of his duties and to bring his salary to a comparable level with other named executive officers.relevant market data.
In April 2009, base salaries for the named executive officers, except for Mr. Alessi and Mr. O’Laughlin, were adjusted by 3.5%. Mr. Alessi’s salary was adjusted as described above. Mr. O’Laughlin received a 5.8% adjustment based on survey data
| | 2011 Base Salaries for Named Executive Officers | | | | | | | | | Name | | Position | | Base Salary | | Keith E. Alessi | | CEO and President | | $600,000 | | Douglas P. Kathol | | Executive Vice President | | $280,500 | | Kevin A. Paprzycki | | Chief Financial Officer and Treasurer | | $245,000 | | Joseph E. Micheletti(1) | | Senior Vice President – Coal Operations | | $145,583/ $225,000 | | Morris W. Kegley | | General Counsel – Mining and Operations | | $224,298 | | John V. O’Laughlin(2) | | Senior Vice President – Coal Operations | | $225,508 |
__________ | (1) | Mr. Micheletti’s base salary was set at $145,583 through May of 2011 in his role as General Manager of the Jewett mine. In May of 2011, Mr. Micheletti’s base salary was increased to $225,000 to reflect his promotion to Senior Vice President – Coal Operations. | | (2) | John O’Laughlin served as our Senior Vice President – Coal Operations through February 21, 2011. Effective as of February 21, 2011, Mr. O’Laughlin accepted a new position with us as Vice President – Strategic Sourcing and Asset Management. |
Annual Incentive Compensation
The annual incentive plan is intended to provide variable compensation awarded for performance based on the achievement of strategic goals and objectives. The incentive at-risk compensation atpay is based on financial performance and personal performance, while executives with direct mining operational responsibility also have a safety component. If the median levelthresholds for targeted performance levels. the financial and safety components are not met, then no payout is made for that particular component. The annual incentive plan goals for fiscal year 2011 were set by the Compensation and Benefits Committee providesin February 2011 and encompassed the following: | GOAL | | COMPONENTS | | PERCENT OF TOTAL | | Financial | | Goal: Depending on the executive, annual budgeted operating income and free cash flow of Westmoreland Coal Company and/or maximizing contract incentives of certain mines ● 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 |
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 May of 2011, Mr. Micheletti was promoted to Senior Vice President – Coal Operations. As such, his percentage of AIP payout was increased from 30% to 35%. | | (2) | In 2011, the annual budgeted operating income goal and free cash flow goal for Westmoreland Coal Company was $27.510 million and $20.487 million, respectively. The 2011 actual operating income and free cash flow was $16.067 million and $26.789, respectively. The weighted actual performance for corporate financial was 100% of goal, resulting in 100% financial payout. The mine level financial goal was based on maximizing contract incentives. The consolidated performance of the mines for Mr. Kegley equated to a 123% payout and the consolidated performance of the mines for Mr. Micheletti was 124% payout. Messrs. Alessi, Kathol, Paprzycki and Micheletti had the entirety of their financial goal based on the corporate operating income and free cash flow measures. However, Mr. Kegley’s financial portion of the AIP was based 30% on corporate financial and 40% on certain mines maximizing contract incentives. | | (3) | In 2011, the average national reportable incident rate was 1.95, which is a calculation based on total hours worked and reportable incidents. In 2010, the average reportable incident rate for Texas was 1.52 and for the mines Mr. Micheletti oversaw as Senior Vice President – Coal Operations was 1.03. | | (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
Long-term incentive awards are designed to align the interests of our executives includingwith those of our named executive officers,stockholders. On April 1, 2011, we issued time-based restricted stock units with the opportunity to earn an annual cash incentive award each year. Our annual incentive plan is designed to rewarda three-year vest and performance-based restricted stock units with a three-year cliff vest on April 1, 2011. The performance-based restricted stock units vest upon the achievement of specific, pre-established financial and operational objectives. In 2008, it also included a personal performance component designed to reward individual effort and performance.preset three-year cumulative free cash flow measure. The annual incentive for Mr. Alessi is described separately below. In 2008, we established performance objectives for our named executive officers. Target levels for those with direct operational responsibility, including Mr. O’Laughlin, werenumber of shares issued was based on the safety of our operations (30% weight), our financial performance (40% weight) and a personal performance component (30% weight). For those with no direct operational responsibly, the primary performance objective was our financial performance (55%) and a personal performance component (45%). The formula used to calculate the payout under each annual incentive award is: (i) the performance in each of the areas as determined by operational responsibility — safety, financial and personal performance — multiplied by (ii) the weight assigned to each area, which in turn is multiplied by the (iii) the executive’s tier level, which is a percentage of the executive’s base salary divided by the stock price on the date of grant.
Long-Term Incentive Awards for Named Executive Officers for 2011 | | | | | | Name | | Percentage of Base Salary | | | Number of Time-Based RSUs | | | Number of Performance-Based RSUs | | | Grant Date Fair Value of RSUs | | | Keith E. Alessi | | | 150 | % | | | 30,081 | | | | 30,080 | | | $ | 900,009 | | | Douglas P. Kathol | | | 80 | % | | | 7,500 | | | | 7,500 | | | $ | 224,400 | | | Kevin A. Paprzycki | | | 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 | | | 60 | % | | | 4,524 | | | | 4,522 | | | $ | 135,328 | |
__________ | (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. |
Post-Employment Benefits
We have a severance policy that provides, under certain circumstances, our executives with twelve months of base pay, in addition to nine months of outplacement assistance and is then multiplied by (iv)12 months of health benefits at the executive’s base salary. The sum of the payout of each component represents the total annual incentive payout. Better than industry average safety performance is required for a payoutsame cost share as active employees. Payment under the safety component. The safety objective compares the lost-time incident (“LTI”) rate of our mine operations to nation-wide surface mine industry averages as reported by the Mine Safety and Health Administration.
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In 2008, our financial performance component was based on achievement of pretax income, as compared to the pretax income set forth in the business unit’s budget for that period approved by the Board. For an executive to receive his targeted bonus for 2008, the executive’s business unit was required to achieve a 7.5% increase in pretax income, as compared to the pretax income set forth in the business unit’s budget for 2008.
Award opportunities include a personal performance component to recognize the relative contributions of each named executive officer to the accomplishment of strategic objectives, outstanding performance, special efforts, and similar factors. The personal performance componentseverance policy is basedtriggered upon the accomplishmentsfollowing events: involuntary termination that is not for cause, such as a layoff; the sale of a facility or division, such as the sale of a specific mine; or a position being relocated by at least fifty miles. Except for this severance policy, we do not guarantee or provide any other cash compensation or benefits to our executives upon their departure from Westmoreland. For full walk-away amounts for each participant.
The Compensation and Benefits Committee participated in the review and award of 2008 annual incentive awards for our named executive officers upon the happening of certain events, such as involuntary termination without cause or change-in-control, see “EXECUTIVE COMPENSATION FOR 2011-Potential Payments upon Termination or Change-in-Control” below.
Federal Income Tax and senior-level executives and managers. In 2008,Other Consequences
Under Section 162(m) of the bonus targets forInternal Revenue Code, we may not be able to deduct certain forms of compensation in excess of $1,000,000 paid per year to our named executive officers other than Mr. Alessi and Mr. Lobb, were set according to the executive’s tier level. The targets ranged from 40% to 45% of base salary. Maximum payoutswho are cappedemployed by us at two times the targeted percent of salary. In general, we pay incentive bonuses in the year following the annual performance period. Annual incentive amounts earned in 2008 were paid in the first quarter of 2009. Actual awards are shown by individual in the 2008 Summary Compensation table below. Annual bonus amounts shown in the 2008 Summary Compensation table (except for the amount shown for Mr. Lobb which reflects an employment incentive) are based on performance against the above objectives. Bonuses for the named executive officers other than Mr. Alessi and Mr. O’Laughlin were based on financial performance (55%) and personal performance (45%). Mr. O’Laughlin’s bonus was based on the safety of our operations (30%), financial performance (40%), and personal performance (30%). For 2008, the financial component of the bonus was based on an increase in budgeted pretax income. If the increase was 7.5% greater than the budgeted amounts, our executives would have received the targeted levels of the financial component of the bonus. The business units relevant to the named executive officers failed to meet their minimum financial performance targets, so no executive received any bonus in respect of financial performance for 2008. Our safety performance was better than the industry average (1.34 LTI compared to the national average of 1.41) which resulted in a 60% payout of that component of the bonus for 2008 to Mr. O’Laughlin. The personal component of the bonus was based on individual contributions to the accomplishment of strategic objectives, outstanding performance, special efforts, and similar factors. For 2008, the personal component of the bonus was based on subjective judgment as to the individual’s contribution to the Company and took into consideration the accomplishment of individual goals. A minimum of two goals were set by each named executive and the goals were approved by the CEO.
In 2008, Mr. Alessi participated in the annual incentive plan, with a guaranteed minimum bonus in an amount equal to 120% of the amount paid to him in salary for the period from January 1, 2008 through April 28, 2008, and paid in the first quarter of 2009 at the same time as bonuses were paid under the annual incentive plan to our other senior executives. Mr. Alessi’s bonus was based upon his successful execution of several priorities, given by the Board, which included the reduction of corporate overhead, improvement of financial reporting processes, consolidation of functions at our mining operations and the completion of two debt refinancing transactions that strengthened our core business. In 2009, Mr. Alessi is eligible to receive up to 70% of his annual salary to be determined by the Board or the Compensation and Benefits Committee in its discretion.
Long-Term Incentive Compensation
General. One component of our executive compensation program is the use of long-term incentives.year-end. The Compensation and Benefits Committee believes that it is generally in our best interest to satisfy the requirements for deductibility under Internal Revenue Code Section 162(m). Accordingly, the Compensation and Benefits Committee has taken appropriate actions, to the extent it believes feasible, to preserve the deductibility of annual incentive and long-term incentiveperformance awards. However, notwithstanding this general policy, the Compensation and Benefits Committee also believes that there may be circumstances when our interests are best served by maintaining flexibility in the way compensation may help attractis provided, whether or not compensation is fully deductible under Internal Revenue Code Section 162(m). Accordingly, we reserve the authority to award non-deductible compensation in appropriate circumstances. Further, because of ambiguities and retain executive talentuncertainties as to the application and provide executives with incentivesinterpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding our efforts, that compensation intended by us to maximizesatisfy the value of our shareholders’ investmentsrequirements for deductibility under Section 162(m) does in us. Long-term incentive awards for executives are based on a tier structure which targetsfact do so.
2012 Compensation Program As illustrated in the graph below, we believe that performance and equity-based compensation should increase as a percentage of total direct compensation as salary adjustedgrade levels and responsibility increases. As such, for market conditions. The annualized value2012, the CEO and the COO have the highest percentage of total compensation at risk through both the annual and long-term incentive awards for our named executive officers is generally intended to be the largest component of our total compensation package. However, as a result of cash constraints and the limited number of stock options, stock grants and stock appreciation rights, or SARs, available to us, award values have frequently been set below the 50th percentile of market and have delivered even less value over most performance periods.
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Historical Long-Term Equity Compensation Practices. In 2000, the Board adopted a Performance Unit Plan, or the 2000 PUP, as part of our long-term incentive program because an insufficient number of shares were available for issuance under stockholder-approved equity plans to support our program. The 2000 PUP offered the opportunity for cash or stock to be earned based on the absolute or relative performance of our stock over three year periods. Awards under the 2000 PUP were granted in the years2000-2002 and2004-2006. Those units granted in 2002, 2004 and 2005 that vested in 2005, 2007 and 2008 resulted in no value and no payments because we did not achieve the aggressive performance targets established in 2002, 2004 and 2005. Performance units granted in 2006 will be valued at the end of the performance period occurring at the end of June 2009. Based on our stock performance as of December 31, 2008, the performance units granted in 2006 were not “in-the money,” meaning if settled at that time, they would result in no payments.opportunities.
In 2005 and 2006, long-term incentive awards consisted
As approved by the Compensation and Benefits Committee and, for the CEO, by the Board, the following table illustrates the total targeted compensation packages for the projected named executive officers for 2012.
| 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 | |
Summary of Named Executive Officer Compensation for 2011
Keith E. Alessi: President and Chief Executive Officer
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 |
Base Salary
For 2012, the Board increased Mr. Alessi’s base salary to $700,000, which puts this component of compensation near 75% of the peer group. The Board reviewed Mr. Alessi’s compensation history and comparative data from the Company’s peer group, noting that his base salary had not increased since he joined the Company in 2007. The Board feels that this new base salary is appropriate given Mr. Alessi’s experience and past performance meeting strategic goals.
Annual Incentive Compensation
Financial Component: The financial component was based on budgeted operating income and free cash flow at the consolidated corporate level. The weighted actual performance for these corporate financial goals was 100%, resulting in 100% financial payout.
Individual Component: The Compensation and Benefits Committee recommended and the Board approved a 134% individual performance payout for Mr. Alessi for his performance in 2011. The non-employee directors of the Board reviewed and provided feedback on Mr. Alessi’s strategic effectiveness, business management, talent management and personal effectiveness. Mr. Alessi was provided above average ratings in all categories by the directors. The Board made particular note of his major accomplishments in 2011, including exemplary leadership of the $150.0 million note issuance, successful reserve acquisition, relocation of the corporate office, successful Kemmerer bid and management of the extended hydro electric power season, subsequent floods and customer plant outage.
Safety Component: Not applicable.
Long-Term Incentive Compensation
For fiscal year 2011, Mr. Alessi was awarded long-term equity at a targeted 150% of base salary, which is at a substantially higher tier than the other named executive officers. The Board felt such grant was warranted due to their performance orientationMr. Alessi’s direct responsibility for overseeing the entire organization, as well as direct responsibility for our company’s profits and losses. The Board and Mr. Alessi felt strongly that his compensation should be directly tied to conserve shares available under approved equity plans. Although awards generally vest over three years, on December 30, 2005, we acceleratedthat of the vesting of all unvested SARs previously awarded to executive officersstockholders and other employees primarily to reduce the compensation expense that would have been recorded in future periods following our adoption of Financial Accounting Standards Board Statement No. 123, “Share Based Payment (revised 2004),” or FAS 123R, effective January 1, 2006.overall financial results.
| Douglas Kathol: Executive Vice President |
Total Cash Received for 2011 | | 2011 Base Salary | | Bonus for 2011 | | # of RSUs / Grant Date Fair Value of 2011 RSUs | | $433,519 | | $280,500 | | $159,577 | | 15,000 RSUs/ $224,400 |
Base Salary
For 2012, the Compensation and Benefits Committee simplified our long term incentive program by issuing stock options and eliminatedincreased Mr. Kathol’s base salary to $287,513 effective April 1, 2012, which puts this component of compensation near the use of both SARs and performance units, which were historically ineffective. The issuance of stock options is easier to administer and more readily understood by senior management, thus increasing the incentive value25% of the awards. Equivalent jobs receive equivalent grants, regardlesspeer group.
Annual Incentive Compensation
Financial Component: The financial component was based on budgeted operating income and free cash flow at the consolidated corporate level. The weighted actual performance for these corporate financial goals was 100%, resulting in 100% financial payout.
Individual Component: Management proposed and the Committee approved a 214% individual performance payout for Mr. Kathol due to efforts in meeting our strategic goal of salary. The strike pricegrowth through acquisition. Mr. Kathol played a key role in our successful bid for the Kemmerer Mine. In addition, Mr. Kathol helped grow the business through the acquisition of additional reserves and the optionsexecution of new coal sales contracts.
Safety Component: Not applicable.
Long-Term Incentive Compensation
For fiscal year 2011, the Compensation and Benefits Committee awarded Mr. Kathol 15,000 restricted stock units representing 80% of his base salary, which is set as the fair market value (the closing price) of our common stocksecond largest equity grant on the date of the grant. Timing of Grants Disclosure and Rationale. Except for certain initial awards granted as of the date of hire for new executives, the timing of long-term incentive compensation awards is typically July 1st and intended to allow for the continuity of awards from year to year.executive team. The Compensation and Benefits Committee approvesfelt this award appropriate given Mr. Kathol’s direct operational responsibilities and to incentivize Mr. Kathol to make decisions that will create and sustain stockholder value.
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
Total Cash Received for 2011 | | 2011 Base Salary | | Bonus for 2011 | | # of RSUs / Grant Date Fair Value of 2011 RSUs | | $370,922 | | $245,000 | | $133,202 | | 11,465 RSUs/ $171,516 |
Base Salary
The Compensation and Benefits Committee approved Mr. Paprzycki’s new base salary for 2012 in line with peer group data, bringing his base salary to $260,000 effective as of April 1, 2012. This increase in base salary brings this component of compensation to near 25% of peer group data.
Annual Incentive Compensation
Financial Component: The financial component was based on budgeted operating income and free cash flow at the consolidated corporate level. The weighted actual performance for these corporate financial goals was 100%, resulting in 100% financial payout.
Individual Component: Management proposed and the Compensation and Benefits Committee approved a 250% individual performance payout for Mr. Paprzycki. Mr. Paprzycki made significant strides in enhancing the Treasury function and implemented new financial reporting systems to greatly simplify and expedite forecast measures. The Compensation and Benefits Committee also recognized Mr. Paprzycki in providing critical modeling and financial data for the successful Kemmerer Mine bid.
Safety Component: Not applicable.
Long-Term Incentive Compensation
For fiscal year 2011, the Compensation and Benefits Committee awarded Mr. Paprzycki 11,465 restricted stock units, which reflected the target percentage award types, amountsfrom his set tier.
Joseph E. Micheletti: Senior Vice President – Coal Operations Total Cash Received for 2011 | | 2011 Base Salary | | Bonus for 2011 | | # of RSUs / Grant Date Fair Value of 2011 RSUs | | $320,282 | | $145,583/$225,000(1) | | $128,546 | | 4,020 RSUs/ $60,139 |
__________ | (1) | Mr. Micheletti’s base salary was set at $145,583 through May of 2011 while in his role as President and General Manager of the Jewett Mine. In May of 2011, Mr. Micheletti’s base salary was increased to $225,000 to reflect his promotion to Senior Vice President – Coal Operations. |
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 this new role.
Annual Incentive Compensation
Financial Component: Mr. Micheletti’s financial component was based partially on his time as President and General Manager of the Jewett Mine and partially on his time as Senior Vice President – Coal Operations. The portion of his financial component tied to his role as President and General Manager was based on the Jewett mine maximizing contract incentives and was paid out at 100%. The portion of his financial component tied to his role as Senior Vice President – Coal Operations was based on the weighting of the five mine’s performance relative to maximizing contract incentives and/or operating income and was paid out at 124%.
Individual Component: Management proposed and the Compensation and Benefits Committee approved a 362% individual performance payout for Mr. Micheletti. The Committee recognized Mr. Micheletti’s key role in the assisting the team in putting together a successful bid for the Kemmerer Mine. Additionally, Mr. Micheletti successfully assisted mine-level management in maximizing contract incentives and in replacing bonding collateral at the Jewett Mine.
Safety Component: Mr. Micheletti’s safety component was based partially on his time as President and General Manager of the Jewett Mine and partially on his time as Senior Vice President – Coal Operations. The portion of his safety component tied to his role as President and General Manager was based on the Jewett mine’s reportable incident rate relative to the national average for surface mines and paid out at 94%. With direct operational responsibility for all of our mines as Senior Vice President – Coal Operations, Mr. Micheletti’s safety component payout in such role was based upon an average of reportable incident rates at all mine locations. In 2011, the average national reportable incident rate was 1.95, which is a calculation based on total hours worked and reportable incidents. In 2011, the average reportable incident rate for the mines Mr. Micheletti oversaw was 1.03, which is significantly less than the national average. This phenomenal safety record correlated into a 189% safety component payout.
Long-Term Incentive Compensation
For fiscal year 2011, Mr. Micheletti was awarded 4,020 restricted stock units, which is a higher tier award termsthan other vice presidents. The Compensation and conditionsBenefits Committee felt such higher tier level was warranted due to Mr. Micheletti’s direct responsibility for each award to ouroverseeing more employees than any other named executive officers. It delegates administrationofficer, direct responsibility for a large portion of our company’s profits and losses, and his direct operational responsibility for all mining operations.
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
Total Cash Received for 2011 | | 2011 Base Salary | | Bonus for 2011 | | # of RSUs / Grant Date Fair Value of 2011 RSUs | | $299,585 | | $224,298 | | $81,425 | | 8,998 RSUs/ $134,610 |
Change in Role
On February 29, 2012, the Board determined that the roles and responsibilities of Mr. Kegley 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. Kegley 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 151% individual performance payout for Mr. Kegley. Mr. Kegley provided invaluable assistance in the review of land and coal supply agreements in anticipation of the Kemmerer Mine bid. Additionally, Mr. Kegley played an integral role in the acquisition of new reserves at our Absaloka Mine.
Safety Component: Not applicable.
Long-Term Incentive Compensation
For fiscal year 2011, the Committee awarded Mr. Kegley 8,998 restricted stock units based on his placement in the 60% long-term incentive tier, as discussed above.
John V. O’Laughlin: Former Senior Vice President – Coal Operations
Total Cash Received for 2011 | | 2011 Base Salary | | Bonus for 2011 | | # of RSUs / Grant Date Fair Value of 2011 RSUs | | $285,695 | | $225,508 | | $64,524 | | 9,046 RSUs/ $135,328 |
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.
Summary Compensation Table
The following tables set forth information regarding the fiscal 2011 compensation for our Chief Executive Officer, Chief Financial Officer, our other three most highly compensated executive officers who were serving as executive officers at the end of fiscal 2011, and one additional individual for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer at the end of fiscal 2011 (collectively, our “named executive officers”). Columns required by SEC rules are omitted where there is no amount to report. The table also sets forth information regarding the fiscal 2009 and/or fiscal 2010 compensation for those individuals who were also named executive officers in fiscal 2009 and/or fiscal 2010.
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | Change in Pension Value Earnings ($) | | All Other Compenation ($)(3)(5) | | Total ($) | Keith E. Alessi(6) CEO and President | | 2011 | | 588,460 | | — | | 900,009 | | 668,460 | | 8,027 | | 16,572 | | 2,181,528 | | | 2010 | | 492,305 | | — | | 884,775 | | 482,239 | | 4,004 | | 16,572 | | 1,879,895 | | | 2009 | | 588,461 | | 350,000 | | 245,100 | | 370,731 | | 20,044 | | 16,643 | | 1,590,979 | Kevin A. Paprzycki CFO and Treasurer | | 2011 | | 237,720 | | — | | 171,516 | | 133,202 | | 14,478 | | 16,369 | | 573,285 | | | 2010 | | 213,948 | | — | | 72,309 | | 101,994 | | 5,907 | | 16,202 | | 410,360 | | | 2009 | | 213,077 | | — | | 45,752 | | 38,354 | | 3,599 | | 12,467 | | 313,249 | Douglas P. Kathol Executive Vice President | | 2011 | | 273,942 | | — | | 224,400 | | 159,577 | | 31,893 | | 76,515 | | 766,327 | | | 2010 | | 248,392 | | — | | 119,996 | | 134,806 | | 16,409 | | 16,444 | | 536,047 | Joseph E. Micheletti SVP – Coal Operations | | 2011 | | 191,736 | | — | | 60,139 | | 128,546 | | 57,061 | | 53,194 | | 483,826 | Morris W. Kegley General Counsel | | 2011 | | 218,160 | | — | | 134,610 | | 81,425 | | 23,535 | | 16,231 | | 473,961 | | | 2010 | | 196,752 | | — | | 53,283 | | 93,779 | | 13,398 | | 16,199 | | 373,411 | | | 2009 | | 213,463 | | — | | 45,752 | | 76,847 | | 38,224 | | 12,472 | | 386,758 | | Former Named Executive Officers | | | | | | | | | | | | | | | | | John V. O’Laughlin(4) VP – Coal Operations | | 2011 | | 221,171 | | — | | 135,238 | | 64,524 | | 54,827 | | 16,283 | | 492,043 | | | 2010 | | 224,239 | | — | | 79,900 | | 66,465 | | 28,987 | | 16,274 | | 415,865 | | | 2009 | | 225,222 | | — | | 68,628 | | 80,535 | | (5,611) | | 12,552 | | 381,326 |
__________ | (1) | Amounts in these columns represent the aggregate grant date fair value of the equity awarded calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 – Share-Based Payment. These columns were prepared assuming none of the awards will be forfeited. Additional information is set forth in the “Grants of Plan-Based Awards” table below. Details regarding the 2011, 2010 and 2009 stock awards that are outstanding as of December 31, 2011 may be found in the ��2011 Outstanding Equity Awards At Fiscal Year-End” table below. A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 2011 may be found in the Notes to the Financial Statements in the Company’s Form 10-K for the year ended December 31, 2011. | | (2) | Represents the cash bonus awarded under our Annual Incentive Plan, a discretionary performance-based award made in the first quarter of each fiscal year for performance in the prior fiscal year. | | (3) | “All Other Compensation” for 2011 includes reimbursements and payments for our contributions to the Westmoreland’s 401(k) plan and life insurance premiums. We contributed $14,700 in matching contributions to the 401(k) plan on behalf of each named executive officer. Our 401(k) match program provided for a match of total cash compensation earned in 2011 up to a maximum allowable cash compensation of $245,000 equaling 6% of total cash compensation. We paid life insurance premiums of $1,872, $1,669, $1,872, $1,346, $1,531 and $1,583 during 2011 for Messrs. Alessi, Paprzycki, Kathol, Micheletti, Kegley, and O’Laughlin respectively. | | (4) | Mr. O’Laughlin served as our SVP – Coal Operations through the end of February 2011. | | (5) | “All Other Compensation” for 2011 also includes $59,943 and $27,122 for Messrs. Kathol and Micheletti, respectively, for relocation of their home. Mr. Kathol was eligible for relocation under our Relocation Policy upon the move of the office from Colorado Springs to Englewood, Colorado. Upon Mr. Micheletti accepting the position of Senior Vice President – Coal Operations, he was eligible for relocation under the Relocation Policy for his move from Texas to Montana. | | (6) | Mr. Alessi does not receive any additional compensation for his services as a director. |
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 tocompensation amounts are annual cash incentives under our Human Resources and Investor Relations Departments. To achieve continuity, the awards, and specifically the actual number of shares to be awardedAnnual 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 approved at a meetingdiscussed 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, held generally in June each year.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. Time-based restricted stock units, representing 50% of the total award, granted to the named executives officers on April 1, 2011 vest over three years beginning 12 months from the grant date, or effective date,with 33% of the shares becoming vested and available for release at that time, and an additional 33% vesting and becoming available for release on each successive anniversary of the grant date. Full vesting occurs on the third anniversary of the grant date. Performance-based restricted stock units, representing 50% of the total award, iswere also granted on April 1, 2011 and will cliff vest on April 1, 2014 upon achievement of a three-year cumulative free cash flow amount that was set by the Compensation and Benefits Committee at July 1st in each year. We doearly 2011. Awards not engage in the practiceyet released are forfeited upon separation.
2011 Grants of timing grants with the release of non-public information.Plan-Based Awards
Equity Incentive Plan. Stock option awards were granted in 2008 under the 2007 plan to a senior management group based on a tier structure that reflected scope and responsibility of positions. The awards ranged from 1,000 to 60,000 stock options. We issued 60,000 stock options to Mr. Alessi who served at the time as Executive Chairman, 25,000 to Mr. Lobb as our President and CEO, 15,000 to Mr. O’Laughlin, who has executive management responsibility for multiple coal mining operations, and 7,000 stock options to each of the remaining named executives. Awards generally vest over a period of three years, with one-third becoming exercisable on each anniversary of the grant date as long as the individual is still employed by us on the date of vesting. The Compensation and Benefits Committee selected a three-year vesting period to reinforce the link between the incentives and our long-term performance. Awards generally expire after ten years.| | | | | | | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | | | | | | | | Name | | Grant Date | | Approval Date by Committee/ Board | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards(#)(1) | | | Grant Date Fair Value of Stock Awards($)(1) | | Keith E. Alessi | | 4/01/2011 | | 3/09/2011 | | | 15,040 | | | | 30,080 | | | | 45,120 | | | | 30,081 | | | | 900,009 | | Kevin A. Paprzycki | | 4/01/2011 | | 2/08/2011 | | | 2,866 | | | | 5,732 | | | | 8,598 | | | | 5,733 | | | | 171,516 | | Douglas P. Kathol | | 4/01/2011 | | 2/08/2011 | | | 3,750 | | | | 7,500 | | | | 11,250 | | | | 7,500 | | | | 224,400 | | Joseph Micheletti | | 4/01/2011 | | 2/08/2011 | | | 1,005 | | | | 2,010 | | | | 3,015 | | | | 2,010 | | | | 60,139 | | Morris W. Kegley | | 4/01/2011 | | 2/08/2011 | | | 2,249 | | | | 4,498 | | | | 6,747 | | | | 4,500 | | | | 134,610 | | John V. O’Laughlin | | 4/01/2011 | | 2/08/2011 | | | 2,261 | | | | 4,522 | | | | 6,783 | | | | 4,524 | | | | 135,238 | |
__________ In addition to the award of stock options, we also issued 100,000 restricted shares of common stock as an employment incentive to Mr. Lobb when he joined us. All of the shares were unvested and were forfeited at the time of his resignation, as were his stock options.
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Tax Deductibility Policy
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction for certain compensation in excess of $1 million paid to our CEO, CFO and our other named executive officers. The Compensation and Benefits Committee reserves the right to use its judgment to authorize compensation payments that may exceed $1 million when it believes such payments are appropriate and in the best interests of the Company and our stockholders, after taking into consideration changing business conditions and the performance of its employees.
Benefits
Benefits for our named executive officers are established based upon an assessment of competitive market factors, a determination of what is needed to attract and retain high caliber executives, and our financial condition. Our primary benefits for executives include participation in the broad-based plans available to most of our other employees including defined benefit retirement plans, 401(k) plans, savings plans, health and dental plans and various insurance plans, including disability and life insurance.
Perquisites
Perquisites for our executives, including our named executive officers, are very limited. As our Executive Chairman and CEO, Mr. Alessi is the named designee on a corporate country club membership. Mr. Lobb was also a designee during his tenure as CEO. Mr. Alessi and Mr. Lobb paid for their own membership dues.
We provide reimbursement to named executive officers for 80% of the cost of an annual physical examination, up to $500 per year.
It is not our practice or policy to provide a company vehicle or a vehicle allowance to our executives. However, in the case of Mr. O’Laughlin, who has responsibility for the executive management of multiple coal mining operations that are reasonably reachable by vehicle, but located a significant driving distance apart, we provide for the use of a company-owned vehicle specifically for traveling between locations.
Employment Contracts
We do not have contracts of employment with our executives, except for the severance arrangements described below.
Post-Termination Compensation
Effective May 21, 2007 and as amended December 2008, we adopted a severance policy that applies to all active full-time employees. This policy is designed to provide our employees with financial protection against the loss of their employment as the result of circumstances beyond their control. Additional information regarding the severance policy, including a definition of key terms and an estimated quantification of benefits that would have been received by our named executive officers had termination occurred on December 31, 2008, is found under the heading “Executive Compensation — Potential Payments Upon Termination or Change in Control” below.
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Richard M. Klingaman, Chairman
Thomas J. Coffey
Michael R. D’Appolonia
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid to each individual who served as our principal executive officer or principal financial officer in 2008 and our three most highly compensated executive officers (other than our principal executive and financial officers) who were serving as executive officers at December 31, 2008. We refer to these seven individuals collectively as our named executive officers. The determination of our most highly compensated executive officers is based on total compensation for 2008 as calculated in the “Summary Compensation” table (excluding the change in the actuarial value of pension and defined benefit plan benefits and above-market or preferential earnings on deferred compensation) shown below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value and
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred
| | | | | | | | | | | | | | | | | | | | | | | Stock
| | | Option
| | | Compensation
| | | All Other
| | | | | | | | Name and Principal
| | | | | Salary
| | | Bonus
| | | Awards(1)
| | | Awards(1)
| | | Earnings(2)
| | | Compensation(3)
| | | Total
| | | | | Position | | Year | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | | | | | | Keith E. Alessi | | | 2008 | | | | 403,846 | | | | 242,308 | | | | — | | | | 231,261 | | | | 3,775 | | | | 12,222 | | | | 893,412 | | | | | | | Executive Chairman, CEO and President | | | 2007 | | | | 351,692 | | | | 422,031 | | | | — | | | | 301,073 | | | | — | | | | 21,157 | | | | 1,095,953 | | | | | | | Kevin A. Paprzycki | | | 2008 | | | | 189,450 | | | | 34,101 | | | | — | | | | 28,302 | | | | 8,741 | | | | 7,088 | | | | 267,682 | | | | | | | CFO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John V. O’Laughlin | | | 2008 | | | | 211,374 | | | | 45,657 | | | | — | | | | 77,583 | | | | 52,408 | | | | 6,971 | | | | 393,993 | | | | | | | Vice President, Coal Operations | | | 2007 | | | | 200,665 | | | | 89,336 | | | | — | | | | 47,993 | | | | 32,235 | | | | 9,758 | | | | 367,064 | | | | | | | | | | 2006 | | | | 192,860 | | | | 81,657 | | | | — | | | | 29,756 | | | | 30,096 | | | | 8,445 | | | | 342,814 | | | | | | | Todd A. Myers | | | 2008 | | | | 218,568 | | | | 78,685 | | | | | | | | 52,106 | | | | 29,014 | | | | 7,582 | | | | 385,955 | | | | | | | Vice President, Coal Sales | | | 2007 | | | | 208,542 | | | | 37,538 | | | | — | | | | 38,297 | | | | 14,552 | | | | 8,066 | | | | 306,995 | | | | | | | Morris W. Kegley | | | 2008 | | | | 200,156 | | | | 36,028 | | | | — | | | | 23,019 | | | | 30,301 | | | | 7,411 | | | | 296,915 | | | | | | | General Counsel | | | 2007 | | | | 175,154 | | | | 39,410 | | | | — | | | | 9,211 | | | | 21,494 | | | | 9,421 | | | | 254,690 | | | | | | | Delbert L. Lobb(4) | | | 2008 | | | | 326,923 | | | | 200,000 | | | | 351,111 | | | | 49,316 | | | | — | | | | 59,657 | | | | 987,007 | | | | | | | Former President and CEO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | David J. Blair(5) | | | 2008 | | | | 72,982 | | | | — | | | | — | | | | (26,178 | ) | | | — | | | | 333,630 | | | | 380,434 | | | | | | | Former CFO | | | 2007 | | | | 256,250 | | | | 51,891 | | | | — | | | | 39,267 | | | | 21,278 | | | | 9,434 | | | | 378,120 | | | | | | | | | | 2006 | | | | 253,004 | | | | 110,551 | | | | — | | | | 19,742 | | | | 17,115 | | | | 7,508 | | | | 407,920 | | | | | |
| | | | (1) | | The amounts in this column reflect2011 LTIP award granted by the amount expensedCompensation and Benefits Committee on February 8, 2011 to all named executive officers, except Mr. Alessi, whose grant was approved by us in each year indicated for financial reporting purposes pursuant to FAS 123R.the Board on March 9, 2011, and consisted of time-based restricted stock units with a three-year vest and performance-based restricted stock units with a three-year cliff vest issued out of the 2007 plan with a grant date of April 1, 2011. The assumptions used in calculating these amounts are discussed in note 13 to our financial statements for the year ended December 31, 2008, which accompany this proxy statement. Unlike the amount reflected in our financial statements, these amounts do not reflect any estimate of forfeitures related to service-based vesting. Instead, these amounts, except for Mr. Blair, assume that each executive will perform the requisite service to vest in his award. | | (2) | | 2008 figures include “above-market” interest on deferred compensation for Messrs. O’Laughlin and Myers of $145 and $286. Also includes change in pension value for Messrs. Alessi, Paprzycki, O’Laughlin, Myers, and Kegley of $3,775, $8,741, $52,263, $28,728, and $30,301, respectively. Pension economic assumptions utilized for our SFAS 87 financial reporting for fiscal years ended in 2005, 2006, 2007 and 2008 were used for calculations at the end of those years respectively. A discount rate of 5.7% was used for 2005, 5.95% for 2006, 6.3% for 2007, and 6.1% for 2008. | | (3) | | “All Other Compensation” for 2008 includes reimbursements and payments, as applicable, for our contributions to the 401(k) Plan, and life insurance premiums. We contributed $6,900, $5,684, $5,998, $6,557, $6,005, $3,227 and $2,158 in matching contributions to the 401(k) Plan on behalf of Messrs. Alessi, Paprzycki, O’Laughlin, Myers, Kegley, Lobb and Blair, respectively. We paid life insurance premiums of $1,872, $1,404, $973, $1,025, $1,407, $1,248 and $472 for Messrs. Alessi, Paprzycki, O’Laughlin, Myers, Kegley, Lobb and Blair, respectively. For Messrs. Alessi and Lobb, the amount shown also includes $3,450 of a special contribution to the 401(k) Plan. For Mr. Lobb, the amount includes $51,732 for relocation and temporary living expenses. For Mr. Blair, the amount shown includes severance benefits and vacation pay of $331,000. |
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| | | (4) | | Mr. Lobb resigned as President and CEO effective January 27, 2009. He was paid a bonus of $200,000 at the end of 2008 under the terms of his offer of employment. Mr. Lobb forfeited all of his stock and option awards at the time of his resignation. He was not vested in the pension plan. | | (5) | | Mr. Blair served as CFO through March 31, 2008. He was not vested in the pension plan. |
2008 GRANTS OF PLAN-BASED AWARDS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other
| | | All Other
| | | | | | | | | | | | | | | | | Stock
| | | Option
| | | | | | | | | | | | | | | | | Awards:
| | | Awards:
| | | | | | Grant Date
| | | | | | | | | | | Number of
| | | Number of
| | | Exercise or
| | | Fair Value
| | | | | | | | | | | Shares of
| | | Securities
| | | Base Price
| | | of Stock
| | | | | | | | | | | Stock or
| | | Underlying
| | | of Option
| | | and Options
| | | | | Grant
| | | Approval
| | | Units
| | | Options (1)
| | | Awards
| | | Awards(2)
| | Name | | Date | | | Date | | | (#) | | | (#) | | | ($/Sh) | | | ($) | | | | | Keith E. Alessi | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 60,000 | | | | 21.40 | | | | 118,359 | | | Kevin A. Paprzycki | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 7,000 | | | | 21.40 | | | | 13,808 | | | John V. O’Laughlin | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 15,000 | | | | 21.40 | | | | 29,590 | | | Todd A. Myers | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 7,000 | | | | 21.40 | | | | 13,808 | | | Morris W. Kegley | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 7,000 | | | | 21.40 | | | | 13,808 | | | Delbert L. Lobb(3) | | | 7/1/08 | | | | 6/25/08 | | | | — | | | | 25,000 | | | | 21.40 | | | | 49,316 | | | | | | 4/28/08 | | | | 4/21/08 | | | | 100,000 | (4) | | | — | | | | — | | | | 351,111 | |
| | | (1) | | Options vest annually in one-third increments. | | (2) | | Represents a grant date fair value of $11.84on April 1, 2011 was $14.96 per option for all named executives and $15.80 per shareshare. |
2011 Outstanding Equity Awards at Fiscal Year-End
| | | Option Awards | | Stock Awards | | | Name | | Securities Underlying Unexercised Options(#) Exercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Units that have not vested (#)(1) | | | Market value of units that have not vested as of 12/30/11($)(2) | | | Unearned units that have not vested (#)(3) | | | Market value of unearned units that have not vested as of 12/30/11($)(2) | | | Keith E. Alessi | | | 30,556 | | | | 24.12 | | 5/02/17 | | | | | | | | | | | | | | | | | 60,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | 10,000 | | | | 127,500 | | | | | | | | | | | | | | | | | | | | | 39,850 | | | | 508,088 | | | | | | | | | | | | | | | | | | | | | 30,081 | | | | 383,533 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 30,080 | | | | 383,520 | | | Kevin A. Paprzycki | | | 2,500 | | | | 29.48 | | 6/05/16 | | | | | | | | | | | | | | | | | | | | | 1,900 | | | | 24.41 | | 7/01/16 | | | | | | | | | | | | | | | | | | | | | 7,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,867 | | | | 23,804 | | | | | | | | | | | | | | | | | | | | | | | 5,944 | | | | 75,786 | | | | | | | | | | | | | | | | | | | | | | | 5,733 | | | | 73,096 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,732 | | | | 73,083 | | Douglas P. Kathol | | | 7,500 | | | | 16.17 | | 8/18/13 | | | | | | | | | | | | | | | | | | | | | 6,700 | | | | 19.37 | | 7/01/14 | | | | | | | | | | | | | | | | | | | | | 6,700 | | | | 20.98 | | 7/01/15 | | | | | | | | | | | | | | | | | | | | | 4,300 | | | | 24.41 | | 7/01/16 | | | | | | | | | | | | | | | | | | | | | 7,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,867 | | | | 23,804 | | | | | | | | | | | | | | | | | | | | | | | 9,864 | | | | 125,766 | | | | | | | | | | | | | | | | | | | | | | | 7,500 | | | | 95,625 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,500 | | | | 95,625 | | Joseph E. Micheletti | | | 5,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,067 | | | | 13,604 | | | | | | | | | | | | | | | | | | | | | | | 2,504 | | | | 31,926 | | | | | | | | | | | | | | | | | | | | | | | 2,010 | | | | 25,628 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,010 | | | | 25,628 | | Morris W. Kegley | | | 1,900 | | | | 24.41 | | 7/01/16 | | | | | | | | | | | | | | | | | | | | | 7,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,867 | | | | 23,804 | | | | | | | | | | | | | | | | | | | | | | | 4,380 | | | | 55,845 | | | | | | | | | | | | | | | | | | | | | | | 4,500 | | | | 57,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,498 | | | | 57,350 | | John V. O’Laughlin | | | 4,700 | | | | 12.86 | | 6/24/12 | | | | | | | | | | | | | | | | | | | | | 3,650 | | | | 18.08 | | 6/30/13 | | | | | | | | | | | | | | | | | | | | | 3,650 | | | | 17.80 | | 12/31/13 | | | | | | | | | | | | | | | | | | | | | 9,800 | | | | 19.37 | | 7/01/14 | | | | | | | | | | | | | | | | | | | | | 14,600 | | | | 20.98 | | 7/01/15 | | | | | | | | | | | | | | | | | | | | | 9,900 | | | | 24.41 | | 7/01/16 | | | | | | | | | | | | | | | | | | | | | 15,000 | | | | 21.40 | | 7/01/18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,800 | | | | 35,700 | | | | | | | | | | | | | | | | | | | | | | | 6,568 | | | | 83,742 | | | | | | | | | | | | | | | | | | | | | | | 4,524 | | | | 57,681 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,522 | | | | 57,656 | |
__________ | (1) | Awards in this column consist of restricted stock granted to Mr. Lobb.units with a grant dates of July 1, for both 2009 and 2010 and April 1, 2011. Awards of restricted stock units vest in thirds over a three-year period beginning on the first anniversary of the date of grant. To the extent vested, these units are reflected in the “Stock Vested in 2011” table below. | | (2) | The market value of the awards of restricted stock units that have not yet vested was determined by multiplying the closing price of a share of common stock on December 30, 2011 ($12.75) by the number of shares. | | (3) | | Mr. Lobb forfeitedAwards in this column consist of performance-based restricted stock units with a grant date of April 1, 2011. These awards pay out at Threshold, Target and Maximum depending on the achievement of a free cash flow metric designated by the Compensation and Benefits Committee in 2011. Upon achievement of the performance goal on April 1, 2014, these awards cliff vest. If performance is not achieved, all awards made in 2008 upon his resignation. | | (4) | | Restricted stock vests annually in one-third increments.will forfeit. |
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2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Stock Vested in 2011 The following table shows outstanding restricted stock, options and SARs as of December 31, 2008 for our named executive officers. Included in the table are initial grants of incentive options, restricted stock or SARs made in connection with the hiring of Messrs. Alessi, Lobb, Paprzycki and O’Laughlin in 2007, 2008, 2006 and 2001 respectively, and annual long-term incentive awards. Approval of Mr. Lobb’s option award was made on April 21, 2008 for the award effective April 28, 2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | Market
| | | | | | | | | | | | | | | | Value of
| | | | | | | | | | | | | | | | Shares or
| | | | | | Number of
| | Number of
| | | | | | Number of
| | Units of
| | | | | | Securities
| | Securities
| | | | | | Shares or
| | Stock That
| | | | | | Underlying
| | Underlying
| | | | | | Units of
| | Have Not
| | | | | | Unexercised
| | Unexercised
| | Option
| | | | Stock That
| | Vested
| | | | | | Options
| | Options
| | Exercise
| | Option
| | Have Not
| | As of
| | | | | | (#)
| | (#)
| | Price
| | Expiration
| | Vested
| | 12/31/08
| | | Name | | Exercisable | | Unexercisable | | ($) | | Date | | (#) | | ($) | | | Shares Acquired on Vesting(#) | | | Stock Value Realized on Vesting($)(1) | | | | | | Keith E. Alessi | | | — | | | | 60,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | | | 10,000 | | | | 179,800 | | | | | | 30,556 | (2) | | | — | | | | 23.93 | | | | 5/01/17 | | | | — | | | | — | | | | 19,925 | | | | 358,251 | | | Kevin A. Paprzycki | | | — | | | | 7,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | | | 1,867 | | | | 33,567 | | | | | | 1,266 | (3) | | | 634 | (3) | | | 24.41 | | | | 6/30/16 | | | | — | | | | — | | | | 2,972 | | | | 53,437 | | | Douglas P. Kathol | | | | 1,867 | | | | 33,567 | | | | | | | 4,932 | | | | 88,677 | | | Joseph E. Micheletti | | | | 1,067 | | | | 19,185 | | | | | | | 1,252 | | | | 22,511 | | | Morris W. Kegley | | | | 1,867 | | | | 33,567 | | | | | | 1,666 | (4) | | | 834 | (4) | | | 29.48 | | | | 6/4/16 | | | | — | | | | — | | | | 2,190 | | | | 39,376 | | | John V. O’Laughlin | | | 20,000 | (5) | | | — | | | | 12.04 | | | | 3/04/11 | | | | — | | | | — | | | | 2,800 | | | | 50,344 | | | | | | 4,700 | (6) | | | — | | | | 12.86 | | | | 6/23/12 | | | | — | | | | — | | | | 3,284 | | | | 59,046 | | | | | | 3,650 | (7) | | | — | | | | 17.80 | | | | 12/30/13 | | | | — | | | | — | | | | | | | 3,650 | (8) | | | — | | | | 18.08 | | | | 6/29/13 | | | | — | | | | — | | | | | | | 491 | (9) | | | — | | | | 18.09 | | | | 5/28/11 | | | | — | | | | — | | | | | | | 1,809 | (9) | | | — | | | | 18.19 | | | | 5/28/11 | | | | — | | | | — | | | | | | | 9,800 | (10) | | | — | | | | 19.37 | | | | 6/30/14 | | | | — | | | | — | | | | | | | 14,600 | (11) | | | — | | | | 20.98 | | | | 6/30/15 | | | | — | | | | — | | | | | | | | | | | 15,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | | | | | | 6,600 | (3) | | | 3,300 | (3) | | | 24.41 | | | | 6/30/16 | | | | — | | | | — | | | | Todd A. Myers | | | 6,700 | (6) | | | — | | | | 12.86 | | | | 6/23/12 | | | | — | | | | — | | | | | | | 6,700 | (7) | | | — | | | | 17.80 | | | | 12/30/13 | | | | — | | | | — | | | | | | | 6,700 | (8) | | | — | | | | 18.08 | | | | 6/29/13 | | | | — | | | | — | | | | | | | 683 | (9) | | | — | | | | 18.09 | | | | 5/28/11 | | | | — | | | | — | | | | | | | 2,517 | (9) | | | — | | | | 18.19 | | | | 5/28/11 | | | | — | | | | — | | | | | | | 12,300 | (10) | | | — | | | | 19.37 | | | | 6/30/14 | | | | — | | | | — | | | | | | | 16,200 | (11) | | | — | | | | 20.98 | | | | 6/30/15 | | | | — | | | | — | | | | | | | | | | | 7,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | | | | | | 5,266 | (3) | | | 2,634 | (3) | | | 24.41 | | | | 6/30/16 | | | | — | | | | — | | | | Morris W. Kegley | | | | | | | 7,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | | | | | | 1,266 | (3) | | | 634 | (3) | | | 24.41 | | | | 6/30/16 | | | | — | | | | — | | | | Delbert L. Lobb | | | — | | | | — | | | | — | | | | — | | | | 100,000 | (12) | | | 1,110,000 | | | | | | | — | | | | 25,000 | (1) | | | 21.40 | | | | 6/30/18 | | | | — | | | | — | | |
__________ | | | | (1) | | Vests in three annual increments beginning 7/1/09. | | (2) | | Mr. Alessi voluntarily forfeited 66,667 unvested options outThe market value of 100,000 options granted in 2007. The remaining 30,556 options vested between June 2007 and April 2008. | | (3) | | SARs vest in three equal annual installments, with the first increment vestingawards was determined by multiplying the closing price of a share of common stock on 7/1/07. | | (4) | | SARs vest in three annual increments withJuly 1, 2011 ($17.98) by the first increment vesting on 6/5/07.number of shares. |
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2011 Pension Benefits | Name | | Plan Name | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit as of December 31, 2011 ($)(1) | | | Payments During Last Fiscal Year ($) | | Keith E. Alessi | | Westmoreland Retirement Plan (WCC) | | | 2.08 | | | | 35,850 | | | | — | | Kevin A. Paprzycki | | Westmoreland Retirement Plan (WCC) | | | 3.0 | | | | 41,627 | | | | — | | Douglas P. Kathol | | Westmoreland Retirement Plan (WCC) | | | 5.81 | | | | 154,017 | | | | — | | Joseph E. Micheletti | | Westmoreland Retirement Plan (WECO) | | | 10.0 | | | | 183,891 | | | | — | | Morris W. Kegley | | Westmoreland Retirement Plan (WCC) | | | 3.67 | | | | 148,150 | | | | — | | John V. O’Laughlin | | Westmoreland Retirement Plan (BSS) | | | 9.0 | | | | 248,063 | | | | — | |
__________
| | | (5) | | Vested in two annual increments beginning 3/5/02. | | (6) | | Vested in two annual increments beginning 6/24/03. | | (7) | | Vested in three annual increments beginning 12/31/04. | | (8) | | Vested in three annual increments beginning 6/30/04. | | (9) | | Vested in two annual increments beginning 5/29/02. | | (10) | | SARs; one third vested on 7/1/05 and the balance vested 12/30/05. | | (11) | | SARs vested 12/30/05. | | (12) | | Mr. Lobb forfeited all outstanding equity awards at the time of his resignation. |
Option Exercises and Stock Vested
There were no option or SAR exercises or vesting of stock awards during 2008 for our named executive officers.
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2008 Pension Benefits
| | | | | | | | | | | | | | | | | | | | | | | | Present Value
| | | | | | | | | | | | | of Accumulated
| | | | | | | | | | | | | Benefit as of
| | | | | | | | | | Number of Years
| | | December 31,
| | | Payments During Last
| | | | | | | Credited Service
| | | 2008(2)
| | | Fiscal Year
| | Name(1) | | Plan Name | | (#) | | | ($) | | | ($) | | | | | Keith E. Alessi | | Westmoreland | | | .58 | | | | 3,775 | | | | — | | | | | Retirement Plan (WCC) | | | | | | | | | | | | | | Kevin A. Paprzycki | | Westmoreland | | | 2.58 | | | | 17,642 | | | | — | | | | | Retirement Plan (WCC) | | | | | | | | | | | | | | John V. O’Laughlin | | Westmoreland | | | 8.0 | | | | 205,861 | | | | — | | | | | Retirement Plan (BSS) | | | | | | | | | | | | | | Todd A. Myers | | Westmoreland | | | 9.08 | | | | 109,330 | | | | — | | | | | Retirement Plan (WCC) | | | | | | | | | | | | | | Morris W. Kegley | | Westmoreland | | | 3.25 | | | | 72,993 | | | | — | | | | | Retirement Plan (WCC) | | | | | | | | | | | | |
| | | | (1) | | Mr. Lobb and Mr. Blair are not included in the table. Neither were vested in the pension plan at the time they ceased employment. | | (2) | | Pension economic assumptions are consistent with our SFAS 87 financial reporting for fiscal year 2008.2011. Demographic assumptions are also consistent with our pension financial reporting, with the exception that per SEC guidance, pre-retirement decrements are not used. A discount rate of 6.1%4.25% was used for 2008.2011. |
Each
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 except Mr. Alessi, participatesparticipated in one of the same defined benefit pension plansplan structures offered to other non-union employees. All employees whose terms and conditions of employment are not subject to collective bargaining and who work 1,000 or more hours per year are eligible for participation in the pension plans. Eligible employees become fully vested after five years of service, or, in any event, upon attaining age 65.vested service. The Company’s pension plan was adopted effective December 1, 1997 andstructure provides for the payment of annualnormal retirement at 65. Early retirement benefits to eligible employees and also provides for disability benefits and forare available at age 55 with 10 years of service, however at reduced benefits upon retirement prior to the normal retirement age of 65. The pension plan provides the following benefits: | | | | • | 1.2% of average earnings plus 0.5% of average earnings in excess of covered compensation times years of service up to 30 years. Covered compensation is a 35 year average of Social Security wage bases at Social Security retirement age; | | | • | Normal retirement age is 65. Early retirement benefits are available at age 55 with 10 years of service. Benefits are reduced actuarially for early commencement before age 65. Participants with 20 or more years of service may retire at age 62, instead of 65, with no reduction in benefits. None of the named executives covered under this plan are eligible to retire as of December 31, 2008; and | | | • | The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are 50%, 662/3% and 100% joint and survivor options, a10-year certain and life option, and a single life annuity. |
Mr. O’Laughlin is also covered under plan provisions for two subsidiaries where he has worked. Aspects of each subsidiary’s plan provisions may be less attractive, and other aspects of a subsidiary’s plan provisions may be more attractive, than the plan provisions applicableonly named executive eligible to us. Based on Mr. O’Laughlin’s service and salary, the Beulah and Savage Salaried Employee’s (“BSS”) benefits are the most valuableretire as of December 31, 2008. Because2011. The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the BSS benefit is currently the most valuable, we have shown benefits for Mr. O’Laughlin based on this formula.single life annuity benefit. The provisions of this planoptional forms available are as follows:50%, 66 2/3% and 100% joint and survivor options, a 10-year certain and life option, and a single life annuity. | | | | • | 1.2% of average earnings plus 0.4% of average earnings in excess of the integration level, times pension service with a maximum of 35 years. The integration level is equal to 35% of the Social Security taxable wage base in effect for the plan year of termination; |
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| | | | • | Normal retirement age is 65. Early retirement benefits are available at age 55 with 5 years of service. Benefits are reduced 3% per year for early commencement before age 62. Participants with 30 or more years of vesting service who terminate and retire on or after attaining age 60 are eligible for an immediate pension without reduction for early commencement; and | | | • | The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are 50%, 662/3%, 75% and 100% joint and survivor options, a10-year certain and life option, and a single life annuity. |
Mr. Alessi, and those who are hired on or after July 1, 2006 and who are not subject to collective bargaining and who work 1,000 or more hours per year, are covered under a new benefit plan. As eligible employees become fully vested after five years of service, Mr. Alessi is not currently eligible for participation.
20082011 Pension Benefits Upon Retirement/Retirement, Termination, Disability or Death
Mr.Messrs. Paprzycki, Kathol, Micheletti, Kegley and O’Laughlin and Mr. Myers are each vested in the pension plan and areentitled to an annual lifetime benefit payable upon voluntary or involuntary termination or death (paid for the life of the spouse). Mr. O’Laughlin is vested in the pension plan and entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). Mr. Alessi is not vested in the pension plan. Benefits shown for Mr. O’Laughlin and Mr. Myers assume that the event entitling themthe individual to benefits occurred on December 31, 2008.2011.
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. MyersPaprzycki are first payable on MarchSeptember 1, 2029.2035. Mr. Paprzycki currently is not eligible for early retirement benefits.
| Name | | Type of Termination | | Plan | | Benefit Amount | | Form of Payment | | Time or Period of Payment | Kevin A. Paprzycki | | Termination | | Pension Plan | | $ | 732 | | Monthly Annuity | | Life | | | | Death | | Pension Plan | | $ | 559 | | Monthly Annuity | | Life of Spouse |
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. O’LaughlinKathol are first payable on JanuaryDecember 1, 2009.2017. Mr. Kathol currently is not eligible for early retirement benefits. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Time or Period of
| Name | | Type of Termination | | Plan | | Benefit Amount | | | Form of Payment | | | Payment | | | | John V. O’Laughlin | | Retirement/Termination | | Pension Plan | | $ | 1,677 | | | | Monthly Annuity | | | Life | | | | Disability | | Pension Plan | | $ | 1,677 | | | | Monthly Annuity | | | Life | | | | Death | | Pension Plan | | $ | 771 | | | | Monthly Annuity | | | Life of Spouse | | Todd A. Myers | | Retirement/Termination | | Pension Plan | | $ | 2,191 | | | | Monthly Annuity | | | Life | | | | Disability | | Pension Plan | | $ | 2,191 | | | | Monthly Annuity | | | Life | | | | Death | | Pension Plan | | $ | 1,757 | | | | Monthly Annuity | | | Life of Spouse |
| Name | | Type of Termination | | Plan | | Benefit Amount | | Form of Payment | | Time or Period of Payment | Douglas P. Kathol | | Termination | | Pension Plan | | $ | 1,291 | | Monthly Annuity | | Life | | | | Death | | Pension Plan | | $ | 985 | | Monthly Annuity | | Life of Spouse |
Retiree Medical 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. Micheletti are first payable on August 1, 2015. Each
| Name | | Type of Termination | | Plan | | Benefit Amount | | Form of Payment | | Time or Period of Payment | Joseph E. Micheletti | | Termination | | Pension Plan | | $ | 840 | | Monthly Annuity | | Life | | | | Death | | Pension Plan | | $ | 319 | | Monthly Annuity | | Life of Spouse |
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 Messrs. Paprzycki, O’Laughlin, Myers andthe spouse). The benefits for Mr. Kegley are covered under our broad-based retiree medicalfirst payable on July 1, 2012. Mr. Kegley currently is not eligible for early retirement benefits.
| Name | | Type of Termination | | Plan | | Benefit Amount | | Form of Payment | | Time or Period of Payment | Morris W. Kegley | | Termination | | Pension Plan | | $ | 993 | | Monthly Annuity | | Life | | | | Death | | Pension Plan | | $ | 758 | | Monthly Annuity | | Life of Spouse |
Mr. O’Laughlin is vested in the pension plan that provides for continued medical coverageand is entitled to an annual lifetime benefit payable upon retirement, at age 62 and with twenty years of service,voluntary or age 65 with five years of serviceinvoluntary termination, disability or death (paid for those hired prior to June 1, 2003 or 10 years of service for those hired on or after June 1, 2003. This plan is closed to individuals hired after July 1, 2006. The Company adopted an alternative, less costly retiree medical plan for new employees hired after July 1, 2006. Mr. Alessi is covered under this plan but is not yet vested. 2008 Nonqualified Deferred Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | Executive
| | | Registrant
| | | | | | Aggregate
| | | | | | | | Contributions
| | | Contributions in Last
| | | Aggregate Earnings
| | | Withdrawals/
| | | Aggregate Balance at
| | | | | in Last Fiscal Year
| | | Fiscal Year
| | | in Last Fiscal Year(1)
| | | Distributions
| | | Last Fiscal Year-End
| | Name | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | | | John V. O’Laughlin(2) | | | 0 | | | | 0 | | | | 291 | | | | 19,316 | (3) | | | 0 | | | Todd A. Myers(2) | | | 0 | | | | 0 | | | | 572 | | | | 27,787 | (4) | | | 0 | |
| | | (1) | | Aggregate Earnings represents interest earned on all deferred compensation during 2008. The portion included in this total that is considered at an “above-market” rate is also reported in the 2008 Summary Compensation table above. | | (2) | | We deferred payments related to the 2001 award of performance units which vested in 2004. | | (3) | | Includes interest of $4,878. | | (4) | | Includes interest of $7,018. |
Under the 2000 PUP, the Compensation and Benefits Committee has the discretion and authority to defer payment of vested performance units in a lump sum or in installments over any period of time not to exceed
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ten years. Participants in the 2000 PUP may not voluntarily defer any payments under this plan. In 2004, the Compensation and Benefits Committee elected to defer payment of a portionlife of the payments earned from awards made in 2001. Awards earned by Mr. O’Laughlin and Mr. Myers were deferred and interest paid at the rate of prime plus 1%spouse). Final payment of all deferred amounts, plus interest, was made in March 2008.
| Name | | Type of Termination | | Plan | | Benefit Amount | | Form of Payment | | Time or Period of Payment | John V. O’Laughlin | | Retirement/Termination | | Pension Plan | | $ | 2,139 | | Monthly Annuity | | Life | | | | Disability | | Pension Plan | | $ | 2,139 | | Monthly Annuity | | Life | | | | Death | | Pension Plan | | $ | 974 | | Monthly Annuity | | Life of Spouse |
Potential Payments Uponupon Termination orChange-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 previously described in the preceding compensation tables and participation in a severance policy that is generally available to all our employees. Our executives are “at-will” employees. They do not have employment contracts or any benefits triggered by a change in control. During 2008, Messrs. Paprzycki, O’Laughlin, Myers and Kegley were covered by our employee severance policy. Mr. Alessi is not covered under any severance policy. The severance policy effective May 21, 2007, as amended December 31, 2008, covers virtually all our employees, although the amount of the severance benefit depends upon whichemployee tier and years of the six employee categories an employee is in.service with us. The highest category,tier, which includes seniorour named executive officers, provides for severance compensation equal to 12 months of monthly base pay, 129 months of outplacement assistance and 12 months of health benefit continuation. Severance benefits are payable under the policy only in the following circumstances: involuntary termination that is not for cause,cause; termination due to sale of a facility, division or business segment,segment; or relocation of more than 50 miles that the employee declines.
Mr. Blair began receiving severance Our executives do not have employment contracts or any benefits undertriggered by a change-in-control, unless the revised policychange-in-control results in 2008. These benefits are estimated to total $331,000.
If an involuntary termination not for cause, or a termination dueof the executive without cause. In addition, our Annual Incentive Policy provides that program participants are only entitled to salepayment of a facility, division or business segment, or relocation of more than 50 miles that the employee declines, had occurred on December 31, 2008, then Messrs. Paprzycki, O’Laughlin, Myers and Kegley would have received, upon execution of a release and settlement agreement, severance payments of $200,000, $207,946, $218,970 and $200,362, respectively, in equal installmentsincentive payouts if they are employed on the normal payroll schedule and net of required withholdings. We estimate that the cost of providing 12 months of medical, vision and dental benefits to Messrs. Paprzycki, O’Laughlin, Myers and Kegley and the value of their unused vacation at December 31, 2008 to be $37,449, $38,549, 33,917 and $48,148, respectively.date
If the employmentTable of Messrs. Paprzycki, O’Laughlin, Myers and Kegley had been terminated on December 31, 2008, they would have retained all SARs that had then vested (for Mr. Paprzycki, 2,932, for Mr. O’Laughlin, 31,000, for Mr. Myers, 33,766 and for Mr. Kegley, 1,266) but would have forfeited all the SARs that had not yet vested unless the termination had occurred within one year following a change in control in which unvested SARs issued in 2006 (for Mr. Paprzycki, 1,468, for Mr. O’Laughlin, 3,300, for Mr. Myers, 2,634 and for Mr. Kegley, 634) would become fully vested, but would represent no additional value because the closing price of our common stock on December 31, 2008 was less than the base price of those SARs. For the purposes of this event, “termination” 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.Contents In addition, if the employment of Messrs. Paprzycki, O’Laughlin, Myers and Kegley had been terminated on December 31, 2008, they would have retained all performance units that had then vested (for Mr. Paprzycki, 160 issuedpayment, which typically occurs in 2006; for Mr. O’Laughlin, 850 issued in 2006; for Mr. Myers, 678 issued in 2006; and Mr. Kegley, 165 issued in 2006), but would have forfeited all the performance units that had not yet vested. However, the valueMarch of the vested performance units would not then have been determinable, so we would not have been requiredfollowing year. All incentive payouts are forfeited should a named executive officer leave our employment for any reason, unless otherwise expressly agreed to make any payment in respect of these units at that time. If a change in control had occurred on December 31, 2008, and if our existence had ended, then vested performance units would have terminated without value. However, if our existence had continued following the change in control, then vested performance units would also have continued in existence, without acceleration of vesting, and would have been valued in the course of our business.
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DIRECTOR COMPENSATION
2008 Director Compensation
| | | | | | | | | | | | | | | | | | | | | Fees Earned or
| | | Stock
| | | Option
| | | | | | | | Paid in Cash
| | | Awards(2)(3)(4)
| | | Awards(5)
| | | Total
| | Name(1) | | ($) | | | ($) | | | ($) | | | ($) | | | | | Thomas J. Coffey | | | 66,250 | | | | 48,740 | | | | 6,581 | (6) | | | 121,571 | | | Michael R. D’Appolonia | | | 19,207 | | | | 13,071 | | | | — | | | | 32,278 | | | Robert E. Killen | | | 44,276 | | | | 18,747 | | | | 6,581 | (7) | | | 69,604 | | | Richard M. Klingaman | | | 50,300 | | | | 48,740 | | | | 17,588 | (8) | | | 116,628 | | | William M. Stern | | | 50,000 | | | | 48,740 | | | | 6,581 | (9) | | | 105,321 | |
| | | (1) | | Mr. Alessi, our President and CEO, has served as a member of our Board since August 2007. Mr. Lobb, our former President and CEO, served as a member of our Board from May 2008 to January 2009. Employees, including Messrs. Alessi and Lobb, do not receive additional compensation for serving on the Board. | | (2) | | The amounts in this column reflect the dollar amount recognized for financial statement reporting purposes in 2008 of stock awards granted to the directors in 2007 and 2008. The assumptions used in calculating these amounts are discussed in note 13 to our financial statements for the year ended December 31, 2008, which accompany this proxy statement. The grant date fair value of the awards granted in 2007 computed in accordance with FAS 123R was $19.29. See notes (3) and (4) for the grant date fair value of the awards granted in 2008 computed in accordance with FAS 123R. | | (3) | | 1,756 shares of common stock were awarded to each non-employee director re-elected to the Board in May 2008. Sale of the shares is restricted until May 2009. The grant date fair value of these awards was $17.08. | | (4) | | Mr. D’Appolonia was awarded 2,916 shares of restricted stock upon his election to the Board in July 2008. The stock vests in two equal annual increments. The grant date fair value of these awards was $20.57. | | (5) | | The amounts in this column reflect the dollar amount recognized for financial statement reporting purposes in 2008 of the SARs granted to the directors in 2006. The assumptions used in calculating these amounts are discussed in note 13 to our financial statements for the year ended December 31, 2008, which accompany this proxy statement. Unlike the amount reflected in our financial statements, these amounts do not reflect any estimate of forfeitures related to service-based vesting. Instead, these amounts assume that each director will perform the requisite service to vest in his award. The grant date fair value of these awards, computed in accordance with FAS 123R, was, for Mr. Klingaman, $14.13 per SAR, or $52,763, and for each of Messrs. Coffey, Killen and Stern, $14.94 per SAR, or $26,324. Each grant vests over a period of four years and expires ten years from the grant date. | | (6) | | Mr. Coffey had 15,000 stock options and 1,762 SARs outstanding at December 31, 2008. | | (7) | | Mr. Killen served on our Board until May 2008 and he had 7,500 stock options and 1,762 SARs outstanding at December 31, 2008. | | (8) | | Mr. Klingaman had no stock options and 3,733 SARs outstanding at December 31, 2008. | | (9) | | Mr. Stern had 10,000 stock options and 1,762 SARs outstanding at December 31, 2008. |
We compensate the members of our Board who are not our employees, whom we refer to as our non-employee directors, by paying them an annual retainer and a fee for each meeting of the Board or committee that they attend and by granting equity in the form of stock options, SARs or restricted shares of common stock based on the 2000 Director Plan and the 2007 plan. These cash payments and equity grants are the sole compensation the non-employee directors receive from us.
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Annual Retainer and Meeting Fees
In 2008, our non-employee directors, except for our Non-Executive Chairman and our Chairman of the Audit Committee, received an annual retainer of $30,000 paid in quarterly installments. Our Non-Executive Chairman received a retainer of $90,000 through his term of service which ended in May 2008. Our Chairman of the Audit Committee received an annual retainer of $41,000. All retainers are prorated in any quarterly period in which the individual is not a directorand/or the Chairman for the entire quarterly period. Each non-employee director also received $1,000 per meeting attended of the Board and of each committee of which he was a member. Any director who participates in meetings by telephone, rather than in person, receives a reduced fee of $500 per meeting. There is no reduction in fee for meetings in which all directors participate telephonically. In addition, the Chairman of the Audit Committee received an additional $750 per meeting, the Chairman of the Compensation and Benefits Committee received an additional $650 per meeting and all other committee chairmen received an additional $500 per meeting attended and chaired.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, 2011. The following tables do not include amounts payable upon termination for pension benefits, as those benefits are described above in the “2011 Pension Benefits” tables.
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | Keith Alessi | | Salary | | $ | 0 | | | $ | 600,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 1,019,120 | | | $ | 0 | | | $ | 1,115,438 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 23,622 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 623,622 | | | $ | 1,019,120 | | | $ | 0 | | | $ | 1,115,438 | |
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | Kevin Paprzycki | | Salary | | $ | 0 | | | $ | 245,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 172,686 | | | $ | 0 | | | $ | 191,040 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 15,122 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 260,122 | | | $ | 172,686 | | | $ | 0 | | | $ | 191,040 | |
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | Douglas Kathol | | Salary | | $ | 0 | | | $ | 280,500 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 245,195 | | | $ | 0 | | | $ | 269,211 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 5,445 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 285,945 | | | $ | 245,195 | | | $ | 0 | | | $ | 269,211 | |
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | Joseph Micheletti | | Salary | | $ | 0 | | | $ | 225,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 71,158 | | | $ | 0 | | | $ | 77,594 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 14,433 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 239,433 | | | $ | 71,158 | | | $ | 0 | | | $ | 77,594 | |
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | Morris Kegley | | Salary | | $ | 0 | | | $ | 224,298 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 137,024 | | | $ | 0 | | | $ | 151,427 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 10,227 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 234,525 | | | $ | 137,024 | | | $ | 0 | | | $ | 151,427 | |
| Name | | Type of Compensation | | Termination for Cause/ Voluntary Termination | | | Involuntary Not for Cause | | | Termination upon Change-in-Control | | | Retirement | | | Death(3) | | | John O'Laughlin | | Salary | | $ | 0 | | | $ | 225,508 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | Vested Equity(1)(2) | | $ | 0 | | | $ | 0 | | | $ | 177,123 | | | $ | 0 | | | $ | 191,603 | | | | | Outplacement services and health benefits | | $ | 0 | | | $ | 9,027 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | TOTAL | | $ | 0 | | | $ | 234,535 | | | $ | 177,123 | | | $ | 0 | | | $ | 191,603 | |
________ | (1) | Various unvested options and SARs held by our named executive officers automatically vest upon a change-in-control. However, all outstanding options held by our named executive officers have an exercise price greater than $12.75, the closing price of our stock on December 30, 2011. There is no intrinsic value in any accelerated options or vested stock options because options with an exercise price greater than $12.75 have zero intrinsic value. The value of vested equity was determined by multiplying the number of vested shares times $12.75, the closing stock price on December 30, 2011 | | (2) | We recently awarded long-term equity to the named executive officers in the form of restricted stock units with grant dates of July 1, 2009, July 1, 2010, and April 1, 2011, vesting in thirds on an annual basis. Pursuant to the restricted stock unit agreements, the units automatically vest immediately prior to a change-in-control, death, disability or qualified retirement of the recipient. No named executive officer met the qualifications for a “qualified retirement” as of December 31, 2011. | | (3) | The performance-based restricted stock units vest pro rata upon death of disability. For valuation purposes, we assume the triggering event (death) occurred on December 31, 2011 resulting in the vesting of a third of the award. |
We have historically delivered long-term compensation to directors in the form of option or stock awards. In December 2005, the Board approved the restated and amended 2000 Director Plan to allow the use of SARs as a form of award in order to conserve shares available for grant. In 2007, stockholders approved the 2007 plan. Under the 2007 plan, each non-employee director is entitled to receive, as an initial grant upon his or her first joining the Board, stock awards, options to purchase a number of shares of common stock, or SARs equal to $60,000 in value. Thereafter, each non-employee director is entitled to receive, upon his or her re-election to the Board, a grant of stock, options or SARs equal to $30,000 in value. In 2008, under the terms of the new plan, each non-employee director, except Mr. D’Appolonia, received a grant of 1,756 shares of common stock equal to $30,000 in value upon re-election to the Board. Mr. D’Appolonia received a grant of 2,916 shares of restricted stock upon his election to the Board. These stock grants are reported in the table above.CERTAIN TRANSACTIONS
The value shown above under the column “Option Awards” reflects the value of the SARs granted in 2006 as determined under FAS 123R for 2008. Each grant vests over a period of four years and expires ten years from the grant date.
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CERTAIN RELATED PARTY 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 such a transaction, arrangement, or relationship, which we refer to as 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 the Board’sour 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. A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Audit Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Audit Committee will review and consider:
| | | | | • ● | the related person’s interest in the related person transaction; | |
| | • ● | the approximate dollar value of the amount involved in the related person transaction; | |
| | • | the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; | | | • | whether the transaction was undertaken in the ordinary course of our business; | | | • ● | whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; and | |
| | • ● | the purpose of, and the potential benefits to us of, the transaction; and | | | • | any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The Audit Committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in our best interests. The Audit Committee may impose any conditions on the related person transaction that it deems appropriate. In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board has determined that the followingcertain 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 this policy:
| | | | • | interests arising solely from the related person’s positionthe policy, such as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of our annual consolidated gross revenues; |
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| | | | • | compensation to an executive officer if the compensation has been approved, or recommended to the Board for approval by the Compensation and Benefits Committee of the Board or a group of independent directors performing a similar function; 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. |
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation and Benefits Committee inor an arrangement that is specifically contemplated by provisions of our certificate of incorporation or bylaws, such as the manner specified in its charter.exculpation, indemnification, and directors’ and officers’ insurance arrangements contemplated by the certificate of incorporation and bylaws.
Certain Relationships and Related Transactions with Tontine
Tontine Note Purchase AgreementTransaction
On March 4, 2008, we completed the sale of $15 million of senior secured convertible notes which we call our senior notes, to Tontine Partners, L.P. and Tontine Capital Partners, L.P., or the Tontine Purchasers. The sale was completed pursuant to a Senior Secured Convertible Note Purchase Agreement dated as of March 4, 2008 among us, the Tontine Purchasers,partnerships, and Tontine Capital Associates, L.P., as collateral agent. The senior notes bearbore 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 arewere payable in full on March 4, 2013. TheIn 2010, we paid the Tontine Purchasers may convertentities $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 shares of our common stock initiallyof Westmoreland at a conversion price of $10.00$8.50 per share. The numberThis conversion, coupled with the cash payment made on the closing date of shares of common stock into which the senior notes may be converted would increase in the circumstances specified in the note purchase agreement, including (i) if we pay interest on thetransaction, resulted in full satisfaction of these senior notes in kind and (ii) if we take the actions described in the note purchase agreement (including paying dividendssecured convertible notes. Mr. Jeffrey Gendell, who is either a managing member of, or making distributions in shares of common stock or issue securities convertible into or exchangeable for shares of common stock at an exercise price less than the conversion pricea managing member of the senior notes then in effect), but the senior notes may not be converted into more than 1,877,946 shares of common stock. In approving the note purchase agreement and the transactions contemplated thereby, the Board considered, among many other things: (1) conditions in the capital markets; (2) our liquidity situation and need for additional capital; (3) the then-ongoing financial restatement and our inability to provide audited financial information to prospective lenders; (4) the going concern emphasis contained in the audit report on our most recent annual financial statements at the time; and (5) the termsgeneral partner of, the documents proposedTontine partnerships is deemed to be signed. The Board also considered our related persons transaction policy.
In the note purchase agreement, we agreed that, so long as the Tontine Purchasers and their affiliates, which we refer to collectively as Tontine,beneficially own 10% or more of the outstanding shares of common stock (including the shares issuable upon conversion of the senior notes on an as-converted basis):
| | | | • | Tontine shall have the right to designate two persons for election to the Board who are reasonably acceptable to the Board, and the Board will consist of not more than nine members (not more than seven members when no Series A Convertible Exchangeable Preferred Stock is outstanding); and | | | • | Subject to the limitations specified in the note purchase agreement, if we offer to sell common stock (or securities convertible into or exchangeable for shares of common stock), then Tontine shall have the right to subscribe for the offered securities on the same terms and conditions and at the same price as the other offerees. |
The note purchase agreement contains affirmative and negative covenants and representations and warranties. The Tontine Purchasers may declare the senior notes immediately due and payable upon the occurrence of the events of default described in the note purchase agreement, and the senior notes are immediately due and payable without declaration upon the occurrence of other events of default specified in the note purchase agreement.
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In connection with the note purchase agreement, we and our subsidiary, Westmoreland Resources, Inc., or WRI, entered into the following agreements with the Tontine Purchasers and the Collateral Agent:
| | | | • | Registration Rights Agreement dated as of March 4, 2008. Pursuant to the registration rights agreement, we agreed to register the shares of common stock owned by Tontine for sale pursuant to the Securities Act of 1933, as amended; | | | • | Guaranty dated as of March 4, 2008. Pursuant to the guaranty, WRI guaranteed our indebtedness under the senior notes and the note purchase agreement; | | | • | Security Agreement dated as of March 4, 2008. Pursuant to the security agreement, WRI granted the collateral agent, for the benefit of the Tontine Purchasers, a security interest in certain of WRI’s assets; and | | | • | Pledge Agreement dated as of March 4, 2008. Pursuant to the pledge agreement, we pledged our interest in the stock of WRI to the collateral agent, for the benefit of the Tontine Purchasers. |
In connection with the note purchase agreement, we also amended our Amended and Restated Rights Agreement dated as of February 7, 2003, as amended by the First Amendment to Amended and Restated Rights Agreement dated May 2, 2007, to permit Tontine to acquire up to 34.5%greater than 20% of our outstanding common stock, subjectstock.
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 – Mining and Power during all of fiscal year 2010. Ms. Kathol retired from Westmoreland on December 31, 2010. During 2011, Ms. Kathol received a severance payout of $166,525, paid throughout the year in the normal payroll cycles.
This proxy statement contains four proposals requiring stockholder action. Proposal No. 1 requests the election of six directors to the limits described therein. We reimbursed Tontine approximately $160,000 in 2008 for legal fees in connection with the note purchase agreement.
The Tontine Purchasers, together with their affiliates, own 1,543,600 shares of common stock, or approximately 16% of the common stock currently outstanding, in each case without giving effect to the common stock issuable upon conversion of the depositary shares or the senior notes. The ownership on an as-converted basis is described in more detail above under “Beneficial Ownership of Securities.”
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AUDIT COMMITTEE REPORT
The Company’s Audit Committee (the “Audit Committee”) is composed of three directors and operates under a written charter first adopted by the Board, on March 10, 2000 and amended most recently on March 11, 2009.
Management is responsible for the Company’s internal controls and financial reporting process. The independent registered public accounting firm is responsible for performing an independent auditProposal No. 2 requests advisory approval of the Company’s consolidated financial statements in accordance with generally accepted auditing standardsexecutive compensation, Proposal No. 3 requests the approval of amendments to the Amended and issuing a report thereon. The Audit Committee’s responsibility is to retainRestated 2007 Equity Incentive Plan, and Proposal No. 4 requests the independent registered public accounting firm, review and monitorratification of the independence and performance
appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm monitorfor 2012. Each of the integrityproposals 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 financial reporting processExecutive Compensation
The recently enacted Dodd-Frank Wall Street Reform and systemsConsumer Protection Act of internal controls regarding finance, accounting2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory or nonbinding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. As background to compensation paid to our named executive officers in 2011 are the following business highlights:
| ● | During 2011, the Pacific Northwest experienced unprecedented amounts of snow that led to a prolonged hydroelectric power season. This negatively impacted our largest customer well into the summer period. In addition, flooding associated with the high snow pack disrupted rail transportation and mining production, which resulted in a further reduction in coal sales across our northern tier mining operations. Lastly, an explosion and fire at one of our major customers in November resulted in further loss of revenue. Despite these large interruptions in our operations in 2011, we ended the year within 10% of our record adjusted EBITDA from fiscal year 2010 due to timely reaction and stringent cost management; |
| ● | To mitigate the effect of future events like those that occurred in 2011, among other reasons, we entered into an agreement for the acquisition of the Kemmerer Mine, which will diversify the business and diminish the impact of uncontrollable events; and |
| ● | Under management’s leadership, the Company improved liquidity through the $150.0 million debt issuance in February 2011, expanded our reserve base through a major acquisition at our Absaloka Mine and relocated the corporate office to the Denver area resulting in lowered costs and a platform for future growth. |
In addition, compensation and legal compliancegovernance practices implemented in recent years include the following:
| ● | The CEO nor any other executive officer has an employment contract; |
| ● | We have eliminated all tax gross-ups, executive supplemental retirement policies, frozen pension plans and terminated retiree health care; |
| ● | The Compensation and Benefits Committee engaged Buck Consulting, an independent consultant who does no other work for us; |
| ● | Approximately 70% of both the CEO’s and the President and COO’s total compensation package is at-risk compensation; |
| ● | We have minimal executive perquisites; |
| ● | The named executive officers receive annual long-term equity awards in the form of restricted stock units with half of the shares vesting at the end of a three-year period upon the attainment of a three-year free cash flow goal. Restricted stock units represent a significantly larger percentage of each officer’s total compensation opportunity as compared to short term annual incentive opportunities. We believe this alignment ensures that a significant portion of our officer’s compensation is tied to long-term stock price performance; |
| ● | The Board implemented officer stock ownership guidelines at three times salary for the CEO and between two and one times salary for other members of the management team; and |
| ● | The Board approved stock ownership guidelines for directors of three times their annual cash retainer fee. |
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 at-risk based on our performance and the named executive officer.
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:
| ● | Update Section 4(a) to prohibit broad recycling of shares; |
| ● | Update Section 4(a) to provide more detail on the treatment of shares that are repurchased by us to cover tax obligations; |
| ● | Reorder the document to put all potential award sections together (Options, SARs, Restricted Stock, RSUs, etc.) and move the director award section to after these sections for better flow; |
| ● | Broaden the current language in Section 3 to allow the Board and the Compensation and Benefits Committee to delegate administrative authority under the plan to executives; |
| ● | Update the Option and SAR sections to prohibit both repricing and cash buyouts without express stockholder approval; |
| ● | Amend the director award section to fix the dollar value of the award at $70,000; |
| ● | Permit amendment of awards to comply with Section 954 of the Dodd Frank Act (the “clawback” requirements) without participant consent; |
| ● | Update the Restricted Stock Unit section to provide for a minimum vesting period of 3 years; and |
| ● | Update the 2007 Plan to provide for double trigger vesting in the event of Change of Control. |
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”).
| ● | Incentive Stock Options and Non-statutory Stock Options. |
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 avenueexercise price less than the then-current exercise price of communication amongsuch option, and (ii) no option may be issued under the independent registered public accounting firm, management2007 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.
| ● | Stock Appreciation Rights. |
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, in the fair market value of a share of common stock. SARs may be granted independently or in tandem with an option. SARs may not be granted at a base price less than 100% of the fair market value of the common stock on the date of grant.
| ● | Restricted Stock Awards. |
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. |
Restricted stock unit awards entitle the recipient to receive shares of common stock to be delivered at the time such shares vest pursuant to the terms and conditions established by the Board of Directors.
| ● | Other Stock-Based Awards. |
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 whole or in part by reference to, or otherwise based on, shares of common stock, and the Board.grant of Awards entitling recipients to receive shares of common stock to be delivered in the future.
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 employee works and may cover such period as may be specified by the Compensation and Benefits Committee; and (iii) will be set by the Compensation and Benefits Committee within the time period prescribed by, and will otherwise comply with the requirements of, Section 162(m) of the Code.
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 this context,addition, on the Audit Committee metdate of each annual meeting of stockholders, each Non-Employee Director who is both serving as a director immediately before and immediately after such meeting will receive an Award with managementa value determined in a manner deemed appropriate by the Board, which may include Black-Scholes modeling, equal to $70,000 (rounded up to the nearest whole share). The Board retains the specific authority from time to time to increase or decrease the dollar values of Awards granted to Non-Employee Directors under the 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 Control Event, then all of such Non-Employee Director’s Awards will automatically vest and become fully exercisable on the date such individual ceases to be a director, provided that the individual has served as a director for three years or more. If the individual has served as a director for less than three years, all of the Non-Employee Director’s Awards will expire on the date such individual ceases to be a director. Notwithstanding the foregoing vesting provisions, (i) a Non-Employee Director’s Awards may vest automatically upon the occurrence of a Reorganization Event or Change in Control Event as described below, and (ii) the Board may provide for accelerated vesting in the case of the death or disability of a director.
| ● | Transferability of Awards |
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.
| ● | Eligibility to Receive Awards |
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 independent registered public accounting firminterests of our stockholders, including: | ● | Administration. The Amended 2007 Plan is administered by the Compensation and Benefits Committee of the Board, which is comprised entirely of non-employee directors. |
| ● | Minimum Vesting Requirements. All equity awards, except for awards of stock options and/or stock appreciation rights and the automatic, non-discretionary awards to our non-employee directors, made under the Amended 2007 Plan are required to meet minimum three year vesting requirements, subject to certain limited exceptions. |
| ● | Shares Returning from Past Awards and Other Limitations. If the Amended 2007 Plan is approved, shares used to pay the exercise price of an award or withholding taxes in connection with an award, and unissued shares resulting from the settlement of stock appreciation rights in shares, will not become available for future issuance under the Amended 2007 Plan. 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 Amended 2007 Plan. |
| ● | Limited Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless approved by the Compensation and Benefits Committee. |
| ● | No Evergreen Provision. There is no “evergreen” feature pursuant to which the shares authorized for issuance under the Amended 2007 Plan can be increased automatically without stockholder approval. |
| ● | No Discounted Options or SARs. Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the underlying shares on the grant date, except as permitted under the Internal Revenue Code. |
| ● | No Repricing Without Stockholder Approval. We cannot, without stockholder approval, reprice awards, such as stock options or stock appreciation rights, by reducing the exercise price of such awards, or exchange such awards for cash, other awards or new stock options or new stock appreciation rights that have a reduced exercise price. |
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 revieweffectively recruit new employees, motivate current employees or operate our equity compensation program.
We manage our use of equity incentive awards carefully and discussmaintained a reasonable “burn rate,” which we define as the Company’s significant accounting policies, systemsnumber of internal controlsshares 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 audited consolidated financial statementstotal overhang as of the record date:
| | | Issued Awards | | | Available Shares | | | Total | | | Before Stockholder Approval | | | | | | | | | | | | | | Stock Plan | | | 433,783 | | | | 50,655 | | | | 484,438 | | | Other Plans | | | 194,307 | | | | 0 | | | | 194,307 | | | | | | | | | | | | | | | | | Total | | | 628,045 | | | | 50,655 | | | | 678,745 | | | Total Overhang (%) | | | | | | | | | | | 4.9 | % | | | | | | | After Stockholder Approval | | | | | | | | | | | | | | Amended and Restated 2007 Plan | | | 433,783 | | | | 750,655 | | | | 1,184,438 | | | Other Plans | | | 194,307 | | | | 0 | | | | 194,307 | | | | | | | | | | | | | | | | | Total | | | 628,045 | | | | 750,655 | | | | 1,378,745 | | | Total Overhang (%) | | | | | | | | | | | 10 | % |
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 year ended December 31, 2008. The Audit Committee alsoparticipant 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 withbelow, the independent registered public accounting firmCompany generally will be entitled to a tax deduction equal to the matters required to be discussedamount recognized as ordinary income by the Statement on Auditing Standards No. 61,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 amended (AICPA, Professional Standards, Vol. 1, AU section 380)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), as adoptedand 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 Public Company Accounting OversightAnnual Meeting. If stockholders approve the Amended 2007 Plan, it will replace the existing 2007 Plan.
Recommendation of the Board in Rule 3200T.
The Board of Directors recommends a vote FOR Proposal 4.
Proposal 4 – Ratification of Principal Independent Auditor
The Audit Committee has receivedappointed Ernst & Young LLP as the written disclosures and the letter from the independent registered public accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. The Audit Committee also considered whether the independent registered public accounting firm’s provision of non-audit related services to the Company is compatible with maintaining such auditor’s independence. Based on its discussions with management and theCompany’s independent registered public accounting firm and its reviewas auditors of the representations and information provided by management and theour consolidated financial statements for fiscal year 2012. In January 2009, E&Y began serving as our independent registered public accounting firm, the Audit Committee recommendedfirm. Prior to the Board that, the audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008 for filing with the Securities and Exchange Commission.
Thomas J. Coffey, Chairman
Richard M. Klingaman
William M. Stern
34
AUDITORS
KPMG LLP (“KPMG”) served as our independent registered public accounting firm for the fiscal year ended December 31, 2008. We expect that a representative of that firm will be present at the Annual Meeting and will have the opportunity to make a statement and to respond to appropriate questions from stockholders.firm.
Change in Independent Public Accounting Firm
In 2008, our Audit Committee solicited proposals from accounting firms, and following a rigorous evaluation process, made a decision to change accounting firms. On January 6, 2009, we notified KPMG that upon completion of the 2008 audit engagement and the filing of the Company’s Annual Report onForm 10-K for the year ending December 31, 2008, it would be dismissed as the Company’s independent registered public accounting firm. The decision to change accounting firms was approved by our Audit Committee. On March 13, 2009, KPMG completed its audit services for the Company for the fiscal year ended December 31, 2008.
During the years ended December 31, 2008 and 2007 and the subsequent period through the date of the filing theForm 8-K/A on March 23, 2009, the Company had no: (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference in connection with their opinion to the subject matter of the disagreement; or (2) reportable events, except as described below. Management of the Company has authorized KPMG to respond fully to the inquiries of the new independent registered public accounting firm regarding all matters.
KPMG’s reports on the Company’s consolidated financial statements as of and for the years ended December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except as follows:
The audit report of KPMG on the consolidated financial statements of the Company and subsidiaries as of and for the year ended December 31, 2008 contained a separate paragraph that stated that “The consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficit, and has a net capital deficiency that raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.”
The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2008 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles.
The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2007 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except that KPMG’s report indicated that the Company did not maintain effective internal control over financial reporting as of December 31, 2007 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contained an explanatory paragraph that stated that:
“Management identified and included in its assessment material weaknesses related to electronic spreadsheets that impact the Company’s financial reporting, census data used to calculate postretirement medical benefit obligations, and the accounting for one of the Company’s stock based compensation plans.”
The Company requested and obtained from KPMG a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with the above statements. A copy of KPMG’s letter, dated March 16, 2009, is filed as Exhibit 16.1 to our Current Report onForm 8-K/A filed March 23, 2009.
35
Engagement of Ernst & Young LLP
On January 8, 2009, our Audit Committee approved the engagement of Ernst & Young LLP (“Ernst & Young”) as our new independent registered public accounting firm beginning with fiscal year 2009, and to perform procedures related to the financial statements to be included in our quarterly report onForm 10-Q, beginning with, and including, the quarter ending March 31, 2009. The Company has not consulted with Ernst & Young during its two most recent fiscal years ended December 31, 2007 and December 31, 2008, or during any subsequent period prior to its appointment as the Company’s auditor with respect to any of the matters or events listed in Regulations S-K 304(a)(2)(i) and (ii). We expect that a representative of Ernst & Young will be present at the Meeting and will have the opportunity to make a statement and to respond to appropriate questions from stockholders.
Auditor’s Fees
The following table summarizes the fees of KPMG, our independent registered public accounting firm,Ernst & Young LLP for each of the last two fiscal years.years 2010 and 2011. For 2008,2011, audit fees include an estimate of amounts not yet billed. | | | | | | | | | | Fee Category | | 2008 | | | 2007 | | | | | Audit Fees(1) | | $ | 1,136,000 | | | $ | 1,947,320 | | | Audit Related Fees(2) | | $ | — | | | $ | 72,502 | | | Tax Fees | | $ | — | | | $ | — | | | All Other Fees | | $ | — | | | $ | — | | | Total Fees | | $ | 1,136,000 | | | $ | 2,019,822 | |
| Fee Category(1) | | 2011 | | | 2010 | | Audit Fees(2) | | $ | 855,000 | | | $ | 911,000 | | | Audit Related Fees (3) | | $ | 77,000 | | | $ | 0 | | Total Fees | | $ | 932,000 | | | $ | 911,000 | |
__________ | | | | (1) | We did not pay any “Tax Fees” or “All Other Fees” to Ernst & Young in fiscal years 2010 or 2011. | | (2) | Audit fees consist of fees for the audit of our financial statements, including fees related to the audit of our restated financial statements, the audit of our internal controls over financial reporting, the review of the interim financial statements included in our quarterly reports onForm 10-Q, and other professional services provided in connection with statutory and regulatory filings. | | (2)(3) | | Audit-related feesAudit Related Fees consist of fees for assurance and related services that are reasonably relatedwe paid to the performanceErnst & Young as part of the audit and the review of our financial statements and which are not reported under “Audit Fees.” These services relate to employee benefit plan auditshigh-yield note financing in 2007 and review of certain SEC filings in 2007.February 2011. |
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 the Company’sour registered public accounting firm. This policy generally provides that the Companywe will not engage itsour 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 described below. procedures. From time to time,time-to-time, the Audit Committee may pre-approvepre- approve specified types of services that are expected to be provided to the Companyus by itsour 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 also delegated to the Chairman of the Audit Committee the authority to approve any audit or non-audit services to be provided to the Companyus by itsour 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 KPMGErnst & Young in 20072010 and 20082011 were pre-approved by the Audit Committee.
36
PROPOSALS OF STOCKHOLDERS FOR 2010 ANNUAL MEETING
Any proposal that a stockholder ofAt the Company wishes to be considered for inclusion in the Company’s proxy statement and proxy card for the Company’s 2010 Annual Meeting of Stockholders (the “2010 Annual Meeting”) must be submitted to the Secretary of the Company at its offices, 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado 80903, no later than December 17, 2009. In addition, such proposals must comply with the requirements ofRule 14a-8 under the Exchange Act.
If a stockholder of the Company wishes to present a proposal before the 2010 Annual Meeting, but does not wish to have the proposal considered for inclusion in the Company’s proxy statement and proxy card, such stockholder must give written notice to the Secretary of the Company at the address noted above. The Secretary must receive such notice no earlier than January 15, 2010 and no later than February 14, 2010, and the stockholder must comply with the provisions of the Company’s bylaws.
The Company reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements, including conditions established by the SEC. If a stockholder fails to provide timely notice of a proposal to be presented at the 2010 Annual Meeting, the proxies designated bystockholders are being asked to ratify the Board will have discretionary authority toappointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such proposal.a change would be in our best interest. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and to respond to questions.
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.
Recommendation of the Board
The Board of Directors recommends you vote “FOR” Proposal 4.
Upon the written request of any person who on the record date was a record owner of Companyour stock, or who represents in good faith that he or she was on such date a beneficial owner of such stock entitled to vote at the Annual Meeting, the Companywe will send such person, without charge, a copy of itsour Annual Report onForm 10-K for 2008,2011, as filed with the Securities and Exchange Commission. Requests for this report should be directed to the Vice President-Corporate Relations, Diane S. Jones, atCorporate Secretary, Westmoreland Coal Company, 2nd Floor, 2 North Cascade Avenue,9540 S. Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903. The Company has adopted a Code of Business Conduct and Ethics Policy which is applicable to all employees, including all senior officers and financial personnel. A copy of the Company’s Code of Business Conduct and Ethics Policy can be found on the Company’s web site at www.westmoreland.com. The Company will provide any person, without charge, upon request, a copy of its Code of Business Conduct and Ethics. Any requests for the Code of Business Conduct and Ethics should be in writing and should be directed to the attention of the General Counsel of the Company at the preceding address. 80112. OTHER BUSINESS
The Board has no present intention of bringing any other business before the meetingAnnual Meeting and has not been informed of any other matters that are to be presented to the Annual meeting. If any other matters properly come before the meeting,Annual Meeting, however, the persons named in the enclosed proxy will vote in accordance with their best judgment.
If you vote by mail, we encourage you to specify your choices by marking the appropriate boxes on the enclosed proxy card. You do not need to mark any boxes if you wish to vote according to the Board’s recommendations; just sign, date, and return the proxy in the enclosed envelope. Thank you for your cooperation and your prompt response.March 28, 2012
By order of the Board of Directors,
Diane S. Jones
Vice President, Corporate Relations
and Secretary
37
 | | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | WESTMORELAND COAL COMPANY | | | 9540 SOUTH MAROON CIR., SUITE 200 Using a black ink pen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.ENGLEWOOD, CO 80112
ATTN: JENNIFER S. GRAFTON | | x | |
 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | | | | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | | | | | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
| | | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | | | The Board of Directors recommends you vote FOR the following: | m | m | m | | | | | | | | | | | | | | | | Annual Meeting Proxy Card1. Election of Directors
Nominees | | | | | | | | | | | | | |
6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
A Proposals — The Board of Directors recommends a vote FOR the listed nominees.
1. Election of Directors by holders of Common Stock:
| | | | | | | | 01 Keith E. Alessi | 02 Michael R. D'Appolonia | 03 Gail E. Hamilton | 04 Richard M. Klingaman | 05 Jan B. Packwood | | | 06 Robert C. Scharp | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 2, 3 and 4. | | | | For | Against | Abstain | | | | | | | | | | | | | | | For2. Advisory approval of Westmoreland Coal Company's executive compensation. | | Withhold | | m | m | m | | | | | | | | | | | | | | 3. To approve the amendments to the Amended and Restated 2007 Equity Incentive Plan for Employees and Non-Employee Directors. | | | m | +m | m | | | | | 01 - Keith E. Alessi | | o | | o | | | | | | | | | | 4. Ratification of the appointment of Ernst & Young LLP as principal independent auditor for fiscal year 2012. | | | | m | m | m | | | | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | | | | | | | 02 - Thomas J. Coffey | | o | | o | | | | | | | | | | | | | | | | | 03 - Michael R. D’Appolonia | | o | | o | | | | | | | | | | | | | | |
B Non-Voting Items
| | | | | | | Change of Address —Please print new address below.
| | | | Meeting Attendance | | | | | | | | | | | | Mark the box to the right if you plan to attend the Annual Meeting. | | o | | | | | |
| | | | | | | Comments—Please print your comments below.
| | | | Receipt of the Notice of | | | | | | | | | | | | Annual Meeting and Proxy Statement dated April 14, 2009 are hereby acknowledged. | | o | | | | | |
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
NOTE: Please sign this proxy exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such.
| | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | | | | | / / | | | | | | | | | |
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | | | | | | | Proxy — Westmoreland Coal Company | | COMMON STOCK | |
Proxy for COMMON STOCK Only
Solicited on Behalf of the Board of Directors
Annual Meeting - May 14, 2009
The undersigned hereby constitutes and appoints Keith E. Alessi, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 14, 2009, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be votedFORthe election of directors. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
| | | | | | | Using ablack ink pen, mark your votes with anXas shown in
this example. Please do not write outside the designated areas | | x |
| | | | | | | | | | Annual Meeting Proxy Card
| | | | | | | | | | | | | | | | | | |
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | A | Proposal — The Board of Directors recommends a vote FOR the listed nominees.
| | |
| | | | 2. | Election of Directors by holders of Depositary Shares: | + |
| | | | | For | Withhold | | | | | | 01 - | Richard M. Klingaman | o | o | | | | | | 02 - | William M. Stern | o | o | | | | |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below .. |
NOTE: Please sign this proxy exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such.
| | | | | Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | | | | |
| | | 1 U PX | 0 1 7 4 5 8 2 | + | <STOCK #> 0112JB
| | |
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | | | Proxy — Westmoreland Coal Company | | DEPOSITARY SHARES |
Proxy for DEPOSITARY SHARES Only
Solicited on Behalf of the Board of Directors
Annual Meeting - May 14, 2009
The undersigned hereby constitutes and appoints Keith E. Alessi, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all Depositary Shares of stock held by the undersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 14, 2009, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be votedFORthe election of directors. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
| | | | Using a black ink pen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.
| | x | |
| | | | | | | | | | | | | | Annual Meeting Proxy Card
| | | | | | | | | | | | | |
6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
A Proposals — The Board of Directors recommends a vote FOR the listed nominees.
1. Election of Directors by holders of Common Stock:
| | | | | | | | | | | | | | | | | | | | | | | For | | Withhold | | | | | | | | | | | | | | + | | | 01 - Keith E. Alessi | | o | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | 02 - Thomas J. Coffey | | oSignature (Joint Owners) | | oDate | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Combined Document is/are available at www.proxyvote.com . |
| | WESTMORELAND COAL COMPANY Annual Meeting of Stockholders May 22, 2012 8:30 AM This proxy is solicited by the Board of Directors The undersigned hereby constitutes and appoints Jennifer S. Grafton as true and lawful agent and proxy with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at The Crowne Plaza Hotel located at 27 North 27th Street, Billings, Montana 59101, on Tuesday, May, 22, 2012, at 8:30 a.m. (mountain daylight time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card. | | | | | | | | | | | | | | | 03 - Michael R. D’Appolonia | | o | | o | | | | | | | | | | | | | | |
B Non-Voting Items
| | | | | | | ChangeThis proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted in accordance with the Board of Address —Please print your new address below.Directors' recommendations. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY AND PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
| | | | Meeting Attendance | | | | | | | | | | | | | | MarkYou are encouraged to specify your choices by marking the box to the rightappropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you planwish to attendvote in accordance with the Annual Meeting. | | o | Board of Directors' recommendations. The proxies cannot vote your shares unless you sign and return this card. | | | | |
| | | | | | | Comments—Please print your comments below.
| | | | Receipt of the Notice of | | | | | | | | | | | | Annual Meeting and Proxy Statement dated April 14, 2009 are hereby acknowledged. | | o | | | | | |
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
NOTE: Please sign this proxy exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such.
| | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | | | | | / / | | | | | | | | | |
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | | | | | | | | | | Proxy — Westmoreland Coal Company | | 401-K PLAN COMMON STOCK | |
Proxy for 401-K PLAN COMMON STOCK Only
Solicited on Behalf of the Board of Directors
Annual Meeting - May 14, 2009
The undersigned hereby constitutes and appoints Keith E. Alessi, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 14, 2009, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted FOR the election of directors. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations.
PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
| | | | | | | | | | Using ablack inkpen, mark your votes with anXas shown in
this example. Please do not write outside the designated areas. | | x |
| | | | | | | | | | Annual Meeting Proxy Card
| | | | | | | | | | | | | | | | | | |
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | A | Proposal — The Board of Directors recommends a vote FOR the listed nominees.
| | |
| | | | 2. | Election of Directors by holders of Depositary Shares: | + |
| | | | | For | Withhold | | | | | | 01 - | Richard M. Klingaman | o | o | | | | | | 02 - | William M. Stern | o | o | | | | |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below. .. |
NOTE: Please sign this proxy exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian please give your full title as such.
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6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6
| | | | | | | | | | | | | Proxy — Westmoreland Coal Company | | 401-K PLAN DEPOSITARY SHARES | | | | | | | Continued and to be signed on reverse side | |
Proxy
Appendix A WESTMORELAND COAL COMPANY AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN FOR EMPLOYEES AND NON-EMPLOYEE DIRECTORS The purpose of this 2007 Equity Incentive Plan for 401-K PLAN DEPOSITARY SHARES OnlyEmployees and Non-Employee Directors (the “Plan”) of Westmoreland Coal Company, a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons with those of the Company’s stockholders. Solicited
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 defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”); provided, however, that the term “Company” shall be limited to include only entities that are eligible issuers of service recipient stock (as defined in Treas. Reg. Section 1.409A-1(b)(5)(iii)(E)), or the applicable successor regulations for Awards that would otherwise be subject to Section 409A, unless the Board of Directors determines otherwise. | 3. | Administration and Delegation |
(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on Behalfall persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. (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. | 4. | Stock Available for Awards |
(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 Company by the Participant to exercise an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. (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 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 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 time or times specified by the Board). (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows: (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 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. | 6. | Stock Appreciation Rights. |
(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 determined by the Board) determined in whole or in part by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock. The date as of which such appreciation or other measure is determined shall be the exercise date. (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 date of grant of the SAR; provided that if the Board approves the grant of an SAR 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. (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. (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 entitled to all ordinary cash and other dividends paid with respect to such shares, unless otherwise provided by the Board. Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to shareholders of that class of stock or, if later, the 15th day of the third month following the date the dividends are paid to shareholders of that class of stock. | 8. | Restricted Stock Units. |
(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 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. | 9. | Other Stock-Based Awards. |
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
Annual Meeting 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 - May 14, 20097 - The undersigned hereby constitutes
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 appoints Keith E. Alessi, Morris W. Kegley, and Diane S. Jones and each of them, as true and lawful agents and proxies with power of substitution,the Board retains the specific authority to representfrom time to time increase or decrease the undersigneddollar values specified in paragraph (b) and to vote all Depositary Sharesamend the terms of director Awards as otherwise permitted by this Plan. | 11. | Adjustments for Changes in Common Stock and Certain Other Events. |
(a) Changes in Capitalization. In the event of any stock heldsplit, 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 undersigned at the Annual Meeting of Stockholders toCompany (or substituted Awards may be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Thursday, May 14, 2009, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card. This proxy, when properly executed, will be votedmade, if applicable) in the manner directed herein. If no directionsdetermined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are given,adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(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 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 proxy willparagraph (2), the Board shall not be votedFORobligated 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 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. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.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 You
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 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. | 12. | General Provisions Applicable to Awards |
(a) Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are encouragedgranted, 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 specify your choicesa domestic relations order acceptable to the Company its sole discretion, and, during the life of the Participant, shall be exercisable only by marking the appropriate boxes, SEE REVERSE SIDE, but youParticipant; 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. (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 markbe 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, boxesrequired 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 you wishthe 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 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 outstanding Option granted under the Plan may be amended to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option (other than adjustments pursuant to Section 10); (2) the Board may not cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option; and (3) the Board may not conduct any cash buyouts of Awards except to the extent the Award may, by its terms, be settled in cash. (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, (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 not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine. (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. | 13. | Vesting. Unless otherwise provided in an Award agreement, Awards shall be 100% vested: (a) for directors, after one year of service, and (b) for employees, ratably over three years of service. |
(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 Section 12(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan. No Award shall be made that is conditioned upon stockholder approval of any amendment to the Plan. (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 delayed for six months after the date of separation from service. (f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the Boardlaws of Directors’ recommendations.the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state. PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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